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Global sovereign investments in Africa, such as the UK's $2 billion commitment to sustainable projects and the US's $200 billion through the Partnership for Global Infrastructure and Investment (PGII) initiative, are set to have a significant impact on the continent's real estate sector, according to global real estate consultancy Knight Frank.
In its 'Knight Frank Africa Horizons 2023-24' report, the firm observed that over the past decade, Gulf Cooperation Council (GCC) countries had been key investors in African nations, with the UAE leading at $59.4 billion in investments, followed by Saudi Arabia with $25.6 billion, and contributions from Qatar, Kuwait, and Bahrain totalling $16.4 billion.
The report also indicates that Middle East sovereign wealth funds are gearing up to invest approximately $120 billion in Egypt in the near future.
'These efforts are expected to trigger an influx of multinational corporations into major hub cities, including Lagos, Nairobi, Cairo, Johannesburg, and Accra," the report noted.
Africa's real estate market stands to gain from unlocking investment opportunities in five sectors: data centres, manufacturing, ESG (Environmental, Social, Governance), infrastructure, and agro-processing.
The data centre market in Africa, valued at $2 billion in 2020, is projected to soar to $5 billion by 2026, with a compound annual growth rate (CAGR) of 15 percent from 2020 to 2026, noted Boniface Abudho, Africa Research Analyst at Knight Frank.
This sector has attracted the interest of global tech giants, e-commerce behemoths, and online retailers. Institutional investors are making substantial moves in Africa's data centre market, such as Digital Realty's $3.5 billion acquisition of Terraco.
Africa's industrialisation potential is drawing attention, as the sector currently contributes an average of just 11 percent to total GDP, dipping to less than 5 percent in most countries.
Abudho said the continent is also emerging as a significant player in ESG-driven investment, as the urgency to meet UN sustainability goals and the rise of green technologies and projects attract investors seeking ESG-linked opportunities.
On the other hand, Africa faces significant post-harvest losses, with 35-50 percent of fruits and 15-25 percent of grains being lost due to almost non-existent agro-processing at the rural level. The agro-processing sector, therefore, represents tremendous promise due to the growing demand for value-added agro products, driven by increased urbanisation, expansion of the agriculture sector, and crop diversification.
Highlighting specific countries, Abudho said Egypt has led North Africa in foreign direct investment (FDI) with an impressive $11.4 billion inflow in 2022, according to UNCTAD data. This achievement is attributed to the Egyptian government's swift implementation of comprehensive economic measures post-pandemic. South Africa doubled its average FDI, securing $9.1 billion in 2022, thanks to its economic policies, sophisticated capital markets, and robust financing services.
The report also underscores Morocco's potential, citing its diversified economic landscape, a resurgent agricultural sector, and a relatively stable political system. The African Development Bank predicts a 3.3 percent growth in GDP in 2023-24.
Other economies mentioned in the report include Rwanda, which boasts an 8.2 percent growth rate in 2022; Ghana, diversifying beyond traditional sectors into digital innovation and financial services; Kenya, making strides in the technology sector and transforming into a pivotal economic, commercial, financial, and logistical hub, and Tanzania, where government-led investments in energy, telecommunications, and finance, along with a projected GDP growth of 5.7 percent in 2023, have garnered investor attention.
In summary, Africa's real estate sector is poised to benefit significantly from global investments, with data centres, industrialisation, ESG-driven opportunities, and agro-processing leading the way in unlocking the continent's potential.
(Reporting by Syed Ameen Kader; Editing by Anoop Menon)
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