Presentation to the African
Union for Housing Finance
(AUHF) Conference
Reginald Motswaiso
Chief Executive Officer
Botswan...
The Journey
• Botswana Housing Corporation’s Mandate;
• Financing the Corporation’s operations;
• Sources of external fina...
Botswana Housing
Corporation’s Mandate
• Established in 1970 by an Act of Parliament with
the following mandate:
 To prov...
Financing of the
Corporation’s operations
• Initially Government provided low interest
bearing loans;
• In 1990’s Governme...
Sources of external finance
• BHC does not receive annual Government
subventions;
• External funding sourced from capital ...
Composition of existing
borrowings
• Loan portfolio as at 31/03/13 includes:
– Loans from Government (pre - ‘swim or sink’...
Exim Bank Loans
•
•
•
•
•

Government – to – Government loans;
Must be authorised by Parliament;
Bots Government on-lends ...
Housing Projects Constructed
Using Exim Bank Loans
•
•
•
•
•

86 housing units in Kasane;
293 housing units in Gaborone;
1...
Kasane – 86 Houses
•
•
•
•
•

86 houses constructed;
Contractor - Complant Botswana;
Loan Amount - P12, 249, 612 ($2.68 mi...
Kasane – 86 Houses Pictures

10
Gaborone – 293 Houses
• 293 houses constructed;
• Contractor - Complant Botswana
• Loan Amount - P49, 657, 860 ($7.99
mill...
Gaborone – 293 Houses Pictures

12
Gaborone – 104 Units
• 104 housing units constructed;
• Contractor - Complant Botswana;
• Loan Amount - P21, 709, 879 ($4....
Gaborone – 104 Units Pictures

14
Francistown – 120 Houses
• 120 houses constructed;
• Contractor - Complant Botswana;
• Loan Amount - P15, 542, 299 ($3.28
...
Francistown – 120 Houses
Pictures

16
Challenges
• Transparency compromised
– BHC is a state owned enterprise;
– Bound by Government’s procurement rules
and reg...
Challenges (cont)
• Contractor often privy to loan agreement
prior to contract negotiation;
• Compromised negotiations in ...
Challenges (cont)
• As a result, contractor often asked for a
review of contract;
• Pricing of houses was cost driven, hig...
Preferred Procurement Mode
– Open tendering;
• Contractors’ credentials are tested;
• Robustness of tender submission test...
Conclusion
• BHC has developed houses using funds from
China Exim Bank;
• Funds availed as loans, not grants;
• BHC prefer...
Thank You
www.bhc.bw

22
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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.
http://urban-africa-china.angonet.org/content/29th-annual-conference-mobilising-capital-housing-finance

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African Union for Housing Finance Conference: Botswana Housing Corporation

  1. 1. Presentation to the African Union for Housing Finance (AUHF) Conference Reginald Motswaiso Chief Executive Officer Botswana Housing Corporation 1
  2. 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 2
  3. 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. 3
  4. 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. 4
  5. 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. 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. 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. 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. 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. 10. Kasane – 86 Houses Pictures 10
  11. 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. 12. Gaborone – 293 Houses Pictures 12
  13. 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 13
  14. 14. Gaborone – 104 Units Pictures 14
  15. 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. 16. Francistown – 120 Houses Pictures 16
  17. 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; 17
  18. 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. 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. 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. 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. 22. Thank You www.bhc.bw 22

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