Financier ∙ Facilitator ∙ Innovator 27 March 2013

Financier ∙ Facilitator ∙ Innovator Overview/Background Strategic Priorities: Alignment to NDoHS Market Context Wholesale Lending model Key Products and Services Financial Highlights NHFC Programmes: FLISP MDI Challenges

Financier ∙ Facilitator ∙ Innovator Who is the NHFC ?

Financier ∙ Facilitator ∙ Innovator  Established: 1996  Type of Organisation: Development Finance Institution (DFI)  Ownership: State Owned Company, 100% SA government  Total Assets: R 3,48 billion (31 Jan 2013 – group)  Total liabilities: R 1,215 billion (31 Jan 2013 – group)  Funding Status: Self sustaining, pays income tax  Credit Rating: Long term AA-, short term A1+  Main business: Broadening & deepening access to affordable housing finance for the low-to- middle income SA households  Geographic activities: National  Number of Employees:88 ( January 2013 )

Financier ∙ Facilitator ∙ Innovator VISION To be the leader in development finance for the low-to-middle income housing market MISSION Provide innovative and affordable housing finance solutions to the low –to-middle income market VALUES OwnershipPassion for purposeTeamwork IntegrityCreativityAchievement STRATEGIC OBJECTIVES Expand housing finance activities, through the effective provision of housing finance solutions, thus enabling 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 NHFC whilst promoting lasting social, ethical and environmental development; and Provide robust, timely and relevant market research

Financier ∙ Facilitator ∙ Innovator National Priorities of Human Settlements as determined by: Pillars of Human Settlements Development Strategy Medium Term Budget Statement (MTBS) and Cabinet Lekgotla SONA Outcome 8, and Political Resolutions of Mangaung Adoption of the National Development Plan (NDP) to resolve the myriad of socio-economic problems

Financier ∙ Facilitator ∙ Innovator Strategy Objective 1 Expand housing finance activities, through the effective provision of housing finance solutions, thus enabling low-to-middle income households to have choice of renting or owning or incrementally building, to meet their housing needs Outcome 8: Output 1 Accelerate delivery of housing opportunities Provide direct wholesale funding and in partnership with other agencies, into inner city regeneration and in the provision of both social (partnership with SHRA) and private rental housing {aligned to Output 1 OF Outcome 8 and NDP on prioritising Inner City developments and funding wide variety of housing types} Provide integrated housing development project funding, directly and in partnership {aligned with NDP by encouraging mixed types and land use}

Financier ∙ Facilitator ∙ Innovator Facilitate the increased and sustained lending by financial institutions to the affordable housing market by Strategy Objective 2 Outcome 8: Output 4 Improve Property Markets Improving ACCESS to housing finance through the mortgage default insurance (MDI) implementation {aligned to SONA and Output 4 of Outcome 8} The Implementation of the FLISP in partnership with all Provinces, to address the household AFFORDABILITY challenges {aligned to SONA and Output 4 of Outcome 8}

Financier ∙ Facilitator ∙ Innovator Strategy Objective 3 Outcome 8: Output 1 Accelerate delivery of housing opportunities Mobilise funding into the human settlement space, on a sustainable basis, in partnership with the broadest range of institutions Mobilise Multilateral agencies (AFD EIB, etc.) co-funding into social and rental housing {aligned to Output 1 of Outcome 8 and with the NDP on prioritising Inner City developments and funding wide variety of housing types} Optimally leverage private sector funding (e.g. Employer-based partnerships, IHS Fund II) to support the growth of the affordable housing market {aligned to Output 1 and 4 of Outcome 8 and with the NDP on prioritising Inner City developments, funding wide variety of housing types and promotion of large scale integrated developments}

Financier ∙ Facilitator ∙ Innovator Strategy Objective 4 Conduct the business activities of the NHFC in a manner that ensures the continued economic sustainability of the NHFC whilst promoting lasting social, ethical and environmental development Improve on our sustainability ratios (e.g. ROA, CTIR) through our pricing, portfolio mix and reduced cost structure {aligned to the NDP on State Owned Entities of DFIs} Improve efficiency and effectiveness through continuously enhancing of systems, processes and competencies across corporation{aligned to the NDP on State Owned Entities of DFIs}

Financier ∙ Facilitator ∙ Innovator  Economic growth expectations lowered, in the S/M Term  Unsecured lending growth continues  Regulatory pressures (Basel III) has also affected mortgage lending  Interest rate outlook remains flat”, unless...  Inflation outlook, is on the rise, for households Unpredictable global economic & capital markets outlook BUT expected to remain lower for longer (to stimulate SA growth)  Lending income under pressure  Supply remains constrained due to attrition of developers: Project funding hurdles set by financiers remain a challenge Households remain over indebted – constrained access to mortgages  Regulatory pressure expected to change business model of banks: Growth in unsecured lending – search for short term returns? Impact will be felt over next years: lower margins from mortgage CHANGE IN BUSINESS ENVIRONMENT IMPACT ON NHFC

Financier ∙ Facilitator ∙ Innovator How we operate

Financier ∙ Facilitator ∙ Innovator Channels Channel Partners Typical products NHFC Wholesale Lending Non-bank financial intermediaries Specialist intermediaries Social Housing Institutions Micro Finance Intermediaries Private Landlords/ Developers Banks Joint Ventures (e.g. with private sector / DFI initiatives) Wholesale loan finance Insurance (MDI) Subsidy (FLISP) Wholesale loan finance & strategic Investment (GPF, HIP, SPACE) Banks financial intermediaries

Financier ∙ Facilitator ∙ Innovator NHFC CORE: Product Offering Defined Market [Per Household Income] Financing Needs Funding Threshold per Counterparty Wholesale Lending 1.Rental Product: - Social Housing - Private Rental R3,500 – R15,000 Subsidies + Debt Funding Equity+ Debt Funding 10% of Shareholder Interest 2. Integrated Development Equity + Debt Funding 3. Incremental 4. Home Ownership 5. Strategic Investment Equity/ Mezzanine Debt NEW PROGMS: MDIMortgage InsuranceR7,500 – R17,600Mortgage Funding FSC income target up to R17,6k FLISPSubsidy R3,500 – R15,000Mortgage FundingMax Mortgage = R300k

Financier ∙ Facilitator ∙ Innovator Financial Highlights

Financier ∙ Facilitator ∙ Innovator 2013/142014/152015/16 Debt (R m): additional debt funding Equity (R m): recapitalisation from shareholder Total funding raised (R m) Total debt/equity ratio (%)* [company] 25%31%34% * interest bearing debt to equity at 19% at 31/03/

Financier ∙ Facilitator ∙ Innovator 11 of 19

Financier ∙ Facilitator ∙ Innovator Return on advances: lending income/average gross loan book 3 of 19

Financier ∙ Facilitator ∙ Innovator KEY PERFORMANCE INDICATORS:ForecastBudget 2012/132013/142014/152015/16 Funding Impact: Total number of approvals Total value of approvals (R'000) Total value of disbursements (R'000) Total Funding Impact (R'000) Developmental Impact: Total Impact (Housing Opportunities) Total Number of Intermediaries funded Beneficiaries benefitting* Number of jobs created Value of disbursements targeted towards women-managed/owned companies (R'000)

Financier ∙ Facilitator ∙ Innovator Examples of enterprise development

Financier ∙ Facilitator ∙ Innovator TRUST FOR URBAN HOUSING FINANCE (TUHF) TUHF specialises in commercial property financing through the provision of funding for affordable inner-city rental units. NHFC played a major anchor role in the establishment of TUHF and is now a 28% Shareholder. To date, NHFC’s R420 million debt funding has leveraged R1 billion worth of private sector funds. TUHF’s focus is inner city regeneration, SMME development, and in particular with the Previously Disadvantaged (PDIs) Rental Landlords. ACHIEVEMENTS: to date, 60% of funding has been to PDIs. 94 PDI property entrepreneurs were created, of which 25 are women. TUHF has R1.4 billion in loans and advances, and delivered units in 3 provinces. The leverage factor: for every R1 of NHFC funding, R2.40 private sector funding.

Financier ∙ Facilitator ∙ Innovator AFFORDABLE HOUSING COMPANY (AFHCO) The NHFC took risk by funding AFHCO as a start-up Company. Achievements: AFCHO has grown from a 2 man company to employer of 150 employees. Massive job creation and growth. Attracted major SA Company to be shareholder. Today Old Mutual owns 50% of AFHCO. Balance sheet size is R 970 million Properties sold R 500 million Total value R1,470 billion Leveraged R847 million (current: Debt = R425m, Equity = R397m) Current NHFC exposure R 150 million, leverage factor: for every NHFC R1, R5.83 of private sector funding Recent: attracted R150 million funding from AFD Concluded R80 million funding from STD Bank

Financier ∙ Facilitator ∙ Innovator NHFC Programmes

Financier ∙ Facilitator ∙ Innovator  8 Implementation Protocols;  1 MOU (FNB);  13 accredited projects across the country;  estimate total units in all these projects;  2012/13 FY = budget is R  Current budget commitment estimated at R42mil;  835 subsidy applications currently processed in development projects representing 3173 households;  57 approvals to date;  2013/2014 budget estimate = R189mil

Financier ∙ Facilitator ∙ Innovator ACTIVITYTARGET DATE PwC to present the final report20 March 2013 Finalisation of capitlisationApril/May 2013 The following are subject to the finalisation of capitalisation Licence application to be reviewed by the FSB licencing committee May/June 2013 Engage with SARB on capital adequacy reliefApril/May2013 Appointment of service provider to develop Interface FacilityMay 2013 Sign a LenderSeptember 2013 Test the IT Infrastructure with a LenderAugust/September 2013 Commence Business3 rd Quarter of the year

Financier ∙ Facilitator ∙ Innovator  NHFC Funding Concessional cost of funding to balance - Developmental and Sustainability Impact  Growth in GDP to stimulate the economy  Growth in Employment levels  Private Sector : Facilitation Regulation: Basel III Unsecured lending: aggressive growth Mortgage lending: subdued Developer funding: adversely affected  Stimulate affordable housing market through:  MDI: Expand access to finance  FLISP: Improve households affordability

Financier ∙ Facilitator ∙ Innovator MDIC Overview of Projects Funded

Financier ∙ Facilitator ∙ Innovator

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