Africa GRI Magazine Vol 3 by GRI Club

GRI AFRICA

magazine

SAO TOME: THE BIRTH OF PARADISE Tony Kay

THE BIG INTERVIEW WITH PAUL ONWUANIBE

EAST VS. WEST Nick Langford

TIME TO INVEST IN MAGHREB? Fabrice LÃ©ger

West Africa GRI | GRI Africa Summit | East Africa GRI Africa GRI

CONTENT 4

Resilience in the Urbanisation era by Mark Whyte

8 14

The Maghreb region - Is now the time to invest? by Fabrice LÃ©ger

The Big Interview

Interview with Paul Onwuanibe

The Improving Nigerian Tax Regime

by Gbolahan Elias

West vs. East

Is there a shift of capital from West to East Africa? Interview with Nick Langford

Africa GRI

The Island Nation of Sao Tome & Principe, Gulf

of Guinea, West Africa: The birth of Paradise By Tony Kay

EDITORâ&#x20AC;&#x2122;S NOTE Despite African economies facing trying times, the real estate sector in Africa remains buoyant. The rapid growth of the middle class, the population boom in cities and the demand for housing means that the long-term outlook remains a positive one. GRI Africa Magazine again brings you the views and perspectives of some of the leading real estate figures in Africa as they share their insights on how real estate on the continent will prosper.

Neall De Beer Director - Africa Global Real Estate Institute PS If you would like to be part of the next edition, do let me know! neall.debeer@globalrealestate.org t: +44 20 7121 5094

In this edition we take a look at the investment opportunities in the Maghreb region and on the Island of Sao Tome. We also analyse the Nigerian tax regime, explore resilience in the urbanisation era and take a closer look at capital flows from West to East Africa. Our headline contribution is from Paul Onwuanibe of Landmark. Paul outlines the opportunities which exist in the midst of some of the chaos in Africa.

Africa GRI

SPECIALIST ADVISE

Resilience in the Urbanisation ERA By Mark Whyte, Senior Partner, Control Risks

Forecasts by the UN in its report on World Urbanisation

Prospects predict that the urban population of Africa will rise from 399m in 2010 to 661m in 2020 and 1.23bn by 2050; a similar picture exists in Asia Pacific and Latin America.

The UN also estimates that 60% of

of the future, making a key contribution

the area expected to be urbanised by

to the prosperity of the region.

2030 is yet to be built. Flagship projects

such as Konza and Tatu cities in Kenya,

This exponential growth in urban areas,

and Eko Atlantic and Centenary cities

while presenting major opportunities

in Nigeria are at the forefront of this

for investors, developers, and contrac-

urbanisation movement and present

tors, comes with significant attendant

exciting visions

risk. They will face a range of societal,

Africa GRI

SPECIALIST ADVISE

technological, political and security hazards and threats. This complex risk landscape has led to increasing interest in the subject of resilience. Resilience is commonly described as the ability of an entity to adapt and evolve to changing environments whilst minimising the probability and/or impact of all hazards and risk events.

Managing the risk It would be reasonable to state that

There is a tendency to focus on

questions of risk, resilience, and disaster

post-event remediation and crisis

risk reduction for new urban centres are

management in place of fully integrated

not particularly well understood. Risk is

resilience strategies that form a part

rarely approached and acted upon from

of initial feasibility studies and master

an all-hazard or whole-life perspective

plans. This is founded on an over

and this will have significant negative

reliance on the ability of civil defence

impacts through the project lifecycle.

and emergency service organisations to develop and implement contingency

The UN observes that, â&#x20AC;&#x153;there is little

plans to manage incidents.

evidence that the risk information proor disaster risk reduction. The produc-

Implementing resilience to deliver value

tion of risk information generally con-

A coordinated, integrated, and multi-

duced is really informing development

tinues to be supply-driven and is rarely translated into risk knowledge for potential end-usersâ&#x20AC;?.

stakeholder approach to resilience should be undertaken. This should be risk-led and outcome-focussed, Africa GRI

SPECIALIST ADVISE

should recognise the importance of

E K O AT L A N T I C

crisis preparedness and response, and must address corruption risks. This will deliver value over the project lifecycle by addressing the problems that previously described. Such an approach should commence at a governmental level through the development of effective resilience frameworks. These should stem from effective national risk assessments that consider all hazards and threats (see Figure 1).

This approach is supported by the OECD, which recommends to:

plex and wide-ranging impacts

Establish and promote a comprehen-

Raise awareness of critical risks to mo-

sive, all-hazards and trans-boundary approach to country risk governance to serve as the foundation for enhancing national resilience and responsiveness Build preparedness through foresight analysis, risk assessments, and financing

frameworks, to better anticipate com-

Africa GRI

bilise households, businesses, and international stakeholders and foster investment in risk prevention and mitigation Develop adaptive capacity in crisis management Demonstrate transparency and accountability in risk-related decision-making by incorporating good

SPECIALIST ADVISE

governance practices and continually

consideration given to environmental,

learning from experience 3

economic, integrity, political, security, and cyber issues.

The resulting framework should provide a common understanding of risk and

This will help inform initial investment

serve to support the formulation of

decisions and the development of

resilience strategies at a regional and

mitigation options can then follow.

city level. It will provide a baseline for

These can then be assessed in terms of

the creation of an effective approach

cost and benefit and then factored into

for new urban development. Ideally,

project budgets. Such activities should

building resilience should commence

help drive investor confidence at these

as a multi-agency activity from the

critical early stages.

feasibility study stage of a project and be an integral part of a scheme master

Mark Whyte is Senior Partner at global

plan.

business risk consultancy Control Risks.

It must be based on a horizon-scanning, all-hazards risk assessment with due

WEST GRI AFRICA 2017 Connec ting African & Global Real Estate Leaders +44 20 7121 5060 | andreas.schonning@globalrealestate.org | www.globalrealestate.org/WestAfrica2017 Africa GRI

REGIONAL SPOTLIGHT

THE

MAGHREB IS NOW THE TIME TO INVEST? By Fabrice LĂŠger, CEO JLL North Africa & Francophone Africa

Morocco, Algeria and Tunisia have no

ated with a lack of economic diversity,

shortage of assets in order to attract

complex legal considerations and social

foreign investors.

instability resulting from inequality. Despite these risks, real estate investors and

However, these countries are currently

developers continue to see the Magh-

hindered by numerous obstacles which

reb market as a huge opportunity.

the authorities are trying to improve. Actually, after an uncertain period of

Governments are currently implement-

political turmoil in the region because

ing special measures and incentives as

of the Arab Spring, the authorities have

they recognize foreign investment as

taken special measures to develop the

a source of economic development,

private sector and promote foreign

modernization and growth.

direct investment (FDI).

Maghreb economies have grown im-

According to the United Nations Confer-

pressively since the turn of the millen-

ence on Trade and Development (UNC-

nium. The region has been long associ-

TAD), Morocco is the most attractive

Africa GRI

REGIONAL SPOTLIGHT

country in Africa with 39% of FDI in real estate, 15% in tourism and 12% in industry. France remains the biggest investor in Morocco (21%) followed by UAE (13,3%) and Saudi Arabia (12,8%). The strengths of the country are the legal framework, the favorable

Fabrice Léger is the CEO of JLL’s North Africa & Francophone Africa business, advising on real estate, hospitality and infrastructure projects worth over $1 trillion in gross development value.

accompanying measures for investors and also political stability that presents the first attractiveness argument. In fact, the Moroccan government is making an effort to attract investors by

Morocco also provides particular aids

developing its infrastructure (highways,

especially for buildings and property

port of Tangiers Med, High Speed Line

acquisition (excluding agricultural areas).

HSL). Moreover, since 1995, the King-

Tax and customs benefits, free zone

dom has adopted the ‘Investment Char-

areas (Tanger, Kenitra, Dakhla, Laayoune,

ter’ which provides for tax exemption

Nador and others) and offshore banking

for five years. Morocco has also conclud-

regulations are positive points for foreign

ed bilateral agreements with 51 coun-

investors.

tries (including France, Italy and Spain) to protect investors from signatories

In addition to these measures, Morocco

countries.

has great growth potential and a young and abundant workforce.

“Morocco has great growth potential and a young and abundant workforce”

Several projects have been initiated to make the Kingdom a key crossroads between the European Union and Africa. Africa GRI

REGIONAL SPOTLIGHT

CAS AB L AN CA FI N AN CE CI T Y - MO R O CCO

The real economic lung of Morocco is Casablanca, the country’s biggest city and Africa’s second largest financial centre after Johannesburg. The big project ‘Casablanca Finance City’ voted in by the Moroccan Parliament in 2010 and due to be delivered in 2018, will attract more than 100 companies and some 1 million square meters of office space. Casablanca Marina, whose offices are marketed by JLL Morocco, is the major project in the city. Composed of nine

European Investment Bank and the

office towers, a shopping centre, a hotel

European Bank of Reconstruction and

resort, luxury residences and a 3500-

Development (EBRD) are the principal

seat congress centre. The project will

financials of the project.

be fully delivered by the end of 2016. WHAT ABOUT ALGERIA ? In close proximity, there is another

project developed over 12 hectares by

The opening of the Algerian economy

Wessal Capital, an alliance of several

has ensured significant growth in

funds from Gulf countries (Abu Dhabi,

recent years. Seeking to diversify

Qatar, Kuwait and Saudi Arabia) and

and modernize the economy, the

a Moroccan fund (Moroccan Tourism

government has embarked on a huge

Development Fund). The project will

challenge to attract foreign direct

consist of a new fishing port, a cruise

investment through plans and priority

terminal, offices, hotels and some luxury

initiatives programmed. The Algerian

residences. The World Bank, the

authorities are using various tools to

Africa GRI

REGIONAL SPOTLIGHT

encourage and facilitate investments in

In Algeria, the acquisition of an

strategic sectors (hydrocarbons, agro

industrial building or a commercial unit

industry, real estate and chemistry).

is possible only if you have a reliable and eligible project. This needs to be

Forum El Djazair

presented to the government through the Local The pharmaceutical and

Unlike Morocco, the largest part of

biomedical industry is gaining visibility

foreign investment in Algeria comes

in Algeria. In fact, Constantine has 1,200

from the Gulf countries, especially in real

hectares dedicated to the sector with

estate and tourism. The major project in

20 factories in operation and a number

the Algerian capital is funded by Emiral

of others currently under construction.

an Emirati investor. Itâ&#x20AC;&#x2122;s developed over 19 hectares and composed of residential

Algeria has claimed itself as an open

towers, offices, a mall and a 5 star hotel.

country to FDI, but is only willing to

Forum El Djazair is considered a luxury

consider investment which integrates

project.

its economy and which creates jobs and ensures the transfer of technology.

The Bab Ezzouar neighborhood located five minutes from Houari Boumediene International airport, along the highway

K S AR - ALGE R I A

linking the capital to the rest of the country is the new business district of Algiers. Located very close to the city downtown, this project is considered the new heart of Algeria. Many head offices of national and multinational companies and hotel chains were implanted there (Natixis, BNP Paribas, CMA-CGM, Ibis and Mercure amongst others). Africa GRI

REGIONAL SPOTLIGHT

T U N I S’ AVE N U E H AB I B B O U R G UIBA

DIFFICULT WAY BACK FOR TUNISIA Therefore, several reforms have been implemented to attract foreign investment. Investors are exempt from customs duties on capital goods not being locally manufactured. The limitation of VAT at 10% on the importation of capital goods and exemption of reinvested earnings to the limit of 35% of the subject to tax are amongst these. On stand-by Like its neighbours, Tunisia has a skilled and productive workforce, with competitive salaries to attract more investors. The most attractive business neighborhood is “Les Bergers du Lac”, which hosts many international companies, is located in the capital Tunis. However, after the recent events that hit Tunis, brokers have observed a net decline in investment and a slowdown in the construction and completion of projects.

Africa GRI

Road to recovery The Emirati investors Gulf Finance House (GFH), Sama Dubai and Bukhatir Group completely stopped their projects in Tunis. However, by the start of 2016, some rumors were confirmed about a bilateral cooperation between Tunisia and United Arab Emirates.

“Like its neighbours, Tunisia has a skilled and productive workforce, with competitive salaries to attract more investors.”

REGIONAL SPOTLIGHT

GRI AFRICA

SUMMIT2016

20-21 OCTOBER JOHANNESBURG

Connec ting African & Global Real Estate Leaders

PARTICIPANTS INCLUDE:

BRONWYN CORBETT CEO MARADELTA PROPERTY HOLDINGS

DALE RAMSDEN Director RMB WESTPORT

WARREN VAN DER MERWE COO VANTAGE CAPITAL

GODFREY TAPELA Senior Investment Officer IFC

PETER LEVETT Managing Director OLD MUTUAL PROPERTY

PAGANI GROUP • LORDSHIP • AT TAFRICA • IFC • PYLOS GROUP STARWOOD HOTELS AND RESORTS • HYAT T INTERNATIONAL • JABILAKE LANDMARK GROUP • CDC GROUP

+44 20 7121 5060 | andreas.schonning@globalrealestate.org | www.griafrica.com

D I S C O V E R A L L G R I E V E N T S : A s i a • B r a z i l • B r i t i s h • C E E • C o l o m b i a • D e u t s c h e • D e u t s c h e Wo h n e n E a s t A f r i c a • E s p a ñ a • E u r o p e S u m m i t • Fr a n c e • I n d i a • I t a l y • M e x i c o • R e t a i l • R u s s i a • W e s t A f r i c a S i n c e 1 9 9 8 , G R I m e e t i n g s p r o v i d e a f o r u m f o r t h e w o r l d ’s l e a d i n g r e a l e s t a t e p l a y e r s t o d e v e l o p valuable relationships, find new business par tners, and strengthen their global networks.

Africa GRI

THE BIG INTERVIEW

The

BIG

Interview

The Big Interview with Paul Onwuanibe

Africa GRI Magazine caught up with Paul Onwuanibe, CEO of Landmark to chat about the current state of play in Nigeria, the prospects for Africa and why the glass is only 10% full right now. GRI: You recently concluded a deal

property market and we were seeking

with Vantage Capital, one of the

funding to expand our real estate

largest fund managers in Africa. Can

portfolio across the continent. they

you tell me a bit more about this?

took their time to truly understand the real estate market trends and the strong

PO: We started speaking to Vantage

supply dynamics in the region. They

in mid-2015 during one of their visits

reviewed our extensive track record

to Nigeria. Vantage were interested in

and believed in our vision to change

gaining exposure to the West African 14

Africa GRI

THE BIG INTERVIEW

the landscape with our Live. Work .Play mixed use concept. We were excited to partner with Vantage for a number of reasons, particularly their enthusiasm for the property market in West Africa, their financial and advisory capabilities. We agreed on a Mezzanine Finance structure over a 6 year period which affords us the flexibility we require to run our business. The $20 million facility provides the supplementary funding required to progress our large development schemes, such as the

Africa was very much an untapped

Landmark Village.

market with enormous opportunities

GRI: When you started Landmark it

facilities to the large corporates

was a European focussed business,

operating in the region.

but you have since changed your focus to Africa. Why? PO: The Landmark journey started in 1998 as a Serviced Office business. Our first office was in London and we expanded into Europe and the U.S. over the next 6 years. In 2003, i had a new vision for Landmark to become an African focused business, run by Africans, in Africa, for Africa.

to bring international standard office

GRI: How did the business develop in Africa? PO: Our first African office was in Lagos, the largest city in West Africa and we quickly expanded into other cities such as Accra, Nairobi and Johannesburg. Our strength is in maintaining high standards and strong client relationships and this has resulted in extremely loyal multinational clients that followed us Africa GRI

THE BIG INTERVIEW

into our various offices across Africa. Although we soon became the second the largest Serviced Office company in Africa, we faced a lot of challenges. There was a huge shortage of quality grade commercial office facilities across West and East Africa which often made it difficult to acquire suitable serviced office space to meet our multinational

clients’

expectations.

Facilities management was poor, the leasing and regulatory environments were cumbersome. GRI: Is that what led you to property

under our own management, and

development?

60,000sqm is under development.

PO: Due to the challenges we faced

Our Property Company has a unique

finding the commercial grade buildings

one-stop-shop service offering, as our

we needed to run our business

experience has shown us that there

successfully, we made a tactical decision

are very strong commercial and lifestlye

to build them ourselves! We knew the

benefits for our users to be able to live,

African terrain and we understand

work and play, all within one secure

our clients’ needs, so in 2007 we

location.

established our Property Company and started acquiring land in strategic CBD

completed commercial grade offices

All our buildings embody this mixed

locations.

use concept, with our Landmark Village

Today, we have over 130,000 sqm of

a 40,000sqm site. It’s designed to be

real estate, of which 30,000 sqm is

the Lagos equivalent of Canary Wharf

Africa GRI

being an expression of this theme across

THE BIG INTERVIEW

in London, Rockefeller Centre in New York, Melrose Arch in Johannesburg and Victoria and Alfred in Cape town. Itâ&#x20AC;&#x2122;s going to be quite special. GRI: The Nigerian economy seems to be struggling at this point, how do you see this evolving and what does it mean for real estate in the country? PO: There is a level of uncertainty in the Nigerian economy at the moment due to recent changes in the foreign exchange mechanisms and the devaluation of the

sustainable approach, that gives me

Naira. Understandably, this has got a lot

confidence in the future of Nigeria.

of people nervous. However, I believe that for the first time in Nigeria, the nation is moving in the right direction. Most people want to see immediate results with the policies. It is however important to note that this process is a

The exchange rate mechanism has now been resolved, so there is a lot more clarity on the value of the Naira against other foreign currencies, as well as comfort around the inflow and outflow

marathon, and not a race.

of these currencies in the country.

GRI: You seem optimistic?

GRI: Are you already seeing the

PO: I am optimistic because I believe they have the right objectives for the Nation, and they are ensuring that the proper and legitimate measures are being taken. This is a much more

results? PO:

Previously

skeptical

foreign

investors who were concerned about the flow of their investments in and out of the country are now feeling their Africa GRI

THE BIG INTERVIEW

way back into the market. This means low cost foreign currency financing has become accessible again. We are also experiencing a rise in demand from multinationals making decisions they wouldn’t have made six months ago about expanding their office space needs in Nigeria. In short term it is still going to be a little tough, so there is a need to be more cost conscious. but in the medium to long term, I am confident that the market will experience significant growth.

We would then go back to the ways where there was 1sqm of space

GRI: Do you see the supply-demand

available for every 10sqm of demand.

imbalance correcting soon?

It takes a long time to build so now is the time to start constructing if you

PO: You look at the commercial real

have the foresight and understand the

estate in Lagos and there is probably

market. The demand isn’t going away.

100,000 sqm of investment grade office space on the market, of which 50% is vacant because demand has soften over the past one or two years. People tend to panic over the 50,000sqm of available space, however in reality this amount of space can easily be taken up by a couple of organizations resulting in a huge supply -demand gap. 18

Africa GRI

“I would say in the short term it is still going to be a little tough, so there is a need to be more cost conscious. but in the medium to long term, I am confident that the market will experience significant growth.”

THE BIG INTERVIEW

I personally know of at least 150,000sqm of office space that is required by multinationals in Lagos alone. These firms are not window shopping, they have serious needs and if the right spaces are not available, they are going to revert to residential accommodation or other similarly inappropriate accommodation until something better comes up. The market has to be ready to meet these needs. I think the future of commercial real estate is very secure. It takes three to five

PO: Before entering any sort of joint

years to develop a property properly,

venture, it is essential to do your

and unfortunately not everybody gets

research and have a clear plan on what

it right. If you fast forward five years

you are looking to achieve from the

there will probably only be a further

partnership. Prioritise your needs but

100,000sqm of quality space added

be realistic know your market and what

to the market during that time. This is

influences it, and understand your

unlikely to be sufficient for a city like

potential partner and what motivates

Lagos alone that has 20 million people

them.

and is still growing. As a developer, I am excited about the huge opportunities

In any market, but Nigeria particularly,

in this space.

there are a lot of moving targets so it’s important to work with an

GRI: You mentioned that you are

institutionalised real estate developer.

aware of a number of companies that

Avoid dealing with what i refer to

are currently looking at JV’s. What

as the ‘D.I.Y. developers and agents’

advice would you have for them? Africa GRI

THE BIG INTERVIEW

because, while they usually have the best intentions, they don’t always understand

the intricate nature of

developing and managing commercial or high value real estate. GRI: Where do you see Africa in 10 years time? PO: Africa is probably the last bit of blue sky left in the world, because it is technically still virgin territory compared to the rest of the world. There is still so much to do and so much to learn There are many emerging economics in this whole collection of nations that is Africa. There is a lot to be achieved in terms of infrastructure, be it power supply, road networks, social infrastructure, schools, hardcore real estate infrastructure.

“I think the future of commercial real estate is very secure.... As a developer, I am excited about the huge opportunities in the space.” 20

Africa GRI

If a glass was to be filled to represent development in Africa, it is probably 10% full right now. In 10 years’ time with focus and investment, the African landscape will rival the Western countries. There really is no better place to do business.

EXPERT ANALYSIS

THE IMPROVING NIGERIAN

TAX REGIME By Gbolahan Elias, Principal Partner, G.Ellias

The Nigerian tax regime for foreign investors in real estate is not unfavourable and is improving. Nigeria is a Federation and the regime of federal taxes includes income tax, capital gains tax, value added tax and stamp duties. State taxes vary from state to state and

The overall tax burden on dispositions

include ground rent charges (applicable

of land today, although varying from

to both developed and undeveloped

state to state, tends to be between

land), neighbourhood improvement

3% and 15% of the open market value

charges (applicable to designated areas),

of the land. The 15% payable in the

land use charges (usually confined to

most expensive states is relatively high

developed land), “governor’s consent”

compared to the 8.3% average for Sub-

fees and registration fees. Most of these

Saharan Africa (stated in the World

taxes are calculated at ad valorem rates.

Bank’s Doing Business Economy Data Africa GRI

EXPERT ANALYSIS

(2015) publication). The authorities ask for, value added tax on rental income from leases at 5 % of such income, but this is disputed as the applicable statute taxes are only “goods and services”, not money and not land. The overall tax burden has been falling over the years and it is expected that it would continue to do so. It used to be between 15 % and 30 % in the states with the strongest real estate markets. For example, Lagos State has

Four classes of relief on land taxes should

recently reduced its transfer taxes from

be borne in mind. First, investment in

an aggregate of about 13 % to 3 %.

real estate development is eligible for pioneer status incentive.

Other states are likely to follow suit seeking to generate revenue from the increased volume of transactions in the market rather than high rates. The vehicle and structure utilized to acquire land will determine the applicable tax. For instance, acquiring shares in a company or fund that holds real estate assets can be an efficient way to avoid some land transfer taxes that would otherwise arise on a direct transfer of the underlying real estate. 22

Africa GRI

“The overall tax burden has been falling over the years and it is expected that it would continue to do so.” This investment incentive exempts the investment company from income tax and shareholders of the company from tax on dividends for up to 5 years. Also,

EXPERT ANALYSIS

capital allowances which would have been enjoyed over the 5-year period will be deemed to have occurred on the first day after the end of the tax-free period. The allowances will then be deductible from tax. Second, foreigners making loan investments to Nigerians for at least 7 years in tenor with a 2-year moratorium will enjoy 100% tax exemption on interest accruing on such loans. Further, tax relief exists for foreigners resident in countries with which Nigeria

real estate developments backed by

has double-tax treaties.

foreign institutional investors.

Withholding tax payable on dividend,

The status confers on such projects

interest, and rent remitted to companies

complete exemption from all federal,

resident in tax treaty states is imposed

state and local government taxes, rates

at 7.5% rather than the usual 10%. The

and levies and duty-free importation of

states with which Nigeria has signed

capital goods and machinery.

double-tax treaties include Canada, Pakistan, Belgium, France, Romania, Netherlands, United Kingdom, China, South Africa, Italy, Philippines, Czech, and Slovakia. Lastly, the Federal government has granted free trade zone development status to a handful of major “new town”

“Further, tax relief exists for foreigners resident in countries with which Nigeria has double-tax treaties.” Africa GRI

WEST VS. EAST

West

vs.

East

IS THERE A SHIFT OF CAPITAL FROM WEST TO EAST AFRICA?

Interview with Nick Langford

Africa GRI Magazine spoke to Rendeavourâ&#x20AC;&#x2122;s Nick Langford to gain his insight into the real estate market in both East and West Africa. GRI: You have worked in both West

fair and transparent, reduce the levels

and East Africa - how do the two

of corruption and impunity prevalent

compare?

throughout both societies, encourage the development of institutions and

NL: Both Ghana and Kenya have real

open the skies to low cost airlines.

opportunities to develop as the hubs

of West and East Africa respectively,

Kenyans appear to be more focused on

but to do that they need to ensure

doing business in the traditional sense

their upcoming elections are peaceful,

but that may just be because our Tatu

Africa GRI

WEST VS. EAST

project outside Nairobi has slightly more momentum than our Appolonia project outside Accra in the industrial and business sectors.

â&#x20AC;&#x153;Kenyans appear to be more focused on doing business in the traditional senseâ&#x20AC;? GRI: In terms of global capital, do you believe there is currently shift

Nick Langford Kenya Country Head Rendeavour

in interest from West Africa to East

take a downturn on the international

Africa?

markets, the exchequer becomes short of funds which naturally causes negative

NL: Yes, there is a shift in interest and this

impact on the domestic economy.

is driven by very simple fundamentals. East Africa has two separate, but at the

Both countries have also struggled

same time related advantages over the

to invest in power production, with

West.

capacity unable to meet demand as the economy develops and urbanization

In West Africa, Nigeria and Ghana in

moves towards 40% of the population.

particular are commodity reliant, oil and gas in the case of Nigeria, palm oil, gas,

In East Africa the development of

gold and cocoa in the case of Ghana.

renewable energy, whether geothermal, wind or solar has been much higher

Neither country currently has the

than West Africa and although power

capacity to add value to these raw

shortages they are much shorter than

materials and when commodity prices

West Africa. Allied to a relatively stable Africa GRI

WEST VS. EAST

currency, in turn due to less reliance on commodities, means investor interest has shifted to East Africa and Kenya in particular. GRI: Africa has a growing need for industrial real estate, how will we see this evolve over the next decade? NL: I can only really comment about Ghana and Kenya, but suffice to say there is very little supply of modern industrial and warehouse buildings; in fact you would be hard pushed to find

At Tatu Industrial Park we have interest

any at all.

from two developers in building speculative warehousing and another devel-

This is because economics just havenâ&#x20AC;&#x2122;t

oper that will construct and sell build

worked up until now. Tenants have

to suit premises for individual occupier

been happy to just accept sub-standard

needs.

building specifications and pay low rents. With no tenants willing to pay the $6.50/$7.00 per m2 per month rent (very low by international standards even in emerging markets) to trigger development of modern industrial/ warehouse space, there will be no development; but this is changing and changing fast.

Africa GRI

â&#x20AC;&#x153;Africa has a growing need for industrial real estate, how will we see this evolve over the next decade?â&#x20AC;?

WEST VS. EAST

These developers have done their research and discovered that occupiers realise the benefits and economies of modern space with 12m high bays, power floated load bearing floors, loading bays and lack of congestion for quick turn around.

“What can you tell us about Rendeavour’s current projects?” Importantly they are prepared to pay for it. There is also huge demand from investors seeking to acquire modern buildings let to financially secure com-

plethora of similar projects as occupiers realise the benefits and investment funds find a safe haven for their money.

panies on international standard leases;

GRI: What can you tell us about

and they will buy such investments at

Rendeavour’s current projects?

the relatively low yields of 8.5 to 9.0%. NL: Both Appolonia outside Accra and The future is looking bright for the

Tatu outside Nairobi have now reached

industrial real estate in Africa, a sector

the stage where the projects possess

deemed less risky and volatile than the

real momentum in revenue from the

retail and office sectors.

sales of land for residential and industrial.

The completion of one successful

The investment in infrastructure over

development project will lead to a

the last three years; the physically

Africa GRI

WEST VS. EAST

invisible investment in water, sewage and power is reaping its reward. We are experiencing such interest in Tatu from developers, individuals and operators of schools, hospitals and other institutional buildings, that in some sectors we have more interest than land available. Not far behind Tatu and Appolonia is Jigna in Abuja where there has already been sales of land ahead of the infrastructure investment planned

Each

project

for 2016 and 2017. The projects at Lekki

characteristics; one cannot just replicate

in Lagos, Kiswishi in Lubumbashi, DRC

the concept for each site in each city.

and King City in Takoradi, Ghana are

Whilst the fundamental philosophy is

all at the planning stage. Roma Park

the same; buy land, create a saleable

in Lusaka is the most advanced of our

legal

projects; and whilst almost complete it

approval, invest in bulk infrastructure

is the smallest of our developments.

and sell land, we have to respect the

interest,

has

very

obtaining

different

zoning

local site conditions, politics, ground

â&#x20AC;&#x153;What are the biggest obstacles you are currently facing in terms of your projects?â&#x20AC;? 28

Africa GRI

conditions, location relative to the capital cities and most important of all the current and anticipated demand. GRI: What are the biggest obstacles you are currently facing in terms of your projects?

WEST VS. EAST

NL: We have a very simple business

populations and assists in the alleviation

model. None of our projects have any

of congestion in the African cities

debt to service; this means that even if

adjacent to where we develop.

we are exposed to delays outside our direct control, we can afford to wait and

It is comforting to know that our

deal with them in a timely manner, not

investment in infrastructure will remain

forced to go for a compromise solution.

long after Rendeavour has developed and sold its real estate.

Whilst we invest hundreds of millions of US Dollars on infrastructure we

Nick Langford is the Country Head,

will always welcome more support

Kenya for Rendeavour. He is a Chartered

from government to provide power,

General Practise Surveyor with 25 yearsâ&#x20AC;&#x2122;

water and roads to our site perimeters.

experience of managing real estate

After all such investment assists in

development in the emerging markets

the development of satellite cities

of Eastern Europe, Africa and Asia.

that improve the lives of the local

Africa GRI

REGIONAL SPOTLIGHT

The Island Nation of Sao Tome & Principe, Gulf of Guinea, West Africa:

THE BIRTH OF PARADISE

By Tony Kay, Shareholder, The Falcon Group

Situated in the equatorial Atlantic and

the Islands a touristâ&#x20AC;&#x2122;s paradise. They

Gulf of Guinea the islands of Principe

have a large maritime economic zone

and Sao Tome lie about 300 km west off

with incredible marine resources plus a

the coast of Gabon.

potential multi-billion barrel oil reserve.

Discovered by Portuguese navigators

LOCATION, LOCATION, LOCATION

and a Portuguese colony until gaining

independence in 1975, Portuguese

From an economic point of view the

is still the official language of the

Islandsâ&#x20AC;&#x2122; physical position in the Gulf of

around the 195,000 inhabitants who

Guinea puts them in a position to be-

populate these islands. As part of an

come the financial maritime, oil industry

extinct volcanic chain of islands that

and regional airline, service centre to the

run from Mt Cameroon to St Helena

whole of West Africa. Sao Tome is ideal-

in the Southern Atlantic, both islands

ly suited to become a major airline hub.

have incredible natural beauty making

Presently there are regular flights from

Africa GRI

REGIONAL SPOTLIGHT

Europe and Southern Africa. The airport is due for an upgrade which will make it one of the best in Africa. It could be said that the Islands are bang in the middle of the western world with short flight times to places like the UK, Middle East, Brazil and Johannesburg. Situated in the middle of shipping routes from North Africa to South Africa, Principe and Sao Tome is able to cater for the oil industry, ship and vessel repair needs. The fertile volcanic soils and ample In 2015 an MOU was signed between

rainfall provide an opportunity for high

the Sao Tome Government and the

value agriculture products like cocoa,

China Harbour Engineering Company

coffee, tropical fruits, vegetables and

(CHEC). CHEC undertook to invest $120m

flower potential for export to Africa and

to design and build the first phase of

Europe.

the $800 million deep water container transhipment port to handle large container vessels that cannot enter the shallow harbours of most West Africa countries.

â&#x20AC;&#x153;It could be said that the Islands are bang in the middle of the western worldâ&#x20AC;?

ECONOMICS The Islands have a stable and democratic Government with kind and caring people. Crime is relatively unknown. Sao Tome is a partner in the AGOA agreement with the USA and the EBA with the EU, providing preferential pricing to both the USA and EU markets.Most importantly, the Government is open for Africa GRI

REGIONAL SPOTLIGHT

Business and their investment codes are in place to establish an attractive environment from investors. A new department has been established for registering a Company in 15 days or express 2 days. The Government offers benefits and incentives to investors, as part of its policy to reduce reliance on foreign aid. The number of hotel rooms and beds has doubled from 2010 to 2016 as did the tourism numbers.

mal potential. The Island Nation has a landing point connecting it to the high

ENERGY

speed and large bandwidth West Africa ACE fibre optic (French) cable which

Presently the Islands are reliant on

connects the Islands directly to Africa,

diesel generating units. This is a costly

Europe and the World.

electricity supply unit. The Government wants to change to renewable, hydro, solar and biomass to meet demand. The Islands have good reliable annual rainfall with potential for an additional 25MW of hydro-electric supply as studies indicate. The geothermal energy generation potential has as yet not been investigated but the Islands being of volcanic source should have geother32

Africa GRI

â&#x20AC;&#x153;Most importantly, the

Government is open for

Business and their investment codes are in place to establish an attractive environment from investorsâ&#x20AC;?

REGIONAL SPOTLIGHT

PROPERTY

and more. It is the first of its kind, largely self-contained in services and to be de-

From a property perspective the

veloped in stages.

potential is good as with the development of key projects like the deep-water

The development of secondary resi-

port, airport, and related industry and

dences for high income individuals in

tourism the demand will grow. There is

West Africa is a highly viable investment

a definite lack of quality residential prop-

opportunity as Sao Tome is within two

erty around the capital city Sao Tome.

hours flying time of most West African

However, there are developments like

countries.

the 205 HA, land secured, residential estate with a possible extension to 300ha

Tony Kay is a shareholder for the Falcon

on the north west of Sao Tome at Lagoa

Group, whose Lagoa Azul development

Azul which are planned. This particular

is situated on the northern tip of Sao

residential development includes a ho-

Tome island

tel site, marina and 18-hole golf course

EAST GRI AFRICA 2016 Senior meeting for real estate investors, developers and lenders active in East Africa +44 20 7121 5060 | andreas.schonning@globalrealestate.org | www.globalrealestate.org/EastAfrica2016

Africa GRI

GRI AFRICA

SUMMIT2016

20-21 OCTOBER JOHANNESBURG

Connec ting African & Global Real Estate Leaders

PARTICIPANTS INCLUDE:

BRONWYN CORBETT CEO MARADELTA PROPERTY HOLDINGS

DALE RAMSDEN Director RMB WESTPORT

WARREN VAN DER MERWE COO VANTAGE CAPITAL

GODFREY TAPELA Senior Investment Officer IFC

PETER LEVETT Managing Director OLD MUTUAL PROPERTY

PAGANI GROUP • LORDSHIP • AT TAFRICA • IFC • PYLOS GROUP STARWOOD HOTELS AND RESORTS • HYAT T INTERNATIONAL • JABILAKE LANDMARK GROUP • CDC GROUP

+44 20 7121 5060 | andreas.schonning@globalrealestate.org | www.griafrica.com

Africa GRI