5 ms·

> What is going on? Start with the lack of finance. Many Senegalese developers struggle to obtain loans without hefty collateral. Instead, some start building,

> 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. I think it's worth noting these two paragraphs above because, whilst the topic refers to "unfinished buildings" (which, depending on your local English dialect, typically evokes a sense of large buildings being constructed), the same financing hurdles apply to far smaller "buildings" across Africa - such as single room homes and other types of small dwellings. > 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. A vicious circle indeed. To the more economically astute among us, how would a country go about solving this problem? Any historical analogies would be appreciated.

hadlock 5y ago
> Instead, people break ground knowing they do not yet have the funds to finish. This is pretty common actually. You build one room, make it livable, and then build the next room, then the next, and when you run out of land, start on the second story. The end result is that a young family with children can own their own home, and live within their means immediately, rather than spend a decade renting and saving towards a down payment. You can see this over and over in the favellas of South America, and even on the outskirts of major cities in Vietnam like Hanoi and Ho Chi Minh City ("Saigon"). Modern/western building codes do not allow for this kind of piecemeal construction, which is probably why it seems so odd to us.
- noir_lord 5y ago
  Reminds me of a documentary I watched about opal miners in Australia who live underground (in nice houses, just underground) - when they want a new bedroom they just get a jackhammer out and hew one. Coober Pedy is one of those places I'd kinda like to visit someday.
ReptileMan 5y ago
Well my experience as a person living in Eastern Europe is that EU funds are just very expensive roundabout subsidy for German car manufacturers - since everybody steals bulk of the money and buys expensive cars. So injecting capital is almost guaranteed to not work.
- rossvor 5y ago
  And yet in terms of economic development countries which joined EU are doing quite markedly better than those that didn't. Obviously, there's some selection bias -- only those who sort of had their shit together were allowed to join. And also just plain market access would have account for some of that. But still, as a person who grew up in EE in the 90s, I feel like people are very quick to forget how bad it really was, and how quickly -- within a generation -- things drastically improved, and how unusual that is.
- BlueTemplar 5y ago
  Money isn't capital and this issue can be helped by giving not money but coupons that can only be used for construction.
jariel 5y ago
Without effective retail finance, which is not possible without other things in place first, which are not possible without a baseline of functioning governance, there really is no 'organized' solution that's going to work. You can't have well run banks without commercial law, you can't have commercial law without great schools, law schools, good legislators, a judiciary, acting in good faith and 'not corrupt'. Without a systematic, organized solution, it might be worth teaching people skills and abilities that serve to create value without the overhead - for example, carpentry, masonry etc.. My grandfather and family built their own home, their own cottage, installed all of the plumbing themselves and this is in a 'modern nation' less than 100 years ago, and it was not uncommon. However - they were highly skilled craftspeople, with knowledge and abilities passed down from generation to generation, information that made it 'across the Atlantic' from Europe into the new world without state organs, schools etc. to do so. We have a hard time today grasping that, we kind of expect 'the government' to make the right trade schools, colleges and universities available for 'where all the knowledge is' but it was never really that way. Without extra currency floating around to facilitate loans etc, then it's the labour of communities i.e. family, friends children. Amish and Mennonite communities are strong examples of this kind of behaviour, not that they are necessarily the perfect example, but you can see it in action. There's so much focus on 'top down governance' approaches in these areas because it's the issue that our own governments can speak to in terms of money, grants, investment, and actors on the other side can sign agreements talk about plans etc.. But in reality it's probably worth sometimes looking at such systems as not very governed at all, and developing things that work very well on the local level.
baybal2 5y ago
That's vastly inaccurate. Unless they talk about some really poor Central African countries, it's not a problem in more well off parts of coastal Africa. A Kenyan, or Nigerian family of economically active class can buy their first property in cash. The talk here is a about the part of populace who is just above living in slums, and informal housing. A very different matter without a doubt.
- herodoturtle 5y ago
  > That's vastly inaccurate. Which part of the article (or my comment), exactly, is vastly inaccurate? Having lived in an affluent part of coastal Africa for a couple of decades, I am intimately familiar with the wealth disparity which you speak of. But I don't see how the luxurious living of the minority renders the overall arguments in that article inaccurate. Please help me understand what you're referring to?
  - baybal2 5y ago
    I am referring to them singling out that "liquidity" thing as the sole culprit, while much more obvious problem of omnipresent "fraudstrepreneurs," and cost of construction materials outside of tier 1 economies of Africa is not even mentioned. Saying simply, credit availability make little difference for construction business in already relatively well doing countries in Africa, and everybody else will have much more obvious issues to deal with first.
ArkanExplorer 5y ago
The population of Senegal is 13 million, with only 50,000 Europeans: https://en.wikipedia.org/wiki/Senegal#Ethnic_groups https://en.wikipedia.org/wiki/Senegal#Ethnic_groups Or 99.6% African. The Top 40 countries by HDI are all European or East Asian (excluding those with oil): https://en.wikipedia.org/wiki/List_of_countries_by_Human_Development_Index https://en.wikipedia.org/wiki/List_of_countries_by_Human_Dev... Why don't countries like Senegal seek to increase their European and East Asian populations until development targets are met? They could offer tax-free immigration and residency.
- deleted 5y ago
  [deleted]
xyzzyz 5y ago
The problem is not just lack of liquidity. If that was the case, the simple solution would be to just print a bunch more money. Then people would have more cash laying around, more of it would end up in banks, which would allow banks to extend more credit. However, this is unlikely to be the root of the problem. More likely is that the national economy is simply not productive enough to reach the production levels needed to enjoy prosperity similar to the one observed in developed countries. What that means is that on the one hand, too much of existing production is going into consumption, and too little into investment. Instead of building more houses, they should be building more cement plants, more building material factories etc, and the same goes for other sectors of economy too (eg if agriculture mechanization allows fewer people to work on food production, more people will be available to work on house construction). Of course, given the already low levels of production and consumption, it’s hard to reduce consumption even further, but then again, prosperous western countries used to be just as poor in the past, and they managed to pull themselves by their bootstraps anyway. In many ways, African countries today have it easier, as the knowledge of what to do and how already exists. In addition to too scarce investment, a second major factor is differences in productivity on individual worker level. The sources of these differences are really diverse: they range from bad people management practices, through use of inefficient work techniques, higher human error rates resulting in more time wasted on useless products, and many more. This is a harder problem, and there are no simple solutions, but on the bright side, the longer economy is stable, the more companies have time to mature and refine their practices, so this is improving on its own over time. And lastly, there is often problem of bad institutional practices, like excessive taxation, excessive regulation, government corruption etc. It’s much easier to build a cement factory when you don’t have to care much about environmental regulations, and this is exactly the regulatory regime that countries like Britain, US or China enjoyed when they were climbing themselves out of poverty. Similarly, there is more money for investment, if the government is taking less of it. This sounds like something easy to change, but in practice the institutional inertia, combined with copying Western practices as of right now rather than as of when they were of similar development levels makes it harder than it should be.

hadlock 5y ago

> Instead, people break ground knowing they do not yet have the funds to finish. This is pretty common actually. You build one room, make it livable, and then build the next room, then the next, and when you run out of land, start on the second story. The end result is that a young family with children can own their own home, and live within their means immediately, rather than spend a decade renting and saving towards a down payment. You can see this over and over in the favellas of South America, and even on the outskirts of major cities in Vietnam like Hanoi and Ho Chi Minh City ("Saigon"). Modern/western building codes do not allow for this kind of piecemeal construction, which is probably why it seems so odd to us.

noir_lord 5y ago
Reminds me of a documentary I watched about opal miners in Australia who live underground (in nice houses, just underground) - when they want a new bedroom they just get a jackhammer out and hew one. Coober Pedy is one of those places I'd kinda like to visit someday.

ReptileMan 5y ago

Well my experience as a person living in Eastern Europe is that EU funds are just very expensive roundabout subsidy for German car manufacturers - since everybody steals bulk of the money and buys expensive cars. So injecting capital is almost guaranteed to not work.

rossvor 5y ago
And yet in terms of economic development countries which joined EU are doing quite markedly better than those that didn't. Obviously, there's some selection bias -- only those who sort of had their shit together were allowed to join. And also just plain market access would have account for some of that. But still, as a person who grew up in EE in the 90s, I feel like people are very quick to forget how bad it really was, and how quickly -- within a generation -- things drastically improved, and how unusual that is.
BlueTemplar 5y ago
Money isn't capital and this issue can be helped by giving not money but coupons that can only be used for construction.

jariel 5y ago

Without effective retail finance, which is not possible without other things in place first, which are not possible without a baseline of functioning governance, there really is no 'organized' solution that's going to work. You can't have well run banks without commercial law, you can't have commercial law without great schools, law schools, good legislators, a judiciary, acting in good faith and 'not corrupt'. Without a systematic, organized solution, it might be worth teaching people skills and abilities that serve to create value without the overhead - for example, carpentry, masonry etc.. My grandfather and family built their own home, their own cottage, installed all of the plumbing themselves and this is in a 'modern nation' less than 100 years ago, and it was not uncommon. However - they were highly skilled craftspeople, with knowledge and abilities passed down from generation to generation, information that made it 'across the Atlantic' from Europe into the new world without state organs, schools etc. to do so. We have a hard time today grasping that, we kind of expect 'the government' to make the right trade schools, colleges and universities available for 'where all the knowledge is' but it was never really that way. Without extra currency floating around to facilitate loans etc, then it's the labour of communities i.e. family, friends children. Amish and Mennonite communities are strong examples of this kind of behaviour, not that they are necessarily the perfect example, but you can see it in action. There's so much focus on 'top down governance' approaches in these areas because it's the issue that our own governments can speak to in terms of money, grants, investment, and actors on the other side can sign agreements talk about plans etc.. But in reality it's probably worth sometimes looking at such systems as not very governed at all, and developing things that work very well on the local level.

baybal2 5y ago

That's vastly inaccurate. Unless they talk about some really poor Central African countries, it's not a problem in more well off parts of coastal Africa. A Kenyan, or Nigerian family of economically active class can buy their first property in cash. The talk here is a about the part of populace who is just above living in slums, and informal housing. A very different matter without a doubt.

herodoturtle 5y ago
> That's vastly inaccurate. Which part of the article (or my comment), exactly, is vastly inaccurate? Having lived in an affluent part of coastal Africa for a couple of decades, I am intimately familiar with the wealth disparity which you speak of. But I don't see how the luxurious living of the minority renders the overall arguments in that article inaccurate. Please help me understand what you're referring to?
- baybal2 5y ago
  I am referring to them singling out that "liquidity" thing as the sole culprit, while much more obvious problem of omnipresent "fraudstrepreneurs," and cost of construction materials outside of tier 1 economies of Africa is not even mentioned. Saying simply, credit availability make little difference for construction business in already relatively well doing countries in Africa, and everybody else will have much more obvious issues to deal with first.

ArkanExplorer 5y ago

The population of Senegal is 13 million, with only 50,000 Europeans: https://en.wikipedia.org/wiki/Senegal#Ethnic_groups https://en.wikipedia.org/wiki/Senegal#Ethnic_groups Or 99.6% African. The Top 40 countries by HDI are all European or East Asian (excluding those with oil): https://en.wikipedia.org/wiki/List_of_countries_by_Human_Development_Index https://en.wikipedia.org/wiki/List_of_countries_by_Human_Dev... Why don't countries like Senegal seek to increase their European and East Asian populations until development targets are met? They could offer tax-free immigration and residency.

deleted 5y ago
[deleted]

xyzzyz 5y ago

The problem is not just lack of liquidity. If that was the case, the simple solution would be to just print a bunch more money. Then people would have more cash laying around, more of it would end up in banks, which would allow banks to extend more credit. However, this is unlikely to be the root of the problem. More likely is that the national economy is simply not productive enough to reach the production levels needed to enjoy prosperity similar to the one observed in developed countries. What that means is that on the one hand, too much of existing production is going into consumption, and too little into investment. Instead of building more houses, they should be building more cement plants, more building material factories etc, and the same goes for other sectors of economy too (eg if agriculture mechanization allows fewer people to work on food production, more people will be available to work on house construction). Of course, given the already low levels of production and consumption, it’s hard to reduce consumption even further, but then again, prosperous western countries used to be just as poor in the past, and they managed to pull themselves by their bootstraps anyway. In many ways, African countries today have it easier, as the knowledge of what to do and how already exists. In addition to too scarce investment, a second major factor is differences in productivity on individual worker level. The sources of these differences are really diverse: they range from bad people management practices, through use of inefficient work techniques, higher human error rates resulting in more time wasted on useless products, and many more. This is a harder problem, and there are no simple solutions, but on the bright side, the longer economy is stable, the more companies have time to mature and refine their practices, so this is improving on its own over time. And lastly, there is often problem of bad institutional practices, like excessive taxation, excessive regulation, government corruption etc. It’s much easier to build a cement factory when you don’t have to care much about environmental regulations, and this is exactly the regulatory regime that countries like Britain, US or China enjoyed when they were climbing themselves out of poverty. Similarly, there is more money for investment, if the government is taking less of it. This sounds like something easy to change, but in practice the institutional inertia, combined with copying Western practices as of right now rather than as of when they were of similar development levels makes it harder than it should be.