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March 2015

Real Estate
Building the future of Africa

It would be easy to underestimate the

impact of global megatrends on Africa.
After all, Africa’s real estate markets have
traditionally lagged behind developed
and many developing economies.

However, our research suggests the

impact of global megatrends on Africa
will be huge. In this report we consider
their impact on the African continent.
100 Building the future of Africa

Foreword 2

Section 1 Real Estate 2020: Building the future 3

Section 2 Building the future of Africa – Drivers for real estate growth 12

Section 3 Country analysis 37

Country profiles:
Nigeria 40
Kenya 44
Ghana 47
South Africa 51
Angola 55
Mozambique 58
Tanzania 61
Namibia 64
Mauritius 67
Zambia 71

References 74

Acknowledgements and recognition 83

Contacts 84


Global megatrends, such as rapid urbanisation and

demographic changes, will lead to substantial growth
in the global real estate industry over the next five
years. Opportunities in the industry will surge, as
will assets invested in the sector. These are some of
the major findings of PwC’s Real Estate 2020:
Building the future report. But how will these
megatrends impact the hugely diverse sub-regional
and national markets on the African continent?

It would be easy to underestimate The report also considers the

the impact of global megatrends real estate market in 10 selected
on Africa. After all, Africa’s real countries in sub-Saharan Africa.
estate markets have traditionally These country profiles provide
lagged behind developed and many insight into local, regional and
developing economies. Levels of global influences on the real estate
investment in real estate in Africa markets of individual countries,
are low by a global standard, while providing an illustration of impacts
significant challenges exist in of trends being felt at a national
exploiting potential opportunities. level.

However, our research suggests the We hope our report will provide
impact of global megatrends on insight into the real estate market in
Africa will be huge. In this report Africa and help to identify some of
we consider their impact on the the opportunities, risks and rewards
African continent. Our objective encountered by investors in African
is to provide an assessment of real estate.
the current state of the real
estate industry across Africa and
demonstrate how megatrends will
drive growth opportunities in key
African markets. Ilse French
2 Building the future of Africa PwC Africa Real Estate Leader
Section 1

Real Estate 2020: Building the


During March 2014, PwC released

Real Estate 2020: Building the
future, a report which highlights
global trends and makes certain
predictions about the real estate
industry up to 2020. Some of these
global trends are already evident
in the African real estate industry,
while others will only start to
appear in the future.

The six predictions that the Real

Estate 2020: Building the
future report made for 2020 and
beyond are:

• The global investible real

estate universe will expand
substantially, leading to a huge
expansion in opportunity,
especially in emerging
• Fast-growing cities will present
a wider range of risk and return
• Technology innovation and
sustainability will be key drivers
for value;
• Collaborating with governments
will become more important;
• Competition for prime assets will
intensify further; and
• A broad range of risks, including
new risks, will emerge.

PwC 3
Global institutional-grade RE



35 3.9% 25.0
30 8.2% 29.0

25 23.8

20 18.9
15 16.9 20.3
10 14.3 14.6 18.1 8.9

5 10.3
5.9 6.9 2.0 3.7
2004 2007 2012 2020

Developing countries Developed countries Compound annual growth rate

Source: PwC analysis

These predictions reflect the impact • Unprecedented shifts in

of global megatrends observed in population drive changes
the report. Real Estate 2020: in demand for real estate.
Building the future observes Demographic shifts will
that global megatrends will change affect demand for real estate
the global real estate landscape fundamentally. The burgeoning
considerably in the next five middle-class urban populations
years and beyond, and Africa in Asia, Africa and South America
is no exception. The six global will need far more housing.
megatrends highlighted in Real Meanwhile, the advanced
Estate 2020: Building the economies’ ageing populations
future are: will demand specialist types
of real estate, while their
• Huge expansion in cities, requirements for family homes
with mixed results. By 2020, will moderate.
the twenty first century’s great
migration to the cities will be well • Emerging markets’ growth
underway. Cities will be swelling ratchets up competition
across the fast-growing countries for assets. Real estate is an
in Asia, Africa, the Middle East integral part of the emerging
and Latin America. Even the markets’ growth phenomenon.
developed Western nations will Even as growth moderates in
be urbanising, albeit at a slower many emerging markets, the pace
pace. But not all cities will of construction activity remains
prosper. While some will become rapid, increasing investment
great centres of wealth creation opportunities. The rise of
in a multipolar world, others are emerging economies is also
likely to fail. increasing competition among
real estate managers and the
investment community.

4 Building the future of Africa

• ‘Sustainability’ transforms As stated in Real Estate 2020:
design of buildings and Building the future, while most
developments. Cities of these global megatrends are
contribute an estimated 70% already becoming evident, there is a
of the world’s energy-related natural tendency to underestimate
greenhouse gases while their impact. The impact of many
occupying just 2% of its land. of these megatrends on the Africa
Their locations – often in low- landscape will differ from the
elevation coastal zones – and expected impact in developed
large populations make them countries.
particularly vulnerable to the
impacts of climate change, In this report we look at the impact
such as rising sea levels. As the of these megatrends on some of
world rapidly urbanises, so the the fastest growing and developing
pressures to make buildings more economies on the African continent.
eco-efficient are mounting.

• Technology disrupts real

estate economics. Technology
is finally coming to real estate. By
2020, technology will have both
altered the economics of entire
subsectors of the industry, and
changed the way that real estate
developers and the investment
community operate.

• Real estate capital takes

financial centre stage.
Private capital will play a
critical role in funding the
growing and changing need for
real estate and its supporting
infrastructure. Just as asset
managers, real estate funds and
sovereign wealth funds (SWFs)
find the assets under their
control swell, so governments
will have an increasing need for
capital to finance urbanisation.
Private real estate capital will
become an important partner of

PwC 5
The drivers for growth in Africa
From our analysis of these megatrends, we have identified eight potential
drivers of growth in the real estate industry in Africa.

Africa’s young population will drive the demand for
real estate and different types of real estate. Across
Africa there will be continued urbanisation, an
expansion of current cities and the rise of new cities.

According to the World Bank, Africa’s median age was 19.7 years in 2012,
and it is expected to increase to 25.4 years in 2050, making Africa the
continent with the youngest population. The global megatrend relating
to ageing populations and the consequent increase in the demand for
retirement homes is therefore not expected to have a significant impact in
Africa by 2020. Projections suggest that in 2015 the continent will have a
population of 226 million aged between 15 and 24 years1. This is expected
to double by 2045.2 This young population will drive growth in the demand
for housing. This may include new or emerging residential subsectors, for
example student housing.

Africa is the world’s second-largest

and second-most populous
continent with 30.2 million km2 or
20.4% of the total global land area.
Mauritius is the most densely
populated country on the continent
with 639 people per km2, while
Namibia is the least densely
populated with three people per
Population Density km2.3 The figure alongside shows
(people per km2 of the diversity of population density
land area)
in Africa.
10 - 24
25 – 49
50 – 74
75 – 99
100 – 149
150 – 299
300 +

Source: World Bank’s World Development Indicators

6 Building the future of Africa

Continued urbanisation will have a major impact by 2020, and beyond. It is
estimated that the urban population in Africa will increase to 56% in 2050,
making it the most rapidly urbanising region in the world.4 The figure below
shows the estimated urban population of a selection of African cities by
2025, compared to 2010:

Growth of Africa cities:

% increase, 2010 – 2025 forecast City population, forecasts, 2010 2025


0 20 40 60 80 100 120 140 Alexandria

Dar es Salaam
Addis Ababa
Dakar Abidjan Accra
Addis Ababa Dakar

Accra Nairobi
Al-Qahirah (Cairo) Dar es Salaam
Al-Iskandariyah (Alexandria)
El Djazaïr (Algiers)
Cape Town
Dar-el-Beida (Casablanca)
10m Luanda

2m Durban
Cape Town

Source: United Nations Population Division, World Urbanisation Propectus, the 2014 revision

The UN expects the fastest-growing urban agglomerations across Africa to be

medium-sized cities and cities with fewer than one million inhabitants.5 The
unprecedented shifts in demographics will affect the demand for real estate
fundamentally. In the residential sector, growing urban populations will
increase demand for affordable housing, while a burgeoning middle-class
will drive demand for more mid-range properties. While office, industrial,
retail and residential will remain the dominant sectors, affordable housing,
agriculture, healthcare, retirement and mixed-use properties will become
significant sub-sectors in their own right.

PwC 7
Industrialisation will continue across Africa and
will be accompanied by a rapid growth in the retail

Indications suggest that industrialisation will be funded by foreign investors,

such as China. Intra-African trade and investment will continue to be an
important driver of growth, as high-profile local companies expand into
regional markets. The retail sector will also develop rapidly as growing
populations and burgeoning middle classes demand greater volumes of
more varied goods. The need for economic diversification, together with
growth, will support the expansion of non-resource sectors and investment
opportunities will arise through an increase in demand for real estate from
these sectors.

The export of natural resources and agriculture will
remain key sources of economic growth, but will
expose certain countries to increased risk.

Natural resources will remain a major source of economic growth in Africa.

New discoveries continue to drive the growth of local activity, although this
continued dependency on natural resources will present both opportunities
and challenges for real estate developers and investors across the continent.
As global demand for food grows, revenue from Africa’s agricultural
output will increase, while Africa’s significant area of uncultivated arable
land will provide opportunities for growth. The risk presented by the
economic fragility of commodity-exporting countries must be offset by the
potential rewards from investment – either directly in helping to exploit
new commodity discoveries, or indirectly through developments aimed
at catering to the increased consumer demand resulting from associated
economic growth.

Infrastructure shortages will create opportunities
for investment.

Growth sectors will continue to create demand for infrastructure investment.

Connections to road, rail and public transport are vital for urban success.
Doing business in Africa remains a challenge as infrastructure lags well
behind the rest of the world, but there are distinct regional differences.
Recent PwC research suggests that infrastructure spending in sub-Saharan
Africa will exceed US$180* billion per annum by 2025, a growth rate of
10% per annum.6 Major infrastructure investment programmes in Nigeria
and South Africa are now being accompanied by significant projects in other
countries like Ghana, Kenya, Mozambique and Tanzania. However, a huge
shortfall in government funding creates opportunities for private investors to
support this development need through direct investment and public-private
partnership (PPP) agreements.

*Local currencies were converted to US dollar (US$) and are approximate

8 Building the future of Africa

The influence of government policy and legislation
on the decision to invest will increase, while local
partnerships will become increasingly important.

Increased political stability on the continent and increased participation

in local partnerships will continue to ease investors’ concerns relating to
investing across Africa. Collaborating with governments or involving a
local partner in future real estate developments in Africa will become more
important to mitigate the risks. Governments and the investment community
will have to work together to fund and build cities and their infrastructure.

Continued advancement within pension fund,
stock exchange and banking regimes will facilitate
investment, and an increased range of investors
will drive demand for real estate investment

Development finance institutions (DFI), sovereign wealth funds (SWF) –

government-run investment vehicles that manage state-owned assets – and
private equity providers continue to enter the market alongside private
capital and institutional investors, while developers and investors will find
raising capital in the markets easier as the local financial apparatus develops.
With interest from a range of investor classes and continued high returns,
competition for prime real estate and infrastructure assets will increase.

Technology will impact business and building
practices as well as consumer behaviour.

Online technology is already having a significant impact on the finance and

banking industry across Africa with the rise of mobile banking. However,
the full impact of technology on real estate in Africa will only be felt in the
medium to long term, as access to technology increases across the continent
and the traditional consumer culture in Africa begins to change. Innovative
and low-cost building technologies will also help make housing affordable.

PwC 9
Sustainability will become entrenched in building
design and occupier requirements, with Africa’s
most ambitious countries changing city design and
building practices.

We observed that in certain countries where new cities are being built,
developers are using eco-friendly technologies to reduce their environmental
impact. Some of these technologies include solar building integration,
climate responsive building strategies, renewable building materials,
recycling and reuse, ecological building materials, an integrated planning
process, low-cost design and the use of innovative design tools, as can be
seen in One Airport Square in Ghana. This trend is expected to continue in
Africa, albeit at a slower pace than in the developed world. Konza City in
Kenya, Eko-Atlantic in Nigeria and Roma Park in Zambia are just a few of
the entirely new urban villages focusing on the concept of ‘place making’ in
a sustainable way. Use of these new technologies will be accelerated by new
sustainability legislation in the most progressive African markets.

Risks of investing in Africa

One of the key predictions made for 2020 relates to the emergence of new
risks, together with the rewards attributed to the new risks. Africa has 54
very different countries with low connectivity between them, and there is no
single answer for ‘which countries to invest in’. Some of the additional risks
of real estate investment in Africa include:

• The impact of political instability and changing government policy;

• Social instability resulting from inequality;
• A lack of economic diversity, with an overdependence on natural
• Complex legal considerations, such as property ownership rights and
investment restrictions;
• The volatility of local currencies against the US dollar; and
• The timeframe of investments and restrictions on possible exit strategies
(e.g. limited institutional investors as compared to more developed
It is important that investors give consideration to these risks when investing
in Africa.

10 Building the future of Africa

Why Africa?
Despite these risks, real estate new economic opportunities. to local market entry may be high,
investors and developers continue Huge shortfalls in residential but by entering the market early,
to see the African market as a huge property across the continent give investors may be able to reap the
opportunity. rise to opportunities for private rewards in the form of high returns
development on a grand scale, and exploit new opportunities as
Investment returns from real while a lack of local funding for they arise.
estate in Africa’s rapidly expanding infrastructure projects provides
economies significantly exceed a platform for new private African opportunities can be
those achievable in almost all partnerships with the public sector. exploited best by combining the
developed markets. Forecasts of Demographic shifts and changes in competitive advantage of individual
20% net annual returns7 from consumer behaviour create demand countries into a coordinated
investing in shopping malls, office for different types of real estate, business model. For example, such
blocks or industrial complexes in allowing the entry of more specialist a model might combine developed
countries across Africa continue to investors into the market. South African capital markets with
draw in new investors. high retail growth in less developed
Economic growth, improving countries.
The opportunities across Africa are political stability and ongoing
significant and span every sector. investments in infrastructure are Risk appetite remains an important
In almost all markets, demand opening previously inaccessible consideration for any investor in
for high-quality retail, office and markets, while increased Africa, but for those real estate
industrial space continues to transparency and availability of companies that can accept and
outstrip supply as international local partners is helping to improve manage these risks there are
and local occupiers respond to the ease of doing business. Barriers significant rewards on offer from
the right investment.

Africa is
redefining itself
through real estate

* Recognition on page 83

PwC 11
Section 2

Building the future of Africa –

Drivers for real estate growth

Megatrends in African
real estate
This section dicusses the
megatrends that will drive growth
in the real estate industry in Africa.

12 Building the future of Africa

1 Africa’s young population will drive the demand for real estate and
different types of real estate. Across Africa there will be continued
urbanisation, an expansion of current cities and the rise of new cities.
Africa currently represents 15% of
the world’s population and 3% of Real GDP growth (%)
the world’s GDP. Africa also has a
relatively young population. The
continent currently has a population
of 200 million aged between 15 and 5
24 years8 and this is expected to
double by 2045.9 Between 2010 and 4
2020 Africa’s consumer spending is
also expected to double.10 The World 3

Bank now classifies 27 of the 54

countries in Africa as either mid- or
high-income countries – 12 more 1
than in 2000. Zambia and Ghana
were upgraded to mid-income 0
2011 2012 2013 2014 2015 2016 2017
status in 2011.
Sub-Saharan Africa World

It is estimated that the GDP of sub-

Saharan Africa will grow at 4.6% in Source: Global Economic Outlook: Sub-Saharan Africa regional forecast”, The World Bank11
2015 and 4.9% in 2016. Growth for
oil exporting countries is expected GDP annual growth
to be above the continental average
at between 5.5% to 5.6% per
Estimated population (Millions)

annum for the same period. These Nigeria

200 US$ 521bn
projections reflect the importance
of oil prices to growth in oil
exporting countries. A sustained Egypt
US$ 271bn
period of the low oil price, as has 100
Kenya US$ 32bn
been experienced from late 2014, US$ 55bn
South Africa Ghana Mozambique
may undermine GDP growth and 50 US$ 350bn US$ 48bn US$ 15bn
regional real estate markets. For Algeria Angola Tanzania
US$ 210bn US$ 124bn US$ 33bn
those countries in North Africa, 0
individual GDP growth forecasts 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0
range from 3.3% to 5.5% in 2015
GDP annual growth estimated for 2017 shown as a % for each country
and 3.5% to 6.0% in 2016.
The size of the bubbles represents the size of the economy (GDP 2014)

By 2050, Africa will account Source: World Bank

for almost 24% of the world’s
population. As at 2014, 40% of Africa’s urban and rural population trends
Africans were urbanised. The
1 600
world’s average for the same period
was 54%; by 2030 this will increase 1 400
to 47%, and by 2050 56% will be 1 200
urbanised.12 This will be the result

of 400 million people in Africa 1 000

migrating from rural areas to cities. 800

Lagos is expected to be the twelfth-
largest city in the world by 2025.13
It is predicted that Africa’s share of 400

the global workforce will increase 200

from 13% in 2010 to 25% by 2050.14
The UN predicts that the urban

population in Africa will surpass the

rural population by 2037.15 Rural Urban

Source: United Nations Population Division, World Urbanisation Propects,

the 2014 revision
PwC 13
A recent study by Standard Bank16 The middle class is clearly rising
indicates that by 2030 the number
of middle-class households across
the 11 fastest-growing countries 45
in Africa17 will have increased to 40
40 million from today’s 15 million
households. Many of the largest
cities in Africa are growing rapidly. 30

Nairobi, Kinshasa and Dar es 25
Salaam, for example, are expected 20
to see population growth of over
70% by 2025. Nigeria alone will add
7.6 million middle-class households, 10
followed by Ghana with 1.6 million. 5
Angola and Sudan will add one
million middle-class households 1990 2000 2014 2030
each. On a scale of urban population Total middle-class households Total lower middle-class households
and GDP growth, Nigeria is far
ahead of the rest.
Source: Standard Bank, Understanding Africa’s middle class

As successful cities attract more Africa’s growing middle class

and more people, the cost of prime
urban real estate per square metre
will continue to rise. Affordability 1 000 40
will fall, leading to greater urban 900 34%
density and smaller apartments. 35
Developers will become more 30
700 27% 27% 579.4
innovative about how they 26%

design and build commercial real 600
estate, seeking to use space more 500 498.6 20
efficiently. Construction techniques, 400 401.1 15
such as prefabricated buildings 300 326.7
and 3D printing, offer potential 303.9 10
200 204.4
for fast, cheap and eco-friendly
100 157.5 5
development. 115.3
0 21.0 25.2 48.8 46.1 0
1980 1990 2000 2010

Upper class Middle class Lower class Middle class % of population

Source: PwC analysis, Middle class defined as those earning $4 to $20/day

14 Building the future of Africa

The change in demographics and Age distribution
increasing urbanisation create
significant infrastructure needs %
and funding requirements. It is
estimated that there is a shortfall of 50
17 million housing units in Nigeria
alone, with a funding requirement
of US$363 billion.18 The real estate 40
sector contributes 7.78% to the
Nigerian GDP.19 The significant
investment shortfall creates 45%
opportunities for investors in the
long run. 46%

Population changes will not only 40%

affect the demand for goods, 10 26% 20%
but Africa’s fast-growing young 11%
population will also drive demand 8%
for a different type of real estate – 4%
for example student housing. 0-14 15-44 45-55 65+

World Africa
In South Africa, for the academic
year beginning January 2015, Source: United Nations Population Division, World Population Prospects, the 2010 revision
207 000 university students
and 400 000 students in
Further Education & Training
(FET) institutions will not have
adequate housing.20 Nigeria,
Kenya and Ghana also face
significant shortages in student
accommodation, leading to some
private investors targeting the
student housing market for future

According to the World Bank,

Africa’s median age was 19.7 years
in 2012 as compared with a global
median of 29.7 years. Africa’s
median age is expected to increase
to 25.4 years by 2050, and Africa
will remain the continent with
the youngest population. African
economies face the challenge of
ensuring this young population is
employed in order to promote stable

PwC 15
With young, growing populations Africa’s worrisome youth
in most countries, the chance for a unemployment is normally
‘demographic dividend’ looks good. assessed against the continent’s
But a growing population can only fast economic growth. The
drive growth if enough people are unemployment rate in Africa is 6%,
above the poverty level and are compared to the global average
employed. of 5%.22 The difference may not
seem significant, but the issue is
The Gini index – a measure that unemployment in Africa is
of income inequality where 0 mainly affecting young people. It is
represents complete equality and estimated that youth unemployment
100 represents perfect inequality – is twice that of adults and accounts
shows there is significant variation for 60% of all unemployment.23 The
in income inequality across Africa. majority of African governments
According to World Bank analysis, are intervening to alleviate the
over the last five years South Africa youth unemployment problem. One
has had a Gini index score of 65 and example is the National Student
Nigeria, a score of 43. Financial Aid Scheme of South
In Nigeria, Africa’s most populous
country, 84.5% of the population Demographic shifts will
lived below the US$2/day poverty affect demand for real estate
line in 2010, up from 83.1% in fundamentally. According to PwC’s
2004. In Mozambique, only 2.6% of report Africa Business Agenda
the population is considered part of 2014, 67% of respondents to the
the ‘stable middle class’ (per capita survey indicated that urbanisation,
consumption level of US$4 to $20/ closely followed by demographic
day). The situation is already very shifts, will impact their business
different in Egypt, where around significantly in the next five years.
30% of the population have made it
into the middle class.21

Megatrend impacting society and business

41% advances 31% shifts

5% 21%
23% 22% 23%

1st 2nd 3rd

Source: Africa Agenda 2014, regional responses to PwC CEO survey

16 Building the future of Africa

Shifting demographic trends are Nigeria, is a major near-city Health sector
likely to create a huge need for development expected to change
new and different real estate by Nigeria’s real estate landscape. Increasing urban populations will
2020 and beyond. The burgeoning also impact on the provision of
middle-class urban populations in Research indicates that high-speed healthcare. As urban populations
Africa will need far more housing. railways make satellite cities more expand and patterns of settlement
Residential real estate will become attractive while relieving pressure shift, health providers in both the
more specialised, with local and on main cities. By reducing travel public and private sectors will need
cultural differences influencing time, high-speed railways push to increase the range and location
how this evolves. For example, satellite cities closer to main cities. of service delivery. The population’s
young professionals may favour changing age profile will also
smaller city apartments, while Concerns have been raised by have implications for the services
young families may live in gated commentators regarding the delivered by local health providers.
community developments outside financing, integration and economic
sustainability of some satellite These demographic shifts will
the city centres. In terms of
cities. However, announcements of present opportunities for real
financing these new developments,
planned developments suggest this estate developers as the public
residential property is an area
will continue to be a trend in Africa. sector struggles to meet the
of anticipated growth for listed
escalating cost of public health
property funds. Currently,
provision and the private sector
residential holdings make up only Low-cost housing
seeks ways of re-applying capital
2.5% of listed property funds, as
Increasing urban populations will to the delivery of core services.
compared to 15% in developed
increase demand for residential To support these changes, an
markets and 25% in other
property across the continent. increase in PPPs, development
developing markets.24 As markets
In the short term this demand agreements and sale and leaseback
develop, funds will begin to increase
will be primarily for low-cost of health facilities can be expected,
their residential holdings. The
housing through direct or indirect creating opportunities for specialist
rise of mixed-use developments in
investment spearheaded by the developers and investors familiar
Africa should not be underestimated
public sector. with the health market in other
as people seek to reduce travel
territories. For example, in Ghana,
times by living closer to centres of
Innovative government solutions PPP projects are planned to improve
employment, recreation and retail.
to help low-income households diagnostic services at Korle-Bu
access mortgage finance are also Teaching Hospital and a proposed
Satellite cities being developed, such as in Nigeria, new Urology/Nephrology Centre Of
Population increases in urban where 2.5% of wages is contributed Excellence.26
centres will also lead to an increase to a fund controlled by the Federal
in the number of satellite cities, Mortgage Bank of Nigeria to provide As new hospitals are developed
albeit at a slower rate to that in mortgages to low-income families to meet growing demand, there
developed markets where major and to support the development will also be a need to develop the
cities have already felt the effects of of new homes. In South Africa, supporting infrastructure to provide
rapid urbanisation. The emergence the Gauteng Partnership Fund access to the sites, together with
of satellite cities, defined as people (GPF) is mandated by the Gauteng secondary opportunities such as
moving to rural environments as a Department of Human Settlement retail, employee housing and other
result of the ever-increasing density to accelerate the provision of related services.
of the main cities, is likely to impact human settlements. The GPF aims
only the largest cities in Africa by to assist housing developers with
2020. equity-type loans, which enhances
the bankability of projects to
Ghana’s Hope City and Kenya’s enable senior lenders to finance on
Konza City are examples of this favourable terms. According to the
type of significant ultra-modern latest annual report, for the period
satellite city development. Both 2012/13, the GPF helped to attract
include a mix of both residential US$210 million in private-sector
and commercial premises. funding into the affordable housing
Developers are also pursuing near- sector, leading to the delivery of
city developments. Eko-Atlantic, 22 000 houses between the GPF’s
inception in 2002 and 2013.25

PwC 17
2 Industrialisation will continue across Africa
and will be accompanied by rapid growth in
the retail sector.

Based on examples such as Britain According to the IMF, trade activity

in the nineteenth century and China between African countries has
in the twentieth century, sustained historically been poor due to a
economic growth has been linked high proportion of them being
to industrialisation. However, relatively small and landlocked.
Africa faces new opportunities Many countries experience barriers
and challenges to those faced by to trade created by physical and
even more recently industrialised human geography.32 Africa’s terrain
economies such as China. These also varies widely from desert
include changing global markets to rain forest, which challenges
and increased automation in infrastructure, while sparse
manufacturing. population densities also present
difficulties. As infrastructure
Looking at the formal sector, development continues, the
industrialisation in Africa has increased industrialisation would
decreased over the past decade.27 make countries more connected,
The manufacturing sector fuelling trade between nations and
contributed less than 10% to thereby generating demand for
African countries’ GDP in 2012, real estate such as warehousing
compared to 30.5% in industrialised facilities.
countries.28 However, by including
the informal sector in the analysis, South Africa has been on the
industrialisation increased,29 forefront of growth in intra-
showing the importance of this part Africa investment and trade. Total
of the economy for future growth. outgoing FDI figures for 2013 were
Manufacturing exports more than US$5.6 billion, with the majority of
doubled from 10% in 2000 to 23% this being invested in neighbouring
in 2010.30 African countries.33 Intra-regional
23% of CEOs across investment can also be seen from
Africa identified Investment from China, in countries such as Kenya and Nigeria
the form of direct investment and from those in North Africa.34
China as the most and development loans, will The destination of this investment is
important country remain a key driver of this rapid also moving away from commodity
industrialisation. In PwC’s Africa industries, with nearly a third of
for growth Business Agenda 2014 survey all intra-Africa investment being in
of CEOs across Africa, 23% of financial services.35
CEOs identified China as the most
important country for growth. Intra-Africa trade occurs as a
Although data about Chinese result of growing diversification
foreign direct investment (FDI) towards activities related to
is not readily available, reports services, manufacturing and
suggest that Chinese investment infrastructure. The investment
in African manufacturing had is mainly driven by high-profile
amounted to US$3.43 billion by South African companies such as
2012.31 Bidvest, Shoprite, Pick n Pay, and
MTN. South African companies
are seeking new growth markets
to compensate for the lower GDP
growth back home.

18 Building the future of Africa

African consumerism and the importance of retail
A recent study by the Economist Intelligence Unit found that institutional
investors now regard the emergence of Africa’s middle class and its growing
consumerism, rather than its commodities, as the most attractive aspect “Africa is poised to
of investing in Africa. Using the theory of purchasing power parity – an industrialise, the
economic theory used to determine the relative value of different currencies
– and taking into account the relative prices of non-tradable goods in industrialisation
different countries, Africa is estimated to grow by 30% over the next five requires regional
years compared to 10% in other more developed regions.36
integration and
Demographics – sizing the opportunity to address the
$3.5 tn
North Rob Davies, South African
$2.8 tn $2.2 tn $2.0 tn Trade and Industry Minister

Germany UK France Africa

$5.5 tn

2020 $3.1 tn $2.6 tn $2.2 tn


Source: IHS Global Insight, September 2013 (EOM)

Africa’s retail market is fast developing. This is supported by Africa’s buying

strength, which is expected to increase from US$860 million in 2008 to
US$1.4 trillion by 2020. Significant construction activities in respect of
shopping malls are underway in Africa – in Lagos there are currently ten
under construction. More than 60% of sub-Saharan Africa’s bullish economic
growth is attributable to the region’s consumer spending.37 Most of the
world’s biggest consumer goods companies are already operating in Africa.

An analysis of major South African retailers expanding into Africa38 shows

that growth in turnover of their African operations is often three times more
than in South Africa. For example, Shoprite plans to open 30 additional
stores in Africa in the financial year to June 2015, representing a 17.8%

Nigeria offers huge potential, where a substantial population and a fast-

growing economy and middle class are creating significant demand for retail
options. Most of the demand is seen in metropolitan areas where retail space
is currently undersupplied.

PwC 19
The expansion of the financial services sector

In a number of African economies, estate. The continued progress

the financial services sector is also of industrialisation will increase
expanding as countries seek to demand for industrial premises
diversify away from commodity- around developing transport
dependent industries. In addition hubs to meet the needs of the
to already developed markets such manufacturing industry, together
as those of Mauritius and South with secondary markets such as
Africa, Rwanda now has a thriving housing and retail centres for
financial services and banking workers. An increased demand from
industry, while Zambia has posted retailers entering African markets
a recent 12% growth per year in for high-grade space will drive the
financial services.40 Botswana has a creation and expansion of shopping
small but thriving financial sector, centre developments. The growth
and the government has outlined a of the financial services sector
strategic plan for the sector’s future may generate a localised increased
development.41 demand for new office space;
however, the impact of this demand
These trends in the manufacturing, will be limited to a small number of
retail and service sectors will bring developing financial centres.
about shifts in demand for real

20 Building the future of Africa

3 The export of natural resources and
agriculture will remain key sources of
economic growth, but will expose certain
countries to increased risk.

Natural resources, especially oil, Agriculture in Africa is also Africa has about
have for decades been the main
source of economic growth in
changing, with African governments
increasing their investments in the
1.2 billion hectares
Africa. The continent holds one sector. With world food production of agricultural
third of global mineral reserves and needing to rise 60% by 2050,45
one tenth of global oil reserves, Africa will be an important part
land,accounting for
and produces two thirds of the of the solution. The continued 23.9% of the world’s
world’s diamonds.42 New discoveries industrialisation of the agricultural
continue to drive new bursts of local sector is therefore important to
total. 46
activity. Natural resources remain drive growth. According to the Food
a key source of foreign exchange and Agricultural Organisation’s
reserves across Africa. statistics, Africa has about 1.2
billion hectares of agricultural
The impact of natural resources land,46 accounting for 23.9% of
on real estate development is the world’s total. It is estimated
well illustrated with the oil and that Africa has about 60% of the
gas discoveries in Mozambique world’s uncultivated arable land 47
in 2012.43 The infrastructure and that the agribusiness output
required to commercialise these will increase from US$313 billion to
discoveries was more than double US$1 trillion by 2030. 48
the country’s GDP. Investors acted
on the opportunity, providing the Downturn in commodity
infrastructure necessary to fully prices
exploit these resources, and as a
consequence an entire new city PwC’s recent report, Mine 2014:
developed in the northern province Realigning Expectation,
of Cabo Delgado. highlighted the difficulties facing
the mining industry. As a result of
Minister Oyoubi of Gabon says the global downturn in commodity
oil exports helped Gabon achieve prices, companies have been facing
growth of 6% during 2013, and significant write-downs and profit
Minister Konneh of Liberia noted slumps. These challenges faced by
that the mining sector is an the industry have a direct impact
important source of strong growth. on African countries dependent
Oil reserves in Angola led to the on commodity exports as the
establishment of the Angolan SWF. foundation of their economy.
In September 2014, the fund was
worth US$4.95 billion.44 The fund
has an objective to build Angola’s
infrastructure by investing up to
20% in alternative investments such
as real estate.

PwC 21
The chart alongside sets out the IMF commodity price indices (2005=100)
commodities price index for the
2010-2014 period. Following
price fluctuations in recent years, 220

commodities have seen a recent

significant decline across all

Commodity price instability has

a negative impact on economic
growth, and with a 80% estimated 140
dependency of African countries
on commodities to earn export 120
revenue,50 its impact on GDP
performance should not be 100
underestimated. Month Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

Total Energy Non-energy

Falling oil prices
According to forecasts by the US
Source: IMF49
Energy Information Administration
(EIA) in January 2015, oil is
expected to sell for US$58 per barrel
in 2015.51 In mid-January 2015
the Bank of America Merill Lynch
predicted the price would drop to
a low of US$31 by the end of Q1
2015. A fall to this price would be
the lowest since April 2004.

The sharp decline in oil prices In addition to falling commodity This continued dependency on
is threatening the economies of prices, restrictive legislation natural resources will present both
several African countries, with may also impact on commodity opportunities and challenges for
Nigeria, Angola, Equatorial Guinea, revenue. For example, in Zambia real estate developers and investors
Gabon, Sudan, Algeria, Libya a new royalty regime has been across the continent. The risk
and Egypt being affected most.52 introduced increasing royalties presented by the economic fragility
Oil-exporting countries will lose payable by mining companies from of commodity exporting countries
government revenue as a result 6% to 20% for open mines and must be offset by the potential
of lower oil prices. The IMF has from 6% to 8% for underground rewards from investment, either
revised its growth projections for mines.54 This significant increase in directly in helping to exploit new
sub-Saharan Africa to reflect 0.9% royalty payments is likely to create commodity discoveries, or indirectly
negative impact on the continent’s disincentives for future private in the form of developments
GDP growth in 2015 as a result of sector investment, with consequent catering to the increased consumer
the fall in oil prices.53 As a result impact on employment and growth. demand resulting from associated
of the impact of the oil price economic growth. An increase in
fluctuation, the IMF estimates that economic diversity will begin to
non-oil sectors such as construction mitigate these risks, but this will
and retail will drive economic remain a key consideration for
growth, supported by high levels of investors in 2020 and beyond.
public spending.

22 Building the future of Africa

4 Infrastructure shortages will create
opportunities for investment.

Doing business in Africa remains a Electricity

challenge as infrastructure lags well
behind that of the rest of the world, It is estimated that 30% of the
but there are regional differences. African population has access
In Ghana road density is similar to electricity, compared to 80%
to the level in China, and in South worldwide. The economies of many
Africa it is similar to the United African countries are disadvantaged
States.55 The World Bank estimates and challenged by the quality and
that Africa’s infrastructure deficit quantity of the electricity supply. To
requires investment of US$93 achieve the goal of universal access
billion per annum. Recent PwC for sub-Saharan Africa by 2030, a
research suggests that infrastructure total of US$300 billion in private
spending in sub-Saharan Africa will investment is required to close the
reach US$180 billion per annum by electricity infrastructure shortfall,57
2025 at a growth rate of 10% per creating a significant opportunity
annum.56 Significant investment is for investors.
planned in utilities and transport
links, but governments must
overcome significant shortfalls in
available finance for these projects
through engagement with the
private sector.

Sub-Saharan Africa’s power supply

Sub-Saharan Raising it to the Requires at least

Africa’s annual level of lower 125 GW of
electricity middle income additional
consumption per countries (typically generation capacity
person stands at about 700 kWh) and the building of
about 200 kilowatt the associated
hours (kWh) transmission and
networks, at the
2 cost of about $400

Source: Independence Power in Africa report

PwC 23
China is Africa’s biggest A PPP is a government service or
Africa’s growing urban population
trading partner, with will increase pressure on existing private business which is funded
and operated through a partnership
total trade volumes transport networks. Although
between the government and one or
accurate urban congestion data
reaching US$210 for Africa is limited, being rarely more private companies.
billion in 2013, and the reported in the form of a congestion Data provided by the African
index,58 cities such as Lagos in Development Bank shows that PPPs
Chinese Government Nigeria, Dar es Salaam in Tanzania, have fostered development over the
expects that China will Kampala in Uganda, Gabarone in past decade. The majority of PPPs
Botswana, Johannesburg and Cape have taken place in infrastructure
have almost doubled Town in South Africa, and Nairobi developments such as power,
its bilateral trading in Kenya are considered to be some transport, telecommunication, and
of the most congested cities in sub- water and sanitation.
activity with Africa Saharan Africa.
Establishing PPPs in Africa is
to US$400 billion Statistical data projects that challenging because of the business
per annum by 2020, governments in most regions will environment, inadequate legal and
remain in a net borrowing position regulatory frameworks for PPPs, a
by which time it will beyond 2019,59 with increasing lack of technical skills to manage
have increased its total lending constraints being put onto PPPs and unfavourable investor
banks by regulators; so, where will perceptions of some countries.60
direct investment stock the financing for infrastructure
Despite these challenges, there have
on the continent to development come from? The lack
been a number of successful PPPs
of funding by governments and
US$100 billion.61 banks, due to a changing regulatory
on the continent. These include:
the N4 toll road from South Africa
regime, creates significant
to Mozambique; the Maputo Port;
infrastructure investment
the privatisation of the Ugandan
opportunities for the private sector.
telecommunications provider; and
Public-private partnerships water provision in the Dolphin
Coast, South Africa.
With Africa’s infrastructure
development facing challenges
in attracting private sector and
foreign direct investment, PPPs
have reliably funded infrastructure
projects across the continent.

“Despite challenges like the under-developed

infrastructure, we extended our international
Express Network to all countries in Africa. We provide
our customers access to the African markets and
help African manufacturers develop their exports.
Compared to other regions, our Africa business is still
small, but growing above average.”
Dr Dirk Baukmann, CFO, DHL Express Sub-Saharan Africa

Source: PwC – Africa gearing up

24 Building the future of Africa

Infrastructure opportunities
Numerous infrastructure development and investment projects are
currently underway across the continent. Ethiopia is building Africa’s
largest hydroelectric plant, and Kenya, the world’s largest single geothermal
plant.62 The continued improvement of infrastructure will support additional
investments in other real estate development in the retail and office sectors.
A PwC analysis of transport and logistics in Africa found Ghana, Kenya,
Mozambique, Angola and Nigeria have the highest prospects for growth, as
shown in the table below. Criteria used in the analysis included trade and
logistics, trade activity, trade facilitation (for instance, its customs clearance
processes), and transport infrastructure, which are all fundamental to the
efficiency of transportation and logistics. Specific reference was made to
the capabilities of each country’s ports, airports, railways, roads and other
transport infrastructure.63

Trade and logitics Transport










South Africa


Strong improvement Some improvement Stagnation/maringal

expected expected change expected

PwC 25
5 The influence of government policy and
legislation on the decision to invest will
increase, while local partnerships will
become increasingly important.

Political risk is widely regarded Respondents to PwC’s 2014 Africa

as a constraint to investment into Business Agenda report noted
developing countries in Africa.64 the following key challenges facing
The 2014 Fragile States Index65 Africa:
puts five African countries on high
alert,66 while Botswana and South Seven key challenges facing
Africa have the most favourable Africa:
rankings in Africa. Research shows
a direct relationship between • Building hard infrastructure
political stability and inflows such as transport, energy and
of FDI, and with improvements telecoms (especially high-
in stability, FDI into Africa has speed internet);
increased by 5% to US$50 billion
over the past 15 years.67 • Building soft infrastructure
like education and financial
The perceived difficulty of systems;
doing business in Africa is a key
challenge that the continent must • Making the business
overcome in order to encourage environment more investor-
greater levels of investment. In friendly, including through
the World Bank’s Ease of Doing lower tax pressure, higher
Business rankings, 40 of the administrative efficiency and
60 lowest-ranked countries are reduced policy uncertainty;
found in Africa, while only four
(Mauritius, South Africa, Rwanda • Improving transparency at all
and Tunisia) rank among the levels;
60 highest-ranked countries.
However, the report noted that • Facilitating pan-African
sub-Saharan Africa has done operations, including
more to improve regulation than international trade and
any other region.68 Of the top workforce mobility;
ten improving countries globally,
five are from Africa. The business • Providing the required
outlook is normally better in regulation to enable a fair and
countries that have strong competitive environment; and
natural resources wealth and
‘open-for-business’ policies. • Reducing complexity, as there
is no such thing as one Africa,
but numerous market niches.

26 Building the future of Africa

The relationship between Government policy trends
real estate and the economy A general trend across the continent
A property market that expands is continued support from The government
and grows in sophistication is government for real estate of Nigeria made
usually associated with various development. The government of
other indicators that are favoured Nigeria made US$300 million US$300 million
available during 2013 to support
by economic policymakers. Firstly,
real estate development in the
available during
it is a sign of faith in the general
level of socio-economic stability, as country,69 Kenya’s government in 2013 to support real
it attracts investment by the private collaboration with the African
sector and individuals that could Development Bank raised US$10 estate development
otherwise have been channelled billion to support the Konza in the country 69
to lower-risk alternatives (such Technology City project 70 and the
as bonds or blue-chip equities). Ghanaian government is
Secondly, property market considering policy reform to bolster
expansion is associated with the real estate support. The South
development of basic infrastructure, African government, in
such as roads, water and electricity. collaboration with the Development
To the extent that government Bank of Southern Africa and the
facilitates the expansion of such European Union, entered into a joint
infrastructure, a range of economic initiative to raise US$130million to
activities underpinning residential support infrastructure development
construction activity complements in the southern African region.71
increased output in economic
sectors that collectively exhibit a Certain changes in government
low level of import propensity. The policy do not benefit the real estate
result is economic growth without market. In Zambia, for instance, The South African
the promulgated Statutory
any significant balance of payments
compromise – also referred to as Instrument (SI) No 33 of 2012 government, in
inward industrialisation – due to aimed to reinforce the use of collaboration with
the secondary positive effect on the local currency (the kwacha)
domestic manufacturing sectors by stipulating that the Zambian the Development
kwacha must be the sole legal
induced by increased private
tender for all public and private
Bank of Southern
consumption expenditure (flowing
from increased employment domestic transactions. Typically, Africa and the
investors who have financed their
in construction and eventually
augmented by job creation in other Zambian real estate investment European Union,
sectors). developments in foreign currency entered into a
(usually in US dollars) would
Such a circular process of an require the rentals to be received joint initiative to
enhanced construction sector in that currency. This resulted in
great concern for foreign investors.
raise US$130
output filtering through to other
secondary industries broadens The World Bank confirmed that million to support
a developing country’s tax base, Zambia revoked SI No 33 after the
relieving pressure on output and large budget overrun of 2013 saying infrastructure
exports in agriculture and mining that the country valued the private development in the
to secure fiscal and balance of sector input on important policy
payments stability. A government changes. southern African
that wishes to enhance the welfare region.71
of its citizens will utilise this tax
windfall to continue stimulating the
economic cycle of increased output
(in relatively labour-intensive
industries), job creation, higher
levels of household consumption
and rising tax revenues through
the continued expansion and
maintenance of infrastructure.

PwC 27
Property rights
The protection of property rights by government is also a key concern for real
estate investors. Of the 23 countries within Africa that were assessed by the
Property Rights Alliance for the International Property Rights Index 2014,
South Africa ranks highest in Africa (26th globally) in respect of institutional
property rights, followed by Botswana and Mauritius (joint 31st).72 Burundi
got the lowest scoring in Africa (95th globally), while Nigeria got the next
lowest scoring (94th globally). A variety of local factors also impact on
interests in land, for example government land ownership or tribal land

Trade agreements
One of the most important factors in Africa’s future development will be
increasing cross-border trade, both within Africa and with the rest of the
world. According to PwC’s report Africa gearing up, only about 11% of
Africa’s trade is with other African trading partners, compared to Asia, where
half of the trade is between countries in the region. There has been progress
in drafting trade agreements to help overcome regulatory obstacles and
stimulate cross-border trade on the African continent.

Trade agreement Member states

COMESA Common Market for Eastern and 19 East and Southern African
Southern Africa states, including DRC, Egypt and

EAC East African Community 5 East African states, including

Kenya and Tanzania

SADC Southern African Development 15 Southern African state,

Community including Angola, DRC,
Mozambique, South Africa and

AFTZ African Free Trade Zone COMESA, SADC and EAC


ECOWAS Economic Community of West 15 West African states, including

African States Ghana, Nigeria

ECCAS Economic Community of Central 10 Central African states,

African States including Angola and DRC

IGAD Integovernmental Authority on 8 East-African countries, including

Development Kenya

AMU Arab Maghreb Union 5 North African states, including


Source: Websites of listed trade agreements

The trade agreements aim to promote co-operation on economic, political

and security issues and ultimately to make free cross-border trade possible.

28 Building the future of Africa

Foreign government initiatives tax regime is expanding in Africa,
and legislation are crucial for which will benefit investors, provide
investment and growth in Africa. easier access to capital and boost
For example, the Doing Business in liquidity. South Africa introduced New commitments
Africa Campaign is an initiative of REIT legislation in 2013 and 33
the government of the United States REITs are currently listed on the amount to more
of America (US) to strengthen its stock exchange in Johannesburg.78 than US$33 billion
commercial relationships with the Nigeria, Kenya, Tanzania, Zambia
continent of Africa. On 5 August and Ghana have also established to support economic
2014, an additional US$7 billion REIT frameworks to encourage growth in Africa.73
in new financing was approved for investment in real estate.
investment in Africa. In addition
to this, US-based companies also Local partnerships
announced new deals in clean
energy, aviation, banking and Despite the improvements in
construction worth more than government policy and legal
US$14 billion. Together with structures, many countries in Africa
the Power Africa initiative to the remain difficult environments to
value of US$12 billion, the new invest in, as demonstrated by their
commitments amount to more than poor overall position in the World
US$33 billion to support economic Bank’s Ease of Doing Business
growth in Africa.73 In terms of rankings. Many countries also have
Africa’s export markets, the US certain economic empowerment,
African Growth and Opportunity local content or partnership
Act (AGOA) provides preferential conditions for FDI. These rules may
quota and duty free access to the be very restrictive, as in Zimbabwe,
US market for about 6500 African or simply complex to navigate,
products.74 The renewal of this such as in South Africa. In certain
legislation, which is due to expire in countries governments’ legislation
September 2015, is seen as critical is aimed at specific sectors,
for the ongoing development of predominantly oil and gas.
African manufacturing.
Therefore, when deciding to invest
in Africa, it is important that
Tax structures investors explore the potential for
The introduction of special local partnerships. Not only may
economic and industrial this be required by legislation,
development zones (IDZs) aimed but such a partnership could
at stimulating trade in specific also bring local expertise to help
geographic regions has increased identify and overcome difficulties
demand for commercial real estate in doing business in the local real
in these areas. Thirty countries or estate market. Partners can also
over 60%, within Africa, have some help highlight potential changes
sort of special economic zones. Over in government policy, allowing
80% of these economic zones were foreign investors with a limited
created in the past two decades.75 local presence to make informed
For example, South Africa has five decisions on future real estate
established IDZs,76 while Zambia investments.
currently has six multi-facility
economic zones (MFEZs).77 PwC research indicates that 23%
of global asset management CEOs
Government support can also be reported partnering with suppliers.
seen in the introduction of certain In fast-growing regions such
tax reforms aimed at facilitating as Africa, partnering with local
trade and investment in real construction and development
estate. For example, the Real companies is seen as an important
Estate Investment Trust (REIT) way to develop properties.

PwC 29
6 Continued advancement within pension fund,
stock exchange and banking regimes will facilitate
Global pension fund investment, and an increased range of investors
assets are expected will drive demand for real estate investment
to increase from
US$33.9 trillion in
2012 to US$56.5 Established stock exchange, pension fund assets are expected
pension fund regime and to increase from US$33.9 trillion
trillion by 2020.81 developed banking sector
in 2012 to US$56.5 trillion by
2020.81 Private real estate capital
A liquid stock exchange and an will become an important partner
established pension fund regime are of governments. Trends show that
important considerations for real institutional investors are raising
estate investors, as they provide a allocations to real estate assets.
possible ‘exit strategy’.
Many African countries are
While many of the African implementing pension fund
exchanges require further reforms. Nigeria’s pension fund
development in order to be assets grew from US$8.67 billion
internationally competitive, in 200982 to nearly US$30 billion in
progress has been made in a 2014,83 and is expected to triple its
number of areas. The liquidity of assets over the next three years to
African stock exchanges is similar US$70 billion. Namibia’s pension
to that of exchanges in India, fund assets are 80% and Botswana’s
Russia, Mexico or Indonesia, but 40% of their countries’ respective
Africa still accounts for less than GDPs. Kenya’s targeted savings rate
1% of the world’s stock market of 25% of GDP is well within reach
capitalisation. In South Africa, with current savings levels of 13%.84
the market capitalisation of real These funds can play an important
estate companies has grown over role in financing real estate and
ten times, to over US$30 billion, infrastructure development.
over the past decade.79 Over Regulations of the pension fund
US$500 million in new real estate regimes are changing by increasing
funds were listed on African stock alternative asset class limits to
exchanges in the 12 months to support Africa’s growth strategy.
September 2014 and more than Nigeria currently allows 15% of
twice the number of projects were in pension fund assets to be invested
the development phase in the same in real estate, which is set to grow
period compared to 2012.80 as the pension fund industry is
growing 30% annually.85
PwC’s report Asset Management
2020: A Brave New World Banks provide financial
estimates that global alternative infrastructure for real estate
investments, including real estate, development. The top banks in
will grow by 9.3% per year to reach sub-saharan Africa are dominated
US$13 trillion by 2020. This will by the Big Four South African
mainly be driven by high net worth financial giants,86 with total assets
individuals (HNWI), SWFs and worth US$456 billion.87 In the
pension funds. case of Standard Bank, the firm
is targeting 25% of revenue to be
PwC’s research indicates that derived from African countries
private capital and pension fund outside South Africa by 2017.88 The
investments will play a critical Big Four banks in South Africa are
role in funding the growing and well regulated and have created the
changing need for real estate and financial infrastructure to support
supporting infrastructure. Global development in Africa.

30 Building the future of Africa

Sources of funding The private equity
Demand for real estate will be landscape
driven not only by private capital Only 1% of total global private
and pension funds, but also by DFIs,
private equity and SWFs looking
equity funding is invested in Africa. FDIs into Africa was
However, sub-Saharan Africa has
for higher returns. FDIs into Africa seen a surge in investor interest. In around US$55
was around US$55 billion in 2014,
down 3% from 2013. This decrease
the first three quarters of 2014, sub- billion in 2014
Saharan Africa attracted US$1.4
was largely driven by reduced billion in private equity investment
investment into North Africa.89 and US$3 billion in fundraising.90
Research indicates that private
Development finance equity professionals believe that the
institutions market is now entering a new level
of maturity. The graph below shows
DFIs and multilateral development the fundraising and investment in
banks have provided a significant sub-Saharan Africa from 2010 to the
portion of the capital required for third quarter of 2014. This reflects
real estate development historically, the huge demand for investable
but the situation is now changing. assets in Africa and could impact
International and African pension prices.
funds, SWFs and African private
equity and real estate funds are
becoming major players in the Fundraising and investment in sub-saharan Africa 2010 – Q3 2014
sub-Saharan region. New emerging
market investors such as regional 3.5
and Chinese investors have been
bringing liquidity to the continent. 3.0

DFIs require recipients of funding 2.5

and the developers to implement
and maintain good environmental, 2.0
social and corporate governance
principles as well as to comply 1.5
with international anti-bribery
legislation. One of the benefits 1.0
of these requirements associated
with most DFIs is the fact that it is 0.5
generally easier to on-sell an African
development company, as buyers 0.0
2010 2011 2012 2013 Q1- Q3 2014
in the real estate industry look for
well managed companies in order to Fundraising (US$b) Investment (US$b)

reduce the perceived risk of doing

business in Africa. The creation Source: EMPEA
of these high-value stocks creates
a healthy secondary exit market, In the first three
making it easier for investors to sell
their developments. quarters of 2014,
sub-Saharan Africa
attracted US$1.4
billion in private
equity investment
and US$3 billion in

PwC 31
Private equity funds also look to attract institutional investors and
Oil is the main traditionally offer higher returns. Previously, investors in Africa were
predominantly South African, but investors seeking to invest on the
source for the continent are now more global.
creation of SWFs,
One of the main reasons cited by potential investors for investing in Africa is
and an estimated as a result of high rentals – for example, a monthly rate of between US$25 to
58% of SWF assets US$30/m2 for high-end office blocks in cities like Rwanda’s capital Kigali or
Ghana’s capital Accra, compared with below US$20 in Johannesburg, South
worldwide are Africa.91
derived from oil and
Forecasts of a 20% net annual return92 from investing in shopping malls,
gas revenues.94 office blocks or industrial complexes in countries such as Zambia and Kenya
are drawing in new investors.

Private funds are also beginning to respond to market demand in the low-
cost residential sector. For example, International Housing Solutions (IHS)
is a global private equity firm focussing on the development of residential
housing. By September 2014 IHS had raised US$136 million for its new
Fund II to be invested in new single-family homes, multi-family and student
housing in South Africa. The fund will also be actively looking at projects
in other countries, including Ghana, Zambia, Botswana, Namibia and

Sovereign wealth funds

With high annual returns and increases in regional stability, the market has
become open to investment from SWFs seeking diversity in their investment

SWFs are an important factor in economic development in emerging

markets as they are considered asset managers with an investment objective
of seeking strong, stable financial returns. With SWFs having a long-term
investment horizon, a significant portion of their money is invested in
infrastructure projects. With the infrastructure gap noted in Africa, both
foreign and local SWFs are increasing their investment footprint on the

The majority of the African SWFs are commodities-based, as they are

established by resource-rich countries. Oil is the main source for the creation
of SWFs, and an estimated 58% of SWF assets worldwide are derived from
oil and gas revenues.94 As of the third quarter of 2014, the following assets
were held by SWFs in Africa:

Country Assets (US$ billions) Origin

Algeria 77.5 Oil and gas
Libya 66.0 Oil
Botswana 6.9 Diamonds and other minerals
Angola 5.0 Oil

Nigeria 1.5 Oil

Senegal 1.0 Non-commodity
Gabon 0.4 Oil
Mauritania 0.3 Oil and gas
Equatorial Guinea 0.1 Oil

Ghana 0.1 Oil

Source: SWF Institute – Fund Rankings95

32 Building the future of Africa

In addition to these existing funds,
other countries are actively seeking
to set up SWFs. For example, Kenya
plans to establish a SWF mandate
which includes infrastructure
development96 to invest proceeds
from recent oil and gas discoveries.

African countries’ SWFs often

invest on the African continent and
fund infrastructure developments
and investments within Africa. A
recent survey by Preqin showed
that 54% of all African SWFs invest
in real estate, and these funds are
increasingly competing for prime
assets. Demand for real estate also
comes from foreign SWFs that
invest directly in Africa, such as the
China-Africa Development Fund
with its focus on industrial and
infrastructure investment.

With interest from a range of

investor classes and continued high
returns, competition for prime real
estate and infrastructure assets
will increase. Developers and
investors will find it easier to raise
capital in the markets as the local
financial apparatus develops. For
those investors with ready access
to capital, prime commercial
developments will be in high
demand. Investors may also explore
new or previously underfunded
areas of the real estate market in
search of returns as competition for
prime real estate intensifies.

PwC 33
7 Technology will impact business and
building practices as well as consumer
The impact of the rise in technology Across Africa, consumer demand
In 2017, Africa’s is being felt across Africa. Almost for online shopping is less mature
social network 70% of Africa’s population now than in more developed regions.
have a mobile subscription,97 and Based on PwC’s report, Achieving
audience will total there are an estimated 800 million Total Retail, 25% of South African
24.2%, up from mobile phones in Africa, significant
for a continent with one billion
shoppers reported that it had been
less than one year since their first
9.5% in 201259 inhabitants.98 The International online purchase. The category
Telecommunication Union’s 2014 of consumer electronics and
figures note that 20% of the African computers reflected the most online
population were online by the end sales at 55%, closely followed by
of 2014 – up 10% from 2010 and clothing and footwear at 54%. The
396% from a decade ago. home improvement category came
in last at 17%.
Technology will also alter the face
of real estate by creating demand PwC’s Real Estate 2020:
for virtual environments such as Building the future projects that
websites or other online services entire retail chains will disappear
such as online shopping, games from the high streets of Western
or video-streaming services. countries in sectors such as video
Nigeria’s e-commerce market alone and music, as the majority of goods
generates US$2 million worth will be bought online. However, in
of transactions per week. It is Africa traditional shopping cultures,
expected that online transactions a lack of distribution networks and
will exceed US$6 billion by the end poor infrastructure mean it will take
of 2014 – significant if you take longer for the full impact of online
It is expected that into account that only 40% of the
population currently has access
retail to be seen in the real estate
online transactions to the internet.99 Some services
The impact of technology on the
in Nigeria will traditionally delivered in a retail
setting are also moving online.
African continent should not be
exceed US$6 billion A recent article by the Harvard
discounted as it has the potential
to have a significant impact on
by the end of 201499 Business Review100 estimates
more people have mobile banking
the real estate market. Physical
real estate will be required to
accounts than traditional bank
service this huge growth area
accounts in nine countries on the
across Africa. Expanding local
continent – more than double
technology companies and new
compared to 2012.
international market entrants will
Responding to the rise of require office space with high levels
technology globally, some African of connectivity, as well as support
countries established themselves services such as server banks.
as technology hubs, with Kenya at However, technology also has the
the forefront. Konza Technology power to disrupt real estate markets.
City, a US$10 billion real estate For example, demand for and use
project marketed by the Kenyan of retail premises may change
government’s ICT board, is directly as consumers shift to making
modelled on California’s Silicon purchases online, while improved
Valley and is designed to include a connectivity will help companies
technology park, university campus, and other organisations (e.g. higher
science park and central business education providers) to deliver
district.101 Similar developments services to consumers remotely,
across Africa hold opportunities for removing the need for a permanent
developers to secure new tenants real estate presence where security,
in growth industries by providing cost or operational concerns exist.
high-grade accommodation while
offering attractive returns for
34 Building the future of Africa
8 Sustainability will become entrenched in
building design and occupier requirements,
with Africa’s most ambitious countries
changing city design and building practices.

It is estimated that cities contribute Although sustainable building

70% of the world’s energy-related practices are less prevalent in
greenhouse gases while occupying Africa than in the developed world,
just 2% of its land.102 The locations property developers in Africa are
of cities, often in low-elevation already integrating sustainability
coastal zones, make them criteria into prime office buildings,
particularly vulnerable to impacts new cities and individual homes.
of climate change such as rising sea New eco-cities such as Eko-Atlantic
levels. The urbanisation of African in Nigeria and Eco-City in South
countries increases the pressure to Africa, both mixed-use real estate
make buildings more eco-efficient. developments, aim to have near-
It is anticipated that by 2020 the zero waste and carbon emissions.
more progressive African real Green office buildings incorporate
estate markets will move towards renewable energy technologies,
implementing a sustainability rating waste reduction and greater
system. use of natural light to improve
economic, social and environmental
According to Horizon Capital performance.
Commercial Property’s commercial
property investment update for For real estate investors, the move
2014, more and more developers towards greater sustainability
and large corporate tenants are in building designs presents
insisting on green buildings due opportunities and risks. If the
to clear operational and economic pressure to increase a building’s eco-
benefits as well as benefiting the efficiency mounts at a faster rate
corporate’s bottom line. According than the market currently expects,
to the Investment Property then many buildings could suffer a
Databank’s (IPD) 2014 annual large ‘brown discount’ as opposed to
green property indicator for South a ‘green premium’.
Africa, green buildings achieved a
total return of 15.9% on average,
while other buildings achieved only One Airport Square (Ghana)
One Airport Square is considered to be the number one corporate
address in Accra. It is a pristine example of a sustainable building. The
The World Green Building
building includes a number of green initiatives:
Trends report indicates that
South Africa has the biggest
• Concrete overhangs shade the glass façade reducing thermal gain,
share of green buildings on the
continent. It is expected that in • Rainwater is harvested, and
2015, 60% of all new commercial • Parts of the building are
developments globally will be green naturally ventilated through
developments. South Africa is one the central atrium.
of the few countries with a high
reported level of green activity in One Airport Square may be
the residential sector, and 36% of considered as the first green space
developers report planned green in Ghana able to achieve higher
activity for low-rise residential rentals.
projects. This is most likely a
result of the power infrastructure
challenges the country is facing.
This is expected to continue to drive
sustainable solutions.

PwC 35
Developers may also be forced
into pursuing sustainable design
and building practices as a result
of environmental, geographical
and infrastructure factors. Africa’s
climate is varied, ranging from
tropical rainforests to deserts.
Each type of environment presents
challenges for modern building
design and sustainable practices
can contribute to the management
of these various extremes without
relying on climate control and air
conditioning systems, which are
both expensive to run and often

A lack of reliable infrastructure, in

particular power and water, are also
helping to drive sustainable building
practices. Developments are being
built to be low consumers, with
some pursuing on-site production
options. Rainwater harvesting and
renewable sources of electricity
such as photovoltaics (PV) are of
particular interest to occupiers
seeking to mitigate the risk of
unreliable services from national

These factors, together with the

expansion of interest in sustainable
communities and an integrated
place -making approach to
sustainability, will over time become
more prevalent in Africa, starting
with the most progressive real
estate markets.

36 Building the future of Africa

Section 3

Country analysis

An overview
Smart investing in Africa means
you’ll need to understand key
regions and local markets. Africa
is not just huge, it is hugely
diverse. From 2001 to 2014, six
of the world’s ten fastest-growing
economies were in sub-Saharan
Africa.103 This high growth is in
part due to the discovery and
ongoing exploitation of natural
resources: top-ranking Angola
and fourth-ranking Nigeria have
both benefitted significantly from
oil exports. Other factors are at
work too – especially increasing
government stability, continued
industrialisation and growth in

PwC 37
Fourteen years ago, the Economist Levels of development also vary
labelled Africa as the ‘Hopeless enormously. While South Africa has
Continent’, but in 2013 the a nearly US$400 billion economy,
Economist published ‘Aspiring the Democratic Republic of Congo
Africa’ at the same time PwC’s (DRC), despite significant mineral
Economic Intelligence Unit resources and the fourth-largest
predicted that nine African population in Africa, has an
economies would join the ‘7% estimated GDP of less than US$18
growth club’. billion.107 After rebasing its economy
in 2014, Nigeria overtook South
Africa could be on the brink of Africa as the biggest economy in
an economic take-off, much like Africa with a GDP of approximately
China was 30 years ago.104 Foreign US$510 billion.108
investment in Africa has grown
more than six-fold in the last Africa’s demographic dividend
decade105 and 74% of respondents
to PwC’s Global CEO survey106
said they expect to expand their
operations in Africa, while only 13% Population in 2019
of them are currently operating on 1 257.9 million
the continent. All of this creates
opportunities for the real estate

Africa has 54 very different

countries with low connectivity Population in 1999
between them, and there is no 768.9 million
single answer for ‘which countries to
invest in’.

Source: IMF World Economic Outlook


To illustrate this diversity and its

impact on local real estate markets,
this section of the report presents
profiles of the real estate markets of
10 sub-Saharan African countries.
The country profiles illustrate
the types of opportunities and
challenges facing investors in real
estate in some of Africa’s economies.
The countries included in this report
Per capita GDP in South Africa • Nigeria
vs in the DRC (2013) • Kenya
• Ghana

$6,618 • South Africa

• Angola
• Mozambique
• Tanzania
• Namibia
• Mauritius
• Zambia

38 Building the future of Africa

The map alongside highlights the
geographical location of the
countries included in this report.

The definitions of the statistical

indicators used in this report are set
out below:

Global Competitiveness
The Global Competitive Report is
published annually by the World
Economic Forum. The report
assesses the competitive landscape
of 148 economies and provides
insight into the drivers of their
productivity and prosperity. A score
between 1 and 7 is awarded to 12
pillars, where 7 is best. All countries
are compared against South Africa,
which achieved the best overall
ranking on the continent.

Income level
The income level classification
is a World Bank ranking of
countries based on their gross
national income (GNI). Low-
income countries are defined as
economies with a GNI of US$1 045
or less, middle-income countries as
economies with a GNI of between
US$1 045 and US$12 746 and
Political stability indicator Corruption Perception
high-income countries as economies The indicator, calculated by Index
with a GNI of more than US$12 746. the World Bank, measures the The index is calculated by
Low- and middle-income countries perception of the likelihood Transparency International and
are considered to be developing of political instability and/or measures perceptions of how
countries. politically motivated violence. The corrupt the public sectors in
indicator ranges from -2.5 to 2.5. different countries are seen to
The worldwide average is 0 for this be. The index ranks almost 200
indicator and may be used for cross- countries on a scale of 0 to 100,
country comparisons. where zero indicates high levels of
corruption. Developing countries
tend to achieve lower scores in the

PwC 39
Country profiles


Key indicators109
Income level110: Lower middle income

GDP: US$522.64 billion (2014)

GDP growth: 5.4% (2013)

Population: 178.5 million (2014)

Inflation: 8.00% (Dec 2014)111

Political stability: -2.08 (2013)

Corruption Perception Index: 27 (2014)112

Nigeria has a young urbanised The Nigerian real estate sector is

population with a median age growing faster than average GDP at
of 19.113 The United Nations a rate of 8.7% (GDP growth at 7.4%)
(UN) projects that the country’s and is now the sixth largest sector
population will reach 440 million in the economy.114 This is driven
by 2050, becoming the third most by a growing middle-class driving
populous country in the world. demand for residential property
According to the World Bank, development and, indirectly, retail,
Nigeria had an annual estimated industrial and commercial real
average urbanisation rate of 3.75% estate development. HNWIs invest
per year for the period 2010–2015, 25% of their assets in real estate
with a total of 47% of the country’s compared to 18% or less in equities
population currently living in urban and other instruments.
Continued government reforms
have created an enabling
environment for property
development and financing.
Increased allocations of funding to
the asset class by local and foreign
investors are also key drivers of
projected growth in this sector.

40 Building the future of Africa

However, Nigeria remains a difficult Global competitiveness report
country in which to do business and
was ranked 170th out of 189 Institutions
countries in the World Bank’s Doing Innovation
Business rankings in 2015.115 5
Nigeria’s score in the Global Business
3 Macroeconomic
Competitiveness Report issued by sophistication
2 environment
the World Economic Forum is set 1
out alongide. Market size Health and
primary education

The Nigerian real estate market

presents substantial opportunities Technological Higher education
readiness and training
as well as a number of specific
risks for property investors. Financial market Goods market efficiency
There are existing problems with Labour market
access to finance; with a lack of
long-term debt financing and an South Africa Nigeria
underdeveloped mortgage market
(mortgage loans represent less than
1% to the nation’s GDP).116

Cumbersome and time-consuming

Nigeria needs
processes for land acquisition and
in 2013 to US$77billion in 2025. investment of
ownership documentation can
make acquiring land difficult, while
This will form a strong foundation US$100 billion over
for economic development and
land in urban areas is expensive.117
the financial empowerment of the next six years
Building materials and construction
costs are also high and there is
Nigerians, which will in turn for projects such as
increase the demand for real estate
a reliance on expatriate workers
in the country. This will range from roads, electricity, oil
resulting from a shortage of
expertise in the local construction
the existing gap in supply in the and gas, and railways
residential market to increased
industry. Security considerations
demand for retail, commercial and
as a result of local unrest should
industrial real estate development
also be factored into investment
Residential sector
The residential real estate market is
A dearth of infrastructure presents
driven by the growing population
difficulties for potential developers,
in Nigeria, as well as the increasing
as non-availability of basic services
rural-urban migration, strong
such as water and energy has
economic growth and a growing
forced developers to provide these
middle class. It is estimated that
amenities, adding up to 30% to total
Nigeria has a housing deficit of 17
development costs. The Nigerian
million houses estimated at US$363
Investment Promotion Commission
estimates that Nigeria needs
billion. This number is expected to
increase by two million houses per
Annual infrastructure
investment of US$100 billion over
year118 at the current population spending is expected
the next six years for projects such
as roads, electricity, oil and gas,
growth of 2.8% per year.119 to increase from
and railways. The infrastructure The World Bank estimates that US$23 billion in
gaps to be filled across these sectors
are significant and according to
44 000 mortgages were granted in
Nigeria between 2004 and 2010,
2013 to US$77
a study carried out by PwC and with an average size of US$31 500, billion in 2025
Oxford Economics in 2014, annual amounting to a ratio of home loans
infrastructure spending is expected to GDP of 0.6%. Interest charges
to increase from US$23 billion on prime mortgage rates among
commercial banks ranged between

PwC 41
Key industry forecast
2014 2015 2016 2017

Percentage Urban population 51.5 52.1 52.7 53.3


Real Estate Industry Value, 9.16 11.36 13.65 16.45


Real Estate Industry Value 23.22 20.28 16.20 16.75

Real Growth Rate %

Real Estate Industry Value as 3.07 3.44 3.65 3.92

It is estimated that % of GDP
there is 1m2 of retail * Real Estate Industry Figures = Residential and Non-residential Industry Building Values
space per 1 000 Source: Business Monitor International (BMI); World Bank

people in Nigeria,
15% and 25% with maximum for discretionary spending. This
compared to South mortgage rates being between 16% equates to more than the current
Africa’s 480m2 and 30% which, when combined populations of Germany and France
with equity requirements of 10% combined.123
retail space per 1 000 to 20%, heavily restricts market
It is estimated that there is 1m2
people.124 access for low- and middle-income
of retail space per 1 000 people
families.120 Lagos is considered to
in Nigeria, compared to South
be Africa’s second most expensive
Africa’s 480m2 retail space per
property market.121
1 000 people.124 This translates into
significant opportunities, given the
The Nigerian government
current population of 170 million
established the Nigeria Mortgage
people. Numerous malls, such as
Refinance Company (NMRC) to
The Palms Mall and Ikeja City Mall,
encourage and promote home
have opened since 2011, but even
ownership in Nigeria by providing
the recent boom in retail space
financial facilities to mortgage
might not meet Nigeria’s rapidly
Plans are in the providers, thereby improving
growing demand. Plans are already
the availability and affordability
pipeline to spend of mortgage loans to Nigerians.
in the pipeline to spend US$3.5
billion on 25 destination malls in
US$3.5 billion on 25 Financing for the scheme would
be a joint initiative between the
destination malls in Central Bank of Nigeria and the Commercial sector
Nigeria. private sector. The World Bank’s
The Nigerian commercial real estate
International Development
Association (IDA) is providing a 40- market is driven by an influx of
year, zero interest loan of US$300 institutional, foreign and private
million to assist the scheme.122 The business into Nigeria as well as
initial funding will be utilised as the growth of local established
Tier 2 capital while Tier 1 capital businesses and multi-national oil
will come in the form of equity companies across the cities of Lagos,
contributions from the Ministry of Abuja and Port Harcourt.
Finance, the Nigerian Sovereign The availability of office space is
Investment Authority, banks and improving and several A-grade
DFIs. projects are underway. Rental
figures in Lagos remain among
Retail sector the highest in the world, with
achievable rents at more than
Nigeria’s retail development
US$85/m2 per month.125 The office
is driven by the large growing
sector will be stimulated by several
consumer class. It is expected that
projects such as the Wings project
160 million Nigerians could live in
in Lagos and World Trade Centre
households with sufficient income

42 Building the future of Africa

in Abuja. The World Trade Centre are underway to improve the
project is a mixed-use eight-tower mortgage situation with initiatives
complex development that will such as the NMRC, support from
feature AAA office towers, luxury National Housing Fund and Federal
residences and up-scale shopping. Mortgage Bank of Nigeria.
The development, at an estimated
total cost of US$26 billion, will also Government support
include 40 000m2 of retail space and REITs are being promoted by the
400 upscale suites.126 The planned Nigerian Stock Exchange (NSE) so
Wings project by Oando PLC is a set that investor funds can be pooled
of identical 15-storey glass towers, to develop much-needed real estate
which secured long-term financing assets and also provide mortgages.
of US$182 million from RMB The REIT structure was introduced
Westport and Stanbic IBTC. in Nigeria in 2007 and three types
of REITs currently exist – equity
Industrial sector REITs, mortgage REITs and hybrid
The industrial real estate market REITs. Some of the REITs currently
also contributed to the growth in Nigeria are: Union Homes PLC,
of the total real estate market in Sun Trust Hybrid, UPDC and Skye
Nigeria with the expansion of Shelter Fund.
industrial activities. The country
The Skye Shelter Fund REIT and
currently has about 25 approved
Union Homes Hybrid Real Estate
free zones (schemes set up to
Investment Trust were launched in
strategically improve the investment
2007 and 2008 respectively. Union
climate by stimulating export
Homes Hybrid REIT had a market
oriented business activities),127
capitalisation in January 2015
although less than half of these are
of US$ 60 million,128 whilst Skye
Shelter Fund REIT had a market
The growth in the Nigerian middle capitalisation of US$ 10.6 million.129
class population and retail activity
are driving demand for warehousing
units as well as infrastructure- Eko Atlantic
enabled industrial clusters and Near Lagos, the government of Nigeria is busy with an urban
free zones. This can be attributed
to manufacturers and suppliers
renewal exercise. A local construction company, South Energyx
seeking premises from which to Nigeria Limited, is building the new city on land reclaimed from
meet growing consumer demand. the Atlantic Ocean.
Real estate finance The city known as Eko Atlantic, a prime mixed-use property
Financing real estate in Nigeria development consisting of 10 districts, will become home to
takes different forms and innovative 250 000 residents while another 150 000 will be commuting
partnership approaches have to the new offices being developed. Residential and office plots
been undertaken in the different overlooking the ocean will sell at US$1 500/m2. The supporting
subsectors. While the sector is very
fragmented, the retail, office and
infrastructure is currently under
luxury residential sectors have some construction, with the first office
large players, including private building due for completion in
equity firms and the few well known early 2016. The development will
developers supported by local and also be self-sufficient in terms of
foreign banks. The non-luxury
residential sector has limited access
power and energy supply.
to finance and employs different Design Concept courtesy of
financing models such as land
swaps, flexible instalment payments
and off-plan sales in the absence of
a robust mortgage sector. Efforts

PwC 43

Key indicators130
Income level131: Lower income

GDP: US$55.24 billion (2013)

GDP growth: 5.7% (2013)

Population: 45.55 million (2014)

Inflation: 6.02% (Dec. 2014)132

Political stability: -1.15 (2013)

Corruption Perception Index: 25 (2014)133

Kenya has one of the most varied Kenya has a strategic location in
ethnic populations in the world, East Africa, and many companies
with more than 70 distinct ethnic looking to expand in this region
groups.134 Kenya is sparsely are looking at Kenya as a market
populated with 79.2 people per km2, entry point. With its relatively
making it the 140th most densely stable political and economic
populated country in the world.135 environment, Kenya is seen as
According to the World Factbook, one of the easier East and Central
42.3% of Kenya’s population are African countries in which to do
aged between 0 and 14, with only business.137
2.6% aged over 65 years. The
average life expectancy in 2010 was The UK and Europe have
57.9 years but this has increased traditionally been Kenya’s biggest
in recent years. According to the trading partners. The recent
United Nations, it is predicted that slowdown in growth in European
Kenya will have a population of economies has translated into a
52.3 million by 2020. Kenya had an large trade and budget deficit for
urban population of 24% in 2011, the country. This may be offset in
but this percentage is growing fast future by strong regional growth,
with an annual urbanisation rate as Kenya’s trade with the Common
of 4.36% per annum for the period Market for Eastern and Southern
2010 to 2015.136 Africa (COMESA) now outstrips that
with the European Union. Half of
Kenya’s exports are now to African

44 Building the future of Africa

Kenya was ranked 136th out of Global competitiveness report
189 countries in the World Bank’s
Ease of Doing Business rankings in Institutions
2015.138 Kenya’s score in the Global 6
Innovation Infrastructure
Competitiveness Report issued by 5

the World Economic Forum is set 4

Business 3 Macroeconomic
out alongside. sophistication environment
Infrastructure Market size Health and primary
One major risk facing Kenya is its
energy infrastructure, as the supply
Technological Higher education
of power lags significantly behind readiness and training
current demand. However, while
Kenya ranks poorly when compared Financial market Goods market efficiency
with global energy benchmarks, development
Labour market
it performs above average when efficiency
compared to its African peers. The
situation is set to improve as Kenya South Africa Kenya

plans to spend US$1.4 billion on

new geothermal power plants Kenya’s government is currently
with a total generation capacity of looking to the private sector to
280MW.139 address the housing deficit and in
2012, the government introduced
Investments have been made in the new regulations to allow PPPs to
new Nairobi-Thika superhighway. be used to develop new housing
The time taken to travel between projects. Three PPP housing The National
Nairobi and Thika has been reduced
from 2–3 hours to 30–45 minutes.
projects for public servants totalling Housing Corporation
76 000 units are currently in the
Plans are underway to improve development pipeline.141 estimates the current
road connections with Mombasa to
help handle growing freight traffic In the private residential market,
housing shortage at
which is financed by a Japanese urban developers in Kenya are 2 million units.
Official Development Assistance
(ODA) loan. Loans have also been
currently adopting a ‘high density’
approach to scheme design – such
Current production
secured from China, now Kenya’s as apartments – and a bigger plot of new houses is
second-biggest lender after Japan,
to support railway and power
ratio in order to make optimal use of
available land.
estimated at 30 000
development projects. units per year.140
Retail sector
Residential sector
The outlook for the retail sector
The growth in Kenya’s middle class is strong and Kenya is starting
has led to an increase in demand to be seen as an ideal point of
for residential real estate, and entry for launching retail outlets
the speed of urban population and consumer goods distribution
growth currently exceeds the rate into East and Central Africa. The
of development of new houses. improved infrastructure facilitates
Kenya’s state-run National Housing the movement of goods and means
Corporation estimates the current a wider variety is available at lower
housing shortage at 2 million units. prices.
Current production of new houses
is estimated at 30 000 units per Kenya has a growing local market
year.140 with a consumer base whose wealth
is increasing. Only about 16.8% of
the population currently falls into
the middle class, but this is growing

PwC 45
Kenya’s ‘Vision 2030’ includes plans Government support
Nakumatt to improve the efficiency of the
retail market and further increase The government has big plans and
Local supermarket chain potential investment opportunities. Kenya’s ‘Vision 2030’ provides a
Nakumatt’s ‘blue label’ Malls are already surpassing office blueprint for future development.
packaged food line is space in profitability. Some initial success has already
been achieved with institutional
rapidly gaining market and business reforms, which has
share. Nakumatt has ample According to an article published in
the Economist, certain challenges improved the business environment.
opportunity for expansion prevail in the retail market. Retail The government’s trade strategy
in the rest of the East African sales are dominated by the informal looks to encourage greater exports
Community, including sector (80%). Nakumatt, the of processed goods, so there
country’s largest retailer, has only is potential for growth in the
Uganda, Tanzania, Rwanda manufacturing sector.
and Burundi. Fragile and a 2% market share. Foreigners
seeking a foothold in the market
conflict-prone countries in have to be concerned about several Kenya has flexible labour
which consumer demand is barriers. Regional trade policies also regulations and investment laws
that allow foreign investors to
rapidly rising and consumer work against foreign retailers that
seek to rely on imports. Preferential receive the same treatment as local
goods are in short supply, investors. Kenya’s financial sector
like South Sudan and tariffs on goods coming from the
Common Market for Eastern and is considered the most developed
Somalia, are also accessible Southern Africa or the East African in East and Central Africa, which
due to strong historical trade Community, as well as government facilitates access to debt and capital
market funding. However, Kenya
links. protection of local producers of
red meat, dairy products and eggs, has a fairly restrictive tax regime.
mean that imported food products The total tax rate payable by
from further afield often struggle to business is 44.4% and this includes
be competitive. a profit tax of 28.1%.142

While the REIT structure was

Commercial sector introduced in Kenya in 2013, there
The total tax rate Kenya’s office sector is becoming are currently no active REITs in
payable by business saturated. It is expected that office the Kenyan market. A number of
supply will exceed demand by 2016. industry players are in the process
is 44.4% and this The current average rent for office of seeking approval from the Capital
includes a profit tax space is approximately US$20/m2 Markets Authority (CMA) for the
per month. This rental may begin purpose of listing REITs. The CMA
of 28.1%.142 to fall as property owners begin to has approved and licensed five REIT
compete for tenants. Managers; Stanlib Kenya Limited,
Fusion Investment Management
Limited , CIC Asset Management
Limited, Centum Asset Managers
Limited and UAP Investments
Limited .

Key industry forecast

2014 2015 2016 2017

Percentage urban population % 25.2 25.6 26.1 26.5

Construction industry value, 2.7 2.9 3.3 3.7


Construction industry value real 4.81 4.9 6.85 7.53

growth rate %

Construction industry value as 4.5 4.5 4.5 4.6

% of GDP

Source: Business Monitor International (BMI); World Bank

46 Building the future of Africa


Key indicators143
Income level144: Lower middle income

GDP: US$48.14 billion (2013)

GDP growth: 7.1% (2013)

Population: 25.9 million (2013)

Inflation: 17.00% (Dec 2014)145

Political stability: -0.02 (2013)

Corruption Perception Index: 48 (2014)146

Ghana’s land mass is almost Ghana is considered to have

the same as that of the United one of Africa’s most stable
Kingdom, but with a population of governments and was ranked 70th
26 million147 it has less than 50% out of 189 countries in the World
of the number of people. Ghana’s Bank’s Ease of Doing Business
population growth is 2.2% per rankings in 2015.148 Ghana’s
year. Of Ghana’s total population, investor attractiveness is buoyed
51.9% live in urban areas and this by abundant natural resources,
number is growing fast, with an an advanced banking system,
average urbanisation rate of 3.5% economic liberalism and a relatively
per annum. diverse economy. FDI inflows have
flourished in recent years, especially
since the commercialisation of oil
began in 2007.

PwC 47
Ghana’s score in the Global Global competitiveness report
Competitiveness Report issued by
the World Economic Forum is set Institutions
out alongside. 6
Innovation 5 Infrastructure
Infrastructure Business 3 Macroeconomic
sophistication environment
Ghana’s most pressing challenge 2

is the power sector, with the lack 1

of reliable energy being a major Market size Health and primary

constraint to economic growth and
continued real estate investment.
The government has plans to Technological Higher education
address the energy supply gap by readiness and training
increasing its power generation Financial market Goods market efficiency
capacity to 5 000MW, from a development
current level of 2 000MW, within Labour market
the next four years. The challenge
presented by the lack of reliable South Africa Ghana
power also creates investment
opportunities for infrastructure
development in the country. Residential sector
New developments in the housing
In August 2011, the government
market are currently being driven
approved a US$3 billion loan from
by new apartment block complexes.
the China Development Bank. The
These complexes are being funded
facility was the largest ever secured
by foreign investors from territories
by Ghana and has been used to
such as Turkey, South Africa
finance the infrastructure gap.149
and the Middle East,150 catering
However, Ghana only drew down
for increased demand that has
half of the available funds, with
resulted from new oil discoveries.
the remaining US$1.5 billion being
For example, Sekondi-Takoradi,
cancelled in 2014.
the Western regional capital, is
benefitting from the effects of
Some of the limiting factors with
recent oil discoveries in the form of
regard to Ghana’s infrastructure
increased demand for residential
development relate to corruption,
property. Demand is driven by both
insufficient government spending
foreign and local employees directly
on roads (only 1.5% of GDP
connected with oil exploration,
compared to China’s 9%) and a
together with members of the
balance of payments deficit of
local economy providing goods
US$4.78 billion, according to the
and services to this new market.
World Bank.
Increased residential demand has
been met with high-end apartment
developments funded by foreign

48 Building the future of Africa

Retail sector Commercial sector
Ghana’s Accra Mall is dominating Prime office space in Ghana may be
The number of
the retail landscape in Ghana. The of interest to real estate investors. visitors per year to
mall attracts nearly four million Office space rental values are up
visitors per year. Further retail to US$35 to US$40/m2 per month,
Accra mall
developments have been built to
meet this high demand.
with a prime yield of around 10%.153
4 million
Office demand derives from the
The West Hills Mall, a US$93 services that support sectors such
million investment,151 should relieve as the banking, telecommunication,
congestion at the Accra Mall, but professional and diplomatic or aid
investors project that both malls will sectors. New office space in Accra is
soon be at capacity on weekends delivered to a ‘shell and core’ finish,
and a third mall will be required although tenants may now demand
to ease this congestion. The West fit-out as part of lease negotiation
Hills Mall development is a joint as more office developments
project between Delico Property are released to the market and
Developments, owned by South
Africa’s Atterbury Africa, and
competition for new tenants
Office space
Ghana’s pension fund. rental values are
The success of A&C Square in East
Government support up to US$35 to
Legon has confirmed the need for Although Ghana’s demographic US$40/ m2 per
neighbourhood retail centres in profile might not be as favourable
Accra. Melcom Ltd and Maxmart as that of some other African month, with a
Ltd, both local general merchant countries, it makes up for this by prime yield of
retail stores, have capitalised on having a less restrictive business
this emerging demand by opening environment and progressive around 10% 153
stores in almost all the major areas macroeconomic policies. Strong
of Accra. Koala, a local grocery protection of civil liberties improves
retailer, has also responded to this Ghana’s investment attractiveness,
trend by recently opening another as does the country’s developed
shop in the airport area to add to its legal and regulatory framework.
flagship outlet in Osu. On a regional
level, Kumasi and Takoradi, the next Ghana’s labour market is efficient
two most populous cities in Ghana, and the country’s laws make
have no formal retail centres; it relatively easy to appoint or
therefore, opportunities exist for retrench employees – although it
further regional developments. may be quite costly once severance
packages are taken into account.
According to Broll Ghana,
developers will more than double Property rights, however, are poorly
the amount of retail space available protected due to overall weakness
in the country’s capital in the next in the rule of law. Setting up a
two years. The average retail rent company is also a lengthy process
rose from US$60 to US$65 during that involves numerous government The average retail
departments and agencies.
rent rose from
The REIT tax structure has been in
existence in Ghana since 1994. The
US$60 to US$65
HFC Real Estate Investment Trust during 2013 152
(HFC REIT) was started by HFC
in 1995. Financial information for
2013 show HFC REIT held US$8
million in net assets, of which
US$1.8 million was held in land and

PwC 49
Ghana’s construction industry value and growth





5.2 4.3 5.3 5.9 6.4 6.9

2013 2014f 2015f 2016f 2017f 2018f

Value (USDbn) Real growth rate (%) Value as % of GDP

Source: Business Monitor International (BMI)

Meridian City Project

The Meridian City Project is a US$120 million mixed-use
development located in Ghana’s
main port city, Tema. The project
is the first of its kind – a privately
developed commercial centre
with 20 000 m2 of retail space, a
10 000 m2 A-grade office block
and a hospitality component in
the form of a three-star business
Design Concept courtesy of Retail & Leisure International

50 Building the future of Africa

South Africa

Key indicators154
Income level155: Upper middle income

GDP: US$350.6 billion (2013)

GDP growth: 1.89% (2013)

Population: 52.98 million (2013)

Inflation: 5.80% (Dec 2014)156

Political stability: 0.06 (2013)

Corruption Perception Index: 44 (2014)157

The United Nations World South Africa is seen as an attractive

Populations Prospects report emerging-market alternative for
estimates that the South African investors that are concerned about
population will increase to 72.9 economic and political turmoil in
million by 2050. Of the current regions such as Eastern Europe.159
population of around 53 million, The World Economic Forum
62% live in an urban setting. This classifies South Africa as a safe
is growing at a rate of 1.21% per investment platform for expansion
annum.158 into Africa with its number one
ranking in auditing and reporting
standards in the world.

PwC 51
South Africa was ranked 43rd out of Global competitiveness report
189 countries in the World Bank’s
Ease of Doing Business rankings Institutions
in 2015.160 South Africa’s score in 6
Innovation Infrastructure
the Global Competitiveness Report 5
issued by the World Economic
Business 3 Macroeconomic
Forum is set out alongside.
sophistication 2 environment
Market size Health and primary
Key factors supporting the country’s education
position as the most developed in
sub-Saharan Africa and a member Technological Higher education
of the BRICS countries161 are its readiness and training
well-developed financial, legal, Financial market Goods market efficiency
communications and transport development Labour market
sectors, as well as an open trade efficiency
policy and a comparatively strong
domestic market. However, South South Africa
Africa still faces the triple challenge
of poverty, unemployment and
income inequality. To address this,
the government introduced what The NDP offers a long-term The transport sector is a key
is called the National Development perspective (up to 2030), sets out contributor to South Africa’s
Plan (NDP). a desired goal and identifies the competiveness in global
roles different sectors of society markets. The country’s transport
need to play in reaching that goal. infrastructure is modern and among
The South African The success of the Renewable the most developed in Africa,
government has a Energy Independent Power
Producer Plan, part of the NDP, is
having received a substantial boost
from projects associated with the
budgeted expenditure key to the roll-out of big projects 2010 FIFA World Cup.
of about US$80 in the US$72 billion infrastructure
development plan, together with The South African government has
billion over the next the successful completion of the two a budgeted expenditure of about
US$80 billion over the next three
three years to boost large coal power stations, Kusile and
Medupi, which are currently under years to boost both existing and new
both existing and new construction. major infrastructure projects.162
major infrastructure One of the biggest risks in the Residential sector
projects.162 economy relates to the energy crisis
Due to massive urbanisation,
that began in 2008 and re-emerged
in 2014/15. Energy capacity has expected to reach 70% by 2030,
the housing backlog in South Africa
The government- become the government’s priority
and Eskom, the government-owned is rising. Demand for affordable
owned power utility, power utility, is undertaking a housing continues to outstrip
supply for low- and middle-income
is undertaking a capacity expansion programme
to the value of US$33 billion that families. In 2012, the housing
capacity expansion will add 17GW of new generating backlog was estimated at 2.1 million
units.163 By 2014, the backlog stood
programme to the capacity to the national grid by
2019. In the short term, the phased at 2.3 million units, a figure that
value of US$33 introduction of new units at Medupi is estimated to grow by 178 000
units each year.164 Since 1994,
billion that will (from mid-2015 onwards) may
also alleviate some of the power the government has been able to
add 17GW of new shortages. However, until these provide 2.68 million units.165

generating capacity to shortages are resolved, South Africa

is expected to experience regular
the national grid by power cuts, with a potentially
2019 significant impact on industry and
residential occupiers.

52 Building the future of Africa

Despite this demand, the residential The high demand for prime real
sector is the least attractive to estate space is set to continue,
investors in the overall property with an increasing number of
market.166 Most forecasts suggest international retailers seeking to
modest growth in the short to enter the market. Sandton City’s
medium term, in line with slower Diamond Walk development, a
economic growth and higher US$20 million expansion project,
inflation expectations. The buy-to- is set to be home to top brands
let market is showing weak growth such as Jimmy Choo and Salvatore
and overall yields are low. Ferragamo.171

Pressures of increased urban density With an estimated broadband

will start to present regeneration penetration of between 11% and
opportunities, such as in areas 12% in South Africa, compared to
within the Johannesburg Central 75% worldwide, the potential for
Business District (CBD) where old online retail is considered a great
commercial office buildings are opportunity taking into account the
being transformed into residential government’s objective to have a
premises with varying levels of 100% penetration rate by 2030.172
success. This regeneration in Growth in online retail is driven
Johannesburg has begun to attract by more attractive online pricing,
residents back to the city centre. increased fixed line and mobile
Eighty per cent of apartment sales broadband penetration, increased
in the CBD were to investors five confidence in online banking and
years ago, but the majority of recent the fact that traditional retailers
sales have been for own use.167 This such as Woolworths and Pick n
demand for space will lead to an Pay are now providing online
increase in brownfield and in-fill retailing.173
developments, together with the
regeneration and re-purposing of This may impact on the types of
existing premises. premises demanded by retailers,
with an increase in storage and
Retail sector distribution hubs and potential
cooling of demand for new retail
The retail sector is leading the space. However, this is likely to
South African property market. only impact the market in the
South Africa’s middle class, with medium to long term, as the rise of
an average disposable salary of internet shopping is dependent on
US$1 100 per month in the formal supporting infrastructure, changing
sector, is developing fast.168 Demand traditional shopping habits and
for consumer goods has increased, market access for low-income
and this demand has been met by an families.
expanding retail sector. According
to the South African Property
Commercial sector
Owners Association (SAPOA), the
retail sector outperformed other The office sector’s vacancy rate
sectors last year on the back of for Q4 2014 was 11.1%, which is
significant capital growth and stable high for the sector174, with recent
vacancy rates. developments increasing pressure South Africa’s retail
on rent and vacancy rates for lower-
South Africa’s retail space is grade office space.
space is reaching
reaching maturity with formal retail maturity with formal
Inner-city offices are converting
penetration at 65% to 70% and is
likely to peak at 80%169 with the to residential space, but this has
retail penetration at
addition of Mall of Africa in the new limited viability. Office rental 65% to 70% and
averaged between US$14.00
Waterfall mixed-use development
in Gauteng. Space growth is mainly to US$17.00/m2 per month in
is likely to peak at
driven by new developments (70%), Johannesburg and US$10.00 to 80%169
as extensions account for only 30% US$14.00/m2 per month in Cape
of additional space.170 Town.

PwC 53
Government support
The listed property South Africa has one of the most sophisticated business environments in
sub-Saharan Africa and relatively well-developed government institutions.
sector has been the The low cost of starting a business, estimated at 0.3% of per capita income,175
top performer of the means that entrepreneurs and developers can respond quickly to developing
four traditional asset
classes over the past The country is also acknowledged for its resilient and stable banking sector.
The tax and financial regulatory climate is robust, and the tax regime is
15 years and has progressive. Special development zones introduced by the Department
outperformed equities of Trade and Industry (DTI) make provision for tax concessions for
infrastructure development in certain areas of the country, resulting in the
by 6.4% and bonds formation of new industrial zones, such as Coega, Saldanha Bay and Dube
by 13.3% per year Tradeport.

South Africa introduced a REIT framework in 2013, and currently 33176

REITs are listed on the Johannesburg Stock Exchange (JSE). Growthpoint,
with a market capitalisation of US$5.6 billion as at January 2015, is South
Africa’s largest listed REIT.177 According to the SA REIT Association, the
listed property sector in South Africa has been the top performer of the four
traditional asset classes over the past 15 years and has outperformed equities
by 6.4% and bonds by 13.3% per year.

Key industry forecast

2014 2015 2016 2017

Percentage Urban population % 64.3 64.8 65.3 65.8

Real estate industry value, 5.11 6.66 8.07 9.31


Real estate industry value real 3.09 4.50 2.96 4.07

growth rate %

Real estate industry value as % 1.61 1.63 1.63 1.64

of GDP

Source: Business Monitor International (BMI); World Bank

Zendai Modderfontein is believed to be the next Sandton and is set to overtake Africa’s richest
square mile in the next 15 years.
The project is estimated at
US$8.5 billion and is expected to
have 12 million m2 of development
capacity, including 100 000
homes, 6 km2 of open space and a
complete transportation network
with rail and express roads.

Design Concept courtesy of Heartland

54 Building the future of Africa


Key indicators178
Income level179: Upper middle income

GDP: US$124.2 billion (2013)

GDP growth: 4.1% (2013)

Population: 21.47 million (2013)

Inflation: 7.48% (Dec 2014)180

Political stability: -0.37 (2013)

Corruption Perception Index: 19 (2014)181

Angola has the third-largest 2002. These severe supply-demand

economy in sub-Saharan Africa imbalances present a clear market
and presents opportunities with its for new real estate development.
growing middle class. The country
has an urban population of 59.2% Angola’s heavy reliance on oil
and this is growing by 3.97% exports exposes the country’s
annually.182 economy to fluctuations in global
oil prices. Oil production and
Luanda, Angola’s capital, has supporting activity account for 45%
growing middle and upper classes, of GDP and 95% of the country’s
making the country an attractive export revenue. Angola is currently
hub for commercial real estate China’s second biggest supplier
investors. According to Mercer’s of oil behind Saudi Arabia. In the
Cost of Living Index of 214 cities, wake of recent fall in oil price, GDP
Luanda overtook Tokyo in 2013 as growth is expected to slow. The
the world’s most expensive city for Government revised its budget in
expatriates. This is partly due to a January 2015 to reduce planned
rapid influx of oil money and partly spending by US$14 billion to
due to a limited supply of goods as reflect the forecast reduction in oil
the country continues to recover revenue.183
from the civil war which ended in

PwC 55
Angola was ranked 181st out of Global competitiveness report
189 countries in the World Bank’s
Ease of Doing Business rankings in Institutions
2015.184 Angola’s score in the Global 6
Competitiveness Report issued by Innovation 5 Infrastructure
the World Economic Forum is set 4
Business Macroeconomic
out alongside. sophistication
2 environment
Infrastructure Market size Health and primary
Angola’s electricity sector is among education

the least efficient in Africa. A 2010

World Bank survey found that Technological Higher education
readiness and training
Angolan firms endured six power
outages a month, lasting on average Financial market Goods market efficiency
14 hours.185 Businesses also reported development Labour market
waiting an average of seven days efficiency
for a new electricity connection.
The government recognised these South Africa Angola

problems and as a result, public

investment as a percentage of
fiscal revenue increased from 15% A major obstacle for investments Residential sector
in 2012 to 20% in 2013,186 and it into industries other than oil is the
poor quality of Angola’s transport Luanda’s residential market is
is anticipated that approximately
infrastructure. Infrastructure was booming and a two-bedroom
US$16 billion will have been spent
severely damaged by the 27-year- apartment with access to a
in the energy sector by the end of
long civil war, while periodic generator, water tank and secure
flooding during the rainy season parking can cost between US$7 000
also takes its toll. Despite this and US$10 000 per month.189 A
weakness, Angola is one of very current trend is that the middle
few African countries that do not class are looking for cheaper homes
face a significant infrastructure outside the city and are moving
funding gap. Thanks to its large oil to Chinese-built housing projects
reserves, Angola has the financial such as Kilamba Kiaxi. However,
resources to address structural much of the local infrastructure
issues and to rebuild the country’s remains underdeveloped and newly
shattered infrastructure, expand the built social housing estates remain
economy, and modernise and better vacant. The slow take-up of the
connect its cities. In the short term, properties is also blamed on their
however, Angola’s ability to address high cost, between US$120 000 and
its infrastructure issues may be US$200 000 each, well out of reach
hampered by the impact of oil price of the average Angolan.190
fluctuations on the economy.
Retail sector
A key factor in infrastructure Angola’s retail market is still in its
funding is Chinese investment infancy, with an undersupply of
in Angola. Thanks to the modern, high-quality retail space.
‘infrastructure for oil’ trade Increased consumer demand has
agreement, Angola has become one led to the development of new
of China’s main suppliers of oil.188 malls with luxury occupants.
In turn, China has been making The Sky Gallery, a US$50 million
significant strides in changing the investment,191 will include high-end
Angolan infrastructure landscape retailers like Prada, Armani and
via the construction of large Gucci brands.
railways, roads and housing projects
in areas like the city of Kilamba

56 Building the future of Africa

Some of the other recent The government also approved
noteworthy retail developments laws to regulate stock and debt
include Luanda Shopping, which markets and confirmed a reduction
forms part of the Comandante Gika of the income tax burden on mining
mixed-use development in Alvalade, companies from 35% to 25%,
as well as Kinaxixi Shopping Centre resulting in additional investment in
in Minaxixi MDN Complex, Luanda. the sector by De Beers.194

Commercial sector The government established a SWF,

Fundo Soberano de Angola, in 2012
Angola’s office space is experiencing and has ring-fenced the equivalent
a sustained period of demand in of oil revenues from 100 000
Luanda, driven by oil companies barrels per day for priority projects
and banks. The demand for quality and essential infrastructure. As at
office space remains high and it is September 2014, the fund had total
estimated that rents for prime office assets of US$5.5 billion.195
space are as high as US$150/m2
per month, contributing to Luanda Given that Angola has the potential
having some of the highest office financial resources to overcome
occupancy costs in the world.192 infrastructure and business
environment challenges in the long
Government support run and to put itself in a strong
Angola’s business environment has position in the region, Angola
not kept pace with international remains a significant focus for real
developments193 . Together with estate investors.
Angola’s low position on the World
Bank’s Ease of Doing Business
Index, the country is placed 181st
out of 189 countries for the ease of Comandate Gika
starting a business, which takes no
The biggest real estate project in Angola with 345 000m2 of
less than 66 days.
construction, which makes the project one of the biggest real
Angola is well aware of its current estate projects in Africa.
business challenges and the
government has carried out major The project includes 145 000m2 of retail space consisting of 215
reforms on regulations impacting shops, 1 food supplier, 6 cinemas, a health club, 2 000 parking
business operations. Government lots, 136 apartments ranging from 260m2 to 298m2, 67 600m2
reforms in Angola are also targeting of prime office space and the five-star VIP Grand Luanda hotel.
the improvement of the private
sector. In 2013 the government
introduced a 10% consumption
tax levy on oil companies, and a
presidential decree was issued to
reduce and eliminate the custom tax
burden on imported goods used as
main inputs for national production.

PwC 57

Key indicators196
Income level197: Low income

GDP: US$15.63 billion (2013)

GDP growth: 7.1% (2013)

Population: 25.83 million (2013)

Inflation: 1.93% (Dec 14)198

Political stability: -0.27 (2013)

Corruption Perception Index: 31 (2014)199

Mozambique has a fairly young Mozambique’s economy has been

population with a median age growing at an average of between
of 16.9 years;200 45.3% of the 7.5% and 8% over the last decade
population are younger than and its future economic potential is
14 years.201 With an average life now underpinned by vast natural
expectancy of 52.6 years, only 2.9% resources. These natural resources
of the population are older than 65 are primarily coal and natural gas
years. deposits that have been either
recently discovered or have recently
Of the countries considered in entered production. However, it will
this report, Mozambique has the take some time for the economic
second lowest level of urbanisation, benefits to spread through the
at 31.2%. This share of the total whole economy. Despite its natural
population is growing by 3.05% resources and fast economic
per annum,202 and this urbanisation growth, Mozambique is developing
rate is set to accelerate further from a very low base and remains
with recent gas discoveries. The among the lowest-ranked countries
concentration of business and in the world based on GDP per
political power as well as the urban capita,203 making private investment
population in Maputo means that imperative.204 Key challenges for
it will continue to be the hub for economic development include
development. The northern and the need to ensure diversification
central regions of Mozambique will of the economy in the light of the
benefit from major infrastructure upcoming resource boom, the
projects over the medium term. creation of infrastructure to meet

58 Building the future of Africa

rising demand and lack of human
capital. Mozambique’s current
expenditure on education amounts
to 5% of GDP205 compared to 7.3%
in the United States.206

Mozambique has a favourable

geographical location as a natural
entry and exit point for global trade
to its landlocked neighbours and
the northern part of South Africa,
but currently this flow of goods will
continue to congest the country’s
transport channels.

Mozambique was ranked 127th out Global competitiveness report

of 189 countries in the World Bank’s
Ease of Doing Business rankings Institutions
in 2015.207 Mozambique’s score in 6
the Global Competitiveness Report Innovation Infrastructure
issued by the World Economic 4
Business Macroeconomic
Forum is set out alongside. sophistication
Infrastructure 1

While still struggling to rebuild its Market size Health and primary
infrastructure two decades after the
end of a civil war, Mozambique is
also seeking to respond to a surge in Technological Higher education
readiness and training
demand for infrastructure resulting
from recent natural resource Financial market Goods market efficiency
discoveries. development
Labour market
Most of Mozambique’s electricity
South Africa Mozambique
capacity is exported to South Africa.
Although less than a quarter of
Mozambicans are connected to the
local electricity grid, the country Residential sector
has insufficient capacity to meet The residential sector is one of the
increasing industrial and domestic more important real estate sectors
demand. The national electricity in Mozambique. It is mainly driven
provider expects electricity demand by the high demand and limited
to grow by around 15% to 20% per supply at the top end of the market.
annum over the next few years on Developers, attracted by rising
the back of a boom in the coal and prices and rentals particularly in
natural gas industries, while supply central Maputo, are entering the Transport projects
will only grow by 10% per year market with new developments
increasing the electricity shortfall. targeting high-end buyers. There worth US$17 billion
To address this, power projects is very limited current investment are planned
worth US$12 billion are in the in the low-cost housing sector, as
pipeline.208 superior returns can be achieved on
high-end projects. Low-cost housing
Transport projects worth US$17 developers are also put off by the
billion are also planned. This need to build the supporting major
includes increased rail links to transport and services infrastructure
ports and expanding port capacities to service new sites, the lack of
to allow for greater exports of government support for low-cost
agricultural goods and coal. housing schemes, and the limited
ability of low-income households to
access affordable finance.209

PwC 59
Retail sector Trade and investment in
Mozambique are undermined by a
The Mozambican formal retail number of factors such as arbitrary
sector is small as a result of the tax policies, minimal enforcement
significant size of the informal of property rights, and weak rule of
sector. Most of the retail activity is law.
The World Bank driven by South African retailers
such as Shoprite, Woolworths and
estimates that it takes Mr Price. Retail investment and
Private ownership of land is not
permitted, creating additional
230 hours, or 29 development are being stimulated challenges for prospective real
by the rising need for goods.
eight-hour working estate developers and investors.
Land tenure in Mozambique is
days to become tax Commercial sector currently obtained through ninety-
compliant.211 The office sector in Mozambique nine year usage rights or acquisition
is experiencing a mild uplift, with of buildings, infrastructure and
prime office rentals increasing from existing improvements on the
US$25 to US$30/m2.210 This uplift land. Foreign individuals and
is mainly as a result of interest from corporate entities can acquire land
diplomatic/aid sectors, banking and rights provided that they have an
telecommunication firms. investment project approved and,
being individuals, have been living
Government support in Mozambique for more than
five years. For corporate entities,
Mozambique is still facing they have to be incorporated or
challenges with its governance registered in Mozambique.
and corruption. Corruption
and bribery are perceived to be There are full property rights for
widespread. Slow decision-making Mozambicans and foreigners over
by government and high levels of the buildings, infrastructure and
perceived ‘red tape’ are also barriers improvements erected on land.
to doing business in the country. In 2007, new legislation was
The World Bank estimates that it introduced concerning real estate
takes 230 hours, or 29 eight-hour timeshare investments, which has
workings days, to become tax opened up investment opportunities
compliant.211 for foreign property investors.

Mixed-use development in Mozambique

Atterbury Africa is planning three mixed-use property developments in the cities
of Beira, Pemba and Nacala.
Pemba Retail is a 7 600m2
convenience center anchored
by Shoprite. The development
is planned to be completed by
the end of 2015.

Design Concept courtesy of

60 Building the future of Africa


Key indicators212
Income level213: Low income

GDP: US$33.23 billion (2013)

GDP growth: 7% (2013)

Population: 49.25 million (2013)

Inflation: 4.80% (Dec 2014)214

Political stability: -0.15 (2013)

Corruption Perception Index: 31 (2014)215

Tanzania is one of sub-Saharan Development Bank, Dar es Salaam,

Africa’s fastest-growing economies the country’s capital, will see
and is expected to become one of population growth of more than
the fastest-growing economies 80% by 2025,217 making it the
of the world, but is still small in fastest-growing city on the African
absolute terms with a market size of continent.
about US$33.23 billion. Key drivers
for anticipated growth will be: The majority of Tanzania’s
population, 44.6%, are younger
• Recent natural gas discoveries; than 15 years and only 2.9% are
older than 65 years,218 giving
• The growth in industrial
Tanzania a relatively young
subsectors such as construction,
population. The country’s total
mining and manufacturing216;
population is growing at a rate of
• Regional integration; 2.8% per year.
• Reforms that improve the ease of
To address relatively poor
doing business; and
development progress and
• A long-term stable democracy. high poverty levels within the
population, the government has
Tanzania has a predominantly called for more active private sector
rural population with only 26.7% participation in its Second National
of the population urbanised – the Strategy for Growth and Reduction
lowest of countries profiled in this of Poverty, MKUKUTA II, which was
report. This urban population is initiated in 2010.219
growing fast at a rate of 4.77% per
year.216 According to The African

PwC 61
The country’s diverse natural Infrastructure
Transport and resources provide the basis for
Infrastructure in Tanzania has
utilities infrastructure attracting investment, earning
foreign currency and supporting witnessed impressive investment
projects worth economic growth. Tanzania is a in recent years and there is
more to come. Transport and
US$19 billion are in significant producer of gold and
diamonds. Tanzanite gemstones, utilities infrastructure projects
the pipeline. coal and uranium oxide have the worth US$19 billion are in the
potential to become fast growing pipeline. Improvements to local
mining subsectors. infrastructure are also expected to
have a positive impact on residential
There are positive signs that house prices.
The construction of a Tanzania will stay on a favourable
Increased development will lead
growth path in the long run and
new US$10 billion establish itself as a viable alternative to greater congestion at the port of
port at Bagomoyo to Kenya as a gateway to the East Dar es Salaam. The construction
of a new US$10 billion port at
African region.
will help alleviate Bagomoyo will help alleviate
congestion once it Tanzania was ranked 131st out of congestion once it becomes
operational in 2017.221
189 countries in the World Bank’s
becomes operational Ease of Doing Business rankings
in 2017.221 in 2015.220 Tanzania’s score in the Of Tanzania’s population of around
49 million, about 20% currently
Global Competitiveness Report
issued by the World Economic have access to electricity. Improving
Forum is set out below. electricity supply and distribution
will assist the country in attaining
higher levels of economic growth.
Global competitiveness report Tanzania in 2013 produced about
800MW of electricity,222 and total
Institutions output is expected to exceed 3GW
Innovation 5 Infrastructure by the end of 2015 as various power
4 projects come on stream. The
Business 3 Macroeconomic increase in capacity will be enough
sophistication 2 environment to meet increased domestic demand
1 and stimulate the manufacturing
Market size Health and primary
sectors as well as providing a
education surplus for export.223

Technological Higher education

Residential sector
readiness and training Tanzania’s real estate market is
Financial market mainly focused on the residential
Goods market efficiency
development Labour market property sector. The government of
efficiency Tanzania owns the majority of the
residential property units, meaning
South Africa Tanzania
there are fewer opportunities for
home ownership at present. The
gap between demand and supply
of houses in Tanzania creates a
significant opportunity for real
estate developers. It is estimated
that the housing shortage is close
to 3.8 million units, growing by an
additional 200 000 units per year.225
This is coupled with an increasing
demand for housing amongst
It is estimated that the housing shortage is close low- and middle-income families,
although access to finance remains
to 3.8 million units, growing by an additional a major constraint on the market.225
200 000 units per year.225
62 Building the future of Africa
The Government of Tanzania has holding company, Turnstar Holdings Government support
already secured a US$104 million Limited, the company intends to
expand its existing tenant mix Tanzania’s historically government-
loan from a consortium of financial
within retail, luring additional led economy is now more market-
institutions to assist civil servants to
corporate organisations to take based but remains hindered by weak
fund housing costs.
up office space in the Mlimani property rights. Land in Tanzania
In the private market, high-end Office Park. This would also bring is officially government property
beach-facing properties in Oyster additional businesses, visitors and and can only be leased from the
Bay, the Masani Peninsula in Dar es residents to Mlimani City, increasing government for 33, 66 or 99 years,
Salaam and Lake Victoria shore in the need for hotel accommodation. depending on its use. However,
Mwanza are obtaining the highest Plans are also being drawn up to annual land rentals are relatively
rents. expand the mall by an additional low and new legislation gives the
10 000m2. lessee first right of refusal to extend
the lease when it expires.
Retail sector
Tanzania’s retail sector is set for
Commercial sector Recent government reforms have
take-off. As in other low-income Most of Tanzania’s office market been aimed at establishing a reliable
African countries, consumers activity is located in its capital. In system of transferring property
focus on price and availability.226 recent years, office space that has rights and have been cited as one
Supermarkets are becoming been developed has achieved full of the reasons for continued real
more popular for higher-income occupancy. However, tenant re- estate development growth in the
Tanzanians and expatriates seeking locations and ongoing construction country. To stimulate economic
variety and more sophisticated may begin to have an impact on activity and further boost the
products. Large retail schemes occupancy levels. country’s real estate market, the
and smaller retail centres are government has also fostered a
being developed near up-market The strength in leasing activity more stable and predictable fiscal
residential areas such as Mikocheni, of new office space demonstrates investment regime, and has signed
Oyster Bay and Msasani. the significant demand for quality several double taxation agreements
office space in Dar es Salaam. and multilateral and bilateral
South African retailers such as, It is estimated that the average agreements.
Game, Woolworths and Kenya’s rental for premium office space is
Nakumatt are operating in US$21/ m2 per month, providing an Regulations have also introduced
Tanzania. Up to 80% of the products income yield of 9%.227 In the past, REITs to the country and the
of these stores are imported through due to the scarcity of office space introduction of the Unit Titles Act,
the port of Dar es Salaam. in the capital, some residential a condominium law, now allows
flats in prime areas of the city have for a multi-storey building to be co-
The country’s biggest shopping been converted into commercial owned.228
mall is the 19 000m2 Mlimani City properties. In recent years demand
in Dar es Salaam, and this is also patterns have begun to change, with The REIT structure has been in
the country’s first air-conditioned some businesses relocating to new existence in Tanzania since 2011,
mall. The mall was opened during office development outside the city when the Capital Market and
November 2006 and according centre to avoid traffic congestion. Securities Authority put in place
to the annual report of the mall’s the regulatory framework to enable
capital raising to finance real estate
projects through REITs. To date, no
REITs have been established in the

PwC 63

Key indicators229
Income level230: Upper middle income

GDP: US$13.11 billion (2013)

GDP growth: 5.1% (2013)

Population: 2.3 million (2013)

Inflation: 4.76% (Dec 2014)231

Political stability: 0.93 (2013)

Corruption Perception Index: 49 (2014)232

Namibia, with its relatively Economic growth will be driven

sophisticated governance and by capital-intensive projects in the
regulatory structures, has mining and infrastructure space,
managed to attract the attention of while key exports such as diamonds
international investors as a stable and uranium will benefit in cases of
country in which to invest. improved market demand.235

Namibia has an urban population The Namibian economy remains

of 38.4%, which is growing at a rate closely tied to the agricultural sector
of 3.14% per annum.233 Windhoek, and with continued climate change,
the capital, is Namibia’s largest city. variations in weather patterns
Two thirds of Namibia’s population pose substantial risks. The impact
are younger than 55 years and the of adverse weather conditions on
country has a median age of 22.8 agriculture poses potential risks to
years.234 growth, inflation and trade.

64 Building the future of Africa

Namibia was ranked 88th out of Global competitiveness report
189 countries in the World Bank’s
Ease of Doing Business rankings Institutions
in 2015.236 Namibia’s score in the 6
Global Competitiveness Report Innovation 5 Infrastructure
issued by the World Economic 4
Forum is set out alongside. Business 3 Macroeconomic
sophistication 2 environment

Infrastructure 1

Market size Health and primary

Namibia is considered to have education
great potential; however, in order
to attract large amounts of foreign
Technological Higher education
investment, the country must readiness and training
seek to bridge gaps in primary
infrastructure, especially in the Financial market Goods market efficiency
areas of oil and gas, agriculture, Labour market
mining and renewable energy. efficiency

South Africa Namibia

According to RMB infrastructure
spending is set to be the biggest Namibia’s port
contributor to the country’s GDP
growth of 4.5% during 2015.237
Residential sector authority will start
The boom in the infrastructure A dearth of mid-range housing the development
sector was mainly driven by the stock has driven up house prices
government’s Targeted Intervention for middle-class buyers in the of the US$365
Programme for Employment and capital Windhoek. According to million Southern
Economic Growth (TIPEEG), which First National Bank (FNB), the
has now ended. In part as a result average price for a small house Africa Development
of this infrastructure expansion, it is US$22 000; US$48 000 for a Community Gateway
is estimated that between 2014 and medium-sized house and US$82
2023, the construction industry will 000 for a large house. There are Port
grow by 10.3%.238 large volumes of properties being
developed and sold at below
Namibia’s port authority will US$175 000, while there is also high
start the development of the activity in the US$300 000 region
US$365 million Southern Africa for luxury houses.
Development Community Gateway
Port, which may become a new Demand for Namibian real estate
gateway to sub-Saharan Africa. is also influenced by South
African and Angolan investors in
Industrial sector recreational real estate in areas such
as Swakopmund and Windhoek.
The current industrial market However the economic slowdown
in Namibia is mainly focused on
providing warehousing space as
in the South African economy
and laws restricting currency
The livestock sector
a result of the significant imports from leaving Angola has led to is estimated to
and exports going through
Namibian ports. Namibia is also
lower demand from these two key
neighbouring countries.
contribute 70%
experiencing positive development to the agricultural
in its mining and manufacturing
industries. There is also demand in
According to Pam Golding
Properties, farms for sale in Namibia
sector of Namibia’s
Swakopmund and Walvis Bay. are extremely popular. This is economy.239
mainly driven by the fact that 46%
of the country’s total surface is
suitable for livestock. The livestock
sector is estimated to contribute
70% to the agricultural sector of
Namibia’s economy.239

PwC 65
Retail sector Government support
The Government’s
Developments in the retail sector The Government’s Targeted
TIPEEG programme are ongoing, with new malls Intervention Programme for
targeted investment under construction and existing Employment and Economic Growth
malls receiving makeovers and (TIPEEG) targeted investment to
to the value of expansions. The South African the value of US$1.27 billion, equal
US$1.27 billion, developer Atterbury, is involved in to 16% of GDP. The programme,
retail developments in Namibia. which has now ended, was expected
equal to 16% of GDP. to create an estimated 187 000
Atterbury is part of a US$110 jobs. With the programme’s
million development of The main objective being to channel
Grove. The development includes investment into agriculture,
54 000m2 of mixed-use floor space. transport, tourism and housing, the
The development includes a hotel, main focus was on infrastructure
offices, apartments, a medical projects. Reports on its success
centre, a health and fitness centre, vary, but the annual report of the
and space for 126 stores. There are National Planning Commission240
a number of new malls currently says 83 315 jobs were created
being developed across the country, representing 44.6% of the target
including in Windhoek and the of 187 000 jobs which the majority
north of the country. Plans for retail were temporary. Programme
developments in Swakopmund and expenditure at the time of the
Walvis Bay are also in the pipeline. report was US$940 million.

Commercial sector With similar banking regulations to

South Africa and strong protection
Demand for office space is mainly of property rights, Namibia remains
driven by activities in the capital, an investment destination where
Windhoek. Freedom Plaza is an investors receive support from the
example of significant office space Government.

The city’s development plan

includes the expansion and
development of IT-based shared
services centres and textile
manufacturing. Demand for offices
is also driven by services supporting
Namibia’s growth industries, such
as mining and energy, tourism and
manufacturing and infrastructure

66 Building the future of Africa


Key indicators241
Income level242: Upper middle income

GDP: US$12.52 billion (2014)

GDP growth: 3.5% (2014)

Population: 1.261 million (2014)

Inflation: 3.2% (2014)

Political stability: 0.94 (2013)

Corruption Perception Index: 54 (2014)243

Mauritius is a 2 040km2 island, approximately 11 times the size of

Washington DC, with 177km of coastline.

The country has an urban population of 41.2% (31 Dec 2013) with the
majority of the urbanised population in Port Louis, the country’s capital.
There was a marginal decrease in the percentage of the total urban
population from 519 718 (41.3%) in Dec 2012 to 518 752 (41.2%) in Dec
2013.244 Based on current demographics, projections suggest the population
will decline from 2030 onwards:

Projected population









2016 2021 2026 2031 2036 2041 2046 2051

Source: Central statistics office, Mauritius

PwC 67
Mauritius’s age distribution has the
It is expected that the structure of a bell curve, with 44.1%
Mauritian economy aged between 25 and 54 years
old.245 The median age in Mauritius
will achieve GDP is 34.4 years. 246
growth of 4.2% in It is expected that the Mauritian
2015 and 2016 247 economy will achieve GDP growth
of 4.2% in 2015 and 2016,247 with
private consumption and tourism
being the main drivers.

The drivers of real estate investment

in Mauritius are sustained GDP
growth, an increase in average
income, declining interest rates,
availability of financing from local
banks and easy access to FDI.

In addition, the measures taken to

restructure the sugar industry have
paved the way for land parcelisation
(known locally as ‘morcellement’),
thereby improving access to land
purchase for residential purposes
for the public in general.248

Mauritius was ranked 28th out

Global competitiveness report of 189 countries in the World
Bank’s Ease of Doing Business
6 rankings in 2015,249 the highest-
Innovation 5 Infrastructure ranking on the African continent.
4 Mauritius’ score in the Global
Business 3 Macroeconomic Competitiveness Report issued by
sophistication environment
2 the World Economic Forum is set
1 out alongside.
Market size Health and primary

Higher education
readiness and training Infrastructure in Mauritius is well
Financial market Goods market efficiency developed and roads are in good
development condition. Of the total 1 910km of
Labour market
efficiency roads, 1 834km are paved.250 With
less than a tenth of the population
South Africa Mauritius owning cars, the road infrastructure
is considered sufficient to hold the
country’s traffic volumes.

Of the total 1 910km of roads, 1 834km are Mauritius has embarked on the
implementation of a broad-
paved.250 based infrastructure programme
(principally towards further
improvement of the road network,
port and airport) with investment of
US$880 million, representing a 39%
increase over 2012.251

68 Building the future of Africa

The country has one port, Port Retail sector
Louis, which was upgraded in the The port currently
In the retail sector, the recent
1990s. Construction of a new quay
is currently underway as part of construction of several large retail handles around
the above-mentioned broad-based shopping centres spurred by FDI US$780 million
mainly from large South African
infrastructure programme. Aiming
to become a major transhipment investors/developers such as worth of trade per
centre, given its location between Atterbury and Retail Africa has annum.252
Africa, Asia and Australia, the meant that this sector is showing
country currently handles around signs of an oversupply, as tenants
US$780 million worth of trade per exercise considerable pressure to
annum.252 review rental rates downwards.
While some retail malls appear to
The country has a new airport be doing well, others are clearly
terminal that has been in operation struggling.
since September 2013. The airport
has paved runways that have been Performance among shopping
extended recently to accommodate centres has varied considerably.
larger aircraft such as the Airbus In most cases, where business
A380. Regular flights by British performance has been poor,
Airways, Air France, South African tenant failure is often attributable
Airways, Emirates and Air Mauritius to incorrect positioning, lack of
service the island.This aids tourism. product demand (product offering
not adapted to the clientele)
The country’s modernised and/or pricing in respect of the
telecommunications infrastructure demography of the clientele at
is mainly the result of a partnership the shopping centre. New market
with France Telecom, which entrants should carefully consider
has a 40% stake in the local these factors when selecting a
telecommunications provider. suitable location.

Residential sector Hospitality sector

There are two distinct categories, Mauritius has a large tourism
namely sale of residential plots from sector that leads to growth and Chinese visitors up
land parcelisation programmes investment in other sectors such as
construction. In order to provide
86.9% in 2014.253
(some are developed into gated
residential developments) and that some protection to the economy
of ready built homes (most often from external shocks such as the
apartments). global financial crisis in 2007, which
had a significant impact on tourist
Increased construction activity has traffic from the US and Europe,
been seen in residential apartments Mauritius has started targeting
despite signs of oversupply in visitors from other markets such
certain areas. The west and central as Asia. Air Mauritius recently
areas of Mauritius are showing clear introduced direct flights between
signs of an oversupply, with prices the country and Shanghai and
stagnating, if not regressing, in Beijing. The strategy is paying off,
some areas. with Chinese visitors up 86.9% in

PwC 69
The growth of medical tourism is Government support
Tax in Mauritius is also noted in Mauritius. Visitors
The government of Mauritius
considered low with come to Mauritius to receive
introduced two property investment
medical treatment either because
taxation at 15% for it is cheaper or because the
schemes, known as the Integrated
Resort Scheme (IRS) and the Real
onshore and between Mauritius healthcare system is more
Estate Scheme (RES). Foreigners
developed compared to their home
0% to 3% for country. Medical tourists showed
obtaining property worth more than
US$500 000 through either scheme
offshore investments. a 70.8% increase in 2012 and with
are entitled to a residency permit.
additional government investment,
Property sold out of the IRS can
the country is looking to attract
only be sold at a minimum value of
100 000 medical tourists by 2020,
US$500 000 where the RES does
up from 21,346 in 2012.254
not have a minimum investment
Hospitality remains a key driver limit. The introduction of these
for the Mauritian economy. There schemes has led to a 10% to 15%
is currently an oversupply of hotel average increase in property values
rooms on the island as compared over the past eight years.255
to the seating capacity of airlines
Through the introduction of the
operating towards Mauritius.
IRS and RES schemes, the island
Occupancy and rates are under
has seen tremendous growth in the
constant pressure and some hotels
number of ready-built units sold to
have resorted to heavy discounting
foreigners. As at December 2013,
to maintain market share. Despite
The Mauritius 1 122 units had been sold under
this, new hotels have opened
these schemes.256
Commercial Bank on the island. Another factor
contributing to the oversupply is Property values have also increased
The office development the emergence of beach bungalows due to significant increases in the
in Ébène, Mauritius is a as an alternative for visitors. cost of construction driven largely
28 042m2 US$ 4.5 million Today 30% of all visitors stay by increases in labour costs and in
development. in bungalows when visiting the the cost of imported raw materials.
island for holidays. That said, the
In addition to the above schemes,
Building materials are growth in the number of rooms and
the Government of Mauritius allows
predominately maintenance bungalows has been higher than the
foreigners that have obtained a
demand for such accommodation,
free and the building permanent resident status the right
thus prices have also suffered
contains numerous green to purchase units in apartments
initiatives such as solar of a minimum of two floors above
Commercial sector ground level.257
heating, photovoltaics,
energy storage and thermal There is a continued oversupply Tax in Mauritius is considered low
of office space in Mauritius. This with taxation at 15% for onshore
building mass activation,
explains the intensified competition and between 0% to 3% for offshore
and during winter months between office building owners for investments.
the building is 100% tenants. This competition has led
naturally ventilated. to downwards pressure on office
rental levels. Office rental rates
have started to decline in the main
business areas of Port Louis and
Ébène, predominantly in the case
of newly-built offices, which are
struggling to find tenants.

*Recognition on page 83

70 Building the future of Africa


Key indicators258
Income level259: Low income

GDP: US$26.82 billion (2013)

GDP growth: 6.7% (2013)

Population: 14.6 million (2013)

Inflation: 7.1%

Political stability: 0.39 (2013)

Corruption Perception Index: 38 (2014)260

Currently, 39.2% of Zambia’s are older than 65 years.263 The

population are urbanised and the average life expectancy in Zambia is
urbanised population is growing currently only 51.83 years. Zambia’s
fast at a rate of 4.2%.261 The young and growing population
country’s capital, Lusaka, has an are expected to drive demand for
estimated population of 1.8 million residential property together with
people.262 Outside urban centres, different types of real estate such as
the majority of Zambia’s population student housing.
are subsistence farmers.
Of the countries profiled in this
Zambia has a fairly young report, Zambia has one of the lowest
population with 46.2% of the education expenditures at 1.3%
population being younger than 14 of GDP (compared to 7.3% in the
years. Only 2.4% of the population United States).264

PwC 71
Zambia was ranked 111th out of Global competitiveness report
189 countries in the World Bank’s
Ease of Doing Business rankings in Institutions
2015.265 Zambia’s score in the Global 6
Innovation Infrastructure
Competitiveness Report issued by 5
the World Economic Forum is set 4
out alongside. sophistication
3 Macroeconomic
2 environment

Infrastructure 1

Market size Health and

In 2012 the Zambian government primary education
raised US$750 million through
a bond issue to bridge the
Technological Higher education
infrastructure funding gap.266 This readiness and training
was expected to increase GDP
growth by two percentage points. Financial market Goods market efficiency
development Labour market
This has been invested in railways,
hospitals, roads and power, together
with other government projects.267 South Africa Zambia

According to the Zambian

Development Agency, hydropower is
the most important energy source of
the country, with the government-
owned Zambia Electricity Supply
Investors are already entering the In 2012 the Zambian
residential market in response to
Corporation being the main high demand and a lack of available government raised
electricity producer. It is estimated
that Zambia has 6 000MW of
housing. For example, the North US$750 million
Western province will see 3 500
unexploited hydropower potential. new residential units added by through a bond
Based on current projections,
electricity demand is likely to
investors when mining company issue to bridge
First Quantum Minerals further
increase to 2 400MW, creating a invests in their mining operations in the infrastructure
550MW deficit in Zambia’s power
the province.270 funding gap.266
Retail sector
Residential sector
The retail sector is poised for
Zambia is facing a critical housing significant growth with demand
shortage, with the biggest shortage driven by the rising population. The
in the supply being in urban areas majority of retailers entering the
and particularly in rapidly growing market in Zambia are from South
towns in the Copper Belt and the Africa, such as the retailer Shoprite.
North Western province, where
mining activities have increased. The Kitwe Shopping Mall at The government
The government estimates there is a
Freedom Park will be a 18 000m2
retail development with space for
estimates there is
backlog of 1.5 million housing units 50 tenants. The development, which a backlog of 1.5
across the country. The delivery of
at least 150 000 housing units per
includes a hotel, will amount to a
US$2 billion investment.
million housing units
annum has been recommended across the country
for the next ten years to bridge the
gap.271 As a result of this shortage,
modern cluster-style homes are
expected to have great potential for
future investors in Zambia.

72 Building the future of Africa

Commercial sector The government has also introduced
multi-facility zones, which are The development
The office sector in Zambia is seeing
positive growth with major new
special economic zones offering
investors tax incentives. Investments
of Roma Park,
developments and refurbishments of more than US$500 000 attract a US$100
of existing buildings. 0% tax on dividends for five years
from the date of first dividend
million mixed-use
In Lusaka, the development of Roma
declaration, 0% tax on profits for investment, will see
Park, a US$100 million mixed-
use investment, will see 217 acres
the first five years and 0% import
duty on capital goods for five
217 acres converted
converted into residential, retail
years.273 into residential, retail
and office space. The office space
will include conference facilities, The Zambian Government
and office space
restaurants and office units. Prices introduced a new royalty regime
for the residential units range from with effect from January 2015,
between US$25 to US$40/m2. 271 which increases royalties payable
by mining companies from 6%
Government support to 20% for open mines and
The government is aware of the from 6% to 8% for underground
infrastructure funding gap, and mines.274 This significant increase
through the introduction of PPPs, in royalty payments is likely to
the government is targeting private create disincentives for future
sector financing as an alternative for private sector investment in the
infrastructure development. mining sector and indirectly impact
employment and growth. It may
The government is inviting also affect demand for real estate
private investors to participate in across all asset classes.
the construction, rehabilitation
and maintenance of public The REIT structure has been
infrastructure and services. These introduced in Zambia, but the
include major infrastructure country currently has no active
projects such as roads, railways and REITs.
energy, together with development
opportunities in low-cost housing,
agriculture and healthcare.272

PwC 73

74 Building the future of Africa

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80 Building the future of Africa

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PwC 81
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82 Building the future of Africa

Acknowledgements and
We would like to thank our Africa
real estate network for their
contribution and the following
people for their valuable input to
this report:

• MJ Oosthuizen, Real Estate

Assurance, Assistant Manager,

• Philip Dennison, Corporate Real

Estate Services, Senior Manager,

• Susan de Klerk, Real Estate

Knowledge Management, Senior
Manager, PwC

We would like to thank the Africa is redefining itself The Mauritius Commercial
following people for the use of through real estate – After Bank (p70)
their photographs. The work is photographs (p11)
licensed under a Creative Commons • The Mauritius Commercial Bank;
Attribution 2.0 International • Celso Flores, Pollack Man34 Christian Bossu-Picat and Johan
Licence available on https:// Pretorius (Photographers); and
• Jeff Attaway Jean Francois Koenig (Architect)
by/2.0/ • Jeff Attaway, Evan Bench
• Rexford Nkansah
Africa is redefining itself
through real estate – Before No changes, other than cropping
photographs (p11) images, were made.
• Sue Hoppe, John Atherton
• Lu-Gerda de Klerk, Mstyslav
• Hugues, Chris Snelling
• TPS. Dave, Caitlin
• Maria Michelle
PwC 83
Your PwC regional contacts for Real Estate

Ilse French

Adekalu Balogun Uganda Uthman Mayanja

Oseini Amui Kenya
Richard Njoroge
Nasir Ali Tanzania Michael Sallu
Stefan Hugo Zimbabwe Clive Mukondiwa
Rudi Binedell
South Africa Nicolas Vaudin
Ilse French
João Martins
Mario Miranda
South Market

East Market

West Market

84 Building the future of Africa

Your PwC South African Real Estate team

Real Estate Leader for Assurance Services Tax Services

South Africa
Ilse French Corlia Volschenk Craig Miller

Debt & Capital Valuations & Due Deals

Advisory Diligence
Craig du Plessis Tertius van Dijk Simon Venables

Corporate Real Estate Governance & Risk Capital Projects &

Services Infrastructure
Philip Dennison Alex Muller Jonathan Cawood

Integrated Reporting, Sustainability, Accounting Advice

Health & Safety and Environmental Services
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PwC 85
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