Botswana government has been cautioned to avoid self-inflicted policies that work against investment in the real estate sector. The rebuke was sounded this week at the second annual Botswana Property and Infrastructure Forum by Executive Chairman of RDC Properties Guido Giachetti.
He said that suicidal policies create market distortions and are antagonistic to efforts of attracting Foreign Direct Investment (FDI). He was presenting on Property Investment in uncertain political and economic climates. While Giachetti is happy with the stability and good governance that prevails in Botswana in comparison to other African countries, he worries mostly over policies and actions that are unclear and contradictory. “While there are visible efforts to attract foreign investment into the country, when the investors come, government imposes a 30 percent transfer duty for non-citizens. This is the highest transfer duty in the world,” cried Giachetti.
He also says that in certain instances, parastatals compete with private sector developers. Further, there is poor stakeholder consultation with regards to issues that affect the sector. RDC Properties has operated in Botswana since 1971, and other countries in Africa including Nigeria, South Africa, Mozambique and Namibia. Giachetti observes that in countries where there are policies with long-term dysfunctional effects, the sector suffers. “For example, indigenisation decree of 1978 in Nigeria had long term effects on the country’s GDP,” Giachetti says, adding that countries must open up economies to allow for easy participation by foreign investors.
He observes that lack of property land tenure also creates challenges in the sector. By its nature property investors are in it for the long haul of about 10 to 20 years and even more, therefore long cycle developers are often subjected to policy changes that come with time; whether positive or negative. “There can never really be certainty, everyone is subject to uncertainty, both political and economic,” he says. His experience is that in Southern Africa there are difficult economic environments coupled with slow growth, high unemployment, and social uncertainty, with lack of good governance in some countries.
“There are still positive signs for the sector. Botswana has stability and good governance however diversification and industrialisation still lag behind.” In the midst of all the uncertainty and several challenges prevailing in the real estate sector, RDC took a decision to do a pubic listing as a protection and sharing mechanism. The company also actively participates in different fora of the sector. “Partnerships are our modus operandi, nationally, regionally and internationally,” Giachetti says. Patrick Katabua of Broll Property Group that has operations in several African countries says currently there is a gap between demand and supply of office space. While demand is low, there is a lot of office space coming up in Botswana, especially in Gaborone and Francistown.
He says developers still hold onto the euphoria that says “build it, they will come” which is no longer relevant. He observes that this is the trend in most southern African countries with the exception of Zimbabwe.
The retail sector also experiences low demand in Botswana, while there are enquiries in the industrial sector. Katabua also observes that there are multiple changes beyond traditional economic factors that will continue to affect real estate throughout industry cycles.
Among them is a growing concern of migration from old CBDs to new CBDs.
“In other regions the spike up in office space is not necessarily because of growth but as a result of rural to urban migration.” In Botswana however, he observes that it is as a result of growth. “The migration from old CBDs to new CBDs should keep developers thinking of what to do with old CBDs”.
In South African for example, Katabua says to avoid hijacking of buildings in old CBDs the city is beginning to donate buildings to developers. “Developers here need to start thinking of rejuvenation of buildings that are left vacant as institutions move into the new CBD.