Africa warms to real estate investment opportunities

By Victor Adar

Knight Frank has unveiled its Africa Horizons 2023/24 report, which sheds light on the continent’s phoenix-like resurgence, unveiling a landscape with potential and opportunities across various industries. 

As Africa takes centre stage in the global arena, investors and corporations alike are encouraged to seize the moment and participate in its remarkable journey of growth and development.

With the shackles of the pandemic now behind us, the report reveals a rejuvenated global interest in Africa, as demonstrated by recent engagement and substantial investment commitments from major global powers, including the US, UK, South Korea, UAE, Saudi Arabia, Turkey, and China. 

Of particular note, the UK’s announcement of a $2 billion investment in sustainable projects across the continent is anticipated to fuel an influx of multinational corporations into key hub cities, such as Lagos, Nairobi, Cairo, Johannesburg, and Accra.

This unprecedented level of sovereign-level interest presents a unique opportunity for private and institutional investors to capitalise on emerging prospects within various real estate sectors, including Data Centres, Manufacturing, Environmental Social Governance (ESG), Infrastructure developments, and Agro-processing. The report delves into these sectors, providing in-depth insights and identifying five standout investment opportunities.

Apart from highlighting Cairo as the ‘newest Africa network and North Africa’s rising star’, the report says investment in the real estate industry has also attracting considerable interest from Middle East sovereign wealth funds.

It says rapid urbanization in Africa has created real estate investment opportunities as mega-cities grow, with a projected population of 145 million by 2030. Securing funding for urban expansion remains a challenge due to political instability and inadequate infrastructure, but opportunities exist in agriculture, data centres, and manufacturing sectors, and the demand for data centres in Africa, which continues to swell due to online retail growth and logistics needs.

Furthermore, manufacturing potential in Africa faces challenges, but has growth opportunities through government policies and the African Continental Free Trade Area, while ESG considerations are gaining momentum globally, and efforts are underway for sustainable financing and an ESG-focused mindset in Africa.

The report also reveals that agro-processing sector in Africa grows with increased farming, crop diversification, and export opportunities.

“There is tremendous potential for industrialization in Africa, presenting an opportunity for its manufacturing industry to become one of the most dynamic globally. Notably, North Africa stands out as the most industrialized sub-region, where manufacturing contributes more than 20% to the GDP of certain countries. In East Africa, notable strides have also been made towards industrialization, exemplified by the manufacturing sector’s share of 7.8% in Kenya’s GDP and 8.2% in Tanzania’s GDP as of 2022,” Mark Dunford, the CEO of Knight Frank Kenya, said.

Key highlights from the report include investment opportunities in Africa, which currently lie in data centres, manufacturing, ESG, Infrastructure, and agro-processing:

Data Centres: Investors are capitalizing on the surging demand for data centres in Africa, driven by online retail growth and logistical needs. Data centres provide a cheaper and more efficient IT capability than inbuilt servers, aiding their popularity. They also offer cloud services, allowing organisations to focus on their core functions.

Manufacturing: Africa’s manufacturing potential faces obstacles such as limited energy access and inadequate infrastructure, but government policies, the African Continental Free Trade Area, technological advancements, and industrial parks present opportunities for growth and competitiveness in the sector.

ESG Considerations: ESG considerations have gained momentum globally, but the African market still lags; however, efforts are being made to drive sustainable financing and transition to an ESG-focused mindset. This includes the introduction of green bonds and the development of renewable energy projects like South Africa’s large-scale solar and battery power plant. 

Infrastructure: Infrastructure development is crucial for driving progress in Africa but is fraught with challenges, such as poor transport connectivity and inadequate road and electricity infrastructure, impeding economic growth and productivity. However, governments and relevant initiatives are cognizant of the importance of infrastructure investment and have undertaken projects across various sectors, including toll roads, renewable energy, ports, water utilities, and social infrastructure.

Agro-processing: Agro-processing is expanding in Africa, driven by food shortages during the pandemic and the need to reduce post-harvest losses. This sub-sector adds value to agriculture, with Ghana shifting towards processing cocoa and stimulating industrial growth. Tanzania’s food industry holds a significant share, contributing to exports and GDP. Consequently, we realize new markets, generate income and promote technological advancements. 

“The growth of the agricultural industry stimulates the demand for raw materials, thereby leading to new markets. Consequently, this generates income for farmers, enabling them to invest in equipment and adopt new technologies that enhance productivity. A good example can be observed in Zambia, where the honey production sector has experienced significant growth. With an annual production of 2500 tonnes, Zambia has successfully catered to international markets and supported over 30,000 farmers,” Boniface Abudho, research analyst, Knight Frank, said.    

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