THUBELISHA HOMES: REPORT TO STAKEHOLDERS FOR THE 4^TH QUARTER ENDING
31 MARCH 2002

1. PURPOSE OF THE COMPANY
1.1 MANDATE
To procure or develop housing stock appropriate for rightsizing purposes.

1.2 MISSION & VISION
To make a substantial contribution on a national basis, to normalization of the low cost housing market through the provision of appropriate ‘rightsizing’ housing opportunities for qualifying clients.

1.3 BUSINESS PURPOSE
To proactively procure, finance, dispose of and where necessary, hold and manage stock to provide adequate and appropriate housing solutions for ex-borrowers or occupants of PIP’s and NPL’s who have signed the necessary agreements and qualify for assistance.

1.4 GOAL
To successfully relocate all qualifying rightsizing households by 31 March 2006.


2. PROGRESS AND PERFORMANCE
Key performance area (KPA’s)

Comment
The year ended on a most satisfactory note from an overall performance perspective with four of the five measured production KPA’s achieving between 90 and 110% of their respective (revised) targets.

Unfortunately, the achievement of the ‘primary’ KPA of house handovers to the clients suffered a major setback on one of the key projects at the eleventh hour. Nevertheless, this KPA achieved 83% of its target.

What is most encouraging is the increased output delivered in the last quarter. This clearly demonstrates that in most of the major activities, the system has shown that it can handle the higher volumes that will be required in the New Year. However, what has still to be ‘put to the test’ is the systems capacity for the actual client handovers at these higher levels.

3. EXPENDITURE PATTERNS

Comment
If Thubelisha is unable to obtain for our clients an exemption from the National Department for their R2479- "NHBRC" contribution, we will have to fund the contribution off our own balance sheet. It is inconceivable that our clients will willingly contribute R2479- for the "privilege" of being rightsized. To threaten them with eviction if they do not contribute would be operationally almost impossible to execute, and also politically very compromising. This additional cost will have a significant impact on our cash flow and consequently the interest income from the investment account will be reduced. This may force us to request the National Department to consider further recapitalisation prior to the planned end of the programme.

The National Department is currently assessing a number of possible scenarios ranging from "close down tomorrow" through to "open ended into the future". Clearly any decision other than business as usual will have severe implications on the company, both operationally and financially.

The old R16000- subsidy was totally inadequate to provide a unit according to the minimum norms and standards as issued by the National Department. The recently announced (but still not approved?) R20300- subsidy is welcomed.

4. INVOLVEMENT IN PROVINCES: HANDOVER OF RIGHTSIZING
HOUSES TO CLIENTS

Comment
A significant portion of the rightsizing portfolio and consequently our operational activity is concentrated in Gauteng. To date we have focused on areas nationally that have had a large enough potential and are therefore able to deliver a ‘critical mass’ of units to make projects viable.

A new focus is to be made on getting rightsizing implemented in remote areas which have very low potential. This will not only increase production in some of the ‘smaller’ provinces, but assist with the geographical dispersion of the operations.

5. SUPPORT OF NATIONAL PRIORITIES
Identified Priority Areas where Thubelisha could make an impact are:

Support for the People’s Housing Process
Promotion of female developers
Promotion of the development of emerging contractors

Comment
Our tender policy for construction activities complies with the Preferential Procurement Policy. Accordingly it targets affirmable business enterprises, local enterprises, and women enterprises through a point system that gives preference to these groups. All developers are forced to make use of local labour. We are finding that the setting up of joint ventures between emerging and more established contractors is very useful and relatively successful. The involvement of women contractors has not been as successful as we had hoped, partly due to the limited number of this grouping involved in this business. We do however find many women labourers working for our contractors on site and taking ‘house-sitter’ jobs with the security companies.

The Peoples Housing Process route is being extensively investigated by the company to determine the efficacy of this approach as an alternative method of housing delivery. Cognisance must however be taken of the potential delivery speed versus the time constraints that the programme has to comply with ie termination by 31 March 2006.

6. ALIGNMENT WITH OTHER INSTITUTIONS
SERVCON
The two company’s respective activities are aligned through a range of formalized meetings covering both strategic and operational issues. These scheduled meetings are attended by the appropriate levels of management and staff of both companies.

Joint training and development sessions have been initiated. An additional spin-off to these sessions is the positive contribution that they add to the mutual understanding of each other’s business.

NURCHA
Emerging contractors have preferred to link up with larger developers through joint ventures for finance. Our involvement with Nurcha has thus far been limited.

NHBRC
Our interaction with them has largely been one of information gathering in respect of what their new requirements are for enrollment of the subsidy houses under the warranty. Of concern from our side is the disproportionate administration and logistics that will be required, particularly regarding the inspections.