annual report presentation to the human settlements
TRANSCRIPT
Annual Report Presentation
to the
Human Settlements Portfolio
Committee
Mr. Samson Moraba
CEO
02 September 2011
CONTENTS
8/22/2011 2
Mandate, Vision, Mission
Strategic Objectives
NHFC Values
NHFC Outcomes
NHFC Past Performance
NHFC Other Impact
Operating Environment
Key delivery highlights – 2011
Factors impacting performance
Business Performance
Strategic Investments
Financial Performance
NHFC footprint and target market
Corporate Governance
Way forward
NHFC’S MANDATE, VISION, MISSION,
8/22/2011 3
Providing innovative and affordable housing finance solutions to the low and middle
income households
To be the leader in development finance for the low to middle income housing
market
The National Department of Human Settlements established the National Housing
Finance Corporation Limited (NHFC) as a Development Financial Institution (DFI) in
1996 with the principle mandate of broadening and deepening access to affordable
housing finance for the low to middle income households
NHFC’S STRATEGIC OBJECTIVES
8/22/2011 4
Facilitate the increased and sustained lending by financial institutions to the lower end of the housing market.
Expand housing finance activities, through the effective provision of housing finance solutions, thus enabling the low to middle income households to have choice of renting or owning or
incrementally building, to meet their housing needs.
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 Corporation whilst promoting lasting social, ethical and environmental
development..
Stimulate the low to middle income housing sector, by providing robust, relevant and timely research and market analysis to practitioners and housing consumers.
THE NHFC VALUES
5
Profit before tax
R76 million
NHFC’S OUTCOMES
8/22/2011 6
Ou
tco
mes
Housing opportunities created:
Affordable Rental, Ownership and Incremental 9,539
Number of beneficiaries benefitting
36,248
Jobs created
1 171
Value of disbursements targeted towards women-managed / owned companies
R32 million
Disbursements
R501 million
Private capital and investment leveraged
R520 million
Funding Impact
R1,02 billion
NHFC PAST PERFORMANCE
7
The capital provided to NHFC amounted to R1,08 billion and
from this loans of R4,46 billion have been made since inception.
Many of the loans, particularly to social housing institutions and
inner city landlords are long term loans.
The housing units provided in the 15 years of the existence of
NHFC equate to an average of 6 854 per year. This compares
to an average of 11 731 mortgage bonds provided per year for each of the major banks during the FSC period.
NHFC OTHER IMPACTEnterprise development
NHFC has funded and capacitated a total of 58 enterprises including Social Housing Institutions, Integrated Housing Developments, CommercialClients and Private Clients.
Funding initiatives
In the year under review, the NHFC was involved in a number of projects that positively contributed to sustainable social development ofcommunities.
•Yeast City: Gilead House project for people with terminal illness•Tau Village: Residential project for young woman and girls at risk•Johannesburg Inner City Regeneration: AFHCO: CityKidz Pre- and Primary School
Corporate Social Responsibility
In the North West Province, in Lichtenburg, the NHFC contributed funds towards furniture and appliances for houses built under the Women’s BuildProject, in partnership with the government and the private sector.The project, in the Woman’s month, enabled five elderly and highly indigent women to not only own their homes for the first time, but to havefunctional facilities..Environmental sustainability initiatives :
Through funding secured from the AFD and EIB, the NHFC is funding the development of environmentally friendly projects.The Corporation has, for third time, committed to partner with other stakeholders in hosting an international energy efficient building competition.Having a rural focus, the proposed event will take place in Cala in the Eastern Cape.At a corporate level the NHFC partnered with ABSA Bank, the NHBRC, Agre’ment.S.A., Agence Franciase De Development, the Western Province,Drakenstein Municipality, the NDoHS, the Swiss Development Corporation and the Pretoria University in the development of the InternationalHousing Innovation Competition.
OPERATING ENVIRONMENT
8/22/2011 9
Slow economic recovery from first recession in 17 years.
Shedding of jobs.
Declining real disposable income.
Affordability challenges due to high levels of
indebtedness.
Low inflation and interest rates are not translating
into increased lending.
The residential property market remained weak for most part of 2010 and early 2011, and couldstill experience negative growth.
KEY DELIVERY HIGHLIGHTS - 2011
8/22/2011 10
The NHFC is on track with the development and implementation of the MortgageDefault Insurance (MDI) Operating Model, backed by the R1bn Guarantee.
Successful mobilisation of external affordable funding into Integrated HumanSettlement development (allocation and disbursement of the AfD and EIB funds, intothe private and social affordable rental market).
The distressed clients’ turnaround and collection recovery strategy was successfullyimplemented.
NHFC's pioneering strategic investment in inner city regeneration, Trust for UrbanHousing Finance (TUHF), loan portfolio reaches more than R 1bn mark (R 1.2bn).
Highest number of NHFC project launches within a single year, proving the extent towhich the Corporation is making a difference, in the lives of the many underservedlow income households.
Concluded an agreement with Old Mutual Life Assurance Company of South Africaand its BEE partners to participate in an Affordable Housing Fund with initial fundingof R900 million.
NHFC company profit before tax is 11% higher than the previous year.
FACTORS IMPACTING PERFORMANCE
8/22/2011 11
IMPACT
Constraint Banks lending and Household Over-indebtedness
Dependence on Subsidy Funding of Social Rental Housing
Timing of Complex Structured Deals
Graduation of some of the NHFC clients
Entry of new funding entities in the affordable space
Single obligor limits / concentration risk
FACTORS IMPACTING PERFORMANCE
8/22/2011 12
FINANCIAL
Lending income impacted by below budgeted disbursementsand lower interest rates.
Sale of houses mainly impacted by the delay in bond approvalswhich in turn led to a delay in transferring of completed units aswell as construction of top structures.
Other income - Positive variance mainly due to revaluation ofinvestment properties.
Impairments – Reversal of impairments previously raisedfollowing conclusion of settlement agreement.
Below budgeted operating expenses.
BUSINESS PERFORMANCE DIVISIONS
8/22/2011 13
WHOLESALE 2011
Number of loans approved 9
Value of loans approved (R‘m) 287
Value of disbursements (R‘m) 394
Housing opportunities created 7 370
RETAIL 2011
Number of loans approved 443
Value of loans approved (R‘m) 83
Value of disbursements (R‘m) 107
Housing opportunities created 709
STRATEGIC INVESTMENTS
14
Cape Town Community Housing Company (CTCHC)Increased focus to turn-around subsidiary into a viable and sustainable operation to attractpotential equity investors. Increased Board participation with inclusion of three membersfrom the NHFC Executive team.
CTCHC has now delivered close to 3 500 units of which 2 700 are for people qualifying forhousing subsidies. Another 2 808 have been upgraded in its rectification programme, withnew windows, gutters, ceilings, paving and painting.
Trust for Urban Housing Finance (TUHF)TUHF remains a conspicuous example of the NHFC’s success story of significantly expandingits impact through Strategic partnership. The NHFC’s initial investment of R10 million in2003, has translated into a viable entity, with a loan book of R 1.2bn, and having created17 000 housing opportunities, mainly in the city of Johannesburg. TUHF is now expanding itsreach, and has now branched out to KZN (Durban), and the Eastern Cape (Port Elizabeth).
As part of its strategy to strengthen TUHF’s ability to significantly grow its business in thenext five years, the NHFC will increase its shareholding in TUHF and help raise additionalcapital funding, to improve TUHF’s capital adequacy ratio.
STRATEGIC INVESTMENTS
15
Housing Investment Partnership (HIP)Recent developments in HIP saw the exit of Pan African Capital Holding as a Shareholder,with the NHFC and Old Mutual remaining with 33% and 67%, Shareholding, respectively.Inclusion of a third investor will have a significant developmental impact of facilitatinglarge institutional investors to participate in the funding into the affordable humansettlement space.
The HiP income-linked home loan enhances the affordability level of first time homebuyers enabling the acquisition of decent housing in the housing gap market segment.
The uniqueness from the product arises from the fact that the loan repayments aredisengaged from interest rate volatility.
FINANCIAL PERFORMANCE Abridged statement of financial position
8/22/2011 16
2011 2010 2011 2010
Restated* Restated*
R'000 R'000 R'000 R'000
Loans and receivables - advances 1 562 794 1 330 922 1 629 775 1 399 338
Instalment sale receivables 42 005 46 168 - -
Investment property 71 252 59 174 51 745 48 400
Other non-current assets 16 221 15 558 25 799 32 437
Non - current assets 1 692 273 1 451 822 1 707 320 1 480 175
Properties developed for sale 64 015 54 334 - -
Other current assets 1 234 234 1 379 771 1 222 456 1 338 816
Total assets 2 990 521 2 885 928 2 929 776 2 818 991
Net assets 2 276 586 2 216 635 2 236 722 2 186 110
Non-current liabilities 681 844 631 111 672 475 615 778
Current liabilities 32 091 38 182 20 579 17 103
Total assets and liabilities 2 990 521 2 885 928 2 929 776 2 818 991
Group Company
FINANCIAL PERFORMANCESummary statement of financial performance
8/22/2011 17
Actual Variance Budget Actual Variance Budget
2011 2011 2011 2011
R'000 % R'000 R'000 % R'000
Lending activities 118 923 -31% 171 386 124 758 -30% 177 773
Investment activities 41 036 38% 29 762 40 005 34% 29 762
Sale of houses 54 465 -68% 169 752 - - -
Other income 29 650 52% 19 521 17 929 95% 9 195
Total income 244 074 -37% 390 421 182 692 -16% 216 730
Impairments (4 427) 81% (23 708) (4 427) 81% (23 708)
Cost of sales (47 795) 66% (140 752) - - -
Operating expenses (115 314) 14% (133 543) (112 306) 4% (117 070)
Operating profit 76 538 -17% 92 418 65 959 -13% 75 952
Share of loss of an associate - HiP (1 544) -147% (626) - - -
Share of profit of an associate - TUHF 1 703 - - - - -
Interest paid (1 150) 92% (13 863) (611) 95% (13 191)
Surplus before tax 75 547 -3% 77 929 65 348 4% 62 761
Tax (15 689) 11% (17 573) (14 736) 16% (17 573)
Surplus after tax 59 858 -1% 60 356 50 612 12% 45 188
Group Company
FINANCIAL PERFORMANCE
8/22/2011 18
Profit before tax
Lending income impacted by below budgeted disbursements.
3% below
Sale of houses mainly impacted by the delay in bond approvals which in turn led to a delay in transferring of completed units as well as construction of top structures.
Impairments – Reversal of impairments previously raised following conclusion of settlement agreement.
Other income - Positive variance mainly due to revaluation of investment properties.
Operating Expenses Under expenditure in marketing, computer and outsourced services.
14% below
FINANCIAL PERFORMANCE KEY FINANCIAL INDICATORS
8/22/2011 19
NHFC Footprint and Target Market
8/22/2011 20
KwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalFree StateFree StateFree StateFree StateFree StateFree StateFree StateFree StateFree State
GautengGautengGautengGautengGautengGautengGautengGautengGauteng MpumalangaMpumalangaMpumalangaMpumalangaMpumalangaMpumalangaMpumalangaMpumalangaMpumalanga
Eastern CapeEastern CapeEastern CapeEastern CapeEastern CapeEastern CapeEastern CapeEastern CapeEastern Cape
Western CapeWestern CapeWestern CapeWestern CapeWestern CapeWestern CapeWestern CapeWestern CapeWestern Cape
Northern CapeNorthern CapeNorthern CapeNorthern CapeNorthern CapeNorthern CapeNorthern CapeNorthern CapeNorthern Cape
LimpopoLimpopoLimpopoLimpopoLimpopoLimpopoLimpopoLimpopoLimpopo
North WestNorth WestNorth WestNorth WestNorth WestNorth WestNorth WestNorth WestNorth West
Concentration of households
within the NHFC target market
distributed across 6 ranges
using the equal count method
KwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalFree StateFree StateFree StateFree StateFree StateFree StateFree StateFree StateFree State
GautengGautengGautengGautengGautengGautengGautengGautengGauteng MpumalangaMpumalangaMpumalangaMpumalangaMpumalangaMpumalangaMpumalangaMpumalangaMpumalanga
Eastern CapeEastern CapeEastern CapeEastern CapeEastern CapeEastern CapeEastern CapeEastern CapeEastern Cape
Western CapeWestern CapeWestern CapeWestern CapeWestern CapeWestern CapeWestern CapeWestern CapeWestern Cape
Northern CapeNorthern CapeNorthern CapeNorthern CapeNorthern CapeNorthern CapeNorthern CapeNorthern CapeNorthern Cape
LimpopoLimpopoLimpopoLimpopoLimpopoLimpopoLimpopoLimpopoLimpopo
North WestNorth WestNorth WestNorth WestNorth WestNorth WestNorth WestNorth WestNorth West
KwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalKwaZulu-NatalFree StateFree StateFree StateFree StateFree StateFree StateFree StateFree StateFree State
GautengGautengGautengGautengGautengGautengGautengGautengGauteng MpumalangaMpumalangaMpumalangaMpumalangaMpumalangaMpumalangaMpumalangaMpumalangaMpumalanga
Eastern CapeEastern CapeEastern CapeEastern CapeEastern CapeEastern CapeEastern CapeEastern CapeEastern Cape
Western CapeWestern CapeWestern CapeWestern CapeWestern CapeWestern CapeWestern CapeWestern CapeWestern Cape
Northern CapeNorthern CapeNorthern CapeNorthern CapeNorthern CapeNorthern CapeNorthern CapeNorthern CapeNorthern Cape
LimpopoLimpopoLimpopoLimpopoLimpopoLimpopoLimpopoLimpopoLimpopo
North WestNorth WestNorth WestNorth WestNorth WestNorth WestNorth WestNorth WestNorth West
NHFC footprint
CORPORATE GOVERNANCE
21
NHFC conforms to the requirements of the King 2report and the Protocol on Corporate Governance.Substantially complies with King 3 requirements, actionplan adopted for implementation where not fullyaligned with.
Board reviewed oversight role and established a BoardRisk Committee given the complexity of the risks facingthe NHFC.
Unqualified audit report for 16 years.
NHFC Credit Rating – Global Credit ratings
•National Long Term AA-
•National Short Term A1+
NHFC remains a Schedule 3(A) entity.
All necessary committees are in place in terms ofthe PFMA.
Prof. M Katz (chair)
Mr S Moraba (CEO)Ms S Swanepoel
Ms P Ramarumo
Mr S NtsalubaMr S Tati
Dr S Khoza
Mr J Coetzee
Ms A Houston
8/22/2011 22
The NHFC has a significant contribution to make, in the main, in two of the four Outcome 8 components, namely, the improving of property markets and making affordable rental housing accessible to low and middle income households.
Key to the priorities of the NHFC, is the successful building and implementation of the Mortgage Default Insurance (MDI) Operating Model. The NHFC is on track with the building of the MDI operating model, backed by the R1bn Guarantee.
The process of winding-down Retail is at an advanced stage. This should be complete within the new financial year. As part of the process, is the change management process that ensures the redeployment of staff, within the greater NHFC.
On the Strategic partnership front, the inclusion of a third investor in the HIP’s initiative will represent great gains for the human settlements sector. As the market is turning the corner, the NHFC has embarked on a Strategy to build new capabilities, enhance its pricing and efficiency and thus improve its potential to take advantage of the change.
WAY FORWARD – FY2012
NHFC Client Showcase
8/22/2011 FINANCIER | FACILITATOR | INNOVATOR 23
Southernwood Square: East London
Emerald Sky: East London IMPALA: Rustenburg
Strathdon: Durban CBD
NHFC Client Showcase
8/22/2011 FINANCIER | FACILITATOR | INNOVATOR 24
Reservoir Mews: East London
Kenwick Close: East London
NHFC Client Showcase
8/22/2011 FINANCIER | FACILITATOR | INNOVATOR 25
Cavendish: Johannesburg CBD
Cavendish Entrance
NHFC Client Showcase
8/22/2011 FINANCIER | FACILITATOR | INNOVATOR 26
TUHF: Boston Block
Jozi: Coronia Building
8/22/2011 FINANCIER | FACILITATOR | INNOVATOR 27
TUHF: WaverleyTUHF: Marshalltown Lofts
TUHF: René Court
TUHF: Sydney Court
8/22/2011 FINANCIER | FACILITATOR | INNOVATOR 28
TUHF: The President
TUHF: The Sands
Mettle: Karino Development - Nelspruit Mettle: Karino Development - Nelspruit
8/22/2011 FINANCIER | FACILITATOR | INNOVATOR 29
Mettle: Karino Development - Nelspruit SPACE: Kimberley
SPACE: Kimberley SPACE: Evaton
8/22/2011 FINANCIER | FACILITATOR | INNOVATOR 30
SPACE: EvatonSPACE: Randfontein
AFHCO: Lustre HouseAFHCO: Lustre House
8/22/2011 FINANCIER | FACILITATOR | INNOVATOR 31
AFHCO: Lustre House
AFHCO: Lustre House
AFHCO: Lustre House
AFHCO: Lustre House
8/22/2011 FINANCIER | FACILITATOR | INNOVATOR 32
AFHCO: Ilanga House AFHCO: Ilanga House
AFHCO: Ilanga House AFHCO: Ilanga House