African Union for Housing Finance Conference: Botswana Housing Corporation

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African Union for Housing Finance Conference: Mr Reginald Motswaiso, CEO, Botswana Housing Corporation. With more than 46 cities in Africa swelling to populations of a million people or more — and 17 of the world's 100 fastest-growing cities located in Africa — there is an acute need to develop housing solutions for so many urban residents. But raising the capital to meet that growing demand for housing remains a significant challenge. In 2013, the African Union for Housing Finance (AUHF) will host a conference under the theme "Raising Capital for Housing Finance.” The Africa-China Urban Initiative will organize a conference panel discussion on "Understanding (and harnessing) Chinese investment interest." Chinese investment in residential development in Africa is increasingly having an impact and demonstrating a track record of opportunity and experience. Panelists invited include Chinese investors setting out their experiences and expectations for the market and an African corporation that has received Chinese financing.

Transcript of African Union for Housing Finance Conference: Botswana Housing Corporation

  • 1.Presentation to the African Union for Housing Finance (AUHF) Conference Reginald Motswaiso Chief Executive Officer Botswana Housing Corporation 1

2. The Journey Botswana Housing Corporations Mandate; Financing the Corporations operations; Sources of external finance; China Exim Bank Loans; Housing projects undertaken through China Exim Banks loans; Challenges; Preferred procurement mode; Conclusion2 3. Botswana Housing Corporations Mandate Established in 1970 by an Act of Parliament with the following mandate: To provide for the housing, office and other building needs of the Government and Local Authorities To provide for, and to assist and to make arrangements for other persons to meet the requirements of the preceding bullet point To undertake and carry out, and to make arrangements for other persons to undertake and carry out building schemes in Botswana. 3 4. Financing of the Corporations operations Initially Government provided low interest bearing loans; In 1990s Government decided parastatals had be self sustaining (swim or sink); Principal financing methods: Rolling back sales proceeds; Borrowings; Pre selling, and collecting as development proceeds; Rental stock, for recurrent expenditure. 4 5. Sources of external finance BHC does not receive annual Government subventions; External funding sourced from capital markets; Interest rates, in current portfolio, range from 7.5% to 12%; Repayment periods range from 8 to 23 years; Bonds secured from capital markets range from 5.88% (floating rate of 1.7% above 91 day Bank of Botswana Certificates rate, currently at 4.18%) to a fixed rate of 10.1%5 6. Composition of existing borrowings Loan portfolio as at 31/03/13 includes: Loans from Government (pre - swim or sink pronouncement) (1%); Ex - Government loans since sold to private sector (18%); China Exim Bank loans (10%); Bond finance (56%); Bank overdraft (15%).6 7. Exim Bank Loans Government to Government loans; Must be authorised by Parliament; Bots Government on-lends to BHC; Bots Government bears exchange risk; Fixed interest rate ranges from 8.4% and 8.5%; 8 year repayment period with a 4 year grace period. 7 8. Housing Projects Constructed Using Exim Bank Loans 86 housing units in Kasane; 293 housing units in Gaborone; 104 housing units in Gaborone; 120 housing units in Francistown; 266 housing units in Serowe meant to use Exim Bank Loan, funds were never disbursed to BHC During the period when these projects were undertaken, 1999/00 to 2004/05, a total 1, 796 housing units were developed; Percentage finance by China Exim Bank (33.5%). 8 9. Kasane 86 Houses 86 houses constructed; Contractor - Complant Botswana; Loan Amount - P12, 249, 612 ($2.68 million); Contract Sum - P12, 569,128 ($2.75 million); Actual cost of development - P11, 743, 416 ($2.57 million); Types of Houses - 86 low - income houses.9 10. Kasane 86 Houses Pictures10 11. Gaborone 293 Houses 293 houses constructed; Contractor - Complant Botswana Loan Amount - P49, 657, 860 ($7.99 million); Contract Sum - P53, 894, 684 ($8.67 million); Actual development cost - P51,050,136 ($8.21 million); Types of Houses - 141 low income, 152 medium income.11 12. Gaborone 293 Houses Pictures12 13. Gaborone 104 Units 104 housing units constructed; Contractor - Complant Botswana; Loan Amount - P21, 709, 879 ($4.54 million); Contract Sum - P21, 899, 913 ($4.58 million); Actual development cost - P24, 353, 026 ($5.09 million); Types of Houses; 76 townhouses and 28 cluster houses13 14. Gaborone 104 Units Pictures14 15. Francistown 120 Houses 120 houses constructed; Contractor - Complant Botswana; Loan Amount - P15, 542, 299 ($3.28 million); Contract Sum; P19, 078, 345 ($4.03 million); Actual development cost - P19, 057, 930 ($4.02 million); Types of Houses - 99 low income and 21 medium income houses.15 16. Francistown 120 Houses Pictures16 17. Challenges Transparency compromised BHC is a state owned enterprise; Bound by Governments procurement rules and regulations (PPADB); Loan condition required use of specific Chinese company; Compromised transparency and desire for value for money;17 18. Challenges (cont) Contractor often privy to loan agreement prior to contract negotiation; Compromised negotiations in favour of the contractor; Delays in concluding loan agreement between Exim Bank and Government; Consequently, delays in starting projects;18 19. Challenges (cont) As a result, contractor often asked for a review of contract; Pricing of houses was cost driven, higher than anticipated house prices;19 20. Preferred Procurement Mode Open tendering; Contractors credentials are tested; Robustness of tender submission tested (duration, delivery team, technical resourcing and pricing); Maximises value-for-money for BHC.20 21. Conclusion BHC has developed houses using funds from China Exim Bank; Funds availed as loans, not grants; BHC prefers a procurement model which is transparent and lends itself to optimising on its purchasing power; Strings attached to loans should be removed (contracts executed by a named Chinese construction company).21 22. Thank You www.bhc.bw22