South Africa's government employees pension fund is investing nearly $750 million into lender SA Home Loans as part of plans to provide cheaper mortgages and build more houses in a country with glaring income disparities.
The lack of affordable housing is a thorny issue in South Africa, where the unemployment rate is around 26.7 percent and poverty persists two decades after the end of apartheid rule.
The government's Public Investment Corporation (PIC), which will invest the 10.5 billion rand ($732 million) on behalf of the pension fund (GEPF), will inject a further 500 million rand to Affordable Housing Development Company.
SA Home Loans has been the lender of choice for many government employees over the years, but also provides them for private sector workers and is often seen as the go-to lender for people who cannot afford regular bank loans.
A housing subsidy programme caters mainly for households with a monthly income of less than 3,500 rand ($240), and households with income between 3,500 rand and 15,000 rand ($1,050) qualify for partial assistance.
However, even families bringing in 15,000 rand a month largely remain excluded from accessing home loans, despite their regular income and relatively security employment.
Five billion rand will be earmarked for members of the pension fund, 2 billion for affordable housing, 2 billion to enable SA Home Loans to extend loans to qualifying applicants and 1.5 billion rand to fund developers, PIC board member Claudia Manning told reporters on Wednesday.
Abel Sithole, principal executive officer of the pension fund, said the investment "will enable many government employees to own their own houses at a much more affordable rate".
"We believe there are many GEPF members who often do not qualify for bank-issued housing loans and housing subsidies offered by the government," he said at the launch.
The PIC is Africa's largest fund manager with more than $122 billion of South African government employee pension assets under its custody. ($1 = 14.3189 rand)
(Reporting by Nqobile Dludla; Editing by Alison Williams)