1. PRESENTATION TO THE DEPARTMENT OF HUMAN SETTLEMENTS
PORTFOLIO COMMITTEE
ANNUAL PERFORMANCE PLAN 2018/2019 FINANCIAL YEAR 18 April 2018

2. MANDATE, VISION AND MISSION
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”

3. PURPOSE
To present the Annual Performance Plan to the Department of Human Settlements

4. INTRODUCTION NURCHA’s business:
short term project finance (36 months), to developers in the affordable housing segment,
Bridging finance to contractors,
Targeted programmes to finance and develop small contractors focusing on youth and women,
Deploy programme and fund management capabilities to support sector development efforts.
NURCHA works on a ‘balanced budget principle’:
Administrative costs must be covered by budgeted income from operations
Sources of income are:
Interest and fees from lending activities,
Fees from programme and management support activities,
Money market investments.

5. STRATEGY PILLARS
Increase development impact in line MTSF Targets and Mandate.
Increased lending towards delivery affordable housing,
Grow loan book in the gap category of the market,
Participate in sector initiatives on mining towns and respond to lending opportunities,
Provide short term finance to rental projects,
Develop lending products that facilitate settlement consolidation and densification.
Improved access to finance for subsidy housing contractors:
Consolidate the lending model and build provincial capabilities
Secure buy-in of NDHS, Provincial Departments and Municipalities on an acceptable lending framework
Implementation of Contractor Finance and Development Programme to focus women and youth owned small and medium contractors,
Develop a lending product to enable women owned contractors to participate in business opportunities in the sector.
Employ programme and fund management capabilities to provide strategic support in human settlement development programmes.

6. STRATEGY PILLARS Continued
Restore organisational sustainability:
- Sustain positive financial results,
- Improve sustainability of business streams,
- Strengthen operations to support provincial lending and development support activities
- Establish provincial capabilities to interface with stakeholders and clients, and manage provincial development activities,
- Develop and maintain controls and systems development to support business,

7. SOCIO-ECONOMIC BACKDROP
NDP AND MTSF
Policy and the programmatic measures to provide adequate shelter and of living environments,
State interventions to address and counter market dysfunctions that perpetuates inequality and poor housing conditions.
ECONOMIC FACTORS
Performance of the economy generally
Banks’ appetite to lend, affordability and credit worthiness of households
Interventions to improved affordability – (FLISP, Employer Supported Housing Schemes)

8. SOCIO-ECONOMIC BACKDROP Continued
GOVERNMENT ROLE IN UNLOCKING HOUSING OPPORTUNITIES
Forward planning and availability of land,
Bulk infrastructure,
Speed of critical property development related approvals,
FINANCING CAPACITY
Access to funding at concessionary rate,
Leveraging and funding mix between grant funding and private sector,
Availability of takeout finance for rental projects (long term finance).
STATUTORY AND FINANCIAL INSTRUMENTS ENABLING NEW DFI TO REALISE THE DESIRED CAPACITY AND IMPACT

9. CORE BUSINESS 1. LENDING BUSINESS Full and Sectional title, Rental
* Affordable Housing,
Full and Sectional title,
Rental
* Bridging finance to Contractors
PROGRAMME MANAGEMENT
* Programme management support
* Fund management
* CFDP

10. STRATEGY EXECUTION SCORE CARD
Change lending model
Terminate intermediaries and re-engineer model
Resolve legal actions with intermediaries
Attend to collection of legacy book
Restore lending performance
Improve reputation in the market
Improve credit rules
Certificate based lending
Reduce infrastructure lending
Lion’s share to affordable housing
Diversification of affordable housing
(client & geographic)
Introduction of CFDP for new entrants, women and youth.
Close control of loan book
New controls and risk management measures
Quick and sustained actions on defaulters
Write-offs and recoveries
write-offs pre-2012 defaults and pursue recoveries on the book
Engage stakeholders on changes and recovery actions
Manage reputational issues arising from litigations
Buy-in on lending protocols with provinces
Engage stakeholders to improve access to finance for contractors
Venture on provincial presence.
Introduction & formalization of PFM
Position NURCHA with new offerings and flagships
Secure multi-year programmes
Introduce of CFDP

11. AFFORDABLE HOUSING OBJECTIVES AND TARGETS
PROGRAMME
KEY PERFORMANCE INDICATOR
BASELINE
2019 PERFORMANCE TARGET
Affordable Housing Finance:
Grow the supply of affordable housing stock
Value of loans
R1.0 billion
R1.7 billion
Loans/projects approved for financing 65
112
Housing units in projects financed
10,656 units
16000 affordable housing units
Value of projects financed
R3.5 billion
Improved geographical spread of financed projects beyond Gauteng
28%of loan book shared by 8 provinces
40% of loans book disbursed outside of Gauteng
Grow the GAP housing component of the loan book
28% of the loan book
40% of the loan book by 2019
Develop new products and innovations
Adopt energy efficiency measurement on projects financed
Benchmark energy efficiency of the loan book by March 2016
Adapt financing mechanisms to respond to medium and high density housing developments
New funding mechanism in place by September 2015

12. SUBSIDY HOUSING OBJECTIVES AND TARGETS
PROGRAMME
KEY PERFORMANCE INDICATOR
BASELINE
2019 PERFORMANCE TARGETS
Subsidy Housing Finance:
Improved delivery of subsidy housing
Value of loans
R491 million
R684 million
Loans/projects approved for financing
127
171
Housing units in projects financed
45,326
62,000
Value of projects financed
R3.2 billion
R7.4 billion
Develop new products and innovations in business fulfilment.
Develop financing mechanisms targeted to benefit women owned contractors.
New funding mechanism in place by September 2015
Sign protocols for collaboration in lending with provincial human settlement departments and Metros
80% of protocols signed

13. PROGRAMME AND FUND MANAGEMENT OBJECTIVES AND TARGETS
KEY PERFORMANCE INDICATOR
BASELINE
2019 PERFORMANCE TARGETS
Programme and Fund Management Portfolio:
Provide programme management and fund management services to provincial and municipal level development programmes.
Provincial department of human settlements supported in execution of programme and mainstreaming youth
4 multi-years provincial support initiatives
1 PHP multi-year project
10 programmes supported across provinces 2 of which are PHP
Establish collaborations with community based organisations and/or co-ops to deliver PHP programmes
Manage R1 Billion of client programme funds in execution of programmes
Small contractors benefiting from the contractor support programme
CFDP pilot project in the EC, with 70% women contractors
150 contractors supported
70% youth

14. ACTUALS FOR 2014/15 TO 2016/17 LATEST ESTIMATES FOR 2017/18 AND BUDGETED OUTPUTS 2018/19 TO 2020/21

15. NURCHA PROGRESS ON COMMITTED MTSF TARGETS AS AT 31 DECEMBER 2017
OUTPUTS
MTSF TARGETS
2017/18 FY
5 YEAR TARGET
MTSF TO DATE TARGET
ACHIEVED TO DATE
PROGRESS AGAINST MTSF TO DATE
% PROGRESS TO DATE
YEAR TARGET
YEAR TO DATE TARGET
YEAR TO DATE ACTUAL
% ACHIEVED YEAR TO DATE
AFFORDABLE HOUSING FINANCE: GROW THE SUPPLY OF AFFORDABLE HOUSING STOCK
NUMBER OF CONTRACTS SIGNED 79 72 45
63%
57% 14 8 6
75%
HOUSES AND SITES IN SIGNED CONTRACTS
11,378
9,964
7,535
76%
66%
1,400
800
1,022
128%
VALUE OF LOANS (‘000)
R1,579,521
R1,120,000
R1,011,346
90%
64%
R280,000
R160,000
R151,219
95%
VALUE OF PROJECTS FINANCED (‘000)
R3,736,326
R2,080,000
R3,172,442
153%
85%
R560,000
R320,000
R544,711
170%
HOUSES BUILT AND SITES SERVICED
7,992
7,170
6,871
96%
86%
910
520
1,100
212%
SUBSIDY HOUSING FINANCE: IMPROVE DELIVERY OF SUBSIDY HOUSING
158
122 85
70%
54% 36 27 10
37%
62,184
51,260
30,026
59%
48%
10,800
8,100
3,252
40%
VALUE OF LOANS (‘000)
R637,304
R474,500
346,504
73%
R126,000
R94,500
R35,100
VALUE OF PROJECTS (‘000)
R5,319,999
R4,214,500
3,060,874
58%
R720,000
R540,000
R409,537
37,596
30,639
16,023
52%
43%
7,020
5,265
1,257
24%
INFRASTRUCTURE AND COMMUNITY FACILITIES: PROJECTS
NUMBER OF LOAN CONTRACTS SIGNED 20 11
91%
50% 4 3 2
67%
66,555
43,500
30,246
45%
R10,000
7,500
9,000
120%
R245,872
R219,500
165,634
R26,000
R19,500
R98,258
504%
NUMBER OF PROJECTS COMPLETED 7
30% 1
200%

16. RISKS AND ENABLERS Economic conditions
Affordability and creditworthiness,
Traction of state interventions to counter impact of economic constraints and stimulate the market,
Financing capacity to meet anticipated lending demand from Developers and Contractors,
Unwillingness of some provinces to co-operate with NURCHA on lending instruments,
Diversion of funds by contractors
Delays by employer departments to pay contractors financed by NURCHA. This contributes to capacity constraints currently experienced by NURCHA.
Management of DFI amalgamation process,
New financing facilities on hold,
Staff turnover and challenges of attracting talent,
Business migration risk.

17. CRITICAL INDICATORS IN PERFORMANCE TRENDS

18. PROGRESS AND PERFORMANCE: LENDING PORTFOLIO

19. CURRENT PROVINCIAL SPREAD 31 DECEMBER 2017

20. LENDING CAPACITY 31 DECEMBER 2017
Funding Capacity
Committed Loans (December 2017)
LVS as % of Capacity
Actual Exposure (December 2017)
Exposure as % of Capacity
Affordable Housing
R 370,000,000
R 575,644,445
156%
R 240,249,915
65%
Subsidy Housing
R 90,000,000
R 231,059,729
257%
R 82,813,178
92%
Infrastructure
R 8,800,000
R 31,830,194
362%
R 11,189,880
127%
Total
R 468,800,000
R 838,534,368
179%
R 334,252,973
71%
NOTE
NURCHA continues to experience capacity constraints.
Employer departments are not paying contractors on time and this impacts negatively on NURCHA’s cash flows.
NURCHA is unable to negotiate funding from the private sectors during the transition to the new development bank

21. FINANCIAL RECOVERY TREND SINCE 2008/09

22. GROSS REVENUE PROJECTIONS 2017/18 TO 2020/21

23. TOTAL PROVISIONS AND DEBTORS TREND

24. FINANCIAL PERFORMANCE PROJECTIONS

25. ASSUMPTIONS MADE
NURCHA will not be funded by the shareholder during the year under review.
No other funding will be available from the private sector until the merger of the 3 DFI’s is finalised.
The performance of Programme and Fund Management Portfolio will drop in view of staff capacity in this portfolio.

26. STATEMENT OF FINANCIAL PERFORMANCE FOR THE PERIOD 2017/18 TO 2020/21

27. STATEMENT OF FINANCIAL POSITION AS AT 2017/18 TO 2020/21

28. STATEMENT OF FINANCIAL POSITION AS AT 2017/18 TO 2020/21 Continued

29. STATEMENT OF CASH FLOWS FOR THE PERIOD 2017/18 TO 2020/21

30. CONCLUSION: KEY CHALLENGES
Slow payment to contractors by departments and municipalities,
Lack of sector alignment and buy-in on lending/financing instruments thereby;
Artificially closing the market and denying contractors access to finance,
Directly raising the level of defaults
New wave of rise in loan defaults.
Lending capacity constraints
Suspended signing of new loans in November 2016 to May 2017,
Impacts on delivery momentum and a negative market signal,
Prolonged transition an impediment to raising facilities in the private sector,
Talent attraction and retention challenge in the transitional period,

31. RECOMMENDATION
The APP is hereby presented for discussion and approval, taking into account the socio-economic conditions and the business environment.

32. THANK YOU