Department Budget: hearings

Meeting report

HOUSING PORTFOLIO COMMITTEE
2 April 2003
DEPARTMENT BUDGET: HEARINGS

Chairperson: Ms Z Kota (ANC)

Documents handed out:
Thubelisha Homes Presentation
Thubelisha Homes Annual Report 2002
Servcon Payment Normalisation Programme Presentation
NHBRC Strategic Corporate Plan 2003-2008 [document awaited]
NHBRC Slide Presentation

SUMMARY
The Committee heard submissions on the Department budget from Thubelisha Homes, SERVCON Housing Solutions, the People's Housing Partnership Trust (PHPT), and the National Home builders Registration Council (NHBRC).

Thubelisha Homes works in conjunction with SERVCON, and was jointly established by the Department of Housing and SERVCON. The organisation provides alternative, affordable to those people who can no longer afford to pay their homes under the SERVCON portfolio, and would otherwise be evicted. They identified illegal occupation of homes and ineffective evictions as major constraints to their work.

SERVCON was established through a joint venture by the Government and the Banking Council. Their mandate is to normalise the housing situation and dispose of their portfolio by 31 March 2006. Problems identified were unresponsive clients, cancelled agreements, and unsuccessful evictions.

The People's Housing Partnership Trust (PHPT) was established by the Housing Department to implement a capacitation programme to develop capacity within Government, civil society, and at community level, to support the People's Housing Process (PHP). Through skills training, the PHPT enables people to take charge of developing their own houses. However, the Committee was not satisfied with the presenter's lack of figures to explain budgetary activity, and statistics to more graphically explain the progress of the PHPT with regard to its mandate. He was asked to reappear before the Committee, with the relevant information.

The mission of the National Home builders Registration Council (NHBRC) is to protect housing consumers by implementing, maintaining, and regulating quality standards within the industry. The CEO stated that the Council is not supported by a financial allocation from Government, but procures finances from those bodies who register with the Council.

MINUTES
Thubelisha Homes Presentation
Mr Kevin Duncan, Chief Executive Officer, delivered a presentation on behalf of Thubelisha Homes.

The primary purpose of Thubelisha is to provide alternative, affordable accommodation to households on the Servcon portfolio who have signed rightsizing agreements with Servcon and complied with their interim payment arrangements. "Rightsizing" is a process whereby alternative accommodation is provided by Thubelisha for home owners who had their houses repossessed by banks because they could not afford to make repayments.

To date, 4443 units have been constructed, in six of the nine provinces, namely, Gauteng (61%), Western Cape (16%), Mpumalanga (8%), North West Province (6%), Eastern Cape (6%), and Free State (3%).

He shared the problems experienced by the organisation:
- R2479 "own contribution" was threatening to a huge impediment, but negotiations with the banks to pay in those amounts, bore fruit. The banks are now providing the R2479 needed for "own contributions".
- The Committee heard how illegal occupations of homes and the subsequent ineffective evictions have a direct implication on the work of the organisation. Some clients, having initially committed to the process of "rightsizing", become influenced by pressure groups to illegally occupy their present housing, which they can no longer afford to pay. They renege on the agreement to relocate to the alternative "rightsized" housing which the organisation provides for them. The organisation is then forced to apply for eviction orders against the clients. The problem is further compounded by the apparent inability of the police services to cooperate with the Sheriff of the Court, in carrying out the evictions.

He added that although the problems were considerable, they were not insurmountable.

Mr Duncan proceeded to speak on the way forward for the organisation. It had become necessary to consider the re-invention of Thubelisha Homes for the following reasons:
- Rightsizing potential had been reduced from 17000 to 11000, since at the inception of the organisation, they had not anticipated the present non-compliance of many of the clients.
- In spite of good planning, considerable external factors were proving a major challenge.
- The need for greater delivery on Government objectives.

On the organisation's future, incorporated into their strategy, is a policy to integrate the aged and disabled from the housing waiting lists of the Local Authorities, for consideration on the Thubelisha programme. This sector would constitute 20% of the organisation's clients.

Thubelisha Homes would like to play a supportive role for the Local Authorities in the provinces. Mr Duncan informed the Committee that already, Mpumalanga Province had appointed the organisation as a primary support organisation.

The Department's Director General had requested Thubelisha to spearhead the Emerging Contractor Development Programme. Emerging contractors would be put through a development type of programme, where they would also attend formal lectures, and eventually graduate with a formal NQF accreditation.

The organisation has made a policy decision to offer 20% of all projects to women in construction.

Referring to the three year financial overview, Mr Duncan mentioned that "Income from Investments" showed a gradual decrease. The organisation was originally capitalised through the Dept, but operational costs were eating away at the investment. The organisation is sustainable, since its operations are not huge. However, they do need to "keep head above water".

With respect to the Balance Sheet, Mr Duncan explained the projected jump in assets by saying that the organisation would be adding a further element to its operations, through the People's Housing Process (PHP). Due to this, there would be large amounts of building materials in the possession of the organisation, specifically for use by the PHP.

Under "Current Assets", he explained the term, "Accounts Receivable". These refer to houses which had been completed, and had not yet been paid for by the Housing Board.

Of the staff complement, he said that the level of professional employment is at two-thirds. On average, the company is fairly highly paid, since the professional level is quite high.

The nett profit per client is R500 - R600.

These were some of the items Mr Duncan requested assistance with:
- The growing scarcity of land.
- Land that is earmarked to be developed into new township areas, is now subject to compulsory environmental impact assessments prior to development, which is causing huge delays.
- They are subject to delays caused by the Deeds Office.
- The occurrence of illegal occupants, and the problems of ineffective evictions.
- Councillors who are not truly supportive of the organisation's work, and who have their own agenda's.

Discussion
The Chairperson asked what method was used to collect the R 2479 "own contribution" from clients.

Ms Semple (DA) asked how the organisation hoped to complete its target of 15000 units by 2006, since it is presently producing more than 2000 houses per year. By when would the demand actually be fulfilled? She commended the organisation on the fact that it was providing houses for the aged and disabled. She asked whether HIV/AIDS sufferers and child-headed households also qualified for these houses.

A Member asked if there was space for new clients who had not applied for homes before the cut-off date of 31 August 1997, to qualify for these houses.

Mr Duncan explained that the organisation provided the client with a bank deposit slip which carried a stamped reference number. The client would use that specific deposit slip when depositing his payment through the bank. The organisation could determine specifically where payments come from, by identifying the reference number on the deposit slip copy which comes from the bank. He reported that the system was working quite well.

Mr Duncan referred back to his earlier statement that the organisation, at its inception, had not anticipated their clients' non-compliance. The organisation could do more, but that would depend on the willingness of the client to comply with the terms of the programme. The programme's success would depend on how many people were willing to take up rightsizing, and for that reason, the effectiveness of the eviction programme was crucial.

Mr V Matlau (Senior Manager: Strategic Relationships) stated that the rightsizing programme is not a palatable operation, because it necessitates people having to move from big, to smaller houses. However, it does provide a solution to people who can no longer afford their homes, so that they do not find themselves without shelter.

HIV/AIDS sufferers and child-headed households do not qualify for homes from Thubelisha. Mr Duncan reported that the National Department is currently drafting a policy aimed at assisting these people.

The programme is at present not open to new people coming on board. The National Department is eager to see how the programme will unfold with the present intake, before taking on new clients.

Ms S Vos (IFP) asked if anything was being done on a national level to address the problem of the lack of support by the SAPS in evictions.

Mr W Skosana (ANC) asked which three provinces were not included in the programme. Additionally, he asked if there were no need for the programme in those provinces.

Mz M. Ramakaba-Leseia (ANC) said that many people had saved much more than R2479. Would the organisation assist such people who were sacrificing to purchase better homes?

Through the People's Housing Process (PHP), Thubelisha Homes would be offering its services in the remaining three provinces, which are the Limpopo Province, the Northern Cape, and Kwazulu-Natal.

To Ms Ramakaba-Leseia, Mr Duncan said that the stipulated policy was that each client must give R2479. Clients who have additional funds to add, are able to purchase bigger houses. Thubelisha Homes would accommodate them.

The Chairperson thanked Mr Duncan for his presentation, saying that the Committee would look into the constraints which he had requested assistance with.


SERVCON Housing Solutions' Submission
Mr M Moroka, Managing Director, presented SERVCON's presentation to the Committee. SERVCON was initiated through a joint venture by the Department of Housing and the Banking Council. Its major responsibility is to meet designated targets in respect of its portfolio. In this regard it is required to secure the withdrawal of properties from the portfolio as follows:
- 7,5% by the 31^st March 1999

- 20% by the 31^st March 2000

- 40% by the 31^st March 2002

- 65% by the 31^st March 2004

- 100% by the 31^st March 2006

SERVCON has an agreement with Thubelisha Homes, whereby clients who can no longer make payments on their existing house, can be relocated through the Thubelisha programme to smaller, more affordable housing. This process is called 'rightsizing', and is an alternative to evicting these defaulters. The previous house is then sold back into the market.

To date, Mr Moroka reported that up to 31 March 2003, SERVCON had managed to deliver at 52.5% of its projected programme, which ends on 31 March 2006.

With regard to the occurrence of illegal occupants, Mr Moroka said that often when an eviction is carried out, and another client buys the re-possessed house from the bank, a pressure group will force the new owner from the house, and put the evicted party back into the house.

He drew the Committee's attention to the organisation's "Financial Expenditure", which shows the bank's contribution versus the Government's contribution, to the programme of SERVCON, for the years 1998 to 2003. For the year 2002 / 2003, there was a total contribution of R73 174 234.

To further illustrate the organisation's performance, based on consistency of payments by clients, he showed "Good Book / Bad Book Split" charts. For the fourth quarter of 2002, there were 1549 cancelled agreements, and unresponsive clients were on the increase. Successful evictions carried out were declining.

Mr Moroka identified the following strategic directives by the organisation:
- Making rightsizing options more attractive.
- Undertaking focused and effective evictions.
- Lobbying for a policy to provide HIV/AIDS sufferers and child-headed households access to subsidies.
- Implementing community development projects.
- Researching opportunities for the secondary market, "to see if there's life after 2006".

Discussion
Ms Semple requested clarity on the "functioning community development projects". With regard to "in situ" rightsizing, she asked if a moratorium had been placed on evictions.

Mr Moroka replied that the community projects, of which there were about 27, were implemented to teach skills development, promote HIV/AIDS awareness, and other projects which could improve the prospects of people in the communities. The organisation was keen to show that they were not simply there to carry out evictions.

Mz Semple referred to Mr Duncan's statements about non-compliance of the police services in performing evictions. She asked Mr Moroka for his opinion on the matter.

Ms Vos asked for a figure on successful evictions.

Mr Moroka responded that in the past five years, there were 2666 attempted evictions, of which 1317 had been successful. A high court decision in the Eastern Cape forced the SAPS to assist the Sheriff of the Court with evictions. He reported that the police services in Cape Town had pledged their support for the process. However, the occurrence of gangsterism in the city could be a detracting factor. However, the police services had been issued with a list of areas where evictions would take place, and SERVCON would hold them to their pledge.

Mz C Ludwabe (ANC) asked how big the houses were, and if the toilets were located inside or outside the houses.

Mr Moroka said that houses in the Eastern Cape, Free State, and Mpumalanga Provinces, were 40m². In terms of the housing plans, toilets are supposed to be inside the houses.

The Chairperson thanked Mr Moroka for his informative presentation.

People's Housing Partnership Trust (PHPT) Submission
Mr M.Tshabangu delivered a presentation on behalf of the People's Housing Partnership Trust (PHPT). The PHPT is to capacitate and engage with national, provincial and local government and civil society, in support of the People's Housing Process (PHP).

They run capacitation programmes to enable people to take charge of developing their own houses. The main advantage of this, is that it is cost-effective, and people can choose what they want their house to look like, while at the same time, improving their skills. He identified these four stages in the programme of the PHPT:
1. The Communication Programme emphasises the building of awareness amongst the people.
2. The Training Programme is aimed at skills development, from the design of the house, to bricklaying, carpentry, and other elements embodied in the building process.
3. The Technical Advisory Services Programme links up with the Training Programme, but is more refined. At this level, people learn Project and Financial Management.
4. The Research and Development Programme involves a database which stores information on past projects - challenges and failures, how they were run, and other information which will be useful to the builder.

Mr Tshabangu reported that the PHP has become very popular, to the point where all provinces now have PHP units, and some provinces have directorates.

The PHPT is presently performing a review on itself, for the purpose of self-evaluation, and determining the way forward, which will culminate in a summit.

Mr Tshabangu further reported that the former Minister of Housing had last year terminated the services of the Board members, as they had been serving for almost three years. He explained that the term of service for a director is two to three years. The PHPT was in the process of establishing a new Board, with the assistance of the Department. Invitations had been made for nominations for candidates. The final decisions on appointments would be made by the Minister.

Discussion
Mr G Schneeman (ANC) pointed out that this was a budgetary hearing but there was no report on budget issues. There was no information on how many people had been assisted, or how many houses were provided. He felt that the hearing was incomplete without that kind of information.

Mr D Mabena (ANC) asked when the Trust had been established.

Ms Semple referred to the 2000/2001 Annual Report, which showed that the Trustees' remuneration had been increased to R1.5 million. In addition to that, meetings were held at exorbitant costs. She felt it was "absolutely appalling". With regard to the appointment of a whole new board, she felt that there should be some continuity between the old and the new boards.

In response to Mr Schneeman's remarks, Mr Tshabangu stated that although there had been a delay in obtaining approval for the budget, the approval had now been received. The budget would now be submitted to the DG, and from there, to the relevant authorities. Funding from the United Nations Development Programme (UNDP) had come to an end, after they contributed their last $100 000. That money would be used for the planned summit which the Trust was planning, on re-evaluating itself within the PHP.

On the staff complement, they have five members, and require three more field workers. The PHPT is not a top-heavy organisation, as they want the bulk of the work to be done in the communities. Where it cannot meet the demands from the communities, the PHPT uses consultants. By way of explanation, Mr Tshabangu said that because the organisation does not have a person who is qualified to teach bricklaying, they must hire the services of someone who can.

He agreed that it was indeed necessary to provide the information requested by Mr Schneeman, and pledged his commitment to do so.

He informed Mr Mabena that the PHPT was established in June 1997 by the Department of Housing.

In response to Ms Semple, Mr Tshabangu said that the Trust had been quite open about its remuneration of Board members. He explained that, after the first Chief Executive Officer (CEO) of the PHPT, an expatriate appointed by the UN, had left the organisation, there was no one to continue the work. The Board seconded its chairperson to the office of Acting CEO, and this person had to be paid for his services. The chairperson used members of his board to assist him in the running of the organisation. They were also paid for their services, hence there were so many meetings in that report. The Audit Committee also met often.

On the continuity of the Board, after the Minister had written to the Board members, terminating their services in December 2002, she appointed three people to run the organisation in the interim. However, it was discovered that the termination of services was not valid, as the stipulations of the trust agreement with regard to appointing a new Board had not been followed. The letters which the Minister had written, were deemed to be insufficient. This all meant that there had, in fact, been continuity, and that there had never really been a gap.

At this point, the Chairperson stated that when a company is run by directors who are board members, there will be many meetings, for the sake of their own remuneration. She requested Mr Tshabangu to reappear before the Committee to redo his presentation, since he had brought no figures with him this time. All were in agreement.

At this stage, Mr Skhosana replaced Ms Kota as Chairperson of the Committee.

National Home builders Registration Council (NHBRC) Submission
Mr P Makgathe, CEO of the NHBRC, delivered the Council's presentation to the Committee.

The NHBRC's mission is to protect housing consumers by maintaining, implementing and regulating quality standards in the home building industry. It has established a warranty fund to provide assistance to housing consumers under circumstances where home-builders fail to meet their obligations in terms of the Act. The NHBRC has to communicate with and assist home builders to register.

Mr Makgathe stated that no money is presently being allocated by the National Department of Housing for the work of the Council. Finances are procured through: a registration fee (for administration costs) of R750, a membership fee of R600, and a document fee (owner's manual) of R100. Late registration fees are set at R150. The Council is contemplating a significant increase for late registration fees.

Through the NHBRC's inspection process, they conducted 65 786 inspection houses in 2002. For every 500 units inspected, one full-time inspector is needed. Mr Makgathe added that mass production of houses leads to mass repairs.

He reported that there were customer care centres in all provinces, except in the Northern Cape, which is assisted by the Free State customer care centre.

Discussion
Mr Schneeman asked when the inspection of subsidy houses had started. He also asked for an explanation of the increases in operating expenses.

Mr Mabena noted in the presentation that the People's Housing Process (PHP) is not accommodated, but geotechnical assistance only is given. He requested clarity on this policy.

Mr Makgathe explained that the Municipality would normally identify a piece of land, and communicate with the relevant MEC. The developer would produce a plan, which would be submitted to the NHBRC. The NHBRC is able to do a feasibility study, and provide an idea of the type of structure that can be erected on that piece of land.

Mr Makgathe explained to Mr Schneeman that since the Minister's announcement, the NHBRC had not yet enrolled a single non-subsidy project. The onus was on the provinces to approach the NHBRC, which they had not yet done. The inspection of non-subsidy houses will start when houses have enrolled.

He further explained that when he arrived at the NHBRC, he advocated for the decentralisation of the structure of the NHBRC. Through that process, they started to appoint regional managers and other staff. They also acquired computer technology. In 2003, the Minister announced that the NHBRC must move into the subsidy sector. The main driving costs of the Council is in paying engineers. There are also the increasing costs of housing inspections. All these factors have contributed to rising operating costs.

Mr Schneeman questioned a statement in the Auditor-General's report that the asset register was not up to date. Furthermore, the internal audit function had not taken place for the year under review. He asked whether the current NHBRC budget had been approved.

Mr Makgathe responded, with regard to the asset register, that they had moved to a new system. All assets would now be recorded on the register. He also reported that they had appointed an internal auditor. He assured the Committee that later on, reports would show they have an internal audit. A draft copy of the budget had been sent to the Minister for final approval, which the NHBRC was still awaiting.

The Chairperson thanked Mr Makgathe for the honest work of the NHBRC on behalf of the people.

The meeting was closed.