As part of the 2015 SAIBPP Convention a panel discussion took place about the pros and cons of taking South African property practitioners beyond South African borders.
The panelists were Patrick Katabua, Head of SA Real Estate Transaction Manager at Cushman & Wakefield, Cushman& Wakefield; Zuki Siyotula, Executive Head: Thebe Oil and Gas; and Dr Kola Akinsomi, Senior lecturer, University of Witwatersrand. The moderator was Lynette Ntuli.
Zuki: We often have this narrative around Africa being a possibility, talking about our potential. And often times it’s the opposite narrative talking about the dark side of the continent.
It gets to a point where I think as Africans we need to own up to our optimism and need to believe in our story to say: “It’s no longer about our possibility and potential. We are living in that state now.”
If you look globally other economies are not growing as quickly as some of the African economies. When we look at the top 10 growing economies they include a lot of African countries.
The time has come to think seriously about regional integration and how to go about it. It’s not necessarily going to be the 54 African countries being in agreement at the same time.
But it’s looking at blocks within the continent that can make certain things feasible. I use an example around gas. When we look at Mozambique, you know they have the resources.
We need energy in South Africa. It’s about the willingness of the leadership and governments and business to have effective partnerships and driving that.
We need very strong African leaders who understand that political will back where the economy is going to be growing for us to realise this potential whether it’s within the property sector or within the energy sector. The other thing that’s quite fundamental to remember is that investments follow stability and we really have to hold African countries accountable for the creation of such stability.
The other key thing is Africans need to own their story of prosperity. We need to focus less on how we attract foreign investors. I would also like to see more South African companies investing in different African countries. Let us partner. When we move into Mozambique, look for local partners on the ground as well as international partners.
Moderator: Patrick, do we need a coordinated land strategy?
Patrick: Let me touch on the point about instability. I find it quite fascinating when you read the papers and you see certain countries being portrayed as unstable and their attractiveness decreases on the map as a result.
And yet you still find corporate companies in those countries. Regardless of what happens in Democratic Republic of the Congo (the DRC), Shoprite is there.
The DRC is meant to be one of the most opaque countries on the continent. You still have United Nations peace keeping forces. So, in theory there’s meant to be war. But Shoprite has wishes to open up eight other sites within the next three years there.
So, if it’s a war-torn country and there’s instability, does it make sense to open businesses there? So, to link instability to real estate I would ask the question – does political instability affect your real estate transaction?
Because it seems like regardless of whether there’s war or not your population still needs to shop somewhere. They still want to go for entertainment somewhere.
Political instability should not feature that high on your radar when you make a decision in terms of which African country to go into. In Arab Africa, despite the Arab Spring, investors are still there. A lot of investors simply changed their investment plan, their entry strategy.
You look at Anglophone Africa. That’s typically where South African money used to go. There’s more competition now. The newcomers are countries in Francophone Africa where South African companies were very shy to enter before because those countries were French and not English. But as soon as Chinese went in they realised that actually the Chinese don’t speak French either.
But if China is successful in Francophone Africa, it might as well make sense for South African companies to look at it as well.
And then you have Lusophone Africa, the Portuguese speaking ones. It’s a bit easier for South African companies to do business in Mozambique because it’s across the border but it is still a bit more tricky than Angola despite the fact that it offers bigger returns.
So I look at all these factors and what is reported in the media. On one hand those factors are true. On the other hand, does it really have an effect on your real estate decisions? Does it really affect your consumer at the end of the day?
Moderator: Thank you Patrick. And finally Kola.
Kola: The past decade in Africa has been very interesting, particularly in the real estate investment trust. Real estate investment – there was an investment trust which initially took gathered wind in the US in the 60s so they has stuck force about 50 years ago.
But real investment trust got introduced on the continent in the past decade. It has opened up another alternative of investment in Africa. So in South Africa the real estate industry came on board.
Currently, the market valuation in South Africa is $35-billion. On a move towards Nigeria market cap is not that huge. It’s just three traded REITS-142 million dollars.
You have REITS in Ghana. One REITS in Ghana. The recent one the most recent one is the one that StanLib. It’s called the Stanlib Bahari REITS.
The initial public offering ended in November 2012. So we can’t have a market valuation on that at the moment. You can see that Africa is moving forward. Investors from Europe, Asia, North America, South America can invest in Africa through instruments or through vehicles such as this. So that is something that moves the real estate space forward. We are moving from the direct real estate on to indirect real estate.
On the other side, we are not doing too well with property rights. We still lag behind. You need to look at the World Economic Forum Competitiveness Report where they look at property rights in all countries in the whole world.
On the property rights and the ease of doing business, African countries are the worst performing – 141,136 out of 150 countries. The only country that performed well in Africa was South Africa, which ranked 20 for property rights and also around the ease of doing business. So, this is something that we need to grapple with. On one hand we are progressive. On the other, we need to be more concerned.
Moderator: Property rights are very sensitive and historically touchy area when you think of Africa. We are now in 2015 when certain countries have perhaps been independent for more than 40-50 years and here South African where we’ve been free for 21 years.
Has it been enough time for us not undo the our country’s harmful legacies, particularly those that relate to the rights around land and property?
For us to begin to say this is how we intend to chart a new future and how to optimally use our land and property and also make sure that, while we have made those changes, the loopholes in our legacy, as well as our statutes, don’t allow African land to be taken advantage of.
Kola: We all know that property rights are the most fundamental or basic of any investment. If I pay for a real estate and I don’t have ownership of that it means that tomorrow my neighbour can come in and take my property off me. So, that’s the fundamental of investments.
That’s something we need to get right. But then if you look at African countries we always mention British colonialism and stuff like that. I mean this happened….what…almost 60 years ago. I don’t know why we keep going back to the same topic.
We should be asking pertinent questions. For example, what are the commissioners of land in various African countries actually doing to make land accessible and to actually register it.
In Nigeria, for instance, property can be registered but then you have instances where there’s no registration of land. Property is passed from one generation to another without documents. So, where do we go from here? And I think it then goes back to legalities and rule of law and how we need to get property rights and land rights intact before we gain towards investments.
Moderator: In terms of regional economic integration, how can we develop a strategy from a land and property perspective?
Where do we even start given the 54 states on our continent? And what then is a priority if we look at those things as being central to what propels the continent forward?
Zuki: It is critical is for us to remember that the 54 African countries are unique. We often think of Africa as one blanket as though it’s one country. But each of those countries differs in size, population, GDP growth and we really need to understand where are the opportunities in each of those countries.
And then we can strategically coordinate to make each block focus on a particular area of economic activity, for example gas or infrastructure development.
And once we start to strategically have those partnerships across different countries we will be able to see progress.
Recently, I looked at some stats on property and one of the things that struck me was how the developed world has used housing to grow their economies. And one of the indicators is the mortgage to GDP ratio.
In the US it’s 77%, in the UK it’s about 80%. Then compare African countries. In Ghana the ratio is 2%. In South Africa, it is 31%, the highest on the continent. And that really measures the ability of an ordinary citizen to go and get a mortgage to own a house.
We need to build institutions that allow people access to finance to own land. Because from there you are able to move on and there’s a lot that we need to deal with across the different countries. Those are some the fundamental blocks we really need to focus on.
Moderator: So, Patrick, what’s the role of instability in terms of between policy and law? Patrick: I think it has its advantages and disadvantages. If we look at the European Union as a case in point you’ll find that there are winners and there are no winners.
Like the countries that are called the PIGS – Portugal, Ireland, Greece and Spain. Once a upon a time Greece was doing fairly well. As soon as they integrated with the rest they could just not compete.
Similarly, in Africa there may be winners and losers depending on who you align with. If you look at Economic Community of West African States (Ecowas) where you’ve got Nigeria, the dominant player, they’ve realised that there is some stigma attached to Nigerian business.
So, typically Nigerian banks are now registering in Togo and Senegal. Ecobank, for example, is a Nigerian bank registered in Togo. That’s an example where regional integration has been beneficial for them.
And it has given Ecobank access to the whole of West Africa. And because it worked homogenously for them they’ve now been able to go to the rest of the continent. So, it has its pros and cons. In East Africa, Kenya, Rwanda, Burundi, Uganda have come together to work on allowing the flow of humans without visas. Similar to what they did in West Africa. Imagine what that does to you as a property owner. If you’ve got a mega shopping centre in Rwanda all of a sudden your catchment area is now
400 000 working class people. It opens it up completely because you now have access to different countries.
This is the form that needs to happen among African countries.
