Human Settlements budget: public hearings: day 1

Meeting report

North West Annual Performance Plan
Mr Johnny Motlogelwa, Acting Head of Department for Local Government and Traditional Affairs for North West Province presented a summary of the strategic and annual performance plans of the province. In Rustenburg 458 houses were completed by the end of February. The figures for houses being built by the province were declining sharply. This was caused by an increase in the cost of building materials. The bulk of funds went to municipalities that were not able to do their own internal services. The target set by the Department five years ago was that 91 216 houses would be delivered. The target that was achieved was 89 522 houses, this was 98% of the initial target. The target would have been achieved if there were more resources available. The approval of beneficiaries for houses was a crucial component of the work of the Department. There had already been 20 034 beneficiaries approved and 13 000 had moved into their houses. The Department was allocated with a budget of R1.1 billion and to date R1.093 billion had been spent. The budget had been exhausted. The Premiere of the province had already begun to conceptualise the need for integration and realistically achieving human settlement projects.

An additional 14 000 units during the next financial year would be delivered. The target for the next five years was to deliver 70 000 units. There was a gradual decline in the number of units that would be delivered; this was because the Department was focusing on quality rather than quantity. Three municipalities had been targeted for accreditation in the province for capacity building purposes. It was stated that 14 Municipalities would be supported to finalise their housing chapters and IDPs. This was so that there could be better planning and co-ordination. The Department was targeting the areas of Tlobutla and Moses Kotanai to improve the quality of housing. The project for informal settlement upgrading would get R135 million. The commercial residential unit was upgrading the units. There had been R59.1 million set aside to address the rural land rights and housing issue. The Department had set a target of 1422 houses that would be completed during the current financial year.

There would be R283 million spent on financial interventions, R893.5 million on incremental housing, R42.1 million on social and rental and housing, R59 million on rural housing. The total expenditure amounted to R1.22 billion. This amount was what the Department had from the conditional grant. The number of units delivered per quarter had to reflect in the amount spent per quarter. The Department had ensured the accuracy of the figures. There were certain areas in the province that had a high housing backlog in the province. The demands were endless in urban areas as there was intensive migration. Some of the main challenges were the acquisition of land for housing development, a lack of bulk infrastructural development and sometimes there was a difference between the priorities of the municipalities and the department. A further challenge was that the Department of Housing and Local Government had been separated into the Departments of Human Settlements and the Department of Co-operative Governance and Traditional Affairs. To address this, the Department had finalised a draft organisational structure programme. There was now a technical structure in the Department which had not existed in the past, such as the inspectorate and engineering division. The Department had gradually begun to fill vacant posts. It had received disclaimer audit opinions in the past. To address this, an audit and reconciliation unit had been established.

Service level agreements with contractors had been altered so that they could adapt to capturing all provisions including penalty clauses as well as obligations on the part of the contractor. Quality housing audits would be conducted but at a limited level as the Department also needed resources. To address service delivery protests, the Department undertook to ensure that the occupation of houses by beneficiaries would be done more speedily. Once a unit was completed the beneficiary on the list had to occupy that house immediately. There were challenges as some beneficiaries migrated to other arrears in search of employment. There were endless demands which had to be viewed against limited budget growth and as a result the Department was forced to continuously revise its targets. Developers were encouraged to build different modes of houses to avoid a “one size fits all” approach.

Discussion
Ms M Borman (ANC) said the accreditation of municipalities would speed things up. How many municipalities were operating with full accreditation in the province? How many municipalities in the North West owed the NHBRC (National Home Builders Registration Council)? How many vacant posts had been filled?

Mr T Botha (COPE) asked how many of the houses that had already been built were new. How many houses that were still going to be built had stands that were already approved? How much did each unit cost and what was the size of each unit?

Ms M Njobe (COPE) said one of the Committee’s tasks was to ensure that the national government tried to ensure that the funding for provinces would not decrease. What was the criterion for deciding who qualified for the units?

Mr A Steyn (DA) said he hoped that next year the Committee would be able to tick off all the targets that the Department had set for itself. There was doubt on the 400 000 backlog figure, the reason was that the Committee, during an oversight visit to the province had visited the Taung area which had 130 units but with only 20 people residing there. There were also houses that were built for which there were no beneficiaries. It was hard to believe that a province where people were migrating could have such a high backlog. How many houses had actually been completed and how many were just slabs? Money allocated to municipalities should be ring fenced and used for the correct purposes. A quality house was expected regardless of the amount allocated to the Department. One cannot say that there would be fewer houses because of the quality

The Chairperson enquired about the rural sanitation programme which had now become the responsibility of the Department of Housing. How was the relationship between the Department of Human Settlements and the other relevant stakeholder departments such as the Department of Co-operative Governance and Traditional Affairs? Had the Department considered other alternatives about the issue of not being able to get a hold of beneficiaries because they had migrated?

Ms Desbo Sefanyetso, Member of the Executive Committee for Human Settlements, in the North West reminded the Committee that the Department was new and therefore there were quite a number of vacant posts. The units were two bedrooms and had an open floor kitchen. This type of house had been built through donor funding. The situation in Taung was part of the Department building units in the outskirts of the province. The Department was now focusing on the rural areas for elderly citizens who did not migrate. The issue of Taung was one of the things that the Department was trying very hard to address.

Mr Motlogelwa said there were no accredited municipalities in the North West. The delivery of houses was on the basis of a service level agreement and the municipalities acted as agents. The Department did not owe the NHBRC any money. The Department had nine senior managers that were driving the budget of R1.09 billion. The challenges were manageable as there were no vacancies at senior management level. The units were actual houses that had been fully completed they were built from foundation to roof level. The majority of houses came at a cost of R55 706. The question of who qualified for a house was a subject of debate both at a political and technical level. There were unintended consequences of policy. If one was 18 years and above, had one dependent and was a citizen of South Africa they qualified for a house. It was true that persons were migrating from the North West whilst others were immigrating for purposes of getting mining jobs. The number of beneficiaries grew annually. The houses were completed houses from top to bottom. The figures were not 100% correct. The cost to build a house almost surpassed the allocated figure from the budget. The budget growth was less and the Department needed more. The Department was aware that the ministry for Co-operative Governance and Traditional Affairs had finalised the transfer of rural sanitation to the Department of Human Settlements. Where the Department had built houses it also contributed to the sanitation programme.

Mr J McGluwa (ID) noted that the document presented to the Department was still using the old names of cities and districts which had been changed. There was a lot that still had to be done in terms of capacity building at municipalities.

Mr Steyn asked about the Department‘s restructuring. What was the situation concerning the R583 million that the Auditor-General (AG) could not trace but was later found in the Department?

Mr Botha asked if it was the intention of the Department to shift funds from one programme to another. Where the MIG fund was concerned, there should be some funds that went towards infrastructural development.

Mr Motlogelwa said the old Department of Housing and Local Government did not have an engineer amongst its ranks but this new one did. Part of the restructuring was that the Department also had a programme management unit which comprised lawyers, engineers and accountants, etc. The Department did not have the authority to shift funds and the observation was correct.

Northern Cape
Mr Bradley Swartland, Acting Head of Department for Co-operative Governance and Human Settlements Northern Cape, informed the Committee that some of the major projects for 2009/10 were:
 Accreditation – R8.3 million
Consolidation – R1.3 million
Emergency – R1.2 million
Rural - R5 million
The grand total for units built was 4089 by the end of February during the last financial year. The priority projects included 190 completed houses and 60 were under construction. In Upington 913-30 houses had been completed and 227 were under construction and in John Taolo Gaetsewe 71 houses were under construction. What was of concern was that the funding for 2010/11 had decreased from R325 011 million to R273 260 million. The needs for 2010/11 were R377 879 million. The decrease would lead to fewer projects completed.

Discussion
Mr McGluwa commended the Department on how well spread the figures were. Why was there a drastic decline in the Siyanda District?

Ms D Dlakude (ANC) was concerned about the use of a bucket system by locals to draw water. This was a serious health hazard.

Mr Steyn said it was a concern that for both the Northern Cape and the North West there were acting Heads of Departments. What happened to the excess funds that were unused? Were the funds returned to National Treasury or did they accrue interest somewhere? Were the numbers next to the priority projects and indication of the number of planned units? The Department seemed to be delivering but it would get considerably less money in the new financial year, what was the reason behind this?

Ms Borman asked if all the projects for the Department were registered with NHBRC. Did the Department owe NHBRC any money? How did the Department build units on farmland when they did not own that land? Are the figures for the backlog for shacks or units?

The Chairperson said pilot projects served as special grants for the municipalities. These grants were invested directly into the municipality.

Mr Kgotso Moeketsi, Senior Manager Office of the Member of the Executive Committee said that the Head of Department, had resigned hence Mr Swartland was deputising. The reduced funding could be because the Northern Cape was the least populated province.

Mr Swartland said that the province was responsible for the monitoring process. There was no bucket system in the province save for where there were informal settlements. The province had received an extra R152 million from Treasury last year. However, the fact that the budget allocation was decreasing meant that the surplus had a net effect. The Department was capable of building 2739 units during the current financial year. The Department had also planned to blacklist contractors who were in breach of their contracts as well as those that did not use proper building material.

Mr Lennie Barnes, Senior Manager for Human Settlements, explained to the Committee that more than 50% of the backlog was made up of informal settlements. Farmers normally consented to the provision of housing for their farm workers and they were willing to either sell the land or transfer it into the name of the beneficiaries.

Mr Racky, Stander Chief Financial Officer, said that the conditional grant received was invested into a fund and the interest accumulated was then transferred into the provinces own fund account for its use.

Ms Borman said her query on whether or not the provinces projects were registered with the NHBRC had not been answered.

Mr Steyn asked for more background on the backlog for property that was transferred to beneficiaries.

Ms Dlakude felt that something should be done on the issue of water sanitation in the informal settlements to eradicate the bucket system as it reflected negatively on the government especially with the local government elections looming.

Mr McGluwa asked for a list of sites where houses had been built as well as the total figure for the ones that had been completed. In which area would the Department build the 2739 houses that it said it would build?

Mr Botha asked if beneficiaries were educated by the Department on matters such as the cost of the house. Were beneficiaries given title deeds and how long did it take to issue one?

The Chairperson said that the Department had to take into consideration the issue of dignity when building the houses. The Committee was aware of the transfer of responsibility of sanitation from the Department of Water Affairs to the Department of Human Settlements.

Mr Moeketsi agreed with the Chairperson that the issue of sanitation had to be dealt with.

Mr Barnes said there was a beneficiary education programme.  Beneficiaries were educated about the house transferred to them. There were challenges with the title deeds as the Department was not always able to provide one immediately after occupation. A transfer sometimes took up to six months.

Kwazulu Natal
Mr Jeffrey Nxumalo, General Manager Kwazulu Natal Human Settlements, informed the Committee that the presentation would look at the financial outcomes for the next financial year; the expenditure pattern in the current financial year as well as the challenges facing the province. One of the areas of focus in the province was middle income property intervention. The Department wanted to accelerate rural development, eradicate slums, create jobs and redevelop hostels. The province would also seek to enhance effective service delivery.  The Department was aligning itself with the strategic objectives of the government at national level. There were four major programmes where funds were allocated. Programme two dealt with housing needs, research and planning; Programme three dealt with the conditional grant allocated to the province and Programme four focused on asset and housing management.

Programme one focused on the administrative aspect of the Department. Programme two focused on planning. Programme three was a core programme that received a substantial amount of the budget. Internal installation of services and the actual construction of houses also fell under this programme. Programme four dealt with the maintenance of assets. The Department owned the transfer and sale of housing assets. It promoted, facilitated and regulated the rental housing within the province.

The allocation for the 2010/2011 financial period would be R253 million. The conditional grant for the same period would be R2.7 billion. There was R133 million allocated for housing disaster management. Financial intervention was allocated R250 million. It was used to assist individuals who needed housing subsidies. There was R31 million set aside for engaging with the NHBRC. R1.1 billion went into incremental housing. Most of the budget was spent on rural housing, this was about R950 million. The R2.7 billion was spread out with the aim of covering almost all the programmes. The target for the next financial year was to build 25 000 houses. There had been a provincial memorandum of agreement with the financial institutions in the province to assist middle income earners to obtain proper housing.

Discussion
Ms Borman asked what was the size of the upgrading the shacks as well as the size of the rectification programme. How was the Department planning on dealing with this? Were the Department’s programmes registered with the NHBRC and how much did the Department owe them?

Mr Steyn asked if the Department operated out of rented buildings. What did the reference to the figure of R77 million represent? What was ineffective in the current legislation and how could the Committee assist in rectifying this? How did the Department plan to use the Guarantee fund?

The Chairperson said that the Departments were not clear on the IDP funds, what was the Department’s stance on this? The document did not mention the new mandate of the Department on sanitation.

Ms Dlakude asked  about the programme around disaster relief. The document did not mention housing for households headed by children and pensioners, why?

Ms T Gasebonwa (ANC) asked why people with disabilities were not mentioned in the document. What property was managed and for whose benefit under the asset management programme? What was the Department going to do to ensure that capacity building did take place?

Mr Nxumalo said there were 600 informal settlements in Kwazulu Natal and 95% were in eThekwini. All had to be dealt with. A combination of the interventions proposed by the Department would be enough to deal with the problem of informal settlements. As part of the rectification process, 5247 houses had to be demolished and rebuilt. Of the houses that had to be demolished 67% had been dealt with. There were 3884 houses upgraded. There had been R73 million allocated for the rectification process for 2010/11. NHBRC had been engaged with on this matter. The total cost of rectification was R561 million. The provinces did own some assets as well as hostels. The Province had owed R13 million to NHBRC and it had reached terms with the company. The figure of R77 million was for the maintenance of the assets that belonged to the province.

Free State Financial Expenditure 2009/10
Mr Mpho Mokoena, Head of Department for Human Settlements, most of the allocations for the programmes had been spent by the Department. Therefore, for the first time in the history of the province it had spent 100% of its funds. Of the R1.015 billion allocated to the Department, R1.011 had been spent. The Department’s backlog stood at 200 000 whilst 102 000 households lived in informal settlements. One of the biggest challenges facing the Department was a lack of bulk infrastructural spending; this meant that there was a big challenge in the supply of water for instance as there was not enough infrastructure to supply all regions. Programme two dealt with the housing needs, research and planning; Programme three related to the housing development scheme, implementation, planning and targets; whilst Programme 4 was on housing and asset management. The Outcomes Based Plan was summarised in the document. R30 million had been set aside for 400 units to be built in the rural area.

Some of the challenges that the Department faced were fraud, nepotism, shoddy workmanship, rigging of tenders and a lack of effective monitoring. Fraud was the biggest issue as at times the Department would have a contractual agreement with one party only to find another working at the site.

Discussion
Mr Botha was concerned about the issue of contractors. The real shortfall in the provision of housing units was the fact that units had to be re-built. This was a serious problem, had any money been recovered from the contractors and how much would it cost to rebuild each unit?

Ms Dlakude said it had not been mentioned what was being done in the rural areas nor did it mention the sanitation programme. Who was responsible for the safekeeping of building materials? Who was responsible for the awarding of tenders?

The Chairperson said that it was very worrying that the new mandate of sanitation had not been highlighted in any of the presentations. What was the national government doing to assist provinces in this matter? What was the national Department also doing to assist provinces in ensuring that the same problems did not persist?

Ms Borman asked whether incompetent contractors were given jobs after their incompetence was discovered. What contributory role was the Housing Development Agency playing in the fulfilment of the Department’s mandate? The breakdown of the units that were due for delivery during the next financial year were not clearly spelt out.

Mr Steyn said that in future closed meetings should be considered as other departments picked up and anticipated the sort of questions that were asked and worked it into their presentations. The presentation was confusing and there was also no indication on what the Department had delivered despite a 100% expenditure figure. What was being done to deal with fraudulent contractors?

Ms N Mnisi (ANC) asked if there was any monitoring done by the NHBRC on the work of the Department and what was being done to combat the serious challenge that was faced by the Department such as fraud; negligence incompetence etc

Mr J Matshoba (ANC) said nepotism was a real concern. There was no monitoring in place and the Department would get more money that would be thrown away, this was a challenge for the whole country.

Mr Mokoena said that contractors were instructed to demolish and rebuild the houses. The Department could not inspect every unit as it was stretched in terms of capacity; it had started with an auditing processes. Most of the subsidies were allocated to development in the rural areas. The Department had effectively not received any instructions concerning the sanitation programme form the Department of Water Affairs. The contractor was ultimately responsible for the safekeeping of materials. The issue of nepotism related to the municipalities as the beneficiary list did not have any follow up. One would then find that communities would complain that they had been on the list for a long time while friends and family members had units allocated to them. The beneficiary list had to be better managed. The Interaction with the Housing Development Agency had just commenced. The Department did not owe NHBRC any money.

Submission: South African Housing Co-operative Association (SAHCA)
Mr Victor Botha Manager at SAHCA Western Cape informed the Committee that the organisation had studied the budget vote and the submission would be on issues of co-operative governance and housing. SAHCA was a national umbrella organisation for housing cooperatives.

Administration
SAHCA would like to see the department establish a fully resourced unit that would work closely with SAHCA on housing co-operative development on the ground.

Housing Policy, Research and Monitoring
Over the years the demand by communities for an alternative to expensive rentals in the inner cities was as a result of stringent bond prequalification criteria on individuals seeking new houses.
SAHCA would like the Department to create a need to research and develop the best form of
co-operative model best suited for practice by the South African communities.

House Planning and delivery support
SAHCA had planned a number of pilot housing co-operative projects countrywide and would like the department to incorporate these into their department programmes.

Housing Development Finance
The presidency acknowledged the important role housing co-operatives played both socially and economically.

Strategic Relations and Finance
SAHCA would like to see the department begin to implement the housing co-operative strategy that was developed collectively two years ago.

The meeting was adjourned.