1. FINANCING HOUSING DELIVERY A view from NURCHA Presented By Nhlanhla Mjoli-Mncube Deputy CEO Wednesday, 26 March 2003

2. A view from NURCHA 1.The context 2.What NURCHA has achieved 3.Things we think about 4.NURCHA’s future: arranging sustainable finance.

3. THE CONTEXT 1995 Hope - Transformation Sustantial resources: - massive inequality Intervention required –Reduce inequality –Normalise the market Politicised housing environment Nervous banks Many institutions formed

4. NURCHA’s ACHIEVEMENTS BRIDGING FINANCE GUARANTEES SINCE 1996: Raised R 140 million in guarantees Issued guarantees valued at R 264 million For 510 loans totalling R.5 billion Financing 113 000 houses Valued at R 1,5 billion

5. CONCERNS 1.Banks lose their appetite  Losses  Difficult business  Banking shakedown  Short term view

6. CONCERNS 2.The limitation of the guarantee  Shares risk but provides no capital  Only downside potential 3.A slowdown in new business  Declining subsidy value  Major new policies 4.The need to sustain ourselves

7. THE FUTURE 1.DIVERSIFY PRODUCT RANGE Not just Guarantees but  Full range of credit enhancements  Wholesale and retail lending  Equity or quasi equity $50 million free credit enhancement from OSI

8. FUTURE 2.Diversify financing partners  Capital markets  Development finance institutions  Donors 3.Reduce risks and improve risk management 4. Find the champions and fund them NURCHA making the match

9. FINANCING CONSTRUCTION NURCHA PACKAGES FINANCES FINANCIERS DONORSCAPITAL MARKETSDFIS CHAMPIONS FINANCIAL REQUIREMENTS CONSTRUCTION: SUBSIDYCREDIT LINKED + RENTAL +

10. NURCHA’s VISION “ An organisation that is regarded as a partner of first choice for those seeking innovative housing finance solutions”

11. RESPONSE TO BUDGET Budget amount is okay, however there are constraints to budget roll out:  Policy on R2479 needs to be politically popularised  Municipal and official buy in  Developer and contractor commitment and role clarification  Design of systems and procedures for the management of R2479  Interim arrangements during transitional period  Local authority capatilisation

12. SOME ALTERNATIVES ON THE GROUND  Individual contractor-driven subsidy  Rural subsidies as a mechanism of avoiding R2479  People’s Housing Process redefined to allow contractor participation  Role of banks and other financial institutions and need for support

13. AN EXAMPLE: THE OPIC FUND RMB Revolving Credit Facility ± R 200 million NURCHA Loans Paymaster Contractor R 20 million first loss guarantee OPIC & OSI $ 20 million guarantee

14. THE COST OF FUNDS RMB – Nurcha=Prime -2,3% + OPIC Fee= 2,5% =Prime + 0,2% Nurcha admin fee=R69 per house Paymaster admin fee=±R500 per house

15. THE PAYMASTER 1.Evaluates the loan 2.Approves on Nurcha’s behalf 3.Opens a project account 4.Pays material suppliers directly 5.Releases funds for labour costs

16. BENEFITS TO CONTRACTORS 1.Access to funds 2.Discounts from suppliers 3.More rapid payments from province 4.Tight financial control and monitoring

17. Contractors supported by Nurcha Types of Contractors

18. Houses constructed through Nurcha’s intervention: February 2003 Eastern Cape Free State KwaZulu-Natal Mpumalanga Northern Province North West Northern Cape Gauteng Western Cape TOTAL NUMBER OF HOUSES SINCE INCEPTION = 122,672