The Workforce Housing Fund, which is managed by IHS, was set up to invest in housing for rent and sale to low and moderate-income families to meet the growing demand for affordable housing in South Africa.
Soula Proxenos, MD of IHS says the global funding includes $95-million from a North American pension fund and a US foundation endowment, as well as up to $80-million in participating debt from the US Overseas Private Investment Corporation (OPIC).
She says the R210-million from the Development Bank adds further capital which could fund an estimated 30 000 homes in South Africa.
Gloria Mamba, DBSA Investment Officer, says the DBSA’s goal is to improve the quality of life of the people of the region and the I H S provides a good conduit for doing this.
She says the DBSA’s purpose is to accelerate sustainable socio-economic development by funding physical, social and economic infrastructure.
“By joining hands with IHS we can assist in various roles of financier, advisor, partner, implementer and integrator and help mobilise finance and expertise for development projects.”
IHS is an affiliate of Municipal Mortgage & Equity (‘MuniMae’), a US leader in affordable housing finance, and was established in 2005 as a joint venture between Munimae and a group of Irish investors led by Frank Gormley of Howard Eurocape Limited, a prominent property investment and development company based in Dublin and Cape Town.
Working directly with owners and property developers, IHS concentrates on funding the development of homes for households in SA earning between R3500 and R18500 a month. This income bracket is often described as the “missing middle”, as families within this income range earn too much to qualify for government-funded housing, but also find that adequate housing is too expensive, either for purchase or rental.
IHS established a foothold in South Africa last year when it opened offices in Johannesburg.
It won major acclaim when it received funds from the US Overseas Private Investment Corporation (OPIC) to create its leveraged fund to finance affordable housing projects in South Africa in the face of major competitive bids.
OPIC is a US government sponsored agency that supports US private investment in emerging markets. It helps US businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing risks associated with foreign direct investment, and supports US foreign policy.
According to Elize Stroebel, Country Director of IHS SA, South African based developers have had difficulties in obtaining equity finance to make large-scale affordable housing developments viable – for both themselves and home buyers. “This has acted as a big impediment to the involvement of the private sector in affordable housing.
“To bridge this gap, IHS involves equity investors, amongst others. We are committing our own capital, as well as that of international investors like OPIC, to help finance affordable housing projects in the form of equity,” she says.
“The equity allows developers to obtain larger loans from the banks at a reduced borrowing cost, which in turn allows them to build bigger developments (more homes) without having to phase them in or conduct large pre-sales. As the developers achieve more scale in their projects, they are able to pass the lower costs on to middle income families, in the form of lower rentals and selling prices which in the current South African economic climate is a huge benefit to these families”.
The IHS group is proving to be a valuable partner because of its global experience in the sector and its understanding of what it takes to make these investments work.
“We are very proud that the first fund launched by IHS is in South Africa. We have no doubt that the fund will play a major role in spurring economic and housing development in South Africa,” concludes Stroebel.
