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RATIONALE AND CHALLENGES IN DELIVERING AFFORDABLE HOUSING
IN SOUTH AFRICA
by
ELIAS MASILELA, CEO, PIC
IHC CONFERENCE, JOHANNESBURG COUNTRY CLUB
3 OCTOBER 2012
Introduction
Section 26 of Chapter 2 of the Constitution enshrines a citizen’s right to adequate housing.
The Government in an effort to realize this right for all South Africans has built over 3 million
subsidized housing units since 1994. Not only is this a constitutional requirement, it is just
simple human dignity.
However, due to the massive growing demands, on the one hand, and decades of
degradation of housing conditions, on the other hand, the backlog remains difficult to
eradicate. Current estimates of the backlog stand at about 2,1 to 2,5 million units. As at
September 2011, it was estimated that approximately 12 million people were still without
adequate housing.
Though consistent and reliable statistics on housing are somewhat patchy, according to the
2009 General Household Survey, 12,8% of South African households lived in a RDP or
State-subsidized dwelling and 13,5% of households have at least one member of the
household on a demand database or waiting list for State subsidized housing.
International human rights law recognizes principles on basic housing. According to the UN
International Covenant on Economic, Social and Cultural Rights, in relation to adequate
housing, the article reads: “the right to housing should not be interpreted in a narrow or
restrictive sense which equates it with, for example, the shelter provided by merely having a
roof over one’s head or views shelter exclusively as a commodity. Rather it should be seen
as the right to live somewhere in security, peace and dignity.” 1
1 General comment 4 on Article 11(1) of the UN International Covenant on Economic, Social and Cultural
Rights.

The Department of Human Settlements has recognised that the backlog in South Africa is
not being reduced fast enough and has committed to increasing the rate of delivery with a
view to wiping out the backlog by 2030. At current levels, over R16billion is earmarked by
Government for housing each year. But still this is not enough and has led Minister Sexwale
to say that “We need all hands on deck to sort this problem out and to create a better South
Africa for all.”
This remark is both recognition and a plea that Government needs the assistance of all
parties possible to eliminate informal settlements and poor housing conditions for millions of
South Africans. Business, individuals, institutions, and Government all need to partner in the
effort. Government already provides various subsidies to the poor to aid the housing effort.
Initiatives include individual housing subsidies, incremental housing programmes, rental
housing programmes and so on.
Some, besides Government, have also already begun to tackle the problem: organisations
such as the National Housing Finance Corporation, IHS, Trust for Urban Housing Finance,
the Rural Housing Loan Fund, micro-finance institutions, the Social Housing Regulatory
authority, to name a few, are all part of the struggle to get the houses built and get people
out of squalor and into better living conditions.
A housing backlog is not a uniquely South African problem. Most developing countries suffer
some degree of backlog, often seen as a capital market, disposable income and access to
banking services problem. We all face the same challenges of eradicating informal
settlements and providing people with homes.
Role of Housing
As the Constitutional Court has said, the provision of “housing as a human right constitutes
more than simply providing bricks and mortar”. 2 Proper housing is a fundamental building
block not only to human decency in terms of living conditions, but also in terms of stability. In
other words, having proper housing allows stability in your life, facilitates the storage of your
belongings, a foundation from which to look for a job if you are a job seeker, to build from a
small house into a better one, and provides stability for your children’s education.
2 Government of the RSA and Others v Grootboom and Others (2001). Para 35.
ELIAS MASILELA KEYNOTE ADDRESS 2012
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Its importance as fundamental bedrock to a better and improved quality of life cannot be
under-estimated. The establishment of formal housing also naturally brings with it over time,
better opportunities for commerce around those housing settlements, schools for children
who grow up in those neighbourhoods, infrastructure in terms of electricity and water, and so
on. In other words, formal housing can act as an essential catalyst to aid development and
growth.
Proper housing aids the development of better communities where all people can feel that
they truly belong to society. It can provide them with a sense of worth, achievement and
belonging. In a study by UCT Professor Viruly, he found that across 2379 units constructed,
the majority of respondents who took up those housing units agreed that their access to
public transport; quality of their children’s lives; house; leisure; social life and health, had all
improved.
Interventions in the housing market of some sort have occurred many times in history, as
countries have been faced with similar problems at some time in their development:
American public housing policy had it’s roots in the Great Depression of the 1930’s;
British public housing policy in line with rapid urbanization in the 1800’s was already
an issue in 1870, with a special Government Board established to oversee the provision of
housing to the very poor. Following the 2nd World War, the Government produced an
average of 170 000 houses per year from 1946 – 51 and by 1954, this figure had risen to
300 000. (Britain to this day has a homelessness strategy that seeks to eradicate the
problem of people living in temporary or informal conditions).
Back-Log: World-wide
“UN-HABITAT estimates that, worldwide, close to three billion people will need access to
housing and basic infrastructure services over the next 25 years. This will require 35.1
million housing units per year or 96 150 per day or 4000 per hour in order to meet
demand…”
Back-Log: Sub-Saharan Africa
Focusing on Sub-Saharan Africa, one needs to acknowledge that profound demographic
change is occurring. The rate of urbanization is extremely high. “African cities will have to
accommodate more than 300 million new residents” by 2030.
ELIAS MASILELA KEYNOTE ADDRESS 2012
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Without investment in infrastructure, water, electricity and housing, urban centres are not
ready to keep pace with the rate of urbanization. In this lies both threat and opportunity.
The threat is clear: without proper investment and planning, increased squalor and informal
settlements will result as urbanization continues. Development will be further retarded and
countries already behind in terms of development versus peers will fall further behind.
The opportunity presents itself too: proper planning, good governance and oversight, and
sound management of urban planning and the formation of proper housing conditions can
provide the 300 million or so people in sub-Saharan Africa who will join urban centres, with a
base from which to work, educate themselves, seek opportunity, start businesses, improve
their access to health services etc, in short, provide a springboard from which they can
contribute to their specific country’s development.
The South African backlog is symptomatic of the rest of Sub-Saharan Africa. Countries can
learn from each other in tackling the problem. In Kenya, 234 000 new housing units are
required annually and about 20 000 – 30 000 are being produced; in Zambia 600 000 units
are needed and less than 1% of that number are being produced.
However, it’s not all “doom and gloom”! According to the Community Survey (2007), in South
Africa “today is better than yesterday”. As reported by Finmark and the Community Survey in
2007:
70,5% of households now live in formal dwellings compared to 64,4% in 1996;
The use of electricity as the main energy source for lighting increased from 57,6% in
1996 to 80% in 2007; and
The percentage of households with access to piped water increased from 84,5% in
2001 to 88,6% in 2007.
But there is still a notable gap. One that raises social instability risk.
Where the PIC is playing a role
The number of housing units required in South Africa and the rest of Sub-Saharan Africa
seems daunting, but many organisations and Governments are tackling the problem. As an
investor, the PIC, like similar investors, can play an important role in contributing to wiping
out the back-log. It will no doubt take sustained effort over many years, but the prospect of
failing is unthinkable in terms of its impact on our long-term social and development.
ELIAS MASILELA KEYNOTE ADDRESS 2012
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The PIC is currently refining its strategy on affordable housing, but already has invested in
entities that provide housing solutions to the very poor and those of low-income. The amount
committed by the PIC currently stands at R2.6 billion and includes:
Investment in low cost housing;
Private equity investment in housing development projects;
Bridging finance for developers of affordable houses;
Mortgage finance for the development and refurbishment of residential
accommodation in the inner city; and
Investment into intermediary organisations dealing with affordable housing.
The PIC is also very open to dialogue. Dialogue not only with Government entities and
international investors, but with partners in the South African and African environment. We
see space both where investor return and social return can co-exist and we believe that one
cannot view the two in isolation of one another. They are inextricable intertwined. An investor
for the long term, the PIC views sustainability and societal development as crucial to
continued future growth and success.
In conclusion
The dialogue that I refer to above is a long and painful agenda. The solutions are not at all
easy. These cannot be resolved by only one party. This agenda is formed by some of the
social and economic imbalances we observe in South Africa. As we are players and
financiers in this field, we still are concerned about issues of:
Access to decent housing for the average South African. This partly has to do with
effectively matching the supply with existing demand conditions;
The other issues relating to access have to do with affordability. How certain are we
that the unit costs of producing is consistent with means of the people we want to assist?
Are we not enriching the middle man?
Do we have the requisite institutions to finance the target markets?
Investing in the right areas, namely those next to work, reversing the effects of the
Group Areas Act
Ensure an optimal quality to the houses we construct
Minding the gap, to ensure that no deserving South Africans are left out
These are issues which, we trust, that this gathering will honestly grapple with and help us
find lasting solutions for.
I thank you.
ELIAS MASILELA KEYNOTE ADDRESS 2012
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