Andrew Chimphondah is the Managing Director of Kenya-based pan African housing development and finance institution – Shelter Afrique. In an interview he spoke on his five-year strategy, especially focus on affordable housing and their commitment to Nigeria.
Shelter Afrique has been facing liquidity crisis and could not meet its obligations to the member countries. How are you planning to solve the problem?
What we have done is that in 2016, we closed for new business, which led to my taking over and having the opportunity to provide leadership of the company. We have increased the governance, reoganised the company and introduce a new business model. I think more importantly, we have a strategy from 2019 to 2023. The strategy is purely on growing the company and providing decent affordable housing to the 44-member countries in Africa. In terms of our mission, what we have crafted is that we want to be the prominent provider of research, advisory and financial solutions, to try and address critical shortage of housing in Africa through public and private partnerships (PPP) so that we can achieve sustainable developmental impact.
Shelter Afrique like any other organization has it challenges. We are now tackling 52 million housing shortage in Africa, that has become a housing crisis. We have really called a sense of urgency by ourselves and other funders to say, let us work together to achieve this. We have strategic goals, which are achieving financial and organisational sustainability in our member states. We have opened to underwrite new business from 2019. We are on a road show across our member states, telling them that we have started new business and raising capital from them and encouraging public private partnership with the governments. We want to encourage large scale delivery of affordable housing. Before, we do a project for 20 houses.
We are now opened to underwrite new businesses from 2019 so we are on road show to 44-members states, telling them we have started and also raising capital from member states. The unique difference now is on the supply side, arranging PPP with the governments because our dreams are to deliver large-scale affordable housing through partnerships. Our target market is the low-income earners and developers that do low-cost developments as well do it in a large scale so that the developers can enjoy the benefits of economics of scale and make it sustainable.
What are the challenges?
Shelter Afrique like any other organization always have challenges. Our authorized capital is $1 billion and what has been paid in is $100 million. We’re in the process of collecting $260 million from member states. When we collect from them, they are giving us equity and capital. When we then go to the debt market, they ask how much are you putting in yourself, we can leverage another $1billion with the $260 million, we’re expecting from member countries. We had an Annual General Meeting in June, all the countries pledged support to Shelter Afrique. But they said, we must sure we comply from governance point and should not engage in fruitless as well as waste less expenditures. We should focus on delivering for low-income earners. At Shelter Afrique, we have the right support and what we just need to do is to make sure that we deliver housing on large-scale on the supply and demand sides. We deliver line of credit to institutions that support affordable housing mortgagees by the right price and tenure so that we then come up with long-term mortgage loan products.
Do you think these efforts will solve Shelter Afrique’s liquidity problem?
Let me explain the cause of the liquidity problem. In 2016, there was a destructive event; it was actually an internal problem. Because of the event, in 2016, the key aid funders withdraw their support, which created a crisis. I’m please to say, that I have met with each of the eight funders, we have agreed on a date to restructure, whereby all their funding will be paid over a five-year period. We have already signed bilateral agreement with them. These include European Investment Bank, African Development Bank, Islamic Corporation for the Development, West African Development Bank, Development Finance International (DFI) and German Development Bank. We have agreed to originate new businesses. There is no crisis anymore and as Shelter Afrique have gotten enough money to fund the five-year strategy.
What part is Shelter Afrique playing in the affordable housing market in Nigeria?
As we know, Shelter Afrique is the only Pan African Housing Development, and Finance Institution committed to facilitating and financing affordable housing delivery across Africa. The Institution’s main shareholders include 44 African Governments (including Nigeria) and being a major shareholder in Shelter Afrique, we are committed to aiding significant growth in Nigeria and to invest more than $180 million (N 650.9 billion) primarily through lines of credit to financial institutions to support the issuance of mortgages and providing construction finance for Public-Private Partnerships (PPP) projects which is in line with our 2019-2023 strategic plan that will help reduce the housing deficit and increase the supply of affordable housing units to above 100,000 units annually.
Now that you are back to business, can you please comment on your plans for Nigeria, what does your pipeline look like.
We plan to tackle the challenges of the housing deficit in Nigeria. As of December 2018, Shelter Afrique’s Portfolio in the Nigerian market was totalling to $14.6 million. As of this year, our board has already approved the disbursement of lines of credit of $16 million to two major financial institutions in Nigeria. We are also working to invest over $180 million in other financial institutions.
Shelter Afrique is exploring avenues to support Nigerian banks and developers, we learnt of your plan for a Nigerian bond to make lending in Nigeria possible. What is like?
Given that we lend in dollars and the Naira to Dollar exchange rate has been fluctuating over the past five years due to the unstable macroeconomic environment, raising a Nigerian bond is now a necessity. As soon as the Nigerian macroeconomic environment seems stable, we plan to commence the process.
Shelter Afrique from 2005 to 2010 committed over N22.51 billion on housing initiatives in Nigeria, and new initiatives are on- going. What interventions are Nigerians expecting in the housing sector, in the coming years?
We plan to partner with the FHA on the Affordable Nationwide Housing Project, which aims at providing affordable housing units to low- and middle-income earners. The project has kick-started in Zuba, Federal Capital Territory. This project will also take place Kwali, Bwari and 46 other sites, which have been marked out in Ibadan and Kaduna. The Kwali mass housing which is situated at Lambata, behind Federal Government College Kwali, encompasses 305 hectares of land and comprises of 12 blocks of one bedroom flat (192) and eight blocks of two bedroom flat (64) which sums up to a total of 256 housing units. The house types captured for this project are of one bedroom, two-bedroom and three-bedroom units, with prices ranging from N3.1 million ($8,611) to N8.3 million ($23,055).
This Affordable Nationwide Housing Project will not only reduce the housing deficit in Nigeria but also provide direct and indirect jobs in the country. It is noted that the nearly completed “Zuba Mass Housing Project” has already created 10,000 jobs. The scale effect of this then happening in over 46 sites across the country will reduce the unemployment rate and create over 460,000 jobs.
We are also considering a partnership with the Nigerian Army Properties Limited and Fresh Cowries Creek on the “Asokoro Hills Smart City” to provide about 2000 units of affordable houses.
Do you think affordable housing is possible in Nigeria? What partnerships can make this a reality?
It is possible. We have formed strategic partnerships with some institutions in Nigeria in the likes of the Ministry of Finance, Ministry of Power, Works and Housing, Federal Housing Authority (FHA), Federal Mortgage Bank of Nigeria (FMBN), Real Estate Developers of Nigeria (REDAN), Family Homes Fund (FHF), Nigeria Mortgage Refinance Company (NMRC), Infrastructure Concession Regulatory Commission (ICRC) and Aso Savings.
We’re in talks to participate in the Mortgage Guarantee Company. Also, we’re instrumental in the formation of the Nigeria Mortgage Refinancing Company (NMRC). We’re keen to see it succeed and monitor the progress.
Nigeria is facing housing crisis in its major cities within Lagos and Abuja and vacancy rate has increased to about 70 per cent. What should be done to ensure sustainable recovery from the present economic recession in the real estate sector in Nigeria?
Due to the ever-increasing population of the country, the Federal Government has implemented various initiatives to reduce housing deficit and increase the annual supply of affordable housing units in Nigeria. I will like to applaud the Federal Government for the creation of the largest affordable housing-focused fund in Sub-Sahara Africa, Family Homes Fund (FHF) which was initiated in 2016 to provide about 500,000 homes in 2023. So far, Family Homes Fund has successfully delivered 582 homes in Nasarawa state and has started the construction of an additional 4000 housing unit project in Kaduna, Ogun, Kano and Delta states. Also, there is the “Rent to Own Scheme” initiated by the Federal Mortgage Bank to build 3,000 homes of which repayment will be done for up to 30 years.
The Federal Government of Nigeria has also committed N30 billion to provide a housing solution for 23,000 civil servants nationwide under the Federal Integrated Staff Housing (FISH) programme. Altogether, the government has done a tremendous job in ensuring that the housing deficit is reduced in Nigeria. However, there is still a large room to do more.
When you’re constructing houses, you get employment created; some is permanent, while others are short-term.
It cuts across the industries. We’re very keen on contributing to developmental impact and getting involved in institutions to increase mortgage lending on the right price and longer term.
What awaits Nigeria real estate developers, especially those interested in affordable housing in your five-year strategic plan?
In line with our 2019-2023 strategic plan, Shelter Afrique will be willing to provide funding of up to $11 million for Public-Private Partnership projects for a maximum tenor of 10 years provided that the assigned property has a valid title document.
Also, I will ask advice property developers not to use substandard building materials for affordable housing units to gain more profit to reduce the rate at which buildings collapse.