- Access to Finance
- Housing Affordability
- Housing Supply
- Housing Policy and Regulation
- Property Market and Housing Sector Opportunities
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2016 edition, which has up-to-date profiles for 51 African countries.Download yearbook
Southern African Development Community (SADC)
The Southern African Development Community (SADC) has its origins in the Southern African Development Coordination Conference (SADCC), which was established in 1980. In 1992, the member states signed the declaration and treaty establishing SADC as a replacement to the SADCC. Currently SADC has 15 member states: Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, United Republic of Tanzania, Zambia, and Zimbabwe. The vision of SADC is for a regional community in which the people of Southern Africa can realise economic well-being, improved living standards and quality of life, freedom, social justice, peace and security. SADC’s mission is to “promote sustainable and equitable economic growth and socio-economic development through efficient productive systems, deeper co-operation and integration, good governance, and durable peace and security, so that the region emerges as a competitive and effective player in international relations and the world economy”.
Two strategic frameworks guide SADC’s operations and provide SADC member states with a comprehensive programme of long-term economic and social policies. The Regional Indicative Strategic Development Plan (RISDP) which provides a governance framework that sets standards for good political, economic and corporate governance. The Strategic Indicative Plan for the Organ (SIPO) focuses on the maintenance of peace and stability in the region. A SADC Secretariat, which oversees the implementation of these plans, is based in Gaborone, Botswana.
SADC had a population of over 267 million in 2015 making up 22 percent of the continent’s population. 43 percent of the population are urban and the average urbanisation rate across the region is 3.11 percent. The GDP was above US$562 billion in 2015 and the average annual GDP growth rate among SADC countries was 2.74 percent in 2015 (calculated using 2015 World Bank Data) down from an average annual GDP growth rate of 4.51 percent in 2014. This decline is attributed to the drop in commodity prices, electricity constraints and severe drought being experienced by the region. The GDP forecast for the coming year is therefore impacted and predicted to have a slow but stable recovery as these issues are addressed through stabilising commodity prices, better fiscal policies and governments addressing power issues. To further emphasis, 11 of the 15 SADC countries have been affected by devastating drought emergencies which negatively affects livelihoods and the economy. The region launched an appeal amounting to US$ 2.4 billion to assist with disaster response. The appeal was responded to by the United States, European Union and United Kingdom.
South Africa dominates the region economically, accounting for 56 percent of SADC’s total GDP in 2015 followed by Angola at 18 percent. The lowest contributors to GDP are Seychelles and Lesotho. For the SADC region in general, the services sector makes up more than half of the GDP, and is the main driver of regional growth, followed by industry at 31 percent and agriculture at 13 percent. These vary per country. SADC has the highest proportion of inter-regional trade at 19.3 percent followed closely by the EAC at 18.4 percent. The region’s pattern of exports makes it particularly vulnerable to commodity price shocks. Fuels, ores, and metals accounted for more than 60 percent of the region’s total exports between 2010 and 2014 compared with 16 percent for manufactured goods. Lower commodity prices obliged a fiscal tightening in several commodity exporters, which caused a sharp slowdown.
The Global Competiveness Report 2015/16 indicates Mauritius is the most competitive economy in the region followed by South Africa. The report also indicates that the drop in commodity prices and the normalization of the US monetary policy affects growth due to investor scrutiny of the emerging market risk. The European Union (SADC’s largest trade partner) signed an Economic Partnership Agreement (EPA) with six countries in SADC in Botswana in June 2016. This free trade agreement aims to foster economic integration to target economic growth and sustainable development and decrease poverty levels through trade.
According to SAIIA, 2015 trade between SADC and the rest of the world increased. 46.2 percent of exports out of SADC originate in South Africa. One major impediment to increased trade and economic growth in the region remains the high cost of transport due to inadequate physical infrastructure and delays at/or behind the-border barriers (SAIIA, 2015).
According to PWC, 2014, to further support infrastructure development in sub-Saharan Africa, the African Development Bank and EU launched the Infrastructure Investment Programme for South Africa (IIPSA) in 2014.
Access to Finance
While there are intentions for regional financial integration, the 15 member states function as independent economies with their own, independent financial systems. As the largest economy in Africa, South Africa dominates, with 55 percent of the region’s GDP. A number of South African lenders have extended to other countries in the region. Standard Bank is licensed to operate in all of the SADC countries. FNB is licensed in Botswana, Lesotho, Namibia, Swaziland, Tanzania, Zambia and Mozambique. Absa operates in Zambia, Tanzania and other countries. In 2011, there were 161 separate banking institutions operating in the region, with 234 subsidiaries, thus in total there were 234 bank licenses issued in SADC. The Southern Times (2015) reported that SADC banks had a combined asset base of US$704 billion from the 55 institutions that ranked in the 2015 Top 200 African Banks.
According to FinScope (2015), 66 percent of adults in the region are financially included amounting to about 83.5 million people. Mauritius has the highest percentage of financially included adults at 90 percent, followed by South Africa at 86 percent and the lowest is Mozambique with 40 percent. While only 36 percent is banked, this is a significant increase from 24 percent in 2011, indicating progress in financial inclusion in the region. Still, exclusion rates are high at 34 percent (41.9 million people), hampering access to credit from formal institutions. Twelve percent of adults rely on informal mechanisms and 18 percent use formal non-bank products/services. According to FinScope (2015) only 27 percent of adults have insurance. Of the 83.4 million adults who are financially included in the region, about 53 percent say they have access to and use credit products. The number of those who use credit for housing is not clear – certainly, mortgage exposure in the region (outside of South Africa and Namibia) is very low. The mortgage percent to GDP ratio ranges from 0.91 percent in Mozambique to 7.5 percent in Botswana and 30.4 percent in South Africa. Mortgage interest rates range from eight percent to 34 percent in the region.
The key barriers to financial inclusion in SADC are made up of;
- Supply barriers – lack of incentives, capacity and inappropriate delivery channels,
- Demand barriers – administrative and systematic,
- Policy and regulatory environment barriers.
The SADC financial inclusion strategy aims to address this by building credit markets and digitisation based on strong payment systems.
Findex 2014, explores use of loans for housing (whether they are secured or unsecured was not specified in the questionnaire). The percent of adults over the age of 15 that had an outstanding home loan in the SADC region ranged from 1.53 percent in Zimbabwe to 9.63 percent in Botswana and 15.22 in Mauritius. This number may be low for various reasons – it may reflect that households finance their housing not with credit but rather with their savings, or that households who use credit use personal and unsecured loans where the housing purpose is unspecified.
The SADC Banking Association, which was established in 1998, aims to coordinate banking related activities throughout the region to ensure acceleration of development. The advanced financial system in South Africa has been identified as playing a pivotal role in strengthening the region’s financial system. Due to South Africa’s role in the region, the country has been given the responsibility to manage the SADC sub-committees that deal with regional integration of the financial sector.
The credit information infrastructure in the region is developing as indicated by the World Banks Doing Business Indicators (2016). All countries in the region have improved their access to credit. For example Lesotho has established its first credit bureau and Seychelles has established a credit registry.
In addition, Southern African Microfinance Project (SAMP) was set up to address limited access to financial services through the development of microfinance. This is done through policy and regulatory environment intervention. It also aims to understand investor requirements so that there is support at a local level to attract international microfinance.
While GDP per capita in the region has been growing, levels of inequality remain high. South Africa, Angola and Namibia are among the most unequal economies in the world. Seychelles, Lesotho, Botswana and Zambia are not far behind. The average annual regional inflation rate was 11.5 percent affecting affordability and consumer spending.
Levels of housing affordability across the region, and even in South Africa (where about 64 percent of the urban population cannot afford the cheapest, newly built house by a private developer), are quite low. The 30 percent drop in oil prices since June 2014 until February 2016, severe drought across the region, electricity constraints and the drop in commodity prices, has put increasing pressure on affordability in 2016. The World Bank has indicated that there will be slower recovery with growth expected to reach 4.2 percent which will somewhat positively impact affordability.
The prices of the cheapest newly built houses by a private developer in the SADC region range from about US$18 000 in Zimbabwe to US$40 788 in Namibia, US$63 000 in Mozambique, and US$200 000 in Angola. Angola, Seychelles and Madagascar were among the most expensive new, formal housing markets found this year. At current lending rates, only 1.3 percent of the Angolan urban population could afford to buy the US$200 000 house.
Generally, formal housing supply is targeted at the upper income and expat populations seeking housing, with very little being built for the working poor. On average, a 50 kg bag of cement costs US$6.82 for the SADC region, ranging from US$4.30 in Botswana to US$9.10 in Malawi and US$13 in Zimbabwe.
Housing backlogs in countries within the SADC region range from an estimated 2.1 million in South Africa; two million in Madagascar, Mozambique and Angola respectively; to 1.5 million in Zimbabwe and 100 000 units in Namibia. Zambia estimates that it will have a backlog of three million units by 2030, if no interventions are undertaken. While there are many government-led housing initiatives in the SADC region, housing supply is largely insufficient.
According to International Housing Solutions, governments in SADC often focus on the poorest segments of the population while most private sector builders focus on the luxury end of the market, creating what is known as the gap market. The key challenge facing all countries in the region is how to promote affordable housing delivery by the private sector, such that the state can better focus on addressing the needs of the poorest segments of society.
South Africa has the most comprehensive subsidised housing programme in the region. The national housing subsidy is targeted at about 50 percent of the population in terms of household income. Recently, however, numerous politicians have highlighted that the programme is not sustainable in the long term. In recent years, the cost of the subsidised house, which is given away for free to qualifying beneficiaries who earn less than ZAR3 500 (about US$246) a month and have dependents, is estimated to be between ZAR150 000-ZAR200 000 (US$10 563 – US$14 084).
Investment in the region is vast with investor interest originating from countries such as China. In Angola, government led housing delivery has inadvertently targeted the higher end of the market even with subsidized mortgages. The governments National Urbanism and Housing Programme, adoped in 2009 aimed at public and private sector delivering around 12 percent of the total of one million housing units and it has been extended to 2017. The government aims to deliver a total of 213 000 houses and 14 new centralities across the country. To finance this the government has adopted legislation to create a Housing Development Assets Fund (FADEH)(Presidential Decree 168/15 of 2015). An example of a public private partnership in Angola is between Kora-Angola and the Angolan government with the aim of delivering 40 000 units across multiple projects in six Angolan provinces,
In a number of countries in the region, state-owned or supported housing delivery entities have a mandate to work explicitly in the low-middle income target market, but many struggle to extend as far down market as their targets suggest they should. The Malawi Housing Corporation and Botswana Housing Corporation are the main housing developers in those countries, and there are similar corporations in Lesotho, Tanzania, Namibia, and Swaziland.
The are many projects currently taking place in DRC, some of which include; China Machinery and Equipment Import and Export Corporation plan to build 2.5 million social houses (Project is pending), NGO “Action pour la Solidarité et le Développement (ASODEV)” plan to build 3 080 social houses and the US$1.4 billion housing development called Luano city which is a mixed-used development project comprising of two and three bedroom houses, office park, retails space in the form of a shopping mall and industrial park (Phase 1 is complete).
In Lesotho, a mix of low, middle and higher income delivery of houses is demonstrated. This can be seen by the MASOWE IV housing project – LHLDC, a government parastatal, is mandated to deliver formal housing in Lesotho. LHLDC has 448 residential plots with 189 earmarked for low-income (plot size of 450m2), 227 for middle to high income plot sizes ranging from 700 to 800m2. In Lusaka, the Pan African Housing Fund project aims at building 310 middle income houses.
In 2015 Bulawayo City Council commissioned a new suburb by unveiling 391 medium-density residential housing stands in Emhlangeni. ‘Emhlangeni Phase One’ is the third in a series of the City Council’s pre-sale housing projects. The contract for implementation of services for phase two stands commenced in July 2016. In addition, the US$1.9 billion government contract with China-Africa Construction Company earmarked for Harare South is aimed to start in 2016. The agreement will provide 32 new houses and expansion of existing suburbs to meet the 2018 ZIMASSET finish line. An additional contract for more than 32 000 houses was also secured from China.
While, the housing supply situation in the region is robust with much activity across sectors involving both public and private investment from investors all over the world, backlogs are real with over half the region’s population living in slums and affordability is still a challenge.
Housing Policy and Regulation
The SADC Protocol on Finance and Investment (FIP) remains the key instrument to facilitate regional integration and aims at making the SADC region an attractive destination for FDI and regional investment. In this regard the harmonisation of tax policies, macroeconomic convergence in the region, liberalisation of capital and current accounts as well as harmonisation of the Central Bank’s policies amongst other issues.
The implementation of the FIP has been rather slow going – by 2011 only seven Member States had implemented over 50 percent of their country commitments under the protocol. When it comes to actual regional integration, only 14.3 percent of commitments have been achieved. More recently, however, with support from the FinMark Trust and other players such as the GIZ, the implementation of the FIP has been receiving increasing attention particularly in the areas of retail payment systems, harmonisation of insurance regulations and improving credit information sharing across the region.
About 79 percent of the regions countries have housing related policies and 86 percent have property and land related policies. These however are at various stages of implementation.
The policy flux in many countries undermines investment especially by international or regional housing developers and financiers who are seeking new markets. National governments would do well to promote a clearer housing approach in their countries to facilitate and create an enabling environment for investment.
The SADC Industrialisation Strategy and Roadmap 2015 – 2065, approved in April 2015, seeks to achieve economic transformation by encouraging regional integration and economic and technological transformation through enhancing its competitive and comparative advantages. This has direct connotation for housing and human settlement development as increased employment generating activity will further increase demand for housing. Further, diversifying the economy and increasing production rates will create an attractive investor destination. This will in turn spur demand for accommodation.
The Revised Regional Indicative Strategic Development Plan (RISDP) 2015-2020 is a framework for regional integration which was revised to keep abreast with the changing global economy. The Financial Inclusion Strategy aligns directly to it. The RISDP focuses on four key areas mainly; industrial development and market integration, infrastructure in support of regional integration and peace and security cooperation.
Property Market and Housing Sector Opportunities
In the World Bank’s 2016 Doing Business Report only six out of the 15 countries improved their position in the Doing Business ranking, namely Botswana, Lesotho, Malawi, Swaziland, Zambia and Zimbabwe. With regard to registering property, only the DRC has decreased the number of procedures in 2016. Botswana, DRC have decreased the time in days to register property. DRC, Madagascar, Malawi, Mozambique, Namibia and Zambiashow a decrease in the cost to register property.
SADC Investment Promotion Agencies are responsible for the promotion of foreign direct investment in their respective countries.
- Angolan Agency for Private Investment
- Botswana Investment & Trade Centre (which is the merged entity between IFSC and BEDIA)
- National Agency for Investment Promotion
- Lesotho National Development Corporation
- Malawi Investment Promotion Agency
- Board of Investment
- Investment Promotion Centre
- Ministry of Trade and Industry
- Seychelles Investment Bureau
- Department of Trade and Industry
- Swaziland Investment Promotion Authority
- Tanzania Investment Centre
- Zambia Development Agency
- Zimbabwe Investment Agency
Recently, the SADC Summit took place in Swaziland. The theme was Resource Mobilisation for Investment in Sustainable Energy Infrastructure for an Inclusive SADC Industrialization for the Prosperity. The results are forth coming. In general, member states have been undergoing policy reforms and the refinement of investment processes, which have improved their respective business environments such as establishing investment promotion agencies, improving investor protection and increasing the transparency of investment codes and policies. South Africa, Angola and Mozambique are major recipients of Foreign direct investment (FDI) in the SADC region. Mauritius and Seychelles are dominated by real estate investment as opposed to oil and gas, which dominates the Angolan economy. While primary trade connections are dominated by the United States, China, the European Union and India, India shows the largest amount of FDI from a developing country perspective. The EU is the largest trade partner and China is increasing housing investment in Africa exponentially – this can be seen by the various developments noted in the housing supply section. In addition, the investment opportunities that SADC possesses, recently attracted the Japanese Business Federation. According to SADC news, SADC is an important region for Japanese investors as it accounts for 50 percent of trade between Japan and Africa. SAIIA, 2015 shows that the real estate sector attracts the third highest FDI inflow into the SADC region at US$18 027.5 million in 2014, preceded by coal, oil and gas and metals. Increased cross border investment and attention is being paid to the SADC region makes it an attractive investment destination. This is coupled with advanced infrastructure development in most countries.
Real Estate Investment Trusts (REITs) have been gaining momentum in SADC countries such as South Africa and Zambia. REITs act as an investment vehicle that investors understand as it is influenced by international legislation by aggregating diverse sources of funding from international and institutional investors through to households, and targeting them into a portfolio that extends beyond the limitations of individual projects. South Africa is one of the eight largest REITs in the world with 30 registered REITs and a market capitalisation rate of ZAR320 billion (US$22.5 billion). Residential specific REITs are emerging and creating an opportunity to diversify ‘risky’ housing investment portfolios.