PRESENTATION TO THE DEPARTMENT OF HUMAN SETTLEMENTS PORTFOLIO COMMITTEE ANNUAL PERFORMANCE PLAN 2016/2017 FINANCIAL YEAR 1 March 2016

MANDATE, VISION AND MISSION 2 NURCHA MANDATE “NURCHA ensures the availability of bridging finance to small, medium and established contractors, building low and moderate income housing and related community facilities and infrastructure.” NURCHA VISION “To be regarded as a partner of choice for those seeking innovative bridging finance solutions” NURCHA MISSION “NURCHA initiates programmes and takes considered risks to ensure a sustainable flow of finance for the construction of low-income and affordable housing, community facilities and infrastructure. We work in partnership with all role-players in these markets to maximize the development of sustainable human settlements”

PURPOSE 3 To present the Annual Performance Plan to the Department of Human Settlements – Portfolio Committee for approval

INTRODUCTION 4 NURCHA’s business: – short term project finance (24 months), to developers in the affordable housing segment, – Bridging finance to contractors, – Targeted programmes to finance and develop small contractors focusing on youth and women, – Deploy programme and fund management capabilities to support sector development efforts. NURCHA works on a ‘balanced budget principle’: – Administrative costs must be covered by budgeted income from operations Sources of income are: – Interest and fees from lending activities, – Fees from programme and management support activities, – Money market investments.

STRATEGY PILLARS 5 1)Increase development impact in line MTSF Targets and Mandate. – Increased lending towards delivery affordable housing, Grow loan book in the gap category of the market, Participate in sector initiatives on mining towns and respond to lending opportunities, Provide short term finance to rental projects (including student accommodation), Develop lending products that facilitate settlement consolidation and densification. – Improved access to finance for subsidy housing contractors: Consolidate the lending model and build provincial capabilities Secure buy-in of NDHS, Provincial Departments and Municipalities on an acceptable lending framework and sign protocols with provinces and Metros Implementation of Contractor Finance and Development Programme to focus women and youth owned small and medium contractors, Develop a lending product to enable women owned contractors to gainfully respond to business opportunities in the sector. – Review current lending facilities with financing partners, – Employ programme and fund management capabilities to provide strategic support in human settlement development programmes.

STRATEGY PILLARS Cont. 6 2)Restore organisational sustainability: -Sustain positive financial results, -Improve sustainability of business streams, -Strengthen operations to support provincial lending and development support activities -Establish provincial capabilities to interface with stakeholders and clients, and manage provincial development activities, -Continue with critical processes, controls and systems’ development to support business,

SOCIO-ECONOMIC BACKDROP 7 NDP AND MTSF Policy and the programmatic measures to provide adequate shelter and of living environments, State interventions to address and counter market dysfunctions that perpetuates inequality and inefficient urban environments and weaken survival economic activities of majority of citizens. ECONOMIC FACTORS Performance of the economy generally and muted international and national growth projections, Banks’ willingness to lend and affordability amidst high demand in the affordable housing market, Interventions to improved affordability – (FLISP, MDI, Employer Supported Housing Schemes),

SOCIO-ECONOMIC BACKDROP Cont. 8 GOVERNMENT INTERVENTION IN MINING AND FAST GROWING TOWNS Forward planning and availability of land, Bulk infrastructure, Speed of critical property development related approvals, FINANCING CAPACITY Access to funding at concessionary rate, Leveraging and funding mix between grant funding and private sector, Availability of takeout finance for rental projects (long term finance). STATUTORY AND FINANCIAL INSTRUMENTS ENABLING NEW DFI TO REALISE THE DESIRED CAPACITY AND IMPACT LIMITED FUNDING CAPACITY IN VIEW OF THE MERGER OF THE THREE DFI’S

CORE BUSINESS 9 1.LENDING BUSINESS * Affordable Housing, Full and Sectional title, Rental – conventional and student accommodation *Bridging finance to Contractors 2.PROGRAMME MANAGEMENT * Programme management support *Fund management *CFDP

AFFORDABLE HOUSING OBJECTIVES AND TARGETS 10 PROGRAMME KEY PERFORMANCE INDICATORBASELINE2019 PERFORMANCE TARGET Affordable Housing Finance: Grow the supply of affordable housing stock Value of loansR1.0 billionR1.7 billion Loans/projects approved for financing65112 Housing units in projects financed10,656 units16000 affordable housing units Value of projects financedR3.5 billion Improved geographical spread of financed projects beyond Gauteng 28%of loan book shared by 8 provinces 40% of loans book disbursed outside of Gauteng Grow the GAP housing component of the loan book 28% of the loan book 40% of the loan book by 2019 Develop new products and innovations Adopt energy efficiency measurement on projects financed Benchmark energy efficiency of the loan book by March 2016 Adapt financing mechanisms to respond to medium and high density housing developments New funding mechanism in place by September 2015

SUBSIDY HOUSING OBJECTIVES AND TARGETS 11 PROGRAMME KEY PERFORMANCE INDICATORBASELINE2019 PERFORMANCE TARGETS Subsidy Housing Finance: Improved delivery of subsidy housing Value of loansR491 millionR684 million Loans/projects approved for financing Housing units in projects financed45,32662,000 Value of projects financedR3.2 billionR7.4 billion Develop new products and innovations in business fulfilment. Develop financing mechanisms targeted to benefit women owned contractors. New funding mechanism in place by September 2015 Sign protocols for collaboration in lending with provincial human settlement departments and Metros 80% of protocols signed

PROGRAMME AND FUND MANAGEMENT OBJECTIVES AND TARGETS 12 PROGRAMMEKEY PERFORMANCE INDICATORBASELINE2019 PERFORMANCE TARGETS Programme and Fund Management Portfolio: Provide programme management and fund management services to provincial and municipal level development programmes. Provincial department of human settlements supported in execution of programme and mainstreaming youth 4 multi-years provincial support initiatives 1 PHP multi- year project  10 programmes supported across provinces 2 of which are PHP  Establish collaborations with community based organisations and/or co-ops to deliver PHP programmes  Manage R1 Billion of client programme funds in execution of programmes Small contractors benefiting from the contractor support programme CFDP pilot project in the EC, with 70% women contractors  150 contractors supported  70% youth

ACTUALS FOR 2011/12 TO 2014/15 LATEST ESTIMATES FOR 2015/16 AND BUDGETED OUTPUTS 2016/17 TO 2018/19

LATEST ESTIMATES FOR 2015/16 AND BUDGETED OUTPUTS FOR 2016/17 – QUARTERLY BREAKDOWN 14

NURCHA PROGRESS ON COMMITTED MTSF TARGETS 30 SEPTEMBER OUTPUTSMTSF TARGETSFY 2015/16 Target 2016/17 – 2018/ YEAR TARGET ACHIEVED TO DATE % PROGRESS TO DATE TARGETACTUAL% ACHIEVED YEAR TARGET AFFORDABLE HOUSING FINANCE: GROW THE SUPPLY OF AFFORDABLE HOUSING STOCK NUMBER OF CONTRACTS SIGNED %211048%73 HOUSES AND SITES IN SIGNED CONTRACTS % % VALUE OF LOANSR M M34%R 315 MR M106%R1 095 M VALUE OF PROJECTS FINANCED R M M48%R 630 MR M118%R2 430 M HOUSES BUILT AND SITES SERVICED % %7 950 SUBSIDY HOUSING FINANCE: IMPROVE DELIVERY OF SUBSIDY HOUSING NUMBER OF CONTRACTS SIGNED %281856%113 HOUSES AND SITES IN SIGNED CONTRACTS % % VALUE OF LOANSR 692 M127 M18%R 112 MR 45.6 M36%R452 M VALUE OF PROJECTSR M M16%R MR M29%R5 650 M HOUSES BUILT AND SITES SERVICED % %47 830

RISKS AND ENABLERS 16 Economic conditions –Affordability and creditworthiness, –Traction of state interventions to counter impact of economic constraints and stimulate the market, Financing capacity to meet anticipated lending demand from Developers and Contractors, Management of DFI amalgamation process, –Reluctance of some funding partnerships to continue during the transition, –Staff turnover and challenges of attracting talent, –Business migration risk.

CRITICAL INDICATORS IN PERFORMANCE TRENDS 17

PROGRESS AND PERFORMANCE: LENDING PORTFOLIO 18

CURRENT PROVINCIAL SPREAD 30 SEPTEMBER

LENDING CAPACITY 30 SEPTEMBER

FINANCIAL RECOVERY TREND SINCE 2008/09 21

GROSS REVENUE PROJECTIONS 2015/16 TO 2018/19 22

TOTAL PROVISIONS AND DEBTORS TREND 23

FINANCIAL PERFORMANCE PROJECTIONS 24

ASSUMPTIONS MADE 25 NURCHA will be not funded by the shareholder during the tax year under review. PIC will consent to the transfer of the loan facility to the new DFI. No other funding will be available from the private sector until the merger of the 3 DFI’s is finalised. The performance of Programme and Fund Management Portfolio will drop in view of staff capacity in this portfolio.

STATEMENT OF FINANCIAL PERFORMANCE FOR THE PERIOD 2015/16 TO 2018/19 26

STATEMENT OF FINANCIAL POSITION AS AT 2015/16 TO 2018/19 27

STATEMENT OF FINANCIAL POSITION AS AT 2015/16 TO 2018/19 Cont. 28

STATEMENT OF CASH FLOWS FOR THE PERIOD 2015/19 TO 2018/19 29

CONCLUDING REMARKS 30 The APP is hereby presented for discussion and approval, taking into account the socio-economic conditions that define frame conditions and impacting on performance.

31 THANK YOU