Real Estate in Africa
Note: This report is an extract from the book "Grow
Rich in the New Africa".
|Table of content:||Part 1: Real Estate as an Asset Class||Part 5: New City Developments|
|Part 2: The Investment Case for Real Estate||Part 6: Yield of Real Estate Investments|
|Part 3: Commercial Property||Part 7: Legal Ownership of Real Estate|
|Part 4: Residential Property||Part 8: Conclusion|
New City Developments
As I have outlined in 2011’s Redefining Business in the New Africa, urbanization is a megatrend that has a particularly pronounced impact on Africa. Millions of people are migrating from rural to urban areas for a variety of reasons. While the percentage of people living in urban areas has already reached very high levels in the Western world and Latin America, some parts of Asia and most parts of Africa lag far behind. The urban population in Africa accounts for about 40% of the continent’s total population, 60 years behind Latin America where 80% of the people now live in cities.
From 2000 to 2030, Africa’s urban population is expected to grow from 294 million to 742 million people, an increase of 152%. Urbanization is taking place in different ways:
- Expansion of existing cities
- Upgrading villages to cities
- Development of suburbs to form the core of new cities
- Planning and building new cities
Most existing cities in Africa will grow randomly, as new migrants arrive and settle somewhere in the city or its periphery. Only a few city councils have implemented a strict process of spatial and urban planning. One example is Kigali, the capital of Rwanda.
Some large cities are planning specific extensions of their outskirts, e.g. Eko Atlantic City which will be built on a new artificial island adjacent to Victoria Island, Lagos. The new city will meet the needs for financial, commercial, residential, and tourist accommodation with a state-of-the-art, high-tech infrastructure in line with modern environmental standards. Eko Atlantic City will also offer its residents an independent source of energy generated specifically for the city. This added value is especially important in the Nigerian context of constraints in power supply.
Abuja is a planned city that was built mainly in the 1980s. It replaced Lagos as Nigeria’s capital in 1991.
In Côte d’Ivoire, Yamoussoukro benefited from becoming the capital in 1983. It still appears to be more of a large village than the political and administrative capital. The far bigger city of Abidjan remains the economic and financial center and, therefore, has the highest real estate prices in the country.
Juba, capital of the new nation of South Sudan, acquired political and administrative functions overnight. The existing infrastructure of roads, buildings, and utilities is totally inadequate for future needs. Many problems and challenges lie ahead, offering numerous opportunities for risk tolerant entrepreneurs and investors. Most likely, however, lack of capital will not be among the challenges as the new nation is likely to be supported by international organizations and development agencies. Multinationals wanting to participate in the country’s huge oil reserves are already active in South Sudan.
Much is going on in and around Nairobi, the capital of Kenya and also the main economic hub of East Africa. Kenya’s national development agenda includes the Nairobi Metro 2030 Strategy and its ambitious project of Tatu City. This planned community is aimed to become the prototype of the African city of the future and a replicable model in Kenya and across Sub-Saharan Africa. The vision for Tatu City is the creation of a world-class, mixed-use new city for an estimated 62,000 residents, situated directly in the path of a continuously growing urban development extending northwards from Nairobi. Tatu City will not only provide homes and jobs for thousands of Kenyans, but will also offer unparalleled economic and business opportunities, including real estate investments. It is also a fascinating case study for efficient and effective urban development and management in the 21st Century and the mobilization of private resources for the development of urban infrastructure and services.
Konza Technology City is another decentralized development area designed to alleviate the congestion within Nairobi. The Konza Technology City (initially called the Malili Technopolis) will be located approximately 65 km southeast of Nairobi – “where Africa’s silicon savannah begins.” The Kenyan government is currently looking for a master developer for the 5,000 acre site.
Both Tatu City and Konza Technology City will be run by semi-autonomous, parastatal authorities that will help oversee the continuity of the projects and non-interference by the politicians. The planned communities will provide a comprehensive mix of land uses to cater for all the needs of residents and visitors. These will include residential developments, retail, commercial, tourism, social facilities, and recreation.
Tete is the capital city of the Tete Province in northwestern Mozambique. This place offers the most interesting business opportunities in the country’s real estate sector. The dynamic development of the commercial and residential market is based on the gigantic coal resources that have been explored recently. The Moatize deposit is one of the biggest in the world, attracting large mining companies and many exploration- and mining-related business activities. Demand for accommodation is vast and rising while supply is still very limited. Savvy investors find excellent investment opportunities there. The biggest challenge for entrepreneurs at such remote places is the lack of skilled workers.
A similar development can be anticipated for the port city of Takoradi in southwestern Ghana, which is the nearest commercial port to the Jubilee oil fields. Business and leisure travelers are increasingly demanding quality, affordable accommodation and conference facilities in the country's new oil and gas hub. The tourism sector is growing at a rate of 25%, and the demand for accommodation is rising. The expectation of an oil boom has pushed up real estate prices in the city and also caused a lot of activity in the construction sector.