Real Estate Investor Magazine South Africa April 2016 | Page 17

CHALLENGES

changes. The end of a more than a decade of civil
conflict in 2011 introduced a new era of a boom in
foreign investment and economic growth.

Democratic Republic of Congo

DRC is abundant is natural resources, however, it fails
to achieve the economic potential presented by this
due to corruption, conflict and political instability.
Despite the hurdles it continues to grow. Renewed
activity in the mining sector, which is the source of
most export income, has boosted DRC’s GDP growth
in recent years.

Ethiopia

Coffee is the major export crop in an economy largely
based on agriculture. The government is putting
a major effort in diversification to manufacturing,
textiles and energy generation. It issued its first
sovereign bond in 2014 generating $1 billion revenue
for a 10-year note. The only downside is that per
capita income remains one of the lowest in the world
despite the continuous high GDP growth.

Challenges

While the opportunities abound, there is certainly no
lack of challenges in Africa either

Fractured Markets

A major challenge is the fact that many of Africa’s
54 countries are small, with populations of fewer
than 20 million and economies of less than $10
billion. While African demographics suggest a large
retail opportunity, many consumers are still in the
low-income bracket. In fact, few individual markets
provide scale to be commercially attractive themselves
in the short term.

Lack of Infrastructure

of road and power infrastructure inhibits formal retail
developments, while traffic congestion causes massive
delays and makes business slow and ineffective. For
example, only 5% of goods are sold through formal
channels in Nigeria.
Developers and investors therefore have to
accommodate financially to cater for access roads,
water, sewage and electricity, as there is a lack
of resources from the municipalities and utilities
providers to support these infrastructures.

High Costs

Building costs in many African countries are high,
partly because many materials have to be imported,
and also due to the high interest rate and the lack of
a dynamic banking system that can provide mortgage
loans at an affordable price.

Property Legislation and regulations

Across the whole value chain of the investment
process, including land acquisitions, country
regulations, market fundamentals affecting valuations
and feasibilities, each African market offers different
challenges. Laws regarding land tenure and land
holding by foreigners are different in each country,
and the process of land acquisition differs widely,
while the taxes affecting foreign property owners are
divergent.

Advice for Investors

With a number of differing opportunities for property
investment and developments arising in Africa, the next
decade could see other African countries developing
commercial property sectors comparable to tha