1. ANNUAL REPORT 2011/12 FINANCIAL YEAR Dr. J. Mahachi, Pr.Eng, Pr.CPM NHBRC Acting Chief Executive Officer Jeffreym@nhbrc.org.za 11 October 2012

2. Outline of Presentation Mandate & Strategy of NHBRC Operational Performance 2011/12 - Non Subsidy Sector - Subsidy Sector Financial Performance 2011/12 Actuarial Evaluation as at March 2012

3. Establishment of NHBRC Legislation of the Housing Consumers Protection Measures Act, 1998 (Act No. 95 of 1998) 26 March 1999 – NHBRC became a statutory body with a mandate of protecting mortgaged homes

4. NHBRC Mandate NHBRC’s primary mandate is: To protect housing consumers by establishing, implementing, regulating quality standards in the home building industry To establish a warranty fund and to provide assistance to housing consumers under circumstances where home builders fail to meet their obligations. To build capacity of home builders and housing consumers with specific emphasis to the historically disadvantaged

5. Objects of NHBRC To represent the interests of housing consumers by providing warranty protection against defects in new homes. To regulate the home building industry. To provide protection to housing consumers in respect of the failure of home builders to comply with their obligations in terms of the Act. To establish and promote ethical and technical standards in the home building industry.

6. Objects of NHBRC Cont… To improve structural quality in the interest of housing consumers and the home building industry. To promote housing consumer rights and to provide housing consumer information. To communicate with and to assist home builders to register in terms of the Act. To assist home builders through training and inspections

7. Extension of Warranty to Subsidy Houses Government Subsidy: Government of RSA provides a full subsidy for the acquisition of land, services and housing top structures to those households earning up to R3,500/mth. Year 2002: Government extends warranty scheme to cover the subsidised houses. A cross subsidisation model for the enrolment fee between subsidy and non-subsidy houses was implemented by NHBRC.

8. NHBRC Warranty Scheme 1999 Legislation Act (Non-Subsidy houses) 2002 Warranty extended to subsidy houses (Project Linked & other) 2011 Rural & PHP? Unenrolled Houses

9. Regulation of the Home Building Industry

10. Housing Consumers Protection Process

11. Vision “A world class home builders warranty organization that ensures the delivery of sustainable quality homes”

12. Mission “To protect the housing consumers and regulate the home built environment by promoting innovative home building technologies, setting home building standards and improving the capabilities of home builders”

13. Strategy To improve visibility and accessibility in the market while enhancing interaction with our stakeholders; To position the NHBRC as a leader in knowledge creation, technical and technological building solutions through strategic partnerships; and To provide diversified services and products in line with changing building requirements and needs.

14. Strategic Objectives

15. Our Footprint

16. High Level Stgructure 16

17. Operational Performance

19. % Renewal of Registered Builders

20. Enrolments & Late Enrolments of homes 20 Growth in Enrolments

21. 21

22. Late Enrolment as % of Total Enrolments 5% target

23. Complaints & Conciliations Type of ComplaintNumber ReceivedNumber Resolved Structural Related431225 Roof Related3622 Maintenance Related16586 Others (e.g. Outside Warranty Period) 17 Total649350

24. Remedial Works YearRemedial Costs (R-million)Inspection Fees (R-million) 2007/08458.8 2008/09783.6 2009/101479.2 2010/112257.5 2011/121573.9

25. Disciplinary of Home Builders Number DC Hearings87 Builders Found Guilty46 Builders not found guilty7 Matters settled15 Verdicts outstanding4 Matters withdrawn13 Matters postponed2

26. Subsidy Sector Performance

27. NHBRC Risk Management The NHBRC uses various risk management tools. Core: Geotechnical assessment; Impact of Civil infrastructure (Stormwater); Structural assessments; and 1 inspector for every 200 houses under construction. Enrolment done in 2 stages: Project Enrolment, and Home Enrolment

28. Value for Money for Enrolled Projects  Evaluation of geotechnical problems  Evaluation of proposed foundation solutions  Evaluation of topographical problems & proposed solutions (stormwater control, retaining embankments, etc)  Evaluation of the capacities & capabilities of home builders  Establishment of appropriate levels of technical specifications & construction guidelines

29. Value for Money (Cont…)  Continued monitoring of quality control procedures being applied by builders on site  Inspection of the quality of the product on an on-going basis  Training of Home Builders  Training of provincial and municipal inspectors and QAs  5 – year structural warranty

30. Project & Home Enrolment 30 Engagement with provinces

31. Inspection of Homes Non-SubsidySubsidy Number of Houses Inspected 62,779156,139 Number of Inspections Conducted 223,349290,826

32. Home Builders Training ProgrammeNumber Trained Emerging Home Builder Training609 Disability Programme18 Women Build134 Youth Build94 Youth in Human Settlements96 TOTAL951 Note: 1.Total Males Trained = 592 2.Total Females Trained = 359

33. Challenges Dealt With in 2011/12  Enrolment Submission during, if not after construction. All provinces have been engaged. Proper alignment of NHBRC and provincial stats. Minister developed a intervention strategy.  Misunderstanding of technical and geotechnical standards by developers and professionals. Workshops held in most provinces.  Scarcity of appropriate technical skills (NHBRC Developing training materials, particularly for inspectors)  Appropriateness of standards to rural projects (Technical standards reviewed and re-aligned for rural projects)

34. Enforce compliance to norms, standards and quality within the sector Trained the public sector on technical standards Assisted the Govt in the rectification program of houses NOT enrolled by the NHBRC. Started on building capacity at the provincial and municipal spheres to undertake monitoring of norms and standards for human settlement programmes and projects through establishment of QA systems; Ensured all enrolled projects are inspected; and Assisted Provinces in Geotech investigations 34 NHBRC Response to Outcome 8

35. Other NHBRC Achievements Transforming the organisation through improving processes and systems with a reliable IT platform (ERP System) Successful host of 12 th International Housing & Home Warranty Conference in Cape Town Workforce profiles in terms of race and gender in line with national demographics Restructuring of organisation finalised Staff turnover (Resignations) of 3.6% acceptable. Repeal the Act (Draft completed) Challenge: Delay in the finalisation of the disciplinary hearing of CEO impacted on delay in recruiting other Execs.

36. Other NHBRC Achievements Transforming the organisation through improving processes and systems with a reliable IT platform (ERP System) Successful host of 12 th International Housing & Home Warranty Conference in Cape Town Workforce profiles in terms of race and gender in line with national demographics Restructuring of organisation finalised Staff turnover (Resignations) of 3.6% acceptable. Repeal the Act (Draft completed) Challenge: Delay in the finalisation of the disciplinary hearing of CEO impacted on delay in recruiting other Execs.

37. Annual Report 2011/2012 FINANCE

38. Statement of Financial Performance Summary R’ Million 38 Actual 2012 Actual 2011 Variance Net income741799(58) Expenditure580437(143) Surplus for the year134362(228)

39. Total Revenue Trend 39

40. Revenue – Premiums and Fees 40

41. Premium Earned R’ Million Trend 41

42. Revenue and Contribution 42

43. Summary Revenue 2011/12 Revenue year-on-year comparison R’ Million 43 Net IncomeVarianceComment Insurance premium revenue(129)Unearned premium reserve Fee revenue24Subsidy project enrolments Technical services revenue103Rectification and water tanks Investment income(98) Restructuring of investment portfolio Other income42Vat / Bad debt provision Total(58)

44. Statement of Financial Performance Summary R’ Million 44 Actual 2012 Actual 2011 Variance Net income741799(58) Expenditure580437(143) Surplus for the year134362(228)

45. Expenditure 45

46. Technical Provision Definitions 46 Outstanding claims provision (OCP) Insurance claims and related expenses paid in the year, including provisions for insurance claims incurred but not reported and related expenses.

47. Expenditure 2011/12 Year-on-year Expenditure Trend 47 Actual 2012 Actual 2011 Variance Expenditure Insurance claims and loss adjustment expenses 5126 Operating / Technical expenses26387(176) Administration expenses3303311 Asset management services990 Total Expenditure607439(169)

48. Insurance claims and loss adjustment expenditure R’ Million 48

49. Technical Revenue and Contribution 49

50. Financial Highlights 2011/12 Expenditure year-on-year comparison R’ Million 50 ExpenditureVarianceComment Insurance claims and loss adjustment expenses 6Lower claim provision Operating expenses(176)Technical R 186 Million Administration expenses1Constant Asset management services0Constant Total Expenditure169

51. Reconciliation of budget surplus with the surplus in the statement of financial performance R Million 51

52. Actuarial Report at March 2012

53. Technical Provisions as at 31 March 2012 53

54. Enrolment fee adequacy for 2012 54

55. Solvency of Warranty Fund 55 Table Above: NHBRC Solvency: The Actuarial Surplus has increased by 16.5% which is due to increasing assets. The Surplus as a % of Provision has increased over the year.

56. PLANS TO ADDRESS CONCERNS RAISED IN ANNUAL REPORT Extensions to contracts were not notified to the National Treasury; No miscellaneous payment through accounting system, has to all go through procurement system; All payments are managed through procurement database, which follows the National Treasury Guidelines; and Tenders will remain open for 21 days.

57. Conclusion on the Solvency 57  The results of the actuarial valuation indicates that the NHBRC as a whole, including both subsidy and non-subsidy houses, is solvent and in a sound financial position as at 31 March 2012.  The actuarial liabilities are 378% funded.

58. THANK YOU