Mention Africa and watch people cringe. The news coverage on the continent is disproportionately about turmoil caused by diseases, vicious wars and dictatorships. Troubled countries abound: Zimbabwe, Sudan and Somalia are all making news for the wrong reasons. Natural disasters such as floods and famines continuously assault Ethiopia, among other countries. Elections can end in violence even in established democracies such as Kenya.
Recently however, there is good economic news trickling from the region. Bold investors keen on finding the next big real estate market are taking note. Some are jumping in, betting on the arrival of better times to the continent.
There are 53 countries in Africa. The continent covers an area of more than 11.6 million square miles. The term Sub-Saharan Africa refers to all countries that are located to the south of the Sahara desert, in part or in full, and roughly covers an area of 24.2 million square meters. There are 47 countries in Sub-Saharan Africa, with an estimated total population of 782 million people.
While some extremely serious negative social and economic trends still remain, overall the continent is doing better than it has for years. The amount of conflicts in the region has fallen while the number of democratically elected governments has gone up, according to the World Bank. The rate of economic growth has begun to catch up with those of other developing regions.
Sub-Saharan Africa recorded a real GDP (total output of goods and services adjusted for price changes) expansion of 6.5 percent in 2007. The growth is a result of oil exports, domestic investment, rising commodities demand, foreign direct investment and increasing productivity, according to the International Monetary Fund (IMF).
This present pattern is expected to continue as long as favorable national and international conditions remain in place to nurture economic expansion through the next few years. However, prevailing trends of rising fuel and food costs are likely to upset growth in many countries in the continent and indeed around the world. Therefore, there is a 20 percent chance that economic expansion in 2008 may fall below 5 percent, according to the IMF.
Doing business in Africa is no longer the daunting task that it was a decade ago, according to the World Bank. Some countries are ahead of the pack in reforming their business atmosphere. Kenya and Ghana, for example, were in Bank’s 2008 list of top 10 reformers that have made considerable progress in readying themselves for investors.
Although economies of countries that have natural resources such as oil and minerals are growing at a faster rate, those who don’t are finding ways to make money in the global market, according to a Boston Globe article published at the end of 2007. Countries such as Ghana, Kenya and Senegal are trying to build an outsourcing industry by putting themselves in a position to compete with India and other nations in the call center and document processing business. Madagascar and Lesotho have thriving textile industries and are exporting to the U.S. under favorable trade agreements, including the African Growth and Opportunity Act. Stock markets in the continent, while tiny in size when compared to those of other developing regions, are still expanding at an impressive rate.
Perhaps unsurprisingly, these positive African trends are going unnoticed. After all, only countries Zimbabwe, which has a severe inflation problem that continues to grow at an alarming rate, and Somalia, which has not had a functional central government since 1991, make many headlines. However, some early bird investors are paying attention and putting their money in places that have turned a corner but are still thought of as risky because of the continent’s bad reputation.
Real estate in Africa
News about real estate investment opportunities in North African countries such as Egypt and Morocco has been buzzing around for sometime. Newcomers such as Tunisia and Cape Verde are also jockeying for investors’ attention. Still, property news from other relatively unknown markets such as Uganda, Senegal and Ghana goes under the radar. However, some investors, especially those from the Middle East, are getting a head start without making too much of a splash.
Dubai World, a state owned United Arab Emirates Property Company has set up an investment branch in Cape Town, South Africa. According to its website, Dubai World Africa will focus on acquiring, developing, and managing real estate all over the continent. It also has a conservation program that is designed to implement environmentally friendly investments in the wildlife and game property sector of the region. The company’s investments span nine African countries: South Africa, Rwanda, Djibouti, Comoros, Tanzania, Mozambique, Morocco, Senegal and Benin.
Southern African countries such as Botswana, Mozambique, Namibia, South Africa and Zambia have a lot to offer in terms of game-related properties, according to Craig McKenzie, owner of Wildnet Africa Properties, a company focusing on wildlife real estate in the continent.
“Wildlife properties are the reason many come to Africa and there are many [investment] opportunities,” said Mr. McKenzie. “With rapidly diminishing natural and wildlife resources, conservation is high on the agenda of many. Africa has unique offerings and opportunities for investors to make a meaningful difference to our planet,” he added.
Another Dubai based developer, Kensington Real Estate, is also investing in the continent and considers Africa to be the next hot market with tremendous growth potential, according to an article in Property Wire. It has already completed two residential projects and is beginning the construction of a third development. So far it has invested in Ghana and Uganda, according to Mr. Nakku Senkeeto, the General Manager of Kensington Africa Ltd., located in Uganda’s capital, Kampala. Kensington’s investment in Africa will total $272 million in 2008, small compared to Dubai World’s investments across the continent, but the company plans to expand its operations quickly and is optimistic about the continent’s economic direction.
The next few years
After decades of misrule and neglect, many African countries are stabilizing and are set to grow over the next several years. Just like many other places in the world, the threats of political instability and economic issues such as currency volatility remain. Investors who pay early attention to the region may stand to reap huge benefits. Africa is a large continent. Pockets of optimism, in this continent perceived as basket case, are popping up everywhere.