Young Ugandan Born Canadian Talks Real Estate Investment in Africa

Sham Kaweesi is a Ugandan born Canadian and CEO of S4K Real Asset Investments .Paul Epodoi, Deputy Editor-in-Chief for Cue Africa has a candid discussion with him about enabling Africans living in the disapora invest in real estate in Africa.

Sham on S4K business activities, the future of the real estate, and more: transcript.

S4K Real Asset Investments Limited Canada is a Canadian company at the intersection of Ugandan expatriates and one of the most profitable and controversial business industries in the world, real estate. S4K designs, constructs, and manages properties in Uganda for Ugandans living in the diaspora. Its Managing Director, Sham Kaweesi worked with Associated Engineering Alberta Limited for three years before becoming the Airport Engineering Technician for Abbotsford International Airport, British Columbia Canada.

He discussed with Paul Epodoi, Deputy Editor-in-Chief for Cue Africa a wide range of issues including S4K’s business activities, the prospects and future of real estate in Africa, and more. This is what he said:

How did you get started in real estate and could you tell us about S4K?

I picked up a passion for real estate from my family. They have been involved in real estate for a very long time and the family developed about 45 properties. I have since decided to open up a company to address the real estate issues Ugandans living in the diaspora face. Our first project was started with an initial investment of Uganda Shillings 4,000,000/= and it has taken four and a half years to finish it. The total investment came to about USD 120k. The project is a two-unit duplex with 4 bedrooms and 4 bathrooms each, located in Bunga, Kalungu. This project is going to work as a prototype for other projects because it shows the quality of our services.

S4K is a company based in Canada with a subsidiary in Uganda. We are real estate developers targeting Ugandan expatriates who wish to invest in property back home. We have a team of 2 members in Canada and in Uganda, we have a builder subsidiary with a team of 20 people working, also supply for building materials, marketing personnel as well as legal and management teams that we partner with. We are focused on keeping our team small but efficient to keep our costs low.

Uganda is ranked 166th in the World Bank ‘Ease of Doing Business’ ranking and is rated ‘C’ (with E-the riskiest) by the EIU country risk rating. What influenced your decision to set up a subsidiary in Uganda? Second, what lessons can we pick from your experience in Canada?

One of the reasons is that I wanted to close a vacuum. There are so many Ugandans abroad that are making good money but have failed to invest back home and the reason is they do not relatives or anyone they can trust with their money. Uganda as you’ve said is a high-risk place to invest and that’s where our company comes in. We want to create a safe environment for Ugandans in the diaspora or anyone who wants to invest in real estate in Uganda by giving them a platform for which they will be assured of results.

You are part of one of the most important business sectors, that is real estate, what you do is an integral part of our livelihood, therefore you need to be trusted. Do you think your business is trusted?

Yes. The reason why we are trusted is that we offer investment bonds as insurance policies. Due to the fact that clients are giving us their money and they expect results at the end, we normally advise them to buy this product as well. It secures their money. At any point where they feel things are not going their way, they can always come out and go after the bond to get their money back. It is a safe investment for all of them so they are guaranteed of getting their product at the end. All dealings are done with the Canadian company and there are protections in place for customers.

What other qualities do you believe makes you an effective real estate company?

There are other qualities that our business possesses especially in terms of quality assurance. First, we have traveled and seen other trends all over the world. We are also experienced in the field and we import top quality materials that we use for our projects. We are also open to buying materials from suppliers in Uganda that are trusted. They supply some of the things we don’t have.

The global real estate investment trends show that just USD 3 billion of private capital was invested in residential properties in 2019. Most private capitals were invested in commercial properties like hotels, offices, etc. Why did you choose to focus on residential properties for Ugandans in the diaspora?

At the moment most people want to have a home because it’s affordable. Most people in the diaspora are not focusing on the commercial side. Eventually, we are going to get into the commercial properties once we have enough clients and there’s a demand for it. At the moment we are offering only residential property services because people want to have a home, like a vacation home that they can come to and live safely.  We are going to encourage our clients to run their residential properties as commercial entities- when they are in Uganda they can stay in it but when they are away, we can manage it on their behalf as an income-generating property for them.

On average, what’s the net profit you make from a construction project?

Due to the fact that we are providing a unique product we do not charge markups. We do not markup on the material, we supply the materials at the market price. We only charge them a management fee for overseeing the project. On average it’s about 3 to 5% of the whole project.

Currently, Africa accounts for only 1% of the global real estate market and 90% of this is in South Africa, comprising a total market capitalization of around USD 30 billion along with approximately 46 dual-listed REITs and listed property companies. How do we improve? Second, what do you see as the most exciting real estate opportunities in Africa?

One of the reasons why the property has not been invested in as much in Uganda or in most African countries is because of a lack of credit or capital. We do not have enough credit to develop the sector yet the population is growing. So, the demand is there but the capital for investment is lacking. That’s why we are trying to target Ugandans in the diaspora, people who have access to the money and we provide them with a solution whereby they can safely invest their money and get a return. In North America and western countries, it’s too expensive to invest in real estate. Africa is still affordable for most people of the diaspora who wishes to enter the market.

Okay, could you give me an estimate of what it costs to construct the same house in Uganda and Canada?

The house we are currently building in Bunga (a duplex with two units-costs) is about USD 120,000 in Uganda but in Canada, that money is just a deposit, it’s basically 10% of the cost. The same house in North America will cost about USD 1 Million.

Globally, we are witnessing the emergence of the ‘Proptech’ Sector. In 2019, an estimated USD 4.6 billion was invested in Proptech in the first 6 months. Africa’s real estate sector has been keen to adopt technological innovation. What trends will be the most influential in driving real estate development in Africa?

One of the trends that we are trying to have is to use integrated building materials that have been tested, for example, cylinder blocks to reduce the cost of construction but with the same quality in our products. Secondly, we are having cameras, internet and security systems integrated into our plans. For now, these are the trends we have adopted, we will evolve with technology.

That is in respect to the property itself, how about the way you do real estate business? You know previously, say for Uganda, if one wanted to find out the property ratings, all we had were a few data bases. How are you using technology to ease your real estate business?

As a startup, we are going to be investing in our website. It will basically be giving our clients updates of what the trends are and the costs and the new developments in the real estate world but mostly we shall be providing our clients with information on available properties they can invest in. Our clients in Canada or Europe don’t have to buy plane tickets to Uganda to buy land. We are going to basically bring the services to them.

Uganda’s total area is 241,038 Sq. Km. with a population of over 42 million. The current affordable housing deficit stands at 2,100,000. The UN forecasts that the average densities will increase to almost 80 people per square Km. in 2050. As an Engineer and a businessman, what desirable initiatives should be put in place to help solve the demand for affordable housing?

Crowdfunding- this is one of the unique products we want to bring to Uganda. If we can have 4 to 8 people invest their money together on one property, we would build it and when it’s done, they all have their individual units. That way it’s affordable. We also plan on connecting our clients to cheaper credit opportunities like the Halal credit system. If you go to Dubai or UAE, these countries have developed quickly because they have affordable mortgages. We are looking at all the different ways we can get the funding to build affordable units especially by cutting costs using local methods and integrated techniques.

The death toll from the global spread of Coronavirus continues to mount, it is a frightening reality to every corner of the world and so is the economic damage. All but essential economic activity has been frozen in many of the countries. What impact is the Corona virus having on your business?

Indeed, the corona has affected our business at some level but being a Canadian company, the government of Canada is offering subsidies to companies that need to survive because they do not want companies to go under. We have access to funding in the form of cheap or interest-free loans that we can access to keep going.

Will the funds from the Canadian government trickle to your Ugandan Subsidiary as well and what are the requirements for these subsidies?

Yes, our clients are Ugandans and our products are in Uganda. We are a Canadian company but we are operating in Uganda so it’s going to be able to help the Ugandan subsidiary keep afloat in this situation.

As we conclude what are your plans for the future?

We are planning to venture into commercial and industrial properties. We are looking at Namanve and all the industrial parks and we are trying to target businesses that want to invest in factories and warehouse construction. We also plan to offer condominium properties and mortgages in the long term. Once we get enough capital, we shall do in house financing for these projects and then agree on a payment plan with any of our interested clients.