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HUMAN SETTLEMENTS PORTFOLIO COMMITTEE 15 OCTOBER 2014

HUMAN SETTLEMENTS PORTFOLIO COMMITTEE 15 OCTOBER 2014. NHFC ANNUAL REPORT 2014. CONTENTS. Overview Business Performance Corporate Governance Risk Management Our People Financial Performance. NHFC OVERVIEW. Established: 1996

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HUMAN SETTLEMENTS PORTFOLIO COMMITTEE 15 OCTOBER 2014

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  1. HUMAN SETTLEMENTS PORTFOLIO COMMITTEE 15 OCTOBER 2014 NHFC ANNUAL REPORT 2014

  2. CONTENTS • Overview • Business Performance • Corporate Governance • Risk Management • Our People • Financial Performance

  3. NHFC OVERVIEW • Established: 1996 • Type of Organisation: Development Finance Institution (DFI) • Ownership: State Owned Company, 100% SA government • Total Assets: R 3,1 billion (31 Mar 2014 – group) • Total liabilities: R 716 million (31 Mar 2014 – group) • Funding Status: Self sustaining, pays income tax • Credit Rating: Long term AA-, short term A1+ • Main business: Broadening and deepening access to • affordable housing finance for the low-to- • middle income SA households • Geographic activities: National • Number of Employees: Group 116 Company 84

  4. NHFC MANDATE NHFC MANDATE The National Housing Finance Corporation Soc Ltd (NHFC) is a state owned Development Finance Institution with a principal mandate to broaden and deepen access to affordable housing finance for the low- and middle-income households.  • The low- to middle-income housing market is any South African household with a regular monthly income between R1 500 and R15 000. • The market segment is able to contribute towards its housing costs, but unable to access housing finance from Financial Institutions. Target Market:

  5. VISION, MISSION, VALUES VISION To be the leader in development finance for the low-to-middle income housing market MISSION Provide innovative and affordable housing finance solutions to the low –to-middle income market VALUES PASSION FOR PURPOSE OWNERSHIP TEAMWORK CREATIVITY INTEGRITY ACHIEVEMENT STRATEGIC OBJECTIVES Expand housing finance activities, through the effective provision of housing finance solutions, thus enabling low-to-middle income households to have choice of renting or owning or incrementally building, to meet their housing needs; Facilitate the increased and sustained lending by financial institutions to the affordable housing market; 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 NHFC whilst promoting lasting social, ethical and environmental development; and Provide robust, timely and relevant market research

  6. STRATEGIC FOCUS AREAS

  7. HOW WE DELIVER ON OUR MANDATE Non-banking retail intermediaries Partnership with banks NHFC provides wholesale funding to non-banking retail intermediaries, that on-lend to households in the NHFC target market. Access to home loans is increased and delivered through a nationwide branch network of intermediaries. Through co-financing and risk- enhancement mechanisms, bank lending in this segment of the market is increased and sustained through leveraged funding provided by the NHFC Home ownership Is achieved through the indirect provision of mortgage bonds for buying an existing home or building one, through partnerships with banks, and non-banking retail intermediaries Rental housing Provision of loans that offer the following types of rental accommodation: Home ownership Incremental housing Incremental housing via approved or selected intermediaries to end-users with household incomes in the R3 500 to R15 000 per month range, and for loans between R1 000 and R20 000. Social rental (R 3 500 – R 7 500) Subsidised rental housing provided by social housing institutions . These institutions receive subsidies in the form of restructuring capital grants from the SHRA as well as top up institutional subsidies from provincial government. In addition to these grants and subsidies, the NHFC provides long-term debt funding (up to 20 years) for the balance of funding for development of the housing project. Private rental (up to R15 000) Rental accommodation is provided by private landlords, whodo not receive any subsidies or grants. It caters for the affordable rental market, including inner city rental developments. NHFC provides long term funding for the development/refurbishment of Inner City buildings for rental accommodation. Strategic Partnerships NHFC develops strategic alliances and partnerships with developers, investors and housing development funds etc. through investment in equities, mezzanine and junior debt capital structures in projects or companies that operate within the affordable housing market.

  8. FOOTPRINT

  9. CORPORATE GOVERNANCE Audit Committee Social & Ethics Committee (SEC) Board Governance Structure BOARD • NHFC conforms to the requirements of the King III Report and the Protocol on Corporate Governance. • NHFC remains a Schedule 3(A) entity. • Board charter reviewed annually. Specific powers and authority have been delegated to the Board committees, each of which has a clearly defined mandate in its written Terms of Reference. • Unqualified audit report since inception. Board Development Impact & Strategy Committee (DISC) Board Credit & Investment Committee (BCIC) Board Human Resources Ethics & Remuneration Committee (HRER) Board Risk Committee (BRC) Executive Committee (EXCO)

  10. RISK MANAGEMENT ROLES, RESPONSIBILITIES AND ACCOUNTABILITY ROLE STRUCTURE NHFC sustains a comprehensive Enterprise Risk Management Framework and strategy to meet both statutory and best business practice requirements. • The Board approves the risk • tolerance level. • The Board has delegated the Governance of Risk to the Board Risk Committee. • Through the Board Risk Committee, the Board ensures that the NHFC Top Risks and emerging risks are identified and risk mitigation strategies put in place. • The Board ensures that Risk Assessments are performed on a regular basis. • The Board ensures that Framework and methodologies are in place to ensure timely anticipation of unpredictable risks. The Board Risk Governance Governance of Risk • Management is responsible for implementing appropriate Board approved risk responses. • Management is responsible for monitoring risks and ensuring that approved action is taken to mitigate such risks. • Management is responsible for reporting on risk on a quarterly basis, or as the need arises, depending on the severity of the identified risk. Management Continuous Risk Assessment and Monitoring

  11. OUR PEOPLE

  12. Business Performance

  13. 2014 IN PERSPECTIVE • Key Highlights • Impact through NHFC funding • 12 537 housing opportunities created • 16 038 job opportunities facilitated • Experiential learners • 12 learner-ships undertaken • Five bursaries awarded • Corporate social investments • Sponsorships to beneficiaries of the built project in Port St Johns • Renovation of Langa High SchoolCape Town • Sponsorship of Alexander Orphanage • Financial • Funding impact through NHFC funding • Disbursements of R675 million - highest level to date. • Leveraging of R2.2 billion of private sector funding into the human settlement space. • Secured second facility from EIB (R250 million), subject to necessary approvals. • Challenges • Funding remains critical to NHFC growing its loan book • Delays in housing project development process in the housing market and high indebtedness of households have both constrained the supply and lending, respectively, in the NHFC’s target market. • Constrained mortgage lending by banks delayed the uptake that is critical to housing delivery. • Revise policies and processes to enable the scaling up of FLISP.

  14. NHFC’S OUTCOMES Housing opportunities created: Affordable Rental, Ownership and Incremental 84 503 OUTCOMES Number of beneficiaries benefitting 321 111 Disbursements R675 million Private capital and investment leveraged R2,2 billion Funding Impact R2,8 billion Jobs facilitated 16 038 Value of disbursements targeted towards women-managed / owned companies - R32 million Profit before tax R35 million

  15. PERFORMANCE HIGHLIGHTS • Cumulative Leveraging: R 15,3 billion • FLISP: Approved R40 million - 927 subsidies • : Leveraged R138 million mortgage loans from banks

  16. KEY PERFORMANCE INDICATORS

  17. OTHER IMPACT • Enterprise Development • Co-funding arrangement between the NHFC and the Gauteng Partnership Fund (GPF) designed to promote participation of Historically Disadvantaged Individualscompanies in the affordable rental property market. An amount of R332 million has been set aside with the NHFC portion being R233 million as senior debt funder and GPF R100 million. R130 million of the senior facility has since been taken up with 18 HDI’s having benefitted from the programme, translating into 698 housing opportunities. • Experiential Learners • 12 learner-ships undertaken • Five bursaries awarded • Corporate Social Investments • Sponsorships to beneficiaries of the Women’s Build Project in Port St Johns. • Renovation of Langa High School Cape Town, Youth Build. • Sponsorship of Alexander Orphanage. • Environmental sustainability initiatives : • Formalised an Environmental Policy towards an integrated approach to both internal and external environmental issues. • Evaluation of projects from an environmental perspective and compliance with regulations and best practice.

  18. Financial Performance

  19. FINANCIAL PERFORMANCE - DRIVERS OF PERFORMANCE

  20. FINANCIAL PERFORMANCE SUMMARY STATEMENT OF COMPREHENSIVE INCOME

  21. FINANCIAL PERFORMANCE - GROUP STRUCTURE

  22. FINANCIAL PERFORMANCE KEY MOVEMENT IN STATEMENT OF FINANCIAL POSITION

  23. FINANCIAL PERFORMANCE CONSOLIDATED STATEMENT OF FINANCIAL POSITION

  24. SHOWCASING OUR PROJECTS Harmony Village – Cape Town

  25. SHOWCASING OUR PROJECTS 424 Commissioner Street, Johannesburg The NHFC, together with Gauteng Partnership Fund (GPF), financed the renewal, conversion and refurbishment of the dilapidated 424 Commissioner Street. NHFC provided a mortgage loan of R7,4 million. The property consists of 34 units, comprising one- and two bedroom units. It is owned, developed and managed by a black female.

  26. SHOWCASING OUR PROJECTS 120 End Street, Johannesburg NHFC provided funding of R110 million for the conversion and refurbishment of two buildings, Frank & Hirsch and Khan Corner, into rental accommodation. The property is now called 120 End Street, and has 479 units comprising one- and two-bedroom units. It is owned, developed and managed by Affordable Housing Company, a leading investor, landlord and property manager in the inner city of Johannesburg.

  27. SHOWCASING OUR PROJECTS Lakehaven Social Housing Project - Phase 1 and 2 The NHFC provided mortgage loan financing of R35,5 million for the development of 312 units, for social housing rental. Other funders of this project are the KwaZulu-Natal provincial government and the Social Housing Regulator. The project has 34 double-storey blocks of eight units on 17 hectares of land in Durban. All the units are two-bedroom. The developer is First Metro Housing Company, a social housing entity.

  28. SHOWCASING OUR PROJECTS Mettle: Karino Development - Nelspruit Kenwick Close: East London SPACE: Kimberley FRESHCO: Bloemfontein

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