Africa is still lagging behind on real-estate investment trusts

By David Whitehouse
Posted on Tuesday, 30 July 2019 15:22

Real estate investors are banking on the growth of the middle classes in cities like Accra. REUTERS/Luc Gnago

Africa’s real-estate sector will continue to lag behind in terms of attracting foreign investment until legislation to facilitate real-estate investment trusts (REITs) moves up the agenda.

Diversified property exposure in a context of rapid African urbanisation reduces the dangers for foreign investors in markets that they see as too risky to enter.

  • Yet the Linklaters law firm found that, between 2013 and 2018, Africa-focused real-estate funds raised only $2bn from investors, compared with $11.9bn and $4.2bn raised by private-equity and infrastructure funds.

A real estate investment trust (REIT) is a company that owns, operates or finances income-producing properties. Africa as a whole presently has “relatively undeveloped” listed public REIT markets, says Grit Real Estate CEO Bronwyn Corbett.

  • Corbett expects the creation of multiple REITs in major African markets over the next decade.
  • Ghana and Mauritius are among countries in the drafting phase, she says.

According to research on African real-estate markets by Jones Lang LaSalle in 2018, South Africa is the only sub-Saharan African country that can be considered transparent. Though moving in the right direction, Nigeria, Ghana and Rwanda are still “low transparency”, while Uganda, Tanzania, Ethiopia, Côte d’Ivoire and Senegal are all “opaque”.

Grit argues that increased property-sector liquidity is of critical importance to African pension funds, which typically hold far more of their investments in direct property holdings compared with those in developed countries.


Grit is listed in London, Johannesburg and Mauritius. Diversification is key to the company’s strategy, both in terms of geography and property type.

  • The company has a mix of 25 shopping centres, hotels, office and industrial buildings in Morocco, Zambia, Mozambique, Ghana, Kenya, Botswana and Mauritius.
  • In July, Grit entered the Senegalese market with the purchase of a Club Med hotel and resort, which will be leased back to Club Med.
  • The company won’t invest in a country that doesn’t offer security of tenure, debt funding and the ability to get your money out.

Corbett prefers to have half of Grit’s holdings in “investment grade” Africa and half in higher-growth but riskier markets. Yet the need to stay diversified puts limits on what Grit can do: the company says that some property investment opportunities are too large for it to take onto its balance sheet alone, and that large institutional investors will be needed. Adopting REIT legislation will help to bring those institutions on board.

Major obstacles, Corbett says, are the time taken for REIT legislation to be drafted and then promulgated, and lack of clarity on tax structures and accounting, even after promulgation. Lack of investor familiarity with REITs and real estate as an asset class are also causing delayed take-up in African markets, she says.

  • Grit is engaging with local institutional investors, primarily pension and insurance funds, and regulators in current and target jurisdictions including Kenya, Mauritius, Ghana and Rwanda.
  • Morocco is likely to see increased REIT activity, Corbett says, as local capital markets are well developed and are structured to take advantage of recently adopted legislation.

Bottom line:

Fast-tracking the adoption and implementation of REIT legislation is a way for African countries to expand the universe of investors willing to consider Africa.



Understand Africa's tomorrow... today

We believe that Africa is poorly represented, and badly under-estimated. Beyond the vast opportunity manifest in African markets, we highlight people who make a difference; leaders turning the tide, youth driving change, and an indefatigable business community. That is what we believe will change the continent, and that is what we report on. With hard-hitting investigations, innovative analysis and deep dives into countries and sectors, The Africa Report delivers the insight you need.

View subscription options