Housing: Minister's Budget Speech

SPEECH BY LN SISULU MINISTER OF HOUSING AT THE OCCASION OF THE BUDGET VOTE 2008/09 FOR THE DEPARTMENT OF HOUSING

28 May 2008

Madam speaker
Honourable members of Parliament
Invited guests
Ladies and gentlemen
Madam speaker

It is a dark gloomy room we have been assigned for our budget vote. It reflects no doubt the cloud that hangs over our horizon as we navigate our way through a number of very unfortunate issues, ranging from the international economic meltdown to the violent and barbaric incidents in Alexandra, Diepsloot, Du Noon and Imizamo Yethu over the past fortnight.

The events that unfolded over the last two weeks cast a terrible pall over all else that we would otherwise be discussing today, making our budget vote single-mindedly focused therefore on the ugly situation that has been thrown up where matters of housing, somewhat unjustifiably in my view, feature quite prominently. We have had to stop in our tracks and examine a number of critical factors: to see how we mend our country, repair the broken spirit of those we have hurt, repair the broken spirit of our humanity. Apart from the immediate relief for the affected community, we have had to look at ensuring that this disaster does not ever befall us again.

Conditions of poverty, especially within the informal settlements are unacceptable. We have drawn attention to this ad museum. It is precisely on this realisation that we, as the housing sector have prioritised the informal settlement eradication and have given it a target date. For this we would like to mobilise the rest of government and civil society to join us. In a country with our level of economic development, it is not justifiable to have these pockets of poverty and vulnerability where the poor scramble for scant resources and when they experience periods of severe hardship, their frustration knows no moral bounds.

This is in no way an attempt to explain or justify barbarism through poverty. But there is something in this situation which is in our power to change, and that is to remove those environments which do not create a better life and which, by their very nature, are beyond the normal reach of governance and government services, and create fertile ground for the kind of situation we have had to deal with.

I have noted that it is all too easy for analysts to blame this situation on the failure of government, easy to deflect blame. The moral fibre of our society and tolerance of “the other” are not government responsibility, they are our responsibility jointly, the Churches, the NGO sector, you and I as responsible citizens of this country. This is our collective failure and I hope, as we learn from this, we can work together to alleviate some of the conditions of unbearable circumstances.

We must create a better world for the poor, where tolerance can take root. We call on all to join us in our bid as we once again heed the call of the Freedom Charter, which enjoins us to create a country where slums are eradicated and in their place, decent, secure communities are created where our children can grow up in dignity to respond to their responsibilities as citizens.

Life will always throw up disasters such as we have experienced. However, progress is not determined by how hard we fall, but how quickly we can get up. And in this case, how quickly we can effectively respond to and repair some of the attendant matters. In housing very specifically, we have been confronted by the fact as perceived that our houses are allocated to foreigners. Allow me to assert and clarify what our policy position is. Our allocations policy provides that houses are given to indigent South African citizens who meet the qualification criteria and are on our waiting lists.

Allegations have been made that councillors are at the forefront of some corrupt practices to divert these allocations to foreigners who do not qualify. Last year the Auditor-General concluded a lengthy and exhaustive audit on the granting of housing subsidies to people who do not qualify, a matter Scopa paid particular attention to. He did not come across a single incident where a foreign national specifically was awarded a house. However, as we all know, it is true that some of our houses are occupied by foreign nationals. This could only mean that our people – the beneficiaries of these houses – have either sold them before the period of limitation has elapsed, or are renting them out. I will deal with this matter at a little later. For now, the point is we have taken note of the concerns raised about housing allocations, and for our own comfort and the comfort of our citizens we have tightened our regulations to ensure that this is effectively addressed.

To ensure that this is adhered to at all levels, we are introducing compulsory adherence to the national housing demand database, which does not allow any municipality the right of allocation outside of this verified and audited database. The data, together with the housing subsidy data will be monitored by an independent audit company and will report to Parliament on an annual basis. This will ensure that our processes are aligned to the necessary transparency and integrity required for universal acceptance. Our policy has been amended accordingly and provincial workshops are currently underway to ensure compliance.
Secondly, and following up on my earlier assertion that our people are selling off their houses, we are implementing initiatives to conduct occupancy audits to establish if the original beneficiaries of the houses still live in them. We have been very concerned about the incidence of the sale of our houses. Our laws prohibit this, but the practice goes on. As an urgent measure, we have decided to enlist the services of the Special Investigations Unit to take action against the practice.

Having said this, the incidents of the past fortnight have thrown up a number of other challenges that have been a consequence of our policies as a government. On three occasions, 1995, 1996 and 1998 we took the decision that people who had been in our country as illegal for a certain specified period, would be given amnesty, exempted from the requirements of our immigration legislation and therefore granted permanent residency. Many of these have since qualified for naturalisation, which in terms of our laws can happen five years since exemption. We therefore have a number of people who would have all the attributes that our people attach to foreigners, but who are, in terms of our laws, South African citizens.

Two years ago we requested Cabinet to approve a policy that was aimed at immediately alleviating the very stressful conditions that invariably exist in high density informal settlements. The policy, which we termed Emergency Housing, was approved by Cabinet. Using this policy instrument, we will be requesting special funding that will help us with some of the severest cases that we have encountered. We will also be stepping up our subsidised rental stock to ensure that those who live among us, but do not qualify for state houses, will have access to affordable rented accommodation. We hope that this intervention will provide some sustainable solutions.

It has been pointed out, and I would like to believe it, that in fact, at the bottom of government's woes, is its own successes. Here I would like to quote from a Sunday Times article of 18 May 2008 by Rowan Phillipi, an article I might not agree with in its entirety , but one whose clarity I find very persuasive:

“The Democratic Alliance (DA) is wrong in its claims that the xenophobic violence seen Alexandra, Diepsloot and elsewhere this week was triggered by an absence of service delivery. For 14 years, South Africans have shown a Job-like tolerance for lack of delivery. Instead, it is precisely when delivery does happen – and happen visibly – that perceptions of injustice translate to violence.

In the Western Cape, it was only after the N2 Gateway housing project began physical construction that major clashes broke out between poor coloured communities and Xhosa migrants from the Eastern Cape. Even long time Xhosa residents of settlements such as Joe Slovo attacked the domestic migrants as “outsiders”, believing them to have jumped the housing waiting lists. And it was only after service delivery was fast-tracked in Khayelitsha that neighbouring informal settlers began to seal off streets with burning barricades.
The Alexandra renewal project is both a staggering failure and a remarkable success. Launched in 2001 the project has accelerated dramatically in the past two years, with the erection of new schools, police stations and almost completed residential units, with a new focus which emphasises construction over “soft projects” specifically so residents would be able to see the fruits of the grand plan. The plan worked too well.

This analysis gives me some comfort and leads me to this next point. This week I got information that tells me that despite the glitches we are changing our world for the better, that behind the gloomy view, there is so much we have achieved, as a people, as a government and as a department and to borrow a beautiful phrase I picked up from the Business Day, there is yet “survival of hope”. When we took over this government in 1994, the then Minister of Housing, Mr Joe Slovo, set out a vision for housing, where within five years we would have provided 1 million houses. When after five years we had not achieved our goal, analysts and commentators crucified us for that. Nothing else that had been achieved was of value to them. We had fallen short of our target and therefore, by implication, we had failed. We took a conscious decision thereafter that we would not be making numbers projections.

When I took over as Minister of Housing in 2004, the government had produced 1.6 million houses. An achievement we were all rightly proud of, despite negative comments. Today, four years later, we have produced 2.6 million houses. This means that in four years we have provided 1 million houses. The target that had seemed so elusive, we have finally achieved, not in five years, but in four years. In plain language, this would mean that we have provided houses for in excess of five million people in four years!

To put this achievement in perspective, we have housed almost the entire population of Scotland 5.1 million in the past four years or if we want to bring it closer to South Africa, we have housed the combined population of Swaziland 1 million, Namibia 1.8 million and Lesotho 2,2 million in the past four years.

It is worth emphasising this point so that any misconceptions are cleared. It never was the intention of the government to give free houses to all. The intention was to provide all the assistance that was necessary to ensure that the poor have access to housing.
It soon became very clear to us that years of dispossession and poverty had pushed some of our people beyond the threshold where they could reasonably provide any meaningful resources to add to the subsidy. As a result we had to take the decision effectively to provide free housing for the poorest, those that we refer to as the indigent. It is worth repeating. No country in the world provides free housing for its people. No other country in the world has provided 2,6 million houses to its people, translating again to providing shelter for 13 million people, free of charge. None anywhere. Our commitment extends to covering another 2.1 million houses.

Not only have we exceeded our own dreams so far as numbers are concerned, we are now producing a bigger product, a decent home. We are providing comfort; we are building communities and transforming South Africa at its very nub. If ultimately we are to succeed in creating a new society, we would not succeed outside the foundation we have laid.
Of course there are again other consequences to our success we now have an avalanche of urbanisation.

Human beings are the most rational species of all animals. Using that rational instinct, our people have responded to free houses predominantly available in the urban areas. Why would any remain on the impoverished land when there is little prospect of employment and when in fact in towns, they can get free houses? The resultant shocking rise in urbanisation has been coupled with a drastic drop in the agricultural productivity and development of the rural areas with dreadful repercussions for us as we grapple with rising food prices. While the international trends in migration to urban areas is estimated at an averaging 2,7%, we occupy the upper end of the spectrum and are faced with the situation where, for the first time, our urban population equals in numbers, that of the rural areas. A dire situation as urbanisation of poverty takes root.

These developments are bound to affect negatively the provision of all the services that government provides. It is sure to put more strain on the health, education, water, sanitation, transportation and the housing infrastructure. However, without a stabilised urban environment, an environment that does not allow for the establishment of more slums, without an environment that opens people's living spaces, the quality of all the other services would diminish. And this in turn has consequences for our fight against poverty. This would dictate that as we deal with a clear and present problem, we should be mindful that this does not happen at the expense of rural areas.

And now, Madam Speaker, to the matter of the budget itself, from 2004, government's housing expenditure has increased from R4,8 billion to R9 billion in 2007/08, representing average growth of 23.2 per cent per annum. The housing budget is projected to grow from R9bn last year to R10.6 billion in 2008/09 and R15.3 billion by 2010/11, at an average annual rate of 19.4 per cent. We have repeatedly pointed out that the funding for housing delivery is grossly inadequate in the face of the backlogs we face.

To begin with, and as I indicated last year, while the housing grant allocation has been increased over the 2008 Medium Term Expenditure Framework (MTEF) period and although this increase may appear substantial, the effects of inflation have eroded the Rand value, and hence, together with our efforts to produce better quality of houses, the average cost of building a house has increased, in excess of the Consumer Price Index (CPIX) for the current period. Secondly, it does not fulfil our needs to fund the number of houses that will adequately assist us to reduce our ever increasing backlog. Nor does it make economic sense. This is borne out by the Financial Model evaluation study of the impact of Breaking New Ground (BNG) which was undertaken in 2006 by KPMG and which concluded that continuing with the current trend in the housing budget would lead to a funding shortfall of R102 billion in 2012, which would increase to R253 billion in 2016 to eradicate the housing backlog.

To alleviate our present circumstance through the budget process, we will be seeking to introduce a once off injection of resources estimated at around R12 billion and an extraordinary effort so we can impact on the housing backlog and poverty in the next 12 months and increase housing delivery.

I am happy to inform this House that our expenditure patterns have been consistently very good. In the year just ended we received R9 billion and have spent 96% of this amount. Our bold steps in exercising control in respect of expenditure include that, if provinces are likely to under spend their pre-determined unspent funds received from the Integrated Housing and Human Settlement Development Grant, the receipt of further funds for that year will be stopped in terms of the Division of Revenue Act and be reallocated to performing provinces. We have implemented this approach in respect of the Eastern Cape and the Free State whose rate of expenditure reflected under spending.

Unfortunately this action is not desirable but, if there is a problem with delivery in one area, it is necessary to ensure that funds are moved to where delivery is being achieved. The intention, however, is to reimburse the provinces that relinquished the funds at a stage when the planning, capacity, and delivery capabilities improve to such an extent that normal delivery can take place. And when this measure does not improve the situation, we will not hesitate to take the necessary steps as permitted by our laws. Again as we unfortunately, have had to do in the Eastern Cape.

At this point I must thank the Portfolio Committee again, for processing and passing the Housing Development Agency (HAD) bill with unusual speed. Through the HDA, we want to ensure that the state has the institutional, technical and administrative capacity to own and manage land for housing purposes. Through this capacity, the state will be able to effectively draw in the private sector in partnerships in creating an integrated non-racial society. It will provide a variety of housing options in well located areas and facilitate access to social amenities and economic opportunities to the poor.

We are also able, using the Housing Development Agency to take over the land parcels that we negotiated and bought from Transnet, as well as all the land parcels that previously belonged to the National Department of Housing. The Housing Development Agency could potentially own thousands of hectares of land, which we desperately need to relieve the pressure on housing delivering. Significantly, we have negotiated with several municipalities the take over of buildings within their inner cities for major refurbishment and use for social housing. We are in the process of negotiating partnerships with various government departments where we could acquire land in their possession in exchange for the provision of affordable housing for some of their employees.

In a major partnership in the Western Cape, the National Department of Housing and the Western Cape Provincial Government are about to conclude a Memorandum of Agreement in terms of which a substantial amount of well located land shall made available in Plumstead, Driftsand, Oudemolen and Southfield. We have also been offered land by our partners, the SDI in Phillipi. These joint ventures will not only significantly contribute to the number of housing units built in the course of the year but will, in a fundamental way, enhance the benefits of the Extended Public Works Programme (EPWP).

We are now putting transitional arrangements in place for the Housing Development Agency that should give some comfort to the staff of Servcon and Thubelisha Homes. They have, understandably been agitated about their place in the new entity. We'll be requesting the Chief Executive Officer of one of our partner housing institutions to come and assist us in putting all the necessary building blocks in place to fast-track the creation of the HDA.
He is a man who will bring outstanding skills and expertise to the HDA and has won us as a country international awards and acclaim for his outstanding pioneering work in housing delivery. We depend on his credibility to build the reputation of this very important entity. The man, Madam Speaker, is Mr Taffy Adler and I ask him now to consider this at his earliest convenience. We ask him this as part of his national commitment to housing, to help us put the ship to sail.

I am convinced that this development will enable us to take command of the critical resources we need in housing delivery. This, after all, is the requirement to maintain the hope that regardless of the obstacles being faced, our struggle will ultimately bear its fruits. It must be borne in mind, however that in as much as the development breaks yet another new ground in our policies, government would not act as though it possesses all the knowledge and have all the solutions. The private sector which too has to improve its delivery remains an important contributor.

We have made significant progress in dealing with the matter of corruption, especially as it relates to government employees. The department, together with the Special Investigating Unit (SIU), led by Willie Hofmeyr, investigated allegations of fraud, corruption and maladministration in relation to the development and delivery of low cost housing in South Africa.

The SIU embarked on a massive forensic data analytical investigation and identified 31 259 potentially irregular housing subsidy transactions awarded to government employees nationally. The SIU has begun the process of prosecuting and finalising criminal cases against the corrupt officials in different provinces around the country. 29 cases have already been finalised with sentences including the payment of the value of the houses. The total amount of debt we expect to recover is R6 827,036.30. A cash amount of R1 103,772.00 has been paid back. The SIU will make recommendations to the department in order to curb future systematic or opportunistic abuse of the Housing Subsidy System.

It is envisaged that 200 cases will be placed on the court roll in the new financial year. The prosecution of fraudulent beneficiaries will have a significant impact in terms of deterrence and promoting a culture of legal obedience.

Developers' failure to perform in terms of the contractual obligation to the department often result in severe reputation damage to the department through its failure to provide sufficient and adequate low cost houses and also significant losses to the department. The second phase of the SIUs intervention will be in relation to this scourge. Preliminary analysis of all contracts submitted by the various provincial Housing Departments has commenced. The list of prioritised housing contracts consists of 65 housing projects, which will require a forensic audit, and, depending on the outcome, a full scale forensic investigation and legal action.
In an effort to further our transformational agenda and empower previously disadvantaged persons, Absa Bank, in collaboration with National Housing Finance Corporation (NHFC), the Estate Agent Affairs Board (EAAB), Sophie Ndaba and Maravi will see 400 black intermediaries trained as real estate agencies and supported through infrastructure in this financial year. These new entry real estate agents will be enrolled in accordance with the new educational dispensation for estate agents. This is to ensure that we can effectively begin to address the matter of the transformation of this industry.

Finally Madam Speaker, we want to recognise an aspiring politician in the gallery, Miss Christine Duvenhage who is not only interested in politics, but wants to participate in political debates on matters that impact on our communities. We welcome the involvement of the youth in politics, because they are the future politicians who will be attending to matters that concern us when we sit in the retirement villages.

Madam Speaker, we have come to the end of our term in government. We leave behind a very solid housing delivery framework, acclaimed as one of the best. We leave behind a policy that fundamentally transforms South Africa's apartheid spatial planning to one that is integrative and can transform South Africa into the kind of society we fought for. We have provided a policy that allows for a bigger product, that lays the basis of the development of communities.

We leave behind an innovation hub that creates the market for new technologies. We leave behind a department that has a solid delivery mechanism where we can acquire land from the State and remove major blockages in the provisions of housing.
We have brought on board very strong partnerships with the financial institutions and major civil society organisations that deal with shelter. We are beginning to turn major inner city slums into habitable and safe environments.
Madam Speaker, we could not ask for more from the joint effort of a remarkable group of people who have walked this road with us against all odds, hope did indeed survive.
I thank you.