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AfDB Approves 570m Rand Loan to Finance Affordable Housing in South Africa

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Akinwumi Adesina - Investors King
  • AfDB Approves 570m Rand Loan to Finance Affordable Housing in South Africa

The Board of Directors of the African Development Bank Group (AfDB) has approved a Senior Loan of ZAR 570 million to South Africa’s Housing Investment Partners Trust 2 -HIP2), also known as Vulumnyango Trust, to help finance affordable housing programmes in the country. The loan will help improve access to long-term affordable housing finance to South Africa’s lower-middle income earners currently with limited opportunities to access affordable mortgages.

It will also consolidate the growth of a strong affordable housing sector within South Africa. The project provides a demonstration effect of tapping local currency capital from Africa’s premier development bank, local asset managers and a State Owned Enterprise to foster South Africa’s economic growth through affordable housing. The project also reduces fiscal pressures on the South African government in respect of housing for a specific market segment and enables HIP2 to mobilize funding from other sources, including eventual access to South Africa’s capital markets.

Although South Africa is one of the more developed economies in Africa, the country still faces acute shortage of affordable housing in its main urban areas, estimated at 3 million units in 2014. This has resulted in more than 2,600 informal settlements springing up around 70 of South Africa’s major urban areas, making it very difficult for the government to reduce inequality and achieve inclusive growth targets.

Despite several government direct interventions in the sector, especially through the Reconstruction and Development (RDP) program which between 1994 and 2015 delivered over 2.9 million low cost houses for vulnerable and low income households, the housing needs of the lower-middle income earning households (otherwise referred to as the Gap Market) remain huge and unaddressed. HIP 2, which has now raised ZAR1.82 billion from National Housing Finance Company, Old Mutual Group, Futuregrowth and AfDB is targeting at offering more than 4,000 affordable mortgages to South Africa’s lower-middle income earners.

The intervention will generate other significant benefits including moving 2,500 – 6,500 out of informal settlements and create about 3,250 permanent jobs mainly for the youth. Overall, financing 4,386 affordable housing units is expected to generate over 10,000 jobs, including 950 – 1,296 direct jobs for women.

Stefan Nalletamby, Acting Vice President for Infrastructure Private Sector and Director, Financial Sector Development Department said: “The approved intervention will assist HIP2 in expanding and deepening South Africa’s housing finance sector and encourage orderly urban development for the provision of basic utilities such as water, sanitation, roads and electricity. In this respect, it will improve the lives of South Africans whilst also assisting in creating new employment opportunities.”

Presenting the project to the Board, Stella Kilonzo, Head of Financial Markets Division noted that “by extending this Senior Loan, the AfDB adds onto its existing initiatives to support affordable housing, development of mortgage finance institutions and deepening of local currency capital markets on the continent.”

“This is an excellent example of how we can intervene in middle income countries, such as South Africa, with developed financial systems where we generate impact through private sector on the quality of life of lower middle income earners in a sustainable manner. It opens up opportunities for the Bank to intervene in the sub sovereign debt markets and offer policy solutions on urbanization. This is hugely important given the fact that, at 3.4%, Africa’s urbanization rate is the fastest globally,” added Senior Vice President Frannie Leautier who chaired the Board meeting.

The Bank’s intervention is in line with its High 5 priorities which build on the Ten Year Strategy for 2013-2022, and specifically the 5th priority of Improving the Quality of Life for the People of Africa. The five focus areas are key to transforming the lives of the African people and therefore consistent with the United Nations agenda on Sustainable Development Goals (SDGs).

It will also have multiplier effects on industries related to the real estate sector and the creation of jobs in the construction industry. The loan will complement South African government’s efforts to develop a self-sustaining long-term affordable mortgage market in the country.

Furthermore, the project fulfils one of the Bank’s priority objectives to support investments that contribute to the widening and deepening of financial markets in Africa, and enabling the private sector to mobilize and access long term-local currency funding from local financial markets. The project will contribute to the growth of bonds backed by affordable housing mortgages as an investible asset class on South Africa’s bond markets.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Escravos Seaport: $27.29 Billion Seaport Project in Jeopardy Amid Bureaucratic Stalemate

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Deep Sea port - Investors King

Nigeria is on the brink of losing a $27.29 billion investment earmarked for the development of the Escravos Seaport Industrial Complex (ESIC) in Delta State.

The ambitious project, championed by the Mercury Maritime Concession Company (MMCC) and backed by foreign investors, is stalled due to prolonged delays in securing final governmental approvals.

Rear Admiral Andrew Okoja (rtd), the chairman of MMCC, voiced his concerns during a recent press briefing.

He emphasized the urgency of obtaining the necessary governmental consents, warning that the delay could result in the forfeiture of the crucial investment.

“EDIB International of Hong Kong has expressed readiness to inject $27.29 billion into the deep seaport project located in Escravos. However, without the required approvals from both federal and state governments, we risk losing this investment,” Okoja stated.

The ESIC project is poised to be a significant economic catalyst, promising to transform Delta State and its neighboring regions.

Modeled after the successful Lekki Deep Seaport and Free Trade Zone, the ESIC is expected to spur trade, commerce, and industry across eight states, including the Federal Capital Territory, Abuja.

“This project is not just about developing a seaport; it’s about creating an economic hub that will drive growth and development across a broad spectrum of sectors,” Okoja explained.

In a letter dated January 19, 2024, EDIB International Ltd., through its chairman Kwame Springer, reiterated its commitment to the project. The letter, addressed to MMCC, highlighted the need for a federal government guarantee to protect the investment.

“We require a guarantee from the Nigerian government to secure our investment. The time frame given to secure these approvals is three weeks, beyond which we might have to consider alternative locations for our investment,” the letter stated.

The Escravos Seaport project has seen provisional approvals from both federal and state governments in the past.

In November 2020, the Federal Government granted a provisional approval for a 50-year renewable concession agreement under the Build, Own, Operate, and Transfer (BOOT) model.

Similarly, in May 2022, the Delta State Government agreed to lease 31,000 hectares of land for the project.

Despite these provisional nods, the final approvals remain elusive.

“We have met all regulatory requirements and are ready to proceed. The delay now lies with obtaining the final consent from the government,” Okoja noted.

He urged the federal and state governments to expedite the approval process to avoid losing the investment to other African nations.

The development of the ESIC encompasses not just the construction of a seaport but also the integration of road, rail, and marine connectivity aimed at optimizing cargo flow.

The project includes the construction of the Warri-Sapele Expressway, linking it to key trade routes.

“This infrastructure will significantly reduce congestion at Lagos ports and open up new economic opportunities for the Niger Delta, Eastern, and Northern States,” Okoja highlighted.

The Escravos Seaport Industrial Complex represents a transformative opportunity for Nigeria’s economic landscape.

However, bureaucratic inertia threatens to derail this landmark project. As the clock ticks, the onus is on the federal and state governments to act swiftly and secure the future of this pivotal investment. Without immediate action, Nigeria stands to lose a monumental opportunity to boost its economy and create thousands of jobs.

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Crude Supply Concerns Stall Nigeria’s Modular Refinery Construction Projects

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refineries

The ambitious plans for constructing modular refineries across Nigeria, aimed at bolstering domestic refining capabilities, are encountering significant roadblocks due to apprehensions surrounding crude oil supply guarantees.

Despite the country’s aspirations to become self-sufficient in refining, the reluctance of international oil companies (IOCs) to commit to supplying crude to these facilities has left many projects hanging in the balance.

Presently, only a handful of the planned 20 modular refineries are operational, with the remaining projects either stalled or facing financial uncertainties.

This predicament stems from investors’ demands for assurances regarding crude oil availability before releasing funds for construction.

Eche Idoko, the publicity secretary of the Crude Oil Refinery Owners Association of Nigeria (CORAN), highlighted the pivotal role of guarantees in securing financing for refinery projects.

He emphasized that without a guarantee of feedstock, investors are understandably hesitant to proceed with funding.

Idoko further elucidated that the absence of a regulatory framework mandating IOCs to provide such assurances exacerbates the challenges faced by modular refinery operators.

Despite repeated pleas from industry stakeholders, regulatory bodies have yet to enforce provisions ensuring crude supply to indigenous refiners, adding to the uncertainty surrounding these projects.

The ramifications of this impasse extend beyond the economic realm, as Nigeria’s aspirations to emerge as a regional refining hub are jeopardized.

With the potential to significantly reduce the country’s reliance on imported petroleum products, modular refineries represent a critical component of Nigeria’s energy security strategy.

Furthermore, the synergy between modular refineries and larger-scale projects like the Dangote Petroleum Refinery could position Nigeria as a key player in West Africa’s refining landscape.

By addressing the continent’s substantial deficit in refined petroleum products, Nigeria has the opportunity to assert its leadership in the region’s energy sector.

However, unlocking the full potential of modular refineries hinges on overcoming the current challenges surrounding crude supply guarantees. With concerted efforts from regulatory bodies, IOCs, and industry stakeholders, Nigeria can navigate these obstacles and realize its vision of a vibrant and self-sustaining refining sector.

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Treasury Bills

CBN to Issue N1.56 Trillion in Treasury Bills for Q3 2024

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T-Bill

The Central Bank of Nigeria (CBN) has unveiled its plan to issue N1.56 trillion worth of treasury bills during the third quarter of 2024.

This strategic move aims to manage inflation, finance the government’s budget deficit, and regulate liquidity in the financial system.

Compared to the N1.56 trillion issued in the second quarter of 2024, the upcoming issuance represents a slight decrease of 4.87 percent.

The allocation breakdown for the treasury bills issuance in Q3 includes N170.85 billion for 91-day tenors, N189.35 billion for 182-day tenors, and a significant portion of N1.20 trillion for 364-day tenors.

Treasury bills issuance is a crucial tool employed by the CBN to influence various aspects of the economy.

By adjusting the supply of money in circulation, managing inflationary pressures, and providing a means for the government to fund its activities, these financial instruments play a pivotal role in shaping economic conditions.

The impact of treasury bill issuance extends to households and individuals, influencing interest rates on savings and investments.

As the yields on treasury bills serve as benchmarks for other interest-bearing assets, changes in these rates can affect returns on savings accounts, fixed deposits, and other investment vehicles, consequently shaping the financial landscape for individuals and families.

Moreover, the issuance of treasury bills contributes to the broader economic environment by supporting price stability and fostering conducive conditions for sustainable economic growth.

By absorbing excess liquidity from the financial system, these bills help mitigate inflationary pressures and create an environment conducive to economic expansion and job creation.

However, amidst these efforts to manage inflation and stabilize the economy, challenges persist, particularly regarding high inflation rates.

Inflation erodes purchasing power, making goods and services more expensive and diminishing the real value of savings.

While the CBN’s initiatives to address inflation through treasury bill issuances are commendable, addressing underlying factors such as supply chain disruptions and fiscal imbalances remains essential for long-term economic stability and improved living standards.

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