presentation saibpp annual microfinance • social investment – sustainable society realities of...
Post on 09-May-2018
Embed Size (px)
GAUTENG PARTNERSHIP FUND:
Presented by Boni MuveviChief Executive Officer
PRESENTATION SAIBPP ANNUAL CONVENTION
GAUTENG PROVINCE HOUSING CHALLENGES STRATEGIC RATIONAL FOR HOUSING GPF BACKGROUND GPF MANDATE, PURPOSE & ROLE MARKET INTERVENTIONS INVESTMENT PROCESS & CRITERIA TYPICAL PROJECT STRUCTURE PROPERTY EMPOWERMENT FUND EEPF FUNDED PROJECTS GPF PERFORMANCE STRATEGIC PARTNERS PRIVATE EQUITY FUND
GAUTENG PROVINCE HOUSING CHALLENGEApprox. 900 000 LOW INCOME
WHY AFFORDABLE HOUSING?
CONTRIBUTION TO ADDRESSING NATIONAL ISSUES!
Historical housing backlog
Redressing the Legacy of living apart Apartheid
Capital redistribution and empowerment
Property ownership, as an asset and a means for creation of wealth
Reducing unemployment /job creation
The constitutional right to housing for all SA citizens
Demand by people for better infrastructure and services (housing)
Is this government responsibility only ?
GAUTENG PARTNERSHIP FUND
IF YOU WANT TO GO FAST, GO ALONE. IF YOU WANT TO GO FAR, GO TOGETHER.
STRATEGIC RATIONALE FOR HOUSING?
- Power / influence
- Concern for Constituency
SOCIAL RESPONSIBILITY AND BUSINESS OPPORTUNITY
Based on C.K Prahalad: The fortune at the
bottom of the Pyramid: Eradicating poverty
through profits: 2005; Dr Llewellyn 2011 presentation.
Contribution to SA Economy
Construction & Property jobs, tax revenue
Mining sector cement, stones etc.
Manufacturing doors, lintels etc.
Small business plumbers, elect etc.
Finance industry mortgage, microfinance
Social investment sustainable society
Realities of limitations and
Not enough capital available in govt treasury.
Pace of delivery needs to be improved.
Insufficient skilled human capital in govt.
Limited innovation. Driven by FSC, Property
charter than opportunities
Gate keeper in companies Decisions on perception
rather than facts.
Lack of investment in under -developed areas.
Limited investment in skills and enterprise development.
GPF: A Schedule 3C Provincial Public Entity (PPE) that was founded in 2002 as aBenevolent Trust under the Trust Properties Control Act 57 (1988).
Shareholder/ Executive Authority: Gauteng Department of Human Settlements(GDHS).
Independent and diverse Board of Trustees whose non-executive members areappointed by the Executive Authority; striving at all times to comply with the principlescontained in the King Code on Corporate Governance in South Africa (King 3, 2009).
The Board is the Accounting Authority in terms of the PFMA and providesstrategic direction and leadership to enhance shareholder value and ensure the GPFslong-term sustainable development and growth.
In fulfilling its responsibilities, the Board is supported by the Chief ExecutiveOfficer and Executive Management Team in implementing the approved strategicand corporate plans and policies.
At the time of its establishment the GPF was given the specific mandate tonormalise the social housing market in Gauteng through innovative fundinginterventions that would provide better gearing for private commercial funding, thusattracting private bank capital into this market.
The fundamental business of theGPF is to leverage funding fromexternal senior funders. Thistranslates into a value propositionthat has and continues to seek to offerthe market innovative funding productsdesigned to provide the first layer ofcapital, very favourably priced relativeto market, to enable senior funders,particularly commercial banks andDevelopment Finance Institutions(DFIs), to mitigate their financing risk.
The GPFs targeted gearing ratio is30: 70 (GPF Funding: LeveragedFunding), although this ratio isextended to 40% GPF funding forcertain products and up to 100%funding for projects of R10 million orless.
Facilitation / PackagingMobilizing Funding Funding
BanksDFIs Developers contractors,
GPF Mandate Evolution Timeline:2
All Human Settlements
GPF MANDATE & ROLERevised MandateThe GPF is to serve as the financing vehicle of the GDHS to leverage additional revenue for all human settlement developments (not just social and affordable housing).
Revised Role Project funding packaging, through the development of bankable feasibility studies
and innovative funding interventions as a mechanism to entice capital market investment;
Fund raising and Investment facilitation, through the formation of partnerships with local and international donors and development finance institutions to address funding shortfalls for the massification of the sustainable humans settlements development programme;
Project financing, through an equitable risk sharing model. Serving as a catalyst to ensure that other funding sources are enticed to participate in funding;
Project Management, to provide an oversight and monitoring role for mega projects. This is to ensure delivery of housing units in an integrated approach;
GAUTENG PARTNERSHIP FUND ROLE
DLGH Municipalities Agencies/ public
Facilitation / Packaging Mobilizing Funding Funding
Banks DFIs Developers contractors,
GPF MARKET INTERVENTIONSFinancial product Purpose
Rental Housing Fund To enhance the viability of investment into affordable
housing by rental developers/ entrepreneurs.
This is an incubator programme designed to enable
sustainable entrance of HDI owned companies in the
affordable rental property market. (The programme is limited
to prospective participants invited on public tender annually).
Social Housing Fund To enhance the viability of investment into affordable
housing by Social Housing Institutions. This is linked to
government institutional subsidy funding.
Student Housing Fund To enhance the viability of investment into affordable
housing for students by rental developers/ entrepreneurs.
Facilitation of Mixed
To develop optimal funding structure and raise
appropriate funding for human settlements projects.
GPF INVESTMENT PROCESS
Project Investment Process
-New business development
-Client relationship management
-Deal flow management
- Viability & Feasibility analysis
& Controls-Credit risk pricing
-Reporting on Investments
Board Investment Committee meets every fortnight or adhocBoard of Trustees meets every 6 weeks
GPF INVESTMENT CRITERIAMandate fit the affordable housing project should cater for households with income
TYPICAL PROJECT FUNDING STRUCTURE EXAMPLE
Project located in Kempton park Erf 223, land zoned residential 4 and can yield 35 housing units.
Project Cost Funding Structure
Construction Cost 10,000,000.00
Professional Fees 1,500,000.00
Total Project Cost 15,960,000.00
Equity Contribution 1,596,000.00 10%
GPF Debt 3,192,000.00 20%
Senior Debt 11,172,000.00 70%
Total 15,960,000.00 100%
Financial RatiosIRR on Cash flow after tax for 20 years 9%
NPV on Cash flow after tax at WACC of: 5% R 19,000,000
ROI on Op's surplus ROI on EAIT
Return on Total investment year 3 10% 7%
Return on Total investment year 5 13% 8%
Debt Cover ratio year 3 1.3
Debt Cover ratio year 5 1.4
Debt equity ratio 90%
Loan to value ratio 80%
Cost : income ratio 25%
WHY EMPOWERMENT FUND?
Constraints to entrance by BEE entities: Understanding opportunities in the sector careers, business and job
creation opportunities in the property sector are not well understoo