Thubelisha Homes Presentation to the Portfolio Committee on Housing

Thubelisha HomesThubelisha HomesPresentation to the Portfolio Presentation to the Portfolio

Committee Committee on Housingon Housing

Presented by: Kevin Duncan

Chief Executive Officer10 May 2006

AgendaAgenda Establishment of Thubelisha Mandate Funding Framework Board members Corporate Governance Strategic Plans Key Challenges Delivery Challenges Contributions to BNG/ASGISA Employment Equity/Procurement Way forward

IntroductionIntroduction Established in 1997 as a Housing Support Institution of the

National Department of Housing

CEO appointed in January 1999, operations commenced soon after

Section 21 company, registered under Section 3(a) of the PFMA with Independent Board of Directors and 3 “classes” of members

Original mandate was primarily to provide housing stock for Servcon’s Rightsizing programme

Minister’s decision in October 2004 to “rightsize” the remaining Servcon portfolio in-situ, forced the creation of an alternative future for Thubelisha

MandateMandate New mandate received on 22nd February 2006

“To undertake the construction of affordable housing projects and related services”

“To provide project management services”

Now required to do actual construction of houses and installation of engineering services

Requires a different business model to manage the higher risk profile associated with construction activities

Appointed as “Implementing Agent” for the Western Cape DoH on the N2 Gateway

Funding FrameworkFunding FrameworkInitial R50 million GrantInitial R50 million Grant

Used as a revolving fund to bridge finance project costs, and then later collect subsidies.

Reduced to R39 m due to R11 m in losses accumulated since inception

Included in the Debtors that still need to be collected from Provinces.

R30 million Capacitation R30 million Capacitation GrantGrant

Since 1 November 2005, R14m used for capacitation purposes including: Recruitment of new staff and salaries Opening of new offices and office rentals Marketing and communicating new role for Thubelisha Travel costs Telephones, equipment rental, capital expenditure

The balance will be spent on further recruitment, capital expenditure, and installation of new IT systems in 2006/7.

Transfers from NDoH for Transfers from NDoH for Overhead RecoveryOverhead Recovery

No transfers for overheads up to year 2006/7

Transfers are expected to take place quarterly starting from 1 April 2006

New Corporate FormNew Corporate Form According to new legislation, public entities

will not be allowed to be section 21 companies.

Thubelisha has made suggestions to the NDoH for a suitable new corporate form.

Whatever corporate form is approved will determine how Thubelisha will be capitalised.

Board of DirectorsBoard of Directors

Mr D M Thompson (Chairman) Mr J L Bartlett Mr K C Duncan (CEO) Ms C L Mdaka Ms D E Moraka Mr V P Maluleke Mr P Chauke (recently resigned) Mr W A Odendaal

Corporate GovernanceCorporate Governance Independent board with relevant committees

that meet regularly Audit 4x pa Executive 12x pa Investment 4x pa Remuneration 2x pa

Reduced number of directors has necessitated urgent changes to Articles of Association

Corporate Governance Corporate Governance contd.contd.

More appropriate corporate form in accordance with Treasury/DPSA governance framework required for new mandate

Will also require transformation of Board in terms of appropriate skills

Generally compliant with King 2 Code

Corporate Governance Corporate Governance contd.contd.

PFMA non-compliant areas: Loans, guarantees & other commitments Investment of surplus funds with Corporation

for Public Deposits Audit Committee should not have same Chair

as Board of Directors Audit committee to meet annually with Auditor

General Payments in excess of R2,000 to be effected

electronically

Scope of ActivitiesScope of Activities Land identification Feasibility Studies Project/technical audits Construction of houses Installation of engineering services Project and Construction management Subsidy and claims administration Beneficiary relocations Support organisation for “managed” PHPs Community liaison Accounts Administrator Contractor development & skills transfer Turnkeys

2005/06 Results2005/06 Results

HOUSES APPROVED BY MANEX / EXCO

0

2,000

4,000

6,000

8,000

10,000

12,000

Actual Cumulative 0 1,962 5,347 5,347 5,997 6,950 7,431 8,506 8,506 9,738 9,738 11,077

Budget Cumulative 417 834 1,252 1,935 2,619 3,537 4,606 5,674 6,425 7,342 8,477 9,612

Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar


SERVICED STANDS SECURED or PRODUCED

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Actual Cumulative 83 167 2,654 2,654 2,654 3,951 4,093 4,533 4,975 5,136 5,603 5,864

Budget Cumulative 119 238 358 642 926 1,210 1,559 2,383 3,070 3,822 4,811 5,800


2005/06 Results2005/06 ResultsHOUSES CONSTRUCTED

0

1,000

2,000

3,000

4,000

5,000

6,000

Actual Cumulative 174 452 638 918 1,316 1,686 1,928 2,443 2,808 3,036 3,544 4,226

Budget Cumulative 212 423 775 1,176 1,578 2,019 2,486 2,952 3,419 3,964 4,570 5,176



SUBSIDY APPLICATIONS COMPLETED

0

2,000

4,000

6,000

8,000

10,000

12,000

Actual Cumulative 327 638 1,038 1,910 4,582 5,188 5,840 6,584 6,870 7,911 8,552 9,900




SUBSIDY APPROVALS RECEIVED

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Actual Cumulative 191 530 855 1,121 3,289 4,668 5,016 5,794 6,084 6,323 7,101 7,952




HOUSES HANDED OVER TO BENEFICIARIES

0

1,000

2,000

3,000

4,000

5,000

6,000

Actual Cumulative 188 440 642 910 1,204 1,433 1,569 1,821 2,029 2,176 2,530 2,880



2005/06 Results2005/06 ResultsREVENUE (Turnover)

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

Actual Cumulative 3.4 9.5 45.5 50.6 56.4 62.8 67.6 78.9 106.4 120.5 139.9 159.6

Budget Cumulative 6.1 12.2 22.9 36.4 49.9 64.5 80.0 96.7 112.7 131.6 152.6 173.6


2005/06 Results2005/06 ResultsOPERATIONS RECEIPTS (Collections)

0.0

50.0

100.0

150.0

200.0

250.0

Actual Cumulative 1.8 9.8 15.0 52.7 57.8 62.0 95.9 99.0 103.0 108.5 146.6 199.3

Budget Cumulative 7.7 15.3 28.1 44.4 60.8 78.4 97.2 117.4 136.9 160.1 185.8 211.4


2005/06 Results2005/06 ResultsOVERHEAD EXPENSES

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Actual Cumulative 2,024 4,628 7,179 9,951 12,583 15,376 18,071 22,400 25,450 28,597 32,125 36,584

Budget Cumulative 2,634 5,246 8,027 11,065 14,110 17,246 20,510 23,782 27,194 31,072 34,956 38,841


Key Strategic ObjectivesKey Strategic Objectives2006/07 – 08/092006/07 – 08/09

Short term: To successfully re-brand Thubelisha by 30

September 2006 To successfully restructure Thubelisha by 30

June 2006 To secure 2 new “mega projects” under the

UISP by 30 September 2006 To reach agreement on a new corporate form by

30 June 2006 To have the funding arrangements to support

this Business Plan approved by NDoH, by 30 April 2006

Key Strategic ObjectivesKey Strategic Objectives2006/07 – 08/092006/07 – 08/09

Medium Term: To contribute 20% of the national “subsidised”

housing delivery by 31 March 2009

To be recognised by the NDoH as the Government’s specialist implementing agent for “mega projects”

2006/07 - 08/09 2006/07 - 08/09 Operational IndicatorsOperational Indicators

ACTIVITY 2006-07 2007-08 2008-09

Houses built 20,300 30,000 40,000

Stands serviced 10,000 20,000 30,000

Revenue (Rm) 606 1,152 1,762

Subsidies secured 30,000 40,000 50,000

Employees 209 287 355

2006/07 – 08/092006/07 – 08/09Financial IndicatorsFinancial IndicatorsACTIVITY 2006/07 2007/08 2008/09

1. Revenue (Rm) 606 1,152 1,762

2. VAT (Rm) 84 158 240

3. Operating costs (Rm) 98 123 156

4. Transfers from NDoH (Rm) 47 50 54

5. Investment (Rm) 95 79 54

6. Compensation : Revenue (%) 10,3 7,2 6,1

7. Capex (Rm) 6,8 1,7 0.1

Budgets:Budgets:Implications & AssumptionsImplications & Assumptions

Subsidy (sales) value and Cost Of Sales increase by 12% per annum

Various forms of tranche payments for all “unblocking” projects

No more P1 to P5 progress payments Operating costs to be partially covered by annual

transfers from NDoH; R47m, R50m and R54m Operating expenses increase by 9% per annum,

compensation by 7% Mega projects increased share of total turnover;

34%, 46%, 49%

Budgets : Budgets : Implications & Assumptions Implications & Assumptions

cont.cont. Revenue recognised in accordance with AC 109

“stage of completion” 10% margin on “unblocking” projects Zero margin on UISP projects, but monthly

retainer and project management fee per unit 4% fee on social & other facilities Accounts Receivable balance at 31 March 2006,

collected by 31 March 2007

Key ChallengesKey Challenges Controls must not be compromised as a result of

decentralised operations, and huge increase in Company output

New IT systems must be timeously developed and implemented

Brand awareness and public relations must be enhanced to obtain successful repositioning

Relationships with some Provinces and Local Authorities must be strengthened

Seen as a “total solutions provider” for socio-political problems, yet measured narrowly in terms of houses built

Key Challenges cont.Key Challenges cont. Management and controls of new construction

activities need special attention to mitigate against new risk areas

Appropriate technical staff will be recruited at an “affordable” cost, and current staff retained, considering the demand for their skills

Additional funding will be made timeously available for projects under the UISP, to enable implementation as per the requirements of the BNG

Stakeholders must not have unreasonable expectations of what is realistically achievable

Contribution to Contribution to BNG/ASGISABNG/ASGISA

Upgrading of informal settlements Provision of social and community facilities Social (medium density) Housing Job creation Unblocking of housing projects Capacity building in Local Authorities Rectification of houses built between 1994 and

2002

Employment EquityEmployment Equity Thubelisha has adopted targets for

employment equity as per the Construction Industry Charter

30% black people at all management levels 12% black women at all management

levels

“Black” = Africans, Coloureds and Indians i.t.o. BBBEE Act 53 of 2003

Employment Equity Employment Equity 2005/062005/06

0

10

20

30

40

50P

erce

nta

ge

Charter Targets 30 12

Thubelisha 41 11 23

Black ManagementBlack Female Management

Total Female Management

Employment Equity Employment Equity by Raceby Race

0

10

20

30

40

50

60

70P

erc

en

tag

e

Nat. Demographic 21 62 10 4

Thubelisha 17 63 8 12

White Black Indian Coloured

Employment Equity Employment Equity by Genderby Gender

0

10

20

30

40

50

60

70P

erce

nta

ge

Nat. Demographic 48 52

Thubelisha 66 34

Male Female

ProcurementProcurement

Our procurement targets are in line with the Construction Industry Charter.

Industry target is to achieve a weighted target of procurement spend from BBEEE suppliers of 70% by December 2013.

Our goal is to increase the procurement of women service providers to 15%, and HDIs to 30% in the next three years.

Way ForwardWay Forward

Reinstatement as a VAT vendor Conversion to a more appropriate corporate

form Communiqué from Minister to Provinces and

Local Authorities regarding Thubelisha’s new mandate

Standardisation of contractual agreements with Provinces, particularly in terms of “tranche payment” arrangements

Thank YouThank You

Documents

Thubelisha Homes Presentation to the Portfolio Committee on Housing