Developing in Africa’s more volatile nodes

Posted On Friday, 01 August 2008 02:00 Published by
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The question posed to two leading property companies was: can it be done and what is the key?

Property-Housing-Residential

Mike Flax  -executive director, Madison Property Fund Managers:

Can it be done? It certainly has been done before, but not without major difficulty being encountered at every turn in the tortuous path.

The real underlying problem is that of security of tenure - the problem that bedevils the developing world. As one heads north out of SA, there is a gradual loss of interest in the concept of protected rights and private property ownership. This is a result of both cultural views on property ownership as well as corrupt and inept administrations.

Maybe because of this factor, Africa remains underserviced by reasonable quality real estate to cater to the needs of a continent growing at a pace well ahead of that of the developed world. All aspects of real estate are under-represented and in demand: from a chronic shortage of housing to a dearth of shops and office buildings, not to say anything about the absence of decent warehousing and factory space. They are just not there! And if you can supply ... well then, the rental return story is compelling.

And therein lies the opportunity!

For the property developer with a taste for the exotic and a stomach strong enough to withstand the bile of disappointment and regret – herein lies the recipe for high returns (or disaster). Mix the dish wrong and disaster is the by-product. Carefully apply the detailed recipe and watch the cook-pot closely – and voila, the riches of success will flow freely like sweat on the brow of an equatorial shopping centre owner!
But pray do tell. What is the key old chap?

The key is to pray, often! Oh, and lots of capital too, because debt is in short supply. Don’t forget to pick a trustworthy local partner as well. Preferably one who is related to the Governor, President-for-life or the local mayor/chief. Don’t appear to try (let alone actually try) and buck the age old system of cronyism. That type of attitude won’t lead to riches and an early retirement on Clifton Beach.

James Wilson  -CEO, Dubai World Africa:

Africa, along with China and India, has been identified as one of Dubai World’s hotspots for investment. There are vast opportunities in Africa, opportunities unlike anywhere else in the world. Recognizing the meaningful investment opportunities to be made on the African continent, Dubai World Africa is the investment arm of Dubai World which focuses on the acquisition, development and management of prime assets on the African continent and the Indian Ocean Islands and currently operates in South Africa, Djibouti, Comoros, Zanzibar, Mozambique, Morocco, Senegal and Benin.

We intend to invest about US$1 billion in Africa over the next five years.

In addressing the challenges and risks specific to investment on the continent, these can be most effectively overcome through partnering with government and the right local entity. This has become our preferred method of investment in Africa.
 
Government support for an investment is crucial. Government input on all levels serves to facilitate real benefit for local communities and thus the support of the community. In addition, our first choice of employment is from within the local population, in order to contribute as much as possible to the local economy.  Wherever possible skilled people are hired locally, and if not found it strives to transfer knowledge through continuous training and support.

Dubai World Africa has a dedicated team seeking investment opportunities in Africa and has learned that investment is required on multiple levels – social, economic, environmental and physical – in order for development to be a success.

Last modified on Monday, 14 April 2014 15:29

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