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3 'practicalities' to consider before investing in property in Africa – expert

Nov 10 2019 16:45
Compiled by Carin Smith

Africa can be a challenging place to do business and property investment is not exempt from some, often unique, challenges, says Gerhard Zeelie, head of property finance Africa at Nedbank CIB.

However, given the growing, number of opportunities available in many African countries, the rewards can outweigh the complexities involved in making them the investments.

In his view, there are three "complexities" that need special consideration when investing in property in Africa, part from the usual look at growth prospects, risk evaluation, supply and demand and full due diligence.

Ease of doing business

For Zeelie, the first is the practicality of the opportunity from an ease of doing business perspective.

"It is important to assess how accessible by both air and road the investment destination is," says Zeelie.

"Then there is the issue of ease of entry into the country, and to what extent your movements and actions will be hamstrung by bureaucracy once you're there."

Corruption

Zeelie suggests that a prospective investor needs to have a clear understanding of the level of corruption he or she will face, and how tolerant they are willing to be of such activities.

"This is of course not to imply that investors need to feed into corruption, but just that they need to be fully aware of it and accept that it may have the potential to delay or limit their investment or property development efforts," explains Zeelie.

Legal regime

Thirdly, there is the legal regime of the country being considered.

"There's much more to legal matters than compliance and bureaucracy. In most countries, the legal environment determines the complexities involved in investment, and as a result, has a significant impact on overall investment costs," he says.

"Africa is certainly not exempt from these legal ramifications and, in fact, the often significant, legal complexities in many African countries prompt numerous investors and financiers to use Mauritius or the UK as the legal jurisdiction for their transactions across the continent."

This doesn't remove the requirement for the execution of security to take place through the local legal system, which can add to costs, particularly when it comes to registering security to access bank funding and when assets are refinanced subsequently by a different financier.

africa  |  corruption  |  money  |  investment  |  property
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