Major Pension Fund Investment To Boost Affordable Housing Stock In SA

The Eskom Pension and Provident Fund has committed R100 million towards the development of around 20 000 new affordable homes in South Africa, through an investment in global private equity funder, International Housing Solutions.

From L to R;  Rob Wesselo of IHS, Sibusiso Luthuli, CEO Eskom Pension and Provident Fund, Soula Proxenos, Managing Partner of IHS, Fagmeedah Petersen-Lurie, CIO of Eskom Pension  and Provident Fund

From L to R; Rob Wesselo of IHS, Sibusiso Luthuli, CEO Eskom Pension and Provident Fund, Soula Proxenos, Managing Partner of IHS, Fagmeedah Petersen-Lurie, CIO of Eskom Pension and Provident Fund

The investment follows the commitment of more than half a billion rand to global private equity funder, International Housing Solution’s second fund by the National Housing Finance Corporation (NHFC) and IFC, a member of the World Bank.

Sibusiso Luthuli, CEO of the Eskom Pension and Provident Fund, said the affordable sector has shown its ability to both improve the social circumstances of thousands of South Africans, as well as provide superior returns to investors into the sector.

“We are proud to partner in this endeavour with International Housing Solutions, which has a proven track record of enabling the building of quality communities while maintaining the highest level of oversight and financial due diligence,” he said.

“We are further convinced that this investment will make a substantial positive impact on the lives of hundreds of thousands of pensioners who rely on the Eskom Pension and Provident Fund to remain in healthy shape.”

The Eskom Pension and Provident Fund is the second largest pension fund in the country, and provides retirement, withdrawal and disability benefits to its members. It also provides death benefits for its in-service members, deferred pensioners and pensioners, which are paid to their qualifying beneficiaries.

The Eskom Pension and Provident Fund’s investment is into IHS Fund II, launched last year in the wake of the unprecedented success of the company’s first fund, the SA Workforce Housing Fund (SAWHF).

The US$230 SAWHF enabled the financing and development of more than 28 000 homes with a combined total value of more than R8.6 billion throughout SA.

IHS was the first international institutional investor to recognise the potential of developing affordable housing, also called gap housing, in African markets. In doing so, it not only opened up a valuable new asset class for investors, but ensured that thousands of families were able to afford a home of their own and start their journey to wealth creation through property ownership.

“The latest research into the provision of affordable housing in South Africa shows that it not only brings with it improved welfare and social cohesion, but is also an important facilitator of opportunities and wealth creation,” says Soula Proxenos, Managing Partner at IHS.

“It has been shown that people who take their first step onto the property ladder in this sector move beyond viewing their homes as a mere shelter. Instead, their homes become assets and through appreciation of these assets entrepreneurship, job creation and access to higher levels of education are stimulated,” she says.

Proxenos says IHS is delighted by the latest investment in the fund by Eskom, as it will further strengthen the sector and the economy as a result of the opportunity it will provide to thousands of families.

She notes that the affordable housing market caters to households with an income between R3500 and R18000 per month. People in this segment earn too much to qualify for government’s low-cost subsidised housing and too little to afford the cheapest standard private sector houses or to qualify for bonds. However even though they are in a position to buy their own homes, there is a shortage of stock in this market.

“IHS Fund II aims to make a substantial contribution to the supply of additional housing stock in this critically under-supplied market,” Proxenos says.

“Housing is like a ladder, if there are rungs missing, the ladder is broken. Creating housing stock in the gap market gives previous RDP households housing to move up to. If there is nowhere for these families to go to then they are not able to improve their lot and new families then are not able to move into previously used government housing,” she says.

Proxenos says that Government alone cannot fix the whole housing ladder and that the gap market is ripe for further private sector development, especially of the right kind of sustainable initiatives which allow more people to join the formal housing ladder in the affordable housing sector.

“And securing such significant local support for international investors further shows that the country is open for business, contributing to a healthy prognosis for the economy as a whole,” she says.

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