Strong foundations

The report examines the intersection of insurance and property markets in sub-Saharan Africa, identifying a gap between the theoretical potential of insurance to mitigate risks and provide financing and the actual low level of insurance penetration. It maps the property value chain—from land assembly to sale—and details the risks (credit, macroeconomic, political, and climate) and constraints (administrative bottlenecks and limited finance) that hinder development. Using Zambia as a case study, the report argues that while insurance can offer products like political risk insurance and performance bonds, its role is currently limited by the underdeveloped nature of the property markets themselves and a lack of aggregated, liquid investment vehicles that suit institutional insurers.

• Property markets in sub-Saharan Africa are characterized by a significant supply-demand gap, where formal supply and financing are insufficient. In the West African Economic and Monetary Union, banks collectively issue only about 15,000 new mortgages per year.
• The property market value chain consists of seven primary components: land assembly and acquisition, tenure, property construction, connection to infrastructure, occupation, ongoing maintenance, and sale and transfer.
• Property development is subject to diverse risks, including credit and refinancing risk, macroeconomic and political risk, administrative and schedule-delay risks, and theft and damage risk. Climate change is noted to aggravate disaster risk, impacting the planning and design of urban areas.
• Non-financing constraints significantly hinder property development, specifically limited access to suitable land, administrative and regulatory bottlenecks, and market limitations. For example, the cost of a construction permit for a warehouse is 3.1% of the value in Zambia, compared to 1.6% in South Africa.
• In Zambia, the property market is constrained by high house prices, low affordability, and a severe lack of mortgages for immovable property, with estimates suggesting fewer than 3,000 active mortgages in the country.
• Insurance can theoretically support the property market through risk transfer (e.g., political risk insurance, performance bonds, and construction all risk insurance) and capital intermediation, but its actual impact in sub-Saharan Africa is limited by low penetration and a lack of scale.
• The role of insurance as an investor in property varies by the stage of market development. In less developed markets (Stages 1 and 2), insurers rely more on real estate due to a lack of other liquid investment options. In more developed markets like South Africa, property investments account for less than 2% of insurance investments.
• Institutional insurers often avoid direct property investment because current mechanisms do not meet their needs for low management costs, high volume, and liquidity. Direct mortgage issuing is difficult for insurers as they are not typically set up for credit risk management.

APA

Msulwa, B., Loots, C., Hougaard, C., & Bennett, E. (2018). Strong foundations. FSD Africa. https://fsdafrica.org/wp-content/uploads/2025/05/Strong-foundations_Cenfri-FSDA_June-2018-1.pdf

Chicago

Msulwa, Baraka, Christiaan Loots, Christine Hougaard, and Erin Bennett. Strong foundations. FSD Africa, 2018. https://fsdafrica.org/wp-content/uploads/2025/05/Strong-foundations_Cenfri-FSDA_June-2018-1.pdf.

Wikipedia

{{cite report |last1=Msulwa |first1=Baraka |last2=Loots |first2=Christiaan |last3=Hougaard |first3=Christine |last4=Bennett |first4=Erin |title=Strong foundations |publisher=FSD Africa |date=June 2018 |url=https://fsdafrica.org/wp-content/uploads/2025/05/Strong-foundations_Cenfri-FSDA_June-2018-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{msulwa2018strong, author = {Msulwa, Baraka and Loots, Christiaan and Hougaard, Christine and Bennett, Erin}, title = {{Strong foundations}}, institution = {FSD Africa}, year = {2018}, month = jun, url = {https://fsdafrica.org/wp-content/uploads/2025/05/Strong-foundations_Cenfri-FSDA_June-2018-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }