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SERVCON PAYMENT NORMALISATION PROGRAMME

SERVCON PAYMENT NORMALISATION PROGRAMME. “SERVCON IS HERE TO SERVE”. PRESENTATION TO SELECT COMMITTEE ON PUBLIC SERVICES IN PARLIAMENT – CAPE TOWN. 2 APRIL 2003. SELECT COMMITTEE ON PUBLIC SERVICES. 1. Servcon’s Role 2. Rightsizing 3. Performance on KPA’s 4. Issues 5. Swamp

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SERVCON PAYMENT NORMALISATION PROGRAMME

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  1. SERVCON PAYMENT NORMALISATION PROGRAMME “SERVCON IS HERE TO SERVE” PRESENTATION TO SELECT COMMITTEE ON PUBLIC SERVICES IN PARLIAMENT – CAPE TOWN 2 APRIL 2003

  2. SELECT COMMITTEE ON PUBLIC SERVICES 1. Servcon’s Role 2. Rightsizing 3. Performance on KPA’s 4. Issues 5. Swamp 6. Towards a New Vision • Draining the Swamp • Strategic Directives 9. Evictions 10. Job Creation and Community Development Project 11. HIV/AIDS l

  3. SERVCON’S ROLE • Joint venture * Department of Housing * Banking Council • Deals with Banks Repossessed Properties * Cut off date 31 August 1997 • Rehabilitation programme * Subsidised rental (13% - less than mortgage) * Buy back option – instalment sales * Rightsizing (Thubelisha Homes) * Aged and disabled • Twin Focus * Relief for ex-owners * Dispose of portfolio over 8 years

  4. RIGHTSIZING “Assistance to relocate to affordable house” • Targeted at those who cannot afford existing house * Alternative to eviction * Affordable interim rental * Government pays special subsidy (relocation assistance * Thubelisha procures alternative house * Client relocates * House sold back into the market

  5. PRICIPAL RESPONSIBILITY OF SERVCON • 7.5% delivery 1-04-1998 to 31-03-1999 7.84 % • 20% delivery 1-04- 1999 to 31-03-2000 20.21 % • 40% delivery 1-04-2000 to 31-03-2002 41.0 % • 52,5% delivery 1-04-2002 to 31-03-2003 51.20 % • 65% delivery 1-04-2003 to 31-03-2004 65.0 % • 82,5% delivery 1-04-2004 to 31-03-2005 82.5 % • 100% delivery 1-04-2005 to 31-03-2006 100 %

  6. SERVCON HOUSING SOLUTIONS 2.SERVCON’S PERFORMANCE UP TO 31 MARCH 2003 171 Staff 169 Staff PROJECTED (2664) 8% 161 Staff R79.5M 167 Staff 140 Staff R87.5M 152 Staff R67.9M (4081) 12.30% 52.0 m (3367) 10.10% R63.5M (3790) 11.40% (2600) 7.80% R44.1M (5726) 17.20% 79.5M (5828) 17.50% R25.8M (5244) 15.70% PROJECTED % BY 31/03/2003 = 52.5% ACHIEVED TO 28/02/200 51.20% Projections to 31/03/2006 (Based on current trends) R52.0 M (3443) 10.30% (2707) 8.10% The remaining delivery percentage must be delivered in the months of: MAR 03 (2500) 7.50% R48.1 M R40.9 M R182.2 M

  7. Financial Expenditure1998/9----2002/3 Projections for the Remaining 3 Years

  8. 2.1 Specifics on results up to 28 February 2003 are as follows KPA 1 : Reduction in Portfolio – Satisfactory Disposed Of (SDO) • Comments • Community resistance has now been escalated ( A movement from Soft Core clients to Hard Core clients) • Inability of Sheriff to serve and execute Court Orders causing a drop in finalisation of SDO’s • Continued request, by those who must be evicted, to be Rightsized using political leadership (Local and Provincial) • Strategic directions, taking effect from 1 April 2003, pave way for new initiative. SDO’s ACHIEVED FROM THE FOLLOWING SOURCES

  9. KPA 2 : Improve Rental Returns • Reasons: Payment Trends • On-going unemployment and re-loss of jobs by Servcon clients • Funeral Expenses – Incurred by clients • Entrenched habit of non-payment-non destitute hiding behind destitute • Limited understanding on benefits of regular payments • Lack of financial discipline • Over commitment on disposable income • Increasing cost of living • Intimidation – a pain largely influenced by non-destitute over destitute • Marital difficulties – Affecting status on joint income and/or Spouse tasked with the responsibility of paying bills • Execution of Legal documents on defaulting clients

  10. KPA 3 – Good Book / Bad Book Split 3.1 GOOD BOOK

  11. 3.2 Bad Book Upward Trend 202 220 109 28 1078 Downward Trend translating into difficulties to perform 538 156 77 24 12 712 1157 409 145 85 Downward Trend Figure on the rise

  12. ISSUES * Payment of subsidies “in situ” in certain circumstances * Cut of date – access to rightsizing * New Subsidy rules – issue of contribution * Resale of vacated properties in possession * Environment has not “normalised” * New Lending and Secondary Market

  13. Breakdown of Law and Order / Defiance Lack of Education And Understanding Environmental Conditions HIV AIDS Poor Community Leadership Structural Defect Unemployment/ Poverty Lack of Financial Discipline THE HOUSING SWAMP

  14. Towards a New Vision NEW VISION Bridge Breakdown of Law and Order / Defiance Trend Line Trend Break Unemployment/ Poverty THE HOUSING SWAMP

  15. Breakdown of Law and Order / Defiance Lack of Education And Understanding Environmental Conditions Mission Poor Community Leadership *Create an enabling environment *Reestablish secondary market *Uplift Communities What is needed is A Package of Measures to address Each issue individually But also holistically Lack of Financial Discipline Structural Defect Unemployment/ Poverty HIV AIDS DRAINING THE SWAMP

  16. Strategic Directives • Offering Properties at Market Value • Improving Rightsizing Housing Options • Secured Vacant Properties (Undertaking focused and effective Evictions • Improving Servcon Profile • HIV/AIDS Orphans ability to access Subsidies (Policy issue) • Functioning Community Development Projects • Determining opportunities for Secondary Market • Promotion of intra – Servcon excellence • Embarking on a restructuring process – (linked to diminishing portfolio with cost increment) • Stakeholder Relationship Management

  17. PROPOSED MERGING OF OFFICES AS A RESULT OF PROJECTED DIMINISHING PORTFOLIO OPERATIONS BENONI 2939 10 8 2 BOKSBURG 3822 9 7 2 GERMISTON 3078 9 7 2 KEMPTON PARK 2578 9 7 2 SECUNDA 1382 5 4 1 TOKOZA 1825 5 4 1 KRUGERSDORP / KLERKSDORP 2331 10 8 2 PRETORIA 911 2 1 1 SOWETO 5164 15 12 3 VEREENIGING / ZAMDELA 1623 4 3 1 WESTERN CAPE 3921 15 11 4 KZN 502 3 2 1 EASTERN CAPE 1654 7 5 2 FREE STATE 1654 3 2 1 33384 106 81 25 1:3671 1:424 1:439 1:368 1:345 1:456 1:911 1:430 1:356 1:251 1:330 1:823 1:291 1:541 543 2481 2321 1359 852 1186 777 1038 576 3093 818 2076 320 924 458 6 4 2 1501 11 9 2 1719 4 2 2 1726 10 8 2 196 3 2 1 1048 5 4 1 1293 9 7 2 335 4 3 1 2071 12 10 2 1845 13 9 4 182 3 2 1 730 6 4 2 1111 3 2 1 15020 93 69 24 805 4 3 1 1:76 1:136 1:429 1:172 1:65 1:209 1:143 1:83 1:172 1:201 1:141 1:60 1:121 1:370 LEGAL UNIT KEMPTON PARK 933 SECUNDA 123 TOKOZA 880 KRUGERSDORP / KLERKSDORP 883 PRETORIA 346 SOWETO 1495 VEREENIGING / ZAMDELA 612 WESTERN CAPE 1739 KZN 115 GERMISTON 1798 EASTERN CAPE 283 BOKSBURG 1002 BENONI 602 FREE STATE 1407 257 6 4 2 499 13 11 2 149 4 2 2 793 11 9 2 73 2 2 0 168 6 4 2 410 10 8 2 138 0 0 0 578 12 10 2 193 4 3 1 341 12 9 3 92 2 1 1 174 5 3 2 237 3 2 1 4102 90 68 22 1:64 1:45 1:74 1:88 1:36 1:42 1:57 1:58 1:64 1:38 1:92 1:58 1:118

  18. Marketing Servcon as a brand Clients who have the financial means mustbe encouraged to purchasethe properties in full. Product Servcon must highlight to clients the benefits of owningyour own home: - - Security - Possible Investment Outright Sale If the property is soldat market value, theclients will be morewilling to buy as itwill be more attractivethan selling it at 105%original loan It must be clearly communicated to clientshow the prices were arrived at. The bond repayments must be clearly explained to clients bythe consultants Pricing Not relocating means that stability within the family will be maintained, e.g. children will not have to change schools etc. The socials aspects of clients and their families will not be affected The benefit of an outright sale is that the family will not have to relocate (Familiarity) Place • Intention of the programme is not to evict. (red) • Occupants who are unnecessarily difficult using defiance stances/ group end up being hurt & out in limbo once an eviction order has been executed. Servcon is here to help And we are committed to home-ownership Promotion

  19. For clients, legal occupants, who can afford the property Through monthly repayments. Servcon will enter into an agreement with occupants in this regard. Clients to be made aware that if they default, the banks will evict them. Product Instalment Sale • Offering monthly repayments to make it more affordable. • Terms of repayments vary accordingly from client to client Pricing Place Same as for Outright Sale • “Servcon is here to help” • Home ownership • Affordability • After 5 Years, property will be transferred into client’s name Promotion

  20. For legal occupants who cannot afford the property in terms of the Instalment sale option, but believe that their income will increase. It must be ascertained if these legal occupants are willing to adjust their financial Affairs so that they can cope with making repayments. A rental programme will then be offered Product Formula Rental Increase the rental amount over a period of 3 to 4 years until it equals the instalment sale amount. The rental amount is variable Pricing Place Same as for Outright Sale “Servcon is here to help” Home ownership Affordability Understanding (adjustment of repayment). Bring message across that government & banks share 50% of the administration & holding costs (rates). Convince the hard-core defaulters that if theydo not go the Servcon route, they will find themselves in a much worse situation. Promotion

  21. Owners who cannot afford the properties assisted by Servcon to find alternative, affordable, long-term accommodation. These owners will have to move to another property that will be provided by Thubelisha Homes. Rightsizing Product Household earnings below R3500 are provided with a Housing subsidy of R22 800 as relocation Assistance under the Housing Subsidy Scheme. Pricing While the process is underway occupants are permitted to continue living on the property at an affordable rent. Options as to where clients can move to are provided by Thubelisha Homes Place • “Servcon is here to help” Clients get alternative affordable, long-term accommodation. • Tenure / Home Ownership • Judgement on default will be rescinded. When their financial situation improves, clients can consolidate the house at their own pace. Clients who Rightsized, can join the Servcon clubs and become part of the Servcon Job Creation Programme. Promotion Stress to clients that Servcon will use evictions as an alternative for occupants failing to Rightsized.

  22. FUTURE STRATEGIC OBJECTIVES After Risk Report) • PLAN A (Business as usual) • Submitted Servcon Strategic Plan 2003/2004 to 2005/2006 financial year provides • PLAN B • Quarterly reporting on the recently approved Strategic Plan will dictate.

  23. JOBCREATION/COMMUNITY DEVELOPMENT PROJECTS“Rebuilding Communities” • Support for Servcon clients trying to improve their financial circumstances • Support activities which will benefit broader community “SERVCON CLUBS” * Networking * Skills Training * Needs analysis * Marketing channel * Data base of skills * Opportunities “Activities” * Computer Training * Internet Access * Sewing & Knitting * Baking * Recycling * Vegetable Gardening

  24. HIV/AIDS PROJECT “Growing number of Parentless Households” Joint venture with AIDS Consortium – USAID Grant • Education • Counseling • Home Based Care Investigating problem of AIDS (and other) orphans Servcon Policy will be developed within the next 3 Months.

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