Division of Revenue Bill & Conditional Grants: hearings (Housing, Social Development, Provincial & Local Government, Education)

Meeting report

FINANCE SELECT COMMITTEE
7 March 2002
DIVISION OF REVENUE BILL & CONDITIONAL GRANTS: PRESENTATION BY HOUSING, SOCIAL DEVELOPMENT, PROVINCIAL & LOCAL GOVERNMENT, EDUCATION DEPTS

Chairperson: Ms. Mahlangu

Relevant documents:
Division of Revenue Bill [B5B - 2002]
Presentation by the Department of Education
PowerPoint Presentation by the Department of Housing
PowerPoint Presentation by the Department of Social Development
PowerPoint Presentation by the Department of Provincial and Local Government

SUMMARY
The Department of Housing briefed the Committee on the types of grants available to the department, the purpose of the Housing Subsidy Grant and the Human Settlement Revelopment Grant as well as the factors mitigating against performance of the Department in delivering houses. [Minutes of other departmental presentations awaited]

MINUTES
Department of Housing
The delegation from the Department of Housing consisted of: Ms. U. Madida (Acting DG), Mr. M. Dlabantu (Chief Director Finance), Ms. M.C. Masemola (PA to acting DG), Mr. L. Jolobe (Chief of Staff) and Ms. S. Taitai (Parliamentary Liaison Officer).

Ms. Madida presented the PowerPoint presentation, expanding on the content of some slides:
Slide: Housing Subsidy Grant
Ms. Madida identified the main programs under the grant and explained that the Discount Benefit Scheme assists people living in state financed houses to take ownership of their houses. The Hostel Redevelopment Program addresses the needs of people living in hostels and ensures that these hostels are made more hospitable.

Slide: Human Settlement Redevelopment Grant
Ms. Madida gave the example of a community within a "normal environment" as having amenities, services, roads, however the community is still making use of the bucket system which is a dysfuntionality. This project aims to assist these people with regards to this sanitation aspect. The project also assists with most of the planning required to ensure integration of the projects at rural level.

Slide: Allocation Criteria
Ms. Madida explained that funds received from Treasury are allocated to provinces on the basis of a new formula to be used in the new financial year. The formula has to be in line with the priorities of the government. The needs of a rural community in need of development will be different from an urban community in need of upgrading. The greatest part of this new formula addresses the need of housing.

Slide: Assessment and Performance of grant
She noted that it is expected that at least four provinces will underspend their allocation. She assured the Committee that the Department is doing everything to ensure that the provinces can deal with the issue of underspending.

Slide: Factors mitigating against performance
Section 118 of the Local Government Municipal Systems Act states that for any transfer of property to take place, all arrears owed to the municipality have to be paid in full. Before the implementation of this Act, if there were arrears, a person could sign an Acknowledgement of Debt and make a commitment to pay the outstanding amount. On that basis a clearance certificate was issued, and the transfer of the property could be effected. The new Act provides that municipal officers cannot issue clearance certificates before the arrears are paid in full. One of the conditions to be fulfilled before a house is constructed is to ensure that the stand (on which the house is to be built) can be transferred into that person's name. This ensures that two people do not lay claim to the property/stand. If you cannot give effect to the transfer, you cannot go ahead with developing on that property, this has lead to the stalling of projects.

With regards to the National Environmental Management Act, Ms. Madida stated that whilst there is recognition for this piece of legislation, the Department has had to learn to deal with the requirements of the Act. The Act prescribes that environmental impact studies be undertaken prior to projects being given the go-ahead. There has been the need to learn how to factor the Act into the delivery process.

Ms. Madida said that the abnormally high rainfall in the Western Province in the winter of 2001 had slowed down the delivery process. Such rainfall leads to emergency shelters being erected, but slows down the erection of permanent dwellings.

Regarding lack of capacity, Ms. Madida suggested that the problems around newly demarcated boundaries of municipalities had led to ad hoc implementation which had slowed down delivery.

Slide: Measures to deal with Under Expenditure
Ms. Madida said that the Department is working to address the problem with Section 118 of the Municipal System Act and improve co-ordination at national level. There is talk of engaging different National Departments, like Land Affairs, to deal with the delivery of houses.

To address the conveyancing problem, the Department wants to establish a working committee to ensure a partnership at the level of policy formation.

Regarding the ad hoc delivery of projects, it is hoped that the Integrated Development Plans (IDP) will be fed into all sections of departments. All departments will have this guiding document which shows how investment in terms of human settlement will go. The Department has worked with the Department of Provincial & Local Government to ensure that during the IDP process, per province housing needs can be identified. She stated that the first draft of the Provincial Housing Development Plans for the medium period, has been received by the department. As a result, the Department is now in a better position to understand how provinces want to implement their housing projects. She said it is a tool against which one can assess the province's cash flow, and monitor delivery of houses in terms of the plan of action.

Slide: Projected Life of the Housing Grant
Ms. Madida said that the backlog required this grant to exist for at least twenty years.

Slide: Capacity
Ms. Madida stated that it is difficult to run a project where the local authority does not have the minimum dedicated capacity. This has been discussed with local authorities and provincial government, and there is a program in place whereby local authority officials are called in to address the delivery process. Such housing development processes are required to interact with construction workers, civil engineers and all involved in the building process .

Discussion
Dr. Conroy (NNP) asked for more information on the sectional title scheme and whether it would be in operation soon.

Ms. Madida replied that where you have state-funded housing schemes and people wish to take ownership of these houses, the way to transfer these houses is through sectional title. In the Job Summit program, some of the units available for purchase will be medium density homes - like semi-detached units. At present the job summit program will deliver some 15000 units of homes, and the budget allocated for that is R240 million. She said she cannot quantify the amount to be covered by sectional titles.

A committee member asked:
- whether the Department has complied with Section 3(1) and (2) of the Treasury Regulations (fraud detection)
- what measures are in place to ensure the department has adequate expertise and knowledge
- how does Section 118 affect beneficiaries especially indigenous people who cannot pay arrears - what is the capacity of the national and provincial departments.

Ms. Madida responded that under Section 118, until such time indigent people are registered as such, local authority will not approve the clearance certificates. It is therefore highly important that indigent beneficiaries of housing subsidies be registered as such. She stated that some of the MECs are meeting with municipal mayors to see what local authorities can do to fast-track the transfer process of homes to indigents. She stated that the Department has taken cognizance of the fact that indigent people receive funding for maintenance.

Mr. Dlabantu responded to the question on fraud prevention, saying it was important to note that fraud relating to the housing sector occurs at implementation level. A task team has been put in place by National department to investigate the cases and implement a fraud prevention plan.

With respect to the skills, expertise and knowledge required, he said an ad hoc staff has been appointed for training members. All provinces have a Chief Financial Officer to oversee matters. Workshops are held to provide adequate financial management training to members.

Mr. Taabe (ANC) asked which provinces were under-spending.

Ms. Madida replied that under-expenditure projections are based on expenditure from the beginning of the financial year to December. The affected provinces are the Free State, Eastern Cape, Western Cape and Gauteng. Kwa-Zulu Natal was a borderline case. Discussions have been held with these provinces and they have indicated how they intend to deal with the under-expenditure. The provinces indicated that these projections may be incorrectly conservative due to the construction workers break during December. Such projections need to recognize the impact of this construction break. The provinces have indicated that there are corrective measures in place, but this will not significantly improve the financial year figures. Provinces have to outline specifically how they intend to deal with the roll-over of the expenses at the end of the first quarter, to see if there are improvements on the figures which are projected.

Mr. Taabe asked if the national department makes an erroneous transfer of money to a province, is there success in recovering this money?

Mr. Dlabantu said that the transfer of funds to provinces is based on the formula which specifies how much is to be apportioned to a province. The Division of Revenue Bill specifies by which time money should be sent to the provinces and that a province has to certify the amount it requires for the month. On the strength of that projection, the transfer is made. The Division of Revenue Bill now states how much is to be allocated monthly, and by which date transfer of the funds to the province has to be made. The Bill provides that funds be held back on the basis of non-performance. The problem is that provinces give you a reason for the non-performance and a program for expenditure, however they fail to perform according to the program. He said that the MTEF figures should give even local authorities an understanding of ultimately how much they will get over a period of three years.

Mr. Dlabantu replied that at National Level, a reconciliation is done. In the past two years no discrepancies have been found and no erroneous transfer of funds has been made. In the Division of Revenue Bill, the certification process has changed which is intended to rectify the problem of discrepancies in transfer of funds to provinces. Within the Housing Department, there is Financial Monitoring Sector working on an enhanced system throughout the country, which tracks records and spending of each province. It can track a project to see if it is performing well. If it is not performing, it investigates to see where the problem lies.

In answer to a question on the Hostel Development program, Ms Madida replied that there are approved norms and standards for the size of the units. The subsidy should provide for a minimum of 30 square metres. The program should also ensure that the hostels are changed to family units, and there are sizes which have to be complied with.

A committee member asked if there are specific reasons/factors to account for the performance rate of a province. He noted that fraud happened at the implementation level and asked if there were any indications for a layperson to try and identify fraud at that level.

Ms. Madida replied that the number of units delivered by a province is affected by the amount of money allocated to that province. Eastern Cape is allocated less money than Gauteng so will deliver fewer units. However actual delivery of units is subject to the success and performance within a particular province.

Mr. Durr (ACDP) asked about the role of Section 21 companies which have historically delivered many houses. What would be the future role of these companies? To what extent does the department see itself as establishing communities? Are they building other institutions such as churches and schools to support a family life or are they merely concerned with putting up homes?

Ms. Madida replied that Section 21 companies definitely have a role in housing development. There have already been a number of such companies delivering homes. There are also job summit projects and medium-density projects which deliver housing. It is recognised that the Government is not the best of landlords, therefore there are companies supported by European Union funding, for example, to ensure that capacity is built in terms of social housing funding.

In answer to the question whether the Department establishes communities or merely houses, Ms. Madida replied that most housing projects have merely erected rows and rows of units placed, to some degree, in the middle of nowhere. Now the emphasis is on the environment, and to work with institutions which can assist with the planting of trees, or to improve the RDP houses. She said that there are project forums which are established to ensure that at the planning stage, people such as police and the local departments are aware of the project, so that amenities can be put into place. She gave the example of the Human Settlement Redevelopment programme, where plans to upgrade an existing settlement should take into account factors such as the need to enquire whether children attend schools close by or travel long distances. She stated that the biggest challenge is to see that such integration occurs.

A committee member asked what the understanding of the Housing Department is on the indigent peoples' policy is. Is there any plans to encourage municipalities to register indigents. Regarding the quality of houses, he asked if there are norms and standards in place to ensure that the houses are of good quality. Also was there a norm in terms of minimum square meterage?

Ms. Madida replied that the Department is aware that people who are indigent qualify for assistance, and it is drafting a memo to Cabinet to request that whilst looking into these issues, Cabinet allows for a moratorium on the eviction of people.

A committee member noted that the problem of a lack of capacity, especially technical capacity, seems to be a problem that will linger for long period of time. The Chair also spoke of the problem of under expenditure and under-performance of people.

The Chairperson thanked the Department for its elaborate presentation.

[The minutes for the presentations by the Department of Social Development and Provincial & Local Government are awaited. The presentation by the Department of Education was not minuted.]

Education summary
During the 2000/01 financial year the Department managed two conditional grants i.e. the Financial Management and Quality Enhancement in School Education and HIV/AIDS.