While the shopping center projects are increasing in Africa Michael Chu’di Ejekam, real estate director at Actis, one of the serious players in this field in Africa, outlines the major challenges faced by a business that is not, far from it, an easy activity.
In its edition on newsstands this week (n ° 2755-56 of 27 October to 9 November), Jeune Afrique investigated the boom of supermarkets and shopping centers in Africa. While the ads, ambitions and projects are multiplying, JA emphasized the major challenges facing this business far from simple: the high cost land, significant funding requirements, risk associated with poor design centers. And, of course, the issue of supply management in some countries, such as Congo, 80% of products sold in supermarkets are imported … Actis is a pioneer shopping centers south of the Sahara, with a decade experience. Michael Chu’di Ejekam, real estate director at the private equity investor, answers questions from JA
Interview by Frédéric Maury
Jeune Afrique: How many shopping centers have you built?
Michael Chu’di Ejekam: Five. Two in Lagos (Ikeja and The Palms), an Accra (Accra Mall), a Nairobi (The Junction) and Mauritius. And we have some ongoing projects.
Garden City, Nairobi, is the largest, with 48 000 m2 of GLA. Work began for delivery in 2015. Like the Jabi Lake Mall, which will be the first quality shopping center in Abuja. We will also build two more centers, one in Accra and one in Lusaka.
Do they know success?
Lagos Ikeja Mall attracts 750,000 visitors per month. The Shoprite supermarket is the third best performing store in the world of the South African group. Brands accompany us: the first wave was composed of South African, Massmart and Shoprite for food surfaces or Foschini for clothing, for example. We expect a second wave this time coming from the Middle East. Groups of these countries there either bring their own brands or international brands they already have the franchise to their area of origin.
You make the bet of the middle class …
SSA has a very large population and will be brought to grow. In 200, 66% belonged to a category defined as having basic needs. In 2020, the proportion will be completely reversed with 54% of households will have interim needs. The 18 major cities in Africa in 2030 displayed a level of expenditure of 1,300 billion per year.
France, it is 539 billion. Other elements count including the population growth in urban areas, where consumption is growing twice as fast as in the countryside. In 2007, 65% of the African population was rural. In 2025, the same figure will be reached but for cities. There is a massive unmet demand in many areas of real estate, because of years of under-investment: shopping centers, good offices and housing for middle income.
Do you think that there is room for a lot of shopping centers south of the Sahara?
Looking at the number of quality surfaces of over 20 000 m2: Johannesburg (between 4 and 5 million inhabitants) account 72. Lagos (22 million), has only 2. Accra only one, as Kampala. And Nairobi, 3. Nothing to Lagos, I think there is easily room for 15 shopping centers of this kind. There in Africa the same dynamics in India between 2003 and 2007, where the number of malls has increased from 30-230.
How do you choose your layout and size sites?
We order systematically studies by consultants. This last area analyze, assess road infrastructure and purchasing power. All this determines the choice of the site and size of the center. After, there are local contexts that may be blocking. In general, 40% of businesses in the centers are linked to the clothing sector. And until 2010, Nigeria was prohibited import of finished textile products. It had to be a blocking factor.
You have not invested in Francophone area. The potential is less important?
It is equivalent. We are interested in this area, which suffered the same boom as the rest of the continent. And in particular to the Ivory Coast.
Your job is complex. What are the main difficulties?
I would cite several challenges. First find the field and at a good price. Next, find the funding. A mall like Ikeja costs about $ 90 million, half in loans. It’s a sum not necessarily easy to find and expensive because the interest rates are high in Africa. Another challenge is the lack of local expertise in real estate development. The construction costs are also very high. It is 2.5 times more expensive to build in Nigeria and South Africa. And 70% of materials are imported. Then there is not enough known brands likely to settle in malls: more would be better. Finally, for us, Actis, which have vocation to sell the shopping centers a few years ago resale: reselling three centers to real estate experts, we have proven our ability to meet this challenge.