The Public Investment Corporation (PIC) has launched a market sounding exercise to banks and other financial institutions who are interested in putting up packages to tackle challenges facing public servants in getting mortgages.
This is in fulfilment of a 2015 resolution that provided the framework for the establishment of the Government Employees Housing Scheme (GEHS).
The PIC, Africa’s largest fund manager with R3-trillion in assets under management, manages such money on behalf of public sector funds, which include the Government Employees Pension Fund (GEPF).
The objective of the GEHS is to assist state employees in accessing finance while receiving guidance on overall financial wellness, debt management and wealth creation; and facilitating access to affordable housing finance, according to the PIC.
The GEHS also aims to assist employees with options to rent houses with a view to buy.
The asset manager in its expression of interest, calling for bidders to come to the fore, said prospective financial institutions should be able to provide home loans to public servants at prime to prime-minus interest rates.
The lenders will also be expected to provide state employees with home loans with a loan-to-value of 100%, with an option but “no obligation to put down deposits”.
The PIC also wants banks to recognise various forms of tenure including permission to occupy in rural areas in order to facilitate access to housing by public servants previously excluded from the market.
The PIC said its unlisted investment division, the Isibaya Fund, has been mandated by the GEPF to assist the department of public service & administration in the appointment of a financial institution group to render housing finance solutions to GEPF members.
‘Fiscal sustainability risk’
“Over 1.2-million public servants have either been receiving or are eligible for the housing allowance as part of their conditions of service. However, this allowance is not being utilised by several employees to acquire homes. This poses a fiscal sustainability risk to the employer while simultaneously not translating into home ownership on the part of employees,” the expression of interest said.
“There are concerns about the number of public servants who are still overindebted amid the interventions introduced by the government. Overindebtedness invariably results in the inability to service debt acquired timeously and regularly.”
The PIC pointed to “market failure” which it said can be linked to the overindebtedness of many public servants, which negatively affects their risk ratings, ultimately leading to the higher cost of a home loan.
It said there was a shortage of sufficient affordable housing stock in the market to meet the demand of public servants and that the lack of supply puts an upward pressure on prices given the higher demand that exceeds supply.
Many government workers have been caught in the “gap market” dilemma — a situation where consumers do not qualify for the Reconstruction & Development Programme (RDP) subsidised housing scheme, as they earn above R3,500 a month, and also struggle to raise bonded finance as they earn below the minimum threshold for bonded houses set by commercial banks.
“The long-term goal [of the GEHS] is to ensure that every employee has access to home ownership. It is anticipated that resolving the home ownership challenges of employees will have a direct impact on improving their productivity at the workplace and will influence them in continuing to regard the government as the employer of choice,” the PIC said.
The new CEO of the PIC, Patrick Dlamini, has been mandated by the board to clean up its multibillion-rand unlisted portfolio, which has courted controversy.
The PIC in April told parliament that more than 40% of its unlisted portfolio was in distress after a sustained period of underperformance. The entity, which reports to the finance minister, has injected about R100bn in more than 150 privately owned companies over the years.
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