Wanetsha Mosinyi
28 March 2008
Gaborone — Botswana Insurance Fund Management (Bifm), in collaboration with the International Finance Corporation (IFC), is to establish a regional property focused fund.
In an interview with Business Today on the sidelines of the African Venture Capital Association (AVCA) conference recently, Bifm CEO Victor Senye said they are waiting for certification from the IFC before they can unveil the full picture of the fund. Initially, the fund will be capitilised by the IFC and Bifm. The IFC is a member of the World Bank Group. It finances and provides advice for private sector ventures and projects in developing countries.
"This is an important additional product for our clients. It will offer the region an opportunity for investment capacity in the property sector," Senye said. He said the development of real estate depends on land, capital and the market, hence the fund will help investors find the best combination to yield a good return on their investment. The growth of real estate in Botswana, Senye said, is encouraging. He cited BSE-listed entities Turnstar, RDC Properties and PrimeTime as examples of how opportunities in the sector are opening up. The Managing Director of Phakalane Estates, Lesang Magang, welcomed the introduction of the fund, saying it will expose local investors to new funding models.
Magang said the IFC has entered into successful partnerships with other players on the African continent and Botswana will benefit from the fund significantly. He said when they started Phakalane Estates, a major challenge was the reluctance of funding institutions, including banks, to invest in real estate because it did not bring immediate returns. "We have learnt at lot at this (AVCA) conference that there are many different funding models."
Some of the participants at the conference said banks cannot afford to fund the development of real estate. The participation of fund managers and equity investors through mechanisms like Public-Private Partnerships (PPP) are vital in the development of the sector. Chief Investment Officer at the IFC, Vincent Roque, who was also at the AVCA conference, said there are plenty of investment opportunities in real estate in Africa, including Botswana.
Roque said driven by global trends that include urban migration, rapid global population growth and a commodity boom, the real estate sector can bring good returns across the value chain. He however said he was disturbed by the rate of mortgage penetration into the GDP of African countries. With exception of South Africa, mortgage penetration into the GDP is almost zero. "It is clear that real estate is growing and can have a huge economic impact," Roque said, "but I wonder why it is not taking off as it should?"
He noted that for the sector to have an impact it requires institutional approach. For his part, Sam Ogbu, the CEO of South Africa's Liberty Life Property, said real estate is a good investment asset class because it has high yield returns, it is reliable and has predictable capital appreciation. Ogbu said the region has high demand for office and retail space because of the growth of financial services. He said as the global hunt for higher yields in investment vehicles continues, Africa might be the last undervalued market place, hence opportunities exist in real estate.
"Africa is hungry for good real estate," Ogbu said. "The economies are growing, so there is demand for where people work, stay and play."
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