Namibia is a middle-income country in Southern Africa, with a GDP per capita in 2010 of US$ 5 330. GDP growth rates have hovered just below six percent since 2007, with a fall to -0.7% in 2009, but up again to 4.6% in 2012. According to the Bank of Namibia, GDP grew an estimated at 4.8% in the first half of 2013. The main growth driver is the mining sector, especially the diamond and uranium mining activities. The construction sector has grown significantly (estimated at 8%),in part due to Namibia’s Targeted Intervention Programme for Employment and Economic Growth (TIPEEG), but also as a result of property developments. The programme was launched by the government in March 2011 in an effort to reduce Namibia’s high unemployment rate of 51.2% by creating and retaining 104 000 job opportunities. Inflation has declined significantly, from 8.7% in 2009 to 4.5% in 2010 – this was due to a drop in demand for agricultural outputs as well as a strong currency. The inflation rate averaged 6.5% during 2012, up from 5% in 2011. In
Namibia is a middle-income country in Southern Africa, with a GDP per capita in 2010 of US$ 5 330. GDP growth rates have hovered just below six percent since 2007, with a fall to -0.7% in 2009, but up again to 4.6% in 2012. According to the Bank of Namibia, GDP grew an estimated at 4.8% in the first half of 2013. The main growth driver is the mining sector, especially the diamond and uranium mining activities. The construction sector has grown significantly (estimated at 8%),in part due to Namibia’s Targeted Intervention Programme for Employment and Economic Growth (TIPEEG), but also as a result of property developments. The programme was launched by the government in March 2011 in an effort to reduce Namibia’s high unemployment rate of 51.2% by creating and retaining 104 000 job opportunities. Inflation has declined significantly, from 8.7% in 2009 to 4.5% in 2010 – this was due to a drop in demand for agricultural outputs as well as a strong currency. The inflation rate averaged 6.5% during 2012, up from 5% in 2011. In August 2012, the Bank of Namibia brought the repo rate down to 5.5% after a slight increase earlier in the year. The discovery of oil off the cost of Namibia in July 2011 promises to change the country’s fortunes dramatically. In February of this year, EnerGulf Resources suggested the discovery involved an estimated 3.16 billion barrels of potentially recoverable oil. Namibia is one of the least equal nations in the world. With a Gini coefficient of 0.58, there is a significant gap between the rich and the poor.
Access to finance
Namibia’s financial banking system, with strong links to South African financial institutions, is mature and efficient. There are four commercial banks, one savings bank (Nampost), ten insurance companies and 348 microlenders. Banks account for 40% of the financial market share. Traditionally, lending to households and corporations has been a significant part of bank credit and has been increasing, with about 52.8% of these loans being in the form of mortgages in 2012. This makes Namibia’s mortgage market relatively high by continental standards and second only to South Africa. Mortgage lending grew by 13.1% in 2012 (reaching N$27.4 billion or US$2.8 billion), compared with 11.1% in 2011. By February 2013, mortgage advances grew by 14.3% year on year, due largely to higher value properties which dominated the activity. The Bank of Namibia has expressed concern with the heavy concentration in long term mortgage bonds on bank balance sheets, and has responded to this by imposing a 50% risk weight to residential mortgage loans. Banks also manage the risk of default. End-user mortgage loan eligibility criteria is generally stringent and has become more so in recent times. Also, limited collateral hampers the usage of these loans by low-income consumers.
To promote enhanced access to financial services, Namibia launched a Financial Sector Charter (FSC) in May 2009 to last until 31 December 2019. The FSC is a voluntary code of conduct for the transformation of the Namibian financial industry. Among its objectives are creating greater access to and affordability of financial products and services. There are specific targets with lending to formerly disadvantaged members of the population, which should encourage even greater lending by the financial sector. The FSC was followed by a Financial Sector Strategy 2011-2021.
FinScope Namibia 2011 reports that the number of people who are unbanked has decreased from 50% in 2007 to 31% in 2012, with usage of insurance doubling over the period. Transaction banking and savings also increased by about thirty percent. Use of credit and loans went up by five percent, from 15% in 2007 to 20% in 2011. FSC targets hope for 74% of Namibians to have access to financial service by 2019. In 2012, the FSC has been developing new legislation that will establish the regulatory framework for Tier II banks, which will serve as microfinance oriented banks with a special focus on serving the low income segment of the society. There are 7.10 Commercial bank branches per 100,000 adults and 0.84 ATMs per 1,000 km2 in Namibia. Outstanding loans from commercial banks make up 48.35% of GDP, according to the IMF Financial Access Survey.
The infrastructure to facilitate mortgage lending is fairly well developed. In terms of the World Bank’s depth of credit information index, Namibia scores four out of a possible six, as the country has three private credit bureaus that include data on approximately 63.9% of the adult population. Government has issued a bill on the Supervision of Financial Institutions, which includes the licensing and regulations of the credit bureau sector. The judicial system scores eight out of a possible 11 on the World Bank’s strength of legal rights index. A collateral registry system unified geographically and by asset type, is lacking. Overall, however, Namibia scores highly in terms of getting credit, in 40th place out of 185 countries, although down two places from last year.
Namibia has a small microfinance sector with only two MFIs (FIDES Bank Namibia and Koshi Yomuti) reporting to the Mix Market in 2011 (and none since then), with a gross loan portfolio of US$3,2 million, serving over 2 731 borrowers. Some microlending for housing purposes is starting to take place, for example by the Shack Dwellers Federations of Namibia (SDFN). The SDFN provides its members with loans ranging from a minimum of N$8,000 to N$26,000, with the main determining factor of the loan value being the ability to repay the loan. The loans are repayable within a period of 11 years at an interest rate of 0.5% per month. The government’s Financial Sector Strategy also includes improved consumer literacy and protection and local ownership in commercial banks. Pension-based lending for housing is allowed, although concerns have been raised that part of the money is diverted for consumer rather than long-term housing spending. Better enforcement for correct use is needed.
A recent publication by the Bank of Namibia indicates that the housing backlog in 2007 was 80 000 housing units, and this grows by 3 000 units every year. Thus it is estimated that the housing backlog now stands at 92 000 units.
According to the February 2013 FNB House Price Index, a small housing unit costs N$ 283,172 (about US$ 28 770) in the central area of Namibia, which includes Windhoek. Over a term of 20 years at 11% interest this will cost US$287 a month and be affordable to a household earning at least N$7836 (US$ 939) per month. As 93% of the population earn less that N$7000 a month, this house is not available to the vast majority of the population. A significant component of this cost – over half – is land and services: the average m2 price for constructing a house by a contractor is about N$3 200. This translates into about N$102 400 (or just over US$14 200). Further, supply of houses at this price, which represents the lowest priced formal housing unit, is not always available. FNB’s Volume Index reported volumes declining particularly in the small price segment: total properties registered were down 15% month-on-month since January 2011. The average price of a house financed by FNB costs US$ 80 000. FNB reports that the lower priced property segments grew fastest while the higher priced properties fell.
There are varied efforts to address housing affordability. Early in the year, a mobile, low cost housing brick plant was opened in Otjomuise, producing a brick that minimised the use of cement. It was estimated that houses built with the brick would cost between N$130 000 (US$14 337) and N150 000 (US$16 543) and take 12 days to construct. For its part, the Namibian government has reduced stamp duties and transfer cost thresholds, also to improve housing affordability.
It is estimated that the national housing backlog is about 100 000 units and growing by 3700 units per year. Given this, informal settlements are visible in all of the urban centres in the country, as households struggle to access housing they can afford. At the same time, the Namibian construction sector is enjoying rapid growth, by 18.8% in 2012, up from 16.2% in 2011, although this is still insufficient to meet the demand. The real value of buildings completed rose by 10.8% in 2012, driven by construction in the residential and commercial property sectors in Windhoek, Walvis Bay and Swakopmund. The real value of building plans approved grew by 33.7% in 2012, suggesting increasing growth in this sector. Still, the focus of this activity is on the higher value markets; and the FNB House Price Index for Namibia argues that the market is undersupplied by 80%.
According to FinScope Namibia 2011, the majority of Namibians claim they own their housing, although the majority cannot prove this with a title deed. Only 24.3% say they bought their home; the majority (62.4%) say they built it themselves. A further 11.8% inherited their homes. Thirty-eight% funded the ownership (purchase or construction) of their housing themselves. An additional 36% said that their housing had no cost as they had used found materials to construct the dwelling. This suggests a high level of informal housing, and is supported by data on servicing levels: while 80% have access to water within their yard, only 52% of Namibians have access to some form of toilet. Only 9% said they had used bank financing to acquire their housing. Ten percent owe money on their housing.
The Government has stipulated clear objectives related to housing provision in Vision 2030, in the National Development Plan III, and in the Targeted Intervention Program on Employment and Economic Growth (TIPEEG). Its main implementing agent in this regard, is the Namibian Housing Enterprises (NHE), which targets low-income formal housing. Established in 1993 by an Act of Parliament, the NHE acts as developer, provides loans for the purchase of its own developments and lets out units that have not been sold. Since 2003, the NHE has built about 450 houses per year for its target market: households earning between N$5000 – N$20 000 per month. Apart from constructing houses, NHE has also been involved in servicing land in a number of local authority areas resulting in a total investment in service infrastructure of about N$145 million. Houses cost on average N$275 000, inclusive of land. NHE loans are offered at a maximum of prime minus one percent.
The total investment requirements for the NHE under TIPEEG for the three years from 2011 to 2014 will amount to N$ 1 093 520 000, or just over N$1 billion. The amount to be spent on land servicing will be N$ 131.4 million while money to be spent on the construction of houses will be N$898 million. It is envisaged that successful implementation of these programs will create some 44 337 direct and indirect job opportunities in the medium term. Since these programmes are constructed around already existing projects, the net new job opportunities to be created will be in the order of 31 000 direct and indirect jobs opportunities over the medium term. The program is also expected to result in 3 980 new serviced plots, 4 521 new low cost houses and about 13 000 new ventilated pit latrines to be completed. The TIPEEG programme is expected to stimulate housing and land delivery by as much as 63% in 2012, aimed at the middle-priced segment. It is hoped that this will also reduce house price inflation.
In 2013, a National Housing Technical Committee was established to develop a mass housing development strategy. Spanning a number of government departments, the committee submitted its proposal to the Ministry of Regional and Local Government, Housing and Rural Development in March 2013. A member of the group, the NHE highlighted limited access to affordable, serviced land; the inflexibility in the current land tenure system; legislative and policy constraints that slow delivery; and a rapidly appreciating property market, as among the challenges. The proposed plan sets out a differentiated funding model to cater for different economic and social segments of the Namibian population, drawing on government, private sector and household financial resources, and is expected to be launched this year. A N$1.9 billion (approximately US$204 million) budget was allocated to the Ministry of Regional, Local Governmnet, Housing and Rural Development to cater for the servicing of land and improved sanitary standards in urban, peri-urban and rural areas. The programme will also be funded through funds from pension funds, other institutional investors and, funds from community savings schemes.
The private sector is beginning to engage with the demand for affordable housing. In September 2012, First National Bank announced that it was looking for partnerships with low income housing providers in Namibia. This led to a partnership with NHE, providing NHE with the necessary liquidity to develop housing more quickly. In March 2013, Eco Beam construction CC and Keystone Development Solutions were approved to construct demonstration houses for the City of Windhoek’s affordable housing project. The demonstrations would then be used to promote further delivery of low cost housing.
In the NGO sector, the Namibian Housing Action Group (NHAG), caters for the housing needs of lower-income groups. NHAG is the service NGO of Shack Dwellers Federation Namibia, and has a membership of more than 20 000 households in 717 savings group. The SDFN is an alliance of savings groups operating in many informal settlements in Namibia. Its principal aim is to mobilise collective savings for the purchase and group settlement of land for their members. The SDFN has also been active in lobbying for a policy that supports incremental development with legal land tenure. The results have been encouraging, especially in Windhoek where residents are allowed to construct basic shelter to meet their needs for accommodation. Through the Flexible Land Tenure Act, secure tenure is obtained through sales of blocks (multiple plots) to communities that are then responsible for upgrading the sites, including transforming communal toilets and water points to individual household connections. SDFN obtains funding from the state for its Twahangana Fund; in 2010/2011 they received a N$3 million (US$411 000) grant. According to the SDI Alliance, SDFN is active in 84 cities across Namibia, and has secured 1621 hectares, providing 5591 families with secure tenure and 1576 of these with toilets, water and electricity. A total of 3403 houses have been completed and 185 are currently under construction. SDFN is undertaking a local mapping initiative at the moment. In this, 235 settlements have been profiled and 73 have been enumerated. Ten GIS maps have been prepared.
The scarcity of land suitable for housing developments is having a direct impact on the housing price in the country, and land delivery has been weakening since 2007. As a result, the monthly delivery of housing has reduced. FNB reports that a total of 17 vacant stands were mortgaged in February 2013, down from 80 stands mortgaged in January 2007. Given this constraint on supply, property prices have grown dramatically. In Windhoek, the median house price increased by 94% in the period between 2008 and 2013; in Swakopmund by 67%. FNB expects property prices to continue to appreciate, given that there is little indication of improved land delivery rates or increasing developer activity in housing construction.
According to the Ease of Doing Business Report, Namibia ranks 169th out of 185 countries in registering property in 2013, a drop of 21 places from last year’s ranking of 148th. On average the eight procedures involved take 46 days and cost 13.8% of the property value. In 2013 Namibia made transferring property more difficult by requiring conveyances to obtain a building compliance certificate beforehand.
Policy and regulation
Housing in Namibia is directed through the National Housing Policy (2009), Vision 2030 (2004) various budget documents and the TIPEEG. The total budget allocated to housing affairs and services in 2011/2012 is N$131 million.
Namibia has enacted judicial reforms targeting mortgage enforcement. These were to improve proceedings by providing detailed guidance on the process, limiting delays and the possibility of abusive appeals, and eliminating arbitrary decisions and delays. The Flexible Tenure Act has also been cited as a pioneering piece of land legislation in its recognition of incremental forms of tenure and building methodology.
Affordable housing presents the highest potential of an untapped housing market. This not only includes people for whom there are no mortgage products, but also a section of the population which may qualify for loans but are unable to access suitably priced housing. Commercial banks are overexposed to mortgages, which is an ongoing concern in the economy. There have been calls to provide greater opportunities for fundraising through securitisation, for example. This could increase the number of investment instruments and deepen the financial sector, as well as enable local authorities to raise the funds necessary for urban infrastructure development and thus increase the housing provision.
The recognized successes of the SDFN through its group savings and lending methods, incremental approaches to housing, and use of land laws such as the Flexible land Tenure System suggest a high potential for housing microfinance.
Of course, the opportunities arising from the discovery of oil can only be imagined at this stage. The Department of Mines and Energy has identified 44 billion barrels of potential off the coast. This would have a dramatic effect on the national economy and would increase considerably the country’s capacity for addressing the challenges in its housing and housing finance sectors.
- How we made it in Africa: Insight into business in Africa: www.howwemadeitinafrica.com
- Kalili, N, Adongo, J, Larson, T, Namibia Policy Research Unit (2008). Access to Housing Finance in Africa: Exploring the Issues (No. 5) Namibia. Paper commissioned by the FinMark Trust with support from Habitat for Humanity
- World Bank (2011) Doing Business Survey: Mozambique
- FNB (2013) Housing Index February 2013. http://www.namibia-realestate.com/attachments/article/49/Housing percent20Index percent20201202.pdf
- Bank of Namibia (2012) Annual Report.
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