Social infrastructure financing frameworks are key to bringing the private sector and Government together to vastly amplify delivery of affordable urban housing. Palesa Mkhize, Head, Affordable Housing Development, Standard Bank discusses the needs for such frameworks and how they can be realised through a blended use of debt, equity and subsidies, reducing risk to investors.

According to the September 2021 Mercer Infrastructure Financing in sub-Saharan Africa report, roughly 60% of sub-Saharan Africa’s population is still without access to grid electricity. The African Union (AU) Commission says the continent needs to connect around 73 million people to electricity every year to reach the goal of access to affordable and sustainable energy for every African by 2030.

Furthermore, Africa is the least urbanised continent in the world, with just 43% of the African population being urbanised (under the global average of 56%).

With cities being drivers of economic growth, the fact that most of Africa’s inhabitants live in remote, underdeveloped regions with limited access to services and formal housing is concerning. Also, even in urban centres, the World Bank estimates that by 2030 over 250 million people will be living in slums in sub-Saharan Africa. This will be home to the majority of the world’s slum dwellers, the only world region that has consistently seen a sharp increase in populations living in slums over more than 20 years, while regions like East Asia and Pacific, Middle East and North Africa, and Latin America and the Caribbean have all been steadily reducing slum populations since around 2005.

Investing in infrastructure that not only moves people from one set of circumstances but lifts their living conditions and access to services is about more than just relocating people from rural to urban.

It is a matter of developing a framework of social infrastructure investment that recognises the unique challenges facing Africa and creating a tailored framework that is able to define how capital is deployed, the process of project evaluation, reporting and external review.

Without a structured approach, governments will continue to direct resources towards programmes that yield limited benefit to people on the ground.

In addition to the difficulties institutional investors face when investing in infrastructure anywhere in the world, there are unique barriers to investing in infrastructure in sub-Saharan Africa.

These include a high-risk perception of Africa, limited investment vehicles, gaps in financing and fragmented markets, with 54 countries each possessing very different institutional, legal and regulatory frameworks.

While governments have all prioritized power generation as an important driver of growth, providing affordable housing to populations could make the difference between lagging global growth and surpassing it.

And this needs to be done in concert with an Africa-centric social financing framework that takes into account the most hindersome barriers discouraging investors from backing key projects. A financing framework is a publicly available document that allows the issuing of social infrastructure bonds, articulating sustainability strategies from a group level down to projects on the ground. 

With the social responsibility of providing affordable housing usually resting in the hands of an overstretched government, raising capital for affordable housing with the right commercial tonality needs to provide scalable deals for the private sector as South Africa has a housing shortage of approximately 3.7 million, which is estimated to be growing at 178 000 annually.

Social infrastructure financing models through public-private-partnerships (PPP), in order to increase impact, allow a government struggling to reach their targets to scale their delivery.

The South Hills Integrated Housing Development, a partnership between the City of Johannesburg, Calgro M3 and Standard Bank, and funded primarily by the Urban Settlements Development Grant, has developed such a model for how these partnerships can yield fruit.

South Hills is situated in the south of Johannesburg, 5kms from the Johannesburg CBD, has delivered over 2000 homes and is anticipated to yield well over 5000 housing opportunities, including fully subsidised housing, gap housing, and open market bonded units.

Various award-wining green initiatives, energy saving technologies, as well as edge compliant design methodologies, are being implemented across the development. Additionally, recycling projects, food gardening and urban greening initiatives are also currently being explored.

South Hills is positively impacting the local community through various upliftment initiatives, employment opportunities and skills development. 

Upgrades of existing sports facilities and public parks, new schools and accessible retail centres will further benefit the community, stimulating economic activity in surrounding suburbs, and providing a direct link to the inner-city corridor.

Standard Bank’s blended financing approach to affordable housing and the appointment of an experienced developer meant the project has been able to achieve the right balance of appropriate debt funding, equity, subsidies and risk. 

The bank’s collaboration with development financing institutions, equity and grant funders, in an effort to share risk with those who seek the impact of sustainable investment, will further assist in the scaling of the delivery of housing. The provision of housing is detailed in Target 11 of the Sustainable Development Goals, but is an important element of sustainable development across all of the goals.

For Standard Bank, being the largest financial services provider on the continent, affordable housing is an integral part of 10 ecosystems that we want drive and contribute into through partnerships and practical mechanisms.

Targeted social infrastructure financing frameworks are key to defining what to invest into, how to structure deals efficiently with reduced risk, and the most effective partnerships to leverage to deliver on the promise to society and bring Africa’s millions of inhabitants into safe and affordable formal housing that enriches their lives and communities.