There are two major challenges facing those involved in the housing sector in South Africa –the lack of access to finance, and the delivery of low-cost housing to those that need it the most. The Gauteng Partnership Fund’s (GPF’s) mandate is to facilitate the evolvement of affordable housing in Gauteng via influential partnerships with all stakeholders through innovative strategies that benefit all players.
Established in 2002 by the then Gauteng Department of Housing and tasked as a catalyst for the mobilisation of private-sector investment into the housing market, the GPF was given a one-off grant from government. This financial backing is used to mitigate the risks to the private sector of investing in the low-end housing sector.
The GPF aims to be the pre-eminent provider of public risk capital, as well as the preferred funding partner in affordable housing. As a development finance institution, it leverages affordable housing by:
• Facilitating collaborations with the ecosystem of public and private sector partnerships;
• Securing new and innovative funding systems;
• Gearing private sector finance to ensure better bankability of projects;
• Ensuring accountability, monitoring and efficiency in the long-term management of funded projects; and
• That housing financiers enter the affordable housing sector on a sustainable basis.
The GPF’s role is to bridge the gap between government and the private sector on affordable housing projects through the following services:
• Rental Housing Fund and Empowerment Property Fund;
• Social Housing Fund;
• Management of social housing institutional subsidies;
• Strategic partnership projects (banks and development finance institutions); and
• Sustainable Housing Fund.
GPF CEO Kutoane Kutoane explains: “When the GPF was established, we expected it to have a determinate life span, but experience has shown that we underestimated the challenges facing us in this market. It became quite clear that a one-off intervention with a limited life span is not going to make the required impact on the housing market”.
“The GPF enters into partnerships with a certain financial commitment, and then we ask the private sector to contribute the balance of funds required. We provide the first layer of capital, so as to leverage the profitability of housing projects from a private-sector perspective, while still enabling the projects to have a down-market reach.
“At GPF, we work in an ecosystem of partners and, therefore, partnerships are of extreme importance to us. Our stakeholders include government departments responsible for housing issues, local municipalities, housing developers, banks, life insurance and pension fund institutions, as well as corporate South Africa,” he adds.
The beneficiaries of the GPF’s activities are rental households with a monthly income of R2 500 to R15 000; people who do not qualify for housing grants or RDP houses from the government; and people who are unable to access funds for a bond from a banking institution due to having no banking record or credit history.
“These people are caught in the middle of restrictive traditional fiscal processes and we need to cater for their housing needs. If we don’t, the informal housing situation will deteriorate to a completely unacceptable level,” says Kutoane.
The GPF believes it is the leading player in the facilitation of affordable housing in Gauteng and has focused its programmes on the mobilisation of the private sector funding to assist in resolving critical funding restraints. The fund has successfully managed to get the banking sector on board to the tune of R2.2-million, which has delivered over 17 000 houses to the targeted population. The GPF has committed over 66% of its initial capital grant to leverage over R2-billion in private funding.
An example of the success it has achieved is the 2005 Brickfields Experience project in Newtown, Johannesburg. The project, supported by the GPF and a number of partners, marked the biggest public–private housing partnership in South Africa at a cost of R98-million, which provided 809 mixed-use units of sizes varying from 37 m2 to 76 m2 .
Kutoane states that the Brickfields project was one of the GPF’s first projects and, to this day, remains one of its flagship success stories. Other recent projects have included Hlanganani and Fleurhof, in Johannesburg, and Tau Village, in Pretoria.
“Obviously the current economic downturn has impacted on GPF but the demand for housing continues to increase. At GPF, there is an understanding that returns on the affordable rental market are lower than traditional commercial properties and that the private sector is unlikely to invest without the support of the government, but the private entities that do invest will be diversifying their portfolio of assets and will reap the benefit of public funding, thereby giving them less exposure to risk,” says Kutoane.
The GPF is also encouraging the private sector to focus its corporate social investment (CSI) towards the housing environment with a belief that there is a natural synergy between housing and corporate CSI programmes, with the benefits of enhanced public relations and substantial tax deductions.
“Housing contributes to the stability of the environment in which businesses operate. Investing in projects that improve the livelihood and living conditions of the local communities from which businesses source employees is the right thing to do.
“The private sector needs to understand that community upliftment is crucial. Targeted CSI programmes add long-term value. The stability of the environment within which business operates is the key to business stability and success. Therefore, it makes sense to join forces with GPF, because there are no losers; it is a win-win situation for all stakeholders,” Kutoane concludes.