How Urbanization in Africa is Driving Shelter Innovation

By Bakang Moetse and Habitat for Humanity Published on Aug. 12, 2022

Can ShelterTech become the ‘it’ trend in combining purpose and profit?

Believed to be the location of 13 out of 20 of the world’s largest urban cities by the end of the century, Africa is poised to experience phenomenal increases in its urbanization rates over the next few decades. While this trend has a variety of ramifications for African nations, some are more consequential than others, given their direct impact on the continent’s ability to achieve the goals outlined in the UN’s 2030 Sustainable Development Agenda or even the African Union’s Agenda 2063. One area increasingly contending for a top spot on the list of priorities is access to affordable housing, especially in sub-Saharan Africa.

Urbanization is applying immense pressure on the sub-Saharan housing market

As more Africans in the sub-Saharan region have moved to urban areas in pursuit of better economic prospects over the past years, demand for housing has skyrocketed. As estimated by the World Bank, the stock of formal housing has proved to be highly insufficient, as evidenced by the 4.5 million new residents entering informal settlements each year. Along with this, a sizeable surge in demand for housing has been predicted by 2050 as 1.2 billion more residents in sub-Saharan Africa are expected to move to the region’s urban areas.

Along with this demand-side pressure, the region’s housing markets continue to be plagued by supply-side constraints, such as a lack of appropriate financing options, administrative inefficiencies, inadequate land rights, high costs of construction materials, and long completion times. Access to affordable shelter is further hindered by scarce and disorganized local and national housing and land policies.

Noting the mounting pressure of demand on a sector already battered by the outlined supply-side issues, it’s hard to characterize this affordable housing challenge as anything but a wicked problem.

A strategy for tackling the ‘wicked problem’ of access to affordable housing

As with all wicked problems, by definition, there seldom exists a single or simplistic solution. Similarly, affordable housing is a complex challenge whose solutions go beyond merely providing walls and a roof but also permeate access to clean water and sanitation, affordable products, safety, health, and connection to education and livelihood opportunities.

This ultimately creates decent and affordable access to housing for the continent’s families, particularly those at the bottom of the pyramid, requiring a systemic approach that incorporates the contributions of multiple actors. Whereas housing has typically been relegated purely to governments and large-scale developers, with underwhelming results, it's clear that the magnitude of the market gap will require a new cohort of problem-solvers.

Acknowledging startups as game-changers

This is where startups come into play, delivering on their reputation as business trailblazers and laying the groundwork to help meet the needs of millions of families in the region who lack access to affordable housing products and services.

In many areas, startups are already tackling some of the world’s most significant developmental challenges. Fintech ventures, for example, have revolutionized the sector by taking advantage of the widespread use of mobile technologies across the region to reduce barriers to financial services, enabling financial inclusion for underserved communities, and contributing to new product development and efficiency gains. In Africa, this has been seen through, Flutterwave, Tala, and other emergent companies, including Bright On Capital.

By witnessing the digital revolution led by Fintech, a sector critical to the continent’s development agenda, it's of little debate that an analogous transformation is required for the housing sector to meet the mammoth housing gap that grows wider every day. The good news, however, is that startups are already driving change in the affordable housing sector, transforming needs into business opportunities.

Spotlighting #ShelterTech startups

Seeing the potential in the startups developing sustainable and scalable housing-related solutions, organizations have started to work with the market to help entrepreneurs create new business models and technologies that increase people’s access to housing under a new umbrella: ShelterTech.

Global housing non-profit Habitat for Humanity and their innovation unit, the Terwilliger Center for Innovation in Shelter, are determined to elevate shelter entrepreneurship as a significant impact investment field in the coming years. Their ShelterTech accelerator programs, spanning from Mexico to Southeast Asia – including an ongoing program for sub-Saharan Africa – have supported over 70 startups and scaleups in improving their business, securing partnerships, and funding to scale.

ShelterTech encompasses new products and services with the potential to radically improve access to quality affordable housing, creating decent living conditions for low-income communities. Considering the multifaceted challenges on both the demand and supply side of affordable housing markets, ShelterTech focuses not only on construction solutions but also on labor, finance, materials, markets, energy, water, and sanitation solutions.


Meet some ShelterTech startups:

Gjenge

Gjenge is confronting issues of plastic waste, unemployment, and the high cost of traditional construction materials in Kenya. The startup impacts these areas by converting plastic waste into affordable and aesthetically pleasing paving bricks. Since its inception, Gjenge has recycled over 100 tons of plastic waste, creating employment opportunities for over 100 women and youth.

Earth Enable

Earth Enable’s innovation in indoor flooring increases the physical and emotional health of residents living in suboptimal homes, making the flooring cost more affordable. The startup’s flooring solutions dramatically reduce childhood asthma, malnutrition, diarrhea, and others. This is in addition to creating employment for over 200 full-time employees in Rwanda, where the company is based, and improving the living conditions and quality of life for almost 15,000 Rwandese families.


#ShelterTech also means business

With Africa’s bottom-of-the-pyramid segments estimated to hold approximately $52bn in purchasing power by 2030 – and with the understanding that this population will constitute a large proportion of those moving to urban areas – the investment outlook for the affordable housing sector is undoubtedly bullish.

This figure alone can turn the heads of many regional corporations, particularly those looking for practical and leaner ways to test ideas. Considering the size of the challenge of access to affordable housing and increasing urbanization rates, a strong case also exists for mainstream businesses to get involved.

“We have a strong call to action for corporates to partner with us so they can access the most promising and out-of-the-box housing technologies,” says Lizan Kuster, ShelterTech lead at Habitat for Humanity. “When we talk about ShelterTech, we are also in the space of allied services, such as energy, education, internet infrastructure, and everything that can be part of the housing ecosystem,” she adds.

Extracting lessons, once again, from the financial services sector, multi-sector partnerships are becoming more frequent, wherein corporations, governments, and venture capitalists come together to forge a robust ecosystem of support for Fintech and Insurtech startups. Several successful examples of this approach exist globally, including some executed through Plug and Play’s innovation platform, which brings together some of the world’s largest financial services corporations, startups, and other players for systemic impact.

Innovation bringing actors together for greater impact

Considering an ecosystem-led approach's effect on the financial service sector’s most established verticals, it's not a far stretch to advocate that ShelterTech, too, can benefit from employing this approach. This can be accomplished by expanding holistic innovation platforms that seamlessly connect disruptive startups with corporate partners, mentors, peers, and investors from across the globe.

Habitat for Humanity’s ShelterTech platform supports ventures more than an accelerator by fostering a community that comes together through events and alums gatherings, mentorship, awards, knowledge sharing, and access to catalytic funding and pilot projects. Its ultimate objective is strategically deploying capital into housing sector startups and creating an investable portfolio of solutions that make housing safe and affordable. This platform approach creates mutually value-generative relationships for the startups and business partners while boosting affordable housing innovation to create a systemic impact that exceeds individual achievements.

As with any African tale worth telling, the unfolding story of transforming sub-Saharan housing markets through innovation can be concluded with an adage to spur action. To all startups, governments, corporations, and venture capitalists looking to create affordable and scalable solutions, "If we want to go fast, we can go alone, but if we want to go far, we ought to go together.”

If you're a corporation, startup, or investor, visit the#ShelterTech Innovation Platform and thesub-Saharan Africa accelerator recently launched by Habitat for Humanity and Plug and Play Africa.

For more information, contact:

Bakang Moetse b.moetse@pnptc.com

Lizan Kuster lkuster@habitat.org