NHFC to scale up operations
February 16, 2009
By Roy Cokayne
The National Housing Finance Corporation (NHFC) plans to raise about R1.6 billion in its next financial year and a total of about R5 billion over the next three years to increase the scale of its operations.
Samson Moraba, the NHFC chief executive, said on Friday that a bond issue was the most likely route it would take in raising these funds.
The organisation would be embarking on roadshows.
However, Moraba said the NHFC was attracting funding from other sources, including multilateral agencies, which would reduce its need to raise finance on capital markets - although this funding would be tied to specific projects
'The NHFC is focusing on the low to medium housing market' |
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About R800 million was expected from one group, with the balance to come from the International Finance Corporation (IFC), but because of market conditions the IFC first wanted to "wait and see", he said.
Moraba said the NHFC was focusing on the low to medium housing market. Affordability was key in these markets, which had led it to blend its sources of funding to enable it to provide more affordable financing on a sustainable basis.
He said the sources of funding included a blend of the NHFC's own balance sheet, the capital market and multilateral agencies - resulting in lower rates than if it had raised these funds in one place.
Moraba referred to finance minister Trevor Manuel's comments in the budget last week about the recapitalisation of development finance institutions and specifically the Development Bank of Southern Africa.
He said the NHFC was in line to have its balance sheet recapitalised to allow it to scale up its activities, but there was no timetable for this.
Moraba stressed that development finance houses needed robust balance sheets if they wanted to raise the scale of their operations, particularly as they had partnered with banks and had to take some of the risks.
"The thrust of the value proposition is that we'd like to see the whole low-income housing market being viable and sustainable like the rest of the housing market.
"Part of the agenda is to provide risk mitigation so we can support the bigger banks and make an impact on the scale of housing delivery."
Moraba said the NHFC already had a memorandum of understanding with Absa and would be signing similar documents with the other major banks this year to facilitate housing projects.
He said the NHFC's strategy was to co-finance housing projects and share the risks with the banks.
Moraba said the NHFC was active in riskier areas for which the private sector had no appetite. Part of its drive in these areas was to create confidence to "crowd in" the private sector, so it could be a player in these markets too.
He said the NHFC had made a profit every year since it was set up 13 years ago, but it was judged on its effect in the housing market rather than on the profit it made.
Moraba said that as a development finance institution, the NHFC had a greater appetite for risk. Its default level, at just less than 5 percent of total loans, was almost double the 2.5 percent default level of major banks.
The NHFC had set a maximum default level of eight percent.
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