Proparco, the private sector arm of the French Development Agency (Agence Française de Développement — AFD) has given inner-city housing financier TUHF a R203.8m loan to support low-cost housing initiatives and entrepreneur development.
The organisation aims to provide financial support to small and medium enterprises (SMEs) and businesses, both directly as well as through banking and non-banking institutions in SA.
“The finding will contribute to supporting access to finance for emerging entrepreneurs operating in the SA property space — providing technical assistance to enable the growth of SMEs,” said Nadia Kruger-Levy, Proparco Southern Africa’s Financial Institutions investment officer.
For more than 40 years, Proparco has been promoting sustainable economic, social and environmental development, and provides funding to support to businesses in Africa, Asia, Latin America and the Middle East.
It focuses on key development sectors, particularly healthcare, education, renewable energy, agribusiness and financial institutions.
Kruger-Levy said the loan granted on July 3 marks the beginning of a long-term partnership with TUHF. The organisation estimates that about 60 property entrepreneurs will benefit from this funding, and about 170 direct and indirect jobs created. About 1,300 affordable residential units expected to accommodate more than 3,600 low-income households, will be developed.
“Up to 30% of the funding will go towards entrepreneurs applying for funding through uMaStandi, with the remaining amount going towards entrepreneurs applying for funding through TUHF,” she said.
In 2015, TUHF launched uMaStandi aimed at creating access to finance for property entrepreneurs into SA’s townships. These entrepreneurs specialise in developing affordable and safe rental accommodation in their respective townships.
She said the funding will include a training programme to build the capacity of backyard developers and property entrepreneurs, which includes mentoring and training on financial management, property management, executing leases, and landlord-tenant law.
Established 20 years ago, TUHF is an unlisted entity with debt instruments on the JSE. It has grown its loan book value from R50m in 2003 to R3.3bn at the end of March.
The nonbank financial services company borrows money from capital markets and invests it in inner-city areas, extending 15-year loan facilities to small-scale property entrepreneurs who want to grow their businesses.
It operates in Gauteng, the Free State, the Northern Cape, Western Cape, Eastern Cape and KwaZulu-Natal. To date, TUHF has financed 734 inner-city buildings, which offer more than 47,000 rental apartments.
Affordable housing
According to the Centre for Affordable Housing in Africa 2022 Yearbook, 69.7% of SA households living in affordable housing owned their homes in 2021, and 18.7% in affordable housing were renting.
Backyard rental is widespread and constitutes a vital informal strategy for housing supply in urban areas.
Many existing backyard rentals are not safe or properly serviced hence TUHF established uMaStandi to enable the creation of safe and affordable rental units for low-income people wanting accommodation close to job opportunities.
Kruger-Levy said affordable housing represents a priority sector for Proparco and the AFD Group in SA. “We believe that the sector has an essential role to play in promoting dignified living standards as well as addressing spatial and socioeconomic inequalities in SA’s metros.”
In 2017, Proparco provided R387m debt financing to JSE-listed Calgro M3 — an affordable-housing and memorial parks developer. In 2021, the company made an equity investment in Respublica, a leading student accommodation provider in SA.
Kruger-Levy said low-cost housing and SME development are critical for economic growth. These sectors were hit hard by the global health pandemic.
Despite’s TUHF’s 20-year track record — access to finance, especially since the pandemic has been its biggest obstacle to significant growth.
In an interview with Business Day in June, TUHF CEO Paul Jackson said though the company continues to lend money, high interest rates, inflation, increasing rates and taxes, coupled with low economic growth, had negative effects on affordability of tenants in its financed buildings.
TUHF adjusted its focus to securing new funding partners to continue growing its inner-city portfolio, diversify the nature of its debt, and develop its uMaStandi township rental-housing portfolio, which attracted the interest of Proparco.
“TUHF’s work in providing affordable housing and boosting small business development provided an ideal opportunity for Proparco to partner with the organisation to further enhance its work in this segment of the market,” Kruger-Levy said.
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