Housing Finance in Eswatini

Overview

Eswatini is a small, landlocked Southern African country with a population of 1.2 million; 1 approximately 76% of which reside in rural areas and 24% in the two main urban areas of Mbabane and Manzini. Approximately 58.9% of the rural population lives below the national poverty line, and with a Gini coefficient of 51.5 (the 10th highest in the world) means that Eswatini has high levels of poverty and inequality.6 Due to the state owning 54% of the land, access to land in urban areas remains an issue in Eswatini. Eswatini’s affordable housing situation is influenced by high levels of poverty and inequality, a predominantly rural population and a lack of access to serviced land for housing.

Eswatini is a developing economy and is dependent on developments both regionally and internationally. The economy of Eswatini is particularly closely tied to that of South Africa, which accounts for about 85% of its imports and 60% of its exports, and as such provides substantial revenue for the country in terms of the South African Customs Union (SACU) agreements. Revenues from SACU are derived from external trade and excise duties on imported goods, as well as from excise taxes for development. Fluctuating SACU revenues have caused significant variation in public spending and pose challenges to the management of fiscal operations and future growth potential. Eswatini with Lesotho, Namibia, and South Africa makes up the Common Monetary Area (CMA)which pegs the Eswatini lilangeni (the local currency) to the South African rand, and also makes it the country’s legal tender.9 Eswatini is therefore exposed to the rising inflation and increase in fuel prices currently happening in South Africa. The year-on-year inflation rate has therefore increased from 3.9% in 2021 to 5.6% in 2022.

In 2022 gross domestic product (GDP) growth was projected at 2% and is expected to drop to 1.8% in 2023.11 The World Bank recorded Eswatini’s GDP for 2021 at E81.072 billion (US$4.94 billion).12 The annual GDP per capita in 2021 was E69 172 (US$4 214).13 The ratio of debt to GDP has been below 50% between the years 2010 to 2022, which, according to the African Development Bank, is considered being in a sustainable debt range. However, public debt to GDP ratio is growing and needs to be managed.

In the context of climate change, agricultural sectors in Eswatini are particularly vulnerable to hydrometeorological disasters such as seasonal floods and severe droughts. It is predicted that these events could leave 25% of the country’s population exposed to food and water insecurity.14 Many households already rely on welfare and social safety nets for survival15 and this situation could be exacerbated. In addition to its Disaster Management.

Act of 2006 and its National Disaster Preparedness and Response Plan, the Eswatini government released its National Progress Report on the implementation of the Hyogo Framework for Action (2013-2015). In response to changing weather patterns and long-term climate change, Eswatini’s disaster risk management aims to better identify the country’s changing disaster profile.

Access to Finance

In 2021, 12% of the population had borrowed from formal financial institutions – banks, Savings and Credit Co-Operative Societies (SACCOs) and micro-finance institutions (MFIs)–while 14% borrowed from informal sources, including savings groups, shop credit, and moneylenders. Women entrepreneurs borrowing money from banks made up 1% of the population, with most borrowing from MFIs and savings groups. As for alternative ways to access to finance, about 71% of the population use a mobile money account. Looking again through the gender lens at this alternative access, 95% of women in Eswatini have access to a mobile phone. This allows for a form of alternative access to finance in the form of mobile money, which has allowed people on low incomes and in rural areas to be included. The mobile money agents are found within a 30-minute walk of 84% of people in Eswatini, allowing them to transact conveniently.

Five banking institutions offer mortgages to the public, of which First National Bank (FNB) and Standard Bank are the only ones offering a refinancing option. The only catch is that a letter confirming employment or a contract of employment is required to refinance an existing home.

The maximum mortgage term given by the banks is 25 years. The minimum mortgage rate given to households is 7.65% while the maximum is 8.65%.20 The maximum Loan-to-Value ratio for urban housing loans given by the commercial banks is 90%, with non-performing loans at 9.5%, a 1.3% growth from 2020. There is a limited interest in financial inclusion of women with few tailored products for women from formal financial institutions.The only financial institution that offers specific financial products and services for women is Imbita Swaziland Women’s Trust.

The formal non-banking sector in Eswatini is dynamic, with 117 MFIs, 51 SACCOS, two credit bureaus and one building society registered with the Eswatini Financial Services Regulatory Authority (EFSRA). This number has not changed despite the pandemic. The number of microfinance loans available is 12 000 with a value of E790 000 000 (US$48 137 269). One of the key microfinance financial programmes is MTN Mobile Money, MoMo, which targets low income earners in rural and urban areas. The loans are small amounts, usually up to E200 and must be cleared in 30 days at 8% interest for the loan period.

The two registered credit bureaus are Digimage Investments (Pty) Ltd and TransUnion ITC Swaziland (Pty) Ltd.26 Credit provided is predominantly mortgage loans, which make up 46% of total household credit, and vehicle loans. The general steps of underwriting a mortgage by formal banks involve requesting a credit report from a credit bureau.The bank then requests the applicants’ banking statements, proof of address, and identification. The main challenge in the underwriting process is the increased legal costs, as the population of is small and pooling sizes are therefore limited. In a bid to increase the financial inclusion of low-income citizens, the Eswatini Housing Board (EHB) partnered with MTN to provide digital services that enable citizens to use mobile money to transact. In order to mitigate the financial exclusion of people in the informal economy, policymakers need to integrate financial services with more credit providers through the use of agents and mobile money platforms.

Affordability

Eswatini’s key affordability issues are linked to inequality, poverty and limited financial and gender inclusion. The estimated backlog of 20 000 housing units in Eswatini is due to the country not developing an appropriate integrated strategy specifically for housing or urban development, and insufficient investment in housing and associated basic service provision. Affordability remains a key issue as the country had an unemployment rate of 25.76% at the end of 2021, a slight increase from 25.51% in 2020. High unemployment rates have resulted in locals seeking income opportunities in the informal sector, which makes up a significant portion of GDP 40.9%). However, incomes in the informal sector are 45% lower than in the formal sector. In the formal civil society sector, the average salary for a cleaner is E1 200 (US$73) before tax; for a teacher, E2 500 (US$152) before tax and for a policeman, it is E9 500 (US$578) before tax. This is concerning from an affordable housing access perspective as formal banks require applicants to have a minimum salary of E5 000 (US$304) to qualify for a mortgage. This detracts from housing affordability as most employed civil servants, except policemen, earn below this minimum salary figure needed to qualify for a mortgage.

The maximum instalment to household income ratio is 33%, meaning it is fairly affordable. People living in Eswatini spend a minimum of 20% to 30% of their income on non-food needs such as health, clothing, sanitation, energy and transport. The national debt of the country was projected to be E33.972 billion (US$2.07 billion) in 2022 and to reach E35.285 billion (US$2.15 billion) in 2023. The high level of public debt and the increase in non-performing loans make accessing credit difficult for people who work in the informal economy (40.9% of the GDP). This negatively affects the affordability of housing finance, and the economic inclusion of citizens who have no access to formal credit.

In terms of property registration, there are only 315 residential properties that have a title deed in urban centres. There has been a decline in property registrations due to factors such as the COVID-19 pandemic, low economic growth, and non-registration of property to foreigners. Land in urban areas such as Mbabane and Manzini costs E500 000/m2 (US$30 466),38 while the minimum regulated size of a residential plot in urban areas is 2 000m2. A newly built a cheap house of 80m2 in Mbabane costs E700 000 (US$42 653), while renting the same house costs E7 250 (US$441). The Eswatini Housing Board (EHB) considers a plot of housing between E250 000 (US$15 233) and E450 000 (US$27 420) to be affordable because most low income earners can afford this price range. The EHB envisions reducing this figure considerably if adequate government funding is made available to reduce the costs of infrastructure for services such as electricity, water, roads and sewer systems, which would make affordability a reality.

Housing Supply

Urban centres in Eswatini offer a variety of property types and prices for different housing typologies. There are rental units, informal housing and standalone houses (mostly on rural urban fringes where land is cheaper or given by chiefs). The rental market is comprised of high-end developments, and low and middle income rentals, which are in high demand from foreigners. Some 32% of the population still live in informal housing and backyard rooms in urban centres.

The Ministry of Housing and Urban Development is responsible for providing housing throughout the country. It does this through its state entity, the EHB, which is a member of the African Union for Housing Finance (AUHF). The EHB provides housing through residential loans aimed at assisting low and middle income citizens. Applicants are required to submit city council-approved building plans; written consent from the Ministry of Housing; a copy of the supervising architect’s professional fee; approval from the Eswatini Environmental Authority and proof of income.

The EHB manages low income rental units that are more than 26 years old, handed over by the state. The units are outdated and due for refurbishments, especially plumbing and electrical works. The lack of serviceable plots has become apparent and, consequently, decent housing for the ever-growing urban population. In Mbabane the smallest residential plot is 2 000m2. As far as affordable housing is concerned, this is of importance, since the cheapest house newly built by a formal developer or contractor in Mbabane is 80m2 in size. There is enough space for approximately 25 households on a 2000m2 plot. With a growing population of 1.2 million, town-planning and land-use schemes must continually be revised to accommodate more affordable housing.

Informal settlements in Eswatini are made of building materials such as steel, which are used in window frames in almost all houses (96%) and corrugated iron for roofing (66%). Concrete is used in large quantities in informal settlements (65% for walls and 96% for floors).46 Environmentally friendly earth blocks and mud with wooden sticks are used in small quantities (12% and 21% respectively) and are found locally. They are valuable as they do not emit large amounts of carbon dioxide, and are recyclable. However, urban dwellers perceive the use of sustainable materials as a sign of poverty. The overuse of concrete blocks by urban dwellers is a consequence of this. A high percentage of residents living in informal settlements are unemployed, and cannot therefore afford basic services. In addition, the total construction costs per square meter for a newly built house is E6 614/m2 (US$403.01), which is high even for anyone earning a minimum wage.

Developers and building contractors are regulated by the Construction Industry Council. As for labour costs, the median salary for a construction worker is E2 810 (US$171) a month. Building permits take 116 days to get approved. It is interesting to note that, despite this, building permits in Eswatini increased from 178 412 in the in the first quarter of 2021 to 340 018 in the second quarter of 2021. This is due land policy reforms such as the now passed The Sectional Titles Act (Amendment) Act, 2018, and Regulations 2020 which is stimulating demand for housing.

Over the last few decades, women have become increasingly independent and have slowly joined the workforce in the developer space. Women are playing larger roles in leading various sectors of real estate, from developers and realtors to brokers and buyers.

Property Markets

The Eswatini Deeds Registry falls under the Ministry of Natural Resources and Energy and was established under Section 3 of the Deeds Registry Act No. 37 of 1968. As of 2020, Eswatini’s Registrar of Deeds records 20 000 registered title deeds land parcels, with 7 300 of them registered in the names of women. There are a total of 1 772 properties registered for property rate payments in the main urban centres, however, only 315 properties have deeds, with the majority of properties being rented out in Mbabane. This is because non-citizens cannot own land and can only obtain long-term leases (10-99 years). With property transfers, 1 004 deeds of transfers were concluded successfully in 2021/2022, down from 1127 properties registered in 2020/2021. Registering property in the Eswatini takes 21 days, which is substantially less than the Sub-Saharan Africa average of 53.6 days. Nine procedures are required and the overall process is estimated to cost approximately 7.3% of the property value.

In terms of the residential property market, Ezulwini, a town along the MR3 highway between Mbabane and Manzini, remains a hotbed of activity. There has been a spike in land prices over recent months due to large corporations buying up the remaining tracts of land available along the highway, particularly with road frontage. There is also a high demand for rental properties, but the availability of well-priced, high-quality rental units continues to be a problem. Due to a lack of options in the market, landlords continue to charge relatively high rentals for poor quality stock.

In terms of specific legislation regulating the property sector, the government has drafted the Estate Agents Registration, Licensing and Professional Indemnity Regulation Act of 2017, which is not yet operational. There is also no registered regulatory body for real estate agents. As a result of the formation of the Eswatini Realtors Association (ESWARA) in 2018, realtors are able to represent themselves. ESWARA collaborates with other organisations supporting estate agents’ work, such as banks, surveyors, valuers, conveyancers, human settlement authorities, municipalities, and the land registry.

Policy and Legislation

In 2021, the Ministry of Housing drafted a new Bill to regulate landlords and tenants. The Residential Tenancies Bill of 2021 aims to address some of the challenges landlords and tenants face in rental housing. According to the Bill, landowners are required to maintain rented properties. A tenant may report a landowner to a tribunal if he or she fails to carry out repairs on time, and rent will not be paid. In April 2022, the Sectional Titles Act (Amendment) Act, 2018 and Regulations 2020 came into effect.

The issues around property right and gender have been contested in Eswatini for several years because previously women could not register property in their names in the Deed’s Registry. Women’s rights activists challenged the Deeds Office to amend Section 16(3) of the Deeds Registry Act. In 2019 the High Court ruled that the doctrine of “marital power”’ was unconstitutional, and granted married woman’s various rights including full rights to buy and sell property in their names, sign contracts, and conduct legal proceedings without the consent of their husbands. Although there are limited laws to protect widows, the Constitution under Section 34 does allow widows to inherit their deceased spouse’s estate.

Opportunities

There are rental housing opportunities for developers nationwide, but especially along the Mbabane Manzini corridor. A renewable energy opportunity has been presented to EHB as a result of the Strategy for Sustainable Development and Inclusive Growth (SSDIG) 2030, developed in 2017. This strategy involves a switch from non-renewable to renewable energy sources. As a result, the waste segregation project that will be piloted at Mobeni Matsapha Estate is intended to encourage green lifestyles within residents’ properties. The goals of the SSDIG, as envisioned by the EHB, are to reduce waste sent to landfills and incinerators by encouraging waste reduction, waste reuse, and waste recycling within EHB communities. The EHB also intends to use solar energy extensively in future developments for powering its residential properties in townships and homes. As part of this process, existing rental units will be converted from electric geysers to solar geysers. In recognition of its environmentally conscious efforts, the EHB was awarded the Green Parastatal award at the Temvelo Climate and Tourism Awards 2020.

The Ministry of Housing and Urban Development anticipates that the Sectional Title Act will stimulate the property market in Eswatini, such as the Liqhaga flats development in Manzini. Property prices are expected to decrease for sectional title units as building, land and service provision costs will be reduced. Sectional title schemes will also be insured, which will benefit the insurance industry immensely. Municipalities also receive money from sectional title units, as owners pay monthly levies.

Eswatini has 60% of its population living in informal settlements, which require upgrading to provide basic services to its citizens. These upgrades can be done in a more environmentally sustainable way.

Availability of Data on Housing Finance

Data is accessible from government departments, although it is mainly outdated and consists mostly of laws and policies related to housing. There is limited current information on housing finance in Eswatini. This could be a result of limited resources and human capital in government departments. It must be noted that the country faces major economic challenges and national surveys are costly and often require external financial support to undertake them.

There is a strong need for secondary data collection from international bodies such as the World Bank, International Monetary Fund (IMF) and the United Nations, and from regional bodies such as the African Development Bank. The Central Bank of Eswatini disseminates financial statistics, such as those relating to interest and lending rates.

Green Applications for Affordable Housing

The Eswatini Independent Power Producer policy was introduced in 2015 to allow for a smooth transition from coal-based electricity to sustainable energy (including wind and solar), while allowing private sector participation in a regulated way. It has allowed Independent Power Producers to tap into the energy potential, with a 100kW grid operating near Siteki in eastern Eswatini. Energy development is guided by the National Energy Policy of 2018.Electricity is still mainly generated from coal and hydroelectric sources, with 60% coming from South Africa, Mozambique and the Southern African Power Pool (SAPP) Day-Ahead Market.It is estimated that the country has approximately 1 700 -1,800 kWh of solar energy per square metre with the best yield being located south of the country.

In 2020, roughly 79.73% of the population had access to electricity. Approximately 69% of the urban population have access to clean water and 58% have access to sanitation services. To address this, the government is implementing the Manzini Region Water Supply and Sanitation Project in Manzini. Banks do not offer green mortgages in Eswatini.

Websites

Central Bank of Eswatini www.centralbank.org.sz

Eswatini Bankers Association www.eba.org.sz

Eswatini Deeds Registry www.gov.sz

Eswatini Property Review www.barcodecreative.net

Eswatini Finance www.eswatinifinance.org

Eswatini Financial Services Regulatory Authority www.fsra.co.sz

Swaziland Building Society www.sbs.co.sz

Eswatini Housing Board www.snhb.co.sz

Southern African Development Community www.sadc-dfrc.org

Standard Bank Eswatini www.standardbank.co.sz

Construction Industry Council www.cic.co.sz

Statista www.statista.com