By Allan Atwiine
Mr. Bitature, the Honorary Consul of Australia, is the Founder, Chairman and Group CEO of Simba Group of companies, a conglomerate of East Africa based companies including but not limited to: Simba Telecom: Protea Hotel, Kampala: Electro-maxx (a 50MW Thermal plant): Simba Mines and Minerals: Simba Properties: Simba Tours & Travel: Simba Forex: Simba Electronics: Simba Tyres : Tororo Solar North etc
Mr. Bitature is a member of the Board of Directors of the
Commonwealth Business Council, Chairman Board of Directors, Umeme Uganda Limited, Chairman Private Sector Foundation Uganda, Board Member, Uganda Reinsurance Company, Chairman, Ndege Premier Aviation Company,
Chairman Presidential Investment Round Table, Board Member, Traidlinks Limited and has previously served as
Chairman Board of Directors, Uganda Investment Authority.
My article is in response to his (attached). The gist of what he says is that government’s move to establish their own offices will stiffle the development of private sector led real estate development & growth. He particularly singles out the planned Bwebajja government campus.
Like he rightly says that there are always two sides to a coin; my response is aimed at showing him the side of the coin he either chose not to see or he is innocently not aware of.
In reference to URA shifting to its Tower, Mr. Bitature says, “in an ideal market, this single move may have collapsed the property market in and around Kampala….”. According to the Oxford Dictionary, ideal means, “existing only in the imagination; desirable or perfect but not likely to become reality”. So, is Mr. Bitature’s statement an admission that indeed, our real estate market represents an abstract system, driven by other factors not known to the common man on the street & therefore URA’s move is shaking but will not collapse the market?
Mr. Bitature, in advising against the government owning a campus to house government offices (I would also advise against one locality. Rather the premises should be spread across different locations), he says, “it will nip in the bud, the beginning of a local property development that has helped dent the huge deficit in the commercial property sector”. If there is a deficit, then why panic?
However, there is no need to panic. According to President Museveni, (Daily Monitor, 19/01/2019), Government spends approximately 96 billion annually on rent. What is the size of our real estate market? What is 96billion as a fraction of that market value? It cannot be above 10%. Therefore a well thought out plan for government to gradually withdraw from being a tenant in no way can it collapse the real estate market as Mr. Bitature wants us to believe.
Is there demand for office space in Kampala? Grade A office space in Kampala has over 90% occupancy rate. Grade AB office space has an average occupancy rate of 70%. Why is the occupancy rate of Grade A office space, which averages $17 /SqM, higher than Grade AB office space which averages $10/SqM? One of the reasons is because Grade AB office space falls below international standards in terms of design and specification, so major companies seeking office space have limited options. Perharps this is an indicator to the wise & able that, the opportunities of our real estate market have now shifted from building “fwaaa” to the niche of “build to suit”. What I also know is that there is a killing to be made for well thought out condominium office space concepts.
The ultimate strategic aim of all real estate players should be to look at having very cheap office space in Kampala, much cheaper than our counterparts in Nairobi & Dar-es-salaam. That will, among other things help us to position ourselves as a regional hub for multinational corporations & organisations. The positive ripple effects on Small & Medium Enterprises development especially in tourism, services sector, agriculture, manufacturing etc will be exponential if we can achieve this. That would also mean a huge absorption of our largely unemployed youth (who though educated are largely unskilled).
That can be achieved, among others, in the following ways:
1. Cheap Financing. As the players discuss ways of cheap financing, the business owners must develop corporate governance structures which will ultimately be a pre-requisite or huge advantage in securing this cheap finance.
2. Government to provide incentives to the cement & steel manufacturers so that the construction cost generally goes low.
Conclusively, if real estate business is approached with proffessionalism so that investment is not guided merely by speculation, it remains one of those businesses that provides higher returns on the principal capital, over the long term since it has minimal variances & provides returns in a stable & consistent manner. This is in addition to creating a hedge against inflation as the assets value grow in tandem with or higher than the inflation rate.
Mr. Bitature concludes his article by quoting the old adage, “not all that glitters is gold”. However, in this matter, all that is glittering is Gold.