Mapping South Africa’s scene
South Africa’s property technology association, SA Proptech, which launched at the end of 2018, has partnered with the Urban Real Estate Research Unit, or URERU, at the University of Cape Town to begin to understand the country’s proptech ecosystem. Together, they have produced the Unpacking the Current & Future Impact of Technology on the South African Property Industry report by Sean Godoy and Luke Boyle.
Here is an abridged version of the report
Africa: the next frontier of technological innovation
Africa has produced numerous tech startups and large organisations that have driven significant technological innovation within various industries across the continent.
Recent research by Global System for Mobile Communications, or GSMC, a global body representing the mobile technology industry, showed that tech hubs are growing rapidly in Africa; from 314 in 2016 to 442 in early 2018.
While developed economies may be better placed to develop and implement new tech services and innovations, what has become evident in the past two decades is that tech-driven solutions can be massively successful and beneficial in emerging economies.
This is largely due to the ability of new technologies to provide new ways of carrying out business and everyday activities without the need for established infrastructure or systems. Some African countries do not possess extensive telecommunications infrastructure, but the rise of smartphones and wireless internet technology such as 3G has made it possible to increase access to internet on a massive scale, without the need for extensive and expensive infrastructure which would be traditionally needed to provide internet access via telephone cables and other hardware-reliant means.
Specific innovations that demonstrate this response include the phone-based money service M-Pesa which launched over 10 years ago in Kenya, and Zipline’s on-demand drones which are delivering 20% of all blood supplies in Rwanda, with plans to expand the service to other countries including the US.
Similar innovations are taking place in the property industry in South Africa as well. Proptech has gained significant momentum in other parts of the world, and we expect the potential for meaningful impact to drive the momentum of the proptech movement in Africa.
Africa as a proptech hub
Proptech principles and trends are already having exciting and meaningful impacts in numerous ways, from crowdfunding, which could bring property investment to a much wider audience, to online estate agencies and the rise of blockchain technology with its potential application to deeds registries on the continent.
This is taking place within a thriving tech and startup ecosystem on the continent, as indicated by record levels of investment in African tech and startups in 2018. A record US$725.6m was raised across 458 deals last year, representing a massive 300% increase over 2017. While it is currently difficult to determine how much of this investment went into proptech, there is evidence that various proptech companies in South Africa have had successful fundraising rounds. An innovative rental platform, Flow, recently raised R20m in funding from local and international sources which is an exciting example.
URERU has been following the development of this emergent sector for the past 18 months. During this time there has been a significant growth of excitement and investment into this space. However, there is currently a lack of knowledge or understanding of this sector and how it works in the region. As such, URERU set out to develop a clearer picture of this budding new area of the real estate industry.
Thus, the main purpose of this research is to map the South African proptech sector in order to gain an understanding of the players and what areas they are working in.
This is a starting point in understanding the sector and laying the foundation for future research. What we discovered through this initial process is that it is not so much the external environment that is changing, but rather the property sector itself – specifically the way that business is being done. At its essence this is what disruption is, and we are witnessing the very beginning of a significant tech-driven wave of disruption. We identified 42 active players in proptech and categorised them as below:
Crowdfunding + finance
This is where proptech and fintech intersect, which is only just starting to gain momentum in South Africa in a meaningful way. There are a couple of companies doing good work in this category and it is likely we will see more emerge in the future as regulatory hurdles are overcome.
Property Mogul is an interesting local example which has been making meaningful progress. The company promotes itself as a real estate and alternative investment marketplace, which aims to disrupt traditional real estate and capital markets.
During our research we identified more than 15 independent coworking spaces offering innovative spaces, however, we decided to only include coworking providers who are operating on a national level in this version of our research.
The 4 companies shown in the graphic operate approximately 32 coworking spaces across the country between themselves. Examples include Workshop17 which is a joint venture between Refuel Properties and South Africa’s largest REIT, Growthpoint Properties, and Spaces which operates 12 locations across the country.
We included this category to cover a variety of exciting proptech companies that are offering a distinctly new and innovative service or product to the market. For example, companies utilising blockchain, like SESCO Global, to significantly change the way deeds registries work and possibly the way property is transferred. iShack Ventures offers proptech consultancy services and can develop bespoke proptech solutions for property stakeholders.
Virtual reality also features here which is one of the smallest categories, but it is the one with arguably the most scope for disruption in local and global property markets.
Selling + letting
Selling and letting platforms have been one of the most active areas of proptech internationally, particularly within the residential property sector. There are currently at least seven of these platforms active in South Africa, including Property Fox and HouseMe.
There are also listing and transaction platforms specialising in commercial property, such as Instant Property and Quoin Online.
This category also attracted investment activity in the past year with letting platform HouseMe securing a ‘multi-million’ Rand deal (over R10m or US$700k raised to date since 2016), commercial property platform Instant Property closing a 10% equity-stake deal, and digital estate agency Eazi.com being acquired by Pam Golding Property Group.
Services + software
It could be argued that these companies were the original proptech companies, utilising technology to improve platforms and systems within the property industry. An established example is MDA who provide property management software solutions, a significant market in South Africa and internationally. Interestingly, both MDA and Propsys were recently acquired by the international software company MRI Software.
Within the property management sphere, apps and dashboard platforms have become popular and offer a convenient platform for tenants, property managers and landlords to interact and manage properties effectively. Local examples include REDi a full-cycle residential development management solution, and Estate Mate a property community ecosystem management and communication app.
Data + analytics
A small cohort of innovative companies in this category are carrying out excellent work in South Africa, and offer a range of data management, analytics and automation services.
Examples include Gmaven, a data services and software provider for commercial property, and Lightstone, an established valuations, information and market intelligence provider, which aims to be Africa’s go-to company for property related information and decisions by 2020.