annual report 2011/12 financial year dr. j. mahachi, pr.eng, pr.cpm nhbrc acting chief executive...
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ANNUAL REPORT2011/12 FINANCIAL YEAR
Dr. J. Mahachi, Pr.Eng, Pr.CPM
NHBRCActing Chief Executive Officer
11 October 2012
Outline of Presentation
• Mandate & Strategy of NHBRC
• Operational Performance 2011/12
- Non Subsidy Sector
- Subsidy Sector
• Financial Performance 2011/12
• Actuarial Evaluation as at March 2012
Establishment of NHBRC
Legislation of the Housing Consumers Protection Measures Act, 1998 (Act No. 95 of 1998)
26 March 1999 – NHBRC became a statutory bodywith a mandate of protecting mortgaged homes
NHBRC Mandate
NHBRC’s primary mandate is:• To protect housing consumers by establishing,
implementing, regulating quality standards in the home building industry
• To establish a warranty fund and to provide assistance to housing consumers under circumstances where home builders fail to meet their obligations.
• To build capacity of home builders and housing consumers with specific emphasis to the historically disadvantaged
Objects of NHBRC
• To represent the interests of housing consumers by providing warranty protection against defects in new homes.
• To regulate the home building industry.
• To provide protection to housing consumers in respect of the failure of home builders to comply with their obligations in terms of the Act.
• To establish and promote ethical and technical standards in the home building industry.
Objects of NHBRC Cont…
• To improve structural quality in the interest of housing consumers and the home building industry.
• To promote housing consumer rights and to provide housing consumer information.
• To communicate with and to assist home builders to register in terms of the Act.
• To assist home builders through training and inspections
Extension of Warranty to Subsidy Houses
Government Subsidy:
Government of RSA provides a full subsidy for the acquisition of land, services and housing top structures to those households earning up to R3,500/mth.
Year 2002:•Government extends warranty scheme to cover the subsidised houses.•A cross subsidisation model for the enrolment fee between subsidy and non-subsidy houses was implemented by NHBRC.
Regulation of the Home Building Industry
Registration &Grading
Training ofHome Builders
Technical &Ethical
Standards
Defaults byHome Builders
Disciplinary(Suspensions &Deregistrations
Renewal orVoluntary
withdrawals
RegulatoryFramework
HOME BUILDER HOUSING CONSUMER
NHBRC
Housing Consumers Protection Process
Enrolment
Inspection
OccupationCertificate
WarrantyCover
Complaints
Conciliations
Remedial Work
Recoveries
PROTECTION
HOME BUILDER HOUSING CONSUMER
NHBRC
Vision
“A world class home builders warranty organization that ensures the delivery of sustainable quality homes”
Mission
“To protect the housing consumers and regulate the home built environment by promoting innovative home building technologies, setting home building standards and improving the capabilities of home builders”
Strategy
• To improve visibility and accessibility in the market while enhancing interaction with our stakeholders;
• To position the NHBRC as a leader in knowledge creation, technical and technological building solutions through strategic partnerships; and
• To provide diversified services and products in line with changing building requirements and needs.
Complaints & Conciliations
Type of Complaint Number Received Number Resolved
Structural Related 431 225
Roof Related 36 22
Maintenance Related 165 86
Others (e.g. Outside Warranty Period)
17 17
Total 649 350
Remedial Works
Year Remedial Costs (R-million) Inspection Fees (R-million)
2007/08 4 58.8
2008/09 7 83.6
2009/10 14 79.2
2010/11 22 57.5
2011/12 15 73.9
Disciplinary of Home Builders
Number
DC Hearings 87
Builders Found Guilty 46
Builders not found guilty 7
Matters settled 15
Verdicts outstanding 4
Matters withdrawn 13
Matters postponed 2
NHBRC Risk Management
The NHBRC uses various risk management tools.
Core:• Geotechnical assessment;• Impact of Civil infrastructure (Stormwater);• Structural assessments; and • 1 inspector for every 200 houses under construction.
Enrolment done in 2 stages:• Project Enrolment, and• Home Enrolment
Value for Money for Enrolled Projects
Evaluation of geotechnical problems Evaluation of proposed foundation solutions Evaluation of topographical problems &
proposed solutions (stormwater control, retaining embankments, etc)
Evaluation of the capacities & capabilities of home builders
Establishment of appropriate levels of technical specifications & construction guidelines
Value for Money (Cont…)
Continued monitoring of quality control procedures being applied by builders on site
Inspection of the quality of the product on an on-going basis
Training of Home Builders Training of provincial and municipal
inspectors and QAs 5 – year structural warranty
Inspection of Homes
Non-Subsidy Subsidy
Number of Houses Inspected
62,779 156,139
Number of Inspections Conducted
223,349 290,826
Home Builders Training
Programme Number Trained
Emerging Home Builder Training 609
Disability Programme 18
Women Build 134
Youth Build 94
Youth in Human Settlements 96
TOTAL 951
Note:1.Total Males Trained = 5922.Total Females Trained = 359
Challenges Dealt With in 2011/12
Enrolment Submission during, if not after construction. All provinces have been engaged. Proper alignment of NHBRC and provincial stats. Minister developed a intervention strategy.
Misunderstanding of technical and geotechnical standards by developers and professionals. Workshops held in most provinces.
Scarcity of appropriate technical skills (NHBRC Developing training materials, particularly for inspectors)
Appropriateness of standards to rural projects
(Technical standards reviewed and re-aligned for rural projects)
Enforce compliance to norms, standards and quality within the sector
Trained the public sector on technical standardsAssisted the Govt in the rectification program of
houses NOT enrolled by the NHBRC.Started on building capacity at the provincial and
municipal spheres to undertake monitoring of norms and standards for human settlement programmes and projects through establishment of QA systems;
Ensured all enrolled projects are inspected; andAssisted Provinces in Geotech investigations
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NHBRC Response to Outcome 8
Other NHBRC Achievements
• Transforming the organisation through improving processes and systems with a reliable IT platform (ERP System)
• Successful host of 12th International Housing & Home Warranty Conference in Cape Town
• Workforce profiles in terms of race and gender in line with national demographics
• Restructuring of organisation finalised• Staff turnover (Resignations) of 3.6% acceptable.• Repeal the Act (Draft completed)
Challenge:• Delay in the finalisation of the disciplinary hearing of CEO impacted
on delay in recruiting other Execs.
Other NHBRC Achievements
• Transforming the organisation through improving processes and systems with a reliable IT platform (ERP System)
• Successful host of 12th International Housing & Home Warranty Conference in Cape Town
• Workforce profiles in terms of race and gender in line with national demographics
• Restructuring of organisation finalised• Staff turnover (Resignations) of 3.6% acceptable.• Repeal the Act (Draft completed)
Challenge:• Delay in the finalisation of the disciplinary hearing of CEO impacted
on delay in recruiting other Execs.
Statement of Financial Performance Summary R’ Million
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Actual2012
Actual 2011
Variance
Net income 741 799 (58)
Expenditure 580 437 (143)
Surplus for the year 134 362 (228)
Revenue – Premiums and Fees
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2012 2011 Variance VarianceActual Actual R Mill %
Premium Written 426 332 94 28 Change in uneared premium / unexpired risk provisions (199) 25 (224) (909) Insurance premium revenue 228 357 (129) (36)
Fee revenue 56 32 24 75 Other income 42 1 42 4 715 Total other income 98 33 66 200
Revenue and Contribution
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2012 2011 Variance VarianceActual Actual R Mill %
Technical services revenue 184 80 103 128 Technical services expenditure (186) (28) (159) 573 Net Technical services surplus/(defecit) (3) 53 (55) (105)
Investment income 197 203 (6) (3) Realised profit on sale of available-for-sale investments 18 126 (109) (86) Fair value gain on financial instruments 16 - 16 100 Asset management services (9) (9) (0) 1 Net Investment Income 222 321 (98) (31)
Summary Revenue 2011/12Revenue year-on-year comparison R’ Million
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Net Income Variance Comment
Insurance premium revenue (129) Unearned premium reserve
Fee revenue 24 Subsidy project enrolments
Technical services revenue 103 Rectification and water tanks
Investment income (98)Restructuring of investment portfolio
Other income 42 Vat / Bad debt provision
Total (58)
Statement of Financial Performance Summary R’ Million
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Actual2012
Actual 2011
Variance
Net income 741 799 (58)
Expenditure 580 437 (143)
Surplus for the year 134 362 (228)
Expenditure
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Loss adjustment expensesInspections and Operating
expensesTechnical Administrative Asset management
2011 12 59 28 331 9
2012 5 77 186 330 9
0
50
100
150
200
250
300
350
R m
illi
on
Expenditure
Technical Provision Definitions
46
Outstanding claims provision (OCP)
Insurance claims and related expenses paid in the year, including provisions for insurance claims incurred but not reported and related expenses.
Expenditure 2011/12 Year-on-year Expenditure Trend
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Actual2012
Actual2011
Variance
Expenditure
Insurance claims and loss adjustment expenses
5 12 6
Operating / Technical expenses 263 87 (176)
Administration expenses 330 331 1
Asset management services 9 9 0
Total Expenditure 607 439 (169)
Technical Revenue and Contribution
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2012 2011 Variance VarianceActual Actual R Mill %
Technical services revenue 184 80 103 128 Technical services expenditure (186) (28) (159) 573 Net Technical services surplus/(defecit) (3) 53 (55) (105)
Financial Highlights 2011/12 Expenditure year-on-year comparison R’ Million
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Expenditure Variance CommentInsurance claims and loss adjustment expenses
6 Lower claim provision
Operating expenses (176) Technical R 186 Million
Administration expenses 1 Constant
Asset management services 0 Constant
Total Expenditure 169
Reconciliation of budget surplus with the surplus in the statement of financial
performance R Million
51
Net surplus per approved budget 258
Adjusted forEmerging contractor reserve (5) Revenue 259 Expenditure 14 Technical Expenditure (173) Realised profit on sale of financial assets 34 Interest (58) 69
Net Surplus from Operations 327
Movement in Technical provisions not budgeted (194)
Net Surplus per the statement of financial performance 134
Solvency of Warranty Fund
55Table Above: NHBRC Solvency: The Actuarial Surplus has increased by 16.5% which is due to increasing assets. The Surplus as a % of Provision has increased over the year.
PLANS TO ADDRESS CONCERNS RAISED IN ANNUAL REPORT
• Extensions to contracts were not notified to the National Treasury;
• No miscellaneous payment through accounting system, has to all go through procurement system;
• All payments are managed through procurement database, which follows the National Treasury Guidelines; and
• Tenders will remain open for 21 days.
Conclusion on the Solvency
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The results of the actuarial valuation indicates that the NHBRC as a whole, including both subsidy and non-subsidy houses, is solvent and in a sound financial position as at 31 March 2012.
The actuarial liabilities are 378% funded.