Click to edit Master subtitle style 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3/18/11 11 FINANCIER | FACILITATOR | INNOVATOR PORTFOLIO COMMITTEE ON HUMAN SETTLEMENTS STRATEGIC PLAN 2012/ MARCH 2011

3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 22 CONTENTS 1. Mandate, Vision and Mission 2. Housing Finance Environment 3. NHFC Human Settlements Interventions 4. Strategic Objectives 5. Developmental Impact Strategic Plan Overview 7. Contribution to Outcome 8 8. Key Performance Indicators 9. Investments 10. Strategic Partnerships 11. Projects: Potential impact (units ) by Province 11. Commercial: Provincial footprint through intermediaries 12. Budget Overview 13. Budget Assumptions 14. Statement of Comprehensive Income 15. Statement of Financial Position 16. Funding 17. Corporate Governance

3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 33 NHFC’s Mandate, Vision, Mission To be the leader in development finance for the low to middle income housing market. Providing innovative and affordable housing finance solutions to the low and middle income households. The National Department of Housing established the National Housing Finance Corporation Limited (NHFC) as a Development Financial Institution (DFI) in 1996 with the principle mandate of broadening and deepening access to affordable housing finance for the low to middle income households. Mis sio n Visi on Ma nda te

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Housing Finance Environment 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 44 After several years of sustained growth, South Africa’s economy fell into recession with GDP estimated to have contracted by 1.8% in 2009 but was expected to recover in 2010, assisted by the recovery in global demand as well as the boost provided by the FIFA World Cup. The economy is also expected to grow further in 2011 to 3.3%. According to FNB, the residential property market was weakening significantly and could experience negative growth. Annual growth rate in house price index was 1.4% in January 2011, significantly lower than the 3.1% for December Inevitably, the effects of this economic downturn, particularly in the housing finance market, as well as the collapse of the credit and mortgage markets made lenders more risk averse as credit to the private sector fell drastically (estimated at 1.6% in some quarters) which was the strongest contraction since Despite interest rates at their lowest levels in more than 30 years, current levels of household indebtedness remain high at 78%.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Housing Finance Environment (cont.) 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 55 The South African Reserve Bank’s Monetary Policy Committee kept interest rates at current levels. The CPI inflation rate has been forecast to remain low for some time and rise gradually during 2011 leading to possible interest rate hikes thus impacting on the housing property market. The Consumer Financial Vulnerability Index (CFVI), which has been developed by BMR and Finmark, indicates that consumers will remain financially vulnerable particularly due to high levels of unemployment, indebtedness and continuous job losses.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 66 NHFC Human Settlements Interventions

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Expand housing finance activities, through the effective provision of housing finance solutions, thus enabling the low to middle income households to have choice of renting or owning or incrementally building, to meet their housing needs. Facilitate the increased and sustained lending by financial institutions to the affordable housing market. Mobilise funding into the human settlement space, on a sustainable basis, in partnership with the broadest range of institutions. Conduct the business activities of the NHFC in a manner that ensures the continued economic sustainability of the Corporation whilst promoting lasting social, ethical and environmental development. Stimulate the low to middle income housing sector, by providing robust, relevant and timely research and market analysis to practitioners and housing consumers. Strategic Objectives 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 77 STRATEGIC OBJECTIVES

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Developmental Impact /18/11 FINANCIER | FACILITATOR | INNOVATOR 88 Housing opportunities created: 16,884 Beneficiaries Benefitting: 64,158 Funding impact : R776 million Private funds leveraged R1,297 million Jobs Created : 1,860 Empowerment (Women and Youth Entrepreneurship) : R100 million OU TC OM ES

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Strategic Plan Overview 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 99 16, , , Housing Opportunities R7 76 m 2012 R8 94 m 2013 Disbursements R3 06 m R5 00 m Funding Requirements R1, 07 6 m 2014 Note: The above figures exclude the Mortgage Default Insurance (MDI) implementation

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Contribution to Outcome 8 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 1010 Outputs2010/11 Target 2011/12 Target 2012/13 Target 2013/14 Target Total NHFC contribution towards Output 1 (Rental) 2,3533,9465,7726,62518,696 NHFC Contribution towards output 4 (Mortgage Default Insurance) Develop MDI business and obtain approvals. 17,000 loans 88,000 loans 110,000 loans 215,000 loans NHFC contribution towards output 4: (Traditional lending activities) 7,22610,31310,34112,70240,582 Total NHFC Contribution to Outcome 89,57931,259104,113129,327274,278 % Contribution40%

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Other Government Priorities 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 1111 Through funded projects, NHFC enables job creation, skills development and entrepreneurship enabling Government to achieve the goal of economic growth. The Corporation has included job creation as a KPI. Disbursements totaling R415 million targeted towards women and youth managed / owned companies in the planning period. The Corporation’s experiential programme (learnership for students, internship for new graduates and sponsorship for students who are still at university –both undergraduate and post graduate) is targeted at providing youth with work experience as well as ensuring that those who are within the NHFC’s field of study are assisted financially.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Key Performance Indicators 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 1212 Objective 1: Expand housing finance activities, through the effective provision of housing finance solutions, thus enabling the low to middle income households to have choice of renting or owning or incrementally building, to meet their housing needs. Provision of loans to institutions that provide various housing tenure options – Social Housing Institutions, Inner City Landlords and Integrated Housing Project Developers. Provision of loans to intermediaries that on lend into the market for incremental housing and home ownership. Syndication through dedicated Funds to scale up housing opportunities. Co-financing arrangements with Banks towards integrated settlements.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Key Performance Indicators (cont.) 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 1313 Housing opportunities Forecast 2011 Budget 2012 Budget 2013 Budget 2014 Housing units3,5556,6447,6269,094 Incremental Loans5,1217,1258,1679,833 Mortgage loans Total Impact9,57914,25916,11319,327 Disbursements Forecast 2011 R’000 Budget 2012 R’000 Budget 2013 R’000 Budget 2014 R’000 Projects472,483581,000709,000846,000 Commercial113,790152,000185,000230,000 Retail124,79442,500 Total Disbursements711,067775,500894,0001,076,000

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Key Performance Indicators (cont.) 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 1414 Social Impact Budget 2012 Budget 2013 Budget 2014 Number of Jobs Created1,8602,1352,546 Disbursements targeted towards empowerment of women as well as youth entrepreneurship. R 100 milR 150 milR 165 mil

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Key Performance Indicators (cont.) 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 1515 Forecast 2011 Budget 2012 Budget 2013 Budget 2014 Funds leveraged R’million9131, Impact leveraged through others2,0142,6252,8493,199 Objective 2: Facilitate the increased and sustained lending by financial institutions to the affordable housing market. Syndication through dedicated funds to scale up housing opportunities. Co-financing arrangements with financial institutions towards integrated settlements. Through strategic partnerships attract other funders to fund intermediaries.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Key Performance Indicators (cont.) 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 1616 Objective 2: Facilitate the increased and sustained lending by financial institutions to the affordable housing market. Leverage ownership through Commercial banks through effective risk enhancements such as Mortgage Default Insurance(MDI). o MDI delivers better affordability levels and improved access for the households. o MDI normalises the housing finance market across the various income bands. o MDI is tried and tested internationally as a proven government intervention. o R1bn guarantee improves the credit rating of the MDI Program, and further enhances household affordability.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR MDI – Progress to date 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 1717 The development of the MDI implementation plan is advancing satisfactorily with the following milestones achieved to date: o Business plan and financial modeling done. o NHFC Board approved MDI program. o MDI program approved by MinMec on 19 November o Appointed Technical Advisor to the MDI program. o Signed Memorandum of Understanding with BASA. o Ongoing consultation with National Treasury to obtain necessary approvals

Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles – Second level Third level – Fourth level » Fifth level 3/18/11 FINANCIER | FACILITATOR | INNOVATOR MDI – Next steps Obtain key decisions from National Treasury and Financial Services Board (FSB). Engage with the Reserve Bank on capital reserve requirements for Banks. Implementation of the MDI progamme with Strategic partners. 1818

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Key Performance Indicators (cont.) 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 1919 Objective 3: Mobilise funding into the human settlement space, on a sustainable basis, in partnership with the broadest range of institutions Budget 2012 Budget 2013 Budget 2014 Value of funds mobilised R’ millions Source and mobilise funding in partnership with broad range of institutions to support strategic objectives. Facilities concluded with AFD and EIB. Concurrent approval from National Treasury and Accounting Executive for both facilities. Sale of Retails books. Approval and implementation of optimum funding strategy and plan. Explore opportunities with DHS to mobilise funding into the Human Settlements space.

Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles – Second level Third level – Fourth level » Fifth level 3/18/11 FINANCIER | FACILITATOR | INNOVATOR Summary of progress on Objective 3 Loans amounting to R416m have been secured from AFD and EIB for rental housing projects – The AFD agreement for R200m was concluded in 2010 and to date 2 inner city projects have been approved for funding under the facility and these are: Jozi - R45 million acquisition and refurbishment of dilapidated old hotel in Hillbrow and conversion to 338 rental housing units Rivavect - R14.5 million refurbishment and conversion of old hostel into 120 family rental units. – EIB facility agreement was signed in January The R216m will be allocated to finance TUHF (R50m) and Own Haven (R45m) projects and the balance will be allocated to qualifying projects in the pipeline. The facilities will enable the NHFC to fund an estimated units during the planning period benefitting beneficiaries. Both financiers are willing to entertain further funding requests following the full and successful utilisation of the approved facilities. 2020

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Key Performance Indicators (cont.) 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 2121 Objective 4: Conduct the business activities of the NHFC in a manner that ensures the continued economic sustainability of the Corporation whilst promoting lasting social, ethical and environmental development KPIBudget 2012 Budget 2013 Budget 2014 Maintain financial sustainabilityReturn on Equity (Profit after Tax)2.11%3.79%4.25% Impairments: Gross advances7.5% Improve operational efficiency Total Operating Expenditure to Total Income 66.58%48.77%44.66% Total Operating Expenditure to Total Lending Income 73.99%49.94%41.16%

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Key Performance Indicators (cont.) 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 2222 Objective 5: Stimulate the low to middle income housing sector, by providing robust, relevant and timely research and market analysis to practitioners and housing consumers. Facilitate the provision of housing consumer education, skills development with Partners and RFI’s. Provide an analysis of the affordable housing market performance, trends in house prices, consumer behavior and patterns. Participate in the promotion and development of housing related policies, instruments and strategies through providing input into DHS policy issues, legislations and regulatory frameworks.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Investments 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 2323 Cape Town Community Housing Company (Pty) Limited New business model has been developed to turn the entity into a viable and sustainable operation to attract potential equity investors. Impact contribution to date 3,716. Housing Investment Partners (Pty) Limited The initial fund is currently being established allowing 200 loans to be advanced. R25 million committed each by Old Mutual and NHFC. An approach has been made to a large third party investor to consider investing a further R50 million in the initial Fund and this looks positive. HIP Fund 1 will allow HIP to have a controlled launch to a select group of clients and employers This controlled roll-out will enable HIP to ensure that all systems are in place and to indicate that HIP is ready for a full scale launch.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Investments (cont.) 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 2424 TUHF o NHFC, through its investment in TUHF, continues to achieve its mandate of delivering affordable rental housing in the inner-city Johannesburg. o The NHFC as the main Architect and backer behind TUHF’s establishment will continue to be involved in the restructuring of TUHF’s balance sheet to enable it to raise funds in the market to grow it’s book. o A proposal to capitalise TUHF with the aim of improving its capital adequacy is being facilitated by the NHFC. o Impact contribution to date 17,035.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Strategic Partnerships 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 2525 Collaboration with other Housing Institutions Nurcha, RHLF, NHFC o Under the auspices of NDOHS, the DFI’s continue to collaborate in exploring a new funding and delivery model for Human Settlements. SHRA o Plans are in place to collaborate with SHRA in respect of the funding rental housing and capacitation of Social Housing Institutions HDA o Collaborate with HDA in respect of making State-owned land available for new affordable housing developments.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Strategic Partnerships (cont.) 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 2626 Partnerships with Financial Institutions o Endeavors to collaborate with financial institutions through co- financing and risk sharing are bearing fruit as demonstrated by among others, the transaction to facilitate the financing of affordable housing units together with OMLACSA and its BEE partners approved by the NHFC Board. In this arrangement, the NHFC’s contribution will be R150 million which will leverage a further R600 million from OMLACSA and its partners. o Having concluded the Old Mutual Space syndication deal anticipate increased activity in the banking sector to partner with the NHFC in similar syndication in large projects. o NHFC investment in TUHF created confidence that has enabled TUHF to secure credit lines totaling R350 million from Cadiz, Standard Bank and Future Growth. Additional facilities of R400 million have been agreed to in principle by PIC and Future Growth.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Job Summit Funds 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 2727 o A new mandate is being finalised with DHS with regards to utilisation of the JS funds. The new proposal tabled envisages the funds being used to contribute towards the rental component of Outcome 8. o The proposal entails a portion of the fund, the R225m capital being extended as concessional loan (jibar linked) to qualifying projects with an exit through refinancing or rent to buy options within a 5 year period. o The interest portion of R165m will be used to bridge finance social housing projects during construction with a once off admin charge not exceeding 2% being levied on a project as opposed to an interest charge. This will have the impact of reducing financing costs at the initial stage of project implementation. o The impact from the programme is accounted for in the business plan to 2014 as follows: o Units funded = o Beneficiaries = o Jobs created = 433 o Affordable rentals targeting income bands: R2 500 to R7 500

3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 2828 Projects: Potential impact (units ) by Province

3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 2929 Commercial: Provincial footprint through intermediaries

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Budget Overview 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3030 Profit after tax of R48 million – 48% above forecast for 2011 Investment in CTCHC – forecasting profit from 2011 Investment in HIP – expected to generate profit from 2012 following launch Low interest rate environment Funding raised externally – borrowing cost Retail – disbursements limited to outstanding obligation of units committed to Impala. Retail book will be sold at value, further two Retail books will be sold at a discount of 10%.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Budget Assumptions 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3131 CPI PRIME RATE DISBURSEMENTS IMPAIRMENTS STAFF SALARY INCREASE 4.6 % 9%9% R 776 m 7.5 % %7% 4.4 % 9%9% R 711 m 8%8% %8% FY 2012 FY 2011

3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3232 Statement of Comprehensive Income

3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3333 Statement of Financial Position

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Funding 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3434 Disbursements R’ m Own Capital R’m Borrowings R’m Total R’m , ,076 No additional capital from shareholder, funding raised externally External funding secured from AFD and EIB Sale of Retail books Approval and implementation of optimum funding strategy and plan.

3/18/11 FINANCIER | FACILITATOR | INNOVATOR Corporate Governance 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3535 Operational Functions Management Committees Executive Committee Board Committees Board of directors NHFC Board of Directors Audit Committee Executive Committee Asset & Liability Committee EM: Enterprise Risk, Audit and Compliance Board Risk Committee Management Credit Committee Board Credit & Investment Committee Shareholder DoHS Subsidiary & Associate Companies (Audit & Risk Committees) Treasury Enterprise Risk Management Committee Subsidiary & Associate Companies

3/18/11 FINANCIER | FACILITATOR | INNOVATOR NHFC Client Showcase 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3636 Southernwood Square: East London Emerald Sky: East LondonHomeFront: Rustenburg Strathdon: Durban CBD

3/18/11 FINANCIER | FACILITATOR | INNOVATOR NHFC Client Showcase 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3737 Cavendish: Johannesburg CBD Cavendish Entrance

3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3838 NHFC Client Showcase TUHF: Boston Block EIB VP Project (financed by TUHF)

3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3939 NHFC Client Showcase EIB visiting project (financed by TUHF)

3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 4040 NHFC Client Showcase JOZI Housing: Coronia Building Hotel conversion JOZI Housing: Coronia Building

3/18/11 FINANCIER | FACILITATOR | INNOVATOR 3/18/11 FINANCIER | FACILITATOR | INNOVATOR 4141 NHFC Client Showcase JOZI Housing: Coronia Building