For the past decade, The Gauteng Partnership Fund (GPF) team has worked tirelessly to address the social imbalances affecting South Africa, specifically from a housing perspective. In the face of fluctuating social climates, changing political infrastructure and constant financial pressure, “Skills On Site” has to ask: how has the GPF delivered ten years of excellence in its task of housing the nation?
“The Fund was established by the Gauteng Department of Housing to address the funding challenges in the affordable housing sector,” begins Pakie Mphahlele, Chairman of the Board of Trustees of the Gauteng Partnership Fund.
-------------------------------------------------------------------------
Special fund
“Let’s start with what prompted the Gauteng Provincial Government to come up with a special fund and how they saw it working,” elaborates Kutoane Kutoane, CEO of the GPF. “Around 2002 we were facing debates regarding job creation, service delivery and housing. People were talking about the Financial Services Charter, transforming the whole financial services industry to make it more inclusive and accessible to the less advantaged.
“Also as far as housing was concerned, as part of the financial sector charter, banks were making commitments to affordable and low-income housing delivery. Banks began partnering with Government to deliver low-income units, which freed up Government to concentrate on the fully subsidised units,” Kutoane adds.
-------------------------------------------------------------------------
Overcoming challenges
However, the transition was not without its hurdles. “We became aware that banks were reluctant to come into the market due to prudential requirements,” Kutoane explains. “They use short-term public deposits to make long-term investments so they needed to ensure that they covered their risk profile. Since they had not been involved in these projects before, there was still a high perception of risk.”
The Government realized that it was necessary to change this perception. This could have been done through coercion but instead they took an approach of encouraging the banks to get involved. It was decided to put aside some monies as risk capital for projects of this nature. By mitigating risks and providing incentives, banks began to see the benefits of coming on board. Mechanisms included reduced interest rates and concessional funding to those involved.
“Government funds must be used for social investment. The returns are greater than most realize because they result in enhanced business dynamism, a more Ten Years of Excellence Addressing the issue of South Africa’s housing shortfall has been a massive undertaking, yet over the years great strides have been made. This has been due to the involvement of key organisations – and the passionate people who run them. Pakie Mphahlele Chairperson of the board of Trustees Kutoane Kutoane Chief Executive Officer 6 Skills on Site October 2012 integrated and dynamic property market, as well as job creation. And that’s why we exist, in a nutshell,” Kutoane smiles.
Not a small nut…and certainly a tough one to crack. He agrees. “It has not been an easy road to travel. Initially we had to run roadshows to explain the concept to banks. We got good buy-in from ABSA and Standard Bank to offer blended cost to developer landlords.
” This highlights another area in which social benefits have been evident. “In the process we have developed fresh financial talent in the organization, and have funded a new generation of entrepreneurial property owners and landlords,” says Pakie. “We are nurturing business people who will drive the economic future not only of this province, but also of our entire nation. We have established a valuable skills base within this organization.”
--------------------------------------------------------------------------
Target markets
In order to target efforts effectively, the Fund has designated areas of expertise. “A direct subsidy is a difficult thing to administer. There’s no such thing as a bag of money that people can dip into. The funds
have to be used effectively,” Kutoane stresses. “We’re looking at the R3,500-R15,000 per month income market. We don’t provide mortgage finance; we work with companies who want to be involved in the process.
“Products include subsidies in terms of ownership, as well as tenure options which provide affordable rentals as part of the social housing unit provision. 30% risk capital from our own funds makes it more accessible,” Kutoane continues.
“We also got involved with other roleplayers, for instance the Public Investment Corporation and various international investment financers. We promoted the concept to emerging entrepreneurs – those with
smaller projects of 30-40 units receive the same benefits as larger developers. We and the HFC recently signed an agreement to invest and manage this sector, providing R100 million each for the purpose.”
-------------------------------------------------------------------------
Efficient adaptation
Both men admit that the Fund is faced with ongoing obstacles. “It’s a constant battle to manage shifts in circumstances and perceptions, so we have to adapt all the time. For instance we’ve accessed
Government land in a bid to provide end-to-end management of Government resources to address the housing situation. This has worked very well so far. Developers are given special incentives to use this
land for low-cost housing, such as the ability to build commercial structures in the areas.
“While we aim to make the projects commercially viable, they must still meet social and Government needs. It has to be clear however, that there’s no such thing as a free lunch. This is taxpayers’ money
and it must work for the people.
However, it remains a multiplayer environment and one which requires careful navigation. “We exist in this ecosystem of meeting the needs of all these roleplayers,” Kutoane emphasizes. “In addition to aggressive mobilization of development funding, we also attend to issues such as green building and sustainability. Yet in spite of the challenges, our goal has been met. We’d like to see national Government take-up, and even international expansion of our model,” Kutoane emphasizes.
Pakie concurs with this statement, adding: “There can be no doubt that the GPF has more than complied with its mandate. Since its inception in 2002, the GPF has committed some R450 million in public funds to gear up to approximately R2.2 billion of private sector funds and facilitated the building of over 18 000 dwellings.
“After ten years of leading the social housing financial instruments market, we’ve successfully closed the space between South Africa’s housing vision and the requirements of private sector banking. I
believe we can share our knowledge and success in our efforts to provide a better quality of life for all people,” Pakie concludes.