ANNUAL PERFORMANCE PLAN FOR 2013/14 FY

1. ANNUAL PERFORMANCE PLAN FOR 2013/14 FY Parliamentary Portfolio Committee on Human Settlements 27 March 2013 Presented by: Jabulani Fakazi, CEO & Bruce Gordon, CFO

2. Presentation Outline • RHLF Mandate • The RHLF Market Size and Coverage • Market Conditions • Government Policy Context • Challenges • Raising Awareness & Developing New Foot Print • Internal Resources • Strategic Objectives • Governance • Conclusion

3. RHLF MANDATE • To facilitate access to incremental housing finance for low income households in rural areas • Focus on rural areas and small towns (outside of metros) • Market segment: below R9, 800 (bias towards those earning R3, 500 and less) • To support the implementation of rural development programme

4. RHLF Market Size and Coverage (Census 2011) • Close to 5 million households living on tribal and farm areas • RHLF loans since inception to end of Q3 of 2012/13 FY = 348 291 (RHLF has a long way to go to have impact on the rural households) & Less than 1% of RHLF loans reach rural households • Small towns not included in these statistics—so market is much higher • Despite all RHLF’s track record of delivery, households in tribal and farm areas are not adequately serviced, because: • Funding shortage (mainly) • Loan distribution channels/intermediary network • Economic conditions: e.g. Low affordability levels and high unemployment

5. RHLF MARKET

6. Market Conditions • Low economic growth outlook • Unemployment rate likely to remain high • Volatility of Rand—currently deteriorating and will likely have inflationary pressure • Inflation food, energy, transport- less income for housing • Level of consumer indebtedness remain high following astronomical growth of unsecured lending

7. Policy Context Despite the challenges posed by the market conditions, government policy interventions present an opportunity to do more, examples: 1. Strategic Infrastructure Projects • When projects are implemented and commissioned, will serve as basis for growth and job creation • We foresee demand for housing loans as a result of implementation of Infrastructure Plan

8. Policy Context 2. Contribution to Outcome 8: • Output 4: Facilitating incremental housing loans (non-mortgage loans) in rural areas: • In 2013/14 RHLF will exceed the outcome 8 target set for RHLF

9. Policy Context 3. National Development Plan (NDP) • Approved Government Plan providing guidance to service delivery • Vision: “… in 2030, we experience daily how: We participate in efforts to liberate ourselves from conditions that hinder the flowering of our talents.” • RHLF is well positioned to support implementation of the NDP, especially in two key areas (Chapters in the NDP): • Inclusive Rural Economy (Rural Development) • Transforming Human Settlements

10. NDP Areas With a Fit to RHLF Mandate

12. Challenges 1. Shortage of Intermediaries: • Action: • Provide additional facilities to existing intermediaries with scale to deliver on the mandate • Continue with efforts to identify community based organisations—three approved in the current financial year (will deliver high impact, but at small scale: Sasekisani Cooperative, Shiyendlele, Amajuba Livestock Association) • Pipeline: Cane Growers Association • Continue efforts to sign new intermediaries and partner provincial DFIs: • Pipeline: Risima Housing Finance, Mpumalanga Economic Development Agency, Free State Development Corporation, Bashumi Banking Services • However, adding more intermediaries to scale up access to incremental housing finance requires more funding

13. Challenges 2. Funding Constraint • In light of the huge market that RHLF has to serve, funding resources are limited to fully respond to market needs. • During the current financial year, we had a shortfall of R98m in meeting the demand for additional facilities from existing intermediaries—a credibility for RHLF and government • Action: • Application for additional capital injection from RHLF shareholder—this is critical for meeting long term development objectives • Applied for relaxation of liquidity covenant on KfW/DBSA/RHLF loan—from 30% to 10% of Total Assets • Exploring raising loan funding from private and international institutions (however, cost may be high given RHLF mandate to facilitate unsecured incremental housing loans & will defeat efforts to continue with the strategy to lower the cost of credit for borrowers)

14. Raising Awareness &Develop New Foot Print • Participate in the DHS capacity development programme for municipalities • Use relevant media in raising awareness of incremental housing finance offered by RHLF and intermediaries • Building merchants willing to partner RHLF intermediaries as loan distribution channels have been identified in Limpopo, North West, Free State, & Northern Cape • In 2013/14 RHLF will facilitate partnerships between its intermediaries and identified building merchants • Opportunities for joint marketing

15. Internal Resources 1. Funding • No new funding, thus limited resources for business growth and development impact 2. Human Resources: Maintain lean model in line with the Wholesale Business Model, built capacity in core business areas: • Operations (Business Development)—Will appoint 1 new Client Executive Intern resulting in the total of 4 staff members • Development Monitoring (New Unit) under Risk Management Department—Will appoint 2 current interns on permanent basis

17. STRATEGIC OUTCOME GOALS

18. Implications of Situational Analysis

19. Strategic Objectives • Broadening & Deepening the Reach of Rural Housing Finance • Building Lending Capacity • Preservation of real value of capital

20. Strategic Outcome Orientated Goals Stake client goals – delivery to Rural Low Income Earners • Lower loan numbers due to funds already committed • Effort being made to move funds to intermediaries who grant lower loans – therefore touch more people • Proud of effect RHLF is having on human settlements for those earning below R3,500 • Leakage targets considered adequate as cost of enforcing higher will lead to more funds on enforcement, less on human settlements

21. Strategic Outcome Orientated Goals Stake client goals – debtors book • Budget based on current funding constraints • Efforts being made to overcome these • Impairment expectation remains constant as risks are needed for rewards

22. Strategic Outcome Orientated Goals Financial goals • Income increases as most funds are distributed for a full year • Expenses as a % of income decrease as we maintain our cost base while improving revenue • These lead to improved profitability

23. KEY PERFORMANCE AREAS Statement of Financial Position

24. KEY PERFORMANCE AREAS Statement of Financial Position

25. KEY PERFORMANCE AREAS Statement of Cash Flow

26. KEY PERFORMANCE AREAS Statement of Financial Performance • Travel and accommodation increase to enable more support to CBOs in remote areas • As RHLF seeks to increase its presence in rural areas our Marketing costs need to increase • Consulting fees are budgeted to increase as we focus on CBO development and research • Employment costs increase by 6% plus the cost of 1 new intern and 2 interns becoming fulltime

27. GOVERNANCE

28. CORPORATE GOVERNANCE

29. Governance – Board and Committees

30. Governance: Board Committees

31. Concluding Remarks

32. Discussion Thank You