Intervention in Nelson Mandela Bay Metropolitan Municipality: Department of Human Settlements briefing

Meeting report

Department of Human Settlements on Intervention in Nelson Mandela Bay Metro (NMBM)

Mr Pascal Moloi, Chief Executive Officer (CEO): Housing Development Agency (HDA), provided an overview of the briefing by the Department of Human Settlements (DHS). On 30 June 2015, a Memorandum of Agreement had been signed by the political principals and an Implementation Protocol (IP) had been signed by the accounting officers on 2 July 2015. A Council resolution in support of the programme had been adopted on 17 September 2015.

A number of challenges had been identified and these were already well known to the Committee. One was the issue of contractors. Over 400 contractors were on the database for contract implementation but only a few of them had actually got contracts to execute projects, and this had caused a lot of disaffection among contractors. Also, there had been the issue of delayed payments to contractors for projects executed.

A couple of areas had been identified to drive intervention, but two outstanding issues had been mentioned -- the appointment of the HDA as an implementing agent, and improving financial support to small, medium and micro enterprises (SMMEs).

Mr Bosco Khoza, General Manager: Land and Housing Support Services, HDA, continued the briefing, and described the procurement improvement of the NMBM which would be implemented by the HDA, as the implementing agent. This would ensure equity among the contractors, transparency on how it was applied and compliance with legislative requirements. Implementation of this framework had begun already. A call for registration had been issued to draw up database of pre-approved contractors and as at 29 October 2015, 1 000 prospective bidders had already collected the forms. The bids close on 13 November 2015 and from these, the service providers will be chosen.

In order to augment capacity, the HDA had appointed a team of professionals in order to allow work to continue. These professionals included civil engineers, town planners, project managers and environmentalists. These professionals were being paid based strictly on the work done.

The NDHS had also seconded a team to the metro to serve as part of the support team due to the fact that the metro had to contend with rectification problems.

Some areas had been identified as hotspots due to the high level of expectations in terms of service delivery. Walmer was one of such places. The Deputy Mayoral steering committee on Walmer had been established .This committee sat every two weeks and included community representatives, public officials and relevant politicians, who were primarily the councillors. This forum had been effective in ensuring that matters raised by the community were attended to.

In Walmer, there were water leakages from pipes that needed to be fixed, poor drainage and flooded homes. A contractor had been appointed to commence construction of 196 housing units in Walmer while five sub-contractors from within had also been appointed. Some quick achievements had been recorded:

• The establishment of an Enhanced Peoples Housing Process (EPHP) programme for the benefit of the community.
• An electrification programme which had been 99% completed.
• The cleaning of open public spaces.
• The rehabilitation of access roads.
• The establishment of a task team which met fortnightly and gave feedback to the community.

These had improved the confidence level of the community in the performance of the metro.

The second hot spot identified had been Khayamnandi. The main idea here had been to build 800 slabs on which top structures would be built later. The project had initially been approved on 23 May 2013 and the funds had been obtained from the Bucket Eradication Programme (BEP) through the Provincial treasury.

Another hotspot was Missionvale. Houses had been built in low lying areas exposed to flooding. The designs had had to be revised to cater for the low-lying foundations. Some challenges had been experienced with designs and the implementation of the project. The housing construction had been done ahead of servicing for water and sewerage in phases one, three, four and five. The houses which had been built but not connected to services in phases one and two had now been fully serviced and phase three was over 90% serviced. Also, there was a plan to ensure completion of servicing of phases four and five by late 2015/early 2016 and to attend to water leakages that were causing waterlogging in some areas.

The total number of serviced sites completed was 10 880, which comprised of 4 852 from NMBM and 6 028 from the HAD. Funding for the Integrated Residential Development Programme for 2015/16 allowed for the construction of only 2 778 top structures, excluding rectification.

As at 30 September 2015, the total Urban Settlement Development Grant (USDG) budget had been R846 480 000, and the quarter 1 expenditure had been R145 543 258, which represented 17% of the allocation.

In terms of settlements, the number of state-subsidized housing units provided in the first quarter had been 240 against the target of 200, while the annual target for the metro stood at 1 506. A total of 195 households had been relocated from stressed informal settlements and servitudes to greenfield development areas, though the target had been 150, and the annual target, 1 200. One settlement had been upgraded from informal to formal, where the annual target was four. 520 households had been provided with permanent water and sanitation services, while the annual target for this was 3 000. In terms of the intervention, it had been agreed that the Metropolitan Municipality would complete what had been started in the previous year.

Four areas which needed reforms had been identified in the beneficiary management system:

• Training to manage the national housing needs register and the housing subsidy system;
• Review of the housing demand and allocation policy;
• A beneficiary and consumer education programme;
• Social facilitation.

14.3% of the issues were being resolved and work was in progress, 35.7% of the houses had been allocated to the rightful beneficiaries, while 50% of beneficiary management issues had not been resolved. These ranged from wrong allocations to illegal occupations and houses not being occupied.

Regarding title deeds, it had been proposed that a complete verification system be developed and a programme implemented to determine the number of title deeds ready for handover. Also, it was important to develop and implement a communication strategy around the community so they understood what was actually being done for them.

Some critical success factors had been identified regarding the programme. These included the sustenance of collaboration between the various organs of government, the confirmation of additional funding mechanisms for up-scaling, the timely resolution of outstanding commitments as per NMBM’s trading account, the establishment of systems and procedures for financial management, beneficiary management and operations management. It had also been important to direct communication to the broader community within the Metropolitan Municipality regarding elements of the programme.

Discussion

Mr Mbulelo Tshangana, Acting Director General, DHS, apologised to the Committee Members for the abridged version of the presentation which had been given out to them.

Mr M Shelembe (NFP) raised the issue of the beneficiary management. He said there were cases where a beneficiary had been allocated a house, but before such a beneficiary occupied the house, moved from one province to another, leaving the house unoccupied. However, on the database of the government, it was recorded that the person had been allocated a house. He asked for clarification on what happened to such a house and what happened to the record of such a beneficiary, since there was a possibility he would apply for a house in the new location.

Ms L Mnganga-Gcabashe (ANC) remarked that she understood that the team reported directly to the mayor, but the Municipality involved other departments and relevant stakeholders. She wanted to know if the Municipality worked hand in hand with the HDA and if not, she proposed that they begin to do so. Referring to the presentation, she said the issue of toilet seats should be made a top priority project, and she wanted that done before the end of the current year.

Mr K Sithole (IFP) observed that during the presentation it had been stated that 184 toilets were being constructed, but during the visit of the Committee they had been told the figure was 200. He wanted an explanation for the discrepancy. Referring to the Walmer project, he asked for information on the number of hectares of land which had been identified for the construction of housing units. What was the relationship between the Mayoral committee and the forum which sat every two weeks? He wanted a breakdown of figures to show how much rectification work had been done since it had not been indicated during the presentation.

Mr S Gana (DA) said his questions were not related to the visit of the Committee, since he had not been part of the visit. He asked for clarification on the number of units that needed to be rectified, and the amount already budgeted for that. Referring to the number of state-subsidised housing units, he wanted to know if the top structures being constructed at Khayamnandi were part of the 1 506 target, or if that target had been met, over and above. He also asked about the quality of those constructions.

He observed that contractors had complained earlier about non-payment of their fees by the HDA and this issue had not been mentioned in the briefing. What had been done to address the issue and what was the current status? Finally, he asked about the cost of the programme to the HDA.

The Chairperson remarked that during their visit, it had been observed that a social housing project in Walmer had almost been stopped by the SMMEs, but during the presentation it had been stated that a programme had been put in place to involve the SMMEs. She wanted to know if that project was still on course.

She also asked about the stability of the HDA in terms of human resource usage. What was the situation where projects had been blocked as a result of protests from people who wanted compensation from the government for carrying out contracts. She was quite comfortable with the issue of beneficiary management because in the past, it had been full of corruption -- how was this being managed? When the Committee had visited earlier, it had been an impromptu one and this had enabled them to see first-hand everything that was wrong with the project. She asked if things had normalized.

Responding to the issue of rectification, Mr Tshangana stated that rectification was a major issue in the NMBM. The National Home Builders Registration Council (NHBRC) had done the verification exercises and quantified the magnitude of the problem.

Talking about capacity building, he said a capacity-building fund had been received last year and not all of this had been used. There was still an outstanding fund of R83 million which remained unspent. The Department of Public Works was paying, but the shortfall in the funds would come from the Department of Human Settlement, in consultation with the Metropolitan Municipality. This was because of the cost sharing arrangement between both departments.

Regarding the value of the exercise, Mr Tshangana said that in terms of the target for the year in delivering housing units, the budget was R450 million. This was meant to provide 2 778 housing units with four implementing entities -- the NMBM, the HDA, the provincial Department of Housing and the Metro. R500 million had been requested from the Treasury as supplementary funds, but only R100 million had been released. This money was meant to deal with issues arising from the revolving fund. Some contractors had been paid from the revolving fund. This fund had been R220 million, but it now stood at R180 million because R40 million had been used to offset money being owed to contractors.

The revolving fund provided funds for projects in anticipation that such money would be refunded by the Provinces. If this fund was not well managed, then it became a liability.

The steering committee was comprised of four entities, and also included the CEO of the HDA and Executive Director of the Metropolitan Municipality. The steering committee met every two weeks and issues which revolved around rectification and the revolving fund were discussed. Linked to the revolving fund was the procurement framework. This was to create a clean and transparent way of doing work.

There was a high level of discontent among the contractors, and the HDA was looking into that. A new roster system was being designed and implemented which would tackle that issue.

Mr Moloi addressed the issues surrounding beneficiaries. He said that the issues were not limited to the NMBM alone. One of the main problems with the NMBM programme was the registration of multiple dependents. Measures were being put in place to address this. The focal point was the training of staff and personnel, to ensure that they were well trained and prepared to deal with these issues. The allocation policy was being looked into to identify areas where there were gaps, and such gaps were being closed. A lot of education and awareness was being carried out in the communities because a lot of people refused to divulge the true information about their earnings.

The Department of Human Settlements was not the only department providing support to the NMBM. The slabs 800being constructed were being checked to be sure the infrastructure performed well. The issue of land in Walmer had been addressed. 64.29 hectares of land had been identified and this would be used for relocating people. There was a process of identifying and verifying in respect of the hotspots

The outstanding work that needed to be done in the Metropolitan Municipality involved close to 6 000 houses, and R645 million was needed to complete the rectification process.

Mr Mandla Mabuza, Acting Executive Director, NMBM, said that when his team had arrived at the Metropolitan Municipality, it had been discovered that contractors were being owed for a period of over four months. Most of them had executed work and there was no reason for them still being owed. One of the challenges identified was that in the past, some contractors had been paid without their invoices being verified. So a contractor could execute work to the value of R800 000, and be paid R1.2 million. This had caused a lot of tension among contractors because some people were paid more than others even when they had executed smaller projects. Some contractors had payments delayed for unknown reasons, even when their invoices had been verified. This contradiction between the contractors and the Department of Human Settlement had led to the delays in payments. When his team had come on board, they had moved to reduce this tension by trying to verify invoices as quickly as possible and pay contractors for work done once the verification had been completed. Last month, between R35 million to R40 million had been paid out to contractors. Contractors were being paid only on the basis of work done by them, so that liabilities would not be created for the state.

In the past, project managers had taken invoices straight to finance to make payment claims without their invoices being verified. This system had been stopped. With the present system in place, claims could be made only after the invoices had been verified, signed and counter signed by Mr Mabuza and Mr Mandla George, Acting Director Housing Delivery (NMBM).

In terms of stability between the Department of Human Settlement and the Metropolitan Municipality, there were four directorates -- housing delivery, developmental support, planning, and beneficiary management and consumer education. The directorates of developmental support and planning were relatively stable and focused while the remaining two had serious challenges. In the past, only two people had made the decisions regarding the allocation of beneficiaries in the directorate of beneficiary management. There had been no basis on which such decisions were made -- allocations were made randomly without recourse to existing regulations. Presently, a committee had been established which focused on the consideration of beneficiaries based strictly on laid down rules and regulations. This would help in tackling the instability in the directorate of beneficiary management.

With regards to the issue of contract workers as against permanent workers, there was a lot of tension between both classes of workers, and this was a serious cause of instability.

The issue of contractors had also been a source of instability. In the recent past, there had been a system that was supposed to ensure an even spread of project execution among the contractors, but only about 30 contractors had projects assigned to them, and this had been done continually to the detriment of others.

There had been serious resistance to the national intervention team because of a rumour that the team had come to take over their jobs. However, engagements had been held with the city manager and various unions to dispel these fears and rumours and it had been established that the job of the intervention team was basically to provide support. So far this team had succeeded in its mission.

Mr George referred to the revolving fund, and said there was a meeting every Monday where all claims were looked into and clarified, so it had been projected that at the end of November the revolving fund would be a reasonable level, consistent with the policy of the council.

Referring to the comment made by a Member of the Committee regarding their last visit, he said the situation where only two of the DHS staff had been present to receive the Committee would not happen again. He pledged the support of the staff of the DHS to the Committee to enable them discharge their oversight functions properly. He also stated that all issues raised by the Committee during the last visit had been looked into and attempts were being made to resolve them. Regular visits would be embarked on by the DHS to project sites to see and understand the problems associated with such projects.

There was a resonance between the DHS and the other departments involved in the programme. This was possible because of the project monitoring mechanism put in place. The working relationships with the provinces had also improved greatly and direct communications had been established.

Mr William Perks, Regional Director, Eastern Cape Department of Human Settlements, commenting on the issue of the destitute, said that a contract had been awarded for the construction of 100 housing units for some of the identified destitute. He responded to the Chairperson’s remarks on blocked projects by saying all projects were on-going and normalcy had been restored.

The Chairperson, in her closing remarks, said the interaction was very critical and she believed in the ability of the team being sent to the Nelson Mandela project to do a good job. She also commented that it was important to continue with consumer education.

The minutes of previous meetings were moved for adoption and seconding.

The meeting was adjourned.