Institutional Context and Transformation

The new CEO’s tenure began with plans to transform Shelter Afrique into the Shelter Afrique Development Bank (ShafDB). However, Hann inherited an organization marked by over a decade of institutional instability, with several CEOs averaging two-year terms and a series of unresolved and recurring scandals. Since its creation forty years ago, Shelter Afrique has faced persistent financial difficulties, recording significant cumulative losses in recent years. Its total assets stood at a mere USD 270 million in 2022, a trivial amount for a pan-African institution whose mandate requires enormous resources, estimated in the tens or even hundreds of billions of dollars. This financial profile makes it difficult for Shelter Afrique to mobilize substantial financial resources due to a combination of institutional, financial, and operational weaknesses.

Diverging Trajectories from Sister Institutions

Shelter Afrique was established by the African Development Bank (AfDB) in 1982, alongside other specialized financial institutions for Africa’s key development sectors:
–  Habitat and urban development: Shelter Afrique
–  Intra and extra African trade: Afreximbank
–  Reinsurance: Africa-Re
Since their creation, these institutions have experienced varying fortunes. By the end of 2022, Afreximbank’s total assets were USD 28 billion, while Africa-Re’s were USD 2 billion, respectively about 100 and 10 times larger than Shelter Afrique’s. This stark divergence highlights Shelter Afrique’s lagging progress. It raises questions about whether congenital flaws at inception continue to affect its persistent lack of effectiveness.

Institutional Malaise

Despite Hann’s arrival, Shelter Afrique struggles to gain momentum, partly due to significant arrears accumulated by shareholders and limited access to capital markets. Shareholders’ reluctance to support capital increases in 2013 and 2017 and the lack of interest from the other 10 countries that have yet to join the institution reflect underlying mistrust and indicate a lack of confidence in the institution’s future and capacity to deliver on its mandate and address the critical issue of housing and urban development. This situation is exacerbated by a lack of on-ground impact, recurring institutional crises, and scandals that have plagued Shelter Afrique for years.

A Pivotal Moment: The Annual General Meeting (AGM) in Kigali

The upcoming AGM to be held on 11-13 June 2024 in Kigali represents a crucial opportunity to address these persistent issues. Issues on the agenda will include modification of the statutes and formally transforming the institution into the Shelter Afrique Development Bank. This AGM could be pivotal in resetting and course-correcting the trajectory of the institution and catching up on lost time amidst an environment of institutional fragility and uncertainty.

A Critical Dilemma for Shareholders

With tightening fiscal space and numerous internal and external obligations, including increased debt servicing, member states with accumulated arrears face tough decisions regarding the optimal use of taxpayer funds. Before clearing these arrears, they must obtain satisfactory answers to a fundamental question: "What is the return on investment for their taxpayers, both as shareholders and beneficiaries of the investments made on their behalf?"

Time for A Hard Look

Given the current situation, it is essential for shareholder representatives to enforce a profound restructuring of Shelter Afrique to provide it with solid institutional foundations. Shareholders, partners, and financial markets are looking for strong signals from Kigali. This expected restructuring should involve all stakeholders and adhere to best practices in institutional governance and operational excellence. Alternatively, shareholders may consider setting up a new entity with the required corporate governance structure, financial resources, and operational capacity to address Africa’s enormous deficit in housing and urban development. It is incumbent upon them to take a hard look at the state of affairs and make the tough decisions required to meet the needs of Africans.

The Enormous African Housing Deficit

Africa’s population is projected to reach 2.5 billion by 2050, with around 60% living in urban and peri-urban areas, representing an increase of approximately 1.2 billion new urban dwellers. To meet these needs, Africa requires a robust Shelter Afrique. AfDB President Akinwumi Adesina estimated at a high-level forum for mayors during the 2023 Africa Investment Forum in Marrakech, Morocco, that investments in Africa’s housing sector should reach USD 140 billion annually, roughly 5.5% of the continent’s GDP. Clearly, as currently constituted and operating, Shelter Afrique, which was created to be the lead actor in the housing space, is not able to play that role and have the expected impact.

Kigali: The Place for Bold Decisions and Decisive Actions

Faced with the gaping mismatch between the institutional and financial capacity of Shelter Afrique and the enormous housing and urban development needs of the continent, the AGM in Kigali presents a crucial opportunity. It is hoped that shareholders will be inspired by Rwanda’s commitment to the highest standards of corporate governance, uncompromising focus on service delivery excellence, and accountability to taxpayers to make the bold decisions and take the decisive actions required.

Future Prospects

Given these enormous housing needs, what can Shelter Afrique achieve with its modest resources and accomplishments over more than four decades? Considering these figures and the current state of Shelter Afrique, what can be hoped for, and what should be done? The 44 member states, along with 10 other countries not yet part of the institution (including Egypt, Ethiopia, Sudan, and South Africa), seek concrete answers from a reformed Shelter Afrique.

Conclusion

Shelter Afrique stands at a critical juncture. To overcome its institutional and financial challenges, a deep restructuring cannot be avoided. The decisions made at the June 2024 assembly will be crucial for the institution’s future and for addressing Africa’s urgent and massive housing needs.
Africans, both as taxpayers and as beneficiaries of effective housing and urban development solutions, deserve nothing less. Anything else would-be dereliction of duty.

Shelter Afrique was established by the African Development Bank (AfDB) in 1982.