RESEARCH AFRICA REPORT 2017/18 REAL ESTATE MARKETS IN A CONTINENT OF GROWTH AND OPPORTUNITY AFRICA REPORT 2017/18 RESEARCH CONTENTS AFRICA: STILL RISING? 03 Africa: still rising? The rise of Africa’s economies has been interrupted by recent external shocks, 08 Capital markets review but there remain grounds for optimism over the longer-term outlook. 10 Sector focus: retail After decades of disappointing 12 Sector focus: logistics FIGURE 1 performance, African economic growth African GDP in current US$ 14 Algeria began to accelerate around the turn of 15 Angola the century. The continent averaged GDP growth of more than 5% per annum 2,000 16 Botswana between 2000 and 2014, primarily driven Sub-Saharan Africa North Africa by fast-growing Sub-Saharan economies. Cameroon 1,500 17 During this period, the term “Africa Rising”, 18 Chad popularised by publications such as The Economist, became shorthand for this 1,000 19 Côte d’Ivoire rapid economic growth and the increased optimism about Africa’s future prospects. US$ billions) GDP (Current 500 20 Democratic Republic of the Congo However, economic growth has since 21 Egypt 0 moderated, due primarily to the exposure 22 Equatorial Guinea of African countries to external factors 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 including falling commodity prices and 23 Ethiopia slower growth in China. The International Source: World Bank/Knight Frank calculations Monetary Fund (IMF) estimates that 24 Gabon and commodity-exporting countries Nigeria entered recession in 2016, African GDP growth slowed to 3.4% in since 2015. The major oil exporters, in while the IMF expected Angola to 25 Ghana 2015, easing further to 2.1% in 2016. particular, have been impacted by low record zero growth for the year. Smaller Growth for the Sub-Saharan region was 26 Kenya estimated at just 1.5% in 2016. Against oil prices, but more resilient growth rates oil-driven economies, such as Equatorial have been seen in oil-importing countries. Guinea and Gabon, have also been 27 Madagascar this backdrop, the question “is Africa still severely impacted by the decline in rising?” has moved to the forefront of Within Sub-Saharan Africa, the drop in commodity prices. 28 Malawi economic debate. GDP growth can be largely attributed to 29 Mali the region’s three biggest economies; Although South Africa is a net oil A multi-speed Africa Nigeria, South Africa and Angola. As importer, its growth has been subdued 30 Mauritania The headline GDP figures disguise Africa’s two largest oil exporters, Nigeria by weakness in the mining and 31 Mauritius the increasingly multi-speed nature of and Angola have both seen oil revenues manufacturing sectors and the effect African economies. In broad terms, there badly hit by lower prices, and this has of a severe drought on agricultural 32 Morocco has been a divergence between the additionally put strain on government production. The country only narrowly growth rates of commodity-importing spending, debt levels and currencies. avoided entering recession in 2016. 33 Mozambique 34 Namibia FIGURE 2 FIGURE 3 35 Nigeria Sub-Saharan Africa GDP growth Sub-Saharan Africa GDP growth rates rates by decade 36 Rwanda 6 10% 37 Senegal 5.64 8% 5 ESTIMATE 38 South Africa FORECAST 4.06 6% 39 Tanzania 4 3.79 3.33 4% 40 Tunisia 3 2% 41 Uganda 2 1.70 0% 42 Zambia 1.01 1 Compound annual growth rate (%) Compound annual growth rate -2% 43 Zimbabwe 2010 2011 2012 2013 2014 2015 2016 2017 0 1960s 1970s 1980s 1990s 2000s 2010s Oil-exporting countries Oil-importing countries (excluding South Africa) South Africa 44 Africa commercial occupier guide to date 47 Knight Frank in Africa Source: World Bank/Knight Frank calculations Source: International Monetary Fund 2 10% 3 8% ESTIMATE FORECAST 6% 4% 2% 0% -2% 2010 2011 2012 2013 2014 2015 2016 2017 Oil-exporting countries South Africa Oil-importing countries (excluding South Africa) AFRICA REPORT 2017/18 RESEARCH In contrast, a group of commodity- food and agriculture processing, populations with limited access to importing East African countries, business process outsourcing, financial formal banking. East Africa, in particular, AFRICA GDP GROWTH including Tanzania, Ethiopia, Kenya and services and construction. There is is a hotbed for innovation in this Rwanda, have all maintained GDP growth also significant growth potential for sector and, according to Global Findex RATES, 2016 rates well in excess of 5%, benefiting manufacturing industry in Africa, as this data, Kenya leads the world, with from low oil prices and growth in private sector consistently underperforms in 58% of the population having mobile comparison with other emerging markets. consumption and investment. The West money accounts. African economies of Côte d’Ivoire and Technological change will be at the heart Senegal have also emerged as two of the African mobile phone markets have of the future growth and diversification continent’s strongest performers aided now entered a second phase of growth, TUNISIA of African economies. Mobile by improved political stability, economic as consumers shift from basic feature telecommunications have already had a reforms and infrastructure investment. phones to smartphones. By 2020, it is MOROCCO transformative socio-economic impact expected that smartphone connections In a reversal of the general pattern of in Africa by allowing large sections of the will be the majority in Africa. The adoption ALGERIA LIBYA recent years, the North Africa region saw population to skip landlines and move EGYPT straight to wireless technology. This has of more sophisticated mobile technology higher GDP growth than Sub-Saharan WESTERN Africa in 2016. However, growth within led to African consumers embracing will have a large role in shaping consumer SAHARA the region has been uneven and Libya mobile banking and payment services, behaviour, and it will drive the growth of and Algeria have both been impacted by improving the financial inclusion of sectors such as online retailing. lower oil prices. MAURITANIA MALI SUDAN ERITREA CABO FIGURE 4 VERDE NIGER DJIBOUTI Economic diversification Africa’s largest oil-exporting countries and technological change SENEGAL CHAD THE GAMBIA BURKINA The current struggles of Africa’s oil- 100 100 SOMALIA GUINEA FASO ETHIOPIA producing countries emphasise the 90 90 BISSAU GUINEA NIGERIA need for the continent’s economies to GHANA SOUTH 80 80 (%) of total exports share Oil’s SUDAN diversify so that they are not dependent CE 70 70 SIERRA CENTRAL AFRICAN on commodities, or any other single LEONE RE REPUBLIC 60 60 BENIN CAMEROON source of economic output. Expediting LIBERIA TOGO UGANDA 50 50 the ongoing process of economic EQUATORIAL GUINEA KENYA diversification is an absolute priority for 40 40 30 30 S GABON many African governments. PRINCIPE DEMOCRATIC RWANDA Value of oil exports (US$ billion) of oil exports Value 20 20 REPUBLIC BURUNDI Potential sources of growth and OF THE CONGO 10 10 SEYCHELLES diversification for African economies 0 0 TANZANIA include sectors such as retailing, NIGERIA ANGOLA ALGERIA LIBYA EGYPT EQUATORIAL REPUBLIC GABON SOUTH CAMEROON REPUBLIC OF GUINEA OF THE SUDAN CONGO THE CONGO Value of oil exports (US$ billion) Oil’s share of total exports (%) COMOROS Source: Observatory of Economic Complexity (2014)/Knight Frank calculations ANGOLA Data includes crude and refined oil MALAWI ZAMBIA FIGURE 5 Africa mobile technology growth forecasts ZIMBABWE MOZAMBIQUE MAURITIUS 800 80 MADAGASCAR NAMIBIA BOTSWANA 700 70 Smartphone connections (% of total) 600 60 KEY SWAZILAND 500 50 GDP growth estimates, 2016 LESOTHO 400 40 ABOVE 6.0% SOUTH AFRICA 300 30 4.1-6.0% 200 20 2.1-4.0% Unique mobile subscribers (millions) 0.1-2.0% 100 10 0% or lower 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 NO DATA AVAILABLE Unique mobile subscribers (millions) Smartphone connections (% of total) MAJOR NET OIL EXPORTING COUNTRIES Dar es Salaam Source: GSMA Intelligence Source: International Monetary Fund 4 5 AFRICA REPORT 2017/18 RESEARCH Population growth FIGURE 6 and urbanisation Global population forecasts AFRICA POPULATION DENSITY While economic growth has faltered in Africa Asia Europe Latin America and the Caribbean North America Oceania AND CITY GROWTH parts of Africa, demographic trends remain 6 favourable to the continent’s longer term development. The population of Africa is 5 3.5m 3.2m 3.6m 4.8m 18.8m 5.1m rising at a faster rate than that of any other 4 CASABLANCA IBADAN KANO ALEXANDRIA CAIRO KHARTOUM global region and its demographic profile is both young and increasingly urbanised. 3 1.2% 3.1% 3.0% 1.8% 1.8% 2.8% Africa’s population has more than doubled 2 over the last 30 years to over one billion, and Population (billions) the United Nations (UN) forecasts that it will 1 surpass four billion by 2100, which would be 0 3.2m around 40% of the global population. With ADDIS ABABA 2000 other global regions likely to be characterised 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 2100 by slower population growth and ageing 3.1% Source: United Nations Population Division trends over the coming decades, Africa 3.5m will be home to an increasingly significant DAKAR Cities Institute suggest that Lagos, Kinshasa environment also appears increasingly portion of the global workforce. McKinsey and Dar es Salaam will be the three most fractured. Recent patterns of growth projects that, by 2034, Africa’s working-age 3.8% 1.9m populous cities in the world at the end of have highlighted the diverse nature population will be 1.1 billion, overtaking both KAMPALA the century.