International investor interest
While Africa is attracting the attention of more and more international investors, interest in the property sector remains relatively subdued. “There is an increasing appetite for investors to invest in Africa. There isn’t a week where you don’t see an article about Africa, and the growth opportunity, and increasing foreign direct investment, etc. Generally, on a macro level, you are seeing more investors looking to invest in Africa,” says Teeroovengadum.
“However, when it comes to property it is a different situation. The universe of investors gets quite small, to be quite honest with you, especially when you talk about international investors. The reasons are multifold. A number of these investors didn’t make good returns over the last decade because of the asset bubbles in the US, Europe and Middle East – so they’ve been burnt in some way or shape or form in the last couple of years. They are very hesitant about investing more into property. Those who are willing are typically your development finance institutions, those institutions that have long-term money for Africa. You do have a couple of international pension funds who are looking at investing in Africa, but there are very few today,” he explains.
There have been concerns about the ease of exiting, or cashing out of, private equity investments in Africa. Despite the fact that Actis recently sold its 85% shareholding in Ghana’s Accra Mall, Teeroovengadum says that exiting property investments in Africa remains very challenging.
“I can tell you that it is not easy. If you look back a couple of years ago, it was non-existent. Now at least we are seeing a couple of deals being done. We are seeing increasing interest from South African property funds that are looking for quick access in good markets. We are hearing more and more international investors talking about setting up pan-African funds. But at this point in time, I can tell you it is not straightforward. There are very few buyers.”
Investing in strong economies
How does Actis decide which African countries to invest in? “We look at the strength of the economy, so … markets like Nigeria, Ghana, Kenya, Uganda, Zambia [and] Mozambique.” Teeroovengadum says these countries have strong fundamentals such as large populations, high GDP growth and increasing GDP per capita.
Strong legal frameworks are also essential. “You are buying land [so] you need to know whether you are buying a clean title deed, whether you can build, whether the bank can mortgage the property. We tick all these boxes,” he says.
Growing demand for office space
Africa’s growing economies and the entry of multinationals are boosting demand for office space. It is for this reason that Actis has invested in office developments in cities such as Lagos, Accra and Nairobi. “With multinationals coming in for oil, copper, etc. – they need proper offices and that is something where we invest quite a bit of money,” notes Teeroovengadum.
The Africa Property Investment Summit, the biggest event on the African real estate calendar, is fast approaching with limited bookings available. The two-day event, taking place in Johannesburg from 4-5 September, will be held at the beautiful Sandton Sun Hotel. The conference package (R6,750/US$845) includes all lunches and refreshments, an invitation to the gala dinner, parking and full access to all research, presentations and documentations. For booking information visit www.apisummit.co.za. Special offer for How we made it in Africa readers: 10% discount for the first 20 readers to register. To take advantage of this special offer email Marie Coetsee on [email protected] or +27 11 408 5695.