NHFC Portfolio Committee Of Housing 13 June 2001

1. NATIONAL HOUSING FINANCE CORPORATION LIMITED NHFCPortfolio CommitteeOf Housing13 June 2001

2. South African Government The National Housing Finance Corporation is one of fivestate-owned development finance institutions in South Africa. With initial, permanent capital provided by government, each one supplements its capital with private sector funding. In this way, partnerships between the public and private sectors are created. KHULA ENTERPRISE FINANCE NATIONAL HOUSING FINANCE CORPORATION DEVELOPMENT BANK OF SOUTHERN AFRICA LAND AND AGRICULTURAL BANK • INDUSTRIAL • DEVELOPMENT • CORPORATION Industrial development finance for, and investments into, industrial concerns Infrastructure development finance for provincial/local authorities, parastatals and utilities Small, medium and micro enterprise development finance for lending intermediaries financing small, medium and micro enterprises Housing development finance for intermediaries financing housing and housing institutions Agricultural development finance

3. THE MANDATE . . . • In partnerships with the • broadest range of organisations, • to search for new and better ways to mobilise finance for housing, from • sourcesoutside the state... • "The corporation’s endeavours should in time ensure that every South African with a regular source of income can gain access to finance to acquire, rent and/or improve a home of his/her own”

4. THE MISSION . . . • The NHFC seek to • create housing opportunities for the low and • moderate income families by: • Funding intermediaries to promote broader access to housing • Building adequate and sustainable capacity within the organisations to which it funds • Partnering organisations to pioneer new finance and housing delivery approaches

5. Wholesale Debt Funding : R 1 083m • Provide credit facilities to retail lenders in low income housing market – existing institutions(Rural/Urban): • Banks - Unibank, Cash Bank • Non-Banks – Agishana, Grand Finance, Mid First, Protea, Sumex • Building Material Suppliers – Bonus Building Supplies • Development Corporations – Ithala, Mpumalanga • Challenges / Experiences • Consolidation / Alliances – extending reach by the big banks • Environment highly competitive – no room for small lenders, clients • Liquidity pressures in this market • Blending of credit with SAVINGS and SUBSIDIES • Risk Management become increasingly important

6. Build & Capacitate new Inst: R 170m • SHF provides capacitation of new housing institutions • Fund housing projects of the housing institutions for alternative tenure – promote Social Housing: • Rental stock - SEMAG, Greater Germiston, Durban Metro, HAEL • Rent-to-Buy – CTCHC, Reatlehile • Installment Sales – CTCHC, ABAHLALI • Co-operatives – COPE, NEWTOWN HOUSING CO. • Challenges / Experiences • Setting time of viable housing institutions – 18 approx. months • Project have to be scale magnitude – approx. 3000 units • Grant funding is crucial at early stages of the project • Vat and Income Tax Exemption – make them sustainable • Enabling regulatory environment – Rental Housing Act

7. Partnering other Organisations… Intent to deliver housing and housing finance at scale • In 1999, setup Gateway Home Loans(PTY) - PPP • Loan Origination and Servicing by major banks – end up in Securitisation : Accredited Lenders • Designed a Non-Mortgage financial instrument : Makhulong Home Loan – Pension provident fund backed / other forms of collateral • Banks – SBSA, NEDCOR, AFRICAN BANK, CASH BANK, ETC • Lessons Learnt • Need for Primary Market stimulation – no big banks in this market • Need for policies/regulation to facilitate the banks involvement • Scale delivery is crucial for successful securitisation • Risk Enhancement mechanisms – NHFC to assume greater risk

8. Performance TO-DATE “HIGHLIGHTS”

9. NHFC Approvals and Disbursements Rm (Annual)

10. Number of End User Loans…

11. Number of Housing Units…

12. Social Impact of the NHFC… • Potentially more 2,5 million low and moderate income families’ quality of life would be improved due to NHFCs funding activities

13. EXAMPLES OF PROJECTS FUNDED BY THE NHFC…

14. CTCHC – WESTERN CAPE Mitchells Plein

15. ABAHLALI - EASTERN CAPE Port Elizabeth / Nelson Mandela Metro • ABAHLALI…

16. TSUTSUMANI - GAUTENG Alexander • SEMAG ( All Africa Games )

17. DURBAN METRO - KZN Durban

18. Housing Budget Relevance… • Initially capitalised by SA Government : Seed Capital • CURRENT YEAR : 2001/2002 – No Allocation from Budget • Current Capital Structure : • Seed Capital R 880m • Debentures from Private SectorR 100m • Distributable Reserves/Profit R 350m R 1 330m • Financial Vision - Longer term goal is to be self-sustainable…

19. Extend the housing finance market down-stream : accommodate the low income households • Unlock private sector capital into the NHFC target market • Ensure that there is increased competition in this sector of the market • Improve on the internal efficiencies

20. Challenges for the NHFC… Financial… • Where the next funding for the Corporation would come from – Self Sustainability • Link Savings and Subsidies to Credit (package better affordability levels with a quality product delivered) • Increase private sector investment in the low income housing market – “risk enhancement” mechanisms • Run a Cost Effective Operation – “Lean and Mean” • Conform to all the Public Finance Management Act regulations ( already do )

21. Challenges for the NHFC… Housing Impact… • Putting the “roof over peoples head” : MANDATE!!! • Deliver finance for ALL forms of Low Income Housing • Ownership ( including, the Urban Renewal Projects ) • Alternative Tenure : Rental / Rent-To-But / Installment Sale • Incremental: Thrust of the RURAL housing market (in line with the Presidential Integrated Sustainable Rural Development Strategy - ISRDS) • How to deal with the AIDS factor that is most prevalent in this target market • Work with other NGOs to quantify the magnitude and the likely impact of AIDS among the LIH • Explore housing solution options for the AIDS sufferers

22. Challenges for the NHFC… Policy… • Effectively use the policy instruments such as the HLMDAand theCRAto ensuremaximum participation by the private sector e.g. banks and non-banking financial and insurance institutions in the low income market • Stipulation of “ENABLING MEASURES / EXEMPTIONS” that will ensure the NHFC can fulfill its public mandate

23. Challenges for the NHFC… Private Sector Participation… • Innovative financial structuring : Aggressive risk “Enhancement Mechanisms” ( Strategic Thrust ) • Through “Enabling Measures”, the NHFC becoming a strategic partner to private sector – the spirit of PPP extended • “Implicit Guarantee” by the Government – To enable the NHFC to deliver lower costs of funding

24. Conclusion • NHFC’s Mandate : “Putting the Roof Over People’s Head” • Strategic Focus : • Self Sustainability – Question of future funding • Focused on Housing Delivery Agenda • Establishment of “Enabling Arrangements” – We need Your Help • Normalisation of the housing finance sector among the low and moderate income families • Thank You – Portfolio Committee of Housing