14 October 2015 Rural Housing Loan Fund ANNUAL Integrated report 31 March 2015 Jabulani Fakazi CEO Bruce Gordon CFO Contents Mandate vision mission and values Value creation Operating environment ID: 741038
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PRESENTATION TO THE PORTFOLIO COMMITTEE ON HUMAN SETTLEMENTS14 October 2015Rural Housing Loan Fund
ANNUAL Integrated report 31 March 2015Jabulani Fakazi – CEOBruce Gordon - CFOSlide2
ContentsMandate, vision, mission and values
Value creationOperating environmentPerformance 2015GovernanceRisksLooking aheadSlide3
Mandate, vision, mission and values
Transparency
Passion for development
Empowerment
Integrity and honesty
Excellence
Respect
Accountability and responsibilitySlide4
ContentsMandate, vision, mission and values
Value creationOperating environmentPerformance 2015GovernanceRisksLooking aheadSlide5
How do we create value for better living conditions?Slide6
What does the Rural Housing Loan Fund deliver?Slide7
Housing opportunities delivered since inceptionSlide8
Our commitment to the current MTSFSlide9
Performance against MTSF targetsSlide10
ContentsMandate, vision, mission and values
Value creationOperating environmentPerformance 2015GovernanceRisksLooking aheadSlide11
Government development policyGovernment Development Policy Priorities as set out in the National Development Plan:Sustainable human settlementsRural developmentMining townsSupporting Small Medium and Micro EnterprisesSlide12
Economic conditions Low economic growth—revised downwards throughout the yearHigh unemploymentInterest rates: REPO rate is still low, the interest rate for unsecured credit is still high, hence RHLF’s Pricing Policy designed to lower interest rate our borrowers pay
Inflation (CPI): although largely within the set target during the year, most relevant inflation indices for RHLF end users are:Food inflationTransport
Rural inflationSlide13
Interest rates
Maximum microlending rate allowed by National Credit Act (2005) – REPOx2.2+20%Slide14
RHLF end user interest rates
By ensuring that RHLF clients charge discounted rates we increase market competitivenessSlide15
RHLF client inflation compared to CPIX
Source: StatsSASlide16
Credit Industry Collapse of African Bank put pressure on the microfinance business environmentTightening of the credit granting criteria by lenders—RHLF lenders included
High levels of consumer indebtedness remains a concernHigh rejections rates—ranging between 45% and 90%Demand for housing loans is there, but affordability is a challengeSlide17
ContentsMandate, vision, mission and values
Value creationOperating environmentPerformance 2015GovernanceRisksLooking aheadSlide18
Stakeholder perspective: Broaden and deepen the reach of housing finance
Housing opportunities delivered - 2015Slide19
Stakeholder perspective: Achieving visibilitySlide20
Stakeholder perspective: Building lending capacitySlide21
Financial perspective: Real capital preservationSlide22
Business process perspective:Sharpen portfolio risk managementSlide23
Business process perspective:Accelerate client acquisitionSlide24
Business process perspective:Targeted positioning and brandingSlide25
Learning and growth: Skills development and capacitySlide26
ContentsMandate, vision, mission and values
Value creationOperating environmentPerformance 2015GovernanceRisksLooking aheadSlide27
Audit outcomesAudit opinion of financial statementsComment on predetermined objectives Compliance with legislation
Internal controlClean (no qualifications or emphases of matter)No material findingsNo material non-complianceNo significant deficienciesSlide28
GovernanceSlide29
Changes in BoardBoard member
Roles at 31 March 2014
Changes since then
Thembi Chiliza
Chairperson of the Board and Member of Human Resources, Ethics, and Remuneration Committee
Added Credit and Development Committee membership
Adrienne Egbers
Deputy Chairperson of the Board, Chairperson of Credit and Development Committee and member of Audit and Risk Committee
No change but acted as Chairperson of Audit and Risk Committee for a period
Knowles Oliver
Chairperson of Audit and Risk Committee
Deceased
Molefe Mothibe
Chairperson of Human Resources, Ethics and Remuneration Committee
Added Audit and Risk Committee membership
Reginald Hamman
Member of Audit and Risk Committee
Became Chairperson of Audit and Risk Committee
Nancy
Sihlwayi
Member of the Human Resources, Ethics, and Remuneration Committee
Resigned upon appointment as
MEC
in Eastern Cape
Jabulani Fakazi
Chief Executive Officer and member of Credit and Development Committee
No changeSlide30
Stakeholder engagementStakeholder MinistryPresidency – Performance MonitoringParliamentary Portfolio
Other departments (Treasury / Rural Development) Local governmentIntermediariesFundersOther DFIsBorrowersEmployees
Types of engagements
Meetings and presentations
Meetings and
presentations
Presentations
Meetings and
presentations
BriefingsRegularMeetings and submissionsConsultationsInterviews at their homesVariousSlide31
ContentsMandate, vision, mission and values
Value creationOperating environmentPerformance 2015GovernanceRisksLooking aheadSlide32
Risks
Risk description
Cause
Mitigation
Future
Insufficient funding
National budget constraints, lack of prioritisation of the Rural Housing Loan Fund
Ongoing selling of the Rural Housing Loan Fund’s mandate to all stakeholders
Integrated reporting, research into the Rural Housing Loan Fund outcomes,
Selling of the benefits of the mandate
Development Financial Institution merger
Policy
decision
Protection
of the Rural Housing Loan Fund’s mandate throughout the process
Selling of the benefits of the Rural Housing Loan Fund’s mandate
Debt levels of retail borrowers
Overenthusiastic lending by consumption lending businesses
Looking for intermediaries who can deliver in areas where indebtedness is lower
Educating consumers on the management of their finances
Inability to earn an adequate Return on Equity
The need to reduce interest rates to retail borrowers
Additional funding is required, ideally grant funds that can earn the Rural Housing Loan Fund additional funds
Income tax exemption
Relaxation of Development Bank of Southern Africa / KFW liquidity covenant
Further relaxation of covenant
Exemption from requirement to deposit spare funds with the Corporation for Public Deposits
Inability to achieve success with community based organisations
Lack of resources well skilled in successfully working with these organisations
Using Junior Clients Executives to manage these
KFW funds will be used to support community based organisationsSlide33
ContentsMandate, vision, mission and values
Value creationOperating environmentPerformance 2015GovernanceRisksLooking aheadSlide34
Looking aheadDevelopment finance institution mergerIndividual Rural Housing Voucher programmeResearch projects:
New products to enhance sustainable rural human settlements and the size of the needImpact assessment (the effect on peoples living conditions)Building loan distribution channels:
Investing in start-up micro-lenders to enhance their sustainability
Continue targeting co-operativesSlide35
Concluding remarksMarketing conditions remain a challengeEconomic growth, unemployment, indebtedness levels, etc.
Demand for incremental housing finance remains high, but affordability levels remain lowRHLF is an established working business model.Builds self reliance by empowering people to incrementally realise their housing dreams (and right of adequate).
Room to scale up delivery of loans by:
Supporting emerging black owned housing
lenders
Supporting Housing Co-operatives and other co-operatives involved in income generating activities (e.g. Co-operative Financial Institutions under Cooperatives Bank Development Agency)
=> Success in working with these new partners complements existing delivery channels and contribute to delivery of MTSF targets.Slide36
Thank you