From the bustling townships of South Africa emerges a new breed of property heroes.
Ordinary locals turned micro-developers aim to alleviate the looming affordable housing crisis.
Also read: Cape Town’s micro-developer fund boosts affordable housing
Over the past 20 years, micro-developers in South African townships have tackled the affordable housing shortage by expanding or rebuilding their homes into low-cost rental units.
According to IOL, the influx of properties throughout the townships always present a challenge to keep pace with.
It is estimated that this is a multi-billion-rand property sector that provides a few million rooms and is growing annually.
In 2018, Zama Mgwatyu of Development Action Group (DAG) coined the term ‘Backyarding 2.0’ to describe the township micro-developers transforming backyard shacks into sophisticated apartments.
Mgwatyu believes informal developers have the potential to solve the country’s housing crisis and their entrepreneurial spirit is creating jobs in local neighbourhoods.
Cynthia Ngxukuma, former chairperson of the Township Developers Forum of the Western Cape, notes that micro-developers are curbing land-grabbing.
Since 1994, housing delivery in South Africa has not kept pace with demand, creating a significant backlog. In the Western Cape, official waiting lists exceed 600 000 people seeking council houses, with over 350 000 in Cape Town alone.
Major challenges for micro-developers include limited access to land and formal finance.
‘Financial institutions are, by nature, conservative and governed by the Credit Act and they have a difficult time getting into this market,’ says Deon van Zyl, the chairperson of the Western Cape Property Development Forum.
The micro-developments in townships have spurred new industries, boosting local economies. These new enterprises include hardware stores, room rental agencies and grocery vendors.
‘The next generation of millionaires can be made here, but things need to happen to ensure we can create generational wealth,’ says Ngxukuma.
Ngxukuma adds that developers create value but often face challenges with dead capital. Lacking title deeds, approved plans, bank financing, or insurance, hinders their capital realisation.
About 70% of properties on the deeds registry in South Africa are valued below R1.2 million. Despite focusing on the top 10-20%, the real property market comprises these lower-valued properties.
However, Van Zyl points out that micro-developers often operate outside formal regulations.
‘It is impossible to take a regulatory environment for the formal sector and try impose it on a more informal sector – it does not work.’
‘Are they solving the housing problem? Yes they are; the problem is there is no real data because many of them fly under the radar.’
Ngxukuma distinguishes themselves from industry giants like Pam Golding and Rawsons, emphasising their unique operational systems and market approach.
‘The law moves too slowly and needs to catch-up with us. Through engagement with the formal sector, I can now encourage my clients to build right.’
The City of Cape Town (CoCT) aims to bridge the gap between the informal and formal property sectors.
COCT has been amending municipal by-laws for micro-developers.
A new R20 million subsidy fund helps cover development charges.
The City acknowledges the sector’s potential to deliver housing and urban density, balancing it with responsibility to protect property rights, health, and safety.
One thing is for sure: the informal sector is thriving.
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Affordable housing for over 1000 residents coming to Goodwood
Picture: Development Action Group / Facebook