Shelter Afrique eyeing Sh9.2b capital injection from shareholders

Shelter Afrique Managing Director James Mugerwa

Pan African housing development finance institution, Shelter Afrique, wants Sh9.2 billion ($90 million) next year to shore up its balance sheet.

The firm which got a two-notch downgrade from Moodys rating agency — from Ba1 to Ba3 — says it will be meeting its 46 shareholders in January to pitch for additional resources.

Shelter Afrique is owned by 44 African Governments, the African Development Bank (AfDB) and the Africa Reinsurance Company.

“We are seeking additional commitments from our shareholders for what the company needs to meet expanded targets for our 2018 to 2020 period. The additional extraordinary subscription is an investment on our strategic plan and not to address existing gaps,” Vipya Harawa, Shelter Afrique Director of Legal Risk and Compliance, said.

Yesterday, one of its key shareholders, the Africa Development Bank (AfDB) signed a deal to disburse Sh839 million ($8.2 million) that was approved by the bank’s board in February.

This pushes up AfDB’s stake in the firm to 23 per cent with its cumulative investment standing at $15.2 million.

“The investment signed today is evidence of AfDB’s steadfast support to Shelter Afrique and confirms the bank’s confidence in the management and board of the institution,” Gabriel Negatu, the AfDB East Africa Regional Director General, said.

Confidence crisis

Shelter Afrique is going through a rough path after allegations cooking books by a former employee dented the institution’s market confidence. The claims are still under investigations.

The firm’s board has since hired consulting firm Deloitte which launched investigations into the malpractices claim against Managing Director James Mugerwa and is expected to deliver the final report this week.

“The audit process on the allegations is ongoing, the board received a draft report on 6th of this month, amendments are being done and this week we will get the final report,” Mr Harawa said.

He denied reports that the equity subscription was a form of bailout stating that unforeseen investments had necessitated the extraordinary cash call.
In 2013, the 46 shareholders made a $150 million commitment for a five-year plan, but the realtor says its impressive 25 per cent growth needed more resources than anticipated.

The firm’s management says the growth in investment has tipped their capital adequacy ratios from 29 per cent to 25 per cent prompting the Moody’s outlook that it cannot be sustained by the available resources.

Mr Harawa said they have signed a deal with the Kenyan government to build 20,000 units for the police service. They have ongoing projects in Rwanda and Uganda and are in discussions with Cameroun, Senegal and Cote d’Ivoire for  several projects. He said the company is also setting up regional offices in Abidjan and Lusaka to increase penetration in the continent.