The Gauteng Partnership Fund becomes iconic in delivering low-cost housing {writer: Staff Reporter}

Having already secured in the order of R2.2 billion from banks to help finance the delivery of low-cost housing in the Gauteng province since its establishment in 2002, the Gauteng Partnership Fund (GPF) – having committed another R450 million – has become a shining example in the country of what can be achieved by public-private partnerships on the development front.

One of the greatest challenges facing South African entrepreneurs who want to become involved in the provision of housing to the lower end of the market – those with a household income of between R3 500 and R12 000 per month – is access to finance.

The situation was further complicated by the global financial crisis, which saw the banks reviewing their funding policies and withdrawing from the low-cost market, explains the chief executive officer of the GPF, Kutoane Kutoane.

“At the GPF, we are looking at what we can do to facilitate the funding of sustainable human settlements,” he adds.

While the GPF plays the role of catalyst, and the government has certain objectives to meet, the latter cannot foot the bill alone and there is a need for the corporate sector to assist, says Kutoane.

He promises that the GPF will renew its model to channel funds while waiting for banks to come back to the market.

In the interim, GPF projects to date have already facilitated the delivery of about 18 000 social housing rental units for low-income households, according to Boni Muvevi, the GPF’s chief investment officer.

The impact of these projects is that each provides shelter to at least three or four people. This translates to well over half a million people who have been provided with a proper roof over their head.

The idea behind the establishment of the GPF was, indeed, to assist people in the so-called middle group – those whose income caused them not to qualify for government subsidies and who could not secure private funding from banks – to acquire low-cost housing.

Because of the risk profile involved with this sector of the housing market, it was difficult for the banks to become involved, says Kutoane.

He explains that, rather than focusing on the individual, the Gauteng government decided to take the first risk position with projects that cater for that sector of the market. Public funds were made available to take up 30% of the risk, and the GPF then works with developers to secure the remaining 70% from banks and other funding institutions. This model saw banks coming to the table to fund a number of projects.

Last year, the GPF introduced the Entrepreneurship Property Fund (EPF) to facilitate the entry of small, medium and micro enterprises into the market. It is aimed at entry-level black entrepreneurs.

The GPF funds the total cost of acquisition up to R7.5m, and co-finances renovations with other financing institutions.

From the first 11 entrepreneurs, five projects already have been approved for funding, and are going ahead. “These are people who would never have gotten into the market through the traditional channels,” says Kutoane.

Muvevi says that the GPF’s priorities going forward would include:

• Working more closely with government institutions on the upfront planning stage of integrated projects and budgeting, and helping to unlock potential bottlenecks;

• Continuing to focus on developing emerging black property developers to assist the GPF in driving its delivery mandate on housing units; and

• Focusing on the rental social housing programme to ensure the targets that have been set for the province will be met.

Kutoane says the GPF will launch the second phase of the EPF and invite interested entrepreneurs who register as developers and have identified viable projects. “We will look at applications on a project-by-project basis. This should not be seen as a free-for-all: we are only interested in serious entrepreneurs who have done their homework and have what it takes.”

The GPF’s strategic plan for the next three years is to provide another 18 000 to 20 000 houses. But, Kutoane says, this depends on corporates coming to the party.