Thubelisha Homes Presentation to the Portfolio Committee on Housing

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Thubelisha HomesPresentation to the Portfolio
Committee on Housing

• Presented by
• Kevin Duncan
• Chief Executive Officer
• 10 May 2006

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Agenda

• 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

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Introduction

• 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 Servcons Rightsizing programme
• Ministers decision in October 2004 to
  rightsize the remaining Servcon portfolio
  in-situ, forced the creation of an alternative
  future for Thubelisha

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Mandate

• 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

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Funding FrameworkInitial 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.

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R30 million Capacitation Grant

• 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.

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Transfers from NDoH for Overhead Recovery

• No transfers for overheads up to year 2006/7
• Transfers are expected to take place quarterly
  starting from 1 April 2006

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New 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.

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Board 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

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Corporate 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

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Corporate Governance 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

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Corporate Governance 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

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Scope 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

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2005/06 Results
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2005/06 Results
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2005/06 Results
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2005/06 Results
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2005/06 Results
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2005/06 Results
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2005/06 Results
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2005/06 Results
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2005/06 Results
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Key Strategic Objectives2006/07 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

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Key Strategic Objectives2006/07 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 Governments
  specialist implementing agent for mega projects

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2006/07 - 08/09 Operational Indicators
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2006/07 08/09Financial Indicators
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BudgetsImplications 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

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Budgets Implications Assumptions 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

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Key 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

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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

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Contribution to BNG/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

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Employment 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

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Employment Equity 2005/06
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Employment Equity by Race
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Employment Equity by Gender
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Procurement

• 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.

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Way Forward

• Reinstatement as a VAT vendor
• Conversion to a more appropriate corporate form
• Communiqué from Minister to Provinces and Local
  Authorities regarding Thubelishas new mandate
• Standardisation of contractual agreements with
  Provinces, particularly in terms of tranche
  payment arrangements

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• Thank You