Sanlam lists property fund on Mauritian Stock Exchange

BUSINESS DAY TV: As part of its growth strategy, financial services group Sanlam recently listed its sub-Saharan African Real Estate Fund on the stock exchange of Mauritius. Joining us to tell us more about this development, as well changes to corporate taxes, is the CEO of Sanlam Investments, Johan van der Merwe.

Let's start off with the Real Estate Fund, because I thought it was quite interesting that you decided to list it in Mauritius.

Was there any particular reason for that, perhaps the tax status of Mauritius?

JOHAN VAN DER MERWE: I don't think the most important factor would have been the tax status. Obviously, we do take tax into account but that's not the determining factor at the end of the day. For that, Mauritius is a very investor friendly area, yes.

It does have tax advantages especially for foreigners, not so much South Africans investing through Mauritius, but in this case, because it's an African fund and we expect a lot of foreign investors, the exchange control was quite an important factor because we can list a dollar or a euro or a pound investment on that stock exchange, whereas in South Africa it has to be in rands.

BDTV: So if we didn't have exchange controls in South Africa at the moment, would you have looked at listing this on the JSE (Johannesburg Stock Exchange) rather?

JvdM: We would have, yes, because if you look at the tax treaties between South Africa and many of the African countries, they are as good and in some cases even better than Mauritius, but that denomination of the listing was quite important in this consideration.

BDTV: Johan, is that quite a big impediment to your business, because as Sanlam has grown increasingly outside of South Africa, in Africa, you've got businesses in India and further east. Is exchange control a big problem for you and how do you work your way around it?

JvdM: No, we haven't really run into problems expanding into Africa or other places. Africa has also got its special dispensation with the Reserve Bank.

BDTV: ... and India also.

JvdM: And India also here, and then, obviously, as you know Sanlam strategy is to go into Africa and emerging markets and very much South East Asia, and I must say that the Reserve Bank up to now has been very accommodating. Obviously, they do ask the hard questions, they want to see the long-term plans, etcetera, but up till now we have a very good relationship and they've been very accommodating.

BDTV: You mentioned Mauritius has a great offshore centre and in the first capital raising for the property fund most of the fund raising came from Southern Africa - I believe it was about a billion dollars which is about R10bn - would you look at more foreigners coming in, perhaps in the second capital raising because Africa is a great growth story? Do you think they want to be part of the property market here?

JvdM: Yes, they want to - our next capital raising will be offshore. Unfortunately, it was only $100m and we want to go to R1bn, so it's not a R1bn here, and we wanted to give the Southern African investors the first bite of the cherry. Also, on the international side, it is a first, this is the first property fund of its kind. You find other development property funds but this one is like a finished product - the shopping centre is already built, the office block is already built.

BDTV: I suppose it's less risky for those investors.

JvdM: It's less risky for those investors but they also wanted to see the first phase being successful, and we've seen that now with the $100m. In fact, we have an over-subscription but we said we would stop it at $100m. For the next capital raising, we're looking at another $150m and the big part of that will be the offshore people, where they come into the second round.

BDTV: Can you tell us a little bit about where those properties are, which countries? You mentioned commercial properties like shopping centre, office.

JvdM: Yes, we focus on sub-Saharan Africa. We also focus on the countries where Sanlam has a presence at this point in time. We've obviously done a lot of research to go into those countries in the first place.

Sanlam has spent hundreds of millions of dollars buying actual businesses on the ground in these countries and, obviously, we've got partners there. We can leverage off their know-how, etcetera. Usually, when you start a fund or a property, you get the money first and then you say to people that you're going to invest.

You don't have the actual ... it's not like buying a share. When to buy the shopping centre doesn't take two weeks, it takes a while, but Sanlam has given us R1bn, which is $100m, as a bridging facility, and when the fund was listed on the Mauritius Stock Exchange we had already bought the Accra Mall, which is a huge shopping centre in Ghana, and a big A-grade office block in Dar es Salaam.

I sat down with Thomas Riley, who is the CEO of the fund today and we're busy with 12 due diligences across the African continent, all sub-Saharan Africa and in the nodes where we believe there will be growth.

BDTV: I would just like to get your view on quantitative easing or perhaps the end of quantitative easing, because we saw quite a lot of market volatility over the past month on the views that it might be ending sometime, even as early as this year. Do you think it's been overdone? Do you think it's been exaggerated? Could we see more market turmoil if it is pulled out?

JvdM: Yes, sometimes I wonder what the investors thought. Did they think that quantitative easing was going to last forever? I think people knew it was going to end. Obviously, some market commentators - Bernanke coming out and saying he was going to end it at some stage.

I believe we're going to see some volatility but I think we're still in a secular bull market. They've done what they had to do. Obviously, you can't just keep on pumping it in but the authorities are in a much better position and place to actually sort these things out, than, say, 10 or 20 years ago.

Source: Business Day, via I-Net Bridge