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. http://urban-africa-china.angonet.org/content/29th-annual-conference-mobilising-capital-housing-finance

1. Presentation to the African
Union for Housing Finance
(AUHF) Conference
Reginald Motswaiso
Chief Executive Officer
Botswana Housing Corporation
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2. The Journey
• Botswana Housing Corporation’s Mandate;
• Financing the Corporation’s operations;
• Sources of external finance;
• China Exim Bank Loans;
• Housing projects undertaken through China Exim
Bank’s loans;
• Challenges;
• Preferred procurement mode;
• Conclusion
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3. Botswana Housing
Corporation’s 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.
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4. Financing of the
Corporation’s operations
• Initially Government provided low interest
bearing loans;
• In 1990’s 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.
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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%
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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%).
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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.
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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%).
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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.
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10. Kasane – 86 Houses Pictures
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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.
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12. Gaborone – 293 Houses Pictures
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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 houses
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14. Gaborone – 104 Units Pictures
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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.
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16. Francistown – 120 Houses
Pictures
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17. Challenges
• Transparency compromised
– BHC is a state owned enterprise;
– Bound by Government’s procurement rules
and regulations (PPADB);
– Loan condition required use of specific
Chinese company;
– Compromised transparency and desire for
value for money;
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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;
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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;
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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.
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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).
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22. Thank You
www.bhc.bw
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