Cost of building materials won’t come down yet

The promise:
One of the highlights of the manifesto that the ruling NRM released in the run up to the 2011 general election was a promise to work in concert with other investors to explore Uganda’s mineral resources with a view of bringing the cost of building materials down if Ugandans were to give it a fresh mandate.
“In order to bring down the cost of building materials, government will co-invest in exploration and development of the requisite materials,” the manifesto reads in parts.

According to the document, the iron ore deposits in Muko were to be tapped into to enable the country produce iron and steel.
An airborne geophysical survey that had been carried out between 2007 and 2008 had at the time revealed that Uganda has an estimated 260 million tons of iron ore.
Others that were lined up for exploration included the limestone deposits at Katikekile and Moyo from which cement was expected to be produced and the glass sand deposits at Diimu village in Bukakata, Masaka from which glass sheets were expected to be manufactured.

Also on the list of deposits that were lined up for exploration were the granite and marble deposits in Karamoja and Busoga sub-regions, from which dimension stone for floor and wall tiles were expected to be manufactured.
“In order to enhance the investment, government will provide the required key infrastructure like power, roads, railway and water services. Similarly, programmes aimed at increasing timber supply for the housing and construction industry will be undertaken,” the manifesto further reads.

The promised intervention came hot on the heels of the release of findings of a housing chain study, which had been carried out in 2010 by the Netherlands-based International Finance Management and Consulting firm, Ayani BV, with funding from Habitat for Humanity International, which revealed that Uganda had a housing backlog of about 1.6 million units.
Findings of the study which targeted individuals with earnings of below $10 per day or a monthly income of less than Shs750,000 suggested that there was a deficit of 211,000 units in the urban areas and about 1.4 units in the rural areas.

This deficit was attributed to a cocktail of issues, among them the high cost of building materials. Other reasons included the difficulties that low income earners were experiencing in acquiring land and land titles and accessing finance to construct houses.
With the urban population estimated to have at the time been growing at the rate of 4.8 per cent per annum and the national population said to be growing at a growth rate estimated at 3.5 per annum, it had been projected that the population would have reached 45 million people by the end of 2020.

The implication was that the problem would build up to crisis proportions if government didn’t make any strategic intervention that would result into the arrival on the market of more housing units.
In the circumstances, the promise was very timely as it came with the prospects of availability of cheaper building materials, which was likely to make construction of houses cheaper. This was expected to translate into a reduction of the housing deficit, but now more than eight years since the promise was first made, most of the building materials on the market are imported, their cost remains high and the housing deficit remains in seven digit figures.

Impact
Despite all the interventions that have led to the increase in the number of cement manufactures, the cost of cement remains very high.
While it is true that the cost of cement in Uganda remains lower than the continental average of nearly $10 for a 50 kilogram bag, consumers in Uganda have for the last few months been crying foul over an increment that saw prices shoot up from a wholesale price of between Shs32,000 and Shs33,000.

That had an impact on retail prices. The price of a 50kg bag rose up to anywhere between Shs37,000 and Shs39,000 as of February. The increments sparked off a crisis in the construction industry as it threatened to affect the cost of many an ongoing infrastructure project.
It was at the time reported that the price hikes were a result of hoarding or rationing of stocks by the retailers, who were believed to have been taking advantage to cash in on the artificial crisis as prospective property developers were forced into panic buys.

In early April, the Ministry of Trade and Industry was forced to swing into action. It issued the manufacturers with an ultimatum to either the cause prices to get back to normal or risk competition from cheap imported cement. The prices have since dropped back to between Shs32,000 and Shs33,000 per a bag, which is still a bit on the high side and remains out of reach for a big number of people.
At the same time, while there have been interventions in the area of providing mortgage finance, it remains available to a small group of people. According to the Centre for Affordable Housing in Africa, there are only 6,000 mortgages in Uganda, with an average mortgage size of $30,000.

Monitor’s Position

Government deserves some credit for a job well done in as far as attempting to attract investments in the area of mineral exploration and building materials, but there is need for much more to be done if Uganda is to bring down the cost of building materials and in the process address the housing shortages that have been plaguing the country for more than a decade now.
While at it, those in government should bear in mind the fact that one existing mortgage and housing finance policies seemed to have left low and middle income earners lost at sea. Packages like the mortgage liquidity facility, which Minister Baryomunsi is so proud of, are actually out of the reach of this category of people. It is necessary that policy makers come up with tailor made packages to suit these two sections of our society.

Government must at the same time actualise promises to recapitalise National Housing Construction Company (NHCC). While sources in NHCC have indicated that government has not been taking any dividends from the company for more than four years, there is still need for the company’s capital outlay to be boosted further.
At the same time, the promise to allow those who are saving money with provident funds like the National Social Security Fund (NSSF) to use part of their savings to either purchase or build houses should be fulfilled to enable many more Ugandans access decent accommodation.

Official explanation
The State Minister for Housing, Dr Chris Baryomunsi, told Daily Monitor on Monday that government has of lately embarked on a very aggressive campaign aimed at ensuring that many more construction materials are manufactured locally.
“Government has been very active in attracting investors in mineral exploration. We have already attracted quite a number of investors. What has been delaying in the case of (exploration of iron ore in) Kigezi is that we need coal or gas. We are also encouraging other investors involved in the manufacture of different types of building materials. Ugandans have been used to the brick and mortar, but we now have very many building materials on the market,” he said.

He also said that new cement factories have already opened up in Kampala and Tororo, while a plant that manufactures floor and wall tiles has since opened up in Nakaseke and Luweero districts.
Besides working on the attraction of investors, he said, government has also intervened in the area of housing finance by recapitalising the Housing Finance Bank through which it has introduced mortgage liquidity facility, which allows people to borrow money to finance housing projects at interest rates that are relatively cheaper than normal bank rates.

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