Category: Case Studies

Introduction

Africa is proliferating in terms of population; the continent’s population has grown significantly over the years, increasing on average by 2.53 per cent annually between 1950 and 2015 and currently stands at 1.340 billion. Based on recent projections, the continent’s population is expected to grow from its current state of 1.340 billion in 2020 to 2.44 billion in 2050. Most African’s still live in rural areas, the estimate currently stands at 60 per cent, but the rate of migration from rural areas to the urban areas is increasing at an unprecedented rate. It has been stated that over 40,000 people leave the rural areas to the urban centres daily; these also have become a significant challenge across the continent of Africa. Data shows that the rate of urbanization between 2000 and 2015 was at an average of 3.5 per cent; this makes it the highest globally. If the current urbanization trend continues, unabated the share of Africa’s urban population is predicted to surpass 50 per cent by 2037 [1][2].

Africa also has the youngest population of all the continents of the world. The young people of Africa could become either an advantage or a disadvantage, a young population such as those seen across African countries could quickly become a ticking time bomb if not adequately engaged, but then also with such young demography, Africa can harness their strengths to develop economically. Currently, these young populations are driving an urgent need for affordable housing, access to meaningful work and food [3][4]. 

Across the globe, thriving cities are significant drivers of economic development, and the quality of the housing stock in these areas have a long-term impact on any form of comprehensive development. With that in mind, governments across Africa have become increasingly puzzled with not just the challenge of providing affordable housing in the urban centres but also coming up with initiatives that will make the rural areas also attractive, to keep the level of rural-urban migration low [5].

Housing Deficits in Africa

The rate of rural-urban migration and a lack of proper planning have created a vast housing deficit across Africa; the deficit is the difference between the number of households and the number of permanent dwellings. Because of the lack of data across the African continent information on the most accurate numbers may not be readily available, however governments across Africa have released various estimates to show the housing backlog for their countries [1].

 Computed data for the 10 countries with the most housing deficit across the continent of Africa.

The housing deficit in Africa, across the 54 countries stand at an estimated 52 million housing units [7]. The table above reveals a spectrum in housing delivery across Africa. Nigeria is at the top, with a larger population than most African countries, the figures are not surprising, what can be surprising is that fact, that the figure of 17 million housing deficit has been cited since 2010, some stakeholders think that the numbers should be more and have given estimates of around 20 million units. Whatever the case, the housing deficit in Nigeria, requires a more focused approach on housing delivery if the housing deficit is to experience any form of decline in the coming years. [1].

Overall, the housing deficit across Africa and the urbanization rate requires a fundamental change in the housing sector. If current trends continue, we expect the population across Africa to continue to increase along with the housing deficits, leaving governments across Africa without a solution on how to tackle the crisis.

Investment Potential

As African cities experience rapid growths, not just in terms of population but also economically, investors are keen on playing a part and harnessing the opportunities these growths present. The potential impact of investment in housing is noticeable, with the figures of the housing deficit presented from 10 countries of the 54 on the African continent. Affordable housing remains a significant challenge for all stakeholders in the housing value chain. Housing affordability is a function of three things: household income, the price of the house, and the terms of the finance. There is the issue of finance; how can the housing backlog be financed, with the limited resources on the African continent. Then there is the issue of construction; what is the best technology to deploy to achieve high productivity across the entire housing value chain. Though these challenges seem daunting, for investors, it presents an opportunity on which area to participate in housing delivery on the African continent [7].

There is increasing investors interest in the housing market across Africa, with an increasing number of funds set up to pursue housing projects, with collaboration between international and local industry players. However, the current approach seems to be counterproductive, as most investors continue to focus on the high-end housing market, this inadequate market entry approach has resulted in empty apartment buildings across the continent, despite the huge housing backlog.  The affordable housing markets present an immense opportunity for both local and international players to make a profit as well as to bring prosperity to the aspiring sparse African population.

Across Africa, governments continue to make efforts to solve the housing challenge and are making invests in the sector. Though commendable, without the right partnership, the right results will not be achieved. For example, in Zimbabwe, the government is taking strides to reduce the housing deficits through the roadmap created by Infrastructure Development Bank in Zimbabwe (IDBZ) to raise US$ 100 million for affordable housing across the entire country. In Kenya, the government launched a project to increase the production of Appropriate Building Materials (ABMT) to aid the construction of houses at a lower cost. The government is convinced that the project if successful, will lower the cost of construction, create a safe and more environmentally friendly house, and generally result in higher quality construction. Efforts like these show that governments across Africa understand the need to be deliberate about solving the housing crisis [1].

The private sector and multinational companies are not left out, in May 2019, the IFC, Chinese Multinational Construction and Engineering Company along with CITIC launched a US$ 300 million investment platform, the goal is to increase the affordable housing stock in various African countries. The parties believe that collaboration of this type will go a long way to stimulate other stakeholders in the industry to make similar moves. The scheme will partner with local developers and provide long-term capital to construct 30,000 houses over the next five years. The impact of the project is estimated to result in the recreation of 150,000 new jobs across Africa [7].

Shelter Afrique another housing development financier in Africa has signed an MOU with Terwilliger Center for Innovation in Shelter (TCIS). The agreement will see TCIS partner with Shelter Afrique in raising capital for affordable housing across 44 African countries. The partnership will focus on providing housing loans to low-income earners in the target countries [7].

References

[1] Bah E.M., Faye I., Geh Z.F. (2018) The Housing Sector in Africa: Setting the Scene. In: Housing Market Dynamics in Africa. Palgrave Macmillan, London

[2] ECA, African Union Commission and UNFPA, “Addis Ababa Declaration on Population and Development beyond 2014” (2014)

[3] ECA, Industrializing through trade: economic report on Africa (Addis Ababa, 2015).

[4] United Nations Economic Commission for Africa The Demographic Profile of African Countries (March 2016).

[5] Beck, T., M. Munzele, I. Faye, and T. Triki. 2011. Financing Africa: Through the Crisis and Beyond. Washington, DC: World Bank Publications.

[6] Buckley, R., L. Chiquier, and M. Lea. 2009. Housing Finance and the Economy. In Housing Finance Policy in Emerging Markets, ed. L. Chiquier and M. Lea. Washington, DC: World Bank.

[7] CAHF. Housing Finance in Africa: A review of Africa’s housing finance markets (2019) CAHF Publications