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Cash-strapped Shelter Afrique targets Sh10bn more after AfDB bailout loan

Troubled pan-African housing financier Shelter Afrique needs a further Sh10 billion this year to finance existing project obligations and meet liquidity ratio requirements. 

This is in addition to the Sh2.9 billion cash injection from the African Development Bank (AfDB), part of which was only approved last week.

Documents seen by the Business Daily that were issued to Shelter Afrique shareholders during the firm’s extraordinary general meeting at the end of January indicated that it requires a minimum of Sh13.3 billion ($127.96 million) to meet “2017 committed obligations and 15 per cent liquidity ratio”.

The AfDB last week approved a $20 million (Sh2.01 billion) bailout loan to Shelter Afrique, saving the troubled pan-African mortgage lender from an imminent liquidity crunch — it had told shareholders that liquidity would run out by March 24.

The lender had earlier this month—on February 1 — disbursed to Shelter Afrique $8.2 million (Sh844.6 million) in equity investment.

Shelter Afrique’s hope for funds to bridge the financing gap lie on the other shareholders — the 44 African States including Kenya — that agreed to pay up their share capital commitments of about Sh12 billion ($116 million) by end of 2017.

“With additional equity support, Shelter Afrique will be in a stronger position to finance an increasing number of projects whether directly or indirectly,” said AfDB in a statement.

“At the EGM, shareholders present unanimously resolved to pay up their share capital commitments of approximately $116 million as soon as possible or to face temporary suspension from membership if not done by the end of 2017.”
Shelter Afrique, which is headquartered in Nairobi, is owned by 44 African countries together with the AfDB and African Reinsurance Corporation.

Kenya is the largest shareholder of Shelter Afrique among other governments with an 11.16 per cent stake, second to AfDB’s majority share of 22.7 per cent.

The housing developer has in recent months been in the eye of a financial storm after allegations of lax lending practices and accounts manipulation at the mortgage lender.

Earlier in the month, Shelter Afrique managing director James Mugerwa resigned following members’ adoption of a forensic audit report done by consultancy firm Deloitte implicating him in financial impropriety.

The financial ills at Shelter Afrique came to light in September last year when the firm’s head of finance Godfrey Waweru blew the whistle via an email on the financial health of the mortgage lender.

The official had accused Mr Mugerwa of dishing out sub-prime mortgages resulting in 59 per cent of Shelter Afrique’s $246.3 million (Sh24.63 billion) loan book being non-performing as at February last year.

Deloitte recommended “disciplinary action against all members of the loans committee who were involved in making irregular restructuring and provisioning decisions for the aforementioned loans”.

The shareholders also agreed to expand the shareholders base to include non-African investors this year.

The firm created a new class of shares (Class C) which will be issued to non-African countries and development finance institutions, with China a likely suitor.

Hitherto, the pan-African lender’s ownership was limited to African states (Class A) as well as Africa-focused multilateral lenders (Class B) where AfDB and Africa Re fall.

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