RURAL HOUSING RURAL HOUSING LOAN FUNDLOAN FUND

Portfolio Committee on Portfolio Committee on Housing Housing

Presentation 10 May Presentation 10 May 20062006

Above is the home of the Nyalunga family in Lydenburg Extension 6. Towards the back is an original RDP house that the family received in 1996 and that has been extended one room at a time. The Nyalungas started by stockpiling building material and built the foundation themselves. They took four successive loans amounting to R22, 000 from RHLF retail partner Indlu to buy bricks, tiles, door and window frames and to pay for labour.

RHLF’s Vision Statement

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

RHLF implementation RHLF implementation strategystrategy

Presentation at Finmark Trust Forum 28 March 2006; Illana Melzer

RHLF’s contribution to “Peoples Contract to Create Work and Fight

Poverty”

• Establish credit histories & repeated access to credit

• PPP with intermediaries creating jobs within housing finance value chain

• Stimulate local economic development using local builders in construction

• Enable access to public utilities• Supporting the BMS industry create jobs in the

industry and related industries• Linking “second economy to first economy”

More Housing, more impact at lower cost of credit

Strategic Directions:

• Back to the housing basics (more impact, better payment behavior)

• Efficient delivery: scale, back-office concentration, smart use of technology

• Expand into the “gap” market: larger non-mortgage housing loans (R10 -30k), longer tenors (~ 36 months)

Lower TCOC

More Housing, more impact at lower cost of credit

Selected Strategic Initiatives:• Savings Linked Housing Credit

– Stokvels, Village Bank, Blue Dot Rural Housing/Wizzit Cell phone banking

• Community-Based Loan Origination– Emerging farmers and farmworkers

• Alternative Building Technologies– Possible changes in Rural Subsidy, alternative building technology

supports environmentally friendly housing• Rural Worker Housing

– Cooperate with employers on agri-village development• Link with Building Material Manufacturers

– Link “second economy to first economy”• Leveraging Housing Subsidies with RHLF top-up credit• New Conventional Wholesale Clients

– Alternative distribution channels, incremental housing.

Cumulative Disbursements

508,360

415,955

260,975

222,455

330,120

39%

17%

26%

26%22%

-

100,000

200,000

300,000

400,000

500,000

600,000

2007 2006 2005 2004 2003

R'0

00

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Cumulative disbursements

Annual percentage movement

Annual Disbursements

92,405

85,835

69,145

38,520

62,059

80%

32%

-38%

24%

8%

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2007 2006 2005 2004 2003

R'0

00

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Annual disbursements

Annual percentage movement

Annual Interest Income

17,533

14,308

17,621

13,904

21,801

23%

27%

10%

-19%

24%

-

5,000

10,000

15,000

20,000

25,000

2007 2006 2005 2004 2003

R'0

00

-30%

-20%

-10%

0%

10%

20%

30%

Interest income

Annual Operating Costs

10,293

9,311 9,546

7,946

9,523

0.2%

-2.5%

10.5%

19.8%

-

2,000

4,000

6,000

8,000

10,000

12,000

2007 2006 2005 2004 2003

R'0

00

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Operating costs

Interest Income vs Operating Costs

-

2,500

5,000

7,500

10,000

12,500

15,000

17,500

20,000

2007 2006 2005 2004 2003

R00

0s

Interest Income

Operating Costs

Impairments on Advances

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2007 2006 2005 2004 2003

R'0

00

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Advance impairments

Advance impairment %

1,006 794

(840)

(12,007)

(20,887)

-25,000

-20,000

-15,000

-10,000

-5,000

-

5,000

R'0

00

2007 2006 2005 2004 2003

Annual Surplus / (Deficit) Before Tax

Commitment to BEE

• Four distinct strategic thrusts– Demand driven developmental needs

of end-users– Funding black owned and managed

companies– Warehouse RHLF shares for future

acquisition– Employment equity

Number of End-user Loans

22,000

28,000

15,202

8,006

10,536

2007

2006

2005

2004

2003

RHLF Gender Distribution of End-user Loans12 Months ending 31 March 2006

51

49

Male

Female

RHLF Empowerment ClientsMDF Grants & Loans

20 19 18 16 16

2117

1616 15

0

5

10

15

20

25

30

35

40

45

2006 2005 2004 2003 2002

Nu

mb

er

of

clie

nts

Empowerment clients

Other clients

RHLF Current Client Profile

3

6

Other clients Empowerment clients

West Coast DC

Northern Free State DC

Sisonke DCFrancis Baard DC

Kgalagadi

Sisonke DC

DPLG listed Rural Nodes

Other Rural District Councils

RHLF development impact in ISRDSApril 2005 to March 2006 (Annualised)

Loans in 17 Rural Nodes

Number of loans 2 881

Value of loans disbursed R 7.9 m

Employment Equity African Coloured Asian White Total

Grade F M F M F M F M

5 1 2 3

4 2 3 5

3 1 1 2

2

1 1 1

Total 4 4 1 2 11

% 36% 36% 9% 18%

% 73% 0% 0% 27%

There is one disabled employee.

RHLF’s response to Key Environmental RHLF’s response to Key Environmental factorsfactors

• Financial Sector Charter – Constructive engagement with

banks, funding of clients reaching RHLF’s maximum

exposure limits

• Land and Agricultural Policy – Share experiences in micro-

finance for housing with Mafisa

• National Payment System and Competition in Banking

Sector – RHLF made representations to SARB and PASA

• New National Credit Bill – bigger loans and longer terms at

lower cost to borrower

Performance Indicators Actual Mar-05 Mar-06 Mar-07 Mar-08 Mar-09

Number of Loans Approved 12 6 9 10 9

Number of Loans in Place 18 21 25 30 30

Value of Loans in Place R 96,492,524 119,928,624 133,037,776 168,330,209 182,420,853

Income from Loans and Related Activity R 10,007,360 15,234,251 17,498,644 21,693,533 25,507,043

Average Interest on Loans Granted 13.98% 13.50% 13.50% 13.50% 13.50%

Losses on Loans R 8,320,650 6,534,679 6,438,025 7,392,000 7,738,500

Number of Financial Intermediaries 6 8 9 9 9

Number of Financial Intermediaries in Distress 1 1 - - -

Disbursements to Retail Intermediaries R 69,145,515 85,835,500 92,405,000 134,400,000 140,700,000

Average End-User Loan Size R 4,674 3,100 4,500 5,800 6,200

Number of End-User Loans 23,208 28,000 22,000 24,000 23,000

Qualifying Housing Use Target (% of loan instances) 48.0% 60.0% 65.0% 70.0% 75.0%

Financial Targets

Income from Core Business R 10,007,360 15,234,251 17,498,644 21,693,533 25,507,043

Income from Financial Investments R 4,300,252 2,298,818 4,302,796 3,290,056 3,412,187

Expenditure R 9,545,617 (9,311,122) (10,292,760) (10,372,386) (10,784,239)

Operating Surplus / (Deficit) R (839,923) 793,518 1,005,655 3,097,328 5,033,992

Total Capital R 133,037,195 158,757,854 185,018,744 212,764,721 216,338,855

Loan Capital R - 25,546,875 51,093,750 76,640,625 76,640,625

Capital used in Operations R 96,393,633 114,235,978 122,250,512 151,758,505 160,268,725

Capital used in Other Investments R - - - - -

Liquid Funds R 36,643,562 44,521,875 62,768,232 61,006,217 56,070,131

Growth Scenario

Assets Mar-05 Mar-06 Mar-07 Mar-08 Mar-09

Non Current Assets

Gross Advances 96,492,523 119,928,624 133,037,776 168,330,209 182,420,853 Impairments (13,327,348) (19,862,027) (26,300,052) (33,692,052) (41,430,552)

Net Advances 83,165,175 100,066,598 106,737,725 134,638,158 140,990,302

Investments in Associates 1,828,787 2,028,787 2,228,787 2,528,787 2,928,787 Available for sale financial assets 500,000 500,000 500,000 500,000 500,000 Property Plant and Equipment 943,398 621,234 364,370 64,170 139,122 Deferred Tax Asset 10,390,902 11,812,195 13,212,465 14,820,225 16,503,349

Total Non-Current Assets 13,663,087 14,962,216 16,305,622 17,913,182 20,071,258

Current Assets

Trade and Other Receivables 559,407 559,407 559,407 559,407 559,407 Cash and Cash Equivalents 36,612,153 44,521,875 62,768,232 61,006,217 56,070,131

Total Current Asssets 37,171,560 45,081,282 63,327,639 61,565,624 56,629,538

Total Assets 133,999,822 160,110,096 186,370,986 214,116,963 217,691,097

Equity and Liabilities Mar-05 Mar-06 Mar-07 Mar-08 Mar-09

Capital and Reserves

Grant Capital 154,762,590 154,762,590 154,762,590 154,762,590 154,762,590 Accumulated Deficit (22,115,010) (21,551,611) (20,837,596) (18,638,494) (15,064,360)

Total Capital and Reserves 132,647,580 133,210,979 133,924,994 136,124,096 139,698,230

Non-Current Liabilities

DBSA Market Facility 0 25,546,875 51,093,750 76,640,625 76,640,625DBSA KfW Concessionary Facility 0 0 0 0 0

Total Non-Current Liabilities 0 25,546,875 51,093,750 76,640,625 76,640,625

Current Liabilities

Trade and Other Payables 1,352,242 1,352,242 1,352,242 1,352,242 1,352,242 Other Provisions and Accruals 0 0 0 0 0

Total Current Liabilities 1,352,242 1,352,242 1,352,242 1,352,242 1,352,242

Total Equity and Liabilities 133,999,822 160,110,096 186,370,986 214,116,963 217,691,097

Income Statement Mar-05 Mar-06 Mar-07 Mar-08 Mar-09

Financial Revenue

Interest Revenue on Advances 10,007,360 15,234,251 17,498,644 21,693,533 25,507,043 Income from Equity Investments 1,574,667 200,000 200,000 300,000 400,000 Cash Dividend Income 110,000 500,000 800,000 Income from Financial Investments 4,300,252 2,298,818 4,302,796 3,290,056 3,412,187

Total Financial Revenue 15,882,279 17,733,069 22,111,440 25,783,589 30,119,230

Financial Expense

Net Impairment of Advances and Investments (8,224,649) (6,534,679) (6,438,025) (7,392,000) (7,738,500) Interest Paid on Non-Current Liabilities - (1,093,750) (4,375,000) (4,921,875) (6,562,500) Overdraft Interest and Other Financial Expense - - - - -

Total Financial Expense (8,224,649) (7,628,429) (10,813,025) (12,313,875) (14,301,000)

Net Financial Income / Net Interest Margin 7,657,630 10,104,640 11,298,415 13,469,714 15,818,230

Operating Expenses

Non-Executive Directors' Fees (209,000) (264,001) (348,000) (372,360) (398,425) Staff Cost (4,561,951) (5,241,779) (5,535,204) (5,292,668) (5,552,107) Travel Expenses (543,894) (371,228) (500,004) (535,004) (572,455) Occupancy Expense (522,860) (473,692) (512,880) (548,782) (587,196) Communication Cost (396,506) (195,735) (209,316) (223,968) (239,646) Marketing Expenses (1,096,809) (870,867) (836,004) (894,524) (957,141) Depreciation Property, Plant and Equipment (278,936) (322,165) (366,864) (400,200) (225,048) Consulting, Legal and Audit Fees (911,084) (824,647) (1,100,004) (1,177,004) (1,259,395) Other Administrative Expenses (1,024,578) (747,008) (884,484) (927,875) (992,826)

Total Operating Expenses (9,545,618) (9,311,122) (10,292,760) (10,372,386) (10,784,239)

Non-Operating Income / Expense

Gain / Loss on Foreign Exchange Rates 242,780 - - - - Gain / Loss on Diposal of Assets 805,285 - - - - Other Income - - - - -

Total Non-Interest Income 1,048,065 - - - -

Net Income Before Taxation (839,923) 793,518 1,005,655 3,097,328 5,033,992

Taxation 568,311 (230,121) (291,640) (898,225) (1,459,858)

Net Income After Taxation (271,612) 563,398 714,015 2,199,103 3,574,134

Actual Mar-05 Mar-06 Mar-07 Mar-08 Mar-09

Low Impairments 11.89% 3.50% 3.50% 3.50% 3.50%

Advance Impairment % (incl prefs) 16.27% 17.09% 18.46% 17.40% 18.74%

Net Income before tax under Low Impairments (839,923) 2,507,784 3,334,756 5,761,832 7,810,715

Expected Value of Impairments 11.89% 5.50% 5.50% 5.50% 5.50%

Advance Impairment % (incl prefs) 16.27% 18.49% 21.44% 21.34% 23.90%

Net Income before tax at Expected Value of Impairments (839,923) 793,518 1,005,655 3,097,328 5,033,992

High Impairments 11.89% 7.5% 7.5% 7.5% 7.5%

Advance Impairment % (incl prefs) 16.27% 19.89% 24.43% 25.28% 29.06%

Net Income before tax under High Impairments (839,923) (920,747) (1,323,446) 432,824 2,257,268

Falling Market Interest Rates

Interest Earned on Cash Balances 6.75% 6.25% 5.75% 5.25% 5.25%

Interest Charge on DBSA Market Facility 8.75% 8.25% 7.75% 7.75%

Interest Charge on KfW Concessionary Funding 6.25% 5.75% 5.75% 5.75%

Yield on new disbursements 13.50% 13.50% 12.00% 12.00% 12.00%

Net Income before tax under Falling Market Rates (839,923) 193,785 (795,697) 645,351 1,607,723

Current Market Interest Rates

Interest Earned on Cash Balances 6.75% 6.25% 6.25% 6.25% 6.25%

Interest Charge on DBSA Market Facility 8.75% 8.75% 8.75% 8.75%

Interest Charge on KfW Concessionary Funding 6.25% 6.25% 6.25% 6.25%

Yield on new disbursements 13.50% 13.50% 13.50% 13.50% 13.50%

Net Income before tax under Current Market Rates (839,923) 793,518 1,005,655 3,097,328 5,033,992

Rising Market Interest Rates

Interest Earned on Cash Balances 6.75% 6.25% 6.75% 7.25% 7.25%

Interest Charge on DBSA Market Facility 8.75% 9.75% 10.25% 10.50%

Interest Charge on KfW Concessionary Funding 6.25% 7.25% 7.25% 7.25%

Yield on new disbursements 13.50% 13.50% 15.00% 15.00% 15.00%

Net Income before tax under Rising Market Rates (839,923) 1,394,547 2,758,782 5,414,519 8,552,458

Sensitivity of Net Income before Tax - Organic Growth Scenario

Board of DirectorsName Date appointed Term

served Expertise

Ms. Totsie Memela-Khambule May 1998 8 years Banking and housing finance Mr. Pepi Silinga May 1998 8 years Development and rural development

Mr. Kgosi Pule May 1998 8 years Regulation and banking

Mr. Moray Hathorn May 1998 8 years Land rights, housing and legal

# Mr. Div Botha (DBSA representative)

February 2004 2 years Development banking

# Mr. Knowles Oliver June 2004 2 years Finance

* Ms. Nonhlanhla Mjoli-Mncube August 1996 9 years Housing development and construction

* Ms. Noncawe Makiwane August 1996 9 years Financial

* Dr. David Porteous May 1998 7 years Financial

* Ms. Jackie Huntley May 1998 6 years Legal and banking

* Mr. Diet von Broembsen (Department of Housing)

May 1998 8 years Housing; policy and settlements

* Mr. Mzi Dlabantu (Department of Housing alternate)

October 2001 4 years Housing and finance

* Resigned recently # Co-opted recently

Thank You