1. the Portfolio Committee on Human Settlements
Presentation to
the Portfolio Committee on Human Settlements
ANNUAL PERFORMANCE REPORT 2016/2017
4 October 2017

2. STRUCTURE OF PRESENTATION
7. Subsidy Housing Programme
8. Lending to Human Settlements Contractors
9. Contribution to Economic Transformation
10. Programme and Fund Management
11. Governance Issues
12. Financial Performance
13. Conclusion
Purpose and introduction
Mandate, Vision and Mission
Core products
Impact since inception
Business Performance
Affordable Housing Programme

3. 1. PURPOSE AND INTRODUCTION
Presentation of Annual Performance Report 2016/2017
Outline the way-forward in pursuit of business targets and DFI consolidation

4. NURCHA IS ….
NURCHA MANDATE
“NURCHA ensures the availability of bridging finance to small, medium and established contractors, building low and moderate income housing and related community facilities and infrastructure.”
NURCHA VISION
“To be regarded as a partner of choice for those seeking innovative bridging finance solutions”
NURCHA 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”

5. 3. CORE PRODUCTS AND SERVICES
LENDING BUSINESS
Affordable Housing
Ownership
Rental – conventional and student accommodation (short term finance)
Bridging finance to Contractors delivering subsidy housing,
PROGRAMME MANAGEMENT
Programme management support
Fund management
CFDP

6. 4. IMPACT SINCE INCEPTION
AS AT 31 MARCH 2017
AFFORDABLE HOUSING
SUBSIDY HOUSING
INFRASTRUCTURE & COMMUNITY FACILITIES
TOTAL
NUMBER OF LOANS SIGNED
214
1 019
291
1 524
HOUSES IN LOAN SIGNED
42 275
N/A
HOUSES/ PROJECTS COMPLETED
35 482
185
VALUE OF LOANS
R2,357 Billion
R1,647 Billion
R668,7 Million
R4,399 Billion
VALUE OF PROJECTS
R8,440 Billion
R11,563 Billion
R3,972 Billion
R23,975 Billion

7. 5. BUSINESS PERFORMANCE

8. TWO KEY DRIVERS OF STRATEGY
Relevance to developmental mandate
(OUTCOME 8, NDP, MTSF).
2. Maintain organisational sustainability.

9. STRATEGIC HIGHLIGHTS
In year ending 31 March 2017 NURCHA achieved a surplus of R20m after impairments. Company reported surpluses for four years in a row in spite of its challenges and difficult trading conditions
Under prolonged transitional period,
Difficulty in attracting and retaining talent resulting in suboptimal or stretched capacity,
Financing capacity exhausted and inability to raise facilities from the private sector,
Expensive borrowing that erodes margins,
Tough economic conditions and slow sales in projects – extension of completion dates,
Slow payments by provincial departments.
Lending output projections to 31 March 2017
subsidy housing signed up 28 projects (80% of target), and 5 could not be taken up due to capacity constraints,
Affordable housing signed up 8 projects (35% of target) partly due to exhausted funding capacity.
Well managed provisions for losses,
R13m year-to-date rise in provisions,
Provisions for losses at 4.3% of total loan book,
Favourable awards in litigations with employers (Buffalo City, Oudtshoorn, EThekwini) and service providers in programme management,

10. STRATEGIC HIGHLIGHTS Continued
Cultivating relations and collaborations across government spheres and partners:
Secured an extension of contract with the City of Cape Town to implement phase two of the Ceilings Retrofit Programme. The programme has propped up performance of this declining portfolio.
Improvements in management of stakeholders and performance of CFDP in the NMBM.
Staff morale and productivity satisfactory in general and attending to normal deviations.
There have been three incidents of diversion of funds and appropriate legal actions have been taken to recover the funds.
Implementation and enhancement of systems, (lending, finance and Supply Chain).
NURCHA has continued to obtain an unqualified audit report since inception.

11. STRATEGIC HIGHLIGHTS Continued
Made in-roads in advancing transformation in the industry
33% of affordable housing book are emerging developers that receive close supervision and control of payments to suppliers. This required a new configuration of internal operations, systems and expertise to manage risks effectively.
51% of contractors in the subsidy housing portfolio are women owned/controlled companies.
CFDP was successfully initiated in Nelson Mandela Bay Metro and drawing to a close in June Challenges and areas of rethink going forward are,
Slow flow of payments to contractors
Mentoring – search for appropriate and responsive approach,
Contractors' financial management acumen and discipline, e.g. management accounts.
CIDB taking interest in the CFDP and initiating rapid appraisal of the pilot to determine areas of co-operation going forward.
Improved BBBEE rating from non-compliant to level 5.

12. CHALLENGES
DFI Consolidation delayed by number administrative and compliance hurdles;
Unfolding of consolidation resulting in high levels of uncertainty;
Divided attention to strategy execution;
Fund mobilisation in limbo pending finalization of the DFI consolidation process;
Achieving optimal utilization of PIC/NLF Facility of R117m remains a challenge for the year ahead with slow down in economy and weaker end-user mortgage approvals by banks.
Retention of core skills, keeping staff moral at a healthy level and maintaining performance standards.
Slow traction in the new areas of focus for Programme and Fund Management;
Output yield of CFDP and Emerging Developer business is low and demands higher attention from a risk management perspective, yet mandate and shareholder demands more of these transformational programmes
Rise in affordable housing overdue loans and impairments.

13. FINANCIAL PERFORMANCE TRENDS SINCE 2008/09

14. OUTPUT RESULTS – MARCH 2017 CORE BUSINESS YEAR BUDGET 2016/2017
YEAR TO DATE APR 2016 TO MAR 2017
PREVIOUS YTD APR TO MAR 2016
ACTUAL
PREVIOUS QUARTER ACTUAL OCT - DEC 2016
CURRENT QUARTER JAN TO MAR 2017
BUDGET 1
AFFORDABLE HOUSING: HOUSES, SITES SERVICED, RENTAL HOUSES & MINING TOWNS
1.1
Number of Loan Applications received 35 19 28 3 10 5
1.2
Number of Loan Contracts Signed 23 8 15 2
1.3
Number of Houses & Sites in Signed Contracts
3,450
1,085
2,864
162
750
1.4
Value of Loans (Rand)
345,000,000
180,605,472
432,895,130
57,162,495
75,000,000
1.5
Value of Projects (Rand)
690,000,000
581,405,600
1,120,520,758
107,098,600
150,000,000
1.6
Number Houses Built & Sites Serviced
2,500
1,904
2,261
282
550
1,142
SUBSIDY HOUSING: HOUSES & SITES SERVICED
2.1 58 54 49 13
2.2 32 7 9
2.3
17,500
4,890
12,111
918
4,500
420
2.4
140,000,000
80,100,000
149,513,000
21,350,000
36,000,000
3,720,000
2.5
1,750,000,000
601,337,861
1,185,964,012
120,846,182
450,000,000
43,014,495
2.6
12,830
4,820
3,984
1,413
3,294
544
INFRASTRUCTURE AND COMMUNITY FACILITIES
3.1 17
3.2 4
3.3
18,000,000
12,800,000
4,445,763
4,500,000
3.4
100,000,000
43,151,037
24,224,332
25,000,000
3.5
Number Projects Completed

15. ACTIVITY VS PERFORMANCE – LENDING PORTFOLIO
PERFORMANCE INDICATOR
YEAR BUDGET 2016/2017
YEAR ACTUAL 2016/2017
REASON FOR DEVIATION 1
AFFORDABLE HOUSING: HOUSES, SITES SERVICED, RENTAL HOUSES & MINING TOWNS
1.1
Number of Loan Applications received 35 19
The pipeline was mainly affected by the uncertain market conditions relating to possible interest rate hikes.
1.2
Number of Loan Contracts Signed 23 8
Conversion of deals in the pipeline was slower as most of the applicants were first time applicants who experienced challenges in meeting NURCHA’s minimum lending criteria.
A major deal with a large capital outlay was lost to another financial institution who is our major competitor in the market place.
Suspended signing of new loans due to capacity constraints in the third quarter.
1.3
Number of Houses & Sites in Signed Contracts
3,450
1,085
Loans signed are for smaller number of serviced sites while sectional title lending is characterized by higher capital outlays but lower number of houses complete.
1.4
Value of Loans (Rand)
345,000,000
180,605,472
The major deal described above would have ensured that this output would have been achieved.
1.5
Value of Projects (Rand)
690,000,000
581,405,600
Same as 1.2 and 1.3 above.
1.6
Number Houses Built & Sites Serviced
2,500
1,904
Majority of projects signed are still the construction phase and the duration of most of the loans are over 24 months.
The active projects will deliver 3, 758 affordable housing opportunities at completion.

16. ACTIVITY VS PERFORMANCE – LENDING PORTFOLIO Cont.
PERFORMANCE INDICATOR
YEAR BUDGET 2016/2017
YEAR ACTUAL 2016/2017
REASON FOR DEVIATION 2
SUBSIDY HOUSING: HOUSES & SITES SERVICED
2.1
Number of Loan Applications received 58 54
2.2
Number of Loan Contracts Signed 35 28
Exhaustion of the funding capacity in the third quarter resulted in some approved projects not being signed. That affected the achievement of this target. 5 Approved projects could not be issued with letter of offer.
2.3
Number of Houses & Sites in Signed Contracts
17,500
4,890
Majority of new loans signed are for emerging contractors on the CFDP programme and thus the projects were relatively small with an average of fifty (50) units, R1,5M loan value and R6M project value.
2.4
Value of Loans (Rand)
140,000,000
80,100,000
Please refer to above note.
2.5
Value of Projects (Rand)
1,750,000,000
601,337,861
2.6
Number Houses Built & Sites Serviced
12,830
4,820
Most of the projects have been extended. The active projects are set to deliver 12,369 subsidy houses on completion.

17. ACTIVITY VS PERFORMANCE – LENDING PORTFOLIO Cont.
PERFORMANCE INDICATOR
YEAR BUDGET 2016/2017
YEAR ACTUAL 2016/2017
REASON FOR DEVIATION 3
INFRASTRUCTURE AND COMMUNITY FACILITIES
3.1
Number of Loan Applications received 10
3.2
Number of Loan Contracts Signed 4
3.3
Value of Loans (Rand)
18,000,000
12,800,000
Value of projects signed were for smaller contractors with smaller reasonably smaller projects.
3.4
Value of Projects (Rand)
100,000,000
43,151,037
Value of projects signed were for smaller contractors with reasonably smaller projects. A higher gearing rate can explain the achievement on the value of loans, and number of contracts signed targets and non achievement on the value of projects signed.
3.5
Number Projects Completed 1
Projects that were due to be completed have been extended.

18. SUMMARY OF LOAN AGING – 31 MARCH 2017
Not Yet Due
Total Overdue
Total Debtors outstanding
Impairments
Affordable Housing R R R
R9 
74%
26%
72%
54%
Subsidy Housing R R R R
33%
67%
15%
Infrastructure R R R R 3%
97% 2%
31%
TOTAL NURCHA DEBTORS R R R
R17 
62%
38%
100%

21. 6. AFFORDABLE HOUSING LENDING PROGRAMME

22. ACTIVE LOAN COMMITMENTS 31 MARCH 2017
LENDING PROGRAMME
TOTAL ACTIVE
PROJECTS
LOAN VALUE COMMITMENT
LOAN
EXPOSURE
No.
(%)
(R'M)
AFFORDABLE HOUSING 29
30.9%
801.85
75.6%
283.83
72%
SUBSIDY HOUSING 55
58.5%
223.67
21.1%
103.92
26%
INFRASTRUCTURE 10
10.6%
35.43
3.3%
6.93 2%
TOTAL 94
100%
1,060.95
394.68
Total loan value committed is 219% of total funding capacity.
Through careful cash flow management NURCHA ensures that it is in a position to meet its lending commitments.

23. HOUSES AND SITES SERVICES BY PROVINCE – AFFORDABLE HOUSING
Project Name GP
KZN LP MP WC FS
Grand Total
"The Gayles" in Evander
324
Alliance Ext 1 & 2
592
Hendrina Ext 4 51
IvyPark Ext 44 75
Lilyfield Sectional Title Units Phase 1& 2
198
Witfield Ridge 82
Rosslyn Extension 46
228
202 On Corronation Phases 1 & 2 48
Eden Gardens - Phase 1
239
Stretford Ext 1
510
Zamdela Housing - Phase 1
187
Gem Valley Ext 3
357
Brindle Mews Development 94
Amberg Paarl Sectional Title Units
172
Southern Gateway Ext 5, Phase 1 & 2
464
Cairngrove Gardens Sectional Title Units 27
Emoyeni Development
298
Alliance Ext. 2
Ashton Development Montagu 97
Ratanda
109
Orchards Ext 51
Gem Valley Ext 4
309
Olive Grove Development,Paarl 80
Illovo Country Estate
Rosslyn Extension 47
283
Toekomsrus
200
Epic Estate Phase 2
100
Summer Gardens Sectional Title Units
102
3,427
201
778
673
397
5,663

24. 7. SUBSIDY HOUSING PROGRAMME

25. NUMBER OF HOUSES IN ACTIVE PROJECTS- SUBSIDY HOUSING

26. NUMBER OF HOUSES IN ACTIVE PROJECTS- SUBSIDY HOUSING Cont.

27. 8. LENDING TO HUMAN SETTLEMENTSCONTRACTORS

28. CATEGORIES OF CONTRACTORS
Developer/ Contractor Tier 1
Traditional contractor Tier 2
CFDP Tier 3
Turnover < R300m
Average 10 projects
5000 units per annum
National presence
Turnover R100m
3 projects at a time
600 units per annum
Provincial focus
Turnover of R0 >R5M
1 project
40 units per annum
Municipal focus

29. CONTRACTOR FINANCE DEVELOPMENT PROGRAMME
The CFDP programme provides bridging finance, construction and enterprise development support to small contractors.
NURCHA has funded twenty two (22) contractors in NMBMM Ministerial Intervention.
Challenges faced by NURCHA in current reporting period:
Four (4) contractors still on site with extensions to October 2017,
Eighteen (18) contractors have completed work on site,
Delays in payments had a major impact on the programme and contractor’s cash flows and performance,
Currently busy with final financial reconciliations on contractor accounts and material suppliers,
There have been no defaults so far in in this programme.

30. 9. CONTRIBUTION TO ECONOMIC TRANSFORMATION

31. CONTRIBUTION TO ECONOMIC TRANSFORMATION – AFFORDABLE HOUSING
Number of Active Projects
Number of Houses & Sites in Active Projects
Value of Loans in Active Projects
(R’M)
Percentage Split of Active Loan Book by Value of Loans
Women Developers 3
233 20 2%
Youth Developers 0%
Emerging Developers 9
1,044
108
13%
-Black-owned Enterprises 8
996 99
12%
-Other 1 48 15
Established Developers
4,619
688
86% 5
992
130
16%
3,627
558
70%

32. CONTRIBUTION TO ECONOMIC TRANSFORMATION – AFFORDABLE HOUSING
Number of Active Projects
Number of Houses & Sites in Active Projects
Value of Loans in Active Projects
(R’M)
Percentage Split of Active Loan Book by Value of Loans
Sectional Title Units (Ownership) 8
823
280
35%
Rental Units 2 80 30 4%
Affordable Housing (Sites & Services) 15
3,583
353
44%
GAP Housing 4
1,177
133
17%
Social Housing 0%
TOTAL 29
5,663
802
100%

33. CONTRIBUTION TO ECONOMIC TRANSFORMATION – SUBSIDY HOUSING
Number of Active Projects
Number of Houses & Sites in Active Projects
Value of Loans in Active Projects
Percentage Split of Active Loan Book by Value of Loans
Women Contractors 24
6,956
R82M
37%
Youth Contractors 9
1,723
R16M 7%
Black-owned enterprises 48
13,154
R182M
81%
Emerging Contractors
1,299
R39M
18%
Other 4
3,011
R27M
12%
The Subsidy Loan Book has 55 active projects

34. NURCHA PROGRESS ON COMMITTED MTSF TARGETS
OUTPUTS
MTSF TARGETS
2014/ /16 FY
2016/17 FY
5 YEAR TARGET
MTSF TO DATE TARGET
ACHIEVED TO DATE
PROGRESS AGAINST MTSF TO DATE
% PROGRESS TO DATE
TARGET
ACTUAL
% ACHIEVED
YEAR TARGET
YEAR ACTUAL
% ACHIEVED YEAR TO DATE
AFFORDABLE HOUSING FINANCE: GROW THE SUPPLY OF AFFORDABLE HOUSING STOCK
NUMBER OF CONTRACTS SIGNED 79 64 39
61%
49% 41 31
76% 23 8
35%
HOUSES AND SITES IN SIGNED CONTRACTS
11,378
9,164
6,513
71%
57%
5,714
5,428
95%
3,450
1,085
31%
VALUE OF LOANS
R1,58B
R960M
R860M
90%
54%
R615M
R679M
110%
R345M
R180M
52%
VALUE OF PROJECTS FINANCED
R3,74B
R1,76B
R2,63B
149%
70%
R1,07B
R2,05B
191%
R690M
R581M
84%
HOUSES BUILT AND SITES SERVICED
7,992
6,650
5,771
87%
72%
4,150
3,867
93%
2,500
1,904
SUBSIDY HOUSING FINANCE: IMPROVE DELIVERY OF SUBSIDY HOUSING
158 95 75
79%
47% 60 47
78% 35 28
80%
62,184
43,160
26,774
62%
43%
25,660
21,884
85%
17,500
4,890
28%
R637M
R380M
R311M
82%
R240M
R231M
96%
R140M
R80M
VALUE OF PROJECTS
R5,33B
R3,67B
R2,65B
50%
R1,92B
107%
R1,75B
R601M
34%
37,596
25,374
14,766
58%
39%
12,544
9,946
12,830
4,820
38%

35. 10. PROGRAMME AND FUND MANAGEMENT SERVICES

36. PROGRAMMES UNDERWAY Ceiling Retrofit Programme, City of Cape Town
Phase 1 complete with houses retrofitted with ceilings and electrical work and roof reseals where necessary.
Phase 2 has commenced in February 2017 in six areas and is to deliver retrofit ceilings, electrical work and reseals.
Contractors have taken site and construction has commenced.
The Client is satisfied with quality of work, accepted the Close-out report for phase 1 and awaiting impact evaluation results.

37. PROGRAMMES UNDERWAY Cont.
Vulindlela PHP – KZN
NURCHA is serving as Community Resource Organisation (CRO), playing the role of paymaster / payment administration.
Project is to deliver housing units in Vulindlela with a budget of R2.5Billion.
NURCHA has to date disbursed R1.6 Billion to service providers.
As at February 2017 the project has delivered eighteen thousand six hundred and fifty one platforms (18 651) and fifteen thousand one hundred and twelve (15112) completions.
The contract came to an end on 31 March 2017 and completed handover of Payment Administrator role to new service provider - Ithala Bank.

38. 11. GOVERNANCE ISSUES

39. GOVERNANCE STRUCTURE AND OTHER COMPLIANCE ISSUES
11 Directors (8 Non-Executive and 3 Executive Directors)
Four board meetings were held during the year.
Four board committees are in place : Audit; Fincom; HCTC and Remuneration Committees.
NURCHA has continued to receive an unqualified audit opinion. There is an emphasis of matter relating to the DFI consolidation.

40. GOVERNANCE STRUCTURE AND OTHER COMPLIANCE ISSUES Cont.
NURCHA is reporting irregular expenditure amounting to R13.4 million in the year under review
R10.5 million of this amount relates to contracts that were signed in 2016 financial year and expenditure incurred in 2017 financial year.
R2.9 million relate to contracts signed in 2017 financial year
In all these instance NURCHA did not suffer any financial losses. Full value for money on the expenditure was received.
A portion of this also relates to a tender (one batch) that did not appear on the e-Tender Publication portal and the Government Tender Bulletin as requested, but was only advertised in a local newspaper and on the NURCHA website.
Appropriate actions have been taken against employees who did not comply.
Controls in the area of SCM will continue to be improved upon.

41. 12. FINANCIAL PERFORMANCE

43. BREAKDOWN OF INCOME PER PROGRAMME

44. ABRIDGED INCOME STATEMENT 31 MARCH 2017
ABRIDGED STATEMENT OF FINANCIAL PERFORMANCE - 31 MARCH 2017
R'000
Budget
Actual
% - Achieved
2016
Revenue from exchange transactions
77,620
137,293
177%
103,598
Other Income
3,027
5,098
168%
9,167
Net Surplus before Administration expenses
80,647
142,391
112,765
Administration Expenses
(80,143)
(106,726)
133%
(131,145)
Operating Surplus
504
35,665
(18,380)
Impairment of assets
1,050
(14,600)
-1390%
36,429
1,554
21,065
18,049
Taxation
(745)
-100%
Surplus for the year
20,320

45. ABRIDGED BALANCE SHEET 31 MARCH 2017
ABRIDGED STATEMENT OF FINANCIAL POSITION - 31 MARCH 2017
R'000
Budget
Actual
% - Achieved
2016
ASSETS
Current Assets
618,650
567,583
92%
602,828
Non-current Assets
96,600
122,507
127%
2,435
Total Assets
715,250
690,090
605,263
EQUITY & LIABILITIES
Current Liabilities
109,750
82,362
75%
50,600
Non-current Liabilities
100,000
69,976
70%
44,144
Net Assets
505,500
537,752
106%
510,519
Total Net Assets & Liabilities

46. ABRIDGED CASH FLOW – 31 MARCH 2017
ABRIDGED STATEMENT OF CASH FLOW
Budget
Actual
% Achieved
2016
Cash receipts
80,647
142,545
177%
112,718
Cash payments
(55,640)
(161,614)
290%
(92,376)
Net cash flow from operating activities
25,007
(19,069)
20,342
Cash flow from investing activities
(95,705)
(53,807)
56%
(44,760)
Cash flow from financing activities 2
67,434
Net cash flow from financing activities
(70,698)
(72,874)
43,016
Cash and cash equivalents at the beginning of the year
141,853
354,154
250%
311,138
Gains on fair value adjustment
155
Cash and cash equivalents at the end of the year
71,155
281,435

47. FINANCIAL RATIOS 1 Net working Capital (R'000) R485,221 2
Current Ratio
6.89 : 1 3
Debt Equity Ratio
0.28 : 1 4
Return on Asset Ratio
3.1% 5
Interest Cover Ratio (time)
3.76 6
Cost to income Ratio
75%
The ratios above indicate that NURCHA remains healthy and has sufficient resources to continue with its operations and meet its obligations
The return on asset ratio of 3.1% is considered reasonable for a DFI
The high cost to income ratio is also expected for a DFI of NURCHA’s size

48. 13. CONCLUSION

49. CONCLUSION: FUTURE FOCUS
Maintain coherence of management and leadership;
Re-focus and energise staff and management to deliver on targets;
Attend to change readiness interventions and DFI Consolidation and attend to business migration challenges.
Provincial engagements, lending protocols and campaigns;
Optimise utilization of PIC/NLF Lending Facility;
Improve lending spread across provinces, particularly subsidy housing;
Improve management of operations and monitoring of projects,
Improve loan management mechanisms to mitigate emerging risks
System enhancement for project monitoring,
Streamlines business processes and functions
Strike good balance between new ‘transformative programmes’ and NURCHA’s conventional business,
Ensure output performance, transformation targets and sustainable revenue generation

50. THANK YOU