NHFC Portfolio Committee Of Housing 13 June 2001 NATIONAL HOUSING FINANCE CORPORATION LIMITED

The National Housing Finance Corporation is one of five state-owned development finance institutions in South Africa. With initial, permanent capital provided by government, each one supplements its capital with private sector funding. In this way, partnerships between the public and private sectors are created. INDUSTRIAL DEVELOPMENT CORPORATION DEVELOPMENT BANK OF SOUTHERN AFRICA KHULA ENTERPRISE FINANCE LAND AND AGRICULTURAL BANK NATIONAL HOUSING FINANCE CORPORATION South African Government Industrial development finance for, and investments into, industrial concerns Infrastructure development finance for provincial/local authorities, parastatals and utilities Small, medium and micro enterprise development finance for lending intermediaries financing small, medium and micro enterprises Agricultural development finance Housing development finance for intermediaries financing housing and housing institutions

In partnerships with the broadest range of organisations, to search for new and better ways to mobilise finance for housing, from sources outside the state... "The corporation’s endeavours should in time ensure that every South African with a regular source of income can gain access to finance to acquire, rent and/or improve a home of his/her own” THE MANDATE...

The NHFC seek to create housing opportunities for the low and moderate income families by:  Funding intermediaries to promote broader access to housing  Building adequate and sustainable capacity within the organisations to which it funds  Partnering organisations to pioneer new finance and housing delivery approaches THE MISSION...

Wholesale Debt Funding : R 1 083m  Provide credit facilities to retail lenders in low income housing market – existing institutions(Rural/Urban): Banks - Unibank, Cash Bank Banks - Unibank, Cash Bank Non-Banks – Agishana, Grand Finance, Mid First, Protea, Sumex Non-Banks – Agishana, Grand Finance, Mid First, Protea, Sumex Building Material Suppliers – Bonus Building Supplies Building Material Suppliers – Bonus Building Supplies Development Corporations – Ithala, Mpumalanga Development Corporations – Ithala, Mpumalanga  Challenges / Experiences Consolidation / Alliances – extending reach by the big banks Consolidation / Alliances – extending reach by the big banks Environment highly competitive – no room for small lenders, clients Environment highly competitive – no room for small lenders, clients Liquidity pressures in this market Liquidity pressures in this market Blending of credit with SAVINGS and SUBSIDIES Blending of credit with SAVINGS and SUBSIDIES Risk Management become increasingly important Risk Management become increasingly important

Build & Capacitate new Inst: R 170m  SHF provides capacitation of new housing institutions  Fund housing projects of the housing institutions for alternative tenure – promote Social Housing: Rental stock - SEMAG, Greater Germiston, Durban Metro, HAEL Rental stock - SEMAG, Greater Germiston, Durban Metro, HAEL Rent-to-Buy – CTCHC, Reatlehile Rent-to-Buy – CTCHC, Reatlehile Installment Sales – CTCHC, ABAHLALI Installment Sales – CTCHC, ABAHLALI Co-operatives – COPE, NEWTOWN HOUSING CO. Co-operatives – COPE, NEWTOWN HOUSING CO.  Challenges / Experiences Setting time of viable housing institutions – 18 approx. months Setting time of viable housing institutions – 18 approx. months Project have to be scale magnitude – approx units Project have to be scale magnitude – approx units Grant funding is crucial at early stages of the project Grant funding is crucial at early stages of the project Vat and Income Tax Exemption – make them sustainable Vat and Income Tax Exemption – make them sustainable Enabling regulatory environment – Rental Housing Act Enabling regulatory environment – Rental Housing Act

Partnering other Organisations… Intent to deliver housing and housing finance at scale  In 1999, setup Gateway Home Loans(PTY) - PPP  Loan Origination and Servicing by major banks – end up in Securitisation : Accredited Lenders Designed a Non-Mortgage financial instrument : Makhulong Home Loan – Pension provident fund backed / other forms of collateral Designed a Non-Mortgage financial instrument : Makhulong Home Loan – Pension provident fund backed / other forms of collateral Banks – SBSA, NEDCOR, AFRICAN BANK, CASH BANK, ETC Banks – SBSA, NEDCOR, AFRICAN BANK, CASH BANK, ETC  Lessons Learnt Need for Primary Market stimulation – no big banks in this market Need for Primary Market stimulation – no big banks in this market Need for policies/regulation to facilitate the banks involvement Need for policies/regulation to facilitate the banks involvement Scale delivery is crucial for successful securitisation Scale delivery is crucial for successful securitisation Risk Enhancement mechanisms – NHFC to assume greater risk Risk Enhancement mechanisms – NHFC to assume greater risk

Performance TO-DATE “HIGHLIGHTS”

NHFC Approvals and Disbursements Rm (Annual)

Number of End User Loans…

Number of Housing Units…

Social Impact of the NHFC…  Potentially more 2,5 million low and moderate income families’ quality of life would be improved due to NHFCs funding activities

EXAMPLES OF PROJECTS FUNDED BY THE NHFC…

CTCHC – WESTERN CAPE Mitchells Plein 

ABAHLALI - EASTERN CAPE Port Elizabeth / Nelson Mandela Metro  ABAHLALI…

TSUTSUMANI - GAUTENG Alexander  SEMAG ( All Africa Games )

DURBAN METRO - KZN Durban 

Housing Budget Relevance…  Initially capitalised by SA Government : Seed Capital  CURRENT YEAR : 2001/2002 – No Allocation from Budget  Current Capital Structure :  Seed Capital R 880m  Debentures from Private Sector R 100m  Distributable Reserves/Profit R 350m R 1 330m R 1 330m  Financial Vision - Longer term goal is to be self- sustainable…

 Extend the housing finance market down- stream : accommodate the low income households  Unlock private sector capital into the NHFC target market  Ensure that there is increased competition in this sector of the market  Improve on the internal efficiencies

Challenges for the NHFC… Financial…  Where the next funding for the Corporation would come from – Self Sustainability  Link Savings and Subsidies to Credit (package better affordability levels with a quality product delivered)  Increase private sector investment in the low income housing market – “risk enhancement” mechanisms  Run a Cost Effective Operation – “Lean and Mean”  Conform to all the Public Finance Management Act regulations ( already do )

Challenges for the NHFC… Housing Impact…  Putting the “roof over peoples head” : MANDATE!!!  Deliver finance for ALL forms of Low Income Housing  Ownership ( including, the Urban Renewal Projects )  Alternative Tenure : Rental / Rent-To-But / Installment Sale  Incremental : Thrust of the RURAL housing market (in line with the Presidential Integrated Sustainable Rural Development Strategy - ISRDS)  How to deal with the AIDS factor that is most prevalent in this target market prevalent in this target market  Work with other NGOs to quantify the magnitude and the likely impact of AIDS among the LIH  Explore housing solution options for the AIDS sufferers

Challenges for the NHFC… Policy…  Effectively use the policy instruments such as the HLMDA and the CRA to ensure maximum participation by the private sector e.g. banks and non- banking financial and insurance institutions in the low income market  Stipulation of “ENABLING MEASURES / EXEMPTIONS” that will ensure the NHFC can fulfill its public mandate

Challenges for the NHFC… Private Sector Participation…  Innovative financial structuring : Aggressive risk “Enhancement Mechanisms” ( Strategic Thrust )  Through “Enabling Measures”, the NHFC becoming a strategic partner to private sector – the spirit of PPP extended  “Implicit Guarantee” by the Government – To enable the NHFC to deliver lower costs of funding

ConclusionConclusion  NHFC’s Mandate : “Putting the Roof Over People’s Head”  Strategic Focus :  Self Sustainability – Question of future funding  Focused on Housing Delivery Agenda  Establishment of “Enabling Arrangements” – We need Your Help  Normalisation of the housing finance sector among the low and moderate income families  Thank You – Portfolio Committee of Housing