ENABLEMENT ENVIRONMENT CREATED
5.6.0 The Financial Services and Shelter provision
to take advantage of the high interest rate differentials between Zimbabwe and its major trading partners (Kanyedze, 1997).
One major unintended effect of significant foreign currency inflows through Foreign Current Deposit Accounts (FCDAs) has been their contribution to money supply growth. Partly due to the FCDAs and partly due to aid inflows associated with donor funding for ESAP, net foreign assets accounted for 75.5% of the increase in money supply in 1994 compared with a contribution of 64.3% of the increase in money supply in 1993. Such a development presents authorities with an apparent paradox.
On one hand, an increase in foreign currency inflows raises a country's foreign exchange reserves, on the other it fuels inflation through its effect on the growth in money supply. The authorities have had to sterilise such inflows through raising domestic interest rates to dampen demand for credit. The problem of large capital inflows, especially if they are of a short-term nature, is intensified as the probability of abrupt and sudden reversal increases (Zimbabwe, ZCTU, 1997).
Unarguably, holding Foreign Current Deposit Accounts, in principal was to facilitate efficiency in foreign transactions of companies, which would benefit the consumers and in this study; the shelter sector. Purchase of materials and equipment that were not readily available was then made possible. The intent in provision of shelter, made deliverance faster than before.
Sources of Finance: Finance for shelter and urban development was raised from the following main sources.
a. Loans from central government appropriated from the annual national budget.
b. Loans from private sector financial institutions,including building societies (principal sources of funds),insurance companies,and pension funds.
c. Locally generated revenues from taxes and revenue generating projects operated by local authorities.
d. Recently,from non -governmental organizations,community based organizations and local authorities.
e. Individuals,and loans from donor agencies such as the World Bank and USAID.
The Public Sector: funds were and are still channeled through the National Housing Fund (NHF), which was established in 1982. The principal function of the NHF is to receive and process loans for low-cost and middle income housing from local
authorities and individuals. The NHF has been effective as an instrument for
encouraging low-income housing construction but the annual amounts allocated for low-income housing have fluctuated depending on the resources available to the government. In the 1994/95 financial year,Zimbabwe spent only 0.2% of the national budget on shelter which is below the annual appropriations for housing in others countries where 2-8% is the average (Zimbabwe, MPC&NH). The following reasons account for the low investment levels on shelter:
a. The need to shift to positive rates for both deposit and lending rates b. The creation of a secondary mortgage market.
c. Removal of restrictions on the opening of new financial institutions to encourage competition.
d. The creation of a system of mortgage financing for community group groups.
e. The restructuring of the municipal bond market to enable easier access by more municipalities.
Efforts by local authorities to find other sources had little success with respect to shelter and urban development. Reliance continued to be on the National Housing Fund and the Building Societies to provide funding.
Traditionally,local authorities performed as facilitators to make land for development available by servicingthe land and then offering the land to developers. This role needed to be modified and a partnership between building societies,the local
authority and the beneficiaries forged during the planning stage if the efforts to solve the low-income housing problem were/are to bear fruit. Most local authorities
responded to such calls by the Ministry of Public Construction and National Housing.
Included in this partnership were Community Based Organizations (CBOs) and NGOs who are increasingly playing an important role in the housing sector.They
have financial limitations and are basically new corners in the housing scene, however their role needs recognition (Zimbabwe, MPC&NH, 1998).
The Private Sector: At government's request, in September 1992, USAID designed the five-year Zimbabwe Private Sector Housing Program to support the Economic Structural Adjustments programme (ESAP) and to assist the government in enacting policy changes in the housing sector. The programme focused on eliminating
obstacles to sustaining production and delivery of low cost housing in three major areas: construction, building materials and construction equipment industries, the land delivery system, and the housing finance systems. The project generated a wide range of policy impacts since 1992 because of the following:
• Increased Affordability
Before the reforms were introduced in 1992/93, the standard house of four rooms was affordable only to 23% of the population. But following the reduced housing standard negotiated under the USAID project, 70% of the population can now afford to buy a house.
• Increased Public Resources for Low Income Housing
As part of policy, the Government of Zimbabwe had to redirect the National Housing Fund resources away from middle class and civil servant housing to provision of low cost stands for low-income families.
• Increased Private Resources for Low- Income Housing
As a result of the project, more funds were made available in financial year 1995 for low-income housing finance through local private financial institutions than the total that had been made available since independence in 1980.
NGOs and Community Based Organisations (CBOs) : NGOs (both funded from the West and within Zimbabwe) had been dominantly rural in the past. Only now is there a slow shift towards (e.g. with World Vision, Hivos) towards urbanisation.
Through government encouragement, NGOs were increasingly playing an important role in shelter and urban development projects. They were involved in the construction of houses and provision of infrastructure for shelter projects. Also there is a diversity of organisations in public transport provision, housing supply, income generating projects and neighborhood security. However, urban civil society is generally weak when it comes to mobilising for urban development issues.
Building Societies: Under the Zimbabwe Private Sector Housing Programme, one of the reforms required by the project was that building societies be granted the right to issue certificates of deposit; granted by the Government of Zimbabwe in 1992.
The resulting substantial inflow of funds in 1995 had enabled building societies to offer new mortgage advances totaling Z$2.6 billion, a rise of about 19% over 1994 (MPC&NH, 1997).
Building societies' contributions to the shelter and urban sector fluctuated in response to Reserve Bank directives and regulations regarding interest rates. The trend pointed towards increasing the level of investment particularly in low cost housing. The establishment of a new bUilding society increased their number to four,
Since the 1992/93 financial year, the volume of lending by building societies has steadily increased (Zimbabwe, 1998).
5.7.0 Housing Development: 1990 - 2000:The New Approaches
The Ministry of Public Construction and National Housing took a decision to directly intervene in order to salvage the situation and adopted the following:
a) Mass production of houses through turnkey approach;
b) The use of affordable house designs and economical land use planning to achieve affordability.
1. Houses Mass Production: The Ministry planned to produce a total of 670 000 units in urban areas between 1992 and 2000; 502 500 for the low income and 167 500 for the middle to high-income groups. The tasks were to be shared between the public sector, the private sector and non-governmental organisation including housing co-operatives. The public sector alone aimed to achieve a target production of about 160 000 units during the planned period (Zimbabwe, MPC&NH).
2. Ministry's Construction Units: To complete the housing programmes implemented by local authorities, the Ministry of Public Construction and National Housing was in terms of section 15 (1) of the Housing and Building Act of 1979 established Construction Units to undertake the construction of houses in local authority areas. The Ministry's Construction Units had a current capacity of producing 5 000 units per annum and are at the moment engaged in the construction of about 1 200 housing/flats units throughout the country. The capacity was to be quadrupled if these Units were provided with plant and equipment such as concrete mixers front-end loaders, trucks etc. Well-equipped Construction Units coupled with increased local authority and private sector efforts were to see a significant reduction in the housing backlog by the turn of the century. Since the Construction Units operated under efficient management, the houses and flats were delivered speedily and economically. In addition the Construction Units generated employment for the local people. From July 1992 to date over 3 of the Construction Units had created over 6 000 jobs (Zimbabwe, 1995).
3. Building Materials Mass Production: In order to facilitate the speedy production of house/flat units the Ministry also established Building Materials Production Units to produce the basic building materials like doors, window frames, and concrete blocks etc (MPC&NH, 1998). This had not only improved the availability of building materials but had significantly contributed to the reduction in construction costs.
4. Economical Land Use Planning Affordable House Designs :In order to make housing affordable to the people, the Ministry adopted various types of semi- detached house and flat designs. These included the cluster houses with a minimum of 4 rooms and a plinth area of 36m2 per unit. With the Cluster arrangement, the estimated savings as compared to the cost of constructing a 4-roomed detached house with a minimum plinth area of 50m2 was over 30% (MPCNH, 1996).
Affordability had been further enhanced by the revision of planning standards to achieve land economy. The minimum stand size was reduced from 300m2 , with a frontage of 12, 5m2 to 150m2 with a minimum stand frontage of 8,5m2 for the development of detached houses (see appendix iii).
The stand sizes for high density detached housing schemes now range from 150m2 whilst the stand sizes for medium density detached housing schemes range from 300m2 to 500m2. The emphasis was on mixed housing development. Hence, in planning for residential schemes planners were required to achieve the following Proportions (MPC&NH, 1997);
(I) 150m2 - 40%
(11) 200m2 - 40%
(Ill) 300m2 - 20%
The mixed development approach included the construction of Walk-up flats for both the middle and low-income families. This approach was appealing in that it facilitates cross-subsidisation within a housing scheme. The adoption of the new planning standards was not meant to reduce the cost of construction but was meant to make a significant contribution in curbing sprawl and reducing transportation and off-site infrastructure costs (MPC&NH, 1998).