2018/19 Annual report analysis Portfolio Committee of Human Settlements 11 October 2019 Cape Town

1. 2018/19 Annual report analysis Portfolio Committee of Human Settlements 11 October 2019 Cape Town Mr. Otsile Maseng Acting CEO

2. Table of Contents • NHBRC Strategy • Council and Its Committees (Governance) • Strategic objectives • Products and Services • Audit Outcomes • Performance Information over the last 5 years • Key performance highlights for 2018/19 • Summary of historical Performance over the last 5 years • Organisational Performance Information for 2018/19 • Financial overview • Conclusions

3. NHBRC Strategy

4. The NHBRC Council was appointed by the Minister of Human Settlements for a period of three (3) years with effect from 01st August 2018, • The previous Council Term of office ended on the 30th July 2018 • The NHBRC Council consist of thirteen (13) experienced members with a good balance of skills and it is constituted by the following Committees: Council and Its Committees (Governance) 5 3 4 2 1 Funds Advisory Committee Industry Advisory Committee Human Capital and Remuneration Committee Audit and Risk Committee Registrations Committee 6 7 Social Ethics and Transformation Committee Disciplinary Hearing Committee Draft

5. Strategic Objectives • To improve cost effectiveness and internal efficiencies of operations • To ensure effective regulatory compliance • To entrench a culture of compliance and ensure efficient enforcement mechanisms • To research and introduce innovative products, methods and technologies within the home building industry • To maintain a sustainable warranty fund Products and Services • Registrations and Renewal of registrations • Enrolment of Homes in the Subsidy sector and non-subsidy sector • Inspections of Subsidy Homes and Non-Subsidy Homes • Training of home builder, women, youths, military veterans, artisans, inspectors and people with disabilities. • Geotechnical investigations assessment • Resolution of complaints • Conciliations between a housing consumer and homebuilder • Legal advisory and enforcement of norms and standards

6. No Financial year Audit Outcome 1 2014/15 Unqualified with findings 2 Unqualified with findings 2015/16 3 Unqualified with findings 2016/17 4 Qualified with findings 2017/18 5 2018/19 Unqualified with findings AUDIT OUTCOMES (PAST FIVE YEARS)

7. Performance Information (PAST FIVE YEARS)

8. Key performance highlights for 2018/19 • Initiated a social transformation programme(STEP) to increase access for targeted groups in the construction sector • Bill amendment to promote inclusion of: • Rural houses enrolment in non-subsidy • Warranty extension • Mixed-use developments • Build 9 houses using IBT technologies • Embedding risk management within the operations with a combined Assurance Model • 5, Achieved unqualified audit opinion

9. Summary of historical Performance over the last 5 Years

10. Registration of homebuilders

11. Enrolment and Late Enrolment of homes

12. Subsidy enrolments

13. Inspection of homes

14. Disciplinary matters

15. Suspension of defaulting homebuilders

16. Organisational Performance Information for 2018/19

17. Work profile

18. Social Transformation (Training)

19. Programme 1: Administration and Governance

20. Programme 2: Regulation and Protection

21. Programme 3: Legal Compliance and Enforcement

22. Programme 4: Legal Compliance and Enforcement

23. Programme 5: Warranty Fund

24. FINANCIAL OVERVIEW Annual Financial Statements Analysis

25. Operating profit amounts to R161m Net profit amounts to R584m Income statement – 5 year view ↑ ↑ ↑ ↑ ↑ ↑

26. Operating Expenses expenses have decreased to R747 m in 2018/19 from R 755 m in 2017/18 Operating Expenditure - 5 year view

27. Council’s response Operating expenditure in context • In order to ensure the long term operating profitability of the NHBRC, in December 2018 Council adopted the following budgetary principles, which have been applied to the 2019/20 -2022/23 budgets: • Five year budget to enable the strategic plan of the NHBRC. • Budget to set the direction for ensuring financial viability. • Actuarial warranty fund losses to be reduced. • Warranty fund assets and related investment activities to be used to cover warranty fund liabilities and economic capital requirements. • Operational requirements to be funded out of revenue generated only. • Budget to embed a culture of accountability, efficiency, value and innovation. • In order to ensure future growth of CPI+1%, cost containment measures have been applied in current budgets with further efficiency opportunities currently being explored for future adjustments. The organisational response above was aimed at ensuring that the NHBRC is sustainable in the next financial year and beyond Focus Areas for Management • Staff costs • Travel costs • Use of consultants. • Telephone usage • Conferencing etc

28. Total assets have grown by R621m (9,2%) after adjusting to fair values Balance Sheet – 5 year view Equity has grown by R584m (11%) Total liabilities have increased by R39m (3%) ↑ ↑ ↑ ↑ ↑ ↑

29. Cash generated from operations amounts to R208m Cash flow - 5 year view Cash in bank of R 1 096m ↑ ↑ ↑

30. Growth in the investment portfolio amounts to R1.8 Billion over 5 years Investments – 5 Year view Investment surpluses exceed technical provisions 2019: 440%

31. End