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RICS Spotlight on the Future of African Real Estate

The Royal Institution of Chartered Surveyors (RICS) Africa 2015 summit in Johannesburg brought together professionals, academics and industry leaders to examine the future vision for Africa’s real estate market. The well-attended, high-energy event on 25 March was the RICS’s first international conference on the continent. A common thread was recognition that Africa was taking its place on the world stage in terms of real estate, infrastructure and construction. There was a clear sense that the RICS can play an important role in helping countries build consistent standards where needed, albeit with a focus on collaboration with existing bodies and governments.

RICS President Louise Brooke-Smith said she had been championing RICS partnerships in Africa and that it was appropriate to hold the conference in the city with the largest GDP in the region: “We’ve evolved into a truly international body. By 2020 the majority of our membership will be from countries other than the UK. We’re seeking to spread best practice wherever we find it.” The aim was to share experiences with open minds in a spirit of partnership. While several participants, including emerging-market economist Kganya Kgare from Stanlib, stressed the differences between African countries, all acknowledged that consistent standards would go a long way to addressing challenges.

Whereas inflation in East Africa is well within target and the Kenyan shilling is stable, with 6% growth expected in 2015, inflation in Nigeria is expected to accelerate from the middle of the year, and interest rates are at an all-time high, said Kgare. Among the topics examined was the economic sustainability of southern Africa. Africa’s economic growth is predicted to outpace all other continents in the next five years, with forecasts showing that four of the world’s 10 fastest-growing national economies will be on this continent. The panellists looked at investment sources, risk and the vital ingredients underpinning ongoing momentum. One conclusion was that commercial property is one of the darlings of the market in countries such as Ghana, Kenya and South Africa.




Urban development, planning and land use was another topic of discussion. “Spatial transformation is an evolutionary animal,” said Johannesburg town planner and manager at Ekurhuleni metro, Itumeleng Nkoane. He called for a mix of the “first and second” (formal and informal) economies. “As planners, we cannot industrialise in the same way as Europe and America… Living in a sustainable environment is not only about living in a beautiful environment, but also about survival. There should be a shift from being development controllers to being development facilitators.”

Brooke-Smith agreed that planning was a balancing act, citing the increasing neighbourhood approach to planning and commercialism, even in developed countries such as Britain. However, she identified a “massive skills gap” in two areas: there were not enough skilled professionals in the built environment and there was a lack of data and information. Co-panellists Nkoane and James Dadson, chief lands officer for the Ghana Land Commission, agreed with Nkoane, saying not enough young people were being encouraged to go into the built environment as a career in South Africa. Dadson said since investors came in primarily to make profit, African governments should position themselves to absorb investors in a way that benefits society.

The importance of infrastructure as a core factor in sustaining growth was another focus area. In a session titled “The African economic engine”, the question was raised: what infrastructure does sub-Saharan Africa need to be truly globally competitive? Dale Ramsden, founder and managing partner at RMP Westport, said the supply and demand mismatch in West African countries such as Ghana, Nigeria and Angola created opportunities. While the RICS could be a huge help in drawing up standards, African countries often wrongly “get a bad rap”. “There are planning standards and approval processes. You have to be patient and things will happen. Do proper traffic impact studies, don’t take short cuts and embrace the community. In these countries, urban planning was a challenge; there was an emotional attachment to land and a strong demand for A-grade real estate. There were opportunities in the massive retail shortage and limited competition, but challenges in that the debt market needed to be grown, delivery was an issue and there was a lack of qualified rentals. Strong local partnerships, market knowledge, zero tolerance of corruption and having the necessary equity in place were identified as key.

RICS Senior Vice President Amanda Clack noted: “In an ideal world, you start with planning. In reality, each country in Africa starts from a different place.” She also noted that the absence of adequate infrastructure could cost African countries two percentage points in GDP growth a year. One of the reasons China was successfully investing in infrastructure development in countries such as Nigeria was that it was willing to take the extra risk, speakers felt. Chinese companies tended to take a long-term view based on a model-linking infrastructure and real estate development.

This risk could be reduced by increased transparency and a zero tolerance of corruption across the region, the panel agreed. Data points were also key to de-risking – and this was an area where the RICS could play a role. Debunking several myths about his continent, Broll CEO Jonathan Yach, a member of the RICS, described himself as a “proud Afro-optimist”. He said: “Africa is probably one of the most connected of continents, and this is driving growth.” While social instability posed a risk throughout Africa, corruption needed to be dealt with, country by country, and democratic governance needed to be encouraged. Opportunities lay in the continent’s young, well-informed and rapidly urbanised people. Enhanced electrification was also opening up opportunity and scope. “This continent, Africa, is redefining itself through its real estate,” Yach said.

“Standardised valuation practices around Africa will increase transparency,” said Amelia Beattie, CIO of Stanlib and president of SAPOA, adding that she had seen interest in South Africa and Africa increasing “significantly” over the past two to three years. “The capital is out there. Our biggest challenge is to find investable opportunities to put the money in. The international market is looking for a much more significant investment base. We should learn as an industry to work together and to bring these opportunities to the world.” In response, RICS CEO Sean Tompkins confirmed that the RICS was “a natural collaborator to make this happen”. The RICS would be delighted to support the development of valuation standards and was prepared to host meetings with leaders and stakeholders to agree on common standards.


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