Cities that Think, Fast and Slow

This essay is excerpted from the 15th edition of the Housing Finance in Africa Yearbook, published in October 2024.

Cities are pivotal to the growth of Africa’s economies – we understand this.  And, as urban areas continue to expand, it is obvious that the development of housing is central to cities’ long-term prospects.  The two go together.  Adequate and affordable housing is a key driver of urban growth because it directly affects where and how people live, work, and access services. When housing is properly planned and integrated into city infrastructure, it can support efficient urban development, manage and leverage the opportunities of increased population density, and stimulate local economic growth.^[1]

But Africa’s cities are informal.  Creative, chaotic centres of job seekers, migrants, and young people, visibly overcome by traffic congestion, street trading, and informal housing, dangerous and uncomfortable, they can only reminisce about the careful planning of the past.  Growing at an unprecedented rate, faster in some places than anywhere else on the planet, their governments are not succeeding in ensuring the delivery of affordable, adequate housing at the price and scale required by their populations.  No matter the new initiatives – a housing development project of 1 000 units here, or a high-rise development of 2 000 units there (many of which are described in this Yearbook) – these are drops in the bucket of demand. City officials and ministers of housing are stuck: no matter what they do, backlogs grow.  No matter how many new units they finance, how many systems and processes and initiatives they implement, their progress is paltry compared to the activity that is happening on the streets.

Take Kenya: in the 10-year period between the two censuses of 2009 and 2019, the urban population grew by just under 200 000 households per annum.  Less than a quarter of these were new urban, owner-occupied households, while the majority, about 158 000, were new urban households who rented.  Most of these tenant households (89%) rented their home from a private individual.^[2]  Critically: this data is not counted.  The Kenya profile in this Yearbook reports: “Despite an annual demand of 250 000 housing units, only approximately 50 000 units are supplied with approximately 2% targeting the low-income segment.”^[3] The 89% of tenant households renting from private individuals are participating in the informal housing market  – driven by households and independent investors, identifying opportunities and realising a return – and at a scale four times that which is delivered in the formal market.  There is a further dimension: tenant households pay rent!  Returns are low; the quality of the urban environment is poor; but tenants pay rent and support a thriving, low margin-high volume economy that serves the breadth of the population, just not yet in the depth they require.

Is there something we can learn from this?

Recognising and leveraging the (so-called) informal

The important role of the informal sector in the labour market, the housing and construction market, and in the finance market is not a new observation – and it is one that is echoed by global bodies such as the delegates to the Africa Urban Forum^[4] held in Addis Ababa, Ethiopia in early September 2024; by UN-Habitat^[5]; by certain Direct Foreign Investment (DFIs) and impact investors^[6], and even by the private sector.  But while we consider ‘the inclusion of the informal’ or ‘the formalisation of the informal’ it is worth reminding ourselves – the informal sector is not secondary to the formal – it represents the majority.

African labour markets are dominated by the informally employed.  More housing is delivered by informal builders and those involved in self-construction than by anything even hoped to be built by either the state or the private sector.  There are more instances of lending and investment that happen informally – whether from hand to hand, through rotating schemes or cooperatives, or in the form of remittances – than formally through regulated channels.  And while informal processes are ultimately inefficient and expensive, opaque and exploitative, and often subject to fraud; they are also nimble and responsive, there are few barriers to entry, and, critically, in their functioning, they are expressive of the priorities, needs and capacities of the majority of people across the continent.   This is important market information and it suggests an important opportunity for well-designed and targeted investment.

Informal settlements

A key indicator that drives many governments and regional bodies, is the percent of the urban population living in slums.  This dominates our imagination of the urban landscape in most countries across Africa – indeed, it is only in a few countries at the northern and southern edges of the continent where less than a quarter of the national, urban population lives in slums.  In most countries, the figure is closer to a third or even half the urban population.  This is echoed in the map on the right, which shows the percentage of households with access to basic services, including water, electricity and sanitation.  While the same countries feature, access to services is somewhat better.

The UN-Habitat asserts that a household is living in a slum if they lack one or more of the following five factors:^[7]

1. Durable housing of a permanent nature that protects against extreme climate conditions
2. Sufficient living space which means not more than three people sharing the same room
3. Easy access to safe water in sufficient amounts at an affordable price
4. Access to adequate sanitation in the form of a private or public toilet shared by a reasonable number of people
5. Security of tenure that prevents forced evictions.

Because data regarding security of tenure is extremely difficult to collect, the UN operationalises its definition of a household living in a ‘slum’ on the first four criteria.

It is intuitive that rapid urbanisation (coupled with insufficient supply to meet demand) is a key factor driving the growth of informal settlements.  In truth, urbanisation rates are not clearly and directly tied to a high incidence of people living in slums.  As illustrated, there are many countries with high urbanisation rates where a majority of households do not in fact live in slums, and a few others with lower urbanisation rates, where they do.  Other factors must also be at play.

There are many: insufficient urban planning and weak municipal government that fails to deliver the necessary infrastructure; poor land management and weak tenure systems; household affordability constraints that undermine investment in housing; an under-developed housing construction sector that lacks the capital and expertise to deliver at scale; and various environmental and social factors – natural disasters, climate change, political instability – that result in urban migrants often being the most vulnerable and least able to meet their housing needs independently.  High urbanisation rates are an important driver of slum growth, but they are intertwined with challenges relating to governance and planning, and the functioning of finance, land, construction, and labour markets.  Urbanisation rates are what make everything happen so fast, but at the centre are people – people who produce as well as consume, people who act instead of wait, people who make a plan to resolve their housing circumstances and pursue their livelihoods as best as they can, sometimes (often) despite government policies and programmes to meet their needs differently.

As we recognise the potential for cities to drive economic growth, and engage with the reality that housing sits at the centre of this effort, we must also recognise and understand the potential of people, operating in the most difficult of circumstances and still getting on with it.

The 2024 Yearbook is full of examples of the informal.  From informal employment to informal land tenure and transactions, to informal construction and informal finance – these approaches dominate the economies of virtually every country on this continent.  While informal processes and systems are mostly indicative of some kind of failure and shortcoming, they are also indicative of what could work and where support is needed. The challenge to policy makers, regulators and the private sector is not to constrain these efforts with a false trust in the formal, but to rather leverage them by better understanding what leads to, emboldens and necessitates the (so-called) informal.

Informal employment

Data from the IMF, World Bank, AfDB, and ILO between 2016 and 2024 show unemployment rates and the percentage of the workforce that is informally employed.^[8]  In virtually every country on the continent, it is the vast majority of adults.  Only in Seychelles, Mauritius, South Africa and Tunisia do the informally employed constitute less than half the workforce.  The remainder of countries for which there is data find that more than half and in some cases more than three quarters of their labour force is employed informally.  According to the ILO, using data from 2021, 98.5% of Niger’s labour force and 97.5% of DRC’s labour force is informally employed.  In Mozambique, the figure is 95.6%; in Tanzania, it is 93.3%; and in Côte d’Ivoire, it is 92.1%.  In Ethiopia where 85.2% of the population is employed in the informal sector and the Gini coefficient is 35 (up from 33.2 in 2020), it is noted that despite economic growth in the country (with a GDP growth rate of 6.5%) poverty has not been significantly reduced and inequality is rising.

What does that mean for access to housing and housing finance?  Almost every profile in this Yearbook explains low levels of mortgage penetration with high levels of informal employment, saying that potential borrowers do not fall within the criteria set by the lenders.  When incomes are uncertain, the author of the Eritrean profile says, mortgage commitments cannot be guaranteed.    As such, the standard requirement for mortgage eligibility is proof of formal employment or verifiable income – something that the majority cannot provide.

There is non-mortgage housing finance.  For example, in Uganda, FINCA Uganda and Pride Micro Finance both offer housing microfinance, as does Housing Finance Bank, which recently developed a housing microloan product alongside its original mortgage product.  Research undertaken by CAHF in this past year, however, found that in most cases, non-mortgage housing credit is accessed in the form of personal loans and unspecified micro-loans.  It has been estimated that as much as one third of all unspecified micro credit is used in some way in support of the home.  The challenge facing borrowers in their home building process, however, is that microcredit that is not specified for housing is often a smaller quantum and shorter duration than what would be needed for housing purposes.  This interrupts the construction process, extending the time involved and, in many cases, also the costs.

The most common source of finance for housing is household savings, mostly held by informal savings groups and cooperatives when they extend the funds as small loans to members.  In this Yearbook, it is reported that in Ghana, households save for housing and other purposes in clubs called “susus”, which, it is argued, are preferred because of their moderate financial requirements and considerate repayment terms.^[9]  In Cameroon, a cooperative is participating in a government-supported initiative in which subsidised loans are extended to households but secured by the cooperative.  The home which is built with these funds remains the property of the cooperative until the member has repaid the loan in full.^[10]  In Senegal, housing cooperatives are also a common mechanism for organising savings towards housing delivery.

In some countries, housing investment is substantially financed by remittances from the diaspora.  Household remittances have increased substantially in Sudan, following the outbreak of the civil war. An estimated 90% of households received remittances through informal channels.^[11]  Remittances are also described as a substantial source of housing finance in Cape Verde and Burundi, Nigeria, Kenya, Senegal, Ghana and Zimbabwe, where analysts estimate up to 40% of the remittances inflow is invested in housing.

Informal land rights & transactions

Informality in land rights also predominate, and very many of the profiles in this book note this as a barrier to formal housing finance and investment, not only by the private sector but also by the state.  Many countries have incomplete land registries and in many of these, efforts to address the gaps are underway.  In Angola, a Land Registry Massification programme was launched in March 2021 with an intention to register 2.9 million properties by 2025, but by the end of 2023 less than 300 000 properties had been registered.  This equates to only 6.6% of Angola’s urban households being registered to pay property taxes – which explains why, in 2023, the income from property taxes contributed only 0.26% of the State Budget.^[12]  Togo is similarly constrained: in 2019, while an estimated 50% of households were homeowners, only 10% said they had property deeds.^[13]

The profile for Comoros describes a property market that suffers from competing legal systems – traditional, Islamic, and modern.  Traditional law allocates land based on inheritance through matrilineal lines; Islamic law regards land ownership within the extent of its productive use; and modern law recognises private ownership.  As a result, several persons may lay claim to a plot of land based on different existing legal systems. While land registered in the name of a private person is meant to guarantee maximum land tenure, traditional laws prevail over modern law, and disputes can arise.  This is similar to the system in Somalia which is also governed by traditional, Islamic and modern frameworks, and where land is mostly transacted informally using a combination of the three.  When there is a title deed, a sale can either be formal with a notary, guarantor and witness, or informal where parties draft sale agreements in the presence of a witness.  Informal transactions are also noted in Burundi.  Sale transactions are recorded on a selling contract which is signed by local leaders and two witnesses of each party involved in the deal. Of course, there is no way that finance can be tied to these transactions, if the framework governing them is so unclear and dependent on context.

In South Africa, where formal legal title is enshrined in the Constitution and taken for granted by the wealthy, a backlog in the delivery of title deeds with respect to government-subsidised properties, as well as lack of clarity on the part of government as to whether beneficiaries may transact, has created a bifurcated system.  Title and formal transactions work well for the wealthy.  But for low-income earners, the good functioning of the property market has been undermined.  In one neighbourhood in Cape Town, it was found that 45% of properties had one or more issues that compromised title – properties with no primary title, others where the title rested in unresolved deceased estates, and informal transactions (albeit sometimes validated at the police station)-  undermining low income household’s access to the asset value of their homes, and militating against their interest in investing in their housing.^[14]

Informal estate agents

While deeds registries may be slow and incomplete, and while finance may be limited, real estate markets are thriving.  Many of the profiles point to a growing number of informal real estate agents – there is evidence in Cameroon, Rwanda, Morocco, South Africa and elsewhere.  In Senegal, our profile author reports that of the 466 real estate agencies listed, only 100 comply with the standards, adding that individual brokers work in informal networks and as freelancers.^[15] In general, their commission for the sale is 5% of the total value of the transaction.  The Moroccan informal real estate agents are known as “samsars” (an Arabic term).  Although they have no official status, samsars act as intermediaries by assisting housing seekers through word-of-mouth, in exchange for a small commission.  The Togo profile highlights the challenge: while there is no barrier to entry to becoming a real estate agent,  anyone is able to use the title of “real estate agent” and to practice the profession. In some instances, this has led to fraud. In Lesotho, it is noted that the real estate industry is insufficiently regulated to control market pricing and ensure consumer protection against speculation.

Informal rental markets

Very many of the profiles in this Yearbook highlight the role of rental – this was an explicit question asked of the country authors.  There are many rental projects highlighted in the ‘case study’ boxes for each profile – mostly government-initiated, large-scale, institutional rental, but two smaller-scale interventions stand out.  In both Mozambique and South Africa, the work of small-scale, or micro builders, and their efforts to deliver backyard rental is highlighted.

Possibly because it happens in backyards, or because its builders or operators are individuals and not registered companies, or perhaps because it is indeed, small scale – this form of housing is the least recognised and is virtually overlooked by policy.  And yet, in many countries, small-scale rental is the dominant form of housing provision.  There are so many examples. In Namibia, the informal rental market is based in the lower income suburbs surrounding the informal settlements, providing accommodation for low and ultra-low income people or households who have come to the city in search of accommodation.  While some units are built of temporary (i.e. shack) materials, others are built with formal materials.   In Zimbabwe ‘household landlordism is widespread in urban areas, with an estimated 42.7% of urban households living as ‘lodgers’.’^[16]  Backyard rental is also mentioned as significant in Malawi and Madagascar.  In Ugandan slums, more than 56% of dwellings are occupied by tenants compared to 30% that are owner-occupied.^[17]  The informal rental housing market for shared rooms (called muzigo) or makeshift housing is also a feature of Ugandan slum settlements.  This is also true for Tanzania, where about 80% of tenant households live in shared accommodation.

Informal housing construction

This Yearbook provides multiple examples of self-construction – indeed, this is by far the dominant form of housing delivery across the continent, in urban and rural areas alike (but only by anecdote and observation, for there is no data).  For most, the self-construction process is an incremental one as the household manages their time and money, together with wider contextual issues such as  the progress of the national and local economy, climate and weather events, and social-political issues.  Houses that are self-built take time – in Kenya, the KMRC found that it takes on average 3.3 years to complete a house.^[18]  In Cape Verde, it can take ten years or more.^[19]  In Togo, households build their homes as they have the funds so that in many cases, their homes are completed by their children once they reach adulthood.^[20]

Households take different approaches to self-construction.  In Angola, most owner-builders contract tradespersons who they find in the informal market, where land and materials are also procured, usually without the assistance of construction contractors and professional real estate agents.  In Madagascar, the construction sector is predominantly informal, with many small, unregistered  companies. Even registered contractors often collaborate with unregistered entities and frequently hire informal subcontractors for specific tasks or small projects.  The situation is similar in Zambia, where informal developers cater for low-income groups, primarily in peri-urban areas.

The challenge with incremental building is that it is often haphazard and of poor quality.  The Comoros profile notes that because the real estate sector of Comoros is under-developed and largely informal, it is ill-equipped to deal with the climate crisis and its impacts.  The author of the Lesotho profile asserts that much existing stock in Lesotho requires renovation, as it was originally built informally.  The Equatorial Guinea profile makes the point that informal buildings usually use the entire surface of the land on which they are built without leaving space for air circulation or water channeling.  This makes them vulnerable to weather events: storms and torrential rains.  Part of the problem is that building codes do not speak to, or acknowledge the existence of, the small and incremental home builders that predominate, and the materials, tools and skills they have at their disposal.

In some countries, the incremental, self-construction approach is embraced by the government, which has established mechanisms to support the effort.  In Gabon, where more than two-thirds of homeowners in urban areas build their homes themselves, the government established a National Real Estate Company (SNI), which provides technical support to builders through the Office for Self-Construction Support (BAAC).^[21]  In Cameroon, the government’s Mission for the Development and Equipment of Urban and Rural Land (MAETUR), makes land available to households wishing to build their own housing in the cities of  Yaoundé and Douala. Offering serviced plots for sale at CFA10 000/m²  (US$16.39/m²), the programme requires that they be developed within three years.^[22]

Efforts in formal housing delivery

This year, we asked country profile authors to share a short report of a housing development underway in their country.  We received many examples of rental projects.  Most projects were state-subsidised, social housing, or involving public-private-partnerships.  A few offer insight into what can go wrong – poor market targeting in Angola, development upset as a result of macro-economic factors in Burundi, and cost overruns in Gabon.   Together, the projects offer a sample catalogue of the kind of housing underway across the continent.

This set of examples should be looked at together with our search for the cheapest newly-built house by a private sector developer.  Absolute prices, converted into USD for ease of comparison, help us understand the variability across countries and tell somewhat of a story of the different conditions in each country that give rise to the prices available.  How each price relates to the affordability of the population where it is being delivered, is an additional and very important consideration.

Drawing on World Bank international comparison data for average household expenditure per annum,^[23] the chart   considers the price of the cheapest newly-built house (collected as a CAHF indicator, every year – see textbox) as a multiple of total annual expenditure.  The bars in the chart are split between expenditure on housing-related items, and expenditure on all else.  These are average figures and therefore indicative at best – in each country there are likely to be very many more people who earn less than these values, and a few who earn more.  Average annual expenditure is highest in the Seychelles, and lowest in the Democratic Republic of the Congo.  It is also important to note that these averages are national – so it is likely that the figure would be higher in urban areas, and lower in rural areas.

The graph then explores how many times annual income must be multiplied, to purchase the cheapest newly-built house:

Typically, it is presumed that in contexts where there is affordable and accessible mortgage finance, and stable, formal employment, a household should be able to afford the purchase of a house that is between two and three times their gross annual income.  There are a few countries in Africa where the house price-to-income ratio is less than two (Seychelles, Egypt, Equatorial Guinea, Namibia, Kenya, Mauritania, Republic of Congo, Nigeria, Angola) – but only a few of these have stable mortgage markets.  For the remainder, the price of the cheapest newly-built house is far out of range for the average household by expenditure.

One reason for this has to do with the broader, macro-economic framework and the cost of construction.  Inflation rates across Africa have been particularly hard this year, with rates exceeding 20% in Angola, Burundi, Ghana, Ethiopia, and Malawi; exceeding 30% in Egypt, Nigeria, and Sierra Leone; and rising beyond comprehension in South Sudan, Sudan, and Zimbabwe.^[24]  Building material cost inflation rates are only available for a few countries – but these numbers, illustrated in orange in the graph below, offer useful and worrying insights for some countries.^[25]  Kenya’s building materials cost inflation was about 19% versus an overall inflation rate of about 6%.  Similarly in Senegal, the general inflation rate was about 4%, but the building materials inflation rate was pitching towards 23%.  Mali’s building cost inflation rate was a little bit higher still.

In the Angola profile, it is reported that the cost of living in the country’s capital increased at almost twice the national rate of 22% compared to the same month in 2023, the highest value since the post-war year of 2004. The year-on-year inflation rate in Luanda grew by 31.5 percentage points, rising from 11.4% to 42.8%.^[26]  In the first half of 2024 alone, prices in the capital grew by 20.4%.  While somewhat lower than inflation for the whole economy, construction material prices rose 24.3% between June 2023 and June 2024, with cement and binder increasing by 51.9% (in the informal market, the price of a 50kg bag costs approximately Kz5 000 or US$5.78).^[27]

CAHF has been collecting the price of building materials – and specifically the price of a 50kg bag of cement – for years.  This year, the data for each country is included in the regional infographics.  The chart below considers overall construction cost per square meter versus the cost of a 50kg bag of cement.  What stands out is that there is no relationship between the two – for the countries for which we could find data, a fairly regular construction cost per square meter is met with erratic prices for a bag of cement.  Clearly it is not only cement that goes into the cost of construction.  Labour, other materials (notably steel), the price of finance, and even the time taken with municipal administrative and approval processes all contribute to the cost of construction and ultimately the price of a house.

Stepping past the simple price of cement, the author of the profile for Sierra Leone speculates that innovation in the production of local building materials can cut building costs by over 40%.^[28]  An innovative project in Cameroon is realising such savings by prioritising the use of sustainable materials including wood, kneaded earth bricks and stabilised earth bricks. Algeria this year has achieved adequate local production of cement, clinker, rebar, ceramics, and other building materials to service the entire local market.^[29] Mauritania is also adopting local building materials as a green housing strategy.^[30]  In 2023, the Mauritanian government implemented an eco-construction charter to mainstream the use of local materials in the projects of local developers.

Setting precedent in unprecedented times

So what does all of this mean?  Most of the projects highlighted in the Yearbook are typical interventions following established town and regional planning standards, building codes, green certification standards, delivery approaches and deal structuring – a normative model of how cities and urban development should work.  In some cases, there is success.  In Egypt, where an estimated 15 million people (14% of the population) live in unplanned settlements, the government has used the year to subsidise approximately 1.2 million citizens, while addressing 357 unsafe informal areas with a total of 246 000 housing units.  The Egyptian government also developed 71 unplanned areas serving approximately 1.8 million citizens. Further projects to upgrade unplanned areas are underway.  This is at an enormous cost, however, which most governments cannot afford.^[31]

Meanwhile, in Ghana, profile authors make the point that the absence of a holistic solution to the housing shortage remains a problem notwithstanding government’s focus on mass housing projects, the establishment of the National Homeownership Fund (NHF), public private partnerships, and creation of an enabling environment for private developers.  Similarly, in South Africa, where the national housing subsidy programme has built upwards of four million subsidised housing units over the past thirty years, informal settlements persist and even grow, while the property market remains as unequal as ever.

We cannot rely on precedent in unprecedented times.  Rapid urbanisation and population growth, regional migration and internal displacement, and environmental degradation and climate change, are just some of the new dynamics that did not exist when precedent was being set.

Cities that Think, Fast and Slow

In 2002 Psychologist Daniel Kahneman won the Nobel Prize for Economics for work that he had done with his colleague Amos Tversky, and which was later published in a book called “Thinking, Fast and Slow”.^[32]  In that book, Kahneman distinguishes between two types of thinking:

• System 1 (“thinking fast”): Intuitive, quick, and automatic decision-making based on heuristics and experience.
• System 2 (“thinking slow”): Deliberate, logical, and analytical thinking that requires effort and conscious engagement.

Kahneman argues that while System 1 is necessary for quick judgments and survival, it often leads to cognitive biases and errors in decision-making because it relies on intuition rather than rational analysis. System 2, though more accurate, is slower and harder to engage, meaning people often default to System 1 even in situations where a more analytical approach is needed.

The framework can be used to think about how cities operate.  The interplay between the formal and informal sectors in African cities mirrors fast and slow thinking:

• Informal Markets (System 1): Many informal market actors rely on System 1 decision-making, based on immediate needs, gut feelings, and practical knowledge. Informal traders often react quickly to daily shifts in supply, demand, administrative requirements and locally-imposed regulations, relying on their intuition and experience to stay afloat. Survival entrepreneurship sees individuals quickly identify and exploit economic opportunities without formal planning or financial security. City politics also fit into System 1: responsive to the electorate, but often at odds with longer term objectives for sustainability.
• Formal Governance (System 2): City governments, on the other hand, attempt to regulate these markets and provide services using System 2 thinking, with detailed laws, planning, and regulations. Yet, these often move slowly and struggle to keep up with the dynamism of informal economies. For example, many city plans are outdated, shaped by colonial origins or designed for much smaller populations, while informal settlements rapidly expand in ways that outpace formal housing or infrastructure projects​.

African cities need policies that allow for fast, adaptive responses to informal market needs while supporting long-term structural changes. One example is the creation of flexible urban spaces—markets, transport hubs, or public spaces designed to accommodate the rapid, informal trading activities of vendors.  Rather than forcing the formalisation of all economic activities, African cities should focus on inclusive policies that work with informal actors. This could mean integrating informal housing into city plans, offering services such as  sanitation, waste collection, or water access without first requiring formal titles or zoning compliance.

The key to this is technology.  And while cities today grapple with unprecedented rates of urbanisation and the pressures of growth, they also have unprecedented access to systems and solutions that make it all possible.  Technology opens up new opportunities, and specific technological interventions can play a critical role in integrating the fast, intuitive decision-making of the informal sector with the deliberate, long-term planning required for sustainable urban development. By leveraging digital platforms, mobile technology, data analytics, and smart city systems, cities can create a bridge between the adaptive flexibility of the informal economy (System 1 thinking) and the structured governance processes (System 2 thinking).

It is already happening:^[33]

• Mobile money: Platforms like M-Pesa in Kenya have revolutionised access to financial services for millions of people.^[34] These platforms enable fast, intuitive transactions (System 1) while also creating an evidence base that records their financial behaviours – useful for credit underwriting (System 2). Over time, users are gradually integrated into more formal financial ecosystems, allowing them to access credit, savings, and insurance products that encourage long-term planning (System 2).
• E-titling: Digital systems have changed the way in which records of tenure can be registered. In 2013, the Rwandan government was one of the first countries in the region to implement  a land digitalisation record system. Known as the Land Tenure Regularisation Program, the nationwide project involved the demarcation, land adjudication, digitisation and registration of all parcels of land. Rwanda has also launched an electronic certificate system referred to as the e-Title so that landowners can quickly and cheaply access their title certificates on the National Land Authority’s official website.^[35]  Kenya and South Africa are also implementing e-title systems which they hope will shortcut the process of land registration and transactions.
• Decentralised property registries: A particular expression of e-titling, blockchain technology can be used to create decentralised property registries or enforceable digital contracts that by-pass cumbersome bureaucracy. This is being used by mortgage lenders in a number of countries, to record the lien on a property outside the formal cadastral system which is less well trusted.  The approach has also been tested in informal settlements – for example by Bitland in Ghana, which has used the OpenLedger platform in 28 communities in Kumasi, Ghana to create a single ledger of land holdings and convert paper-based evidence into a digital format.^[36]
• Rent-to-buy models supported by e-lending approaches: Blockchain technology also reduces the cost of transactions, especially in terms of how it validates “truthfulness” of data. This has had a profound impact on housing affordability for the household, and on market size and opportunity for the developer.  Working with Empowa in Mozambique, Casa Real has found that the homes it produces are now accessible to 80% of the population, as against the same houses being accessible only by 3% of the population based on the incumbent mortgage-model.^[37]
• Tokenisation: Whether by blockchain or another web3 technology, tokenisation offers an important opportunity for raising capital for affordable housing, while also facilitating investment in smaller bites for lower income or more tentative investors. Hodhi, in Kenya, describes itself as an investment platform that aims to unlock the financial power of the home.  Hodhi secures an income generating property asset, for example, a block of 200 apartment units.  It then issues tokens against this asset.  These are called AKREs.  AKREs are priced at 50 Kenyan shillings, enabling investors of all income groups to purchase as many as they can afford.  AKREs appreciate over time while rental income from the apartments is reinvested into sovereign securities, further enhancing returns.  AKRE holders can enjoy passive income growth without the need for ongoing contributions.  AKREs can be used as collateral for loans, providing access to credit.^[38]
• Credit underwriting: This is another area where technology can be usefully employed to better quantify risk and thereby establish the opportunity for return. Lenders often require a little bit of a push, however.  In an effort to promote financial access, the Djibouti government has set up a guarantee fund (FOGAD) which includes a guarantee provision of up to Fdj10 million (US$56 223) for what are called “precarious households” who earn between US$450 – US$1 518.^[39] This would seem to be somewhat similar to the FOGARIM guarantee implemented many years ago in Morocco.  In Kenya, the KMRC has established a partial credit guarantee to de-risk mortgage lending to the informal sector – the Kenya Mortgage Guarantee Fund.^[40]
• Data Collection and Mapping Informality: Tools such as GIS (Geographic Information Systems), drones, and satellite imagery can help map the informal economy. This can provide real-time data on informal settlements, markets, and economic activities, allowing city planners to understand and respond to informal dynamics more effectively. In the coming year, CAHF is going to explore this in Kenya with the Lincoln Institute for Land Policy.
• Mobile Platforms for Trade and Market Access: Mobile apps like iBuild Global^[41] (an e-commerce networking platform with operations globally) or Cutstruct^[42] (a Nigerian proptech platform) allow informal builders and small-scale developers to access larger markets. These platforms facilitate fast, intuitive market participation, while also enabling them to engage in formalized systems of trade and distribution. The track record that users create becomes a basis against which lenders can contemplate credit, which then supports growth and the further development of the small businesses

There are so many examples targeting specific stumbling blocks across the value chain.  Technology offers enormous potential for bridging the gap between fast, adaptive decision-making in the informal sector and the slow, deliberate processes of urban planning and governance. Through digital platforms, data-driven tools, and smart city technologies, informal workers can engage in more strategic, long-term decision-making, while governments can respond more flexibly to the dynamic realities of informal economies.

This integration fosters a more inclusive urban environment that leverages the resilience and adaptability of the informal sector while enhancing access to formal systems that support sustainable economic growth and urban development.

While informal processes are ultimately inefficient and expensive, opaque and exploitative, and often subject to fraud; they are also nimble and responsive, there are few barriers to entry, and, critically, in their functioning, they are expressive of the priorities, needs and capacities of the majority of people across the continent.   This is important market information and it suggests an important opportunity for well-designed and targeted investment.

Understanding and working with so-called informality

As we seek to leverage the “massive small” capacity^[43] of the so-called informal sector, we also need to understand it.  An important opportunity lies in collecting data from the active experiences of players who work both fast and slow in their particular local contexts.  This is the focus of CAHF’s Open Access Initiative (OAI)^[44], which seeks to record the activities and experiences of developers delivering affordable housing.  The OAI has developed templates to record data on steps, time and cost of the housing delivery process and all its elements, down to brick level, and the cost of labour.  These are being shared with developers in Kenya, and soon in Nigeria.  Shifting the focus more to the so-called informal, the OAI is now also working with FSDKenya and the Livelihoods Impact Fund to track construction processes and costs for ultra-affordable housing.

In Senegal, a project called the “Promotion of Resilient and Sustainable Affordable Housing” (PHARD) is directed at the role of housing cooperatives in the “100 000 houses“ programme of the government.  Financed by the French Fund for the Global Environment (FFEM) and the Ecological Transition Agency (ADEME), PHARD has brought together a consortium of expert development partners to assist housing cooperatives that are mid-way and stuck in their housing development process, struggling to carry out their projects and finding themselves in debt while informal and often poor-quality construction is left unfinished.  The project is studying the way in which the cooperatives operate and then providing support and advice towards innovative construction and financing solutions, with a focus on environmental sustainability and climate resilience.  CAHF is working with PHARD to assist in documenting and then disseminating the experiences of the project.  A critical part of this will involve considering how national and local policy frameworks and affordable housing initiatives can work productively with cooperatives, achieving housing outcomes that are truly affordable to the target market and sustainable in the long term.

A project funded by GIZ in Rwanda in partnership with the Ministry of Infrastructure involves hosting an “Urban Lab” in which stakeholders in the affordable housing sector – both formal and informal – participate in the deliberation around interventions that could support existing households living in inadequate housing conditions in both planned and unplanned settlements.  The work is focused on an often-overlooked segment of the population – households earning less than USD350 per month.^[45]

Slum Dwellers International is a global network of slum dwellers that brings together locally-based savings groups to drive improved living conditions in their communities, championing access to services, improved economic livelihoods, resilience against climate change, affordable and adequate housing, and community building.  In Africa, the group works with over 5000 savings groups across 16 countries in southern, eastern and West Africa.  With a membership of just over half a million savers, this is a critical data source.

SDI’s Know Your City programme presents the data for each settlement, when it was established, its history, and then information on demographics, and its development needs in terms of sanitation sewage, electricity, land tenure, housing and water drainage.  The profiles are out of date, however, with data most recently collected in 2017.^[46]  They are also incomplete.  Within the structures of the savings groups and across the settlements, there is economic information that would be so valuable to investors and policy makers trying to assess risk and opportunity for engagement. SDI is aware of the gaps and the opportunities – it is their plan to improve their data portal in the coming year.

One of the definitions of informality is that it escapes enumeration – it is invisible.  The objective of promoting formality, therefore, might be as easily achieved as making the invisible visible.  That effort will take detailed counting, and it may also change our understanding of what constitutes a workable ‘formal’ model, as we learn.

The profiles in the 2024 Yearbook show a continent of possibility – not just driven by the formal processes and projects underway in each country, but also by the people living their lives and realising their housing needs independently and incrementally. The key to realising effective, efficient, and working residential property markets in African cities lies in integrating the two, working with the so-called informal and leveraging its massive capacity, while creating solid, evidence-based systems and frameworks in which it can operate. Informal economies thrive on rapid, intuitive responses to survive daily challenges, and are at the centre of the housing delivery effort across the continent.  Long-term urban planning and investment, however, must be deliberate and data-driven to address structural constraints and make space for growth that is sustainable and builds resilience. By blending these approaches, thinking fast and slow, cities can support the resilience of their residents while investing in sustainable urban growth.

[1] This point was beautifully made in the 2017 report which asks “how can cities become economically dense – not merely crowded?”  See Lall, S. V. Venables, A. J., Avner, P. ( 2017). Africa’s Cities: Opening Doors to the World. World Bank. http://hdl.handle.net/10986/25896 (Accessed 8 October 2024).

[2] See presentation which references the two national censuses of 2009 and 2019:  Rust, K. , Mwangi, B. Melzer, I., Breier, J., Dieye, F. and Matiko, C. (2022). Positioning affordable and backyard rental housing as a key target in Kenya’s Affordable Housing Programme DRAFT Findings.https://housingfinanceafrica.org/documents/positioning-affordable-and-backyard-rental-housing-as-a-key-target-in-kenyas-affordable-housing-programme-draft-findings/ (Accessed 8 October 2024).

[3] See Kenya profile, footnote 50: Kenya Mortgage Refinance Company (2024). Research on systemic barriers towards access and usage of housing finance in Kenya 2023. Pg. 9.

[4] The Addis Declaration for the Africa Urban Forum on Sustainable Urbanisation for Africa’s Transformation (signed 6 September 2024) commits member states to “encourage urban development results in the significant investment in addressing the challenge of informal settlements through allocation of resources and formalization. This should be done in line with the ten key actions of the Global Action Plan for Slum Transformation which consolidates a collective partnership to shaping Cities for All, leaving no one and no place behind, which was adopted at the UN-Habitat Assembly in June 2023, in Nairobi, Kenya.”  Paragraph iiiv, Africa Urban Forum Declaration (2024).  https://au.int/sites/default/files/documents/44056-doc-AFRICA_URBAN_FORUM_DECLARATION_English.pdf (Accessed 10 September 2024).

[5] UN-Habitat (2023). Global Action Plan: Accelerating for Transforming Informal Settlements and Slums by 2030.  https://unhabitat.org/sites/default/files/2023/05/global_action_plan_22-05-23.pdf (Accessed 28 September 2024).

[6] GSG Impact (2022). Informal Settlements: No Longer Invisible. https://www.gsgimpact.org/resources/publications-and-reports/informal-settlements-no-longer-invisible/  (Accessed 29 September 2024).

[7] UN-Habitat (2007). State of the World’s Cities 2006/7.  https://mirror.unhabitat.org/documents/media_centre/sowcr2006/SOWCR%205.pdf (Accessed 23 September 2024).

[8] Explore this data using the ILO’s ILOSTAT explorer:  https://ilostat.ilo.org/data/ (Accessed 8 October 2024).  World Bank data can be found on its Open Data Portal: https://data.worldbank.org/ (Accessed 8 October 2024).

[9] International Finance Corporation (2023). Her Home II Housing Finance for Women in Ghana, Senegal and

Indonesia. https://www.ifc.org/en/insights-reports/2023/housing-finance-for-women-in-ghana-senegal-and-indonesia (Accessed 8 October 2024).

[10] The PALS Alternative Social Housing Programme is profiled in the Cameroon country profile.

[11] United Nations Development Programme (2020). The Potential of Sudanese Diaspora Remittances,

September 2020. https://t.ly/g5MoU (Accessed 23 July 2024). Pgs. 29, 32.

[12] See Angola profile, footnote 44: Cain, A. (2024). Angola’s Unfinished Land Reform – presented to World Bank Land Conference, Washington, 14 May 2024.

[13] See Togo profile, footnote 38: Harmonized Survey on Household Living Conditions, 2018-2019.

https://microdata.worldbank.org/index.php/catalog/4298 (Accessed 8 October 2024). Author’s calculations.

[14] See the work of the Tenure Support Centre, which has been supporting households in Khayelitsha, Cape Town, to resolve their titling issues, while engaging in the policy space at the national level through what is called “Operation Vulindlela” – a cross-departmental intervention aimed at improving the functioning of South Africa’s economy.  See www.titledeed.org.za and Operation Vulindlela (2024). Phase 1 Review 2020 – 2024. https://www.stateofthenation.gov.za/assets/downloads/Operation_Vulindlela_Phase_1_Review.pdf  (Accessed 7 October 2024). Pg. 29.

[15] See Senegal profile, footnote 35: Online interview with Ahmet LÔ, Founder of AML Estate Intelligence and real estate specialist, on 17 July 2024, Dakar.

[16] See Zimbabwe profile, footnote 45: Zimstat (2024). Zimbabwe 2022 Population and Housing Census Report Volume 1.https://tinyurl.com/5fx6d89c (Accessed 25 July 2024). Pg 75

[17] See Uganda profile, footnote 58: Shelter and Settlements Alternatives (2021). Informal Settlements: Statistics, Slums and the Housing Situation in Uganda. https://ssauganda.org.ug/areas-of-focus/informal-settlements/ (Accessed 29 July 2024).

[18]See Kenya profile, footnote 42: Kenya Mortgage Refinance Company (2024). Research on systemic barriers towards access and usage of housing finance in Kenya 2023. Pg. 51.

[19] See Cabo Verde profile, footnote 17: Governo de Cabo Verde (2019). Perfil do sector de Habitação Cabo Verde 2a Edição. https://tinyurl.com/ms2kavp2  (Accessed 11 August 2024). Pg. 114.

[20] See Togo profile.

[21] SNI. Office of support for self-construction. https://www.sni-gabon.com/offres/9-bureau-daccompagnement-a-lauto-construction (Accessed 5 October 2024).

[22] See Cameroon profile, footnote 45: Ngono, B. (2024). Cameroon: The government increases the Guaranteed Interprofessional Minimum Wage (Smig) by 5%. 25 February 2024. Ecomatin.

[23] See World Bank, International Comparison Programme, on https://databank.worldbank.org.  Data on the price of the cheapest newly-built house is collected annually by CAHF.

[24] Inflation data is available from the IMF’s Data Mapper: https://www.imf.org/external/datamapper/PCPIPCH@WEO/OEMDC/ADVEC/WEOWORLD/ (Accessed 8 October 2024).

[25] This data was drawn from local online sources by CAHF’s data team.

[26] See Angola profile, footnotes 7 and 8: World Bank (2024). Angola: Urban population growth rate for 2023, and Statista (2024). Angola Urbanisation from 2013-2023.

[27] See Angola profile.  Data is from the Construction Materials Price Index published by the National Statistics Institute (INE).

[28] See Sierra Leone profile, footnote 73: Ray, P. (2015). Low-cost residential building using locally available materials. https://rebrand.ly/idhaoly (Accessed 11 July 2024).

[29] See Algeria, footnote 33: Algeria Press Service (2023). 60 years after independence, the building materials industry is building a solid foundation. 10 February 2023.

[30] See Mauritania profile, footnote 58: Sahara Media. (2022). Sélibaby: completion of the construction of 50 housing units made with local materials. 12 March 2022.

[31] The Egyptian profile  shows that despite the prevailing interest rate of 28.25%, the Central Bank has introduced mortgages targeted at low-middle income earners, at 3%, with an average value of US$3000 per mortgage.

[32] Kahneman, D. (2011). Thinking, Fast and Slow. Farrar, Straus and Giroux. Or see a summary of the book on https://en.wikipedia.org/wiki/Thinking,_Fast_and_Slow  (Accessed 4 October 2024).

[33] CAHF has recently launched a proptech interview series, engaging with proptech founders in Nigeria and Kenya to understand their businesses, the challenges they face and the opportunities they see.  See https://housingfinanceafrica.org/projects/exploring-technology-in-housing-finance/

[34] See https://www.vodafone.com/about-vodafone/what-we-do/m-pesa (Accessed 28 September 2024).

[35] See Rwanda profile, footnote 36: National Land Authority (2023). Rwanda launches Electronic Land Registration Certificate System. https://www.environment.gov.rw/index.php?eID=dumpFile&t=f&f=60199&token=d4588c66990902b4c18eb3

53d4d3d0cfc5a3ba44 (Accessed 19 July 2024). Pg. 1.

[36]Coleman, L (2024) Bitland Blockchain Initiative Seeks to Create Reliable Land Titles in Africa.  https://www.ccn.com/bitland-blockchain-initiative-seeks-to-create-reliable-land-titles-in-africa/  (Accessed 8 October 2024).

[37] Email correspondence with Marie-Odile Zanders, Empowa, on 7 October 2024.  See also Pilot Insights | The Impact of Climate-Resilient Housing and How Web3 Technology Can Scale Its Development | by Mercy Corps Ventures | Mercy Corps Ventures | Aug, 2024 | Medium

[38] Unpublished interview with Mao Mukuria, co-founder of Hodhi Inc in August 2024 by David Chiwetu.

[39] See Djibouti profile, footnote 46: The Nation. (2023). Spotlight: Djibouti Guarantee Fund: Much more than a financing lever. 10 April 2023.

[40] The RSF Manual for the Kenya Mortgage Guarantee Fund is available on the KMRC’s website: https://www.kmrc.co.ke/resource/rsf-manual (Accessed 8 October 2024).

[41] Visit https://www.ibuild.global/.

[42] See CAHF’s interview with Cutstruct founder here https://housingfinanceafrica.org/documents/insights-in2-innovation-in-proptech-cutstruct/ (Accessed 27 September 2024).

[43] For an interesting application of the concept, see: https://www.tuhf.co.za/massive-small-future-urban-housing/.  (Accessed 8 October 2024)

[44] See the outputs of the Open Access Initiative here: https://housingfinanceafrica.org/projects/open-access-initiative/

[45] See the outputs of the Rwanda Urban Lab Initiative here: https://housingfinanceafrica.org/projects/the-giz-urban-lab-initiative/

[46] See SDI’s Data Portal here: https://sdinet.org/explore-our-data/ (Accessed 27 September 2024).