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Sub-Saharan Africa’s modern retail stock grows in size, quality

The retail property sector has been a major focus for development activity within Africa over the last decade, causing the shopping mall concept to take root in increasingly wide range of major African cities.


Development has been driven by the growth of the continent’s consumer markets and the expansion of domestic and international retailers, particularly the leading South African supermarket chains such as Shoprite, Pick n Pay and Game. South Africa is by far the largest and most mature retail market in the Sub-Saharan region, with approximately 23 million sq m of shopping centre floor space, compared with only about 3 million sq m in the whole of the rest of Sub-Saharan Africa. The South African market continued to grow in 2016, most notably through the completion of Atterbury’s 131,000 sq m Mall of Africa, the largest single-phase mall development ever in Sub-Saharan Africa.


Outside of South Africa, the Kenyan capital Nairobi has the greatest volume of modern retail floor space in Sub-Saharan Africa, and it continues to be a development hotspot. The city saw the completion of the first phase of Actis’ Garden City Mall (33,500 sq m) in 2015, followed by the opening of The Hub (30,000 sq m) in the affluent suburb of Karen in 2016. The 67,000 sq m Two
Rivers Mall, which is now the largest in Kenya, opened in February 2017.


Elsewhere, developers including Atterbury, Novare, Resilient and RMB Westport have all delivered modern mall projects over the last two years, adding to the retail stock of countries including Ghana and Nigeria. The positive growth outlook for Côte d’Ivoire and Senegal has caused these countries to also attract increased interest, having previously seen relatively limited modern retail development.


Of particular note, CFAO has opened PlaYce Marcory in Abidjan as the first of a series of Carrefour-anchored malls that are planned for West and Central Africa.Large volumes of modern retail space remain in the pipeline across Sub-Saharan Africa, although the weakening of the oil-driven economies has led to the postponement or scaling down of some projects in these countries.


With most of the region’s major capital cities now having at least one modern mall, developers have increasingly targeted secondary cities in order to gain first-mover advantage in these locations. There are also signs that pragmatic developers are now concentrating on the delivery of well-located small and medium-sized convenience shopping centres rather than regional mega-malls.


As the sector grows and competition between retail schemes intensifies, developers will seek to differentiate their malls by offering access to international brands, leisure facilities and upscale consumer experiences. Selecting the right micro-locations for development will be crucial to the success of new centres, particularly in cities that already have successful existing malls. Modern mall development will play a major role in shaping the future landscapes of Africa’s growing cities.

CAPITAL MARKETS REVIEW

The persuasive long-term investment case for Sub-Saharan Africa has drawn increased numbers of international investors to investigate opportunities within the region over recent years, albeit transactional activity has been restricted by the limited availability of investment- grade stock and the opacity of the markets outside of South Africa.


Interest in the sector remains heightened, despite the weakening of some Sub-Saharan economies over the last two years. Investors’ appetite for Sub-Saharan real estate was highlighted in 2016 by the announcement that the UK-based emerging markets specialist Actis had raised US$500 million for its third African property fund, Actis Africa Real Estate Fund 3.


This is the largest amount that has ever been raised for a private real estate fund focused on Sub-Saharan Africa outside South Africa, and it included a commitment from the Government of Singapore Investment Corporation (GIC).Actis’ two previous funds, closed in 2006 and 2012, have been involved with some of Sub-Saharan Africa’s most modern commercial property developments, in countries such as Ghana, Kenya, Nigeria and Tanzania.


In recent years, Actis has exited from many of its first wave of investments, selling its interests in assets including the Accra Mall, Nairobi Business Park and Ikeja City Mall. When Actis launched its first Sub-Saharan Africa fund over a decade ago, it was a pioneer entering a market largely untapped by global property funds.


However, its third fund will enter a significantly more crowded marketplace as a series of property investment vehicles have emerged in recent years targeting Sub-Saharan real estate. Many of these are South African-controlled funds, albeit often registered or listed offshore in Mauritius.


A prominent example is RMB Westport, which was created in 2008 as a joint venture between Rand Merchant Bank and the Westport Property Group. Its current development projects include the Wings Office Complex in Lagos and Muxima Shopping Centre in Luanda. RMB Westport’s second fund, which has a target of raising US$450 million, has attracted commitments from both GIC and the UK investor Grosvenor.


Other real estate investment vehicles to have been launched in the last two years include a pan-African joint venture created by Growthpoint and Investec, which has the target of raising US$500 million. Momentum Global Investment Management and Eris Property Group have also formed a joint venture, the US$250 million Momentum Africa Real Estate Fund, which has allocated capital to development projects in Ghana and Nigeria.


The Anglo-South African group Old Mutual signalled its intention to expand its African footprint by announcing a partnership with the Nigerian Sovereign Investment Authority in the second half of 2016. This venture aims to raise US$500 million for a real estate fund, in addition to a US$200 million agriculture investment vehicle. A further noteworthy event during 2016 was the creation of Mara Delta, a pan-African real estate fund formed from the merger of Delta Africa and Mara Diversified Property Holdings.


During 2016, Mara Delta was one of the most acquisitive buyers of real estate across the region, growing a portfolio which currently includes assets in Kenya, Mauritius, Morocco, Mozambique and Zambia. The activities of South African investors in the rest of Africa are part of a wider trend that has seen them increasingly move into foreign markets in order to hedge against a weak rand and a sluggish domestic economy. This has also led to South African investors directing significant volumes of capital to Central and Eastern Europe, attracted by the relatively high yields on offer in this region.


During 2016, South African investors including Hyprop, Redefine and Tower acquired US$2.1 billion of property in CEE markets. Significant demand for African real estate stems from Middle Eastern investors, who generally have a preference for large-scale development projects rather than direct property investment.

(An extract from the Africa Property Report 2017)

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Inflation spike building further upwards

27th October 2020
Inflation spike

In the coming months prices will go up and inflation will shoot sharply above the target of 3 percent to 6 percent towards the third quarter of 2021, the Bank of Botswana on the other hand will continue to withhold its knife on the Bank Rate. This is according to a forecast made by Kgori Capital in its recent Market Watch Segment.

Statistics from Statistics Botswana show that the recent 1.8 percent increase in the September inflation, from 1 percent in August, was a reflection of the upward adjustment in public transport fares (Transport (from -6.9 to -3.9 percent) in September 2020, which is estimated to have increased inflation by approximately 0.64 percentage points.

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Plans to erase Edgars, Jet trademark from Botswana malls underway

27th October 2020
Edgars Jet trademark

Local anti-trust body, Competition and Consumer Authority (CCA), this month received back to back acquisition proposals from South African clothing retailers to wipe out their former rivals, Edcon, from Botswana malls.

Last week BusinessPost was in possession of Merger Notice No 23 of 2020 whereby a South African clothing retailer owner, Retailability Proprietary Limited, through Oclin Proprietary Limited, proposed to acquire parts of the Edgars business conducted by Edcon in Botswana (through Edcon Botswana), as a going concern, consisting of certain assets and identified liabilities.

South African government’s Business Rescue Practitioners earlier this year announced that Retailability will buy Edgars, after the latter filed for a business rescue plan in April after it failed to pay suppliers. This move will see Retailability add Edgars to its portfolio consisting of brands such as; Legit, Beaver Canoe and Style.

Retailability landed on Botswana shores 18 years ago with its flamboyant urban fashion Style which had 17 stores. Style, having almost the same target market as Edgars as it offers men’s and ladies’ contemporary and formal fashion, gave the 91 year old legendary clothing retailer a run for its money, and has won the battle as its parent company has taken over Edgars.

Retailability brands are synonymous with Botswana shopping centres and there are currently five (5) Beaver Canoe stores, 10 Style stores and seven (7) Legit stores across this country. The Beaver Canoe stores sell clothing apparel for men and boys only. The Legit stores have a fashion store format which focuses on the retailing of clothing, footwear, accessories, colour cosmetics and cellular products.

Retailability operates in over 460 stores across South Africa, Namibia, Botswana, Lesotho, and Eswatini. Many observers suggest that because of the deal with Retailability to swallow Edcon, most Edgars stores in Botswana will change their name and be branded Style. A sad tale for religious consumers of the Edgars trademark who got used to love their favourite brand for years.

According to CCA’s Merger Notice No 23 of 2020, Retailability is controlled by Clifford Raymond Lines (through a company which functions solely as a holding company of his interests in Retailability) and Metier Investment and Advisory Services Proprietary Limited (“Metier”). Metier is a private equity enterprise with investments in a number of industries spanning from healthcare, hospitality, FMCGs and telecommunications.

Retailability directors are mostly South Africans; Clifford Raymond Lines, Mark Richard Friday and Norman Victor Drieselmann. Only Nasreen Essack, who was appointed February this year, is a Motswana. He comes after Brian Thuto Tsima left on the same date. Retailability 100 percent owns Oclin Proprietary Limited, the company it is acquiring Edgars with, by a capacity of 3000 shares.

The target business, Edgars, offer textiles, cosmetics and cellular products. Edcon has a Motswana director, Charles Mzwandile Vikisi, a South African, Shane Van Niekerk and Zimbabwean Jethro Kamutsi.

“The Target Business comprises of two (2) Edgars franchise brands and private label stores across Botswana. These stores target middle to upper income customers and are home to a range of private label brands such as Free2BU, Charter Club and Stone Harbour, and a wide range of market label brands (such as Levi’s and Guess) for clothing, footwear and cosmetics.

In addition, the Target Business operates iconic Edgars Home and Edgars Beauty stores as store-in-store formats rounding out the department store offering in Botswana,” said CCA.
Foshini also lines up to take Jet Botswana from Edcon.

The Foschini Group (TFG) released a statement confirming its latest intentions to acquire Edcon assets or Jet for a cash purchase consideration of R480 million. This was after the business rescue practitioners offered TFG to buy Jet by that amount.

CCA is currently mulling on a proposed merger by TFG to take over Jet operations in Botswana. Merger Notice No 21 of 2020 from TFG came a few days before the Retailability proposal. In this merger TFG, acting through Foschini Botswana, want to take over “parts” of the Jet business conducted by Edcon through Jet Supermarkets Botswana.

TFG will be willing to add Jet to its portfolio of 30 retail brands that trade in clothing, footwear, jewellery, sportswear, homeware, cell phones, and technology products from value to upper market segments throughout more than 4085 outlets in 32 countries on five continents. TFG will also get Jet’s distribution centre located in Durban and certain stores in Botswana, Lesotho, Namibia and Eswatini. Also part of this fat deal is that the company is looking to also acquire JET Club and all existing JET stock of no less than R800 million.

Johannesburg listed TGF owns Foschini Retail Group which owns the local operations called Foschini Botswana, the acquiring enterprise according to CCA merger notice. “TFG is not controlled by any enterprise/s and for completeness, the three largest shareholders of TFG holding shares greater than 5% as at 27th March 2020 are: Government Employees Pension Fund (16.2%) Public Investment Corporation (13.2%); Old Mutual Limited (6.7%); and Investec Asset Management (6.3%). The remaining issued share capital in TFG is widely held,” said the merger notice.

Only Abdool Rahim Khan is a Motswana in the Foschini Botswana directorship, the rest; Ganeswari Shani Naidoo, Anthony Edward Thunström and Gustav Jansen (alternate director) are South Africans.

According to the CCA merger, the Jet Business is Edcon’s discount department store division, selling clothing, footwear, homeware and some cosmetics as well as cellular products and targets lower-to-middle income consumers throughout Botswana. The Jet Business does not directly or indirectly control any enterprises, says the notice. CCA seeks any stakeholder views for or against the proposed merger, which may be sent within 10 days from date of this publication to the following address.

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BOCRA, associates to provide broadband internet in schools

27th October 2020

Botswana Communications Regulatory Authority BOCRA signed a memorandum of Agreement (MoA) with the Ministries of Transport and Communications (MTC), Basic Education (MoBE) as well as Local Government and Rural Development (MLGRD).

The MoA seeks to continue the collaboration that dates back to 2016 when the three parties first agreed to work together in a project aimed at computerizing and providing broadband Internet to primary schools in remote and underserved areas of Botswana.

The project benefitted 68 primary schools and 9 secondary schools through the construction of Local Area Network (LAN) in each primary school, provision of 5 Mbps dedicated broadband Internet to each Primary School and provision of Wi-Fi enabled tablets, laptops and related peripherals such as printers and copiers.

Further, the project will see the augmentation of computers in 9 Junior Secondary Schools with 30 laptops per identified school and employment of Information Technology (IT) officers at each primary school.

When speaking at the signing ceremony in Gaborone, Chief Executive of BOCRA and Chairperson of Universal Access and Service Fund (UASF) Board of Trustees Martin Mokgware said the project’s ultimate goal is to facilitate pupils in schools and host villages to be able to play a meaningful role in the digital economy.

Mokgware indicated that this necessitates upgrading of existing Telecommunications infrastructure to high capacity broadband that will support delivery of education, accessibility to the quality Internet and usage of ICTs.

The Fund began its inaugural programme by sponsoring the provision of WiFi hotspots in public areas around the country as its first project. Following the successful implementation of public WiFi hotspots, the Fund identified Kgalagadi, Ghanzi and Mabutsane areas for mobile network upgrades, schools computerization and internet provision.

Conscious that the project would not be possible without buy-in and support from MoBE, MTC and MLGRD, the Fund facilitated the signing of the first MoU between the three parties in 2016 for implementation of the project.

BOCRA Chief Executive said the signing of this agreement is aimed at benefitting the Kweneng District, adding that they have already assessed the area and have determined that they will be covering 62 underserved villages and 119 schools, 91 of which are primary schools.

“This is a project for which the partner Ministries need to re-commit for its success. Lessons from the previous schools’ computerization and internet connectivity project require that we increase our involvement and resources dedicated to the project for it to be successful. It is my belief as the project coordinator, that we will not do things the way we did them during the first project, for if we do, then we will not have learnt anything,” he said at the signing ceremony.

The purpose of learning is so that there can be continuous improvement to minimize the length of time and amount of resources utilized, he said expressing confidence that their partners will step up to the plate and ensure they play their part in the implementation of the project and that it will progress smoothly having already tread along a similar path.

UASF’s role lies mainly in funding and project management. According to Mokgware, once the project is completed, the work to integrate ICTs into the classroom begins in earnest. Therefore, he said, the project will not succeed without full cooperation and oversight of partners.

“MoBE will put in place the necessary content and ensure that the curriculum is available to all. MLGRD will provide, among others, the enabling environment by ensuring readiness of the school’s infrastructure and necessary security.”

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