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Moladi (South Africa) – an affordable housing solution for the poor? Case study now available.

Pierre Coetzer is an associate at Reciprocity, a development consultancy based in Cape Town. He holds an MA in International Relations and Public Affairs from the University of Louvain (UCL) in Belgium, and a BA in Business Management from ICHEC in Brussels. He has seven years experience in Finance and Investment banking with Arthur Andersen in Luxembourg and Euroclear Bank in Brussels. He moved to Cape Town in 2007 to work as an independent analyst on socio-economic and political issues affecting countries in transition, with a special focus on Southern Africa. Within Reciprocity, Pierre is mainly in charge of researching, writing and publishing factsheets on inclusive business models and other initiatives aimed at expanding choice and opportunity for people at the base of the economic pyramid. He holds dual South African and French citizenship and is fluent in French, Afrikaans, English, and German.

Moladi is a South African company that utilizes a unique plastic injection molded technology to produce cast-in-place mortar structures. The process allows unskilled laborers to use indigenous materials to quickly and cheaply construct high standard permanent buildings that are earthquake, cyclone and tsunami resistant.

To download the Moladi case study from the GIM database, please click here.

What has been your personal experience going through the GIM training and case research process?

The GIM training was an excellent experience as it allowed me to get a clear understanding of the needs and wants of the GIM team and meet with several of the key personalities involved in the process. The research process back in South Africa took a while to gain momentum, as it took some time to convince Moladi to become a subject of a case study. Once the site visit and interviews had taken place, however, it was much easier to liaise with the company’s founder, and visualize the technology and understand what gave Moladi so much potential.

What is Moladi’s basic value proposition and what makes its financial model sustainable?

Moladi produces and sells a revolutionary construction technology based on pre-cast plastic panels, which are then assembled into casts into which concrete is poured to form extremely solid walls. The openings for windows, sewage and electricity are all pre-cast and don’t need to be cut out later on. One the basic frame of the building is cast, a roof is installed and the unit is ready for use. The technology can be used to build schools and clinics, for example, and this has great potential all over the developing world. By far the most interesting application, however, is for low-cost housing: a functional 40m2 unit can be built for the equivalent of US $ 6,500 – 7,000, a much lower amount than the equivalent built with traditional brick-and-mortar methods. Moladi makes its money by selling this technology to contractors in building projects around the developing world.

What have been the biggest challenges hindering Moladi’s development and growth?

It was clear, speaking to the founder, that political factors played a big role in hindering Moladi’s development and growth inside the country. Low-cost housing projects in South Africa are steeped in politics and winning tenders sometimes has more to do with political connections than with the quality of the offering. This might explain why Moladi has been much more successful in winning contracts outside of its home market: it has been very successful in other emerging markets such as Nigeria, Ghana, Mexico and India.

Another challenge is perhaps the founder’s fear of losing control over his company. Viewed from the outside, Moladi could probably gain significant scale by partnering with an outside investor.

What are the main challenges in terms of providing housing for the poor in South Africa and also more broadly in developing countries?

The main challenge is political. Housing policies and urban planning in South Africa are still heavily influenced by factors inherited from apartheid, and despite one of the world’s biggest housing programmes, driven by government, shantytowns and slums keep growing in size near the big cities. It may even be misguided to think that the solution resides in more formal housing in the wrong places and futile attempts to “eradicate” slums (as some of the official terminology would have it).

Better long term solutions may involve accepting that “slums” are likely to remain part of the urban landscape of developing countries for some time to come, and resources could be better spent at providing access to services such as efficient energy, sanitation, sewage, and the gradual upgrading of shacks. This is not to say that shacks are preferable to formal housing, of course, but current housing policies in many parts of the world sometimes fail to take into account the dynamics that drive people to build shacks where they do, and why.

Moladi should maybe seize on the opportunities presented by the upgrading of informal dwellings, as its wall-building technology could prove to be affordable, job-creating and very reliable.

What are the promises in terms of human development of access to affordable housing?

A house provides security and shelter, two of the most important pillars of material human well-being (the third and fourth being health and income). So gaining access to affordable (and adequate) housing is a fundamental indicator of human development. However, it must be said that owning a house is not automatically a step out of poverty: the maintenance costs of a formal dwelling compared to a shack can actually aggravate poverty in some cases. This is why, in South Africa at least, so many people who are allocated a low-cost house in terms of the government housing programme rent it out to others and move back into a shack: from an economic point of view, this is a perfectly rational decision that maximizes return on assets. In the long run, of course, access to affordable adequate housing promises to significantly improve the lives of the poor and form one basis of material progress.