Cape Town – The number of South African investors aiming to tap into the potentially lucrative African property market is on the rise, according to the Knight Frank Africa Report 2015.
Driving this trend is a demographic statistic set to be one of the most important world shapers over the course of the century.
According to Knight Frank's Africa Report 2015, released last week, Africa's population will quadruple to over 4 billion by 2100, with nearly 1 billion of these people in Nigeria alone.
Tony Galetti and Francois Staples, who share the title of joint CEO and co-founder of Galetti Knight Frank, told Fin24 that SA investors have been turning their attention to other African markets as they search for better returns than those available domestically and aim to diversify their holdings.
“Large cities in the fastest-growing economies have been the main targets for investment, particularly Nigeria (Lagos), Ghana (Accra), Kenya (Nairobi) and Angola (Luanda), as well as Mozambique (Maputo), Tanzania (Dar es Salaam) and Zambia (Lusaka).
“Over the last couple of years, there has been a very noticeable trend for SA investors to announce the establishment of funds targeting other African markets,” they said.
Egypt economy set to unseat SA
The report projects that 13 of the 20 fastest-growing global economies over the next five years will be in Africa, and that by 2100 40% of the world’s population will live on the continent.
The South African property market has become highly competitive and it has become increasingly difficult to achieve consistent growth due to a lack of high quality investment grade stock. As a result, property funds and institutional property owners such as Atterbury, Stanlib and Resilient are targeting the rest of the African continent for growth opportunities.
Egypt is set to unseat South Africa as the continent’s second-largest economy in 2019 according to International Monetary Fund projections. Galetti and Staples attribute its growth largely to population size and growth rate.
“There are also signs that the Egyptian economy is beginning to turn around after some difficult years. It is attracting increased investment from the Gulf countries and large infrastructure projects such as the Suez Canal expansion should also help growth,” Galetti and Staples said.
In 2019 Egypt is projected to command a gross domestic product of $528.7bn, with South Africa trailing at $426.8bn.
SA investment companies which have, according to the researchers, established funds targeting other African markets:
According to Staples and Galetti, RMB Westport is a prime example of an investor involved in office and retail projects in Angola, Ghana and Nigeria.
“We think this is a very important trend within African real estate – the type of projects being developed by the likes of RMB Westport are of a higher quality than is currently present in most African cities. Their projects will help to create larger and more mature property investment markets, and they are building a quality of product that may attract overseas institutional investors,” they said.