Protecting Investments In African Real Estate Projects

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Klapton’s appetite high based on African average economic growth of over 5%.

Protecting real estate investments in Africa by Shay Reches

On August 3, 2017, Sanjiv Mihdidin, Managing Director at SMART PROPERTY, published an article “IS REAL ESTATE THE NEXT BIG THING FOR AFRICAN INVESTMENTS?”.

In the article, Sanjiv Mihdidin describes the change in view, expressed in the Economist: where in 2000 the Economist headlined Africa as “The Hopeless Continent” portraying a continent ravaged by war, economic and social distress. The same magazine radically changed its headlines referring to the continent as “Africa Rising” in 2011 and “Aspiring Africa” in 2013.

Africa has averaged economic growth of over 5% per year with countries like Ethiopia, Mozambique, Nigeria and Tanzania topping the ten fastest-growing economies over the past decade.

The continent is home to more than 1 billion people with an expected forecast of 2.5 billion by 2050. Africa will then be the most populated and youngest continent resulting into the world’s fastest rate of urbanization. UN forecasts say that the populations of Lagos, Kinshasa and Luanda will all grow by more than 70% during the 2010-2025 period, while Dar es Salaam, Kampala and Lusaka are expected to double in size.

Fuelled by sustained economic growth, a sizeable middle class with disposable income is rapidly emerging across the continent thus creating opportunities for both commercial and residential real estate.”

Klapton’s risk appetite remains high as to providing protection to investments in Africa. The Company’s interest remains especially high as to long term investments, where a clear contribution is made to improve the social and economic status of the people of Africa.

Investments in real estate, especially in the right locations will remain an attractive target for Klapton’s investment protection guarantees in the coming years.

There are many factors that have a major effect on considering an investment risk: regulations, exit strategies, volatility of local currencies against the major currencies, government stability – all of these and more must be taken into account.

We agree Sanjiv Mihdidin’s observation that Africa’s real estate markets require careful navigation and international investors attracted by the continent’s progress need to look beyond the macro growth story and understand the microenvironment of individual markets.