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More Struggles for Real Estate Investors as Xenophobia Threatens Opportunities in AFCFTA

The xenophobic attacks in South Africa directed chiefly at nationals of other African countries are seriously threatening opportunities which the African Continental Free Trade Agreement (AFCFTA) is expected to offer real estate investors on the continent, experts have said.

At the continental level, African real estate markets are underperforming with the investors struggling with falling demands and rising vacancy rates in both residential and commercial real estate buildings. The signing of AFCFTA in June 2019 was seen by these investors as light ray in the tunnel.

Apart from facilitating job creation and greater competitiveness of African micro, small and medium-sized enterprises (MSMES), experts explain that, as a trade agreement in force between African countries, there are also opportunities for real estate investors in AFCFTA.

But these foreseen or expected opportunities are now under threat because, according to MKO Balogun, CEO, Global PFI, a Lagosbased real estate firm, “any disturbance or unrest leads to uncertainty while uncertainty, in turn, breeds negative effect on economy.”

Though Balogun says the value of African foreign ownership of real estate asset in South Africa may not be all that significant, Edem Usong, a real estate manager and property market analyst, differs, taking a holistic view of Africa as a whole and South Africa as the second largest economy on the continent.

Africa is generally considered underweight relative to other continents in terms of the value of its real estate assets. Despite its large and growing population estimated at 15 percent of the world total, the gross asset value of Africa’s real estate is estimated at €113 billion, representing just 1 percent of the world’s total value.

Andrew Baum, a Cambridge University professor and thought leader on global real estate investments, who gave this insight at a roundtable discussion in Lagos, explained that the continent’s underweight in real estate asset value was based on global performance of real estate investment trusts (REITS).

This explains, in part, why AFCFTA as a crucial ingredient in lifting people out of poverty and invigorating the continent’s growth trajectory, was welcome especially by real estate investors. “Africa is now one of the biggest economic blocs in the world, meaning that the continent has become borderless such that businesses can now move from one country to another,” noted Mustapha Njie, CEO, Taf Africa Global.

“Free movement of businesses from one country to another means there will be increased demand for both residential and commercial real estate, including office, retail and industrial space in which investments could be made,” Njie added in an interview with Businessday.

However, Usong notes that “what xenophobia is doing in South Africa is a direct opposite of the expected gains of AFCFTA because the attacks on Nigerians and their investments in South Africa and the reprisal attacks on South African interests in Nigeria are all counter to the spirit of AFCFTA”.

“Nigerian, Zimbabwean and Kenyan nationals are the main targets of the xenophobic attacks and these countries, particularly Nigeria, are major real estate investment destinations and commercial hubs on the continents,” Usong said, pointing out further that these attacks impact negatively on the economy of the continent and also on individual countries.

He recalled how South African investors took the Nigerian retail and office space markets by storm, spreading their investment interests in both core and secondary retail markets. He cited Resilient Africa, a real estate investment company from South Africa, that was already operating outside the traditional big cities of Abuja, Lagos and Port Harcourt.

Source: Businessdayng

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