BUDGET (2009 / 10 - 2011 / 12)

Revenue

Insurance Accounting - Annual Financial Statements Fair presentation of financial statements The Housing Consumers Protection Measures Act (Act No. 95 of 1998). The Public Finance Management Act (Act No. 1 of 1999). Standards of Generally Accepted Accounting Practice; and South African Statements of Generally Accepted Accounting Practice. International Financial Reporting Standard (IFRS 4) 9/19/2018

Conventional Accounting – Management Reporting Fair presentation of financial statements The Housing Consumers Protection Measures Act (Act No. 95 of 1998). The Public Finance Management Act (Act No. 1 of 1999). Standards of Generally Accepted Accounting Practice; and South African Statements of Generally Accepted Accounting Practice. 9/19/2018

Technical Liabilities

Enrolment fee structure Revenue Assumptions Non-Subsidy Registration fees R 750 (Inc) per builder Annual fee R 600 (Inc) per builder Manuals R 100 (Inc) per set Enrolment fee structure 0 – R500k 1,3% (a) R501k – R1 mill (a) + 1% of difference (b) R1 mill – R 2 mill (b) + 0.75% of difference (c) R 2 mill – R 5 mil (c) +0,5% of difference Above R 5 mill Maximum of R 34 000 Late Enrolment Fee R 592 (Excl) per enrolment

Enrolment Distribution Non-Subsidy Province Number of Units Gauteng 27 806 KwaZulu-Natal 3 488 Eastern Cape 3 376 Western Cape 7 974 Limpopo 3 834 Northern Cape 1 561 Free State 1 556 North West 3 758 Mpumalanga 2 544 TOTAL: 55 897

Budget Revenue 2010/11 Non-Subsidy Units R’ Millions Registrations 4 096 2,7 Renewals 13 079 6,9 Late Enrolments 2 795 1,2 Home Enrolments 55 897 448,3 Technical and Other - 9,9 Builder Grading Discount (10.9) Total: 458,1

Revenue Variance R’ Million Non-Subsidy Estimated 2008/2009 Budget 2009/2010 Variance Registrations/renewals 12,6 12,1 (0,5) Home Enrolments 372,3 448,3 76,0 Technical 52,4 6,1 (46,3) Grading (11,0) Subsidy 23,0 51.5 28,5 Project Enrolments 29,0 98,9 69,9 Other 0.2 2.1 1,9 Total: 490,0 608,5 (118,5)

Revenue Assumptions Subsidy Housing Subsidy Enrolments 1,0 % Project enrolment 0,75% Home enrolment fee

Enrolment Distribution Subsidy Housing Province Number of Enrolments Projects Gauteng 28 125 45 000 KwaZulu-Natal 10 000 20 000 Eastern Cape 15 000 25 000 Western Cape 6 000 Limpopo 6 644 Northern Cape 2 500 4 000 Free State 18 000 North West 13 000 17 000 Mpumalanga 2 000 TOTAL: 101 269 145 644

Revenue Subsidy Subsidy Project Enrolment Subsidy Home Enrolment Subsidy Housing Units R’ Millions Subsidy Project Enrolment 145 644 51,5 Subsidy Home Enrolment 101 269 98,9 Sub Total: 246 913 150,4

Revenue Variance R’ Million Non-Subsidy Estimated 2008/2009 Budget 2009/2010 Variance Registrations/renewals 12,6 12,1 (0,5) Home Enrolments 372,3 448,3 76,0 Technical 52,4 6,1 (46,3) Grading (11,0) Subsidy 23,0 51.5 28,5 Project Enrolments 29,0 98,9 69,9 Other 0.2 2.1 1,9 Total: 490,0 608,5 (118,5)

Revenue Variance R’ Million Non-Subsidy Budget 2008/2009 2009/2010 Variance Registrations/renewals 12,7 12,1 ( 0,6) Home Enrolments 561,3 448,3 (113) Other 2,0 2,1 0,1 Subsidy Home Enrolments 27,7 51,5 23,8 Project Enrolments 45,8 98,9 53,1 Other – technical invoices - Grading 5,0 (7,2) 6,1 (11,0) 1,1 (3,8) Total: 647,3 608,5 (38,8)

Revenue Trend

Expenditure

Operation Expenditure Assumptions Accreditation Costs Based on number of new applications and number of annual renewals. Full credit check done on all new applications. Full credit check done on 50% of renewals. Cost per check R 350.00- Inspection fees Enrolment value # Inspections Assumed Less than R500 k 4 4 R500k – R1 mill 5 5 R1 mill – R2 mill 6 6 > R2 mill 8 6

Inspection Non Subsidy Assumptions Province Number of Inspections Inspection Fees R’ Million Gauteng 121 865 17,4 KwaZulu-Natal 18 484 7,8 Eastern Cape 17 893 5,2 Western Cape 34 050 7,4 Polokwane 17 585 10,2 Northern Cape 6 619 2,1 Free State 7 282 2,6 North West 16 861 15,1 Mpumalanga 11 602 4,0 TOTAL: 252 241 71,8

Inspection Subsidy Assumptions Province Number of Inspections Inspection Fees R’ Million Gauteng 28 125 14,0 KwaZulu-Natal 10 000 5,0 Eastern Cape 15 000 7,5 Western Cape 6 000 3,0 Polokwane 6 644 3,3 Northern Cape 2 500 1,3 Free State 18 000 9,0 North West 13 000 6,5 Mpumalanga 2 000 1,0 TOTAL: 101 269 50,6

Major Expenditure Variances R’ Million Expenditure Actual 2008/2009 Budget 2009/2010 Variance R’ Million Operating Inspections - Non Subsidy 82 76 (6) Inspections - Subsidy - 51 Fixed 417 408 (9) Major variances Special Projects / Ministerial 150 27 (134) Employment 140 189 49 Consulting 8 15 7 Emerging Contractor Training 17 36 19 Traveling 18 (10)

Major Expenditure Variances R’ Million Budget 2008/2009 2009/2010 Variance Operating Inspections – Non Subsidy 96 72 (24) Inspections - Subsidy - 51 Other operating expense 10 9 (1) Fixed 505 408 (97) Major variances Special Projects/ Ministerial 161 27 (134) Employment 181 189 8 Emerging Contractor Training 17 36 19 Other expenses 4 6

Emerging Contractor Training Fixed Expenditure Emerging Contractor Training Course R’ Millions Construction Management 2,6 Finance for Non Financial Managers 1,2 Construction Project Management 2,3 Plumbing 2,4 Painting 3,5 Plasters 3,6 Brick Laying 6,2 Roofing 14,8 TOTAL: 36,6

Income and Expenditure Strategic Additional Income and Expenditure Inspection Fees (Subsidy)  R 51,0 m 48 Internal subsidy inspectors Motor Vehicles (Mobile Offices) R 2,4 m

Expenditure 9/19/2018

Summary Income Statement R’ Million Description 2007/8 Actual 2008/09 Provisional 2009/10 Budget 2010/11 2011/12 Total Revenue 647 396 608 651 697 Change in unearned premium/ unexpired risk provision (51) 237 Operating costs (64) (116) (132) (141) (151) Gross Margin 532 490 476 510 546 Fixed Costs (225) (417) (408) (431) (457) Operating Surplus/(Loss) 307 73 68 79 89 Interest Revenue 177 241 217 232 248 Surplus after interest 484 314 285 311 337

Capital Budget R’ Million Computer Equipment R 7,5 Million Furniture R 2,7 Million Equipment R 1,2 Million Innovation Hub R 5,0 Million Motor Vehicles R 3,9 Million Total: R 20,3 Million

Summary Balance Sheet R’ Million Description 2007/8 Actual 2008/09 Provisional 2009/10 Budget 2010/11 2011/12 Non-current assets 2,521 2,860 2,929 3,244 3,586 Current Assets 86 192 6 7 ASSETS 2,607 3,052 2,935 3,251 3,593 Reserves 1,440 1,970 1,888 2,199 2,535 Current Liabilities 233 72 77 83 Technical Liabilities 975 849 Equity and Liabilities

Cash Flow 9/19/2018

Cash Inflows / Outflows Excluding R25 Million recall in March 2009 9/19/2018

Actuarial 9/19/2018

Actuarial Provisions 9/19/2018

Enrolment Fee Adequacy Based on apportionment of budgeted expenses for 2009/10 as well as volumes of new enrolments, it is our opinion that the enrolment fees charged shall NOT be adequate for expenses and claims for both non-subsidy and subsidy houses. The utilisation of the enrolment fee by initial expenses per enrolment is very high, attributable to assumed lower number of enrolments (2008/09 enrolments) than prior years as well as sticky expenses not responding to lower new business volumes. 9/19/2018

Enrolment Fee Adequacy 9/19/2018