Development financier the Eastern Cape Development Corporation (ECDC) is processing almost 100 tenant purchase offers, having announced its plan to sell 238 standalone houses to the tenants in December last year. The houses are part of the ECDC’s 473 residential properties, which have a balance sheet of R233-million.

The funds generated from the sale of the properties will be reinvested in the ECDC to help fund businesses that want to take advantage of opportunities in key growth sectors of the economy. The financier’s mandate of economic development includes funding businesses, attracting foreign direct investments and investing in infrastructure and in growth sectors of the province’s economy, as well as promoting trade and exports.

The tenants were offered the first right of refusal to buy the houses they occupy at market value and they had until the end of last month to make an offer. If no offer was made, the houses would be sold through a public process.

ECDC CEO Sitembele Mase says that, in some cases, a combination of the market value and the rental arrears may result in some tenants not being able to afford the houses. However, the ECDC is prepared to negotiate settlement deals with the tenants if individual cases are presented and the ECDC deems the tenant as deserving.

The ECDC decided to dispose of its residential rental portfolio because residential property management hampers the institution from fulfilling its development finance role of stimulating economic growth in the province, explains Mase.

The ECDC is owed about R60-million in rentals by tenants despite the low rental rates, which vary from R90 a month to R380 a month. It is also paying millions in rates and taxes to municipalities for services.

“This has rendered us unable to maintain the refurbishment and maintenance of the properties as the funds are used for rates, services and security, yet there are no payments and cash inflow for the use of water, rates and buildings. This situation is neither economically viable nor financially sustainable,” he says.

The ECDC says that 82% of the tenants fall into the medium to high-income group, earning between R7 500 and R 20 000 a month, which means they can afford the houses they live in. The remaining 18% fall below this income bracket and the financier will embark on a separate process to identify and seek relevant support for the possible indigent group by using the government policy.

The ECDC will facilitate the link to relevant government departments so that the tenants can access support through government subsidy schemes and other social support measures.