Tuesday, September 29, 2020

BHC faces uphill battle as costs escalate while rentals remain stagnant

The Botswana Housing Corporation (BHC) is grappling with a number of problems in its operations, among them, escalating costs in the face of stagnant rental and purchasing revenue. This came to the fore in Francistown recently when Deputy Chief Executive Officer, Milidzani Majingo, revealed that the corporation is labouring under the yoke of outstanding rental arrears, shortage of land, escalating costs of building material, especially steel and the increasing costs of retaining qualified personnel in the face of competition posed by the construction boom in South Africa.

Majingo said that the rising cost of building materials directly escalates the cost of construction and, therefore, affects their mandate of making their products affordable to the masses.
“We are currently experimenting with alternative methods of construction, as in the case of the Ga-Phatshwa project as well as considering research on utilization of local building materials,” he said.

To address the problem of scarcity of land, Majingo said that the corporation has, where possible, reduced demarcated plot sizes in order to increase the number of housing deliveries.

BHC was, in the past, forced to suspend the two installment purchase schemes because of increasing default on payments. Majingo revealed that despite the suspension of the two schemes, the number of housing units sold per annum remains relatively unchanged, which further adds credit to their contention that the corporation did not need to bear the burden of financing Batswana as they can be catered for by private financial institutions.

However, it emerged that the corporation was forced to suspend the installment purchase schemes because of high rates of defaulting by customers. The corporation seems not to have been adequately prepared to deal with incidences of default as it emerged that it lacked a proper computer system to monitor arrears. At the same time, BHC sales personnel was not adequately backed by the credit backing system and they ended up selling houses to people who would later default on installments.

Because of this glaring mishap, BHC found itself saddled with alarming instances of arrears, which eventually necessitated the setting up of a task team to address the issue. Operating from April 2005 to March 2007, the task team eventually managed to reduce the arrears from a glaring P44 million to P 190 million. Presently BHC is grappling to recover arrears of P4 million.

At the same time, BHC has addressed the situation that led to the accumulation of the arrears by instituting an integrated computer software system, a credit control policy and assigning the sales department to follow up on outstanding arrears. Rental arrears have also reduced from P18 million to P10.5 million.

Apart from operation discrepancies, the BHC has also had to deal with a lot of discontent from Batswana who felt that they have lost their mandate of providing affordable housing to citizens. Speaking at the presentation of the 2006/07 Stakeholders dinner and launch of the annual report in Francistown, CEO Reginald Motswaiso painted a gloomy picture of a corporation that finds itself faced with the daunting task of battling to provide decent and affordable accommodation in the face of decreased revenue caused by stagnant rentals and skyrocketing development costs. At the time, he also called for the amendment of the BHC Act to make it more autonomous.

He complained that because of their lack of autonomy they are faced with impediments in the implementation of prudent management decisions that would benefit the corporation’s business. He said that they are restrained by having to report to the minister who reports to cabinet, a tedious thing which hampers speedy commercial decisions.

The amendment of the act would effectively shift power from the minister to the corporation’s board of directors.

That would enable them to make independent decisions on issues like rental increments and loan acquisitions without having to seek approval from the minister.

Faced with increasing public hostility led by maverick BCP MP Dumelang Saleshando, who last year tabled a motion in parliament requesting government to review the BHC mandate and to empower it to provide affordable housing for the lower and middle income groups, the BHC CEO threw down the gauntlet at the corporation’s dinner and came out with guns blazing in a no-holds barred defense of his beleaguered corporation.

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The Telegraph September 30

Digital edition of The Telegraph, September 30, 2020.