Real Estate News - Africa: Construction industry awakening

AfricaNews - I made my first trip to Africa in 2000. Up to that point I had been working for a manufacturer of construction materials based in Dubai and servicing the Middle East. Even at that time, much of Africa was suffering the economic hangover of both colonialism and the subsequent de-facto cold war which had been waged across Africa.

At the end of the Cold War, many African countries were left with corrupt regimes whose paymasters had left them to fend for themselves. In this environment, most individuals and investors were reluctant to put there money into projects with such a high degree of political and economic uncertainty.

The construction industry is a good barometer of economic growth. It is one of the first industries and indeed stimulants of economic growth and is likewise one of the first sectors to grind to a halt at the earliest sign of instability or economic downturn.

In 2000, the construction industry across sub-Saharan Africa was starting to stir. Stability in East and Southern Africa and Oil wealth in West Africa fuelled and continues to fuel development. At the top of the social scale, the wealthy have become very wealthy, but the stimulation of economies has resulted in a rapid increase in the size of the middle class. Increased disposable income coupled with increased aspiration, has led this segment of African society to jump on the property ladder with both feet. This has resulted in a real estate boom across Africa that was known previously only in South Africa.

There are some good case studies. Tanzania for example is still designated as one of the world’s poorest countries, coming 127 out of 130 countries listed by income per head of population*. However, it has seem political stability for over 15 years and from a very low base, continued year on year growth has seen a great rise in economic activity, particularly in and around Dar Es Salaam, the country’s capital. Individual property investment has risen from a sleepy past-time into a major industry. 7 years ago, all of our sales were to individual home-owners, whereas today these are more than equalled by residential developers building anything from small complexes of 10 units up to major developments of up to 50 or more homes.

Taking this a stage further, Addis Ababa in Ethiopia is experiencing a major boom in real estate, partly due to increased wealth, partly due to increased security and partly due to the government release of land. The largest of these to date has 1100 individual housing units currently under construction.

In West Africa also Ghana and Nigeria have been experiencing booms in residential construction particularly around the urban centres. Accra the Ghanaian capital together with Lagos and Abuja in Nigeria have benefited the most.
In South Africa this trend has been continuing for over 6 years and shows no signs of abating. The value of residential properties over the same period has doubled, sometimes tripled.

Angola too following the end of the 27 year civil conflict in 2002, though still struggling to tackle the legacies of the war, has re-entered the construction market with force. The capital Luanda has seen a massive rise in civil, industrial and residential construction, drawing in many contractors and investors from overseas, but notably from South Africa.

The increase in disposable income among Africans and the political stability which brings in tourists, to coastal locations and those on game Safari’s, as well as the increase in demand for business accommodation; has also created a boom in hotel refurbishment and new development. As an example, when I first visited Mombassa in the wake of the Paradise Hotel bombing targeting Israeli tourists, rooms were available in 4-5 star accommodation full board for US$25 per night. The same package today will cost at least 4 or 5 times this amount.

Not touched on here because they are not areas where I am directly involved are countries in North Africa such as Morocco, Libya, Tunisia and Egypt (as well as further south, the Sudanese capital Khartoum). All of these countries are witnessing huge investment in construction and development.

In the words of a senior staff member at Emmar, the UAE based developer and one of the worlds biggest, “Africa is where the biggest future opportunities are going to come from”. For those involved in construction, whether it be as a manufacturer, an investor or international contractor, this bears consideration.

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