Category: Inside the Market

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BRICS: South Africa Gains Financial Security Through Global Alliance

Brazil, Russia, India, China, and South Africa, known simply as BRICS, are a group of five fast-developing economies that analysts believe will be most dominant in the next thirty years. Originally coined by economists at Goldman Sachs, this prominent group of countries first included just four countries (BRIC), but ultimately South Africa was included in these top ranks.

Today, BRICS is a powerful geopolitical and economic group known around the globe. Spanning four continents and representing over one third of the world’s population, BRICS members are known for their significant influence on regional affairs––all are members of the G20, which includes other countries like the United States, United Kingdom, Japan, Australia, Mexico, and the European Union. In addition, leaders from BRICS regularly meet to share opportunities and discuss policies and actions that benefit one another.

South Africa’s Growing Influence in the Global Arena

Since being recognized as an emerging economy and joining BRICS in 2010, South Africa has gained a greater influence and exponentially more trade opportunities in the global market to boost its own economy. While this has been a huge benefit to South Africa’s economy, BRICS has been great for the entire African continent.

How we made it in Africa says, “With South Africa as a permanent member, Africa is not left out of major decisions made by other developing nations. Africa therefore has the opportunity to contribute to the decision-making process, and reap the benefits from the economic cooperation among the BRICS nations.”

South African Ties to the BRICS Development Bank

As a member of BRICS, South Africa has access to the New Development Bank (NDB), which is the “brainchild” of BRICS countries. Created after the 2008 financial crisis, the NDB “seeks to set itself as an alternative development funder to compete with traditional multi-laterals like the IMF and World Bank.” With access to the NDB, African countries now have an alternative source for major project financing, which has been and will continue to be a huge asset for the region.

Today, the NDB is based in Shanghai, but has regional branches in BRICS countries, such as the Africa Regional Centre in South Africa. In 2017, the local arm of the NDB approved loans worth $1.5 billion to fund infrastructure-related projects in South Africa. By 2021, the NDB is targeted to dispense up to $15 billion to fund relevant projects. South Africa is represented on the bank’s Board of Governors and Board of Directors.

South Africa Increases Trade With China

When South Africa joined BRICS, the Chinese Foreign Ministry spokesperson said, “We believe that South Africa’s accession will promote the development of BRICS and enhance cooperation between emerging economies.”

Since then, China has become South Africa’s largest trading partner. According to the International Trade Centre, China-Africa trade from 2006 to 2016 increased by around 260% to a total of $144.6 billion. More African countries are taking advantage of South Africa’s close ties to China and making trade agreements of their own. Egypt and Kenya are China’s third and seventh-largest African trade partners, respectively.

South Africa Continues to Make a Name for Itself

South African President Cyril Ramaphosa says his country is entering “a new era.”. With the second highest GDP in all of Africa and a luxury real estate market with growth that is outpacing most of the world, South Africa is one of five developing economies to keep an eye on.

Illovo Central – Johannesburg, South Africa

In 2018 after the resignation of South Africa’s President, Jacob Zuma, “international investors upgraded South Africa’s prospects, sending the nation’s currency, the rand, to a three-year high, while bidding up shares of South African companies.”

As a permanent member of BRICS with a heightening global influence and growing trade opportunities, South Africa is attracting the attention of sophisticated investors worldwide who seek high-quality alternative investments for their portfolio.

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Cape Town Luxury Real Estate Takes #2 Spot Worldwide

With double-digit growth in 2017, Cape Town’s luxury real estate market is the second-fastest growing in the world. The South African coastal city has long been an economic hub and is now making a name for itself as the real estate market of choice for ultra high net worth individuals (UHNWI) around the globe.

8.5x Growth in Cape Town Compared to Overall PIRI 100 Index

According to Knight Frank’s 2018 Prime International Residential Index (PIRI) 100, which tracks the movement of the world’s luxury residential property markets, Cape Town’s luxury real estate market grew a staggering 19.9% in 2017. Not only did it outperform the city’s wider mainstream market, but its growth has far outpaced the overall index, which increased by just 2.1% this year.

Cape Town’s high growth luxury real estate market has caught the attention of sophisticated investors worldwide. In May 2018, executives from the top 300 Japanese companies visited South Africa to take advantage of prospective investment opportunities. And they’re not the only ones heavily investing in the South African strategy. South African President Cyril Ramaphosa is set to raise $100 billion in new investment capital in just five years.

The Vogue – Cape Town, South Africa

Cape Town Outperforms 98% of PIRI 100 Cities

Cape Town’s rapid growth in the luxury real estate market has propelled it to the number two spot on the 2018 PIRI 100 Index. The economic hub outperformed a number of other notable cities, including Aspen (19%); Amsterdam (15%); Seoul (13.2%); Frankfurt (12.9%); Seattle (12.2%); Paris (12%); Sydney (10.7%); and Madrid (10.6%).

In fact, only the Chinese city of Guangzhou reported higher growth. Of the 100 cities on the index, two thirds reported flat or positive annual price growth in 2017, while only 11 cities, including Cape Town, enjoyed double-digit growth. Cape Town’s growth is virtually unmatched, making it an excellent investment for individuals who want the best return on their investment.

One of the most notable opportunities in Cape Town’s high growth luxury real estate market is the city’s relative value compared to other countries. In cities like Hong Kong, New York, and London, a million dollars won’t give homebuyers much: a reported 22, 25, and 28 square meters of prime property, respectively. In Cape Town, however, one million dollars will net buyers 127 square meters—about five times more than its foreign counterparts. With relatively less costs, high net worth and ultra high net worth individuals are coming here to get more for their dollar.

Zero2ONE Tower – Cape Town, South Africa

The Economics Behind the Boom

The mechanics of supply and demand helped fuel the recent market boom in Cape Town. On the supply side, there is a shortage of high-quality new and existing properties. Together, the coastline and iconic mountain range have made it challenging for investors to secure prime real estate in what has become an extremely competitive marketplace. Only large, well-established players are able to successfully navigate the landscape to capitalize on double-digit growth opportunities.

At the same time, demand is booming with both foreign and domestic buyers scrambling to get a piece of the pie. Specifically, Knight Frank noted that the area near Table Mountain, including the Atlantic Seaboard and City Bowl, had attracted a strong inward migration. While many South Africans are choosing to move to Cape Town, it’s also an in-demand city for the international community.

Since 2015, according to FIN24, “Cape Town has set South African records for both the highest-ever sale price achieved for a residential home  – R290m for a house in Bantry Bay – as well as the highest-ever rental price – R450 000 a month for an estate in Constantia.”

Zero2ONE Tower – Cape Town, South Africa

A Richly Diverse Coastal Hub

Cape Town is South Africa’s legislative capital and the second-most populous urban area in the country. The lush coastal city is a showcase of biodiversity (some of the greatest in the world) and a growing tech and startup community, making it a fresh, innovative, and welcoming environment for both international and local buyers alike.

According to Deon de Klerk, head of wealth for Africa regions at Standard Bank, “Cape Town is fast becoming a truly global holiday destination and an increasingly desirable residential address for [South Africa]’s high net worth individuals (HNWIs), as well as those from abroad.” In fact, the city was recently dubbed the Monaco of the South.

Investing in Cape Town

Despite marginal growth from many cities on the 2018 PIRI 100 Index, Cape Town is proving to be a dominant region for high-growth property investments. Rich in natural resources and economic opportunities, yet without the high costs associated with places like New York, Seoul, and Paris, it’s a no brainer that investors are looking to this South African hub.

With demand from savvy investors accelerating, Cape Town’s high-growth real estate investments are a smart choice for people who seek unique investments with high upside potential. We are excited to be leading exclusive co-investments into South African developments.

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