On 15 June 2021, the Private Infrastructure Development Group (PIDG), together with the Foreign, Commonwealth & Development Office (FCDO) Accra and Lagos, hosted an Affordable Housing Workshop with contributions from the Ghanaian and Nigerian governments, the FCDO, GuarantCo (a PIDG company), InfraCredit Nigeria, Mixta Africa, the Centre for Affordable Housing Finance in Africa, the National Housing and Mortgage Fund – Ghana, CDC, the Ghana Infrastructure Investment Fund and the World Bank.
The workshop was attended by key figures including Honourable Minister for Works and Housing, Ghana – Honourable Francis Asenso-Boakye, Honourable Minister of State for the Federal Ministry of Works and Housing, Federal Republic of Nigeria – Engineer Abubakhar Aliyu and Philippe Valahu, PIDG CEO.
Tim Streeter, Head of Investor Relations at PIDG shares the key findings from the discussions, highlighting the importance of local currency and capacity building, sustainability, and green finance solutions in the delivery of affordable housing in Ghana and Nigeria.
Affordable housing has been recognised as a key priority by the Nigerian and Ghanaian governments, given the sector’s importance in addressing social needs and its role in the local economy. Affordable housing is an infrastructure sector that is of particular interest to PIDG. Our most recent project in this sector is Acorn Housing – an energy efficient university student accommodation project for 5,000 students in Nairobi, certified to IFC EDGE standards. PIDG companies GuarantCo and the Emerging Africa Investment Fund (EAIF) invested in the first East African green bond – with dual listing on the London Stock and Nairobi Securities Exchanges. As with all of our infrastructure projects, Acorn Holdings was supported to take a deliberate gender angle in the design and management of the buildings, developing tailored solutions to ensure safety and well-being of women students as part of their positioning in the market. The Acorn project drew on many facets that could be replicated in other jurisdictions: denominated in local currency, EDGE-certified, financed by means of a green bond and subsequently with a REIT.
This project also clearly demonstrates PIDG’s mandate to deliver sustainable development impact in line with the Sustainable Development Goals (SDGs) and our strategic impact themes.
Building local capacity and the role of local currency
A central part of local capacity building is the use of local currency to match assets and liabilities and to minimise exposure to foreign exchange risk and thereby help improve affordability. Establishing the confidence of homebuyers in the market is equally important. This can be achieved by improving their financial understanding and developing local capacity in areas such as mortgage and service provision. This does not come without its challenges, however. The cost of land, local regulations, market transparency, tenancy rights and the legislative framework are just a few challenges; in fact, these exist everywhere. Nevertheless, positive and proactive collaboration between key stakeholders can help address these issues.
Moreover, the importance of the impact of homebuilding on driving the local economy should not be understated. It can have extremely beneficial primary and secondary effects in driving economic growth; but at the same time, developers and financiers must take account of local habits and cultures in the design and build of housing developments. In Ghana and Nigeria, unions, employers and economic zones could represent promising and potentially untapped counterparties or areas that could be developed further. Thus, successful projects depend on finding local solutions. Real Estate Investment Trusts and Green Finance also offer interesting dimensions.
The Real Estate Investment Trusts product as a means of funding ownership
Real Estate Investment Trusts (REITs) are increasingly being used for housing projects. For REITs to develop successfully – as they have in many markets across Africa – confidence in the market needs to be built, which is often an issue of experience. A key focus for REIT market capacity to develop is transparency to help the investor understand the dynamics of the market – meaning regulation, liquidity and institutional participation. Sharing data to encourage transparency and efficiency will serve to decrease transaction costs. In these ways, REITs can facilitate the raising of capital locally to support housing projects and aggregate investment opportunities.
The role of Green Finance in broadening sources of funding
When discussing affordable housing, it is crucial to recognise the importance of sustainability and the potential of green finance. In Ghana, housing is specifically mentioned in the strategy for meeting the SDGs. Sustainability brings multiple benefits to housing projects, not only in terms of the build itself, but also in attracting subsidies and lower financing costs (at both wholesale and retail levels). Investor demand for green bonds is high. For example, Acorn Housing demonstrated incremental investor interest by virtue of its EDGE certification.
The Ghana Infrastructure Investment Fund (GIIF) has been supporting the development of university college accommodation. For GIIF, the product must be right – there is a need for stakeholder engagement to ensure that designs best target the housing that people genuinely want. Unit costs are relatively high in Ghana and innovation that reduce costs while improving quality should be encouraged.
From our discussions, we identified the need for a multi-pronged and collaborative approach to address affordability, targeted government interventions, and the encouragement of private sector engagement. By sharing ideas and through constructive discussion, we are hopeful that this event has started or helped to advance conversations that can continue amongst all stakeholders.
Head of Investor Relations at PIDG