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Case Studies

Granny Seape, one of the developers nurtured by Nurcha, has built over 2,000 houses since she has started her company in 1998.

Before becoming a developer she worked in Washington, D.C., in the Southern Africa division of the World Bank and, after returning to South Africa, in the low-cost housing mortgage divisions of two national banks. She decided that rather than theorize about providing decent houses for people with low incomes, she would try her hand at building them.

"Two and a half years later, I think it is feasible," she says. "I strongly believe there is a future for low-cost housing. All that needs to be done is for people to do their jobs. It takes three years to transfer land, yet we have a backlog of millions of houses that are needed. The government must sit down with the housing industry and streamline the process." Delays in land transfers bedevil developers. She signed a contract for a housing project in 1998; only in late 2000 did the land transfers come through and only then, could she begin to build.

Such delays cost developers money. "The one thing that will drive me out of the industry," Granny says, "is when it is no longer viable, when you can't make a profit. But for the moment we make little profit. We break even on some, lose money on a few. Sometimes you wind up subsidizing the government. You lose money not because of your own shortcomings but because of the things that are beyond your control. That shouldn't be the case."

Is she discouraged?

"Every morning I wake up discouraged," she answers," and then I get to the projects and I'am motivated."

She is motivated knowing that by building houses she is also creating jobs. Her housing project in Pretoria employed 650 people over a period of nine months. That's excluding the office and professional team. The project made 8,000 cement blocks a day on site.

The workers learned new skills. About 90 percent of the workers had never been employed before. And 65 percent of them were women, involved in almost all aspects of the construction work. The women worked alongside the men, carrying cement blocks on their heads. Small businesses emerged from the project. One run by women became a subcontractor, putting in cupboards, improving the houses. Although the Pretoria project was completed in 1998, the improvement work continues.

Emerging developers such as Granny Seape are taking advantages of the opportunities offered by the low-cost housing market. The government is spending 2 to 3 billion rand a year on housing delivery.

Local housing authorities, which control much of the spending, prefer emerging developers over established companies. For that matter, established companies are reluctant to take on small projects with low profit margins that can easily be erased by a few delays.

The barriers to entry into the construction industry are almost nonexistent. This is both good and bad. As developer Tim Potter jokes, "If you can find a wheelbarrow and three shovels you can be in the housing industry." The banks, of course, don't lend money to someone whose main credentials are a wheelbarrow and three shovels.

Granny agrees there should be tougher criteria for getting started in construction, but she doesn't think experience as a developer or contractor should be the only measure. After all, under apartheid, blacks were barred from the construction industry's management jobs.

Cedric de Beer points out that the problem isn't only at the point of entry into the construction field. Nurcha has many emerging developers and contractors who are now working on their fourth or fifth projects, all of which were well run, and yet the banks still do not want to fund them without Nurcha guarantees.

"You need a completely new mind-set," Granny says. "There are people in the banking business who have been there for who knows how long, and they're not going to change overnight."

With the banks reluctant to participate, Granny and her home owners have improved new payment methods.

"On the Pretoria project, people had to put in their own money to get the houses they wanted," she says. They organized their own system of paying me. We didn't have an office on site because all the houses were occupied, but every month on the 7th a young man from my office would go to the community and stand under a lamppost, collect money, and write invoices. There was no fixed monthly installment.

THEY PAID WHAT THEY COULD THAT MONTH. TWO YEARS LATER NOT ONE PERSON OWES.