Category Archives: Africa

BOND PROTECTION INSURANCE

So you’ve decided to work out the dePicturetails of your bond repayments with our bond calculator. But now you need to start thinking about, what they call in the industry, Bond Protection Insurance.

Bond Protection Insurance is a bond insurance plan that has been specifically designed to provide flexible risk benefits in respect of home loan protection.

The plan pays the original bond in the event of Death, Dread Disease or Permanent Disability, and pays the monthly bond instalments in the event of illness, injury, temporary disability and retrenchment. Under most plans the bond holder has the flexibility to select any combination of the benefits, in addition to the death benefit.

Most insurers these days offer choices, making the cover more accessible, highlighting the convenience and expertise they offer. Getting insured should be a straight forward process ensuring that your particular financial needs are adequately met and that your most important asset is protected for Life.

This is all very well but what about the details. Once you’ve used your bond calculator and you have some idea of the kind of house you’re in the market for and what the repayments you’ll be  faced with, bond protection insurance is like another hill before the end of the marathon. So let’s look at what insurers are offering.

What are the benefits?

Firstly there is the direct payment of benefits into your home loan. Next there is the death benefit (which typically pays a lump sum directly to the home loan within 48 hours of receiving all the documentation on a valid claim). There is also an instalment protection benefit which covers the bond instalment in the event of illness, injury, temporary and permanent disability.

There is usually a permanent disability benefit which pays a lump sum directly to the home loan in the event of a valid disability claim as well as a dread disease benefit which pays a lump sum directly to the home loan in the event of a valid dread disease claim allowing you to focus on getting better. A retrenchment benefit is offered which covers the bond instalment for up to 6 months while you focus on finding new employment.

Very rarely are there medicals or HIV test. Two lives may be insured under one policy, thereby providing a more affordable premium. The policy can be ceded to any financial institution. The policy will pay the full death benefit on death even if the instalment protector benefit has been claimed. While a valid Instalment protection benefit is being claimed, all the policy premiums due during that period do not have to be paid. You should be able to increase or decrease your cover to suit your home loan requirements.

Free death cover is offered, usually around three months,  while the bond registration is pending. Cover is provided for the term of your home loan.

Typical Features of the Products

Instalment Protector Benefit

If you as a homeowner are prevented, as a result of illness or bodily injury, from earning an income for a period of usually 90 days or more, your bond protection plan Insurance will pay the monthly home loan instalments while you are unable to work. These would be the same instalments you that can be worked out with a bond calculator.

Dread Disease benefit

Most Bond protection policies include what’s called a Dread Disease Benefit. A list of diseases would be included with the policy. If you are diagnosed with any disease on that list you will be paid the sum assured, usually after a period of 90 days, allowing you to concentrate on recovery. If the sum assured is greater than the outstanding home loan balance, the difference will also be paid into the home loan account.

The following 12 Dread Diseases are more often than not covered by most insurance companies:

Blindness, Cancer, Coma, Coronary Artery Bypass Graft, Heart Attack, Heart Valve Surgery, Loss of Limb, Major Burns, Major Organ Transplant, Paralysis, Renal Failure, Stroke.

Retrenchment Benefit

If a homeowner is retrenched for a period longer than 30 days, Bond Protection Insurance will, if this benefit is included, pay the home loan instalments for up to 6 months, allowing the homeowner the peace of mind to find alternative employment.

Lump Sum Disability Benefit

Almost all bond protection insurance covers homeowners who are totally and or permanently disabled rendering them incapable of earning income for a period of 90 days or more. Bond Protection Insurance will pay the home loan instalments for the first 24 months, before paying the lump sum benefit equal to the sum assured into the home loan account. If the Sum Assured is greater than the outstanding home loan balance, the difference will be paid into the home loan account.

Death Benefit

In the event of death all Bond Protection Insurance schemes pay a benefit equal to the sum assured. Again, if the Sum Assured is greater than the outstanding home loan balance, the difference will also be paid into the home loan account.

Now that you’ve seen all the benefits of Bond Protection Insurance you can soberly consider the value in pursuing this next stage in your journey to purchase your own home.

Investing in Africa, Good News, Bad News and Faux Pas

As people around the globe eye Africa for potential investment and South Africans head north there is some encouraging news to feed those ambitions, worrying reports to temper our enthusiasm and some mistakes to learn from.
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Ghana’s capital Accra is awash with educated, well-dressed young up-and-coming people, driving top-of-the-range cars living in stylish houses. It’s indicative of Ghana’s economic growth, 4% last year. According to the World Bank many African economies are among the world’s fastest growing in 2015. African countries in the top 20 last year with the highest projected compounded annual growth rate (CAGR) from 2013 through 2015, based on the World Bank’s estimates are: Zambia 7.2%, Tanzania 7.4%, Uganda 3.4%, Sierra Leone 9.5%, DRC 7.9%, Ghana 8.1%, Mozambique 8.7%, Angola 8%, Rwanda 7.8%, Gambia 7.8% and Ethiopia 7.9%.

US-based business consulting company Ernst & Young reports: “There is a story emerging out of Africa: a story of growth, progress, potential and profitability.”  Back in 2013 US secretary of state for African affairs, Johnnie Carson is quoted as saying that Africa represents the next global economic growth since 2000, U.S. trade relations with Africa have been dictated by the Africa Growth and Opportunity Act (AGOA). As a unilateral preference scheme of the U.S. to promote trade and investment in Africa, AGOA was meant to boost U.S. trade with Africa and the development of the continent. However, 14 years in, U.S. trade in goods with Africa has demonstrated a perplexing downward trend since 2011. U.S.-Africa trade dwindled from $125 billion in 2011 to $99 billion in 2012 and $85 billion in 2013. For the first five months of 2014, U.S.-Africa trade in goods totalled about $31 billion. At this rate, the total trade volume in 2014 could be well below $80 billion in a continuation of the declining trend. This is largely blamed on an decline in demand for oil from Africa and the fall-out from the 2008 financial crisis

In comparison, Beijing has been quite low-key in disseminating its Africa trade promotion efforts, although its trade with Africa has been growing exponentially. China surpassed the U.S. as Africa’s largest trading partner in 2009. China-Africa trade reached $166 billion in 2011, an 83 percent rise from 2009. The bilateral trade further increased another 19.3 percent to $198 billion in 2012, and passed the $200 billion threshold to $210 billion in 2013. In terms of trade volume, Chinese trade with Africa not only dwarfs U.S. trade with Africa, but the gap is as large as 2.5 times the magnitude of last year. But there’s some dissonance between the rhetoric and action.   {THE HILL}

London based magazine The Economist reported: “Since The Economist regrettably labelled Africa ‘the hopeless continent’ a decade ago, a profound change has taken hold.” Today “the sun shines bright … the continent’s impressive growth looks likely to continue.”

Africa’s trade with the rest of the globe has skyrocketed by more than 200% and annual inflation has averaged only 8%. Foreign debt has dropped by 25% and foreign direct investment (FDI) grew by 27% in 2011 alone and 13% in 2013. Although according to E&Y FDI projects (as opposed to cash) declined by 3% in 2013

Despite projections for growth in 2015 being revised downward due to the so called Arab Spring, lack of demand for oil and a sluggish world economy , Africa’s economy is expected  to expand by 4.2%, according to a UN report earlier in the year. The International Monetary Fund (IMF) is expecting Sub-Saharan African economies to increase at above 4.5%. Added to that, there are currently more than half a billion mobile phone users in Africa, while improving skills and increasing literacy are attributed to a 3% growth in productivity.

According to a UN report the think tank,  McKinsey Global Institute writes, “The rate of return on foreign investment is higher in Africa than in any other developing region.”

An end to numerous military conflicts, the availability of abundant natural resources and economic reforms have promoted a better business climate and helped propel  Africa’s economic growth.  Greater political stability is greasing the continent’s economic engine. The UN Economic Commission for Africa (ECA) in 2005 linked democracy to economic growth. Having said this attacks by Boko Haram in Nigeria and Al Shabab in Somalia and Kenya go against this trend and have worrying consequences if not contained. Also in this category would be the so-called  Xenophobic violence in South Africa.

All this growth and urbanisation is putting a strain on social services in cities, it has also led to an increase in urban consumers. More than 40% of Africa’s population now lives in cities, and by 2030 Africa’s top 18 cities will have a combined spending power of $1.3 trillion. The Wall Street Journal reports that Africa’s middle class, currently estimated at 60 million, will reach 100 million by the end of 2015.

Some other sobering news:  “A sustained slowdown in advanced countries will dampen demand for Africa’s exports,” writes Christine Lagarde, managing director of the IMF. Europe accounts for more than half of Africa’s external trade. Tourism has been and may continue to suffer as fewer Europeans come to Africa, affecting tourist dependent economies like Kenya, Tanzania and Egypt.

The South African Reserve bank warned in May that the financial crisis in Europe, which consumes 25% of South Africa’s exports, poses large risks. Adverse effects on South Africa could have severe consequences for neighbouring economies.

Another worry is the resurgence of political crises. Due to the so called Arab Spring, economic growth in North Africa plummeted to just 0.5% in 2011 and hasn’t recovered much since. Recent coups in Mali and Guinea-Bissau could have wider economic repercussions. “Mali was scoring very well, now we are back to square one,” says Mthuli Ncube, the AfDB’s chief economist. Ethiopia, Kenya, Uganda and other countries have militarily engaged in Somalia, which may slow their economies.

A cause for concern what many are referring to as Africa’s “jobless recovery.” Investors are concentrating on the extractive sector, specifically gold and diamonds, as well as oil, which generates fewer employment opportunities. 60% of Africa’s unemployed are aged 15 to 24 and about half are women. In May, UNDP raised an alarm over food insecurity in sub-Saharan Africa, a quarter of whose 860 million people are undernourished.

But none of this is deterring South African business interest north of the border. One may ask why? South Africa’s domestic market is not providing local companies with enough growth opportunities, prompting many of them to look at the rest of the continent. This according to Ernst & Young’s Africa Business Centre’s leader, Michael Lalor in an online press conference recently: “While South Africa was still growing well compared to the advanced economies, it’s certainly hasn’t kept up with some of the other rapid-growth markets.” Says Lalor. Now it’s battling to grow at all.

Analysts are pointing out that many of the other emerging markets, such as China and South America, are difficult to enter, making the rest of Africa the obvious choice. Asia is seen as almost excessively competitive. Latin America ventures mean dealing with a very strong and ever present Brazil. Therefore Africa, given its sustainable growth story and its potential, is an obvious region for South African companies to grow into.

Quoted by howemadeitinafica.com Lalor says that most Johannesburg Stock Exchange-listed companies are currently developing strategies for the rest of the continent.   Ernst & Young is experiencing strong interest from foreign companies to invest in the continent. “The response from our clients and from potential investors is overwhelmingly positive, to the extent that we simply cannot keep up. So there’s no doubt that we are seeing significant interest, both spoken, interest in spirit, but also people putting their money where their mouths are,” he said.

These sentiments are confirmed by a survey done last year by Price Waterhouse Coopers. A CEO survey published by PwC found that 94% of South African company heads expect their business in Africa to grow in the next 12 months. PwC interviewed 32 South African CEOs in the ICT, financial services, and consumer and industrial products and services industries.

With this in mind it’s worth turning to Raymond Booyse, founder of consultancy firm Expand into Africa, who identified four mistakes often made by South African companies venturing into the rest of the continent.

The first was: Not doing your homework. South African firms are frequently not prepared to spend money on market research. “Go and look if there is a market for your products or services. After you’ve established that there is indeed a market, find out who your competitors will be,” says Booyse.

Booyse points out that South African companies underestimate transport costs and ignore how local laws and regulations influence doing business.

Secondly: Ignorance. Many South African business people are ignorant of local cultures and attitudes according to Booyse. By way of example, ignorance doesn’t realise that just because they’re both former Portuguese colonies, what works in Angola’s capital Luanda, doesn’t necessarily mean it will work in the northern Mozambique. In a recent report, research firm Nielsen noted that African consumers’ attitudes towards technology, fashion and how to spend leisure time vary greatly. No prizes for that one.

Thirdly: Arrogance. Booyse says that South Africans sometimes think they know what people in the rest of the continent need. “In the rest of Africa, South Africans are often regarded as arrogant.”

Finally: Not being prepared for the high costs of doing business in Africa. Many South African companies are not aware of the high costs involved in doing business in the rest of the continent. “If you want to spend two weeks in Angola it will cost you R40,000 (US$4,700),” notes Booyse. “It is not cheap and easy.” Flights for example, from South Africa to either Kinshasa or Lubumbashi can be costly, and hotel rates are also very high.

It’s clear that Africa is a fertile place to plant seed. But Africa is not for the faint-hearted as business is done in a very different way to elsewhere in the world, with all manner of social and political hoops to jump through. South African companies have a potentially bright future and definite advantages if they are prepared to take risks, stay humble and do their homework.

For more articles by Matthew Campaigne-Scott CLICK HERE

Indigo Skate Camp – Skate and Create

Indigo Skate Camp

I was asked by Ian Wittenbur and Patrick Cummings of US online magazines Again Faster and Evolve to visit a little village in the Valley of 1000 Hills and experiance a fascinating project started by South African skateboading supremo Dallas Oberholzer that started with some skateboads and ramps and has blown up into a full on community enrichment project. Read on.

Indigo

Driving through rural KwaZulu Natal is a reward in itself. Travelling through the rambling beauty of the Valley of thousand Hills comes with a boxer’s bob and weave type of driving through dips and around bends that are loaded with surprises from docile cows to 100 ton trucks.

A cool autumn day presents itself with fat little cumulous clouds floating toward the distant horizon. Colourful wild flowers line the narrow roads.  I feel a sense of excitement at the prospect of the novelty of my intended destination of Isithumba village.

The Indigo Skate Camp is my target amidst all this rural beauty. The skate camp is the brainchild of Dallas Oberholzer, South African skate boarding icon. With the intention of giving back to a community that would almost certainly have never heard of skate boarding, over eleven years ago he put down some roots in the humble yet idyllic surrounds of the village of Isithumba, named after an imposing and impressive rock overlooking the life-giving Umgeni River.

Indigo Skate Camp has giant ramps and a ‘kidney bowl’ structure you would see at any urban skate park. The children from the surrounding area learn skate boarding and other life-skills brought to the camp by overseas tourists who come for a skateboarding holiday. Here the tourist is treated to Zulu hospitality of good food, story-telling and bush walks. Indigo Skate Camp was the beginning and now foundation stone to the Indigo Youth Movement (IYM) which is the road show, if you like, of what’s been happening at Indigo Skate Camp for years.

images (6)Driving into the deep valley toward Isithumba the road is lined with school children on their way home. Friendliness is one of the first things that greets an outsider. People smile and wave as you drive tentatively between goats, cows and curious pedestrians and potholes. I’m a little lost so I stop and ask some mischievous looking primary school children where Indigo Skate Camp is. “Lift, lift, can we have a lift?” The spokesman chances. I say “sure, just show me where Indigo is please.” My dinky Toyota which normally takes four adults is now filled to the brim with possibly as many as 12 under twelve’s’. We travel a kilometre or so and they stop me and hop out. “Is this Indigo?” I point to a driveway. “No” they chorus with shiny impish faces surrounding sparkling white teeth. “Indigo is that way.” They point to the opposite direction. Rascals. Every South Africa urban dweller’s nightmare is being hijacked. I’ll be able to tell my friends about the friendliest hijackers in the country!

Upon arrival at Indigo the impression is not of a scintillating establishment transplanted into the midst of poverty. Though the area is poor it’s neither derelict nor slumish. It’s rural, simple and peaceful. The ‘camp’ is reflective of the community in which it resides. A collective of the traditional Zulu rondavels and other out buildings around the ‘elephant in the room’. I refer to the enormous skateboard ramp, skate pool (kidney bowl) and other ramps. It’s totally out of character with the rest of the scene.

images (5)Wading through the long grass I see a slim, athletic looking man in his mid-forties. He greets me with friendly surprise. He introduces himself as Dallas. Hooray, I’ve caught the big fish in his natural habitat first try. Despite being very hospitable, Dallas is very busy with his financial advisor and doing financial transfers over the phone- not quite aware of the incongruousness of the scene of high tech business world juxtaposed to the rural African backdrop. My appointment is with G. But G is still on his way so I’m privileged to eaves drop on Dallas’ financial meeting cum skateboard lesson on one of the ramps.

I meet a couple of overseas visitors who’ve come to hangout and help-out at the camp. We chat casually about the camp and how impressive the structures are and how beautiful the area is. Helle is from Denmark and is travelling around South Africa to: “Get a feel of the place, to be exposed to other cultures and people.” Indigo welcomes her with open arms and puts her up for a few days while she helps with odd jobs about the camp. Surprisingly she has no interest in skating just learning about how another people live.

It’s now after four in the afternoon and seemingly out of nowhere emerge little bunches of children, some primary school age, other’s well into their teens. Let the skating begin! Some seem content at first to play with their own inertia as they use a little exertion to get their skate boards up one side of the ramp and then up the other. Then comes the madness, four or five kids on the big ramp chase each other in a circle up and down the curves creating a whirring that’s almost manic. Their faces a mixture of intense concentration and abandoned joy. One takes a tumble – the board flies in the air and smacks one of the spectators on the shoulder. He dives to the ground in mock agony, or is it? Everyone laughs as he waves his finger smiling, telling the culprit that he needs to learn to skate. There’s anuproar of laughter and gestures. Then everyone joins in the skating. It’s crowded and it’s difficult to see what’s going on- some kids are practicing tricks others seem content with the rhythm of going up and down at either end of the ramp. The girls look on.

images (7)I approach a stand where about fifteen girls sit. They come from the village after school to watch the skating they say. I ask them: “So why aren’t you skate boarding?” There’s uproarious giggling. “No, no, no not for me.” says a 13 year old. “How, I am too scared to do that” says another. They all laugh and dismiss my challenges to them as foolishness. I make a mental note to myself to ask G about this. While I wait for G to arrive I chat to one of the other leaders of the camp, T. T, short for Thabang, comes from the village and makes it clear that Indigo Skate Camp has provided him with a hope and future that he believes would not others wise be there.  He goes on to explain that as many as 50 kids come and participate in the activities at the Skate camp. On a skating note T reckons that some of the kids have become so practiced that they are more adept than he is on the ramps.

With that I meet G who has arrived after his long trip by minibus taxi having had errands to do in Durban. G is a friendly easy-going young man, although when among the kids he has a very discernible sense of authority. He is naturally hospitable. We settle down under the canopy of some thorn trees upon some makeshift benches made from branches. I switch on my recording device and ask what I know people from outside are bound to want to know.  There is an elephant in the room – a skateboard park in rural Kwazulu-Natal, what is that all about?

images (10)G nods and smiles, he knows exactly what I’m talking about. “It started with the skate camp in 2001 for the guys who came from the cities to come and visit Indigo, we used the tourism centre near the primary school where we used to have our skate camps during the school holidays, bringing the kids from the cities and different provinces to interact with the village kids.

We use skate boarding for social change to stop drugs and alcohol and to talk about life and also to learn more English.  So Indigo, I can say, is a beautiful place and I’m sure you wouldn’t expect to find a skateboard park here.  It is so beautiful, we are surrounded by the mountains of the valley of a thousand hills and the Umgeni River which flows into the sea and usually in January or February we have the Duzi canoe marathon comes past the camp.

From my side, Indigo made me what I am today.  I have learned things in school but I can say I’ve learned more here because I’ve learned things from tourists and courses, learning how to communicate with different people and experience different things.  For me, I am doing the right thing because I love the kids and I love being around the kids seeing them progressing, that was one of my dreams.  Now one of the guys here is better than me, which is quite amazing.”images (3)

I asked about some construction work going on below us.  G explained: “At the moment as you can see we are upgrading the place – we are building some chalets so that when we have a skate camp we will have more accommodation for our guests. “

Dallas had expressed to me earlier that day that he didn’t believe anyone could take what there is at Indigo and plant it, replicate it, elsewhere since what is here is unique. “So G how would you take the concept, at least, of Indigo to say, Tanzania?”

G is unfazed: “Well what I can say is that it is not about me and my ambition but it’s about the camp itself.  You plant a seed and then the seed starts to nurture and becomes a tree.  I feel that we need more youth leaders and role models because we are lacking in role models for the kids (in the community).  Some of the kids drop school at an early age and some of the young girls get pregnant.  We can’t wait for the government to do something, it is our village and we need to do something to make better lives.  For my life it’s not about having fancy clothes and what, what, it’s about my village and making it a better place, that is my main mission.”

G then got pensive and shared his thoughts: “To go into Africa , I think it will be quite a challenge because first I need to get some connections with other people before I leave South Africa.  Luckily we have another project, I think in Kenya, which is funded by the Laureus Foundation.  If I can get connected with them, then maybe they can make a suggestion of where I can start a project for them.  You wouldn’t know what you are going to meet along the way but as long as you are passionate about what you are doing then anything is possible.”

images (9)Wanting to get back to skate boarding for a moment I asked G if he was familiar with the concept of a Holy Grail. I likened it to surfer searching for the perfect wave or the fisherman and the fish that didn’t get away. “What is the Holy Grail for you as a skate boarder? Is there a moment in a skate boarder’s life when you say: ‘ah that was perfection.’”

G took me straight back to Indigo, as if trying to emphasise his main passion and the passion of Indigo Skaters:  “it’s not about skateboarding but how skateboarding can change a life.  This project started out just being about skateboarding but now it’s about changing people’s lives.  To me it’s about people who get trained to build some life-skills, to up-grade peoples knowledge and of course the kids.  Indigo up-graded my knowledge and now it’s time for me to give back to the kids.  I feel that if I wasn’t skateboarding I wouldn’t be having the life I’m having.  I was born in a township, not here, but I came here 15 years ago.  Whenever I go back to that place I see life differently.  I see the guys that I grew up with smoking and taking drugs.  I don’t think they have a future.  They used to be ahead of me but I thank skateboarding that it made me into a better person because I didn’t know what I wanted to be after matric.  We’ve got people around, people who have done matric but they are doing nothing.  There are fewer job opportunities and this is like bread to me because even at home I am the bread-winner, I am the one that is supporting and putting bread on the table since I do this project.”

I’m distracted by an ever-growing commotion behind us. Uproarious laughter, jumping up and down and very cheerful faces. T,  is leading a group of about 30 to 40 children ages, ranging from 8 to 18, in a game of Simon-says Zulu style. Although in Zulu it’s immediately recognisable to me as the children squirm, straighten and flap in response to the key words. Everyone is involved, no one is on the side lines and those who are ‘out’ are cheering on and laughing with those who are in. The little boy in me immediately wants to play too, but instead I take photos and enjoys watching the action catching the vibe of the crowd. Apparently each day there are activities like this or something similar to include all the local children and not just skaters in the camp’s activities.

I chat to an older woman who is watching from the side-lines vicariously taking part. She introduces herself as Kosi. I know everyone calls her Mama Kosi. We chat about the children and she tells me that she was very pleased the day Indigo came to the village. She lives adjacent to the property. Mama Kosi gives me a wide toothy grin and tells me how she cooks for the guests. I ask what she enjoys cooking for the foreign visitors. She responds with no hesitation:” Mngqusho en Mbotyi,” that’s samp and beans in English, it’s a traditional Zulu dish. The samp is made from crushed mealie kernels and the beans are usually sugar beans. Mama Kosi is a lady of few words but clearly likes it when there are guests to cook for.

I call it a day and we agree to continue the interview tomorrow. I drive on up out of the valley under a grey sky but with a spring in my step as some of the spirit of the camp has rubbed off on me.

On day two of my sojourn at the Indigo Skate Camp I  arrived on a fresh sunny morning with just the faintest wisp of cloud in the otherwise deep blue sky. The ramps are empty and quiet given that the children are all at school. The little collection of rondavels are not quite as silent as people are preparing for a day of work, smartening up the site and building the next rondavel.

G emerges and politely smiles and greets me. He is natural hospitality with a warm friendly face immediately putting one at ease. After some small talk I asked G if Dallas was on his own when he started this endeavour – or if there was a partner involved? G answers: “Actually, I can say that it was him (Dallas) from the start and I feel that I am living his dream I can say thank you to him for the partnership, because this is something that he wanted to do with the community and I think it worked out very well.  He had to eventually get funds from somewhere; ‘Element’ and then we used to be funded by the sports trust ”Laureus Sports For Good Foundation” now fund much of Indigo Youth Movement’s road show as well as some of the day to day running of the Skate Camp. The skate camp ensures up to 40 people for the village receive stipends and over 50 local children are learning to skate. The activities also include life-skills, exposure to reading, music and dance too.

Aware of how one can’t just buy and build on land in rural Zululand I asked if Dallas had to get permission from the local authorities and the chief. G explains: “To get this piece of land we spoke to the headman of this village and after the headman agreed you still have to go to the Chief. They give us permission to build this park on the land because they know it is for the good of the community.”

Having read up on the net that 74 per cent of skateboarders are male I relate my questioning of the girl spectators becoming skaters to G, also how they found that an hilarious concept.  G:”Ja, I can say that a couple of years back we had some ladies who tried on skating, and they skated good, it was just that they grew up and felt that they cannot skateboard anymore.  So now we are just grooming these small ladies but we have a special day to teach them.  We teach them how to balance and stuff– we’re still going to bring a balance board. It will take time but we’ll get there.”

I ask G if he has a story of someone who stands out for him that epitomised the Indigo Skate Camp?” G doesn’t hesitate: “There is, like my own story – I was born in 1988 in Mpumalanga Township and I grew up there as a township boy playing in the street and doing all those rough things.  We didn’t have a chance as children, we were always on the street, running around, breaking the rules.  But since I came here it was quite funny because we went down to the river and I didn’t know how to swim.  I couldn’t experience what they had experienced.  But strangely I gelled together with the life here and I think I came here at the right time because that’s the time Dallas came also with the idea of starting the skate camp and then it was easy for me to make new friends because we were all beginners by then.  I knew about skateboarding but I wouldn’t have tried if he hadn’t come around here, I thought it was dangerous and I thought it was for white people only.  I came here as a random normal child and they groomed me to be like a role model, but it wasn’t easy though, I had to go through some tough times.  There will always be moments when you have to come out of your shell and share your experience with other people.

But when I look back into my life I think that if I wasn’t skate boarding I would be in jail because that is where most of my friends are at the moment.  We all make decisions and sometimes it is hard to judge but I would like all of us to walk in the same pathway I am walking to try and change the world, although we can’t change all of it but to start from places like this valley of a thousand hills and then to take it to the next level.”

Many missionaries and churches and government programmes try to make a place for themselves, seeking acceptance in the Valley of a Thousand Hills. So I ask G what sort of opposition they have encountered from the community toward the camp.

G:”I remember about 8 or 9 years ago there was a guy who was good at skating and he was skating around here on the street and he had an accident and he was killed by a car so they wanted to stop everything.  They couldn’t stop it though because we were passionate about it and we told them that we weren’t going to skate in the street and that it had been an accident.”

Dallas was telling me that he wants this to be more than just a skate park, that he wants more activities and programmes. I ask G about the life skills programmes.

G: “All I can say is that it’s not just about skateboarding but what we want is maybe like 10 computers in our clubhouse and teach some IT skills to the kids while they still young so that they can grow up with some knowledge. We do also have our own life-skills manual where we teach the kids to work amongst the people and to work together as a group.  We talk about drugs and alcohol abuse.”

“We play games like icebreakers and we do these energizing things after stretching exercises, then we have a chance to include everyone. After lunch everyone can go crazy if it’s a skating day, everyone can do what they want, but if it’s the life-skills day, then after eating we will sit down and learn.”

“Normally, it’s not only me who does the life-skills we also have other skate coaches like T who also teaches life skills,  I am good with the older guys and T is good with the younger kids.  So we know what they want, and we know how to create fun amongst them, we know how to make them laugh.”

Matt: “What role do the people from overseas play – I see you have 2 young ladies here from overseas.  How often do you get people here from abroad?”

G: “We don’t often get people from overseas, and my own dream is to have this place filled with people.  These people that are coming here they have something that they have learnt back home and they want to take it to Africa. For example we have an art teacher like Natalie, she will be doing some classes with the kids soon.  It depends on the interest that you have something that you want to teach the kids and then we will create some space for you and then you do it with the kids.”

I explain the impression I got from the website (http://www.indigoskatecamp.co.za/) that the Skate Camp offers a skateboarding holiday, experiencing African culture, the bush, the food. Did I understand the Website correctly?

G:” You’ve got it right but it’s something more like a day trip where people come from the cities or from overseas, stay in town and can come visit us. For example: you see if you walk along the river you can see over this hill – the village and we will talk about the village because you can see a big rock, which is called ‘Isithumba Rock.’ The village is named after the rock, and we normally have some interesting stories which we tell them.  We introduce the visitors to the headman because he is living more like the style of the 80’s or the 60’s.  Most of the guys are more traditional here.  I have a friend who is a healer and I normally take them to him. And we tell them about the ancestors and why we have ceremonies where we have to slaughter goats and cows, that sort of thing.” Apparently skate camps are for kids aged 9 and 18 where they can stay for a few days at a time. There is often survival training and exposure to Zulu culture as well as visits to skate parks in surrounding towns.

I put it to G that skateboarding is perceived in South Africa as a pastime mostly for white teenage boys. What is Gs take on this? “Have you ever been under pressure from your peers to be spending time doing something more traditionally Zulu?”

“It doesn’t matter to me what I do, it only matters that I know my roots where I’m from.  It doesn’t matter who I hang out with, I can go and stay in London, but so long as I don’t lose my culture, my roots and where I from. I know this mentor from ‘Laureus’. He’s like the African Project manager who runs the ‘Laureus Sports For Good Foundation’.  He lives in London, but you can see he has never lost his roots, he knows where he is from, whenever he phones me he doesn’t appreciate speaking in English, and he speaks in Zulu. I don’t want to lose my ground and lose who I am, and when it’s time for my ancestors, I have to act traditionally, I have to act as I was born.  I know that we have some different destination, and they (the ancestors) know I have a different destination and they understand and are happy that I’m doing this, they know I’m getting something out of it as long as I respect them and know that they exist and know that they are still around making sure that I always go safely and do what I ought to do.”

I can see G is eager to get back to work. Dallas arrives in his pickup with cement and supplies for the day’s work party. I can see that he too is in work mode and I don’t want to disturb his rhythm. We chat briefly. I can see everyone is motivated and ready to labour.

I catch up with Dallas later and he explains all the activity: “We’ve had a push for more accommodation, to develop more hospitality skills.” The intention is to build more rondavels for the planned increase in accommodation for visitors and similar buildings to facilitate Dallas’ drive for hospitality training.

Dallas is animated as he tells me how volunteerism is the key to the future of Indigo: “We need more volunteerism. Locals enjoy interacting with the visitors. It enlightens and encourages the locals and they are amazed that these outsiders show an interest in their lives. So the big push is going to be for more structured interaction with volunteers so that they can feel directly engaged in the community’s life. “

Then there’s tourism. Dallas is focused: “everything from day trips to month-long stays. I see us developing trails, mountain biking and so on. We’re more than just the niche market of skateboarding, we’re also a playground. We want to create a kind of park and play situation… to be a place where you can park your car, ride your bike, have food – we can spray down your bike and so on, to be a hub of outdoor fun.”

Looking further into the future, Dallas considers the English language, IT, Internet studies and communication playing a role. One of the buildings I see being worked on is planned as a computer centre where volunteers can train local children in computer skills. But language is a key component of Dallas’ dream: “We can create something unique. Some people want the African experience – lets create a unique destination where you can learn English, sitting among African people. I’m trying to find ways of benefitting the community and also to create another reason for a person to visit, creating reasons beyond just skateboarding. Initiating a language centre can do that.”

Asked if there are more ‘Indigos’ down the road, Dallas explains that the situation at Indigo is unique and not likely to be replicated, however he does say: “I might consider the whole model elsewhere in Africa. We have considered Mozambique or maybe Uganda.  Of course we want to finish getting this thing (Indigo) running fully on its own. We want to see it generating its own revenue. I believe in two years’ time we’ll be there.”

images (11)Watching the skaters fly in the air and glide up and down the ramps I had to ask what the future holds for the guys who are just here to skate.  Dallas offered these thoughts: “I’m sure a few of them will become standout skateboarders and a few will be the next instructors, some will run the facility. The skateboard community needs to provide jobs for skateboarders and skateboarders need to run the skateboarding fraternity. I’m on a mission to create jobs. Guys will never stick with skateboarding if they are forced to go and sell hotdogs at the race track. I’m trying to create jobs that will keep them in skateboarding. I couldn’t find a job in skateboarding.  I created this place to create jobs and somewhere down the line guys will see me as a role model having created this entity. Skate and Create is what we’re doing, that’s what this is about -skating and creating.” As an afterthought he adds: “That should be the name of your piece!”

Catalyst Focuses on Real Estate in East Africa

Paul Kavuma

East African Chief of Actis Paul Kavuma

Catalyst Principal Partners, the Kenyan based private equity firm is surveying the real estate opportunities across East Africa, where consumer demand is growing and the knock-on effect is being felt from recent oil and gas discoveries.

Another force to be reckoned with in East Africa would be the emerging markets focused Actis. The East African Chief of Actis Paul Kavuma left in 2009 to form Catalyst, taking a wealth of experience with him.

Paul Kavuma told the Catalyst Web News Room: “We have a strong pipeline of deals and are at advanced stages of completing a number of new investments which will be announced by the end of the year,”

In Kenya, Catalyst Principal Partners has started making investments from a broad $125 million fund and from a partnership dedicated to real estate.

The World Bank’s International Finance Corporation, accounts for about 70 per cent of cash raised for the first fund, and the rest came from individuals, insurance firms, fund of funds and others. The firm may approach the market to raise a second fund in the next two years.

Catalysts original investments were in Tanzania. It seems that some of the most attractive opportunities were outside Kenya, the region’s biggest economy. So far in 2013 Catalyst plans are focusing 35 per cent of the first fund on industries such as building materials and cement, technology and financial services.

Catalyst has set up a partnership with Acre Solutions, an international property developer. Together they have identified real estate projects. Investors are being sought. The partnership is also working on a mixed commercial, residential and hospitality development in Kenya requiring about $2 billion in investment over 10 years. Real estate investment trusts (REITs) are planned for the future.

Middle income homes, among other housing in east Africa has surpassed supply for nearly twenty years, and the sector has outperformed other asset classes such as fixed income and stocks. Catalyst, among similarly focused entities, expects the region’s already booming consumer demand and growing economies to get a further shot in the arm from oil and gas finds.

Reported in the Catalyst website newsroom:  CEO Paul Kavuma says, “capital has been raised from leading international and regional institutions and from credible regional high net worth private investors, with the quality of investors in being reflective of the attractive fundaments of the region and is a positive signal of the growing confidence in the economic prospects for East Africa”.

Latin Lessons in Retail – Africa Take Note

Screen shot 2011-10-11 at 3.21.32 PMWith the death of Hugo Chavez dominating news a while back many commentators continue speculating on the future of Venezuela’s property and retail markets, Will the current Latin Socialism continue? But despite the spread of so called Latin Socialism, Latin America is experiencing free market forces not unlike those influencing much of Africa. Have emerging markets of Africa and Latin America anything in common when it comes to the development of retail space for their growing middle classes.

Africa in general and South Africa in particular has much in common with Latin America’s labour force. Although Asia’s, for example, current competitiveness relies considerably on its working-age population, Latin America and Africa’s outlook for labour force growth is much stronger, as young inhabitants set to join the labour force make up a higher percentage of those continents’ populations.

Like Africa, Latin American consumer demand is rapidly growing and the expanding middle class currently represents about 60% of the total population and approximately 40% of total purchasing power. With demand for newer retail infrastructure increasing, opportunities exist for developers and retailers who seek to expand their consumer base.

However, people are asking questions about whether the emerging African middle class is as big as the experts believe. Rapid urbanisation rates are pushing up potential consumer numbers but not necessarily incomes. These factors, among many others, are inhibiting the intention of developers and retailers to build critical mass quickly in African markets. It may still be a while before their high expectations manifest in the real world.

In Latin America however, development is increasing shopping centre space. In most of the region’s countries, traditional high street retail has gradually deteriorated as retail markets mature, with retailers migrating toward shopping centres. This has for some time been considered one of the drawbacks of the shopping centre invasion. Small businesses are seen to suffer and local decay of commercial real estate creeps in. This seems to be universal, with stark examples in both Africa and Latin America.

Latin American supermarkets have already seen notsable expansion and, among retailer types, they are expected to expand the most quickly—with new developments anchored by Wal-Mart, Carrefour and strong local players such as Commercial Mexicana (Mexico) , Pao de Acucar (Brazil) and Jumbo (Chile & Argentina).

By way of comparison, international brands such as Nike and McDonalds and KFC do currently have a presence in shopping centres in Africa. But an international study of retailers by South African property management company Broll, indicates very few players are prepared to commit. Out of over three hundred companies surveyed, scant few were considering African markets at all. There is evidence of interest in SA and North African countries but little attention has been paid to markets that South African companies are eyeing like Kenya, Nigeria and Mozambique and Zambia.[Broll]

Enter the Power Centre. A power centre is an unenclosed shopping centre with 23,000 m2 to 70,000 m2 of gross leasable area that usually contains three or more big names retailers and various smaller retailers, usually located in strip malls, with a common parking area shared among the retailers. [Wiki]Power Centres seem to have less of an appeal in Africa in that big retailers get behind the big conventional mall developments or not at all. Also the Power Mall presupposes a culture of one-shopper-one-car. Not a common African phenomena.  In Latin American markets, Power centres have increased their footprints, with larger areas leased to specialized retailers. Power centres are also beginning to play a more important role in second-tier cities, targeted at lower income groups.

Changes in local government policies in Latin America as well as attractive yields and moderate risk have encouraged major international developers to focus more on commercial development in the region, and local investors to expand their operations to neighbouring countries. Companies such as BR Properties, Westfield and Brookfield began to invest extensively in retail property development nearly four years ago, and they have grown their retail asset portfolios across the region.

Alas in Africa problem-free land title is one of the challenges. Litigation from multiple claimants remains an ever-present threat. Disproportionately high costs of land and obtainability of large parcels of it in choked-up urban areas is a huge challenge.  Similarly, Africa is challenged by the limited availability of long-term debt and a relatively low level of interest by international institutions in African property funds. Electricity outages and all sorts of other elements in the supply chain push up costs hence high rentals are required in order to achieve a reasonable return.

In 2012, retail commercial real estate transactions in Latin America represented 37% of the region’s total volume of U.S. $12 billion, and 25% of the number of deals. [Source CBRE] The lack of adequate supply, especially in secondary locations, and consumer fundamentals such as credit availability, will continue to be key drivers for retail expansion, regardless of the specifics of each country market. Africa lacks a certain sophistication compared to its Latin rivals for foreign direct investment. Both these developing markets are hungry for attention from international developers and investors. Local government legislation and infrastructure may play a more important role than the emergence of a middle class with spending power to release the funds and set the wheels in motion for African retail space.

Social Grants – How They Influence Rural Retail.

Social grants queues in Vosloorus.photo by Simphiwe Mbokazi

Social grants queues in Vosloorus.photo by Simphiwe Mbokazi

Keillen Ndlovu, head of Property Funds for Stanlib has been widely quoted of late, saying: “When it comes to retail property investment, the lower income market is still the place to be. It is where the population is and where the growth is. There are still opportunities for smaller retail centres with a convenience element.”

For small town and township retail, food and fashion are basic ingredients. Proximity to public transport is a further need. Banking facilities: branches and ATMs also contribute, given low Internet penetration and a preference to transactions in cash.

Shopping centres in this subsector show a monthly shopping cycle. Pronounced spikes in shopping at month ends and early stages match payments of government social grants and salaries for the growing working middle-class, less reliant on discretionary spend, providing more stable trading densities.

Someone else to weigh in on the subject is Marc Wainer, chief executive officer of  Redefine Properties, in an interview with Denise Mhlanga from property 24 said “with interest rates expected to remain low for a while, consumers appear to be spending more than in previous years and rural shopping centres are benefiting from the Government social grants.”

Marietjie Oelofse of the Aida Lichtenburg office says “This is in stark contrast to the situation five years ago, when many retail shops in town centres stood empty. But minimum wage payments and better distribution of social grants have increased disposable income, creating a demand especially for clothes and furniture.

As a result, there is strong demand for space from retailers catering to this growing buying power.

Clearly social grants paid by the state are helping retailers in township shopping centres weather tough economic conditions.

Two Shoprite stores owned by Futuregrowth’s community property fund, Diepsloot Mall and the other in Tembisa, enjoyed the highest turnover per square metre of any Shoprite outlet in SA over the past two years.

Futuregrowth portfolio manager James Howard told Business Day Briefing that the fund’s shopping malls in Diepsloot and Tembisa were consistently rewarding despite “harsh” economic conditions, thanks largely to the social grant money that was being spent by the two communities. The centres improved turnover even during the credit crunch since few community members were in the market to borrow.

Shoprite has a long history of investing in township and rural property even before returns looked promising. Howard said: “Shoprite has backed rural development for the past 15 years, before these areas were seen as investment hotspots. We have seen land in places that are considered ‘no-go areas’ develop into attractive stores.”

The influence of social grants is even more visible when looking at the payout points themselves. But there are pro and cons.

Talking to the Mail&Gaurdian, Andrew Mills, director of Boxer Superstores, part of the Pick n Pay group, said spending on social-grant payout day at the 95 Boxer outlets in South Africa was bigger than it was on payday. He said recipients who lived in remote areas often did all their shopping after collecting their grants at a store to save on transport costs.

The recipients are encouraged to spend 10% of their grants on goods in the store before the remainder is withdrawn as cash from the tills. Mills added that Boxer consumers were “wise” and the stores tried to offer promotions on pension-payout days to discourage people from shopping elsewhere.

Mike Prentice, Spar’s group marketing executive also talking to the M&G, said its supermarkets also experienced “massive spikes” in sales on social-grant day and the days that followed. “It’s definitely the biggest trading day of the month. It changes the entire complexion of the store over that time.”

Spar has 850 stores throughout South Africa and, like Boxer; almost half are located in rural areas. Many Spars are payout points for the grants, although the biggest spikes in spending that Prentice speaks of, are seen in rural areas. Preparation for payout days involves extra staff at certain stores. Shelves are restocked with top-selling items such as rice, maize, long-life milk and airtime. Social-grant payouts totalled close to R100-billion in 2012. More than half was for child support and the remainder was largely for old-age pensions and disability grants.

But not everyone is happy, “Retailers acting as payout points for social grants are problematic” said Social Development Minister Bathabile Dlamini in a public statement. Dlamini said the department was concerned that those drawing their money from retailers were not given the full amount and were obliged to buy a certain amount of goods at these stores.

“The retailers are only interested in money, not the quality of food our people eat. We don’t mind communities coming to this kind of agreement, but not when they are forced into it.”

Back to Mills, who says customers were encouraged, not obligated, to spend 10% in the store at the month’s end. “They do their shopping at the same time, because it is more cost-effective for the customer and saves in transport costs.”

Mike Prentice, Spar’s group marketing executive, said its customers were not expected to buy in the store. “It is not even implied,” he said. “People just tend to do their shopping there anyway.” The fees cost each store 0.25% of the total payout, he said, but the resulting revenue surge more than made up for it.

Social grants are an important source of cash income for households with eligible members. While these are important for poor and vulnerable households and individuals, there is a disturbing trend – the number of people (households and individuals) dependent on social grants as major or only source of income is increasing.

According to Booysen and Van der Berg (2005) HSRC paper, the number of beneficiaries increased between 1998 and 2003 from 2.8 to 5.8 million, which represented an annual growth of 15% or an increase from 67 to 125 grants per 1 000 of the South African population. However, the increase in 2003 could be attributed mainly to the introduction of the CSG (Child Social Grant) and the increase in public awareness of eligibility for grants. Nonetheless by 2009, the number of beneficiaries was estimated to be 13 million (22% of the population) and, rightly so, the government has started to get concerned about this high dependence on social grants. The social grant system transferred about R78 billion in cash grants (DBSA 2009) and has continued to grow, putting enormous pressure on the fiscus.

Depending on what measures government chooses to take, to reign in the growth of social grants, will determine the level of reliability dependence those social grant will be on influencing secondary market spend trends. An entire commercial and retail industry may be dependent on the outcome.

A Darker Reason Why SA’n Business is Moving into Africa?

Reports abound of more and more South African companies doing business in Africa, but why are they not investing that money locally, are there challenges to making development work locally? Looking back over the last few quarters some disturbing stories have emerged.

It can’t be a good sign when you hear the news that a company like Resilient is looking elsewhere to do business.

Des De Beer (courtesy FM)

Des De Beer (courtesy FM)

Johannesburg-based real-estate investment company Resilient, which has a local market capitalization of 11 billion Rand is looking to Nigeria to expand its business. This on its own is not a worry since many SA firms are expanding into Africa. However it’s the stated reasons and comments from its executive that raise some eyebrows.

According to The Citizen’s Micel Schnehage, Resilient’s Director Des de Beer explained that it’s the firm’s struggle with local government. “(Resilient) is hampered by extensive bureaucracy and red tape, resulting in expensive delays.” He went on to state that the era for Resilient to develop non-metro malls was over.

What seems to have been the last straw was the loss of documents pertaining to the Mafikeng Mall by local authorities 17 times. “They’re not accountable to anyone so they don’t really care,’’ said de Beer.

Unlike South Africa, is the implication, Resilient believes there is a sincere intention in Nigeria to see the country raised up and that officials are largely positive facilitators of the investment process.

Another big player in the industry, Redefine, the second largest listed SA property loan stock company by market cap on the JSE, with assets exceeding R37bn, claims to be hampered by red tape.

The value of the group’s properties declined by 1.7% in the review period while the South African portfolio valuation increased by R260million. Red tape involving local authorities and other government departments are holding back developments in rural areas.

Redefine’s CEO Marc Wainer

Redefine’s CEO Marc Wainer

Redefine’s CEO Marc Wainer announced last year that Redefine intended to launch a shopping centre of between 20 000m² and 30 000m² in a rural area which could create between 4 000 and 5 000 jobs. This includes cleaners, security guards and other workers needed by retailers.

However, Wainer said instead of the authorities welcoming these developments, processes are being frustrated by officials wanting their palms greased before setting the ball rolling.

The Redefine head said retailers are keen to enter into rural areas with a growing segment of the market’s buying power increasing in terms of social grants, but are now rather opting for Africa. Wainer cited a recent announcement by Liberty Properties to opt for its new growth in Zambia. “It’s easier to do business in Africa than South Africa,”  Wainer told reporters. He added that money being spent offshore should be spent locally, but conditions frustrate this.

In an interview with CitiBusiness  Wainer lashed out at government, criticising the administrative practices of local authorities. At the time he added Redefine was not going to invest in areas where bribes were expected, citing the former Hammanskraal as an example.

But this doesn’t mean everything’s rosy in Africa either, doing business where local authorities are concerned can be a red tape head ache for developers in general. By way of example consider Steven Singleton’s  story.

Steven Singleton wrote to the Daily Maverick about his struggle in setting up a Private hospital in Zambia where he was frustrated at every turn by Zambia’s top banker and business mogul Rajan Mahtani: “Business in Zambia is very much like this and magnates such as Mahtani make sure it stays that way and he retains control.

In my case I offered him what I considered to be “a project on a plate” and, instead of rewarding the provider, he not only took the project, but the plate as well. Why? Because he could, and there was no recourse to be had.

This is all too often the nature of doing solo business in Africa. Powerful and politically connected parties are able to move with relative impunity as long as their alliances are intact or until a change of regime shifts the balance of their power base.”

Although not the same situation, the dynamics are similarly reported when trying to do business involving local authorities in South Africa it seems.  Whether this is an African challenge or a South African challenge, developers have their work cut out for them as they try to invest and develop under

Cement Property’s Gauge of the Future

PPC Cement

PPC Cement

So you may have heard the old adage: “When they’re a’ pouring cement, property prices are a’ rising.”  It’s not rocket science – for a gauge on future of the property market, find out what’s happening in the sloshy world of cement.

The latest news on this front is that of South Africa’s Pretoria Portland Cement Company (PPC ) planning to build a cement factory in Zimbabwe. PPC has been upfront that it plans to increase its proportion of sales outside South Africa to a least 40%. In November PPC received its Zimbabwean indigenisation certificate which opened the way for the firm to expand its operations there.

A former executive told a local newspaper that the project could cost as much as R1.7bn. The same source said that PPC had its sights set on four new opportunities in Africa. The company already has two plants in Zimbabwe with the intention of building another in Mashonaland province.

This comes in the wake of PPC acquiring a 47% Habesha Cement Share Company (HCSCo) of Ethiopia with South Africa’s Industrial Development Corporation (IDC) in a deal worth US$21million. PPC’s $12m cash injection secured 27% equity in HCSCo, whereas IDC’s $9m secured a 20% equity stake.

PPC is not the only cement company capitalising on the fast growing cement consumption in that region. Dangote Cement of Nigeria and Athi River Mining of Kenya are also competing for market share. Dangote Industries Limited (DIL), formally increased its stake in South Africa’s Sephaku Cement (Pty) Limited, on PPC doorstep, from 19.76 per cent to 64 per cent. The transaction, which comprised a R779 million investment into Sephaku Cement by Dangote, was the largest ever foreign direct investment (FDI) by an African company into South Africa.

Coming back to the cement gauge, some would suggest that PPC is looking for greener pastures since South Africa is said to have a glut of buildings in the shadow of the building boom that ended in 2010.  And yet French based African cement giant Lafarge Group with operations in 11 African countries, is making its presence felt in South Africa. The Group’s subsidiary, Lafarge South Africa was a Gold Sponsor of the Advances in Cement and Concrete Technology in Africa (ACCTA) conference on 28-30 January 2013 at Emperor’s Palace, Johannesburg. Apart from the heavy sponsorship, the company contributed two important technical papers showing a commitment to its presence in the subcontinent. Lafarge’s confidence in Africa reflects its global strategy of investing in emerging countries.

Revisiting PPC’s position: it paid $69million for control of Rwanda’s only cement maker in December. The company plans to spend $300million expanding into the other parts of the continent. The company announced that the first quarter of the financial year saw mild growth in South African, Botswana and Zimbabwean cement volumes. The company admits that there are limited options on major infrastructure projects in South Africa but there is sufficient increase in demand to be cautiously optimistic about Southern Africa.

Property investment, it seems, is like standing on wet cement; the longer you stay, the harder it is to leave, and you can never go without leaving your footprints behind.

Serviced and Virtual Offices Take Off in Kenya

Kenyan Offices

Kenyan Offices

Back in 2005 a UK expat, Alexander Andrewes, set up a business in Kenya dealing in interactive media services. Having scoured office space in the capital Nairobi for serviced offices he came up empty handed. That didn’t stop Andrewes who now heads up Eden Square Business Centre (ESBC) a business he started that is the leader in the field of serviced and virtual offices in Nairobi.

Back in the beginning Andrewes was looking for a firm that provided serviced offices, meeting rooms, virtual office packages and administrative support. He told HowWeMadeItInAfrica in an interview that what he wanted back in 2005 was the convenience of walking into an office that is fully serviced, complete with furniture, internet, telephone networks and other administrative services.

As an entrepreneur Andrewes quickly spotted the gap in the market and acquired financing to the tune of US$150 000 with which he launched ESBC. In April 2006 he procured 14 offices at the Eden Square building the Nairobi Westlands and was open for business. All the client needs is his/her own computer when moving in, everything else is taken care of right down to the teaspoons.

On the Virtual Office side of the business, companies that are not in a position to handle huge overheads can acquire offices too. These clients are set up with a fully functioning office, though only at agreed time slots.

Both types of clients are freed the burden of water, electricity, security and other administrative aspects of running a business. This frees them up to focus more on the main core of their business.  Andrewes told HowWeMadeItInAfrica that they had seen small entrepreneurs that started at ESBC with virtual offices, move on to serviced offices and eventually relocated to their own office premises.

But it was not all roses in the beginning. Andrewes explains that at the initial start-up property owners were reluctant to lease to him, selling the serviced office concept to locals was a heavy task. From humble beginnings ESBC now have 180 office units in five locations with plans for a further two locations.

The ESBC client portfolio has grown to over 200, comprising big corporates, non-governmental organisations (NGOs), as well as small business start-ups. Some of ESBCs former and current clients include, Grey Marketing Limited, the Louis Berger Group ,General Motors, Rockefeller Foundation, Google, General Electric and Ericsson.

Now there are other players in the market who have cottoned on to the whole serviced and virtual office concept. But Andrewes seems unfazed by the competition. He reckons the market is big enough. In fact the growth in the industry has affirmed the necessity for it which is good for business as the office community is becoming conditioned to the need for such a market.

The grass doesn’t grow under Andrewes feet though. His plans for ESBC is to provide a service offering financial and strategy business advice to start-ups, NGOs and international firms opening branches in Kenya for the first time. He has his eyes on Uganda and Tanzania next. So watch this space.

Kenyan Retail and Property Sectors are Alive and Buzzing


IF
Kenya’s property industry is seeing unprecedented growth. Retail and office space is in very high demand. Foreign investors and local business are seeking out and snapping up opportunities across the country especially in Nairobi. But there are challenges as well as rewards.

Players in the construction and property industries refer to last year as a year of equilibrium in demand and supply. Though there was a reported slowing down toward the end of last year in anticipation of the elections. Looking back to 2007/2008 elections where there was violence, foreign capital stayed away and is eyeing the situation this time around with caution.

Those watching the property/development sector are doing so with interest in the extraordinary amount of international companies moving into the country. This naturally results in a greater demand for buildings.

A saying has emerged: “everyone in Kenya has become a real estate expert.” So looking for skilled advice is a little more challenging. This is where Actis owned Mentor Management comes in. In an interview with HowWeMadeItInAfrica, James Hoddell, chief executive explained that to his mind there are very few competitors in this market, at least those who do the full development and project management. “We are experiencing a real estate boom that is set to continue for years.” People are realising that you can’t just build whatever you feel like and sell or rent it.

Nairobi Business Park

Nairobi Business Park

Mentor Management has two notable developments currently on the table. One is the Garden City development. Upon completion it will be the largest mall in East Africa. It includes residential units, a public auditorium, a hotel and offices.  The other is Nairobi Business Park, which has a substantial waiting list. Hoddell is at pains to point out that projects like these are bringing in much needed foreign capital.

Foreign retailers in particular are sitting up and taking notice. Last year Mentor signed the first unit for Massmart in Kenya that will employ several hundred people. They are currently touring South Africa and Dubai to meet retailers winning them over to Kenya. Retail is a big growth area in Kenya.

It’s clear that the expanding population coupled with the growing economy is driving this property boom. If there weren’t tenants for these buildings, no one would be building them. Hoddell points out that for 20 years there was inadequate availability of property, there was very little development and the economy had stalled. But now, there is a renewed impetus in re-starting the economy. There is growth in Indian and Chinese investment as well as other international money, like the Actis fund.

“This is a relatively cost effective market to operate in. It is a cheap country to build in; it has a developed construction industry with developed sets of consultants and a functioning real estate market, which a lot of African countries don’t have.” Says James Hoddell.

One challenge faced by developers is the acquisition of land is becoming punitively expensive. The expectation of owners some may argue is unrealistically high.  It gets to a point where profitability is reduced such that it is not worth developing. This despite the rise of rentals.  Regardless the property and retail sectors in Kenya are alive with the sound of investment.
[Main Source HowWeMadeItInAfrica]

African Growth: Competitive Investment and at What Price?

Courtesy - The Economist

Courtesy – The Economist

Africa for so long a collective of querulous bankruptcies and killing fields has seen its coffers increasing and democratic advances reaping peace and prosperity.  The International Monetary Fund predicts sub-Saharan Africa growing at 5.4 per cent this year compared to 1.4 per cent for developed economies.

Africa’s is home to some of the world’s fastest growing economies and rapidly rising disposable incomes. A decade of relative political stability has also helped the case for African investment.

New investors come expecting bargains because the continent is still seen as poor. However investors looking to buy into future growth are now paying a premium due to sellers savvy to opportunities being fewer and further between.

Sub-Saharan Africa’s attractiveness as an investment destination has risen to fifth place in 2012 from seventh in 2011, according to a survey by the Emerging Markets Private Equity Association. Opportunities traditionally existed in mining but speakers at Reuters Africa Investment Summit in September have pointed to consumer and banking services sectors as the next big thing.

Africa’s largest telecoms operator MTN is a perfect example of a company that paid what was considered a weighty price at the time, for the right to commence operations in Nigeria 11 years ago. It paid $285 million for a mobile license, now it has over 41 million subscribers and banked revenues of 34.9 billion rand ($4.47 billion) in 2011.

Actis, a private equity firm in emerging markets, said it was recently outbid in a North African deal by a trade buyer that offered 12 times EBITDA (Earnings before interest, taxes, depreciation and…). Valuations on the continent are, however, cheap compared with price demands in bigger emerging economies in Asia. Speaking to Reuters, John van Wyk, the firm’s co-head for the region said: “Valuations, depending on the sector, can be quite high but … compare that to the 16 times EBITDA multiple you are being asked for in India or China, that’s kind of stratospheric stuff.” “We are quite bullish about the continent but Africa doesn’t come without its challenges,” van Wyk said.

It seems that it is not unusual for new investors on the continent to make the mistake of coming with preconceived ideas of where valuations should be.

The world’s biggest retailer Wal-Mart bought a majority stake in South Africa’s Massmart for $2.4 billion in 2011, a 19 per cent premium to the 30-day volume weighted average price. With that has come a great deal of political and legal manoeuvring that remains to be finalised.

Even where companies are willing to pay a premium for a good target, companies of the right size are hard to come by. Every big African brewer, for example, has been nailed down, according to SABMiller’s head for the region, Mark Bowman. “No one is getting anything for a reasonable price any more; you are paying for a future opportunity a significant premium. Anything that would become available would be aggressively priced and one would have to take a view if it’s worth it,” he told Reuters. Diageo, consumer goods companies with a portfolio of world-famous drinks brands, dug up a heavy $225 million for an Ethiopian state brewery last year, months after Heineken paid $163 million for two other beer makers in that country.

Emerging Capital Partners is opening an office in Nairobi, its seventh office on the continent, to grab east African opportunities. Alex-Handrah Aime, a director of the Africa-focused ECapitalP: believes that one way of bridging the valuation gap is for buyers to start with a convertible bond, instead of taking up equity at the onset. Private equity firms need to avoid auctions to keep a lid on valuations, she told Reuters. “It’s a competitive process. If you end up in an auction situation … the person who pays the most is going to win. That’s not necessarily the valuation that is going to be most sensible.”

Some investors have turned their backs on what they see as inflated prices. South Africa’s second-largest banking group First Rand dropped its bid for Nigeria’s Sterling Bank last year after the two disagreed on price.

Interestingly Middle East investors, though slow to join the fray, are competing for investment opportunities on the continent. Not short of oily billions and short of investment opportunities in the developed world, Africa is looking attractive.

However challenges have been quickly recognised. One is the relatively small size of potential deals. “The Middle Eastern sovereign wealth funds are very interested in Africa, the challenge that they face is the increment at which they need to invest is way too large for the continent at the moment,” Diana Layfield, Africa chief executive at Britain’s Standard Chartered Plc. told Reuters in an interview on the side-lines of the World Economic Forum on Africa.

“Definitely there will be more (investment) coming to Africa,” Saudi Arabian Minister for Agriculture Farad Balghunaim told Reuters. “With the clear vision that is building up in African leadership now, there will be more and more investors from Saudi Arabia,” he said in Addis Ababa.

However accessing growth is not a given. There is a lack of liquidity in public capital markets. For private equity bankers, there is often a shortage of deals that can meet their mandate when it comes to size. For example, emerging markets private equity firm is reportedly aiming for individual deals of $50 million or more in Africa, meaning it has to focus on the continent’s biggest economies – South Africa, Egypt and Nigeria – to find deals.

Dubai’s Abraaj Capital is in the process of acquiring UK-based private equity firm Aureos Capital, which invests in small and medium-sized businesses in Africa, Latin America and Asia. “We tend to have a sweet spot at around $10 million, but we have investments as low as $2 million and going up to about $35 million,” Davinder Sikand, Aureos’ regional managing partner for Africa told Reuters.

“Our focus has been to build regional champions. So we’ll take positions in businesses that can demonstrate management vision and build (them) out, recognising that each of our markets other than Nigeria and South Africa are fairly small markets, and you need to build that scale.”

Due to the constraints in their home markets, Middle East investors are familiar with Africa’s challenges, such as the poor infrastructure, the shortage of a highly trained workforce and the lack of liquidity in capital markets.

Frederic Sicre, a partner at Abraaj Capital told Reuters: “Behind us are 200 of the wealthiest merchant families, royal families from the Middle East, and sovereign wealth funds from the Middle East. We can pull them in to looking at the infrastructure development space, or the big utility development space, into looking at the opportunities here.”

Clearly the continent has become a far more competitive place than it used to be. Despite many target deals being on the small side for the bigger players, the expected returns are considered reward enough in the long term. Africa, -keep doing what you’re doing and you’ll keep getting what you’re getting. If democratisation continues, peace will abound and prosperity should follow the necessary hard work buoyed by investment.

South Africa is Part of Africa, but will it Take Part in Africa?

The World Bank has likened the doubling of African manufacturing output over the last decade to China’s position thirty years ago. Emerging Markets Investment firm Actis’ real estate director Louis Deppe believes that South African investors who ignore the potential in African markets do so at their own peril.

Ivor Ichikowitz, founder of Paramount Group, a privately owned defence and aerospace company, believes South Africans have looked to Asia and the West for the best ideas and viewed them as their natural competitors, as opposed to our African neighbours.

Louis Deppe of Actis

Louis Deppe told Moneyweb at an Africa Property Investment Summit in Sandton. “You have no choice not to care about Africa. It’s on your doorstep. Some significant economies are going to overtake South Africa in a very short space of time. They’re growing faster and have far more potential to grow.”

An example Deppe probably has in mind would be Ethiopia, their economy is expanding at 7.5% annually and that’s not just traditional industries like mining and agriculture, it’s also manufacturing. An example on the periphery of Addis Ababa is Chinese shoe maker Huajian, which has built a factory employing around 500 workers.

An economist at the World Bank who recently wrote a report on light manufacturing in Africa cites this as an example of how Africa could overtake Asia to potentially become the world’s next manufacturing hub.  Low labour costs, the availability of natural resources, and preferential access (duty-free and quota-free access) to the US and EU markets are all some of the advantages of operating in Africa.

It is predicted that Nigeria, with a growth rate of 7% should overtake South Africa by 2015. Louis Deppe warns that up until now, South Africa, being, arguably, the most democratic and stable country on the continent, has been able to attract foreign direct investment (FDI), often getting the lion’s share compared to other African countries. Once other countries also start fulfilling some basic requirements, this will no longer be the case.

South Africa used to be the gateway to the rest of Africa. If foreign investors wanted to set up and go into Africa, the FDI would come to SA first, before moving up north. This is no longer happening and foreign investors are now moving directly into Africa from China, Europe and the United States.

Nairobi – an “African Tech Hub”

By 2035, the continent’s work force will be greater than any individual state on earth.  Nigeria and Ethiopia will add over 30 million workers by 2020, whereas South Africa is looking at adding 2 million.

However, it’s not just manufacturing that Africa is excelling in and challenging South Africa. The Economist recently (August 2012) named Nairobi an “African tech hub” because of the hundreds of start-ups that have sprung up in the last few years. Kenya’s exports of technology related services have risen from $16m in 2002 to $360m in 2010. It is also a world leader in the adoption of mobile payments technology – and is far ahead of China and India.

According to Ivor Ichikowitz, within a few years Kenya could soon emerge as a world leader in mobile payments and export the technology to countries across the world.

He also refers to the African film industry. The Nigerian movie industry, which has overtaken South Africa’s to become the strongest on the continent worth £500m and producing more films than Hollywood every year. The films may not be international blockbusters, but they have huge appeal across Nigeria and Africa, and prove that Africans have the creativity to compete in non-traditional industries.

Nigerian Movie Industry Worth R6Billion in 2011

Clearly we need to be at least aware of what our neighbours are doing if our market is shrinking or stagnating and the world around us is getting bigger, we risk becoming less relevant in the grand scheme of things. Alas it seems the South African economy is sliding backwards while the rest of the continent is in first gear. Most African markets that Louis Deppe’s Actis group invests in are experiencing 7% GDP growth. “Despite claims of corruption, a lot of that money still filters down into the economy, there’s a lot of economic drive and growth.” he said. He added that on the development side, Actis was getting returns of between 13% and 14%.

But Ivor Ichikowitz has a positive spin on this: “it’s a positive opportunity for us to export our products and knowledge and generally expand trade with other African nations, which in turn will generate jobs for the youth of our country.”

South Africa has some great assets – its infrastructure, mature private sector, well developed services sector, stock exchange – that give us the opportunity to provide a range of goods and services to help grow our own economy, but we can work harder to maximise these advantages.

IVOR ICHIKOWITZ

Ichikowitz says that countries like Ethiopia, Kenya and Nigeria are rushing forward and emerging as serious competitors for destinations of foreign capital.

This is pressuring our government and business leaders to look more closely at their policies and approach to business. The harsh reality is that if South Africa is to retain its position as the leading economy on the continent it can’t for a minute ‘rest on its laurels’.

Ichikowitz doesn’t see South Africa as being in competition with the rest of Africa, but rather in a position to learn from and impart learning to neighbouring states, which is why it is essential that we share technologies and collaborate to build strong regional industries that bolster inter-Africa trade.

Deppe looks more into the nitty-gritty glancing back to what he refers to as a watershed year for property investments in South Africa, 2010, after the World Cup. “We had all these infrastructural projects, the economy had withstood the 2008 global recession. Then suddenly: what’s next in SA? There’s not much left in South Africa, we are a saturated market.” Deppe said by way of illustration that vacancy rates had increased in many shopping centres across the country. As a result, investors’ returns at 7% or 8%, which were not great to begin with, are shrinking and are likely to be impacted further. He said with GDP growth in South Africa being below 3%

New South African Bank Notes

“you’re not even going to get out of the starting blocks. You’re actually going backwards in real terms.”

The troubling dynamic among South Africa investors is their reluctance to invest in Africa stems from an unfounded conservatism. “With the South African base not as strong as it was, it’s forcing people into a mind-set to look abroad. I don’t think they have a choice.” Deppe said.

Taking Africa Seriously

Whether it’s private equity firm Actis’ movements in Africa, surprising news about Ugandan oil reserves or South Africa’s PPC cement eyeing Ethiopia, it’s all part of the growing trend to take Africa more seriously.

Actis continues to dig deep and wins an award too.

Actis

Emerging markets private equity firm Actis is looking to invest around $300 million annually in Africa. The firm aims for individual investments of $50 million or more, meaning it focuses on Africa’s biggest economies – South Africa, Egypt and Nigeria for example – where there are more opportunities for bigger deals.

Actis was formed in July 2004, as a spinoff from CDC Group plc (formerly the Commonwealth Development Corporation), an organization established by the UK Government in 1948 to invest in developing economies in Africa, Asia, and the Caribbean. The Actis management team acquired majority ownership of CDC’s emerging markets investment platform.

According to Wikipedia on 1 May 2012 the Secretary of State for International Development, Andrew Mitchell, announced that the state’s remaining 40% stake had been sold to the Actis management for an initial £8m. The deal also included a share of future profits that could be worth over £62m to the UK Government.

Actis Spokesman John Van Wyk a veteran South African private equity banker told Reuters recently “I tell our investors that I think Africa is still probably the best-kept secret because we continue to make superior returns,”

Actis, which has about $1.5 billion deployed in Africa, last year led a $434 million buy-out of South African firm Tracker, which makes vehicle tracking equipment.

A feather in Actis’ cap is that they have won ‘Best Developer in Africa’ in Euromoney’s 8th global real estate survey – official recognition of the private equity firm’s track record in investing in the real estate sector on the continent. Actis launched their first real estate fund in 2006 and focus ‘institutional quality retail and office developments in high growth markets.

Despite its challenges, the real estate sector is growing in popularity for PE funds – Kenyan Britam (recently rebranded from Britak) is planning to include the sector in their targets for their first PE fund.

Ugandan Oil Deposits

Ugandan Oil Deposits 40% greater than expected.

An additional 1bn barrels of oil has been discovered during exploration on Uganda’s oil fields, pushing the figures of commercially viable deposits to at least 3.5bn barrels and pushing Uganda up from 43rd place to 32nd place among the world’s oil producers, just ahead of the UKs North Sea Oil.

Ernest Rubondo, the commissioner for petroleum exploration and production at the ministry of energy and mineral resources, made the announcement in September. The Ugandan Daily Monitor quotes him as saying: “From about two or three wells we have increased our oil barrels to 3.5bn,” Rubondo said. He further disclosed that out of 77 wells drilled so far, 70 have been proven to contain oil and gas.

The Albertine Graben in which oil has been discovered in Uganda is located in the western part of the country, mainly in Masindi, Kibale and Hoima districts.  Unfortunately, according to the energy ministry, production has been hampered by squabbling over contracts and taxes. Infrastructural inadequacies are not helping either.

Enter corruption: three ministers are facing allegations of accepting bribes. The government has not been forthcoming with information about these irregularities and this has just fuelled suspicions of high level corruption.

British explorer Tullow Oil, want commercial exploitation to start immediately, saying it is unreasonable for it to be expected that they hold their capital idle. Howwemadeitinafrica.com confirms reports that Block 1, found on the northern tip of Lake Albert, is operated by a local unit of France’s Total SA, while Block 2 is operated by Tullow Oil. Total entered Uganda’s oil industry early this year after it signed onto a joint venture with China’s CNOOC and took up a third each of Tullow Oil’s exploration assets in the country worth $2.9bn.

The Ugandan government says only about 40% of the Albertine Graben has been explored to date and has stated it will be demanding tougher terms in new oil deals. This tale is far from over.

South Africa’s PPC Cement and the IDC acquire 47% of Ethiopia’s giant Habesha Cement.

PPC cement

Acquiring a 47% share in Habesha Cement Share Company (HCSCo) of Ethiopia, South Africa’s Pretoria Portland Cement Company (PPC), joined hands with South Africa’s Industrial Development Corporation (IDC) in a deal worth US$21million. PPC’s $12m cash injection secured 27% equity in HCSCo, whereas IDC’s $9m secured a 20% equity stake.

PPC is not the only cement company capitalising on the fast growing cement consumption in the region. Dangote Cement of Nigeria and Athi River Mining of Kenya are also competing for market share, reminding South African business that it’s a new kid on the block. PPC’s stated intention is to grow revenue earned outside of South Africa to 50% during the next few years.

According to Imara Africa Securities Team, in addition to the injection from the IDC and PPC, the company secured $86m debt financing from the Development Bank of Ethiopia. The first phase of HCSCo’s plan is a $130m state of the art cement plant with an annual capacity of 1.4m tonnes per annum (mtpa) specifically for the Ethiopian market. The plant’s future development plan includes an option to double the capacity to 2.8 mtpa. The plant, which is currently in the early stages of construction, is located 35km north-west of Addis Ababa. Cement production is planned to commence during the first half of 2014.

Ethiopia

During the initial construction phases, PPC will assist HCSCo by providing operational and technical expertise and with the training of plant personnel at its operations at the PPC Academy in South Africa.

At 85 million, Ethiopia is the second largest country in Africa by population. However the per capita GDP is $354. Worth watching though is that the country’s economic growth rate was at 8.8% in 2011. Ethiopia’s government has launched a 5-year (2010/15), Growth and Transformation Plan (GTP), which is geared towards fostering broad-based development. The scheme seeks to double the GDP and the agricultural production and to increase electricity coverage from 41% to 100% and access to safe water from 68.5% to 98.5%. Since 2003, the government has embarked on a housing reform programme – a modest 11,000 homes have been completed to date providing individual ownership of affordable quality housing. The future market in Ethiopia for construction and thence cement is substantial.
{Sources: Howwemadeitinafrica.com/ Imara Africa Securities Team/ Businessmonitor.com}

Three examples of where Africa is being taken very seriously is a just the tip of the ice berg. There’s more where that came from so watch this space.

Ghana’s Economy, Sending Mixed Signals

Ghana’s economy is sending the world mixed signals. Last year it saw growth skyrocketing, influenced largely by the launch of oil production at its Jubilee oil field in November, sending GDP soaring by nearly 15 per cent. But that growth rate is expected to nearly halve to 8.2 per cent this year as oil production has averaged 80,000 bpd as opposed to the 250 000 bpd that was anticipated for 2013. Either way it’s all growth and the spinoff for the rest of the economy is worth taking notice of.

Ernst & Young defines Rapid Growth Markets (RGMs) as countries with economies and populations of a certain size that display strong growth potential and are, or could be, strategically important for business. Ghana will this year be among the three fastest growing economies from a group of 25 global RGMs, according to a new Ernst & Young report. Ghana’s burgeoning oil industry is credited with the recent rapid economic growth.

Jubilee Oil Fields

The sudden slowdown in growth since the beginning of 2012 is expected to be just a phase. “Our analysis suggests that RGMs are likely to weather the on-going Eurozone crisis and remain engines of global growth, though many will see expansion slow this year,” says Alexis Karklins-Marchay, co-leader of the E&Y Emerging Markets Centre. “Their expansion is expected to accelerate once more in 2013, helping stimulate a wider pick-up.”

The report is dependent on Ghana’s oil output rising, be it gradually. Nevertheless, Ghana’s growth is comparable with other African oil producers. Angola’s economy is expected to grow 9.1 per cent this year, surpassing the rate of stalwart Nigeria, seen growing 7.0 per cent this year. Ghana’s Oil exports should also help to sustain the public finances and the balance of payments, which have been affected by higher government spending.

Ernst & Young forecasts GDP growth of approximately 7% for 2013 and an average of 5% annually over the medium term. “While Ghana will only be a small oil producer, production of the commodity has boosted medium-term growth prospects,” says E&Y.

Growth’s knock-on effect on infrastructure is worth noting. Foreign direct investment into Africa in 2010 fell by 9% but rose significantly in Ghana. The promise of an oil boom has attracted the interest of global construction and infrastructure companies.

An example of this interest has been the signing of a $2 billion letter of intent by Hasan International Holding, a Chinese corporation, to develop an advanced industrial facility near the port of Takoradi, which handles 60% of the country’s crops and mineral exports according to a report by Euromonitor International.

The expected on-going effect should be the creation of jobs in the region, attracting local and foreign workers, which could provide a substantial consumer foundation for retailers looking to expand outside of the capital, Accra.

Another example of infrastructure growth is Helios Towers Africa, a company that leases space on telecom towers to mobile network operators. By owning and managing the towers, Helios allows the network operators to focus on their core business. Helios Towers Africa (HTA) was founded in 2009 and is the leading independent, telecoms tower company in Africa with operations currently in Ghana, Tanzania and the Democratic Republic of Congo (DRC).

Pioneers of the sale-leaseback model in Africa, the Helios model of shared telecoms infrastructure, is helping to deliver improved operating and capital efficiency for mobile network operators, reducing costs, increasing accessibility and improving network quality of service for users. Together with subsidiary HTN they own and manage 3,500 telecom towers, the largest number held by an independent company focused exclusively on Africa.

Due to the infrastructure investment deficit in most sub-Saharan African markets, the timing is perfect. Unless telecoms infrastructure investment in Africa increases, it will be impossible to serve the burgeoning levels of consumer demand for 2G voice, let alone the site densification required for 3G coverage, improved capacity and the rapid growth in data traffic.

More than 60% of Ghana’s population are mobile phone subscribers. Mirroring a trend common throughout Africa, mobiles are increasingly used as a means for cashless payments/transfers, and target the large unbanked population. An example is MTN’s Mobile Money, a service that allows users to send cash and purchase goods from participating retailers.

Retail space has not gone untouched by Ghana’s growth.  Accra, Ghana’s capital is a microcosm. The majority of modern retail space has been developed in Accra, due to better infrastructure and access to a large population. An Euromonitor report notes that Ghana’s retail industry achieved 14% value growth between 2006 and 2011, which reflects the strength of fast-moving consumer goods (FMCG) companies in the country.

An example is Danish-based dairy firm Fan Milk Group. It is reporting 10 times the turnover per capita in Ghana than in Nigeria. In 2010, Ghana was the largest market for the company and, with a turnover of US$67 million, accounted for 48% of the group’s revenue and 64% of its operating profit. Other cases include Unilever and PZ Cussons “The presence of such manufacturers provides a good opportunity for retailers as they can source these manufacturers’ products cheaper locally rather than importing them,” says Euromonitor.

On the retail front, according to Howwemadeitinafrica.com:  RMB Westport, a South African property firm, is also working on two mixed-use developments in Accra. The first is West Ridge Head Office where the ground floor will offer retail space while offices will occupy the rest of the building. The second location is Icon House, close to the airport and Accra Mall, which will also offer retail space.

Artists Impression of Takoradi Port after redevelopment

One place which is a microcosm of the effects of growth in Ghana is the port city of Takoradi. It is expected to see significant growth because of its proximity to the country’s offshore oil fields. Before Ghana began with hard-core commercial oil production in 2011, Takoradi was designated as a backwater town. Nevertheless, it has since risen to prominence due to being the nearest commercial port to Ghana’s offshore oil industry.

In a recent development investment firm Renaissance Group announced a new mixed-use urban development, called King City, to be located 10km from the Takoradi harbour.

King City will be developed on 1,000 ha of land and is designed around a live-work-play concept. It will accommodate residential and commercial growth associated with the region’s mining and energy sector boom. According to Renaissance, the development will feature shopping facilities as well as residential and commercial components. King City will be built in phases over 10 years and is expected to eventually be home to over 90,000 residents.

Other news is that the International Finance Corporation (IFC) has provided a loan of US$5.45 million to Alliance Estates Limited, to build the first Protea Hotel in Takoradi. The 132-room, three-star hotel will help meet demand for business infrastructure as more investors are venturing into the oil producing region of Takoradi. The Protea Hotel will be amongst the first to provide international-standard rooms, rates and conference facilities.

Potential boom towns in Ghana like Takoradi offer attractive opportunities from a property development perspective – especially for hotel and retail developments.

Ghana moved up the World Bank’s Ease of Doing Business rankings from 102nd in 2005 to 60th in 2011. Also internal tariffs are being abolished, allowing for a greater level of intra-regional trade. All good news. Yet analysts remain concerned about a weakening cedi currency due to rising imports for the oil industry.

Inflation has trended upwards, making life difficult for locals, even though economic growth is on the rise from the oil production. A Reuters poll forecasts inflation averaging 9.6 per cent this year and 9.3 for 2013. The inflation rate rose for a fourth straight month in June to 9.4 per cent from 9.3 per cent previously. The cedi has lost over a third of its value since it began producing oil in November 2010, trading now at around 1.95 per dollar.

So it is mixed signals for the investor. Ghana’s growth is coming in ebbs and flows. The development of Ghana’s infrastructure, catalysed in part by the discovery of off-shore oil reserves, and the country’s movement to political stability, has paved the way to sustainable economic growth. With this has come retail potential and prospects that could see Ghana emerge as the next retail hub in the region.

Investing in Africa, Good News, Bad News and Faux Pars

Accra Mall Ghana

As people around the globe eye Africa for potential investment and South Africans head north there is some encouraging news to feed those ambitions, worrying reports to temper our enthusiasm and some mistakes to learn from.

Ghana’s capital Accra is awash with educated, well-dressed young up-and-coming people, driving top-of-the-range cars living in stylish houses. It’s indicative of Ghana’s economic growth, 14.4% last year. According to the World Bank many African economies are forecast to be among the world’s fastest growing in 2012. Top of that list are the DRC, Nigeria, Ghana, Liberia and Ethiopia.

US-based business consulting company Ernst & Young reports: “There is a new story emerging out of Africa: a story of growth, progress, potential and profitability.”  US secretary of state for African affairs, Johnnie Carson is quoted as saying that Africa represents the next global economic frontier. China’s trade with Africa reached $160 billion in 2011, making the continent one of its largest trading partners.

London based magazine The Economist reported last month: “Since The Economist regrettably labelled Africa ‘the hopeless continent’ a decade ago, a profound change has taken hold.” Today “the sun shines bright … the continent’s impressive growth looks likely to continue.”

Africa’s trade with the rest of the globe has skyrocketed by more than 200% and annual inflation has averaged only 8%. Foreign debt has dropped by 25% and foreign direct investment (FDI) grew by 27% in 2011 alone.

Despite projections for growth in 2012 being revised downward due to the so called Arab Spring , Africa’s economy is expected  to expand by 4.2%, according to a UN report earlier in the year. The International Monetary Fund (IMF) is expecting Sub-Saharan African economies to increase at above 5%. Added to that, there are currently more than half a billion mobile phone users in Africa, while improving skills and increasing literacy are attributed to a 3% growth in productivity.

According to a UN report the think tank,  McKinsey Global Institute writes, “The rate of return on foreign investment is higher in Africa than in any other developing region.”

An end to numerous military conflicts, the availability of abundant natural resources and economic reforms have promoted a better business climate and helped propel  Africa’s economic growth.  Greater political stability is greasing the continent’s economic engine. The UN Economic Commission for Africa (ECA) in 2005 linked democracy to economic growth.

All this growth and urbanisation is putting a strain on social services in the cities, it has also led to an increase in urban consumers. More than 40% of Africa’s population now lives in cities, and by 2030 Africa’s top 18 cities will have a combined spending power of $1.3 trillion. The Wall Street Journal reports that Africa’s middle class, currently estimated at 60 million, will reach 100 million by 2015.

Then there’s the more sobering news.  “A sustained slowdown in advanced countries will dampen demand for Africa’s exports,” writes Christine Lagarde, managing director of the IMF. Europe accounts for more than half of Africa’s external trade. Tourism could also suffer as fewer Europeans come to Africa, effecting tourist dependent economies like Kenya, Tanzania and Egypt.

The South African Reserve bank warned in May that the financial crisis in Europe, which consumes 25% of South Africa’s exports, poses large risks. Adverse effects on South Africa could have severe consequences for neighbouring economies.

Another worry is the resurgence of political crises. Due to the so called Arab Spring, economic growth in North Africa plummeted to just 0.5% in 2011. Recent coups in Mali and Guinea-Bissau could have wider economic repercussions. “Mali was scoring very well, now we are back to square one,” says Mthuli Ncube, the AfDB’s chief economist. Ethiopia, Kenya, Uganda and other countries have militarily engaged in Somalia, which may slow their economies. And Nigeria is grappling with Boko Haram, a terrorist sect in the north of that country.

A cause for concern what many are referring to as Africa’s “jobless recovery.” Investors are concentrating on the extractive sector, specifically gold and diamonds, as well as oil, which generates fewer employment opportunities. 60% of Africa’s unemployed are aged 15 to 24 and about half are women. In May, UNDP raised an alarm over food insecurity in sub-Saharan Africa, a quarter of whose 860 million people are undernourished.

But none of this is deterring South African business interest north of the border. One may ask why? South Africa’s domestic market is not providing local companies with enough growth opportunities, prompting many of them to look at the rest of the continent. This according to Ernst & Young’s Africa Business Centre’s leader, Michael Lalor in an online press conference recently: “While South Africa is still growing well compared to the advanced economies, it’s certainly not keeping up with some of the other rapid-growth markets.” Says Lalor.

Analysts are pointing out that many of the other emerging markets, such as China and South America, are difficult to enter, making the rest of Africa the obvious choice. Asia is seen as almost excessively competitive. Latin America ventures mean dealing with a very strong and ever present Brazil. Therefore Africa, given its sustainable growth story and its potential, is an obvious region for South African companies to grow into.

Quoted by howemadeitinafica.com Lalor says that most Johannesburg Stock Exchange-listed companies are currently developing strategies for the rest of the continent.   Ernst & Young is experiencing strong interest from foreign companies to invest in the continent. “The response from our clients and from potential investors is overwhelmingly positive, to the extent that we simply cannot keep up. So there’s no doubt that we are seeing significant interest, both spoken, interest in spirit, but also people putting their money where their mouths are,” he said.

These sentiments are confirmed by a survey done last year by Price Waterhouse Coopers. A CEO survey published by PwC found that 94% of South African company heads expect their business in Africa to grow in the next 12 months. PwC interviewed 32 South African CEOs in the ICT, financial services, and consumer and industrial products and services industries.

With this in mind it’s worth turning to Raymond Booyse, founder of consultancy firm Expand into Africa, who identified four mistakes often made by South African companies venturing into the rest of the continent.

The first was: Not doing your homework. South African firms are frequently not prepared to spend money on market research. “Go and look if there is a market for your products or services. After you’ve established that there is indeed a market, find out who your competitors will be,” says Booyse.

Booyse points out that South African companies underestimate transport costs and ignore how local laws and regulations influence doing business.

Secondly: Ignorance. Many South African business people are ignorant of local cultures and attitudes according to Booyse. By way of example, ignorance doesn’t realise that just because they’re both former Portuguese colonies, what works in Angola’s capital Luanda, doesn’t necessarily mean it will work in the northern Mozambique. In a recent report, research firm Nielsen noted that African consumers’ attitudes towards technology, fashion and how to spend leisure time vary greatly. No prizes for that one.

Thirdly: Arrogance. Booyse says that South Africans sometimes think they know what people in the rest of the continent need. “In the rest of Africa, South Africans are often regarded as arrogant.”

Finally: Not being prepared for the high costs of doing business in Africa. Many South African companies are not aware of the high costs involved in doing business in the rest of the continent. “If you want to spend two weeks in Angola it will cost you R40,000 (US$4,700),” notes Booyse. “It is not cheap and easy.” Flights for example, from South Africa to either Kinshasa or Lubumbashi can be costly, and hotel rates are also very high.

It’s clear that Africa is a fertile place to plant seed. But Africa is not for the faint-hearted as business is done in a very different way to elsewhere in the world, with all manner of social and political hoops to jump through. South African companies have a potentially bright future and definite advantages if they are prepared to take risks, stay humble and do their homework.

Namibian Property Market – Open for Business

Namibia is the 15th largest country in Africa with a population of just over two million people; this makes it the second least densely populated country in the world after Mongolia. With a per capita GDP of $7363.00 (7th in Africa) one would think the population isn’t doing too badly, however, given that approximately half the population live below the international poverty line of U.S.$1.25 a day, that picture alters.

The country’s Gini coefficient (list of countries by income equality) is 70.7 the highest in the world followed by South Africa. That means with the disparity of wealth in Namibia comes property markets poles apart from one another. Median house prices vary from N$ 317 000 for a small property in the south, N$ 510 000 for a medium sized property in the north to N$ 1 100 000 for a large property at the coast. (N$ pegged to ZAR)

Paul Kruger of Pam Golding Namibia, says that currently the residential market segment with the most activity is represented in the price range of N$ 450 000 to N$ 1.6 million. As prices increase, activity dissipates and the market segment with the least activity is in the price range above N$3.5 million, although activity in this segment remains vibrant. Sectional title units is a popular local investment with an average price between N$ 750 000 and N$ 1 800 000 for two to three bedroom units which generally offers a rental return between N$ 7 500 and N$ 13 000 per month.

Windhoek CBD

However there is a trend in the development of lifestyle estates in the residential market and turnkey products for clients in the retail and commercial sectors. Further evidence of this is the development of two new mixed use facilities (residential, commercial and industrial), one in Windhoek and another in Swakopmund, with the first two regional shopping centres as the core focus of these projects.”

Many South Africa’s may have out-dated perceptions of Namibia, perhaps going back to the South West Africa days. Things have changed somewhat in the major centres, for example there are sophisticated shopping malls in most of Namibia retail centres.

The Maerua Mall

The Maerua Mall is a shopping complex in Windhoek. Expanded to more than double its original size in 2006, Maerua Mall is now the largest shopping mall in Namibia and contains a number of retail outlets, including Ackermans, @home, FNB, and Total Sports. It is the only mall in Namibia which contains a cinema and a Virgin Active gym. Maerua has the usual fast-food/convenience restaurants including Spur, Wimpy, Mugg & Bean and Dulce Cafe.

Wernhil Park with a facelift -artist’s impression

The Wernhil Park Mall is also in Windhoek. It is named after the first names of Werner and Hildegard List, the senior stockholders of the Ohlthaver and List Group of Companies who owns the facility. It is the second largest mall in Namibia. Along with Maerua Park Mall, the two malls are the largest formal shopping venues in Namibia.

From an infrastructure point of view, things are on the move with the upgrading of airports for example.

The Namibia Airports Company (NAC) is investing R1, 2-billion on airport upgrades over the next five years, which will allow any-sized aircraft, including super jumbo jets, to land at the country’s two main airports. The State-owned enterprise said that the envisaged improvements would also enable it to offer around-the-clock service at the Hosea Kutako International Airport (HKIA) and the Walvis Bay airport.

Windhoek International Airport

NAC is spending R120-million on runway rehabilitation at HKIA, which is located 45 km outside Windhoek. This is its biggest undertaking since its inception, and is financed partly by the Namibian Ministry of Works and Transport. NAC also plans to build a new passenger arrivals terminal, an office block and a head office at HKIA.

At the Walvis Bay airport, NAC is expanding the terminal and refurbishing the old taxiway and apron at a cost of about R37-million. The increased terminal capacity would boost passenger movement from 50 passengers an hour to 250 passengers an hour, paired with increased retail offerings.

Walvisbay

“The Walvis Bay fishing export industry will also benefit greatly from this expansion as traffic will return to the area, resulting in lower transport costs of particularly fish exports to international markets,” the company has reported.

Plans to increase safety and security have also been undertaken at Windhoek’s smaller Eros airport and the Lüderitz airport.

Improved infrastructure is showing the political will to improve the investment prospects of Namibia commercial centres. Clearly the intention is of attracting investors, among other reasons. Looking more specifically at property: despite the property market showing an annual growth of 20-25 per cent over the last few years, the banks have increased their lending criteria.

Mother bonds are available to property developers after securing 80 per cent pre-sales on developments.  Other financial institutions like Old Mutual invest in and fund commercial and residential property developments in Namibia, while alternative funding is available through various institutions like the Government Institutions Pension Fund (GIPF) to finance targeted property development projects.

In the words of Pam Golding’s Paul Kruger: “The potential for growth in the real estate sector in Namibia seems endless. One area with exceptional growth potential is property developed for the low to medium income bracket in Namibia.  At the current rate at which Namibia is addressing structural supply shortages, it will take at least another 720 years for the country to exhaust all available municipal land.”

Since August 2011, municipal areas across the country were found to hold a capacity of 3.6 million houses, 1.6 million of which would fit into Windhoek and its recently extended boundaries. Currently, Windhoek accommodates over eighty thousand houses, whilst the present population growth requires the mortgaging of approximately 300 stands per month. On average only five stands are mortgaged monthly.

Paul Kruger says while these figures accentuate the demand for low to medium cost housing they also indicate the need for housing as well as infrastructure across all sectors. Further demand and growth is expected with the anticipated growth in the mining and resources sectors as the mining of uranium and oil reserves occurs.

Swakopmund Schuller Strasse

Namibia’s three major centres being Windhoek, Swakopmund and Walvis Bay are the hot spots in the residential market according to Kruger. There is also a recovery in development in some smaller towns like Tsumeb, Otjiwarongo and Omaruru

Agricultural land is also in high demand, in particular game farms, as well as farms suitable for livestock and irrigation. On the commercial front Windhoek, Swakopmund, and Walvis Bay are the focus of developments. There is also much investment in Oshakati and Ondangwa.

New retail developments in Keetmanshoop in the south and Otjiwarongo in the north funded by GIPF (Government Institutions Pension Fund) will undoubtedly contribute to growth in these areas.   Industrially, both Windhoek as a growing capital city and Walvis Bay as the main port with planned upgrade and expansion to its container terminal offer various industrial investment and development opportunities.

The Grove

An arresting development on the retail front is the new Grove shopping centre in Windhoek. Upon completion it will be Namibia’s largest. The mall is situated within the Hilltop mixed use estate next to Tradecentre in Kleine Kuppe, Windhoek. Kleine Kuppe and surrounds is currently the fastest growing node in Windhoek and the area enjoys the most convenient access from almost all suburbs. The Grove with a total development cost of N$1.1 billion is the largest commercial property investment ever within the borders of Namibia.

“From a commercial perspective Windhoek is experiencing a boom in the commercial (office) sector, with various investment and development opportunities. With a growing economy, stable and sound political environment, well developed and maintained infrastructure, sound fiscal and legal framework there are good reasons to invest in property in Namibia,” says Paul Kruger.

Doing business in Namibia, according to the World Bank’s International Finance Corp, is at rank 74 (SA is 35) down 4 spots since 2011. Getting credit is ranked 24, (SA has a number 1 rank) registering property is 145 while South Africa is at 76. So although not at the same level as South Africa, the rankings are fair as far as Africa goes.

Price Waterhouse Coopers official line on Namibia is encouraging: “This African jewel is a growing hub of business opportunity, with a wealth of land-based resources shows considerable growth prospects in the Tourism, Mining and Agricultural sectors. With the Namibian business environment firmly supported by the Ministry of Trade and Industry, investors can look out for: An open government attitude towards foreign direct investment. Government policy that supports free enterprise. A sophisticated banking system and a multitude of business opportunities.”

And who can argue with that.

 

 

 

Africa is the Next Big thing

Investment into Africa as the next big thing seems to be all but established. But investment into property developments has been stop start, with some notable exceptions. Experts on the ground are expecting investment to pick up as Africa’s hunger for shopping malls and commercial office space continues to grow.

Many retailers that have set up operations in Africa have expressed that their expansion on the continent is being held back by the lack of suitable shopping malls. This begs the question that if there is such a strong demand for modern retail locations, why aren’t we seeing new malls being developed at a more rapid pace?

There are some worthy exceptions: South Africa’s Manto Investment Group is to construct a US$30 million shopping centre in Ndola, Zambia. Construction work is expected to commence after feasibility studies have been completed.

West property, Augur Investments and McCormick Property Development, are planning the building of a 68, 000sqm shopping mall in Zimbabwe located in Harare’s up market Borrowdale suburb. According to The Zimbabwean online (UK), this represents the biggest shopping mall in Africa, outside South Africa.

The Financial Mail reports that Resilient Property Income Fund Ltd plans to spend more than 1 billion rand building 10 shopping malls in Nigeria.  The malls, 10,000 square meters and 15,000 square meters in size, will be built over the next three years in the capital, Abuja, and the city of Lagos respectively, the main commercial hubs. Shoprite, Africa’s largest food retailer, will be the major tenant. Bloomberg reports that Standard Bank Group Ltd, Africa’s biggest lender, and construction company Group Five Ltd. (GRF) are also partners in the deal.

Recently, emerging markets private equity firm Actis has been at the forefront of a number of Africa’s more high-profile property developments. The company is behind Nigeria’s arguably first modern shopping malls and has recently announced that it will invest in East Africa’s largest retail mall to be situated in Nairobi.

How we made it in Africa asked Kevin Teeroovengadum, a director for real estate at Actis why we aren’t seeing new malls being developed at a more rapid pace. Teeroovengadum believes there hasn’t been significant enough interest from international property developers to invest in sub-Saharan Africa. South African developers were focused on the local market due to the football World Cup, while European firms were concentrating on Europe and the Middle East. However, the recession in Europe has prompted some European real estate companies to look at Africa for growth opportunities. Post-2010 many South African property players have also turned their attention to the rest of the continent.

Something that players in the industry point out is that the development of shopping malls is time consuming. This referring to the red tape involved with dealing with multiple countries, different regulations and laws and political interference.

Teeroovengadum said. “But if I look at today, and compare it with five years ago, there are far more players involved in the real estate sector. We can really see that happening on the ground. I think if we fast-forward two or three years from now, you are going to see more shopping centres being built in places like Ghana, Nigeria and Kenya – the big economies. You are going to see a fast-tracking of property development happening in Africa.”

Africa south of the Sahara, not including South Africa, has a little in the way of  the modern shopping mall experience. Most shoppers still have to frequent a variety of places for their shopping requirements.

However, there appears to be an inclination towards convenience where a variety of products can be found in one location. “Clearly we are seeing in all the markets where we have invested a type of evolution of people moving from informal to formal shopping centres.” Says Teeroovengadum.

One of the challenges continues to be access to funds for property developments in much of sub-Saharan Africa. With the exception of many of South African developments that are funded with up to 100% debt, the rest of the continent developers often need to put down around 50% in cash.  Currently there are few banks that are willing to lend for 10 to 15 years. However it is reported that this is improving, as markets become stronger, local banks become stronger, and changes are occurring in markets like Ghana, Zambia and Nigeria in this regard.

Although Africa is drawing the attention of increasingly greater numbers of international investors, interest in the property sector remains relatively passive.  On a macro level, more investors are looking to invest in Africa.  Barely a week goes by that one doesn’t see an article about Africa, and its growth opportunities and increased foreign direct investment.

However when it comes to property it is a different situation says Teeroovengadum. He refers to the number of investors who made poor returns over the last decade due to the asset bubbles in the US, Europe and Middle East. They are very hesitant about investing more into property. Those who are willing are typically development finance institutions, those institutions that have long-term money for Africa. There are a couple of international pension funds who are looking at investing in Africa, but there are very few these days.

When the question was posed to Actis directors about how they decide which African countries to invest, in they replied that at a basic level they look for a ‘strong economy’ like Nigeria, Ghana Kenya, Uganda and Zambia. This indicates that these countries have good fundamentals, a large population, GDP growth and increasing GDP per capita etc. A Strong legal system was also referred to.

Africa wants shopping malls and companies like Resilient and Actis are gearing up to deliver.

Africa is not an island and is subject to the ebbs and flows of the world economy and its whims and fancies. Nevertheless for whatever reasons Africa is emerging as the next big thing in world investment and economic growth. But is the time right while the world is reeling from financial crisis upon financial crisis. Time will tell if those who were brave enough were foolish or wise.