Strategic Plan - PMG

1 NURCHA Five Year Strategic Plan

Strategic Plan For the Fiscal Years

2014/2015 - 2018/2019

Submitted by: Managing Director

Mr Viwe Gqwetha

Date: 06 February 2015

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FOREWORD

NURCHA developed a five-year Strategic Plan 2014/2015 – 2018/2019 based on the human settlements

sector delivery targets as captured Medium Term Strategic Framework (MTSF). This five year Strategic Plan

2014/15 – 2018/19 seeks to present a medium term to long term strategic responses to operational and

business challenges and the National Development Plan. The plan enables NURCHA to effectively respond

to development imperatives of its Mandate. The Strategic Plan is formulated around three overarching

pillars as outlined below:

1. Accelerating delivery of affordable houses:

Key area of focus in the affordable housing lending stream remains that of growth in response to national delivery targets in this category of the housing market as captured in the MTSF. This includes:

Growing the programme to meet set annual and multi-year targets as outlined in the plan.

Strengthen expertise and systems to improve project assessment and risk management throughout

the life cycle of projects.

Actively search for opportunities and innovations to push house prices downwards into the “Gap

Market”. The re-modelling of Financed Linked Individual Subsidy Programme (FLISP) and

streamlined implementation as led by NHFC will advance this goal significantly.

Closer cooperation with municipalities and other role players to identify and resolve upstream

bottlenecks and facilitate generation of a good pipeline of affordable housing projects particularly in

under serviced provinces.

2. Restore financial viability to the financing of Small to Medium Contractors:

Implement the Contractor Finance and Development Programme (CFDP) as a platform to finance

qualifying contractors in this segment.

To prudently implement the lending criteria and procedures to mitigate lending risks to contractors

doing subsidy housing and Infrastructure and Community Facilities. These were introduced for the

first time in 2012 financial year and continue to be revised in response to the market.

Continue with the administration and management of the whole value chain of the lending business

in-house. This includes completing the winding down the intermediary supported lending model.

Intensify the collections effort and early intervention on defaulting borrowers.

3. Application of NURCHA’s programme and fund management capabilities to support service

delivery and normalise lending risks environment

In the 2011/12 and 2013/14 financial years, good progress in the implementation of this business stream was achieved. For the 2014/15 to 2018/19 financial years, this business stream has a portfolio of programmes which includes:

KZN Department of Human Settlements – Vulindlela Rural Housing Project

Free State Department of Human Settlements

Eastern Cape Rural Development Programme

Contractor Finance and Development Programme (CFDP)

Bucket Eradication Programme

Partnership agreements on the above programmes have been concluded for implementation and the portfolio is envisaged to grow as more agreements are concluded.

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OFFICIAL SIGN-OFF

It is hereby certified that this Strategic Plan was developed by the management of NURCHA under the

guidance of the Department of Human Settlements.

The Strategic Plan takes into account all the relevant policies, legislation and other mandates for which

NURCHA is responsible and accurately reflects the strategic outcome oriented goals and objectives which

NURCHA will endeavour to achieve over the period 2014/2015-2018/2019.

Mr Khehla Shubane Signature:

Chairperson

Mr Viwe Gqwetha Signature:

Managing Director

Mr Sindisa Nxusani Signature:

Chief Financial Officer

Minister of Human Settlements Signature:

Executive Authority


TABLE OF CONTENTS

PART A: Strategic overview ............................................................................................................ 5

1. Vision .......................................................................................................................................... 5

2. Mission ....................................................................................................................................... 5

3. Values ......................................................................................................................................... 5

4. Constitutional and Legislative mandates ..................................................................................... 5

4.1 ...................................................................................................................................... 5

4.2 Legislative mandate .................................................................................................................. 6

4.3 Policy mandate ......................................................................................................................... 6

4.4 Relevant court rulings ............................................................................................................... 8

4.5 Planned policy initiatives ........................................................................................................... 8

5. Situational analysis ................................................................................................................... 8

5.1 Performance environment ......................................................................................................... 8

5.2 Organizational Environment .................................................................................................... 11

5.3 Description of the strategic planning process ......................................................................... 15

6. Strategic outcome oriented goals of NURCHA ....................................................................... 17

PART B: Strategic Objectives ....................................................................................................... 18

7. Programme Outline and Performance Indicators .................................................................... 18

7.1 Programme Outline ................................................................................................................. 18

7.2 Resource considerations ......................................................................................................... 26

7.3 Risk management ................................................................................................................... 27

PART C: Links to other plans ........................................................................................................ 27

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PART A: Strategic overview

1. Vision

To be regarded as a partner of choice for those seeking innovative bridging finance solutions.

2. Mission

NURCHA initiates programmes and takes considered risks to ensure a sustainable flow of finance

for the construction of low-income and affordable housing, community facilities and infrastructure.

We work in partnership with all role-players in these markets to maximize the development of

sustainable human settlements.

3. Values

NURCHA’s values (PRIDE) have for the past fifteen years served as fundamental pillars that have

guided our behaviour, ethics and business approach.

Prudent use of resources entrusted to us,

Respect and Integrity in our interactions with each other and our clients and our partners,

Innovation and the Willingness to take considered risks in testing the limits of sustainable finance,

Development of individuals, communities and the country,

Excellence in everything we do.

4. Constitutional and Legislative mandates

4.1 The constitution and other legislation have a fundamental impact on the National Housing Policy and

programmes aimed at satisfying these two specific rights enshrined in our Constitution.

Section 26 of the Constitution states that all South Africans have the right to have “access to

adequate housing”, therefore Government has the duty to take legislative and other measures

within its available resources to achieve this right on a progressive basis.

Schedule 4 of the Constitution sets out the powers of the different spheres of Government that

can do the following:

o National Government develops laws that are in the national interests of its people.

o Provincial Government has the power to develop provincial laws and housing as a

function area is included.

o Municipalities have the power to administer functions such as housing and other related

infrastructure and the provisions of service delivery.

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4.2 Legislative mandate The Housing Act of 1997 sets out the macro policy position and spells out the roles of the different

spheres of Government.

All spheres of Government are encouraged to apply the following principles:

a) The needs of the poor must be prioritized.

b) The housing process should provide a wide choice of housing and tenure options that should be

economical and financially affordable and sustainable.

c) The housing process must be administered in a transparent and equitable manner.

d) Housing development should occur in an integrated manner that creates socially and

economically viable communities.

e) Government should encourage and support all individuals and community based bodies in

fulfilling their own housing needs in a way that ensures skills transfer and community

empowerment.

f) The active participation of all relevant stakeholders in housing development should be facilitated.

g) The gearing of Government investment in housing by the provision of additional finance and

other investments by the private sector and individuals should be facilitated.

Other auxiliary legislation that has a bearing on the delivery of Human Settlements products and

services include:

a) The Rental Housing Act, 1999

b) The Social Housing Act, 2008

c) The Housing Development Agency Act, 2008

d) National Development Plan

4.3 Policy mandate Policy in the Human Settlements environment is derived from the following sources:

a) The Housing Code, 2000 and 2007. These codes set out the roles of the National, Provincial

and Local governments. The subsidy scheme is the core of the delivery programme.

The second edition of the code expanded on the financial interventions and provided for more

implementation of powers at the local level.

The types of financial institutions included are the following:

Accreditation of municipalities

Enhanced extended discount benefit scheme

Financial Subsidy Scheme

Operational capital budget for subsidy project implementation

The inclusion of a housing chapter in the Integrated Development Plans of municipalities

Provision of social and economic facilities

Rectification of pre 1994 houses

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Incremental Housing Intervention:

o Consolidation of the subsidy programme

o Emergency housing programme

o Integrated residential development programme

o Upgrading of informal settlements

Rural intervention comprising the rural subsidy communal land rights

Social and rental interventions:

o Community and residential units programme

o Institutional subsidies

The Financial Sector Charter of 2003 was a voluntary commitment by the financial services sector to

transform an activity of a wide variety of infrastructure, housing and empowerment programmes to

create an equitable society. (Post 2008, after R42 billion investment contributions by the private

sector spent, particularly in the mortgage environment, came to an abrupt end).

In respect of NURCHA’s mandate, it is primarily focused on MTSF targets geared at the creation of

Sustainable Human Settlements. While this does not reflect a new policy, it does represent a shift in

emphasis to improved state delivery mechanisms to achieve improved quality of life through the

provision of basic services, sites and facilitating the property market development in South Africa.

In summary, the new programmes consist of the following delivery outputs: a) Upgrading of households in well-located informal settlements with access to basic services and

secure tenure.

b) Improve access to basic services.

c) Mobilisation of well-located public land for low income and affordable housing.

d) Improve property market through the financing and/or facilitation of housing opportunities for

people earning between R3 500 and R12 800.

Development finance for the above is generally provided by the public and private sector. Much of

the loan financing to contractors for subsidy housing and developers of affordable housing is

channeled through NURCHA. NURCHA has since 2005 also taken on the financing of contractors

that produce infrastructure and community services and amenities for the public sector. NURCHA

blends both private and public money to lend to projects that are in support of the creation of

sustainable Human Settlements. This in many instances cuts across many of the other secondary

outcomes listed in the table above.

Therefore, from a financing perspective, NURCHA’s programmes are inextricably linked to the

delivery of subsidy homes, water and sanitation projects and amenities such as schools and clinics

and affordable housing that comprise a functional and integrated town or city.

In the last two years, NURCHA has ventured into the construction industry by supporting Provinces

and Municipalities that have capacity and skills constraints. In this respect NURCHA’s technical and

management skills are being used to unblock projects to assist local government complete projects

successfully.

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4.4 Relevant court rulings None

4.5 Planned policy initiatives None

5. Situational analysis

5.1 Performance and Operational environment

5.1.1 International Economy

The international economy has made slow recovery from the 2008 financial global crisis.

Emerging economies, particularly the African continent has demonstrated good growth rates

as the back of global measures to stimulate economic recovery of developed economies.

For NURCHA the economic outlook was not favourable for securing financing facilities at

concessionary rates and securing international funding partners became increasingly

difficult.

The introduction and implementation of Basel III capital adequacy requirements affect how

the banks view their lending requirements. The outlook of banks on lending coupled with

weak affordability levels will directly affect the vibrancy of the affordable housing market and

impact of NURCHA’s supply side innovations.

5.1.2 The South African Economy

The impact of the recent global crisis and domestic challenges continue to act negatively on

our local trading conditions and resulting in muted economic growth projection of 2.5% for

2015. The South African economic growth has been well below 2% for 2014 and some of

the challenges that retarded growth are still haunting the local trading environment. The

banking sector approaching lending to the affordable housing market with extreme caution

and continue for the foreseeable future.

This withdrawal has caused many developers to carry higher costs by refinancing or

extending development loans so that when end user loans are made available they can

dispose of their existing stock. Amidst the poor performance of the economy job retention and creation has been affected

negatively fiscal resources notably constrained. The level of social unrest has also

increased in the review period and local communities are vocal in demanding better

services, houses and amenities. Some underserviced areas have come out in protest, some

violently demanding that government improve quality and the level of services.

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5.1.3 Performance of Local and Provincial Government

A greater emphasis has been placed on government’s core delivery programmes. The slow

pace of projects coming to market in some provinces adversely affected NURCHA’s

performance in the last three years. The local environment has been severely affected by the

following:

a) The poor payment record on projects in implementation.

b) Contractor unwilling to legally challenge their employers for outstanding amounts lead

them to defaults on loans.

c) The stretched capacity affects performance in planning and managing capital

expenditure at provincial and municipality levels.

d) Slow administrative approvals for housing development also impact negatively on

delivery of new stock in the affordable housing market.

5.2 Programme Performance

NURCHA until recently had three programmes, namely, Subsidy Housing Programme,

Infrastructure and Community Facilities Programme and Affordable Housing Programme. With the

need in the provinces and local authorities for contract and programme management capacity,

NURCHA successfully ventured into the Programme & Fund Management Portfolio.

5.2.1 Subsidy Housing Programme

Challenges

The Subsidy Housing Programme has seen a slow growth in projects. This is largely due to

limited brand visibility, legacy of the intermediary model, capacity constraints and slow

internal processes.

Solutions

This programme will enhance internal capacity and processes in order to improve

turnaround times for the client internally. In addition, it will build strong relationships with

critical stakeholders and enhance brand recognition through marketing offerings of NURCHA

and offer complimentary services to existing lending products.

5.2.2 Affordable Housing Programme

Challenges

The challenges faced in this programme slow deal flow and conversion that impact on

supply of new stock and meeting the targets set. The challenges are largely due to a

concentrate of deals from small number of developers, loan security hurdles, and dominance

of deals from Gauteng coupled with limited lending opportunities in other provinces.

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Solutions

NURCHA intends increasing its geographical spread and footprint across all nine provinces

in this market. In addition, it intends expanding the affordable rental housing product by

expanding into the provision of Student Housing. Analysis is currently underway in

environmental scanning of this market and developing a business model. In an endeavour to

enhance internal processes, the Loan Management System (LMS) is being piloted.

5.2.3 Programme & Fund Management

NURCHA’s portfolio is still made up of the first generation of programme signed at the

inception of the portfolio. There is a vast opportunity to grow the portfolio particularly in

support of strategic programmes such as PHP with high potential for job creation

5.2.4 Financial Performance

After NURCHA’s poor financial performance against targets with the net operating deficit for

the 2011/12, a surplus before impairments of R0.4million was posted for 2012/13. In

2013/14 financial year an operating surplus of R9.8 million is reported. This has come about

due to successful diversification of main sources of income and cost management

strategies. An upward trend is forecast for the remainder of the MTSF period.

NURCHA does project a surplus for the 2014/15 year onwards as illustrated in table 2

below. This is premised on a number of assumptions of which the approval of the Contractor

Finance Support Programme is a key contributor. These are based on the introduction of

new programmes as part of the successful turnaround strategy which has laid the foundation

for growth and expansion over the remaining years in this period.

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Table 1: Programme Performance Indicator and Annual Targets

5.2.4.1 Provision for Losses

NURCHA’s loan book is presented with respect to the size of the book and the impairments for

losses as at 30 September 2014. NURCHA changed to the certificate - based lending model in

July 2011 which ensures that NURCHA is able to quantify and advance against actual certified

value on site and thereby eliminating risks associated with inferior quality.

NURCHA further migrated to the direct lending model from the intermediary supported lending

model in April 2012 which has been well received by the market place. This model has brought

NURCHA closer to its clients and provided much-needed insight into the suitability of

NURCHA’s products, emerging risks and areas of growth.

In order to monitor the performance under the new lending models the debtors’ book was

divided into two subcategories, namely the regular and non-performing loans portfolios. See

table 1 below.

PERFORMANCE INDICATORS AND ANNUAL

TARGETS

LATEST

ESTIMATES

BUDGET

2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

(R'000) (R'000)

INCOME FROM OPERATIONS 52,355 70,049 82,977 110,536 111,355 119,655 130,723

- INCOME ON MONEY MARKET INVESTMENTS 10,319 11,594 11,398 9,199 9,195 8,701 9,505

- FINANCING PROGRAMMES 24,985 24,652 35,771 46,734 48,340 52,829 57,716

- PROGRAMME MANAGEMENT FEES 17,051 33,803 35,808 54,604 53,820 58,125 63,502

OTHER INCOME 5,136 5,055 8,263 3,741 2,430 2,566 2,804

ADMINISTRATION EXPENSES (57,074) (65,311) (80,036) (94,381) (99,711) (105,026) (114,741)

NET OPERATING SURPLUS OR (DEFICIT) 417 9,793 11,204 19,896 14,074 17,195 18,785

(INCREASE)/DECREASE IN IMPAIRMENTS AND

LOSSES (17,714) (4,745) (4,207) (5,230) 1,691 1,137 1,242

OTHER GAINS / (LOSSES) (18,334) 2,130 - - - -

SURPLUS OR (DEFICIT) FOR THE YEAR (35,631) 7,178 6,997 14,666 15,765 18,332 20,028

Provision for Project losses 34,852 38,278 42,485 47,715 46,024 44,887 43,645

MEDIUM-TERM TARGETS

(R'000)

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Table 2: NURCHA’s Loan Book as at 30 September 2014

The regular portfolio mainly consists of projects signed up under the new lending model. R283M

(92%) of NURCHA’s total book debts are within the regular portfolio. The overdue debts of 10%

under the regular portfolio are due mainly to 2 projects with a single debtor and where one of the 4

major banks applied for the liquidation of the debtor. An impairment of R14.8M was raised on the

regular portfolio.

The Subsidy Housing projects under this portfolio are stable with arrears at manageable levels. An

impairment of R1.3M was raised on the Subsidy Housing Regular Programme.

The new lending model, however, has not succeeded so far to impact positively on the Infrastructure

programme with 84% of the Infrastructure debts in arrears and an impairment of R7.8M raised. This

failure can largely be attributed to diversion of funds out of the project accounts by contractors. Legal

action is being instituted against the contractors and employers for the diversion of funds. The Board

of NURCHA together with the associated co-funding partners has decided that new loans on the

Infrastructure Programme will only be considered to existing clients and with due consideration of

contract systems of the Employer.

As at 30 September 2014, the total debt outstanding under the incentive portfolio is R25.2M (8% of

NURCHA’s total book debts) with impairments of R24.8m (63% of total impairments). A total

collection incentive of R4.8M has been paid to the private company to date. The Infrastructure

Community Facilities Programme at R22.8m (91%) accounts for the largest exposure on this

portfolio.

TOTAL DEBTORS

OUTSTANDING

TOTAL DEBTORS

OVERDUE

IMPAIRMENTS

REGULAR PORTFOLIO

Affordable Housing R241 755 238 R12 692 990 R5 759 945

Subsidy Housing R32 203 460 R6 909 720 R1 260 084

Infrastructure & CommunityFacilities R9 466 037 R7 961 313 R7 816 218

SUB-TOTAL R283 424 735 R27 564 023 R14 836 247

NON-PERFORMING LOANS

Affordable Housing R 1 R 1 R 0

Subsidy Housing R2 392 294 R2 373 247 R2 392 294

Infrastructure & CommunityFacilities R22 849 837 R22 480 974 R22 370 082

SUB-TOTAL R25 242 132 R24 854 222 R24 762 376

TOTAL R308 666 867 R52 418 245 R39 598 623

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5.2.6 Administration

5.2.6.1 Systems and Processes

NURCHA continues to build and develop its ICT systems capacity. The focus in the 2014/15

financial year will be on infrastructure redundancy to improve stability, on data storage and

retention assurance, as well as on core applications functionality that support business

processes. To date NURCHA utilised stand-alone servers, but will transition to a virtualised

sever environment for better reliability and cost efficiency.

NURCHA hosts a loan management systems ( SLIM ) for the Lending environment which allows

transactions to be processed from all other offices via the Virtual Private Network. NURCHA has

also developed a Customer Relations Management system which is web- based that can be

accessed nationally. A newer Loan Management System (LMS) is also being developed for the

Lending and Projects environments. This LMS is integrated to the CRM system allowing seamless

projects tracking from inception to closure.

NURCHA continues to develop and document business processes in different parts of the

business. This effort seeks to improve business performance by ensuring that business processes

are optimized with respect to loan risk management and that operational efficiency is improved.

This effort will continue into the next financial year.

5.2.6.2 Human Capital Management

NURCHA has a staff compliment of 51 and 15 fixed term employees as at 31 March 2014.

Responding to strategic requirements, a new portfolio, namely, Programme & Fund

Management was established. In addition, a Supply Chain Officer position was created and

filled during the 2014/15 financial year in order to ensure that procurement needs are met.

The Acting Allowance and Relocation Policies were implemented. A new Performance

Management System has been implemented. Senior management and the Executives

embarked on a Leadership Development Programme.

5.2.6.3 Branding & Marketing

A comprehensive marketing plan has been developed and currently being implemented to

enhance the profile of NURCHA in all nine provinces and with critical stakeholders together

to improve the service to the clients in the nine provinces.

5.2.7 Summary of business performance analysis

Strengths, weaknesses, opportunities and threat analysis (SWOT) have been compiled to

fully understand the changing internal and external environment. This analysis formed the

basis on which the key strategic thrusts have been crafted that will be detailed in the

forthcoming annual performance plan. Please see table 3 below for a summary of the

SWOT analysis.

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Table 3: Summary of SWOT Analysis

INTERNAL STRENGTHS INTERNAL WEAKNESSES

Funding capacity to deliver a loan book of R650M

(Affordable Housing; Infrastructure/Community

facilities and Subsidy Housing)

Human capacity and specialised skills in

construction and financing

A key player in lending to the smaller and medium

contractors that understands the construction

business

Ability to differentiate in the market with the quality of service and turnaround times

Well-positioned as a state entity to provide Programme Management

Experience and track record in structuring funding

structure with the private sector

Capacity and structure to interact with

stakeholders and undertake marketing and sales.

Enhancements to risk mitigation measures and

collections are taking root in the organisation.

Ability to build strong relationships with local,

provincial and national government

Marketing capacity to sell and promote

NURCHA’s products in the market place is not

operating at optimal capacity yet.

Ability to grow the brand amongst critical

stakeholders

Critical skills constraints to growth of the loan

book beyond our conventional products

Historical poor business performance combined

with high loan defaults put the organisation in a

survival mode.

Limited and inappropriate funding for the

marginal and high risk programmes.

Imbalance between high risk business and the

ability of a DFI as a mechanism to absorb the

risk (the essence of the DFI mandate).

EXTERNAL OPPORTUNITIES EXTERNAL THREATS

Leverage off flagship programmes, for example

Eastern Cape, KwaZulu Natal, Free State.

Improving relations between NURCHA and the

NDoHS

Ability to deliver optimally on the Sanitation

Programme

Opportunity to support provinces and

municipalities in programme management,

financial management and technical support

Growing interest for partnership with NURCHA

from other DFIs (potential competitors) – SEFA,

DBSA, FDC, etc.

Align our existing capacity to MTSF targets and

opportunities.

The R1 billion Guarantee Fund may stimulate

mortgage lenders and create an increased

appetite for developers to create projects in the

Gap market.

More scope to influence policy/strategy at national

level.

No sustained brand profile in provinces.

Image/perception of being expensive as a

government entity.

Lender of last resort to contractors in need of

bridging finance.

High defaults as a result of government non-

payment of contractors due to poor contract and

cash flow management.

Small profit margins or lack of viability new

projects issued in the public sector.

Low approval of mortgage loans for the

affordable housing category.

Consequence of fraudulent and corrupt

transactions.

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More opportunities to structure bridging finance for

the creation of rental stock by developers.

DFI consolidation process to mobilise additional

funding and align scope and mandate.

5.3 Description of the strategic planning process

NURCHA has a strategic planning process in place and this framework will be used on an annual

basis to refine its long-term strategy and compile its annual performance plan. This process will be

updated periodically. The detailed planning process and cycle is illustrated in pages 16.

Over the next five years, this process will be institutionalised and all staff will be encouraged to

actively participate. The next step will be to routinize the regular compliance and report requirements

associated with the planning process.


6. Strategic outcome oriented goals of NURCHA

NURCHA is a mandated Development Finance Institution but its outputs in line with the Medium

Term Strategic Framework have far reaching impacts, some of which are numerically quantifiable

and others that are of a non-quantifiable subjective nature. Therefore, the following sets of strategic

goals have been crafted to adequately encapsulate its mission:

1. Strategic Outcome Oriented Goal Access to bridging finance to contractors

Pursue interventions and products to ease

access to finance

Concessionary pricing of financing products

Enhanced risk management mechanism to

mitigate high risk nature of financing

Pursue financing partnership to increase

lending capacity

Goal Statement Access to bridging finance to contractors is

maximized

2. Strategic Outcome Oriented Goal Access to bridging finance to developers

Growth in the supply of affordable housing

stock (Rental & ownership)

Pursuing unfit and high density projects to

enhance efficiency of the urban environment

Pursue innovation to reduce the cost of units

in construction, funding and incentives

Goal Statement Subsidy homes, affordable housing, student

housing and infrastructure are delivered at

scale

3. Strategic Outcome Oriented Goal Programme management & fund management

Pursue fee based programme and project

support with implementing authorities.

Goal Statement Build capacity in skills and competencies to

deliver housing stock successfully.

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PART B: Strategic Objectives

The following strategic goals have been translated into the following programmes that have specific

performance measurements set for the next five years. These have been crafted through a midterm strategic

review and SWOT analysis process by NURCHA and its business partners.

7. Programme Outline and Performance Indicators 7.1 Programme Outline

The nine months into the five-year strategy has brought with it opportunities and challenges within

the lending environment. The migration to direct lending from the intermediary supported lending

model is receiving positive reviews in NURCHA's targets market and the marketing drive will

continue to be intensified and address reputational issues where they exist. Direct lending comes

with a leverage of complete control of all aspects related to its lending business processes including

ability to interact directly with clients. This has brought NURCHA closer to clients and provided much

needed insight into the suitability of our products, emerging risks and areas of growth.


7.1.1 Programme One: Subsidy Housing

Table 3: Actuals and targets for the Subsidy Housing Programme

2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019

Actual Year Budget

Year to Date

Budget (April to

Sept)

Year to Date

Actual (April to

Sept)

Budget Budget Budget Budget

Contract Signed 11 28 13 10 32 35 38 40

Houses and sites in signed contracts 4,428 9,660 4,485 7,188 16,000 17,500 19,000 20,000

Value of Loans (Rands) 55,481,861 112,000,000 52,000,000 53,625,482 128,000,000 140,000,000 152,000,000 160,000,000

Value of Projects (Rands) 349,911,460 724,000,000 336,375,000 535,738,610 1,200,000,000 1,750,000,000 1,900,000,000 2,000,000,000

Houses built and Sites serviced 3,108 5,500 2,554 3,201 7,044 12,830 16,750 18,250

SUBSIDY HOUSING (Houses and Serviced Sites)


7.1.2 Programme Two: Infrastructure and community facilities

NURCHA embarked on a strategy to restore profitability and sustainability. This resulted in the

adoption of a ‘certificate based lending model’. This means that the contractor must have some

capacity to set up site and undertake the first stage of work to a point that it can be certified by the

employer.

Notwithstanding the restricted lending approach, in exceptional cases loans will be disbursed prior to

certificate. This will be done after taking into consideration a variety of factors such as tangible

security, existing relationships with the contractor, above-average viability of the project, and

NURCHA’s experience with the performance of the employer.

It will be the intention to return to full scale lending in the future. Two important milestones are set to

measure readiness to resume full-scale lending. The first is the revision of the credit procedures. The

second is to conclude Employer/NURCHA Co-operation Agreements so as to establish a new legal

platform for lending to deserving contractors in NURCHA’s traditional markets. These agreements

will be a requirement for pre-qualifying public sector employers so as to enable NURCHA to lend to

the contractors they appoint.

Therefore the performance and 5-year forecast for both Subsidy and Infrastructure/ Community

facilities programmes are somewhat constrained:


Table 4: Actuals and targets for the Infrastructure and Community Facilities Programme

2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019

Actual Year Budget

Year to Date

Budget (April to

Sept)

Year to Date

Actual (April to

Sept)


Contract Signed 0 4 2 3 4 4 4 6

Value of Loans (Rands) 0 17,380,000 8,690,000 21,724,572 18,000,000 18,000,000 18,000,000 27,000,000

Value of Projects (Rands) 0 88,000,000 44,000,000 79,674,173 100,000,000 100,000,000 100,000,000 150,000,000

Project Completed 8 8 4 0 2 4 4 4

INFRASTRUCTURE & COMMUNITY FACILITIES


7.1.3 Programme Three: Affordable Housing Programme

The conventional bonded housing market is showing signs of increased demand and sales

although this is restricted to certain growth nodes spread across the country.

Based on the improved trends of 2013 and early 2014, the prospects for delivery during the

new financial year and as well as the forecast period are encouraging, both for concluding

transactions with new developers and increasing our geographic spread to other provinces.

To support the affordable housing programme, the approach will be twofold:

a) Continue to support established developers that have an existing pipeline of projects

with good prospects.

b) Develop a programme to support small scale developers who have smaller projects in

well located sites with home prices that are attractive to the market.


The table below presents an optimistic forecast for the next five years which is subject to Governments recapitalization and the necessary PFMA

approval to borrow additional capital to support the growth in loan book:

Table 5: Actuals and targets for the Affordable Housing Programme

2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019

Actual Year Budget

Year to Date

Budget (April to

Sept)

Year to Date

Actual (April to

Sept)


Contract Signed 14 20 9 6 21 23 24 26

Houses and sites in signed contracts 1,983 2,800 1,260 1,531 3,150 3,450 3,600 3,900

Value of Loans (Rands) 230,729,433 300,000,000 135,000,000 116,258,475 315,000,000 345,000,000 360,000,000 390,000,000

Value of Projects (Rands) 873,072,445 440,000,000 270,000,000 578,396,878 630,000,000 690,000,000 840,000,000 900,000,000

Houses built and Sites serviced 1,619 1,950 600 725 2,200 2,500 2,650 2,800

AFFORDABLE HOUSING (Houses and Serviced Sites)


To further strengthen the programme the following actions are part of the unit’s business plan:

a) Review its business process and introduce LMS (Loan Management System) as the core

management tool.

b) Not take on additional risks by financing land acquisition transactions.

c) Raise additional funding, as an example via the DoHS for small scale developers.

7.1.4 Programme Four: Programme & Fund Management

The Programme and Fund Management Portfolio has made good inroads on a range of flagship

programmes across four provinces. NURCHA has demonstrated its capacity and is geared to

support the sector of the strategic programmes such as PHP and innovation on job creation. Section

7.2 outlines key performance indicators for multi-year programme support.

7.2 PERFORMANCE INDICATORS

7.2.1 STRATEGIC GOAL: Improving the supply of housing stock 7.2.2 OUTCOME STATEMENTS

Bridging finance available to emerging and established contractors

Development finance available to developers in the affordable housing market (rental and ownership)

Improve programme and project management capabilities

26

7.3 Resource considerations NURCHA changed its delivery model from that of using intermediaries for support to a direct delivery

model using its own internal staff. This will inter-alia mean scaling up of operations and an increase

in staff numbers from 42 to 80 in 2018/19 financial year.

Summary of overhead costs


7.3 Risk management

The enterprise risk list has been re-structured as follows to focus on the key issues that could lead to organizational failure.

Risk Dimension Cross cutting issues

People, Skills and Systems

Government Performance

Legal Environment

Monitoring and Compliance

1. Understanding the operational environment and adapt credit granting

√ √ √ √

2. Collections ineffective √ √ √ √ 3. New Business Model

required to deal with high risks

√ √ √ √

4. Affordable Housing requires capacity and skills

√ √ √ √

5. Sources of appropriate funding scarce

√ √ √ √

6. Status of Housing Institutions could change through consolidation

√ √ √ √

7. Introduction of Programme & Fund Management Portfolio

√ √ √ √

These risks impact both the viability of programmes as well the long term sustainability of NURCHA.

A risk management forum together with risk owners has been established to manage and mitigate

risks identified.

PART C: Links to other plans

1. A Development Finance Strategy for the Human Settlements sector: “Proposed Strategy and Institutional Implications May 2011”.

2. National Development Plan

3. Medium Term Strategic Framework

Strategic Plan - PMG

Documents

Transcript of Strategic Plan - PMG