Foreign Exchange

South Africa may be one of the few places where foreign investment flows into commercial real estate in sub-Saharan Africa. But the nation’s real estate industry is looking for a higher profile on the global stage. In August, the Association of Property Unit Trusts, a group representing the six real estate companies listed on the Johannesburg Stock Exchange, indicated that it would support the adoption of REIT structures.

While South African business leaders are confident that the largest sub-Saharan economy will continue to grow (business confidence indicators are the highest in two decades), the commodities-heavy economy is not racking up great numbers, despite rising prices for gold and other exports. In fact, the International Monetary Fund predicts that GDP growth will slow to 4.2% in 2006 and 4.0% in 2007, down from 4.9% last year. Meanwhile, in late September, the Rand fell to a three-year low on news of inflation and a growing current account deficit. Foreign direct investment has stalled: A study by the Economist Intelligence Unit and Columbia University this summer concluded that FDI will drop to $6 billion this year, from last year’s $6.3 billion and will remain flat through 2010.

Still, the property sector is attracting interest. Britain’s CDC (Commonwealth Development Corp.) recently earmarked $100 million for real estate investment in Africa through the new Actis Real Estate Fund. The CDC, which is funded by the British government, makes private investments to encourage economic growth in Commonwealth nations. South Africa is a likely target for such infusions.

And some foreign investors are making sizeable bets in South Africa. Dubai World’s investment arm, Istithmar, recently teamed up with London & Retional Properties to beat out local bidding teams to buy Victoria & Alfred Waterfront Co. The mixed-use development, on Cape Town’s historic harbor, was undertaken in the 1990s to revitalize the waterfront district and had been owned by the Transnet transportation agency and its pension funds.

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