In December 2011, The Economist magazine ran a cover called Africa Rising, in which it claimed that African economies were set to shine after decades of experiencing underwhelming growth following achieving independence. Many of these countries were rich in commodities which would be mined and exported to developed nations in Europe and North America.
But in the years since the cover was published, many African countries have just not been consistent enough. Africa remains the poorest continent on Earth. Almost every second person living in sub-Saharan Africa, for example, lives below the poverty line. While many of these challenges are structural and will take decades more to be alleviated, real estate offers a golden opportunity to improve the lives of hundreds of millions of people.
“Access to liquidity is a huge challenge across large parts of the continent,” Niyi Adeleye, Standard Bank Group Head: Real Estate Finance Africa Regions says.
The former engineer and Harvard University graduate who is responsible for debt and equity financing decisions for large real estate projects in West Africa for Stand Bank, explains that it’s very difficult for entrepreneurs and property developers to finance deals because cash just isn’t around.
“Property goes through cycles and we are in a tough part of the cycle. Institutions have been less willing to lend the millions of rand needed to fund the development of say large shopping centres and housing schemes. They allocate their money around the world but Africa is not always lucky enough to be a priority investment area. This will change when the global economy gains some semblance of normality again,” Adeleye says.
While there are legislative problems and other red tape holding African real estate back, global forces beyond the continent’s control, are also a problem.
“Sometimes it’s our own fault. For example, it’s very difficult to own property as a foreigner in certain countries. Then trying to get funds in and out of certain countries can also be very difficult. But sometimes it isn’t our fault. An example of this is how the world economy is faring post the pandemic,” says Adeleye.
The war in Ukraine has made governments wary about where conflict could pop up next. It has also fuelled higher fuel and food prices and this affects Africans who live thousands of kilometres away from Europe.
“Despite the strong economic recovery in 2021 which many countries enjoyed; the financial difficulties are far from over. Many countries are facing increasing debt burdens and high inflation. In a world which has become more risky, institutional investors have become more risk averse,” says Adeleye.
The most important investment that needs to be made in Africa right now, is in housing. The continent which has about 1.4-billion people living on it, according to the latest United Nations estimates, needs to offer much better housing.
Projects need to include apartment blocks, free-standing houses and student accommodation.
Currently developments across the continent have tended to include industrial projects such as warehousing and logistics. This is on trend with much of the world as people shop online. Mobile phone penetration is also growing rapidly across Africa and this has brought a boom for mobile money on the continent. In fact, Africa owns about 70% of the global money market which is worth more than $1-trillion. While it makes sense for money platforms like MTN MoMo, Airtel Money and M-Pesa to demand warehousing, logistics facilities and other infrastructure from developers across Africa, people still need to live in decent homes near their place work, for the continent’s economies to thrive.
“Africa has the youngest population of any continent. We literally are the future of this world. But we need to be the present too. We need to create the right incentives, regulations and financial mechanisms to encourage investment. We need to enable Africa to be in a position where it can rise again,” Adeleye says.
Niyi Adeleye, Standard Bank Group Head: Real Estate Finance Africa Regions, will speak at the Africa Property Investment (API) Summit 2022 which will take place from September 21 to 22 at The Marriott Hotel in Melrose Arch, Johannesburg. API is the premier real estate investment conference on the continent and is expected to attract hundreds of guests as they look to network and collaborate in an effort to take African real estate forward. Register to attend this year’s event at apisummit.co.za