For many decades, the African hospitality market has been exclusively reserved to private investors, of which the majority are hotel chains and property companies. Looking at the market today, it appears that the Sub-Saharan African hospitality sector, excluding South Africa, is now rising as a key investment opportunity for both international hotel chains and institutional investors such as private equity firms. With the tourism sector being a key target for most African governments, hospitality investments are strongly supported by public authorities who offer incentives to attract the world’s largest brands, making the continent the new battleground of major international hotel groups. According to EY’s Africa Attractiveness Survey, the African hotel and tourism sector was forecasted to grow by almost 17%, with accommodation demand increasing from the business travelers connecting to big smart African cities and many other African commercial capitals, as a reflection of strong economic growth. As the continent remains attractive to investors for business, trade and capital investment, it leads to an increasing demand for accommodation and hospitality products. The hospitality sector is developing at a fast pace with large investments planned in sub-Saharan Africa. It has shown a 29% average yearly growth rate between 2012 and 2016 in terms of room capacity, according to W Hospitality Group 2016 survey. At the end of 2016, hotel developments are planned for 35 of the 49 sub-Saharan African countries, with western Africa absorbing 45% of the capacity of rooms planned, followed by Southern Africa with 26% and Eastern African capturing 24% of the planned rooms. The offer covers all hotel’s segmentation, with an emphasis on 4-star hotels, mainly targeting business travelers and tourists with specific requirements when visiting Africa. In terms of the number of investments, they are largely focused on the southern region of the continent, with South Africa absorbing the highest amount of investments. Kenya attracts the highest amount of hotel investments in the east Africa region, followed by Uganda, as the countries are offering diverse opportunities for tourism development and therefore large capacity of absorbing hospitality investments. West Africa is also a key target for several investors, with Nigeria on top of priority, followed by Cote d’Ivoire and Ghana. Both countries are very attractive due to the rise of their business travelers, as their economies keep prospering. Historic segment investors like international hotel groups are actively taking advantage of the market opportunities. They all plan several openings and hotel extensions, with some looking to increase their footprint on the continent through hotel acquisitions in main countries and local development offices to support their strategies: AccorHotels has set up partnerships with strong investors to conquer the African hospitality market and aims to increase its sub-Saharan Africa network to 15,000 rooms in 100 hotels over the next five years. Carlson Rezidor, with 30 hotels comprised of 6,300 rooms under development across the continent, has set up a hospitality fund, Afrinord Hotel Investments, with Nordic institutions to support its growth on the continent. Marriott International announced in 2014 its plan to expand its African presence to 150 properties in 17 national markets by 2020. Its acquisition of Protea, a 116-hotel group spanning seven African nations, for USD 200 million, marks a key step in its strategy. The American group Hilton, with 39 hotels in 17 African countries, intend to double its presence to 80 hotels by 2020 with new openings and extensions in Ghana, Kenya and Nigeria. Even if international hotel chains seem to be the leading active players on the field, the local groups are not in marge. Mangalis Hotel Group, the new African hotel chain is investing USD 340 million to build 15 hotels in west and central Africa through 3 brands (Noom, Yaas and Seen) with a total of 2,200 rooms and suites. Azalaï Hotels who has footprints in several west African countries, with a capacity of 1,000 rooms, intends to grow above 1,600 rooms in terms of capacity after this fundraising. At the beginning of this year, AfricInvest announced an injection of EUR 17.3 million in Azalaï Hotels capital, to support the hotel group development across Africa through capacity extension and service improvement. Beside the hotel groups, institutional investors are also showing interest to the hospitality and tourism sector. Gradually increasing their exposure on the segment, investment funds see the African hospitality sector as a golden egg, and show their enthusiasm for the segment by mainly investing through equity vehicles. Their investments target both greenfield and brownfield projects in all geographies. These funds targeting African hospitality markets are largely funded by development institutions around the world, helping local tourism sectors take off and raise the economy. As other institutional investors, African sovereign wealth funds are looking to hospitality, as the segment is considered as a relatively safe investment sector. The Libyan Investment Authority (LIA), the Libyan sovereign wealth fund, has been actively investing in hotels in Africa through its subsidiary LAICO, Libyan African Investment Company. The fund owns hotel chain Laico Hotels & Resorts, which also owns the Ensemble Hotel Holdings group, proprietor of the high-prestige Michelangelo Hotel in Johannesburg. Laico Hotels & Resorts has 10 properties of 4-star and 5-star hotels with over 2,200 rooms through 2 brands: Laico and Ledger. Most of its acquisitions were targeting three-star to five-star hotels and are managed by international operators. In 2008, LAICO established a joint venture, called LAICO Hotels Management Company, with Tunisia Travel Service (TTS), a Tunisian company involved in the hospitality sector through hotel management, airlines and ground transportation. LIA is similarly followed by Angola’s Fundo Soberano de Angola (FSDEA), which is starting investments in hotel and commercial infrastructure in sub-Saharan Africa. The fund is expected to invest in 50 sub-Saharan African hotels over three years, including in Angola. This is thanks to allocation of USD 500 million in equity capital to a hotel development fund for Africa, as it has earmarked the tourism space as a particularly potent area. FSDEA’s hotel fund will focus on three-star to five-star hotels in sub-Saharan African capitals and other commercial centers, targeting business travelers rather than tourists for their currently returns. The fund will target existing hotels changing ownership or those still under development. Funds from Mozambique, Nigeria and Ghana are all intending to follow their peers and to exploit the recent rises in tourism to Africa. The new dynamism on the African hospitality sector proves that investment opportunities on the continent are diverse for all types of investors. All it takes is to be more alert to rising opportunities and growing sectors. Gaicha Saddy, Senior Associate at Infomineo. Sources: Agence Ecofin, AfricInvest investira 17,3 millions d’euros pour soutenir le développement du groupe Azalaï Hotels (January 2017) http://www.agenceecofin.com/investissement/0601-43579-africinvest-investira-17-3-millions-deuros-pour-soutenir-le-developpement-du-groupe-azalai-hotels Jeune Afrique, Hôtellerie : Hilton entend doubler sa présence africaine (October 2016) http://www.jeuneafrique.com/362631/economie/hilton-entend-doubler-presence-dici-4-ans-afrique/ W Hospitality Group, Hotel Chain Development Pipelines in Africa 2016 (May 2016) http://w-hospitalitygroup.com/newwhg/wp-content/uploads/2016/05/W-Hospitality-Group-Hotel-Chain-Development-Pipeline-in-Africa-2016-1.pdf EY’s attractiveness survey, Africa 2015, Making choices (2015) http://www.ey.com/Publication/vwLUAssets/EY-africa-attractiveness-survey-2015-making-choices/$FILE/EY-africa-attractiveness-survey-2015-making-choices.pdf JLL, Hotel Investment Outlook 2015, Hotels & Hospitality Group (January 2015) http://www.jll.com/Research/JLL%20Hotel%20Investment%20Outlook%202015.pdf African Union, Invest In Africa 2015 (2015) http://www.un.org/en/africa/osaa/pdf/pubs/2015investinafrica.pdf Bloomberg, Angola Sovereign Wealth Fund Starts Hotel, Infrastructure Pools (April 2014) https://www.bloomberg.com/news/articles/2014-04-23/angola-sovereign-wealth-fund-starts-hotel-infrastructure-pools African Development Bank, Africa’s Quest for Development: Can Sovereign Wealth Funds help? (December 2011) https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/WPS%20No%20142%20Africas%20Quest%20for%20Development%20%20Can%20Sovereign%20Wealth%20Funds%20help%20AS.pdf Companies websites
The African continent, a beacon of African growth, remains one of the fastest-expanding economies globally. Despite this promising trajectory, the economic foundation of many African nations is still predominantly tethered to commodity production and exportation, especially crude oil, underscoring a critical need for diversification and development of internal value-added operations. Oil is a natural resource that commonly attracts a high amount of foreign investment and boosts the main economic indicators of a country. It can be easily used as a proxy for natural resource based economies. Moreover, due to the current commodity crisis for certain economies, with the barrel price sinking in 2014-15 to its lowest level since 2003[1], it is easier to highlight some differences in performance between oil producing and non-oil producing African countries. It is also important to highlight such differences since it provides an opportunity to assess the convenience and sustainability of a development process based on these natural resources. Oil and Non-oil Producing Countries Nineteen of the 54 African countries are currently oil producers, however, it is worth noting the number of produced barrels can considerably vary from one country to another. Those countries are home to about 56% of the African population.[2] Fig.1 - African crude oil producing countries[3] In terms of wealth, the gap between the two groups of countries is evident, when it comes to GDP and GDP per capita. Nevertheless, the growth rates for both indicators show how the recent trends are not necessarily related to the oil economy. In relative values, the non-producing countries show better performance than the producers, but the progress of the two groups of countries can be reasonably compared over the years. Fig. 2 – GDP in USD bln[4] Fig. 3 – GDP growth[5] Fig. 4 – GDP per capita in USD[6] Fig. 5 – GDP per capita growth[7] It is easy to identify the higher impact that the 2014-15 price crisis had on oil-producing countries, whose overall GDP and GDP per capita fell by 10.0% and 12.2% respectively in 2015. The same crisis could have also been an important factor in the good export dynamics. As the following chart shows, the oil-producing countries’ export precipitated in 2015 (-49.0%), as a result of a negative trend during the last five years. Even the export from non-oil producing countries fell during the same period, but the overall decrease is moderate (-2.0%). Fig. 6 – Export of goods in USD bln[8] Fig. 7 – Export of goods growth (decrease)[9] In terms of attractiveness, the oil economies continue to attract the most attention from foreign investors, despite the fall in oil prices. The producing countries received increasing FDI (+4,7%) with a fluctuating trend in the course of the years. In the last years, the oil-free countries received around 21% to 56% fewer inflows compared to the oil producers, yet still showing an overall +1.0% growth. Fig. 8 – FDI inflows in USD bln[10] Fig. 9 – FDI inflows growth[11] Beyond indicators strictly related to the economy, it is interesting to recognise how the richer oil-producing countries are on average more developed than the others. With reference to human development aspects such as life expectancy, education, and income per capita (enclosed in the elaboration of the Human Development Index), the African oil producing countries show better performance than non-producers. The following chart shows this gap, despite the fact that HDI growth trends are comparable among the two groups of countries. Fig. 10 – Human Development Index[12] Consequences and Recommendations The recent crash in oil markets and commodity prices has harshly affected the global economy, with no immunity offered to developing countries. Saudi Arabia for instance, once thought immune to the downturn in oil prices, was recently declared at the verge of bankruptcy and forced to make its first international bond sale[13] to bring in necessary cash. In Nigeria, the falling oil prices have been claimed to have “a painful effect” on the country’s economy, with the necessary slowdown of the production and a negative impact on the rest of the industry[14]. In Angola, the oil crisis is believed to have unmasked how poorly managed the country really was in the last decade, giving visibility to all the economic and social deficiencies that were concealed by the high growth percentages[15]. Even some non-producing countries have been affected by the negative situation. For example, in Mozambique the realisation of various large projects aiming to benefit from the country’s natural gas resources, whose selling price is strictly related to oil price, has been continuously delayed these past years. This conjuncture created a series of erroneous expectations leading the country into a major economic downturn, with the government taking on more debt assuming an easy repayment, once revenue from LNG started flowing[16]. The IMF pointed out how most of the African countries where energy and mining exports accounted for a larger share of GDP will need to make “sizeable adjustments” to their domestic spending. On the other hand, countries that have invested in infrastructure and strengthened domestic consumption are all expected to grow at rates between 6-7% and more in the next few years. This is the case for the Ivory Coast, Kenya, Rwanda, Senegal and Tanzania[17], leading to the clear but not so obvious conclusion that diversification is an inescapable factor for sustainable growth. Antonio Pilogallo, Associate at Infomineo. Learn more about Antonio. [1] Source: http://www.bbc.com/news/world-35345874. [2] Source: Infomineo analysis on WB data [3] Source: https://www.cia.gov/library/publications/the-world-factbook/rankorder/2241rank.html. Given the very small amount of crude oil production, Morocco has been considered as a non-producing country. [4] Source: Infomineo analysis on WB data [5] Source: Infomineo analysis on WB data [6] Source: Infomineo analysis on WB data [7] Source: Infomineo analysis on WB data [8] Source: Infomineo analysis on UN Comtrade data [9] Source: Infomineo analysis on UN Comtrade data [10] Source: Infomineo analysis on UNCTAD data [11] Source: Infomineo analysis on UNCTAD data [12] Source: Infomineo analysis on UNDP data [13]Source: http://www.forbes.com/sites/timdaiss/2016/10/23/we-are-doomed-to-bankruptcy-unless-changes-made-says-saudi-official/#6e9b68d24471 [14] Source: http://www.bbc.com/news/world-35345874 [15] Source: https://www.washingtonpost.com/news/worldviews/wp/2016/08/02/how-the-crash-in-oil-prices-devastated-angola-and-venezuela/?utm_term=.816db1e8ab7d [16] Source: http://ww2.frost.com/frost-perspectives/impact-oil-and-gas-price-slump-mozambiques-economy/ [17] Source: https://www.weforum.org/agenda/2016/04/10-things-the-imf-wants-you-to-know-about-africas-economy
Is the Italy-Africa relationship taking off? Africa has been one of the fastest growing region in the last decade, holding for long periods the highest rate of return on foreign investment than in any other developing region[1]. Despite a recent slowdown in term of GDP growth rate, there are at least three positive trends that are sustaining Africa’s attractiveness[2]: By 2034, Africa is expected to have the world’s largest working-age population (1.1 billion), Households and business consumption are expected to growth, mainly due to the urbanization processes, African economies are well positioned to benefit from rapidly accelerating technological change. This perspective led the African region to receive USD 54 Billion of FDI in 2015[3]. In this context of opportunities, how does Italy position itself, in terms of actual and perspectives footprint? The past Starting since 1882, Italy has been a colonial power as well as other European countries were, although its presence in Africa evolved in a different way and lead to different historical and socio-economics consequences. In the period of maximum expansion, the Italian colonial possessions covered less than 4% of the overall colonial surfaces, including three African territories (Libya, Somalia, and Eritrea) to which would be later added Ethiopia.[4] Since the end of the Second World War and the progressive loss of colonial possessions, Italian presence in Africa went decreasing, especially when compared to other countries, relegating Italy to a secondary role in terms of economic footprint. The present Today, among the WTO countries, Italy is the 7th mayor exporter to Africa and the total value of the exported goods and services exceeded USD 26 Bln in 2014. Italy to Africa export[5] It is worth to highlight how between 62% and 65% of total Italian export to African countries can be attributed to six main product categories, as the following chart shows[6]. These categories include product like: Machinery and mechanicals appliances, including: dishwashing machines; machinery for cleaning or drying bottles or other containers; turbojets, turbo-propellers and other gas turbines; taps, cocks, valves and similar appliances for pipes, boiler shells, tanks Mineral fuels, mineral oils and products, especially including petroleum oils and oils obtained from bituminous minerals (excl. crude) Electrical machinery and equipment: electrical apparatus for switching or protecting electrical circuits, transformers, converters, wires and cables Iron and steel like bars and rods Vehicles and parts: tractors, motor vehicles for the transport of ten or more people, cars, vehicles for the transport of goods Articles of iron and steel: structures and parts of structures, tubes and pipes, etc. Among African countries, the following markets stand out in terms of size and popularity of Italian products: Tunisia and Morocco, given the geographical proximity South Africa, which is believed to hold about 50% of the overall purchasing power of the continent[7] Ethiopia, to which Italy is bound by mentioned historical reason. The following chart shows the recent trends for the top African market, in terms of value of overall value of products imported from Italy[8]. As for direct investment in African countries, Italian outward flows have considerably increased in the last years, as the following charts show. Italian investment flows in Africa[9] This become particularly relevant when compared to other countries flows, especially because Italy showed no divestments in the last years. The African business environment for Italian companies increase its attractiveness thanks to the strong presence and dynamism of some huge operator. The most relevant among them could be ENI, the national oil company, whose footprint is already well established in 14 countries[10], but also expanding in others – how shown by the exploration permits recently obtained in Morocco[11]. But Africa is also where several entrepreneurial Italian success stories took place, like the case of Mr. Gabriele Volpi’ Orlean Invest, major player in the field of logistics in Nigeria, Angola and Mozambique[12]. The future On May 18th 2016, the biggest Italian ministerial conference ever realized about Africa took place in Rome. In the presence of the institutional leaders, a delegation composed by high-level representatives from 52 African countries met the heads of the most important Italian economics and cooperation bodies, to discuss about migrations, economic and socio-environmental sustainability, peace and security.[13] The Prime Minister Matteo Renzi made clear how Africa became the new priority for the Italian foreign policy. Renzi himself addressed to African countries 3 trips in the last two years (Angola, Mozambique and Congo-Brazzaville in 2014; Ethiopia and Kenya in 2015; Nigeria, Ghana and Senegal in 2016)[14]. Happening for the first time since the foundation of the Italian Republic, this circumstance reveals a strong willing in strengthen the bilateral relationships between the “Bel Paese” and the African economics. Antonio, Analyst at Infomineo. Know more about Antonio. [1] Source: http://www.mckinsey.com/global-themes/middle-east-and-africa/whats-driving-africas-growth [2] Source: https://www.weforum.org/agenda/2016/05/what-s-the-future-of-economic-growth-in-africa/ [3] Source: World Investment Report 2016: http://unctad.org/en/PublicationsLibrary/wir2016_Overview_en.pdf [4] Source: http://www.treccani.it/scuola/tesine/centocinquant_anni_anni_di_guerre_e_di_pace/rabuiti.html [5] Source: Infomineo analysis on ITC data [6] Source: Infomineo analysis on ITC data [7] Source. http://www.investireinsudafrica.org/?page_id=1201 [8] Source: Infomineo analysis on ITC data [9] Source: Infomineo analysis on OECD data [10] Source: ENI 2015 annual report: https://www.eni.com/docs/en_IT/enicom/company/integrated-annual-report-2015.pdf [11] Source: https://www.eni.com/en_IT/media/2016/03/eni-enters-into-the-upstream-of-morocco [12] Source: http://www.orleaninvest.com/ [13] Source: http://www.vita.it/it/article/2016/05/18/italia-e-africa-si-corteggiano/139435/ [14] Source: http://www.rivistaeuropae.eu/esteri/esterni/lafrica-priorita-politica-estera-litalia/
Angola, rich in oil, gas, diamonds, and other minerals, plays a pivotal role in showcasing how natural resources can fuel a country's economic engine. Yet, with Angola identified as a Low Human Development Country and a significant portion of its population living below the poverty threshold, the question arises: Can Angola's growth in natural resources wealth translate into tangible social development? This article embarks on a journey through Angola's economic landscape to explore the interplay between its abundant natural riches and the quest for human development (more…)
In the most expensive city in the world[1]: Luanda, Angola, everything is expensive but time. Even with pre-scheduled meetings, people can leave you waiting for more than an hour and just apologize for it with a common smile; a smile that I will come to understand over the course of my assignment in the country and that translates simply into “Sorry, traffic!”: Navigating the streets of the capital can take an easy two to three hours to move between districts, a clear indicator that Luanda’s infrastructure is not catching up with the city’s exponential and visible growth. (more…)