1. ANNUAL PERFORMANCE PLAN FOR 2013/14 FY
Parliamentary Portfolio Committee on Human Settlements
27 March 2013
Presented by:
Jabulani Fakazi, CEO & Bruce Gordon, CFO

2. Presentation Outline RHLF Mandate The RHLF Market Size and Coverage
Market Conditions
Government Policy Context
Challenges
Raising Awareness & Developing New Foot Print
Internal Resources
Strategic Objectives
Governance
Conclusion

3. RHLF MANDATE
To facilitate access to incremental housing finance for low income households in rural areas
Focus on rural areas and small towns (outside of metros)
Market segment: below R9, 800 (bias towards those earning R3, 500 and less)
To support the implementation of rural development programme

4. RHLF Market Size and Coverage (Census 2011)
Close to 5 million households living on tribal and farm areas
RHLF loans since inception to end of Q3 of 2012/13 FY = (RHLF has a long way to go to have impact on the rural households) & Less than 1% of RHLF loans reach rural households
Small towns not included in these statistics—so market is much higher
Despite all RHLF’s track record of delivery, households in tribal and farm areas are not adequately serviced, because:
Funding shortage (mainly)
Loan distribution channels/intermediary network
Economic conditions: e.g. Low affordability levels and high unemployment

5. RHLF MARKET

6. Market Conditions Low economic growth outlook
Unemployment rate likely to remain high
Volatility of Rand—currently deteriorating and will likely have inflationary pressure
Inflation food, energy, transport- less income for housing
Level of consumer indebtedness remain high following astronomical growth of unsecured lending

7. Policy Context
Despite the challenges posed by the market conditions, government policy interventions present an opportunity to do more, examples:
1. Strategic Infrastructure Projects
When projects are implemented and commissioned, will serve as basis for growth and job creation
We foresee demand for housing loans as a result of implementation of Infrastructure Plan

8. Policy Context 2. Contribution to Outcome 8:
Output 4: Facilitating incremental housing loans (non- mortgage loans) in rural areas:
In 2013/14 RHLF will exceed the outcome 8 target set for RHLF

9. Policy Context 3. National Development Plan (NDP)
Approved Government Plan providing guidance to service delivery
Vision:
“… in 2030, we experience daily how: We participate in efforts to liberate ourselves from conditions that hinder the flowering of our talents.”
RHLF is well positioned to support implementation of the NDP, especially in two key areas (Chapters in the NDP):
Inclusive Rural Economy (Rural Development)
Transforming Human Settlements

10. NDP Areas With a Fit to RHLF Mandate
Productive farms
Funding housing in agricultural areas and adjoining settlements
Land reform beneficiaries
Financing housing for beneficiaries who want to resettle on land
Development of new towns as a result of development of rural development (agricultural and non-agricultural activities)
Funding housing for households/individuals who do not qualify for housing subsidy programmes or mortgage finance
Secure water and food supplies
Funding for connecting to utilities (water, sewerage and electricity)
A mix of housing types
Funding self or owner specified homes— maximising housing choices
Energy efficient homes (contributes to transition to low carbon economy)
Funding for solar energy, insulation,alternative building technologies, etc.
Rural areas fully integrated into the economy
Funding productive housing, local building industry activity, increased activity for local building merchants

11. Few examples of communities mobilising to initiate their own planning and problem solving but many have become dependent and have become passive recipients of government delivery.
By funding individuals who are required to repay loans and identifying CBOs, NGOs and broad based community structures that can deliver housing. RHLF encourages rural communities to help themselves thus encouraging independence in the spirit of Vukuzenzele.
Renewed effort is needed to ensure that national provincial and local government work together in reshaping the built environment
As a national SOE, RHLF makes a point of interacting with a broad range of players in the housing delivery market in rural areas, meeting with representatives of all 3 tiers of government
Rural restructuring zones—e.g. new settlements formation (Spatial Restructuring)
Funding housing for households/individuals who cannot access subsidy programmes or mortgage finance

12. Challenges 1. Shortage of Intermediaries: Action:
Provide additional facilities to existing intermediaries with scale to deliver on the mandate
Continue with efforts to identify community based organisations— three approved in the current financial year (will deliver high impact, but at small scale: Sasekisani Cooperative, Shiyendlele, Amajuba Livestock Association)
Pipeline: Cane Growers Association
Continue efforts to sign new intermediaries and partner provincial DFIs:
Pipeline: Risima Housing Finance, Mpumalanga Economic Development Agency, Free State Development Corporation, Bashumi Banking Services
However, adding more intermediaries to scale up access to incremental housing finance requires more funding

13. Challenges 2. Funding Constraint
In light of the huge market that RHLF has to serve, funding resources are limited to fully respond to market needs.
During the current financial year, we had a shortfall of R98m in meeting the demand for additional facilities from existing intermediaries—a credibility for RHLF and government
Action:
Application for additional capital injection from RHLF shareholder—this is critical for meeting long term development objectives
Applied for relaxation of liquidity covenant on KfW/DBSA/RHLF loan— from 30% to 10% of Total Assets
Exploring raising loan funding from private and international institutions (however, cost may be high given RHLF mandate to facilitate unsecured incremental housing loans & will defeat efforts to continue with the strategy to lower the cost of credit for borrowers)

14. Raising Awareness & Develop New Foot Print
Participate in the DHS capacity development programme for municipalities
Use relevant media in raising awareness of incremental housing finance offered by RHLF and intermediaries
Building merchants willing to partner RHLF intermediaries as loan distribution channels have been identified in Limpopo, North West, Free State, & Northern Cape
In 2013/14 RHLF will facilitate partnerships between its intermediaries and identified building merchants
Opportunities for joint marketing

15. Internal Resources 1. Funding
No new funding, thus limited resources for business growth and development impact
2. Human Resources: Maintain lean model in line with the Wholesale Business Model, built capacity in core business areas:
Operations (Business Development)—Will appoint 1 new Client Executive Intern resulting in the total of 4 staff members
Development Monitoring (New Unit) under Risk Management Department—Will appoint 2 current interns on permanent basis

17. STRATEGIC OUTCOME GOALS

18. Implications of Situational Analysis
Targets must be set in the context of these economic realities
Targets for 2013/14 are still on the conservative side through funding constraints
Work done is finding new business needs to be followed up with funding
RHLF enhancing audits of compliance with human settlement mandate
Focus more on supporting intermediaries with sound infrastructure to achieve impact
Additional effort on CBOs being undertaken

19. Strategic Objectives
Broadening & Deepening the Reach of Rural Housing Finance
Building Lending Capacity
Preservation of real value of capital

20. Strategic Outcome Orientated Goals
Stake client goals – delivery to Rural Low Income Earners
Lower loan numbers due to funds already committed
Effort being made to move funds to intermediaries who grant lower loans – therefore touch more people
Proud of effect RHLF is having on human settlements for those earning below R3,500
Leakage targets considered adequate as cost of enforcing higher will lead to more funds on enforcement, less on human settlements

21. Strategic Outcome Orientated Goals Stake client goals – debtors book
Budget based on current funding constraints
Efforts being made to overcome these
Impairment expectation remains constant as risks are needed for rewards

22. Strategic Outcome Orientated Goals
Financial goals
Income increases as most funds are distributed for a full year
Expenses as a % of income decrease as we maintain our cost base while improving revenue
These lead to improved profitability

23. KEY PERFORMANCE AREAS
Statement of Financial Position

24. KfW (via DBSA) Soft Loan:
KEY PERFORMANCE AREAS
Statement of Financial Position
2011/2012 R49,5 million (received)
2012/2013 R32 million
2012/13 R0.00
Capital Funding:
Repayment start in Dec 2014
Repayable in 41 half yearly instalments
KfW (via DBSA) Soft Loan:
RHLF is in the initial phases of exploring new funding areas
Some may need National Treasury permission in terms of PFMA
No government guarantees will be sought
Other avenues

25. KEY PERFORMANCE AREAS
Statement of Cash Flow

26. Statement of Financial Performance
KEY PERFORMANCE AREAS
Statement of Financial Performance
Travel and accommodation increase to enable more support to CBOs in remote areas
As RHLF seeks to increase its presence in rural areas our Marketing costs need to increase
Consulting fees are budgeted to increase as we focus on CBO development and research
Employment costs increase by 6% plus the cost of 1 new intern and 2 interns becoming fulltime

27. GOVERNANCE

28. Composition of the Board
CORPORATE GOVERNANCE
Full and effective control over the company
Monitors management
Decisions on material matters are in the hands of the board.
Board of directors
Six non-executive directors
Non-executive chairperson
One Executive
Composition of the Board

29. Governance – Board and Committees

30. Governance: Board Committees
BOARD OF
DIRECTORS
HR ETHICS &
REMUNERATION COMMITTEE
CREDIT AND DEVELOPMENT
COMMITTEE
AUDIT AND RISK
INTERNAL
AUDIT

31. Concluding Remarks
RHLF will meet targets which have been set low due to limited funding resources—however the market is huge that is not serviced
Market conditions will remain gloomy due largely to subdued economic growth
If Government initiatives for job creation materialise, and general economic conditions improve—the NDP implementation provides a scope for RHLF growth assuming additional funding is resolved during the MTEF period and beyond

32. Discussion
Thank You