RURAL HOUSING LOAN FUND

1. RHLF Strategic Plan for 2011/2012 FY 16 March 2011 Presented to: National Department of Human Settlements by: MR. JJ Fakazi – CEO MR. H Potgieter - CFO RURAL HOUSING LOAN FUND

2. Outline • RHLF Mandate • Vision • Mission • Policy Context: HS & Other Policy Priorities • Provincial Involvement • Partnerships with other Development Finance Institutions • Business Environment: Internal and External + Implications • Key Performance Areas • Financial Projections • Materiality Framework • Corporate Governance

3. MANDATE • To facilitate housing credit to low income rural households: including communal land, rural towns, small towns • To support Government’s Rural Development priority—(Comprehensive Rural Development Programme) • To support government’s effort to expedite housing delivery in rural areas through administering the delivery of the Individual Rural Housing Voucher Programme – once implementation is approved by MINMEC • Focus on low income market: upper limit increased from R7, 500 to R9, 800 per month • Takes into account inflation • Covers the gap market who can’t access mortgage (limited affordable housing product, and no title to land in communal land)

4. VISION RHLF is a world-class rural housing social venture capital fund that creates new financial arrangements and opportunities for rural families to improve their housing, economic and living environments.

5. MISSION To empower people in rural areas to maximise their housing choices and improve their living conditions with access to: • Housing finance from sustainable retail lenders & • Government subsidy through the Individual Rural Housing Subsidy Voucher Programme

6. Policy Context: RHLF’s contribution to Sustainable Human Settlements Financial Services Market: Repeated access to credit for incremental housing and fixed home improvement for the rural working poor 2. Entry level credit – building credit history 3. RHLF scales-up using its venture capital investments to leverage additional debt funding from financial sector Incremental Housing: Existing core financing opportunity for RHLF business Enable borrowers to progressively improve quality of their housing asset Supporting Rural Human Settlements Development: Provision of loans for improving traditional houses in communal land Support building of new quality houses—especially “rural gap market” Enable access to services: water, energy & sanitation

7. POTENTIAL CONTRIBUTION TO OUTCOME 8 Encourage intermediaries to explore financing opportunities in: • Informal Households Upgrading • Target can be only set once clear understanding on delivered service sites have been ascertained • Backyard rentals • Cannot set targets at this stage • One client conducting feasibility on this financing opportunity & will submit proposal to pilot • RHLF will liaise with the Provincial DoHS on these two opportunities in order to identify opportunities

8. Policy Context: Other Govt Priorities • Rural Development • SMME Development • Job Creation (within intermediaries & local builders) • Addressing needs of the 2nd Economy: productive housing • Local Economic Development

9. Provincial Involvement • RHLF is a national wholesale housing finance institution • Has national reach through intermediary lenders who lend in all provinces • Engage & support with provinces on human settlements development issues • Ensure that RHLF programme helps in enhancing housing delivery in rural areas and small towns: • Improvement of basic core house and improvement of quality of traditional rural houses • Enabling people in the gap market to access housing finance, without need for collateral • Engage Traditional Leaders as partners in the improvement of quality and delivery of housing on communal land

10. Partnerships with other DFIs • Engagement with NURCHA on the Subsidy Voucher Scheme Pilot Implementation • RHLF has strong funding relationship with DBSA—resulting from KfW loan to RHLF • Possibility of RHLF to establish funding relationship with NHFC to scale up incremental housing finance—which is RHLF’s only core business. • Especially clients in which RHLF has reached max exposure

11. RHLF – Strategic plan for 2011/2012

12. Business Environment: Internal Factors Internal factors affecting RHLF: • Funding: RHLF received R49,5 million during 2010/2011 Expecting R49,5 million in 2011/2012 R51,9 million in 2012/2013 • Human Resources: Small but dedicated team • Mr. JJ Fakazi appointed CEO in Sept 2010 • Need to build capacity: Employed following during 2010/2011 • Risk Analyst • Marketing Consultant • Intern Client executive • DFI review: RHLF is playing an active roll in the ongoing DFI review process.

13. Business Environment: External Factors / Economic Climate • Steady growth rate predicted but recovery will be slow and fragile for next 12 months • High level of job losses – Around 1 million. Seeing some improvement but re-employment in the formal sectors will lag the economic recovery • Inflation has moderated somewhat – Risk of oil price, food prices and effect of ESKOM price increase • Over indebtedness - household debt represents on average between 70% and 80% of their disposable income • At the end of 2010, South Africa close to half of the credit active consumers had impaired credit records • Lower interest rates to remain for rest of the year • Liquidity crunch - credit supply conditions remain tight

14. Implications of Environmental Considerations • Targets must be set in the context of these economic realities • Targets for 2011/12 are still on the conservative side • Intermediaries are starting to look at growth but they will remain focused on improving portfolio quality • Consumer protection critical: avoid pushing credit and then looking at portfolio as “sub-prime” later

15. KEY PERFORMANCE AREAS Rural Housing Finance Reach • Number of end user loans financed by RHLF Average loan size in 2010/2011 = R4500 Budget for 2011/2012 based on R4855

16. KEY PERFORMANCE AREAS Rural Housing Finance Reach • Annual Disbursements

17. KEY PERFORMANCE AREAS • Rural Housing Finance Reach • Value of Loans in place and impairment provision

18. KEY PERFORMANCE AREAS • Rural Housing Finance Reach • Impact

19. KEY PERFORMANCE AREAS • Rural Housing Finance Reach • Finance

20. KEY PERFORMANCE AREAS • Rural Housing Finance Reach • Strategies to increase number of loans • RHLF plan to add at least 2 more community based organizations to its delivery channel. In this process we would give preference to organizations that are based in the provinces where our impact is currently on the low side, like Northern Cape • RHLF plan to add at least 1 new intermediary with a foot print in the provinces where our impact is currently on the low side as well as rural provinces in general. • RHLF will be extending a facility to RPH and Lendcor Group – Low leakage risk due to business model allows RHLF to introduce lower interest rates • RHLF to roll out its low interest rate loans to all other clients who have capacity and distribution channels to on-lend the low interest rate product– • Will reduce rates by between 6% and 8%

21. Lendcor Low Interest loans • Lendcor gives 94% housing loans in deep rural parts • R40 mil revolving facility – R5 mil disbursements per month • In April 2010 Lendcor lowered its rates on the 18, 24 & 36 month loans • RHLF interest rate to Lendcor = 15%p/a • To assist Lendcor: RHLF lowered its rate to 12%p/a • From 1 Now 2010 RHLF lowered rate to 9.5% on all new disbursements • 2% of the saved points will be passed on to endures.

22. KEY PERFORMANCE AREAS Statement of Financial Position

23. KEY PERFORMANCE AREAS Statement of Financial Position

24. KEY PERFORMANCE AREAS Statement of Financial Performance

25. KEY PERFORMANCE AREAS Statement of Financial Performance

26. KEY PERFORMANCE AREAS Statement of Financial Performance • 62% increase in Directors fees: Fee increased from R4000 to R4500. Budget based on all directors at all meetings • Staff cost up 20% • COO appointed from Sept 2011 • New positions: • Intern for Client Executive team • Receptionist • Annual increase for current employees based on inflation and performance • Travel Expenses up 88% • Increase activity – new clients, monitoring low interest loans, risk reviews • Increase in fuel prices and toll fees • Increased travel re Rural Housing Subsidy Voucher Scheme • Marketing cost, up 39% • Consulting, up 104% • Inflation increase for internal and external audit • Increase in legal fees – new agreements for new clients and low interest loans • Impact audit at clients • Rural Housing Subsidy Voucher Scheme – R1,5million

27. KEY PERFORMANCE AREAS Cash Flow Statement

28. KEY PERFORMANCE AREAS RHLF high level organisational design

29. CORPORATE GOVERNANCE • The board of directors retains full and effective control over the company, monitors management and ensures that decisions on material matters are in the hands of the board. • The composition of the board of directors provides for a majority of non-executive directors, including a non-executive chairperson. RHLF CEO is the only Executive Director on the Board • The sub-committees of the board are as follows:

30. CORPORATE GOVERNANCE

31. CORPORATE GOVERNANCE

32. Thank You