Actis LLP, a private-equity company, will lead investment of as much as $1.5 billion in African commercial property to meet rising demand from international companies targeting a growing middle class.
“We are seeing a shift in interest from South African brands to European retailers” seeking opportunities in fast-growing economies such as Nigeria, Ghana and Kenya, Kevin Teeroovengadum, 39, director of Actis’ sub-Saharan Africa real estate unit, said in an interview in Johannesburg on June 11. “They want to tap into the emerging middle class.”
Actis, which is based in London, plans to invest in projects including shopping centers, office towers and industrial parks that will come to fruition over the next five years, Teeroovengadum said. The company will use the proceeds of its second African real estate fund that raised $280 million in October, while the rest of the investment will come from commercial partners and loans.
Africa’s economy, excluding Libya and Somalia, is forecast to expand 4.5 percent in 2013 and 5.2 percent next year amid a rise in oil and mining projects and direct investment from foreign companies, according to the Tunis-based African Development Bank’s annual outlook. Nigeria, the continent’s most populous country, grew 6.6 percent in the first quarter while South Africa, the continent’s biggest economy, expanded by an annualized 0.9 percent.
Actis has raised about $1.4 billion across seven Africa funds since 2003, according to data compiled by Bloomberg. The company is also pursuing deals in South America and Southeast Asia in sectors including energy and technology.
Africa is home to the world’s youngest and fastest-growing population, McKinsey & Co. said in a 2010 report. Household expenditure in the continent is forecast to expand 63 percent to $1.4 trillion by 2020, the report said. Shantayanan Devarajan, the World Bank’s chief economist for Africa, said in May last year that “this is a very good time for retailers to get a foothold in Africa.”
Actis has already invested the proceeds of an initial $155 million real estate fund in malls and office buildings in Ghana, Nigeria, Kenya, Botswana and Mauritius, Teeroovengadum said. The company has partnered with Mauritian investment company GML to invest in Port Louis-based Indian Ocean Real Estate Co., which is developing a $1.5 billion town in the island nation.
“We have leapfrogged to shopping centers of 25,000 square meters from existing small shops” in Nigeria and Ghana, Teeroovengadum said. “The idea was when you go into Africa, you benefit from middle-class growth.”
South African retailers Shoprite Holdings Ltd. (SHP), Mr Price Group Ltd. (MPC) and Truworths International Ltd. (TRU) have outlets in Actis’ Nigerian shopping centers, Teeroovengadum said. Spanish fashion chain Zara, owned by Inditex SA (ITX), and Arcadia Group Ltd.’s Topshop are among European chains with African expansion plans.
The company is adding industrial and logistics parks to its African property portfolio in response to a “complete lack” of that kind of infrastructure, Teeroovengadum said. “These opportunities will happen in key markets such as Mozambique, Zambia, Ghana.”
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