1. Financier ∙ Facilitator ∙ Innovator 27 March 2013

2. 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

3. Financier ∙ Facilitator ∙ Innovator Who is the NHFC ?

4. 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 )

5. 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

6. 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 2010-2013 Outcome 8, and Political Resolutions of Mangaung Adoption of the National Development Plan (NDP) to resolve the myriad of socio-economic problems

7. 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}

8. 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}

9. 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}

10. 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}

11. 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 3 - 5 years: lower margins from mortgage CHANGE IN BUSINESS ENVIRONMENT IMPACT ON NHFC

12. Financier ∙ Facilitator ∙ Innovator How we operate

13. 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

14. 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

15. Financier ∙ Facilitator ∙ Innovator Financial Highlights

16. Financier ∙ Facilitator ∙ Innovator 2013/142014/152015/16 Debt (R m): additional debt funding 150250200 Equity (R m): recapitalisation from shareholder 446200 Total funding raised (R m) 596450400 Total debt/equity ratio (%)* [company] 25%31%34% * interest bearing debt to equity at 19% at 31/03/3012 18

17. Financier ∙ Facilitator ∙ Innovator 11 of 19

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

19. Financier ∙ Facilitator ∙ Innovator KEY PERFORMANCE INDICATORS:ForecastBudget 2012/132013/142014/152015/16 Funding Impact: Total number of approvals 19 26 32 39 Total value of approvals (R'000) 788 492 936 237 978 418 1 071 153 Total value of disbursements (R'000) 579 899 637 889 714 436 814 457 Total Funding Impact (R'000) 948 316 2 164 353 1 333 094 1 519 806 Developmental Impact: Total Impact (Housing Opportunities) 13 926 21 471 23 880 27 418 Total Number of Intermediaries funded53647995 Beneficiaries benefitting* 52 919 81 588 90 743 104 189 Number of jobs created 7 547 11 743 13 746 15 749 Value of disbursements targeted towards 80 053 98 182 118 588 142 695 women-managed/owned companies (R'000)

20. Financier ∙ Facilitator ∙ Innovator Examples of enterprise development

21. 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 18 000 units in 3 provinces. The leverage factor: for every R1 of NHFC funding, R2.40 private sector funding.

22. 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

23. Financier ∙ Facilitator ∙ Innovator NHFC Programmes

24. Financier ∙ Facilitator ∙ Innovator  8 Implementation Protocols;  1 MOU (FNB);  13 accredited projects across the country;  6 737 estimate total units in all these projects;  2012/13 FY = budget is R172 825 255  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

25. 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

26. 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

27. Financier ∙ Facilitator ∙ Innovator MDIC Overview of Projects Funded

28. Financier ∙ Facilitator ∙ Innovator

31. THANK YOU !!