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Thursday, 20 August 2015 06:13

Lessons for Kenyan Entrepreneurs from Two Rivers

The most obvious sign has been the increasing business interest from international brands looking to set up in Africa and choosing Nairobi as a destination and launch pad.

Developments in the real estate sector have put into perspective just how sought after Kenya is. One of the latest developments is Two Rivers, arguably the biggest construction project in East and Central Africa.

On completion, the 102-acre project will become the second destination mall in Nairobi. The first is the 32-acre Garden City, which completed its first phase and opened its doors to the public in May.

Here are some of the lessons entrepreneurs can take away from Business Beat’s visit to Two Rivers.

1. THINK GLOBAL, ACT LOCAL

According to Knight Frank’s 2015 report on Africa, since 2000, the continent has had an average growth of over 5 per cent per annum, with the Sub-Saharan region averaging growth of close to 6 per cent.

The larger emerging economies of this region, such as Nigeria, Kenya, Angola and Ethiopia, have been key drivers of the continent’s growth.

Two Rivers is being developed by Athena Properties, which is a wholly owned subsidiary of Nairobi Securities Exchange-listed Centum Investment Company.

The mixed-use real estate development firm — whose average staff age is 27 — has looked inward for growth, and its move is backed by solid numbers.

Kenya is East Africa’s largest economy, with a gross domestic product of $62.7 billion (Sh6.4 trillion). The country is also ranked a middle income nation, following a recalculation of the value of the goods and services it produces in 2014, which made it the ninth-largest economy in Africa.

These figures illustrate that spending power is on the rise, and with it, demand for international products from a customer base exposed to global brands.

Two Rivers’ retail mall, which will occupy 11 acres and is already 62 per cent let, will host several international stores, some of which will be flagships for Africa, and others for East Africa.

The anchor client, French retailer Carrefour, has confirmed it has let 10,000 square metres — about 2.5 acres, or one and a half times the size of a professional football pitch — which would make it the largest supermarket in the country.

In addition, Virgin Active is setting up a gym that will occupy an unprecedented 3,500 square metres, or just under an acre.

Other brands that have booked tenancy include Giovani Galli, Hugo Boss, Nike, Boulangerie, Panarottis, Caffe Nove, Villeroy Bosch and Aldar restaurant.

And according to the Knight Frank report, Nairobi has the best lease period in Africa at an average of six years, which helps global firms draw a clearer picture of their long-term running costs.

Kenya is also an attractive destination for its strong talent pool and strategic location.

2. BUILD YOUR OWN INFRASTRUCTURE

The World Bank has estimated that while sub-Saharan Africa needs trillion-shilling investments in infrastructure every year, it gets less than half what it requires. A report done by PricewaterhouseCoopers (PwC) concurs, and notes that one of the biggest hurdles in the way of Africa reaching its growth potential is low development of infrastructure.

It goes further to state, “Shared urban wellbeing in Africa depends on the public and private sectors collaborating on the cornerstones of infrastructure, human capital and security.”

In recognition of this, Athena Properties is handling the project and urban management of Two Rivers much like a municipal or county council would.

“We develop, manage and run all the key and supporting infrastructure for Two Rivers” Chris Ochieng, the managing director of Athena, said.

“We have our own power station, where we buy 66 kilovolts of electricity from Kenya Power and step it down to supply directly to our clients. In addition, the rooftop parking will have shades fitted with solar panels, with an energy output of two megawatts.

“We have also installed mechanical water recycling plants that can handle 80 per cent of the development’s water. The grey water will be used to water the three-acre amphitheatre, as well as the garden.”

To boost security, a key global concern, Two Rivers has opted for a ‘smart system’. It will utilise a wide range of screening and surveillance equipment to detect, deter and mitigate all possible threats.

“Our systems have been designed to provide high-level protection, and they shall be implemented in a way that enables seamless and non-intrusive screening, creating a safe and convenient environment for shoppers.”

And though the actual construction of the lifestyle property is being done by China National Aero-Technology International Engineering Corporation, the project is being fully managed by Athena, which is 100 per cent Kenyan.

3. BE SMART ABOUT PARTNERS

Of the 20 African cities that a PwC report picked as having the continent’s greatest opportunities, Nairobi was the strongest for foreign direct investments, which is where a company or individual based outside the country holds a controlling stake in an enterprise based in the country.

With Two Rivers, the Chinese government put in Sh6.4 billion to buy a 38.9 per cent stake in the Sh16.6 billion project. The funding, done through the Aviation Industry Corporation of the China (AVIC), is one of the biggest single foreign direct investments into a private enterprise.

Kenya’s Industrial and Commercial Development Corporation (ICDC), which was established in 1954, has also bought a 23 per cent stake in Centum at Sh462.5 million.

ICDC was started to help local entrepreneurs access the financial resources needed for their businesses or industries through loan finance. It is also mandated to promote economic development through the purchase of shares or provision of corporate loans to medium and large-scale projects considered to be of long-term developmental value to the country.

Last modified on Monday, 07 September 2015 07:08