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Shelter Afrique paves way for China stake sale with new shares

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Mr James Mugerwa, Shelter Afrique’s managing director. PHOTO | FILE

Shelter Afrique directors have voted to create a new class of shareholding for non-African countries, opening the door for China to acquire a stake in the cash-strapped mortgage financier.

The troubled mortgage lender has created a new category of shares targeting non-African countries and development finance institutions, giving Beijing a leeway to invest in the bank.

“The general assembly also passed a resolution to open a new class of shareholding for additional investors, it is expected that this move will consolidate the financial base of the organisation,” Shelter Afrique said in a statement.

Shelter Afrique’s board on Tuesday held a crisis meeting in Nairobi to discuss fresh plans to raise additional capital at the distressed lender, and adopted a forensic audit report into the financial health of the agency.

The “Class ‘C’ shares will be issued for subscription by countries and legal personalities not falling into class A or Class B,” reads the new article adopted on Tuesday.

Foreign shareholders will be eligible to elect directors to the Shelter Afrique 14-member board, in proportion to their stakes, reads the new statutes.

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

Kenyan taxpayers control 10.63 per cent of Shelter Afrique, which is jointly owned by 44 African countries together with the African Development Bank and African Reinsurance. The entry of China and other foreign shareholders will dilute Africa’s voice at the institution.

China has since 2010 been eyeing a piece of Shelter Afrique, but ownership restrictions stood in the way.

Efforts to amend statutes to pave the way for foreign ownership of Shelter Afrique had run into multiple headwinds, with African states suspicious of China’s expansionist strategy.

Shelter Afrique is eyeing Beijing’s deep pockets to boost its balance sheet and tap funds for rolling out large scale social housing schemes across Africa in a model similar to the one used in the Asian economic giant.

The housing financier is set to run out of liquidity by February 17, according to a notice circulated to shareholders ahead of Tuesday’s extraordinary meeting, underlining the dire situation at Shelter Afrique which is also battling allegations of subprime lending and manipulation of its financial records.

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Shelter Afrique needs $127.96 million to meet this year’s committed obligations and maintain a 15 per cent liquidity ratio, says Shelter Afrique legal, risk and compliance director Vipya Harawa, in the notice.

Ratings agency Moody’s in November downgraded Shelter Afrique’s long-term issuer rating from Ba1 to Ba3, and placed it on review for further downgrade pending an internal investigation, following reports of accounts manipulation and breach of corporate governance rules.

“Shelter Afrique has experienced a persistent deterioration across most of its credit fundamentals, which appear to reflect structural, rather than cyclical drivers,” said Rita Babihuga, assistant vice president at Moody’s.

In 2011, the housing body’s boss Alassane Bâ revealed plans to sell a stake to China in a strategic move to access cheaper capital for affordable housing projects, and raise cash for onward lending to developers.