Meeting report

Opening remarks

The Chairperson said the Committee would focus on the third quarter report and the recovery plans from provinces. Last year the Committee was unhappy, as the Department was not doing much in ensuring expenditure improved. The Committee took a resolution to call the Minister and the MECs to come and account. Inability to spend impacted on delivery on the ground. Although this was late last year, an indication was that the Minister had held a teleconference with MECs, and urged them to improve expenditure. Subsequently, provinces were asked to provide recovery plans to ensure that expenditure improved. Today’s meeting would receive the report as to what progress had been made.

Department of Human Settlements (DHS) on 3rd Quarter 2012 Performance

Mr Neville Chainee, DHS Deputy Director- General: Strategy and Planning, reviewing the quarterly performance plan monitoring enterprise architecture and the communication and outreach key, said DHS looked to foster closer relationship with the Department of Co-operative Governance and Traditional Affairs (COGTA) in order to make the local government turnaround strategy work (Slides 3 to 5). There were deficiencies in the systems due to challenges experienced at local government level that also resulted in under expenditure.

Outcome 8 – progress report

Following the technical MinMec called by the Director-General (Mr Thabane Zulu), it became apparent that DHS was concerned with the number of households provided with upgraded services. About 131 668 households, about 33% of the 2014 target were attended. Another challenge was the “well located state land” released to municipalities for human settlements development. The 7 477 hectares (ha) released was not enough. (Slide 6)

Job creation

Mr Chainee said the delivery of 4 074 serviced stands and 7 087 completed houses created an estimated 5 287 job opportunities during the third quarter of the current financial year (Slide 7).

Sanitation: job creation project scope, progress and challenges

The overall scope of the sanitation project provided support to municipalities to adopt and implement job creation principles in the delivery of sanitation services within the Expanded Public Works Programme (EPWP) context. Getting municipal support, buy-in and commitment on rollout of the sanitation job creation programme proved to be a challenge due to a number of factors such as municipal staff turnover or inadequate municipal capacity. (Slides 8-14). The capacity, expertise and knowledge gaps were intense at particular rural municipalities.

Sanitation: rural household infrastructure programme

The total number of completed toilet structures as at 31 October 2012 was 3 043. Figures were provided for the following provinces: Eastern Cape, Free State, KwaZulu-Natal, Mpumalanga, and North West. (Slide 15)

Rural Household Infrastructure Programme financial performance

Figures were provided for the following provinces: Eastern Cape, Free State, Limpopo, KwaZulu-Natal, Mpumalanga, Northern Cape, and North West. (Slide 16)

Accreditation of municipalities

The total number of accredited municipalities stood at 26, with Gauteng concluding implementation protocols with its three metros. The Western Cape and the City of Cape Town had also finalised their implementation protocols. The Eastern Cape and KwaZulu-Natal had not met the deadlines but were working towards concluding the implementation protocols. The assignment process for the six metros which were accredited during 2011/12 was at an advanced stage. The provinces were being assisted through the Capacity and Compliance Panel of the national Department to prepare a submission to the Financial and Fiscal Commission as required by the Municipal Systems Act. (Slides 17-18)

Entities performance

Social Housing Regulatory Authority (SHRA)

The Social Housing Regulatory Authority was a challenge as to funding and that affected the entity achieving its targets. Money was availed through the savings and the recovery plan. But some municipalities have had to reprioritise. (See slides 19-20)

Housing Development Agency

The Housing Development Agency had availed 6 795ha of land for human settlements in Madibeng. Completed informal settlements enumeration and rapid assessments, as well as technical plans developed for informal settlements in Limpopo and Free State. But also plans had been developed with the Northern Cape for support work around planning and pipeline projects. (Slide 22)

National Urban Reconstruction and Housing Agency

Under the National Urban Reconstruction and Housing Agency, DHS had resolved that the amount of R20 million would be provided towards the Contractor Finance and Development Programme. The implementation plan was under review in line with the reduced programme budget. (Slide 23)

Rural Housing Loan Fund (RHLF)

The Rural Housing Loan Fund was a 'star-performer' programme of the Department. About 116 000 loans to rural households had been dispersed.

Cash disbursed in quarter three alone was close to R41 million compared to the R44 million disbursed in the first two quarter of the year. 92% of loans granted was used for housing related purposes, in line with the RHLF mandate and this was above the set target of 80%. (Slide 25)

An indication had been that compliance by provinces to the National Home Builders Registration Council was not optimal, but there had been some improvement on monitoring. (See Slide 26)

National Housing Finance Corporation

The National Housing Finance Corporation approved 13 new projects in the third quarter totalling R660 million. About 4 751 beneficiaries benefited from the NHFC in the third quarter, with 3 494 units delivered and 1 500 job opportunities created. (Slide 27)

Estate Agency Affairs Board (EAAB)

There were 1 448 new registrations in 2012 for October to December as compared to 1 395 in 2011. EAAB operating costs were 16.84% below budget compared to a target of 5%. (Slide 28)

Financial issues

Ms Funani Mahlatsi, DHS Chief Financial Officer, reviewed the medium term estimates (slide 29). He said the adjusted figure for the overall budget of the Department was R25.2 billion, and that there were rollovers from the previous years. There was a drastic cut on the Rural Housing Infrastructure Grant to the tune of 138 million. (Slides 30-31). This significantly decreased the budget, and yet spending was not where it should have been. (Slide 32)

The status of the operations budget was a challenge. DHS expected provinces to have spent 75% by December; but no reliable figures had been provided. Currently spending was at 52% and this was not acceptable. (Slide 33). Realising that spending was not where it should have been, DHS sought to identify areas where failure seemed to have occurred. (Slide 34)

Ms Mahlatsi said that a challenge was with the Special Investigating Unit (SIU) which was not certain as to whether it could bill the Department. Another issue was proclamation. Remedial action had to be outlined in order to sort the issues with the SIU. The service level agreement was signed. And the DHS had started receiving invoices from the Unit; three invoices were still unpaid. (See Slide 35).

She noted secondly current progress on property management. There were problems with the landlord of the new building DHS was to occupy. That challenge took a bit longer to resolve but the issues had been finally resolved and was expected that this would no longer be an issue in the next financial year. This had been communicated with the Department of Public Works, and there would be a difference in spending next year. The landlord had started refurbishing and DHS would be moving in soon. Quarrels around the accommodation extended even to the Auditor-General (AG), who seemed not to know that the Department had not even occupied the building. (See slide 35)

She further reviewed current progress (see slides 36-37), savings declared (slide 38), and proposals for addressing underspending (slide 39). 

She observed the challenge was with Programme 2 of the Department. DHS indicated at the beginning of the financial year that staff complement would be increased. Slow pace in filling the vacancies was experienced. Posts were advertised and the process was at the finalisation of interviews. Some of the directors had been appointed and would hopefully begin on 01 March; at the beginning of April all chief directors would have started with the Department.

Under Programme 3 there were challenges around the programme of assistance to municipalities in so far as the upgrades of informal settlements. The challenge included the Department being unable to appoint contractors at the time it wanted to. Currently four contractors had been appointed and the bid committee would be sitting to appoint the contractors that would assist the municipalities. The programme was also affected by non-filling of the vacant posts.

Grants, transfers and payments

Ms Mahlatsi said there were so many measures in place to improve spending on the Rural Household Infrastructure Grant (RHIG). DHS had appointed six additional service providers and should soon be on site as service agreements had been signed. The six contractors indicated they would be able to build toilets allocated to them. Government implementing agents like the Independent Development Trust (IDT) and the Mvula Trust had challenges, but Mvula Trust had improved performance.

She said among challenges identified was programmes running very slow, and tenders starting very late in the year. Tenders should start way too early with implementation starting around the June month. This was indicated to programme managers and bid committees would be finalising their process in the last two months of every financial year. Programme managers needed to identify savings on time and declare them.

The four provinces – Eastern Cape, Western Cape, Gauteng and KwaZulu-Natal – receiving the biggest chunk of the budget should be at 75% expenditure. In September, provinces were given a six month period to improve their spending. DHS took a decision where spending was still at 50% to call MECs to indicate if their respective provinces could accelerate expenditure. (See slides 40-43).

Other milestones (31 December 2012) (Slide 44), delivery performance against targets (Slide 45), Urban Settlements Development Grant expenditure (Slide 46), challenges (Slide 47), and strategic mitigation measures (Slide 48) were noted.  

Ms Mahlatsi said DHS was worried that there had to be recovery plans. Provinces submitted in September and were allowed ample time to implement. All provinces except for Limpopo should have been able to improve on spending. After careful consideration in January, to determine if the recovery plans had helped, the Department had raised the alarm again.

On Tuesday the DG had to call a special technical MinMec with all the Heads of Department (HODs). It was realised that most invoices from service providers had still not been processed, despite that payments usually happened around December. It was discovered that expenditure was still at 52% at the end of January. The Department pleaded with provinces to declare savings early so they could be used where they were most needed. In the North West and KwaZulu-Natal expenditure was where it should have been and the savings could have been used there or declared back to the National Treasury.

At the end of January, over R1 billion had not been used by provinces, and remained with the provincial treasuries. The Department was in a precarious position of having to transfer for February, and yet provinces had not been able to spend R1 billion. If one took the money and the history of spending by provinces, over R4 billion would not be spent at the end of the financial year.

DHS monitored those provinces that indicated higher spending and would thus ensure that there was value for money. The technical MinMec highlighted the issues that might result in non-utilisation of the Housing Subsidy System (HSS) that impacted on spending. This issue limited the Department from reporting the correct figures. DHS was in the process of sorting out the issues. Mpumalanga was the only province using the HSS optimally and reporting correctly; Gauteng was not far behind.

In the technical MinMec, three provinces – Eastern Cape, Free State, and Limpopo - declared savings after DHS had made a call that they would not be able to spend the money before 31 March. It was proposed that the March allocations not be transferred, as doing that would amount to fiscal dumping.

DHS was reluctant to transfer to Gauteng, until the Department had visited the province and verified the invoices and the amounts the province indicated at the technical MinMec. The Western Cape indicated challenges with the City of Cape Town, but also that expenditure had improved by R200 million.

The status of the Urban Settlements Development Grant (USDG) did not look good as some metros still struggled with implementing the Grant. The Department was putting measures in place to improve that scenario, as it did not want to penalise metros.

DHS Draft Provincial Recovery Plans

The Department provided information on the Human Settlement Development Grant (HSDD) expenditure, and non-financial performance, with details for each of the nine provinces.

The Department recommended that provinces, where required, increase and redirect funds for land purchases through the Housing Development Agency (HDA), within the required mandate, but service level agreements (SLAs) must be signed. Where there was good performance and progress in respect of upgrading of informal settlements, funds would be re-allocated to ensure that initial shortages were funded. The Department confirmed the need to upscale the USIP over other milestones that were not realisable and not achievable by the end of the financial year. The Department also recommended that funds be redirected to social and rental housing to the SHRA. The SHRA had been tasked to prepare pipeline projects that could be implemented this financial year. The Department proposed an increase and redirection of funds to the NHFC for the implementation of the Finance Linked Individual Subsidy Programme (FLISP) programme for the eight provinces that had already signed the implementation protocols. It also recommended that provisions be made for additional funding to programmes and projects that showed results but were inadequately funded in the business plans, including those for rural housing. (See presentation document). 

Director-General's comments

Mr Thabane Zulu, DHS Director-General, said the Department had met HODs the previous day, to ascertain the extent of challenges provinces faced. The first engagement took place way back in October and the intention was to put measures in place and avoid under expenditure. DHS had also organised a workshop, last year, to deal with this phenomenon. There were pending engagements with Free State and Mpumalanga to understand the details of where the money had been spent.

There was a lack of prioritisation by provinces and municipalities. There was no synergy in the plans and that affected service delivery. Another challenge that had been identified was the bulk services, and without bulk there could be no human settlements development. There also was no alignment of strategic planning among different spheres of government and this made the work of the Department that much more challenging.

There was a great need to improve technical skills for delivery in general. As part to addressing this challenge, all senior managerial positions were targeted to be filled. The 'DDG directorate' had not been filled; DHS awaited the Cabinet decision as the process had already been completed. The issue of business plans would be done differently going forward. The business plans would be closely scrutinised and then there would be a follow-up workshops with all the provinces before they were signed off.

Discussion

Mr K Sithole (IFP) commented that he disagreed that transfer of money to the Eastern Cape would amount to fiscal dumping. The situation of not transferring money to the Eastern Cape, was concerning. That province was a disaster and the communities needed the money. How could DHS not send money to the province; people in the province were suffering. He proposed that Heads of Departments in all provinces be summoned to Parliament.

The Chairperson agreed. The provinces were where delivery happened, and they were the ones who should account to Parliament. The Committee needed to call the HODs and the Constitution allowed for it.

Mr Sithole said the President had long spoken out on the rate at which government institutions filled vacancies. He sought clarity on the money that had been taken back to National Treasury, and which provinces had failed to spend with regards to vacancies.

He asked if municipalities had capacity on sanitation. He said DHS needed to clarify the matter with Ekurhuleni Metro where the function of sanitation was still with water services.

He asked if the Department had a monitoring system of projects especially that provinces and municipalities seemed had hostile working relationships.

Ms M Njobe (COPE) commented that statistics could be meaningful or meaningless depending on how they were presented. It would have been better had the presentation indicated both the targets achieved and the targets planned on job creation. She wanted to know what action was the Department taking where under expenditure had occurred. From the presentation it was clear that the Department had begun to act decisively; especially in the Eastern Cape where there were too many projects but with limited capacity. DHS needed to take measures to help improve capacity in provinces like the Eastern Cape.

She commented that the Committee together with DHS needed to look at whether to continue with the RHIG programme. Everyone was agreed; sanitation had to be improved but expenditure limitations by the programme had to be addressed.

She asked if there were no solutions to the problem of under spending in the programme. She wondered if the challenge could not have been with the tendering processes. She commented that when it was reported on the media that the Buffalo City Municipality was underspending, Members jumped in and criticised. Was it fair to criticise the Metro especially that big Metros like Ethekwini were under spending just as much. She asked if there were other challenges other than capacity. Huge sums of the funds sat there unused while people on the ground were suffering.

Mr S Mokgalapa (DA) commented that the remedial actions taken by the Department were commendable. He said he had issues with the claim that the Department was making a saving, whilst in actual fact there was no delivery. One could not begin to talk of savings given the number of backlogs that DHS had.

The idea to transfer the USDG money to other municipalities other than the eight metros was a good one. The Eight Metros could only spend R2 billion of the allocated R7 billion, and yet it was only one month to the end of the year. What would the Department do to ensure that the small municipalities improved on expenditure?

He was happy that DHS had taken a hard line that if provinces and municipalities did not spend they would not get funds. The Department was starting to provide leadership in service provision and ensuring that the money went to where it was intended. There had to be punishment for non-expenditure.

He sought clarity on the Guarantee Fund. Most provinces were not showing where and how they were doing in terms of the Guarantee Fund. What challenges were there on implementation of the Fund, he asked?

Ms P Duncan (DA) remarked that MPs read the reports, and when officials prepared documents they needed to include a lot of information. Holding back in terms of details did not help the Committee. She said there was a challenge with business plans as it appeared that there were no requisite skills at the provinces. Business plans of provinces and municipalities needed to be closely monitored they requested money. But that might prove too expensive an exercise, especially when it came to monitoring and communicating. She asked if there were there no other means of dealing with submitting business plans, like putting easy guidelines on how the provinces put together their plans.

She asked if there were processes in place to address challenges faced when recruiting. She sought clarity on the contractors appointed along the IDT and Mvula Trust to provide sanitation as part of the RHIG.

The Chairperson wanted to know if provinces brought operational plans alongside business Plans. DHS should demand the operational plans, as these plans spoke to business plans, in that they ensured business plans were implemented.

Ms J Sosibo (ANC) wanted to know the challenges that were there in filling vacant posts. She also sought clarity on the R4 billion that was likely to be under spent by the end of the financial year. Did this money ended up as savings?

Ms G Borman (ANC) said filling vacancies was the challenge at the Department and that much was indicated at a workshop last year. She said DHS needed to pay a particular attention to those employees hired at managerial positions. When filling vacancies the Department needed to ensure it hired people with the requisite skills. Did the Department have capacity to take spending to where it should be this late in the financial year? She commented that plans came too late to DHS, and this made it impossible for provinces to meet the spending requirements. This made one wonder what was being discussed in the MinMecs.

Mr M Matshoba (ANC) asked if the DG’s office was adequately staffed. Was there capacity at the DG’s office?

Ms Borman sought clarity on the interests rates charged via intermediaries by the NHFC. Interest rates the NHFC charged were exorbitant and that defeated the purpose they were founded on, that of benefiting the people.

The Chairperson commented that she saw in the media a comment about blocked projects. How many blocked projects were there? She said it appeared that provinces did not account for the projects.

She voiced dissatisfaction on the attitude of the Department when hiring people with disabilities. She said the Department needed to improve on this aspect of job creation. DHS needed to reject business plans from provinces if the aspect of people with disabilities was not adhered to.

She requested the list of both the municipalities that had been accredited, and the provinces that had not been compliant with enrolling projects that were not compliant to the acceptable standards. She said rectification would no longer be tolerated and acceptable after 2012. If anyone failed, something had to be done, rectification delayed delivery.

She commented that the apparent strained working relations among departments needed to be addressed. The departments were all government units and had one common objective; department should implement service delivery. She said the Department of Public Works needed to understand that accommodation of staff at DHS was apparent. When DHS employed people where should those employees be accommodated.

The Committee should come up with a strong recommendation around how departments worked, and take it up with the Deputy President, as the leader of government business in Parliament. If departments did not co-operate service delivery would be hampered. She said the Committee did not want to hear the issue about accommodation resulting in under spending again. Money had been provided by NT for accommodation; this was serious.

The transfer to SHRA appeared to be fiscal dumping. She asked if SHRA had capacity to draw and utilise the money. The Nelson Mandela Bay and Buffalo City Metropolitans, for an example, did not have a social housing arrangement and yet had a lot of employees who needed the service. The two metros appeared to care less about this aspect of the Department.

She commented that she was unhappy that disaster funding was not mentioned anywhere in the presentation. The Committee understood some issues were beyond the department, but money had been transferred to provinces.

She said the issue about bulk infrastructure was being addressed through the Urban Settlements Development Grant. The Department had been instructed to prioritise bulk infrastructure as this was the crucial aspect when doing planning. The mentality that one could plan and implement at the same time should be done away with.

The Department should consider adopting the Australian model where a year was spent on planning, and then the following years were dedicated for implementation. This model allowed for locals to be trained and employed. She said South Africa had too many projects, whose viability was questionable. The country should focus on projects per district; currently SA was not practising that.

The Chairperson said DHS needed to do a follow up on the money spent in the province of Mpumalanga, as it was doubtful that the province had the ability to spend. The Department should ascertain the project where and when the money had been spent. She voiced scepticism about releasing the final portion until such time the expenditure had been verified.

Director-General's response

Mr Zulu said there had been processes that were happening to try and address some of the issues that were raised, and that bulk of the questions would be ‘padkos’ for the Department. He commented that vacancies remained a very strategic focus area and was an important aspect of delivery and capacity. Vacancies were the only way that the Department could ensure delivery on the ground. There was commitment that all vacancies would be filled by the end of the year.

He said 68% of all vacancies at the Department had been filled, and the rest was likely to be filled the end of the financial year. DHS committed to filling all the positions simply because this was an instruction from government, and that a full staff complement would ensure full capacity to deliver.

He said whether his office had capacity or not could be answered both in the negative and a positive. In so far as being positive; there was staff employed in the Department, yes there was capacity, but in areas that were vacant there was none. The key area that DHS lacked capacity was project management, and without an effort to get that right, nothing would be achieved.

The Department had advertised posts and the DDG Project Management Unit remained vacant, but interviews had been finalised. Someone had been identified; DHS awaited qualification verification and vetting processes by the Department of Public Service and Administration (DPSA). Three Chief Director posts – sanitation, human resources and chief investment – would still be confirmed. No fully charged person for the Sanitation; and HR. These three executives would increase the capacity of the Department, but all these positions were already in the system and by the end of the financial year they would be filled.

Mr Zulu said he had engaged both the Minister and his counterpart at the Department of DPSA during the Cabinet Lekgotla on the challenges he was faced with. The strength and capacity of the Department influenced what was happening at provinces. It was important that the work of DHS was focused instead of trying to do everything without achieving anything. The capacity issue was so important even at provincial level.

He supported the recommendation to call HODs to Parliament. He requested that a particular focus be given on project management at provinces. Without the capacity at provincial levels the work of the Department was compromised. DHS had communicated that provinces like the FS and Mpumalanga had been asked to verify expenditure. The Department would undertake that exercise of reconciling delivery and financial performance.

Mr Chainee commented that DHS had done what it was asked to do on business plans. Since last year there had been a series of engagements around business plans but sadly they had not yielded the results. The stance by the DG that if the business plan was not thorough he would simply not sign was positive. DHS had to be sensitive as it dealt with communities; insistence on good business plans was not about punishing provinces and municipalities but trying to ensure a quality result.

The Department would be coming back to the Committee on the issue of the USDG and the technical capacity. Buffalo City Municipality was not the only one lacking capacity. There were about nine HODs in acting capacity in most metros. It was difficult to hold people accountable in this scenario, and there was a need for a strategic session and discussion around the issue. Acting capacities led to indecisiveness, and a lack of competency, and maturity.

He said another challenge was the amount of effort put by municipalities on informal settlements upgrade programme. While the Department tried so hard, the same could not be said about municipalities and that did not make sense. As a consequence of this scenario the Department had decided to have the USDG run parallel in another programme.

Ms Mahlatsi apologised for the missing slides and promised to provide more information next time. She said the outstanding information would be forwarded to the Committee Secretary, and such information would include information on the Disaster Relief Fund. She confirmed that the Department would indeed look into the matter of Mpumalanga and FS expenditure. The Department was very cautious of transferring the March money and monitoring of where the money was spent would be conducted. She said information on the six contractors appointed along IDT and Mvula Trust would also be availed at a later stage.

Ms Sindisiwe Ngxongo, DHS Chief Operations Officer (COO), commented that NHFC interest rates talked to the nature of the business as the high-risk loans. The micro-lenders were allowed to charge exorbitantly; DHS was concerned of the impact this had on the end-user, and had as a result entered into discussions to ensure that the benefits charged intermediaries were passed to the end-users. People needed to be aware that there was risk attached to the loans; that could result in high interest rates.

She clarified that DHS acknowledge that the estate agency industry was so much untransformed. Provinces were given a 30% target on transformation stakes, and yet they all underperformed. DHS was looking at how best to address that. The Department had data per province, and that would be availed to Members. Engagements had already begun with provinces, especially around the issue of Estate Agency Affairs Board (EAAB) not being known to communities.

Closing remarks

The Chairperson commented that there was a need for a bigger indaba to discuss the matter of the estate agencies. She pleaded that ‘a visionary and transformed individual’ needed to be invited for the discussion, and not ‘a capitalist’.

The meeting was adjourned.