WHAT ELEMENTS MAKE UP THE PROJECT
The initial contract period is set at 5 years (e.g. to cease at the end of 2021).
It is however practical to provide (on mutual agreement) that the term be amended, if:
1. The targeted 1 000 churches are not planted in the initial contract period.
2. The targeted churches are planted well ahead of time and surplus funding is available.
3. Either CDTF or JH cease to operate, and/ or
4. The parties mutually agree to extend the initial contract period.
The mechanics of the lending.
It is believed that the proposed mechanism has a unique opportunity given the access to foreign funding (for the planting of 1 000 SnapChurches), loan finance (a revolving credit fund) and some contribution from the congregation.
A community contribution is vital not only as it ensures congregational ownership, and the dignity that goes with doing it yourself, but will also help ensure that church plantings are affordable to the communities.
The cost of a SnapChurch will therefore typically be sourced from:
1. A contribution from the congregation (typically around R 60 000).
2. Foreign donor funding of USD 10 000 per church (this translates into +- R 140 000) and
3. The balance provided by a revolving credit fund (typically around R 120 0000 to R 140 000 per church)
The ‘heart of the solution’ is a revolving credit fund (provisionally called the Africa Church Fund).
The fund will offer individuals and organisations (e.g. faith oriented PBS’s and foundations) several ways in which to help fund the planting of churches (e.g., fixed term interest nearing loans or interest free, in perpetuity loans) in disadvantaged communities.
The first source to cover bad debts would be the income reserves (the income earned in excess of the interest and expenses) of ACF.
Thereafter CDTF and JH must share them equally to a maximum of say 4% of the fund value, any loss greater than this (highly unlikely) to be for the lenders.
This is to be debated in greater detail.
While the initial term is planned as five years, the parties may agree to operate the fund until the targeted 1 000 SnapChurches are planted, and/or agree to extend the term, subject to funders being offered the return their capital/ funding.
Having offered back their capital to any lender to ACF. CDTF would buy the residual book at a discount of say 20%. The fund would then be divided 50/50 to CDTF and JH.
Mechanics of the ACG
At the heart of the ACF is a Capital Fund (effectively a revolving credit fund).
This capital fund will represent a combination of permanent capital (funds donated and accumulated surpluses) and temporary (term) capital.
The fund will allow donors/ lenders a wide range of donation or funding options, including:
1. Outright donations to the fund.
2. Interest bearing term loans, with maturities between 2 years and 5 years. Fixed interest rates will be payable (illustrated at 6.5%).
3. Interest free term loans, with maturities between 2 years and 5 years, and
4. Callable loans, where the lender can recall the loan with a reasonable notice period (e.g. 6 months), after an initial loan period (e.g. 2 years).
The notional interest on interest free loans (at 6.5%) will be credited to the permanent capital of the fund.
Basic operation of ACF Capital Fund
Donations and loans will be channelled through JH to the CDTF (for regulatory and control purposes), who, will in turn transfer all funding/ capital received directly into the separately accounted for.
While JH and CDTF will work together on finding suitable church planting opportunities, the management (both daily administration, loan evaluations and asset and liability matching) of the fund will be done by CDTF, thereby ensuring strict lending practices and good administration of the fund.
The wide range of funding options is designed to mobilise as much potential capital/ funding as possible, for example by allowing families to provide funding for a period (when the funds aren’t required by them), but that those funds can be recalled when required for family needs.
SNAP Churches as an alternative to bricks and mortar
Building a traditional bricks and mortar building typically costs in the region of R 6 000 to R 8 000 per square metre (on decent build quality and complying with building regulations), depending on size etc. Add to this professional fees, such as architectural fees and engineering fees Could easily see a modest 15 m x 8 metre church cost R 1 mil.
A SNAP church in contrast costs less than R 350 000 (fully installed). The structure consists of steel columns that stand on concrete plinths. Steel trusses bolted to columns with purlins, carry the corrugated iron roof. The patented steel wall, with a polystyrene core and aluminium coating, is fire resistant, rust free, and provides excellent insulation.
We have modelled costs of R 320 000 per SNAP church, believing that the volumes will result in a lower cost per unit
The other benefit of the SNAP church solution is how the entire church can be constructed in roughly a week.
Affordability and foreign funding makes SNAP Churches a great option
The difference between R 350 000 and R 1 mil is frankly the difference between viability and non-viability. Put differently, one could plant 3 SNAP churches for every bricks and mortar option.
This is especially relevant as JH has secured foreign funding for $ 10 000 per SNAP church (for 1 000 churches), effectively reducing the funding obligation to roughly R 200 000 (possibly less if the volumes result in a lower cost per unit).
It is actually quite amazing to think that a congregation with only a R 60 000 deposit can get a SNAP Church and only have a repayment obligation of R 2 445 p.m.. Many communities could generate a significant amount of the monthly instalment by making the sanctuary available for functions.
What is also powerful is the dignity that we give the community by providing them with a solution that allows them to acquire a church for themselves.