Slums and sums

THE state of the African housing market in the current economic crisis is the focus of the 28th annual meeting of Shelter-Afrique being held in Windhoek over the next few days.

Shelter-Afrique is a company that was created by African governments in 1982 to provide financing and technical support to housing developers on the continent, focusing especially on the low-income segment.Africa’s housing market has been in a precarious state since the explosion of urbanisation in the 1980s, with a high number of shack dwellers and informal settlements dotting the outskirts of many African cities. The central theme emerging from the conference was that with the global financial crisis, governments need to work hand in hand with developers and turn away from the laissez-faire attitude of free-market capitalism.Isaac Megbolugbe, a professor of the Carey Business School at Johns Hopkins University, said in his presentation entitled ‘Magnitude and Impact of the Global Economic Crisis on Africa’s Housing Market’ that housing is one of the most important sectors as it has ‘social as well as economic implications’.On average, people spend between 15 and 40 per cent of their income on housing. ‘Home ownership is a cornerstone of financial stability,’ Megbolugbe said, as ‘owning a house represents the best form of long-term savings’. ‘Widespread home ownership … is a fundamental objective of any market economy with social equity responsibility,’ he continued. Megbolugde said a key problem to more people owning homes in sub-Saharan Africa is the risk-averse nature of banks operating there, especially towards the low-income sector.He also lamented the lack of government initiatives providing low-cost loans for home ownership.Where these funds exist, he said, they are often mismanaged. Another key problem on the continent has always been to get developers to engage in low-cost housing development in the first place, as medium- and high-end housing has always been more profitable.Mustapha Njie, Chairman and Chief Executive Officer of TAF Holdings in Gambia, the country’s leading local construction company, said in a presentation entitled ‘Promotion of Private Capital Investment in Low-Cost and Social Housing’ that ‘adequate private capital investment is not being made in the low-cost and social housing sector’.Njie said the accepted definition of affordable housing is a cost of about U$2 500 per year, a figure which makes it difficult for the private sector to draw profit from this income group. One way to do this, Njie said, is to reduce costs for companies by governments subsidising part of the cost of development.This includes, for example, providing developers with free land in decently placed areas, covering part of infrastructure costs as well as providing low-interest loans through national or land banks.He also said low-cost housing should have ‘some commercial allocations’ attached to it to make it profitable. On the buyer side, Mustapha said governments could subsidise first-time home buyers by lowering their deposit requirements and by guaranteeing their mortgages.