Housing Finance in Southern African Development Community (SADC)

The Southern African Development Community (SADC) is a regional economic community made up of 16 member states. Established in 1992, SADC was founded on the need to promote the integration of southern African markets. To date, this has been influenced by economic and political factors.

The introduction of the SADC Industrialization Strategy and Roadmap (SISR) in 2017 symbolizes SADC’s effort to foster industrial development and deepen regional ties. Despite this, SADC as a whole is characterized by high unemployment and poverty rates, the inability to structurally transform its economies, environmental challenges, high inflation and rising debt. This continues to undermine the region’s socio-economic growth potential.

The lack of adequate infrastructure in the region limits integration efforts, discourages investors and further delays economic growth. This has implications for housing development. Access to finance for infrastructure development also remains a major challenge for many Member States.

There is no policy framework to address the huge housing backlog or the production of affordable stocks at the regional level. Some Member States have developed national policies that prioritize inclusive housing, although implementation remains slow. The Regional Development Fund (RDF) could potentially bridge the gap in bulk infrastructure financing, and in turn deeply support housing delivery.

The banking sector is largely concentrated by South African banks. Overall, SADC’s financial system is relatively underdeveloped. Although financial inclusion, thanks to mobile money services, is on the rise, high interest rates prevent the majority of the population from accessing formal mortgages.

Access to financing

While regional financial integration is at the heart of SADC’s goals, member states have independent financial systems. To regulate practices and policies, two bodies were created under the auspices of SADC: the Committee of Central Bank Governors (CCBG) in 1995 and the SADC Banking Association (SADC Banking Association). – SADC BA) in 1998.

SADC BA has established a regional banking coordination platform to guide strategy and develop processes to maximize cooperation of member banking associations. By strengthening the technical and regulatory capacity of its members, the association aims to attract regional and international investors to the financial markets.

SADC BA is mandated by CCBG to host and manage the payment scheme management body for banks that settle transactions using SADC’s Real Time Gross Settlements (RTGS) mechanism , called SADC Integrated Regional Electronic Settlement System . The related payment project aims to develop regional payment instruments, regulatory parameters and trade procedures, and serve as a monitoring mechanism in the context of SADC RTGS, including reporting to the Oversight Committee. SADC payments.

Due to the dominance of South African banks which have subsidiaries across the region, the banking sector is highly concentrated. Thus, Standard Bank operates in all SADC countries except Comoros, Madagascar and Seychelles; the First National Bank (FNB) is present in Botswana, Lesotho, Namibia, Eswatini, Tanzania, Mozambique and Zambia; finally, the ABSA bank is active in Botswana, Mozambique, Zambia, Seychelles, Tanzania, Mauritius and Namibia. As a result, in 2018, 68% of the SADC population was considered financially included, up from 66% in 2015.

In SADC countries, the provision of accounts through mobile phone financial services has enabled rural populations to access financial services. However, the rising costs of these services across the region are causing some concern.

Indeed, the expenses generated by banking tools, including those associated with cross-border fund transfers in the region, remain a major obstacle. However, to reduce these fees, efforts have been made in some countries such as Malawi, where a law has been passed to remove monthly fees on entry-level accounts, or in Zimbabwe, which has set up a forum financial inclusion.

Mauritius has the highest mortgage penetration rate in SADC. As 13% of the population has a home loan, their housing market is characterized by a high degree of home ownership. In addition, an estimated 10% of the Botswana population holds a mortgage, which ranks the country second in SADC in terms of mortgage penetration. On the other hand, while 81% of people aged 15 and over in Namibia have a bank account, only 3% of the Mozambican population has access to credit.

The backlog in large mass infrastructure (and the lack of maintenance of existing infrastructure), without which housing construction cannot take place, is a critical obstacle to the growth and development of the SADC region. With the constant influx into urban areas, overloaded infrastructure is under increasing pressure.

To remedy this, in August 2017, SADC approved the operationalization of a Regional Development Fund (RDF) which could be used to fill the funding gap for essential regional infrastructure projects. However, none of the Member States is today sufficiently stable financially to inject the necessary capital into this fund.

Budgetary feasibility

In SADC, persistent poverty coupled with glaring inequalities undermines affordability of housing. With an amount of USD 16,434, Seychelles has the highest GDP per capita, followed by Mauritius with USD 11,283 and South Africa, arguably the most developed country in the region, with just USD 6,340. Far behind their regional neighbors, Malawi and Mozambique have GDP per capita of 389 and 490 USD respectively.

Inflation rates follow a similar gap since, in February 2018, two Member States, Angola and DRC, recorded double-digit inflation rates (23.8% and 51.9% respectively) , while Zambia had the lowest inflation rate at -1.0% and the regional average rate was 9.3%.

Among the newly built houses by private developers in the SADC region, the cheapest cost between about $ 73,918 (in Zambia) and $ 11,678.83 (in Lesotho), while in six other countries their prices exceed $ 50,000 per unit.

There is no indication that the SADC or its affiliated financial structures will seek to put in place affordable financing or crowdfunding models to close the financial accessibility gap between consumers and the current offer at the regional level. Indeed, no regional policy covers the backlog of housing supply and the construction of affordable housing.

Therefore, each Member State must individually respond to these shortcomings. However, given the economic inequalities present in many of these countries,it is considered that affordable housing can be provided by the market (although more restrictions and regulations are needed for this purpose) and therefore states are focusing more on the provision of social housing and rental stock.

In Mauritius, the State supports the delivery of affordable housing by encouraging the self-construction of individual houses on land purchased either directly or through a “right of acquisition” policy. Squatters buy land for a small fee or through free allocation of land on a case-by-case basis.

Subsequently, the cost of building a house can be covered by public subsidy programs. In Mozambique, although the State Housing Assistance Fund provides access to finance to private developers and subsidizes the final sale price of properties, housing remains unaffordable for low-income households.

In South Africa,a household earning a gross income of 10,000 ZAR (708 USD) per month will be able to acquire a house worth 285,917 ZAR (20,237 USD), for which the repayment will be equivalent to 30% of its monthly salary for 20 years.

Even though this rate is within the range of affordability, many fail to obtain such loans, and with an unemployment rate of 27.7%, entry into the South African real estate market remains unattainable. for the majority of the population.entry into the South African real estate market remains inaccessible for the majority of the population.entry into the South African real estate market remains inaccessible to the majority of the population.

Housing supply

In the region as a whole, the housing stock is national. However, all countries are experiencing massive demand, exacerbated by the constant increase in urbanization, resulting in a growing backlog of more than 11.5 million dwellings. SADC countries are therefore increasingly unable to meet the demand for affordable housing.

Ideally, the supply of affordable housing should be driven by different national governments through social development projects or partnerships. In Mauritius, between 2017 and August 2019, 2,291 social housing units were built and 2,788 others are expected to be completed by the end of 2019.

In the DRC, the delay in housing construction is estimated at just under four million homes, while the country needs 263,039 new units per year. In Botswana, the Botswana Housing Corporation was established in response to rapid urbanization and to cover a backlog of around 36,000 units, but the high cost of land is a barrier to the supply of affordable housing, with private developers providing mainly middle and high income markets.

In South Africa, the availability of development funds for the development of affordable housing has helped supply the rental stock and the sales stock. However, we observe above all a supply of the rental stock, in particular in the large urban and peri-urban economic centers.

Many SADC countries are starting to support an urban housing supply with supporting infrastructure and economic opportunities. This mainly involves support for densification strategies along transit corridors. In addition, there is a trend in favor of policies encouraging private sector developers to build a number of low-income housing in proportion to the number of houses intended for sale at market rates.

Real estate markets

In 2018, in the Doing Business report , SADC ranked 121st out of 190 with a score of 57.25. Mauritius took the lead (20th) with a score of 79.58, followed by South Africa, ranked 82nd with 66.03 points. At the bottom of the scale, the DRC was ranked 184th with a score of 36.85. [1]

Since 2011, Mauritius has undertaken reforms to make doing business easier by linking the business register database to the social security office database and removing some social inequality policies leading to gender discrimination. In general, across the region, reforms aim to reduce inefficiency by lowering approval time, using technologies to improve supply or processing, changing costs or fees associated with operations trade, registrations or permits, making processes fairer or reducing red tape.

SADC presents various real estate markets. Countries like South Africa are home to a wide variety of local and international real estate developers, while in DRC developers and financing mechanisms to support development are lacking despite growing demand, especially around centers. urban. Affordability relative to supply and demand hinders housing development.

As a result, the needs of the high-end market, in which the margins are better, prevail. At the same time, most low-income households either self-build or depend on the informal sector to meet their housing needs. On the demand side, low-income households with informal income sources cannot obtain or access a mortgage. Most of SADC’s financial systems are either underdeveloped or dominated by commercial banks that do not meet the needs of most of the population.

Policies and legislation

SADC Member States have developed the Regional Indicative Strategic Development Plan (RISDP) covering the period from 2015 to 2020. This program defines the main priorities and specific objectives of SADC and is focuses on industrial development, market integration, support infrastructure for regional integration and cooperation for peace and security.

This initiative is part of the SADC Industrialization Strategy and Roadmap) for the years 2015 to 2065, having been approved in 2015 to support economic transformation through regional integration and economic and technological transformation by strengthening competitive and comparative advantages.

SADC’s infrastructure program focuses on energy (electricity and hydropower), tourism, transport (roads, rail, air, ports and inland waterways), water and sanitation, meteorology ( global telecommunications and climate monitoring) and communications technologies. Housing is not one of the key objectives of this program, and housing developed through SADC would be a direct product of a socio-economic stability plan.

At the level of South African municipalities, policies include the implementation of a mandatory 30% supply of affordable housing from the total private development portfolio in construction projects of more than 20 housing units. In the housing sector, the inclusion policy aims to encourage private sector development through incentives, including the granting of additional allocations in bulk beyond those already specified in the zoning specifications. In Lesotho, the Maseru Master Plan) aims to increase the density of development around the center of the capital.

This strategy responds to limiting access to land for development while ensuring that development takes place in places where significant infrastructure is already in place. This aspect is also being explored in Johannesburg, South Africa, as part of the Nodal Review Policy.


SADC is hard hit by the growing demand from urban populations and the scarcity of resources, whether housing stock or the lack of support structures to ensure its development. Countries rely primarily on private sector-led development to meet the needs of the affordable housing market.

Through the SADC banking association and associated organizations, this represents an excellent opportunity to strengthen the strategic vision of the region and to use the mechanisms and organizations in place to foster private sector development through innovative policy interventions. Policies, such as inclusive housing,show how independent states could encourage increased supply through private development.

As an organization, however, SADC remains focused on regional economic and political stability, as well as intergovernmental collaboration and support, which fosters an enabling environment for investment. The lack of a regional housing-focused strategic framework does not necessarily negatively reflect the structure of SADC, as it is not conceived as a mechanism for the provision of housing.

This logistics and the legislative and financial mechanisms, as well as those relating to the related supportive investment, are negotiated and dictated at the national level. However, the lack of investment in major infrastructure (linked to the supply of housing,such as water and electricity) and support for mixed use and income development will be counterproductive for regional growth.

For SADC Member States, the precise data sources available are limited. Many countries have inconsistent or non-existent indicator data. As habitat is not a key objective of SADC, the research carried out by this body does not cover regional trends in this sector and the data quality and access mechanisms for reviewing and compiling information vary from country to country.

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