At US$24 per square metre per month, Botswana has the lowest prime rent for retail space among Southern African economies surveyed by Rand Merchant Bank for its 2015/16 Where to Invest in Africa report.
The only other Southern African Development Community country with the same rate is Namibia. Elsewhere the rates are much higher: $120 in Angola, $60 in South Africa, $40 in Mozambique and Seychelles, $35 in Madagascar and Zambia, $30 in Tanzania and the Democratic Republic of Congo (DRC) and $25 in Zimbabwe. For the rest of the countries surveyed for the report, the lowest rates are in Mali ($18), Mauritania and Cote d’ Voire ($15) and Tunisia ($12). Prime yield is highest in Angola and Madagascar (13 percent); followed by DRC (12.5 percent); Tanzania and Mozambique (10 percent); Zambia (9 percent); Namibia, Botswana and Zimbabwe at 8 percent; South Africa (7.8 percent) and Seychelles (7.5 percent).
Through RMB Westport (a real estate investment management and development fund that was established in 2008) the bank focuses on property developments in Sub Saharan Africa. The fund targets real estate opportunities where investment flows and broad-based economic growth is most lucrative and the supply-demand mismatch of high-grade office space and modern retail offerings is most severe. West Africa is key driver of growth in the African retail market. The bank has earmarked Ghana, Nigeria and Angola to develop high-scale retail assets. In SADC, retail growth is strongest in Angola and Mozambique where post-independence development was delayed by years of civil war.
The report says that there has been a slowdown in the growth rate of FDI into different sectors, including retail. This slowdown is not due to decline in interest but a “struggling” global economic environment. That notwithstanding, opportunities remain abundant.
“We continue to see consumer firms entering certain markets. In fact, Deloitte in its Africa: A 21st Century Review, said that by 2017, Africa is expected to become the second largest market for investment by European consumer businesses. Many retail construction projects are being developed by investment firms and private equity funds eager to cash in on the region’s burgeoning consumer markets. In Deloitte’s view, the consumer opportunity rests on five pillars: the rise of the middle class, exponential population growth, the dominance of youth, rapid urbanization and fast adoption of digital technologies,” RMB says.
While the report notes that 80 percent of African still shop in traditional outlets (with 40 percent shopping in small, local grocery stores), it observes that there has been increased demand for more modern retail formats. It forecasts US$1.4 trillion revenue in the consumer industry by 2020.
“Retail has been the word on every investor’s lips since the advantages and implications of the continent’s growing demographic opportunities were understood,” RMB says.
The Top 10 consumer markets in Africa are Nigeria, Ethiopia, DRC, Kenya, Tanzania, Egypt, Uganda, Malawi, Mozambique and Burundi.