Presentation to the Portfolio Committee on Human Settlements ANNUAL PERFORMANCE REPORT 2014/ October 2015

STRUCTURE OF PRESENTATION 2 1.Purpose and introduction 2.Mandate, Vision and Mission 3.Core products 4.Impact since inception 5.Business Performance 6.Affordable Housing Programme 7.Subsidy Housing Programme 8.Programme and Fund Management 9.Financial Performance 10.Conclusions

PURPOSE AND INTRODUCTION Presentation of Annual Performance Report 2014/2015 Celebrating a 20 years in advancement of development finance in the Human Settlement sector, in two eras: –Enticing commercial lenders to broaden access to finance for households, contractors and developers –Provided guarantees to loans issued by commercial lenders towards housing –Introduced savings schemes to facilitate access to housing finance by poor households –In 2002 converted to direct lending, indicative slow traction by commercial lenders in opening access to finance –Fruitful partnership international Donor Agencies and DFIs and, commercial lenders –Celebrating 20 years of good governance and unqualified audits Outline the way-forward in pursuit of business targets and DFI consolidation 3

NURCHA IS …. 4 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”

CORE PRODUCTS AND SERVICES 5 LENDING BUSINESS  Affordable Housing  Ownership  Rental – conventional and student accommodation (short term finance)  Bridging finance to Contractors delivering subsidy housing, PROGRAMME MANAGEMENT  Programme management support  Fund management  CFDP

IMPACT SINCE INCEPTION 6 AS AT 31 MARCH 2015 AFFORDABLE HOUSING SUBSIDY HOUSING INFRASTRUCTURE & COMMUNITY FACILITIES TOTAL NUMBER OF LOANS SIGNED HOUSES IN LOAN SIGNED N/A HOUSES/ PROJECTS COMPLETED VALUE OF LOANSR1,743 BillionR1,417 BillionR647,4 Million R3,807 Billion VALUE OF PROJECTSR6,738 BillionR9,776 BillionR3,905 Billion R20,419 Billion

7 BUSINESS PERFORMANCE

TWO KEY DRIVERS OF STRATEGY 8 1.Relevance to developmental mandate (OUTCOME 8, NDP, MTSF). 2.Maintain organisational sustainability.

KEY HIGHLIGHTS 9 Focus and progress on amalgamation of DFIs Revision and easing of credit rules for Subsidy Housing and Affordable Housing Achieved a surplus of R10.5 million after impairments Achieved net increase in provisions for losses of R2.4 million for the year Successful implementation and closure of Bucket Eradication Programme in the EC Intensified organisational change readiness interventions Approval of R61m for 2015/16 to repay SEDF loan Achieved unqualified Audit result with an Emphasis of Matter related to DFI consolidation.

CHALLENGES Lending capacity challenges, Slow progress in securing commonly agreed lending protocols and collaborations around contractor finance –Opening greater access to bridging finance –Mitigation of diversion of funds –Contractor development enablers Managing staff anxieties around DFI consolidation 10

FINANCIAL PERFORMANCE TRENDS SINCE 2008/09 11

HISTORICAL INCOME 12

OUTPUT RESULTS – MARCH CORE BUSINESS Current Year APRIL 2014 TO MARCH 2015 Previous Year APRIL 2013 TO MARCH 2014 BUDGETACTUAL 1.AFFORDABLE HOUSING: HOUSES, SITES SERVICED, RENTAL HOUSES & MINING TOWNS 1.1.Contracts Signed Houses & Sites in Signed Contracts Value of Loans Value of Projects Houses Built & Sites Serviced SUBSIDY HOUSING: HOUSES & SITES SERVICED 2.1.Contracts Signed Houses & Sites in Signed Contracts Value of Loans Value of Projects Houses Built & Sites Serviced INFRASTRUCTURE AND COMMUNITY FACILITIES 3.1.Contracts Signed Value of Loans Value of Projects Projects Completed 808

ACTIVITY VS PERFORMANCE – LENDING PORTFOLIO 14 AFFORDABLE HOUSING PROGRAMME Loans approved:R490,4M (23 loans) Loans signed:R246,6M (16 loans) Approved but not yet signed:R125,4M (3 loans) Approved but not taken up:R119M (4 loans) SUBSIDY HOUSING PROGRAMME Applications receivedR231,2M (46 loans) Loans approved:R131,5M (23 loans) Loans signed:R81,8M (15 loans) Approved but not taken up:R49,7M (8 loans) Unable to assess due to lack of information:R91,9M (21 loans) Applications declined:R7,8M (2 loans)

SUMMARY OF LOAN AGING – MARCH R’000Not Yet DueTotal Overdue Total Debtors Outstanding Impairments Affordable Housing R R R R %6%78%18% Subsidy Housing R R 8 767R R %26%11%9% InfrastructureR 3 521R R R %89%11%73% Total NURCHA Debtors R R R R %18%100%14%

TOTAL PROVISIONS VERSUS TOTAL DEBTORS 16

DISTRIBUTION OF DEBTS BY PROGRAMME 17

PERFORMANCE AND DISTRIBUTION OF DEBTS – MARCH

PROVINCIAL SPREAD 19 WCECNCKZNFSNWMPGPLP CONTRACTORS Loan values per provinceR R R R R R R Number of houses per province DEVELOPERS Loan values per provinceR R R R R Number of houses & serviced sites per province

20 AFFORDABLE HOUSING LENDING PROGRAMME

AFFORDABLE HOUSING SINCE INCEPTION 21

SPREAD OF AFFORDABLE HOUSING BOOK 22 PROJECTSUNITS PERCENTAGE OF BOOK Sectional Title Units74439% GAP Housing41,41828% Affordable Housing163,14063% TOTAL275,001100%

ACTIVE LOAN COMMITMENTS 23 LENDING PROGRAMME TOTAL ACTIVE PROJECTS LOAN VALUE COMMITMENT LOAN EXPOSURE LENDING CAPACITY ALLOCATION SET COMMITMENT CEILING No.(%)(R'm)(%)(R'm)(%)(R'm)(%)(R'm)(%) Subsidy Housing2741%14119%3111%8013%20021% Affordable Housing3248%57377%23384%47580%66570% Infrastructure711%355%124%407%808% TOTAL66100%749100%276100%595100%945100%

HOUSES AND SITES SERVICES BY PROVINCE – AFFORDABLE HOUSING 24

KEY VARIABLES IN AFFORDABLE HOUSING 25 ECONOMIC FACTORS Performance of the economy generally Banks’ willingness to lend Household Affordability MINING AND FAST GROWING TOWNS Forward planning and availability of proclaimed land Bulk infrastructure Speed of critical property development related approvals Capacity of less resourced Municipalities to fulfill the function FINANCING CAPACITY Access to funding at concessionary rate

26 LENDING TO HUMAN SETTLEMENTS CONTRACTORS

CATEGORIES OF CONTRACTORS 27 Developer/ Contractor Tier 1 Traditional contractor Tier 2 CFDP Tier 3  Turnover < R300m  Average 10 projects  5000 units per annum  National presence  Turnover R100m  3 projects at a time  600 units per annum  Provincial focus  Turnover of R0 >R5M  1 project  40 units per annum  Municipal focus

CONTRACTOR FINANCE DEVELOPMENT PROGRAMME 28 The CFDP programme provides bridging finance, construction and enterprise development support to small contractors In year 1 of the programme, which ended in March 2014, the programme enrolled 13 contractors NMBMM of whom 80% were women Renewed engagements at advanced stages of implementation readiness between NURCHA, the HDA, NMBMM and Mzingisi Trust Challenges faced by NURCHA in current reporting period: –Misalignment of approaches to contractor development –The commencement of the programme is dependent upon the conclusion of a MOU between NURCHA and the participating government entity

NUMBER OF HOUSES - SUBSIDY HOUSING 29

30 PROGRAMME AND FUND MANAGEMENT SERVICES

PROGRAMME AND FUND MANAGEMENT 31 Three years into programme management and built strong capabilities to support delivery efforts in the sector Have managed multi-year programmes in support on National and Provincial departments Generated 31% of NURCHA’s gross income ClientsProgramme Scope NDHSBucket Eradication Programme Contractor Finance and Development Programme ECBucket Eradication Programme Rural Housing Development Programme KZNVulindlela PHP – Paymaster (CRO) FSProgramme management support and systems development.

EASTERN CAPE BUCKET ERADICATION PROGRAMME 32 A total of 10 projects across 8 municipalities were implemented with a budget of R106m NURCHA has concluded the ECBEP and submitted the close out report that has been accepted by the department NURCHA eradicated buckets out of 3118 An investigation on the adequacy of a sewer network to 1245 sites in Sundays River Municipality (Paterson) was completed and a repair or replace approach was determined A total of 40 SMMEs were employed in Makana Municipality (Grahamstown) to implement 737 toilet top structures A total of 8 SMMEs were employed in Ndlambe Municipality (Port Alfred) to erect 967 toilet top structures The remainder of the projects will be implemented by the Department of Water and Sanitation

NURCHA CONTRIBUTION TO NDOHS MTSF 33 CONTRIBUTION FROM BEGINNING OF MTSF PERIOD TO 31 March 2015 # OF LOANS SIGNED # OF HOUSES IN CONTRACTS SIGNED VALUE OF LOANS (RAND) MINING TOWNS TOTAL155, M Affordable Housing81, M Subsidy Housing74, M GAP HOUSING TOTAL M WOMEN EMPOWERMENT TOTAL62,03423M Affordable Housing000 Subsidy Housing62,03423M MILITARY VETERANS TOTAL M

NURCHA PROGRESS ON COMMITTED MTSF TARGETS 34 OUTPUTS MTSF TARGETS % PROGRESS TO DATE FY 2014/15 % ACHIEVED FY 2014/15 FY 2015/16 % PROGRESS YTD FY 2015/16 AFFORDABLE HOUSING FINANCE: GROW THE SUPPLY OF AFFORDABLE HOUSING STOCK TARGETNUMBER OF CONTRACTS SIGNED ACTUAL 2320%1680%733% TARGETHOUSES AND SITES IN SIGNED CONTRACTS16,900 2,800 3,150 ACTUAL 4,15125%2,56492%1,58750% - HOUSES SERVICED SITES3,370 2,105 1,265 TARGETVALUE OF LOANSR 1,710,000,000 R 300,000,000 R 315,000,000 ACTUAL R 436,693,24826%R 246,625,59082%R 190,067,65860% TARGETVALUE OF PROJECTS FINANCEDR 3,500,000,000 R 440,000,000 R 630,000,000 ACTUAL R 1,341,015,25438%R 925,805,198210%R 415,210,05666% TARGETHOUSES BUILT AND SITES SERVICED12,100 1,950 2,200 ACTUAL 2,33919%1,60682%73333% - HOUSES BUILT SITES SERVICED1,787 1, SUBSIDY HOUSING FINANCE: IMPROVE DELIVERY OF SUBSIDY HOUSING TARGETNUMBER OF CONTRACTS SIGNED ACTUAL 2012%1554%516% TARGETHOUSES AND SITES IN SIGNED CONTRACTS82,160 9,660 16,000 ACTUAL 12,74816%9,773101%2,97519% TARGETVALUE OF LOANSR 692,000,000 R 112,000,000 R 128,000,000 ACTUAL R 110,491,46114%R 81,791,46173%R 28,700,00022% TARGETVALUE OF PROJECTSR 7,574,500,000 R 724,500,000 R 1,200,000,000 ACTUAL R 1,082,472,08013%R 864,035,302119%R 218,436,77818% TARGETHOUSES BUILT AND SITES SERVICED60,374 5,500 7,044 ACTUAL 6,56511%5,962108%6039%

35 FINANCIAL PERFORMANCE

BREAKDOWN OF INCOME SOURCES 36

BREAKDOWN OF INCOME SOURCES 37

ABRIDGED INCOME STATEMENT MARCH

ABRIDGED BALANCE SHEET MARCH

ABRIDGED CASH FLOW – MARCH

FINANCIAL RATIOS 41 Net working capital (R’000)R 345,667 Current ratio3.55 : 1 Debt equity ratio0.11 : 1 Return on asset ratio12.37% Interest cover ratio 2.94 Cost to income ratio 91% NURCHA’s financial position remains sound as reflected in a positive net working capital of R345 million, and the current ratio of 3.55 : 1 demonstrates that the company has sufficient current assets to meet its current liabilities. A return on asset ratio of 12,37% is reasonable. The cost to income ratio is high and that is to be expected for a DFI

CONCLUSION: 2015/16 FOCUS AREAS 42 Consolidation and ensure sustainable results in line with MTSF targets,  Generation of business volumes and keeping market and stakeholders engaged across provinces,  Improve and sustain credibility of our systems and services to stakeholders, clients and shareholders; i.e. performance to desired standards, improved financial reporting and supply chain management  Operational presence in provinces in line with business activity and keep the market and stakeholders engaged.  Strengthen skills base in key areas of the business. Intensify activities on the DFI consolidation process and risk mitigations during the transitional period.

BUCKET ERADICATION PROGRAMME GALLERY 43

DUVHA PARK, WITBANK 44 Where:Witbank, Mpumalanga Province Number of Units:128 Average Size:48m 2 Loan Value:R 33.1 million Project Value:R million Average Selling Price:R

LILYFIELD PROJECT, MIDRAND 45 Where:Midrand, Gauteng Province Number of Units:198 Average Size:50m 2 Loan Value:R 64.8 million Project Value:R million Average Selling Price:R

EMPANGENI SECTIONAL TITLE UNITS 46 Where:Empangeni, KwaZulu-Natal Number of Units:51 Average Size:55m 2 Loan Value:R 17.7 million Project Value:R 29.4 million Average Selling Price:R

47 THANK YOU