Seeds of Opportunity: The African Growth Series

In this week's issue, you will learn more about:

'Back to Work' Trends in South Africa

An insight into the real estate industry.

Since the outbreak of the novel coronavirus pandemic, the corporate world has seen a significant shift in working patterns as more companies adopted the ‘Work from Home’ (WFH) model. Considering that this trend has persisted for nearly two years, there is a strong belief that this is here to stay, altering the office property market as we know it. A recent survey (Decoding Global Ways of Working) found that South Africa emerged as one of the top countries that would embrace a fully remote work environment, with 44%^[1] of respondents indicating that they would prefer to work fully remote compared to the global average of 24%. A second survey confirmed that the WFH model is likely to stay as a third of South African workers (33%) would like their future ideal work environment to consist of a mixture of face-to-face and remote working. 24% favoured mostly virtual work with some face-to face interaction and 27% opted for a wholly virtual place where employees can contribute from any location².

Only 4% of South Africans indicated that they wanted to return to working completely on-site at an office after the pandemic.

This suggests that in a South African post-pandemic work environment, some form of remote working is likely to persist. Accordingly, it is predicted that by 2023, a third (33%) of all South African businesses will allow their staff to WFH, which isn’t a significant change from the lockdown induced 38%, marking the continuity of this trend³. However, this WFH model has had a significant impact on the commercial property market, as the sector experiences a continued decline in rental agreements and office vacancies. ​

At the end of 2020, office vacancies stood at 13%⁴. Large cities such as Johannesburg and Cape Town experienced a drop in vacancy rates, averaging between 13.9% and 7.2%, respectively. In FNB’s 2^nd quarter 2021 survey on commercial property, 58.7%⁵ of brokers perceived companies to have been re-evaluating their office space needs, and in many instances were downscaling on office space. This value gradually improved in the 3^rd quarter of 2021 with brokers perceiving 36.7%⁶ of companies to be re-evaluating their office space needs.

South Africa is likely to continue to promote a WFH model as companies look to save on infrastructure costs. Thus, the commercial property market is likely to have a continued impact as demand for office spaces decreases. This means that real estate agents will need to find innovative ways to get business, which could include negotiating rates, having flexible terms in lease agreements, or redeveloping some rental spaces to accommodate the new norm.

In some parts of the country, developers are purchasing vacant office spaces and converting them into residential units or co–living or co–working units. While in other parts, developers are converting older office spaces into either residential units or co–living or co–working units. Both these examples signify that going forward, the industry is likely to see a decrease in the construction of new office spaces, but rather the conversion of buildings implying green shoots that are likely to emerge from a supply perspective in the medium term.

In 2022, the hybrid working model is likely to remain, causing companies to review their office footprint strategies. As the hybrid workforce will be defined by flexible schedules and shared spaces, office spaces could gradually become smaller. Accordingly, there will be a drive for the real estate sector to align their strategies with the hybrid working model as offices will remain, but will serve a new purpose. Offices will mostly likely become corporate centres designed to spur innovation and connection while developing the team.

Kiana Steyn

Author, Frost & Sullivan Africa

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PVC recycling increased by 9.5% in 2020

PlasticsSA found that the recycling of polyvinylchloride (PVC) or vinyl products in South Africa had recorded a year-on-year increase of 9.5% in 2020. Despite difficult trading conditions due to global raw material shortages and supply chain issues, high material costs, interrupted electricity supply due to load shedding and the economic downturn induced by the COVID – 19 pandemic, PVC or vinyl products was the only plastic polymer to have an increase in recycling figures. During this time, the virgin market saw an 8.2% decrease while 21,433 t of PVC was being recycled. As global PVC supply was badly impacted by disruptions in supply chains associated with pandemic, natural disasters in the northern hemisphere as well as other domestic and international events, demand for recyclate increased, improving cradle-to-cradle infrastructure that further aided in development of the circular economy.

PVC products have the advantage of being low maintenance as they require low amounts of energy, raw materials and chemicals to ensure their continued functionality. Furthermore, they can remain in use for a long period before they enter the waste stream and once recycled, PVC can cause carbon dioxide savings of up to 92%.

Kiana Steyn

Author, Frost & Sullivan Africa

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Part Two: Trends in Africa's Fintech Market, 2022

Finance technology in South Africa is a growing industry and this post continues from the previous post by elaborating on the last 4 out of 8 fintech trends for 2022.

Investment race

Global venture capital firms have realised the potential in Africa's unbanked population and there are a total of 359 equity deals on the continent; with 20% of them being completed by startups in South Africa. A lot of money is being raised and that money needs to be deployed into Africa's emerging market. There are not a lot of assets so a bidding war for the funds.

Wellness

The pandemic has highlighted the importance of physical and mental wellness along with the management of chronic diseases. Discovery Vitality has led the SA market by always encouraging their users to change their behaviour. However, there are startups such as @Alignd which offer healthcare financing.

Buy now, pay later

Buy Now, Pay Later (BNPL) enables customers to make a purchase and receive it immediately, and pay for it over a series of installments. This is a great value proposition for customers because the initial purchase price is lower, and this payment solution charges no interest. In turn, merchants enjoy an increase in their e-commerce presence.

Cryptocurrency

In December 2021, Finder’s Cryptocurrency Adoption Index's survey ranked South Africa 8 out of 23 countries in crypto awareness. With 47% of the respondents believing crypto to be a sound investment option, this is higher than the global average of 43%. Crypto payment companies are thriving with Luno growing to more than 9 million customers in 40 countries.

To find out more about opportunities in Africa, please contact Lynne Martin.

Lynne Martin

Sales Contact, Frost & Sullivan Africa

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lynne.martin@frost.com+27 21 680 3260