SERVCON PAYMENT NORMALISATION PROGRAMME

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SERVCON PAYMENT NORMALISATION PROGRAMME
SERVCON IS HERE TO SERVE

• PRESENTATION TO SELECT COMMITTEE ON PUBLIC
  SERVICES IN PARLIAMENT CAPE TOWN

2 APRIL 2003
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SELECT COMMITTEE ON PUBLIC SERVICES

• 1. Servcons Role
• 2. Rightsizing
• 3. Performance on KPAs
• 4. Issues
• 5. Swamp
• 6. Towards a New Vision
• Draining the Swamp
• Strategic Directives
• 9. Evictions
• 10. Job Creation and Community Development
  Project
• 11. HIV/AIDS
• l

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SERVCONS ROLE

• Joint venture
• Department of Housing
• Banking Council
• Deals with Banks Repossessed Properties
• Cut off date 31 August 1997
• Rehabilitation programme
• Subsidised rental (13 - less than
  mortgage)
• Buy back option instalment sales
• Rightsizing (Thubelisha Homes)
• Aged and disabled
• Twin Focus
• Relief for ex-owners
• Dispose of portfolio over 8 years

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RIGHTSIZING

• Assistance to relocate to affordable house
• Targeted at those who cannot afford existing
  house
• Alternative to eviction
• Affordable interim rental
• Government pays special subsidy (relocation
  assistance
• Thubelisha procures alternative house
• Client relocates
• House sold back into the market

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PRICIPAL RESPONSIBILITY OF SERVCON

• 7.5 delivery 1-04-1998 to 31-03-1999 7.84
  
• 20 delivery 1-04- 1999 to 31-03-2000 20.21
• 40 delivery 1-04-2000 to 31-03-2002 41.0
• 52,5 delivery 1-04-2002 to 31-03-2003 51.20
• 65 delivery 1-04-2003 to 31-03-2004 65.0
• 82,5 delivery 1-04-2004 to 31-03-2005 82.5
• 100 delivery 1-04-2005 to 31-03-2006 100

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SERVCON HOUSING SOLUTIONS
2.SERVCONS PERFORMANCE UP TO 31 MARCH 2003
171 Staff
169 Staff
PROJECTED
161 Staff
(2664) 8
167 Staff
R79.5M
140 Staff
R87.5M
152 Staff
R67.9M
(4081) 12.30
52.0 m
(3367) 10.10
R63.5M
(3790) 11.40
R44.1M
(2600) 7.80
(5726) 17.20
79.5M
R25.8M
(5828) 17.50
(5244) 15.70
PROJECTED BY 31/03/2003 52.5 ACHIEVED TO
28/02/200 51.20
Projections to 31/03/2006 (Based on current
trends)
R52.0 M
(3443) 10.30
(2707) 8.10
The remaining delivery percentage must be
delivered in the months of MAR 03
(2500) 7.50
R48.1 M
R40.9 M
R182.2 M
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Financial Expenditure1998/9----2002/3
Projections for the Remaining 3 Years
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2.1 Specifics on results up to 28 February 2003
are as follows KPA 1 Reduction in Portfolio
Satisfactory Disposed Of (SDO)

• Comments
• Community resistance has now been escalated ( A
  movement from Soft Core clients to Hard Core
  clients)
• Inability of Sheriff to serve and execute Court
  Orders causing a drop in finalisation of SDOs
• Continued request, by those who must be evicted,
  to be Rightsized using political leadership
  (Local and Provincial)
• Strategic directions, taking effect from 1 April
  2003, pave way for new initiative.

SDOs ACHIEVED FROM THE FOLLOWING SOURCES
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KPA 2 Improve Rental Returns

• Reasons Payment Trends
• On-going unemployment and re-loss of jobs by
  Servcon clients
• Funeral Expenses Incurred by clients
• Entrenched habit of non-payment-non destitute
  hiding behind destitute
• Limited understanding on benefits of regular
  payments
• Lack of financial discipline
• Over commitment on disposable income
• Increasing cost of living
• Intimidation a pain largely influenced by
  non-destitute over destitute
• Marital difficulties Affecting status on joint
  income and/or Spouse tasked with the
  responsibility of paying bills
• Execution of Legal documents on defaulting
  clients

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KPA 3 Good Book / Bad Book Split
3.1 GOOD BOOK
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3.2 Bad Book
Upward Trend
202
220
109
28
1078
Downward Trend translating into difficulties to
perform
538
156
77
24
12
712
1157
409
145
85
Downward Trend
Figure on the rise
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ISSUES

• Payment of subsidies in situ in certain
  circumstances
• Cut of date access to rightsizing
• New Subsidy rules issue of contribution
• Resale of vacated properties in possession
• Environment has not normalised
• New Lending and Secondary Market

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Breakdown of Law and Order / Defiance
Lack of Education And Understanding
Environmental Conditions
HIV AIDS
Poor Community Leadership
Structural Defect
Unemployment/ Poverty
Lack of Financial Discipline
THE HOUSING SWAMP
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Towards a New Vision
NEW VISION
Bridge
Breakdown of Law and Order / Defiance
Trend Line
Trend Break
Unemployment/ Poverty
THE HOUSING SWAMP
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Breakdown of Law and Order / Defiance
Lack of Education And Understanding
Environmental Conditions
Mission
Poor Community Leadership
Create an enabling environment Reestablish
secondary market Uplift Communities
What is needed is A Package of Measures to
address Each issue individually But also
holistically
Lack of Financial Discipline
Structural Defect
Unemployment/ Poverty
HIV AIDS
DRAINING THE SWAMP
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• Strategic Directives
• Offering Properties at Market Value
• Improving Rightsizing Housing Options
• Secured Vacant Properties (Undertaking focused
  and effective Evictions
• Improving Servcon Profile
• HIV/AIDS Orphans ability to access Subsidies
  (Policy issue)
• Functioning Community Development Projects
• Determining opportunities for Secondary Market
• Promotion of intra Servcon excellence
• Embarking on a restructuring process (linked
  to diminishing portfolio with cost increment)
• Stakeholder Relationship Management

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PROPOSED MERGING OF OFFICES AS A RESULT OF
PROJECTED DIMINISHING PORTFOLIO OPERATIONS
BENONI 2939 10 8 2
BOKSBURG 3822 9 7 2
GERMISTON 3078 9 7 2
KEMPTON PARK 2578 9 7 2
SECUNDA 1382 5 4 1
TOKOZA 1825 5 4 1
KRUGERSDORP / KLERKSDORP 2331 10 8 2
PRETORIA 911 2 1 1
SOWETO 5164 15 12 3
VEREENIGING / ZAMDELA 1623 4 3 1
WESTERN CAPE 3921 15 11 4
KZN 502 3 2 1
EASTERN CAPE 1654 7 5 2
FREE STATE 1654 3 2 1
33384 106 81 25
13671
1424
1439
1368
1345
1456
1911
1430
1356
1251
1330
1823
1291
1541
543
2481
818
2321
2076
1359
320
852
1186
777
1038
576
3093
924
458 6 4 2
1501 11 9 2
1719 4 2 2
1726 10 8 2
196 3 2 1
1048 5 4 1
1293 9 7 2
335 4 3 1
2071 12 10 2
805 4 3 1
1845 13 9 4
182 3 2 1
730 6 4 2
1111 3 2 1
15020 93 69 24
176
1136
1429
1172
165
1209
1143
183
1172
1201
1141
160
1121
1370
LEGAL UNIT
KEMPTON PARK 933
SECUNDA 123
TOKOZA 880
KRUGERSDORP / KLERKSDORP 883
PRETORIA 346
SOWETO 1495
VEREENIGING / ZAMDELA 612
WESTERN CAPE 1739
KZN 115
GERMISTON 1798
EASTERN CAPE 283
BENONI 602
BOKSBURG 1002
FREE STATE 1407
257 6 4 2
499 13 11 2
149 4 2 2
793 11 9 2
73 2 2 0
168 6 4 2
410 10 8 2
138 0 0 0
578 12 10 2
193 4 3 1
341 12 9 3
92 2 1 1
174 5 3 2
237 3 2 1
4102 90 68 22
164
145
174
188
136
142
157
158
164
138
192
158
1118
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Marketing Servcon as a brand
Clients who have the financial means must be
encouraged to purchase the properties in full.
Product
Servcon must highlight to clients the benefits of
owning your own home - - Security - Possible
Investment
Outright Sale
If the property is sold at market value, the
clients will be more willing to buy as it will be
more attractive than selling it at 105 original
loan
It must be clearly communicated to clients how
the prices were arrived at.
The bond repayments must be clearly explained to
clients by the consultants
Pricing
Not relocating means that stability within the
family will be maintained, e.g. children will not
have to change schools etc.
The socials aspects of clients and their families
will not be affected
The benefit of an outright sale is that the
family will not have to relocate (Familiarity)
Place

• Intention of the programme is not to evict. (red)
• Occupants who are unnecessarily difficult using
  defiance stances/ group end up being hurt out
  in limbo once an eviction order has been executed.

Servcon is here to help And we are committed to
home-ownership
Promotion
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For clients, legal occupants, who can afford the
property Through monthly repayments. Servcon will
enter into an agreement with occupants in this
regard.
Clients to be made aware that if they default,
the banks will evict them.
Product
Instalment Sale

• Offering monthly repayments to make it more
  affordable.
• Terms of repayments vary accordingly from client
  to client

Pricing
Place
Same as for Outright Sale

• Servcon is here to help
• Home ownership
• Affordability
• After 5 Years, property will be transferred
  into clients name

Promotion
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For legal occupants who cannot afford the
property in terms of the Instalment sale option,
but believe that their income will increase.
It must be ascertained if these legal occupants
are willing to adjust their financial Affairs so
that they can cope with making repayments. A
rental programme will then be offered
Formula Rental
Product
Increase the rental amount over a period of 3 to
4 years until it equals the instalment sale
amount.
The rental amount is variable
Pricing
Place
Same as for Outright Sale
Servcon is here to help Home ownership
Affordability Understanding (adjustment of
repayment).
Bring message across that government banks
share 50 of the administration holding costs
(rates).
Convince the hard-core defaulters that if they do
not go the Servcon route, they will find
themselves in a much worse situation.
Promotion
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Owners who cannot afford the properties assisted
by Servcon to find alternative, affordable,
long-term accommodation.
These owners will have to move to another
property that will be provided by Thubelisha
Homes.
Rightsizing
Product
Household earnings below R3500 are provided with
a Housing subsidy of R22 800 as relocation
Assistance under the Housing Subsidy Scheme.
Pricing
While the process is underway occupants are
permitted to continue living on the property at
an affordable rent.
Options as to where clients can move to are
provided by Thubelisha Homes
Place

• Servcon is here to help Clients get alternative
  affordable, long-term accommodation.
• Tenure / Home Ownership
• Judgement on default will be rescinded.

When their financial situation improves, clients
can consolidate the house at their own pace.
Clients who Rightsized, can join the Servcon
clubs and become part of the Servcon Job Creation
Programme.
Promotion
Stress to clients that Servcon will use
evictions as an alternative for occupants failing
to Rightsized.
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FUTURE STRATEGIC OBJECTIVES After Risk Report)

• PLAN A (Business as usual)
• Submitted Servcon Strategic Plan 2003/2004 to
  2005/2006 financial year provides

• PLAN B
• Quarterly reporting on the recently approved
  Strategic Plan will dictate.

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JOB CREATION/COMMUNITY DEVELOPMENT
PROJECTSRebuilding Communities

• Support for Servcon clients trying to improve
  their financial circumstances
• Support activities which will benefit broader
  community
• SERVCON CLUBS
• Networking
• Skills Training
• Needs analysis
• Marketing channel
• Data base of skills
• Opportunities
• Activities
• Computer Training
• Internet Access
• Sewing Knitting
• Baking
• Recycling
• Vegetable Gardening

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HIV/AIDS PROJECT

• Growing number of Parentless Households
• Joint venture with AIDS Consortium USAID Grant
• Education
• Counseling
• Home Based Care
• Investigating problem of AIDS (and other) orphans
• Servcon Policy will be developed within the next
  3 Months.