Why does Africa have many unfinished buildings?
Weak banks, poor land titling, and grabby relatives all play a role
Like an enormous grey skeleton, a six-storey apartment building looms over a quiet street in Dakar, the capital of Senegal. Concrete balconies and bedrooms are discernible. But there are no windows, doors, or lights. And the only painting is of the scatological variety from the sole residents: crows. How long has it been like that? “Five or six years,” says the guard. Property in Senegal has been booming, but concrete is frequently poured into buildings only for construction suddenly to stop, often for many years.
Half-made buildings are everywhere in African cities. In Abuja, Nigeria’s capital, the government last year said it would take over 600 of them because they had been unfinished for so long. Dakar’s skeletal structures illustrate many of the reasons why unfinished buildings are so common—and the costs of this problem.
Putting up walls is not cheap. The concrete and materials for a five-storey apartment building cost hundreds of thousands of dollars. Senegal is desperately short of finance. Around 40% of firms say access to cash is their biggest obstacle, compared with 14% in the rest of the world. Across sub-Saharan Africa, it is businesses’ largest problem (see chart). Savings are low and bank lending is limited. Yet money is still poured into buildings that earn nothing for years. Whatever the pop star Pharrell Williams says, few prospective tenants feel like a room without a roof.
What is going on? Start with the lack of finance. Many Senegalese developers struggle to obtain loans without hefty collateral. Instead, some start building, hoping to tempt buyers to put down deposits on flats and then use that to help finance the rest of the building. But buyers are wary of making a commitment based on a construction site. These unfinished projects often tie up prime land, too.
For Senegalese hoping to build their own homes, mortgages are rare. In all, they cover only about 20% of the need. Across many African countries, even the cheapest newly built house is unaffordable for most people. Instead, people break ground knowing they do not yet have the funds to finish. When they earn a little more money they add more bricks.
The shortage of finance makes a vicious circle. Many Africans, in effect, save in concrete. Thus money gets tied up for years in unfinished buildings earning nothing, rather than being put into a business or bank where it could earn a return which could allow would-be homeowners to build more rapidly later. The lack of liquidity in the financial system then further limits what banks can lend to builders.
Only 33% of sub-Saharan Africans had a bank account in 2017. Many are suspicious of financial instruments. “Here it is mine, it is more secure,” says Mansour, a resident of Dakar, pointing to the house he is building. In countries with high inflation, saving in concrete is particularly appealing. And investments in buildings often escape the notice of African tax collectors, since enforcement is weak.
Pouring concrete makes sense for other reasons, too. When you start building the neighbourhood respects you, says Cheikh Abdoul Faty, who has been trying to finish the second floor of his home in Dakar for a decade. “If you have millions in the bank, people do not see it,” points out Mamadou Diagne, a consultant. If you just start building they “appreciate you more”. Relatives are also more likely to pitch in to help you finish, once construction has started.
Half-built walls also offer protection from grasping cousins. In much of Africa, social pressure to help even distant kin is high. Mr. Faty sends money to his mother every month. However, by putting the rest of his spare cash into plaster and tiles he sidesteps some requests from other relatives. “If you have money in your pocket, under your bed, or in the bank you have to go and take it and help them,” explains Mr. Diagne. “But if you put it in your concrete,” he says, “you can say you have no money.”
Weak property rights also matter. In Kampala, Uganda’s capital, the predominant land-tenure system often gives both the occupant and the ownership rights to the land. That can gum upland markets, hampering new developments. But it can also spur people to pour concrete to try to strengthen their claims. Similarly, in the suburbs of Dar es Salaam, Tanzania’s commercial capital, formal land titles are rare, so people start building to try to secure their rights.
Bigger building projects tend to stall for other reasons. Many developers are caught short by the fluctuating prices of materials or by flaky contractors who spend the budget but don’t finish the job. Still, some want to turn cash hastily into concrete, regardless of whether they can finish the building—because they are laundering money.
In Dakar property is a “target”, says Khady Dia Sarr, who advises the mayor. “A lot of people are investing behind [fake] names.” In a recent case, a Guadeloupean drug-trafficker with multiple aliases is accused of stashing cash in edifices. Many other African countries are affected, too. In 2019 Leilani Farha, then the un’s special rapporteur on housing, fretted that in Nigeria the thousands of buildings that stood empty were used to launder money.
More money in the financial system and less idling in unfinished buildings would help businesses and aspiring homeowners alike. That would require improvements to taxes and regulations, expanded access to banking services, and clearer property rights. In Senegal, the government is starting by trying to make borrowing more affordable by giving banks guarantees on home mortgages. Meanwhile, few Senegalese can predict when their homes will be finished. “That depends on God,” says Mansour, as he places one more cinder block in the wall.