Emerging markets private equity firm Actis has in recent years been involved in many of Africa’s more high-profile property developments. The firm has backed Nigeria’s first ever modern shopping centre and has recently announced that it will invest in East Africa’s largest retail mall to be situated in Kenya’s capital Nairobi. How we made it in Africa talks to Kevin Teeroovengadum, a director for real estate at Actis and one of the speakers at this year’s Africa Property Investment Summit, about the trends in the continent’s property industry.
More shopping malls to be built in Africa
Some retailers that have opened shop in Africa have suggested that their expansion on the continent is being held back by the scarcity of suitable retail locations – ie shopping malls. But if there is such a strong demand for modern retail locations, why aren’t we seeing new malls being developed at a more rapid pace?
Teeroovengadum says that before 2010 there hadn’t been a significant interest from international property developers to invest in sub-Saharan Africa. South African developers were focused on their local market due to the football World Cup, while European firms were concentrating on Europe and the Middle East. However, the recession in Europe has prompted some European real estate companies to look at Africa for growth opportunities. Post-2010 many South African property players have also turned their attention to the rest of the continent.
“You need to understand that to develop a shopping mall takes quite a lot of time, especially if you are dealing in multiple countries where you’ve got different regulations, different laws, issues with title deeds, etc. So these are things that are going to take time,” says Teeroovengadum. “But if I look at today, and compare it with five years ago, there are far more players involved in the real estate sector. We can really see that happening on the ground. I think if we fast-forward two or three years from now, you are going to see more shopping centres being built in places like Ghana, Nigeria and Kenya – the big economies …You are going to see a fast-tracking of property development happening in Africa.”
Consumers looking for convenience
In most of sub-Saharan Africa, with the exception of South Africa, the penetration of modern shopping malls is relatively low. Many people still have to go to various locations for their shopping needs.
However, according to Teeroovengadum there is a trend towards convenience where a variety of products can be found in one facility. “What we are seeing is that people are looking for convenience, so they are looking for a place to go, one place, where you can shop for everything – for your food, for your clothing, for your white goods. Clearly we are seeing in all the markets where we have invested a type of evolution of people moving from informal to formal shopping centres.”
Funding remains a challenge
Teeroovengadum notes it is still challenging to access funding for property developments in many parts of sub-Saharan Africa. Although some developments in South Africa are funded with up to 100% debt, in the rest of the continent developers often need to put down around 50% in cash.
“There are very few banks at this point in time that understand property finance, and are willing to lend 10 to 15 years. But even on the financing side it is becoming more and more efficient as markets become stronger, local banks become stronger, and we are seeing this happening already in markets like Ghana, Zambia and Nigeria … So it is happening,” he says.