Sub-Saharan Real Estate Sector Outlook

Quarterly Research Report

Adapted from BMI Research ReportFebruary 2020

Asia & Africa Leading Growth Regions

GLOBAL MARKETS OVERVIEW

Asia & Africa Leading Growth RegionsGlobal Regions – Overall RRI (Relative Risk Index ) & Industry Growth Scores

Global Construction Growth To Accelerate

Central Africa

Central and Eastern Europe

Central and South America

Developed States

East and Southeast Asia

MENA

North America

South Asia

Southeast Europe

Southern Africa

East Africa

Western Europe

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

30.0 35.0 40.0 45.0 55.0 60.0 65.0 70.0

Co

nst

ruct

ion

Ind

ust

ry R

eal

Gro

wth

50.0

RRI

West Africa Caucasus and Central Asia

African Markets

Risks are weighted to the downside given

political, and geo-political risk uncertainty

remains elevated. However, acceleration in

China, UK, Australia, France, Canada, India, US

are expected to lift the global construction

sector

Global Outlook

The global construction industry is expected to

accelerate in 2020 relative to 2019 with a real

growth of 3.5% y-o-y

Developed Markets

Expansions East African and West African

markets will be the fastest in 2020, but Asia the

focus of global construction activity.

What is the current scale of Africa’s Real Estate Market?

OVERVIEW OF REAL ESTATE

Top 5 Africa Deals Africa Property Investment Summit Stakeholders

Global Construction Growth To Accelerate

Shelter Afrique in Affordable Housing Deal with Habitat International

Centum RE & Nedbank Two Rivers development project transaction

African Logistics Properties (ALP) Signs Debt restructuring deal with Standard Bank

CDC commits to mezzanine debt investment in Teyliom Hospitality

Grit buys Senegal Club Med

$ 60Mn

$100 Mn

$ 26 Mn

$ 30Mn

$ 12Mn

Pan-Africa Fund

Kenya

Kenya

Mauritius

Senegal

Deal SizeCountry

In 2019, Africa Property Investment Summit reported over $ 500 million across multiple jurisdictions focused on

affordable housing; hospitality; logistics; and mixed-use developments.

$14.5 billion has been raised deployed for Africa’s market in the last 15 years

02

01

03

04

05

API Summit Database 2018

*API Summit Database 2018

Maturity Phase Institutional & Public Investment Phase

2010 2016

CONSOLIDATION

FIRST SELL-OFF

2028

Early Money Phase

Market Correction

NOW

Steady & Sustainablegrowth

TAKE OFF

NOTABLE PROJECTS IN EAST AFRICA

TWO RIVERS MALL

GARDEN CITY

DELTA TOWERS, WESTLANDS

MLIMANI CITY

ACACIA MALL

NOTABLE PROJECTS IN WEST AFRICA

IKEJA CITY MALL

STANBIC HEIGHTS

THE PALMS

ONE AIRPORT SQUARE

LEKKI MALL AND GATEWAY MALL

ACCRA MALL

WEST HILLS & ACHIMOTA MALLS

Emerging asset classes include hospitality, logistics

and master planned developments

Value

2022

Where is the market in the cycle?Next phase requires players in real estate to consolidate assets for public investment

Note: Size of bubble denotes 2020 Construction Industry Value.Source: Fitch Solutions Infrastructure Key Projects Database

Angola

Cote d'Ivoire

Ethiopia

Kenya

Ghana

Mozambique

BotswanaNamibia

Nigeria

Rwanda

South Africa

Tanzania

Uganda

Zambia

Cameroon

Zimbabwe

5Gabon Sudan

0

10

15

20

25

30

0 10 20 30 40 50 60

Nu

mb

er

of

Nat

ion

alit

ies

in F

inan

cie

rR

ole

s

Number of Companies in Financier Roles

Top 10 Financiers

• African Development Bank

• World Bank

• Exim Bank of China

• Japan International

• Cooperation Agency

• European Investment Bank

• European Union

• Agence Francaise de Developpement (AFD)

• Islamic Development Bank (IDB)

• Development Bank of Southern Africa

• KfW

How is the Regional Finance Landscape?Nigeria is attracts the highest number of foreign financiers in the region

Angola

Botswana

Cameroon

Cote d'Ivoire

Ethiopia

Ghana

Kenya

Mozambique

Namibia

Nigeria

Rwanda

South Africa

Gabon Sudan

Tanzania

Uganda

Zambia

Zimbabwe

0

5

10

15

20

25

0 10 20 30 70 80 90 100

Nu

mb

er

of

Nat

ion

alit

ies

in C

on

stru

ctio

nR

ole

s

40 50 60

Number of Companies in Construction Roles

Note: Size 0f bubble denotes 2020 Construction Industry Value.Source: Fitch Solutions Infrastructure Key Projects Database

Top 10 Contractors

Sinohydro Corporation

China Civil Engineering Construction Corporation

(CCECC)

China Henan International Cooperation Group Company

LimitedChina Communications

Construction Company(CCCC)

China Harbour EngineeringCompany (CHEC)

China Road and Bridge Corporation

SOGEA-SATOM

Mota-Engil China

Geo-Engineering

Corporation (CGC)

Regional Construction LandscapeKenya ranks 4th in attracting global contractors in Africa

Deep Dive Into African Construction Sector

African Construction Sector

Asia & Africa Leading Growth Regions

East & West Africa Ahead

Source: Fitch Solutionsforecasts.

0

1

2

3

4

5

6

7

8

9

SSA Regions – Construction Industry Value Real Growth, % Chgy-o-y

10

2020 2021 2022 2023 2024

Southern East West

East Africa…expected to continue to boom, although growth

over multi-year horizon will begin to slow due to

financing constraints and base effects.

Outlook

Sub-Saharan Africa’s construction sector over 2020 is

expected to accelerate .

Southern Africa…expected to be comparatively slow in its growth

over 2020, with slim project pipelines affect

markets such as Botswana and Namibia, while

debt servicing costs will divert investment in

Zambia and Mozambique.

11

• Nigeria: 2020 Construction sector in growth at 2.1% y-o-y, compared to3.9% previously; oil price weakness and limited growth in oil production.

• Lower revenues, higher recurrent spending and security spending will seebudget deficit remain wide and capital spending on infrastructure projectsto be limited.

• Efforts to mobilise funds for infrastructure development from new sources,including Sukuk loans and a tax credit scheme, will not provide the financialsupport necessary to boost sluggish construction growth

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

0.0

Op Risk LTPR

West Africa – Political & Operational Risk Scores, Out of100

• Ghana: a strong project pipeline across the transport, power, industrial andresidential building sectors, improving government revenues due to awidening tax base, and the ready availability of Chinese financing, will supportan acceleration of growth in the construction industry.

• Senegal: Political stability and policy continuity following election - EmergingSenegal Plan to remain guiding document for infrastructure development to2035 – focus on SEZ, ports. Strong track record of utilising PPPs and concessionsto deliver complex projects across transport and energy sectors, with supportfrom MLIs.

0.00

20.00

40.00

60.00

80.00

100.00

120.000.0

-0.5

-1.0

-1.5

-2.0

-2.5

-3.0

-3.5

-4.0

-4.5

-5.0

2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f 2023f 2024f

Brent, USD/bbl (RHS)

Nigeria – Budget Balance & Global BrentPrice

Budget balance, % of GDP (LHS)

f = Fitch Solutions forecast. Source: FitchSolutions

West Africa

12

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Ethiopia Kenya Rwanda

Pre-Construction Pipeline (USDmn)Under Construction (USDmn) 2020

Industry Value (USDmn)

225%

378%

933%

Rwanda Has Scale IssuesProject Pipeline Value & Construction Industry Value,USDmn

Source: Fitch Solutions Infrastructure Key Projects Database

Both Kenya & Ethiopia To Slow, While Rwanda BoomsConstruction Industry Value Real Growth, % Chg y-o-y

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2020 2021 2022 2023 2024 2025 2026 2027 2028 2029

Ethiopia Kenya Rwanda

Source: Fitch Solutionsforecasts.

East Africa

13

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

2019e 2020f

Transport Energy & Utilities

2021f 2022f 2023f

Residential & Non-residential Building

South Africa Returns To Weak GrowthSouth Africa Construction Sectors – Industry Value Real Growth, % Chgy-o-y

2.00

.00

-2.00

-4.00

-6.00

8.00

6.00

4.00

12.00

10.00

2019

Mozambique

2020f

Botswana

2021f

Zimbabwe

2022f

Zambia

2023f

Namibia

2024f

Angola

Mozambique Offers Strongest OutlookSouthern Africa – Construction Industry Value Real Growth, % Chgy-o-y

• South Africa: Growth to post-moderate recovery largely due to base effects. Industry capacity remains limited and little movement on budgetincreases/Infrastructure Fund.

• Mozambique: Cyclone/debt budgetary constraints in short term, but Power sector a bright spot.

• Angola: continued budget cuts for infrastructure – China key driver of activity. • Zambia: maintaining fiscal deficit, debt servicing costs to rise, but mild recovery in broader economic activity should support construction. Tax regime negative for

miners, but copper prices to improve.• Namibia: government investment-led recovery after steep contraction, but tepid outlook from slim pipeline.• Botswana: stagnant revenue growth and a higher public wage bill will limit room for public investment in infrastructure, but stability will attract miners.

Southern Africa

Impact of Drive For Regional Integration on Real Estate

Regional Integration

15

Trade Within Regional Blocs, % Of TotalTrade

Note: Number of countries in each region/trade bloc in brackets. Source: UNCTAD, FitchSolutions.

100

90

80

70

60

50

40

30

20

10

0

Africa (56) Southern Association ofCommon Market SoutheastAsian

(5) Nations (10)

North American Free Trade

Agreement (3)

European Union (27)

Intra-group Rest of the world

Regional Integration on Real EstateAfrican Trade Has Potential For Growth, But Faces Major challenges

Infrastructure and security challenges…Continue to constrain trade, while, border closures by

Nigeria and Rwanda in 2019 signals that the political will

for meaningful integration remains uneven across

member states.

Regional Integration…

Not expected to significantly increase Africa’s intra-

regional trade, even despite the Africa Continental

Free Trade Area (AfCFTA) coming fully into force.

Single Currency

There will also be limited scope for the Economic

Community of West African States (ECOWAS)’s

objective of adopting a single currency in 2020.

Thank You