Department of Human Settlements on Budget & Strategic Plan 2009/10 & the Status of Thubelisha, Servcon & Social Housing Foundation

Meeting report

The Chairperson welcomed the Deputy Minister of Human Settlements, Ms Z Kota-Fredericks, the delegates from the Department and other attendees.  She emphasised the importance of mutual respect and co-operation between the Committee and the Department in order to realize the common goal of delivering services to the electorate.

The Deputy Minister thanked the Committee for the opportunity to present the Strategic Plan and 2009/10 budget and gave the assurance of the Ministry and Department’s willingness to work with the Committee.

Briefing by the Department of Human Settlements on Strategic Plan and Budget Vote 26

Mr Itumeleng Kotsoane (Director-General: Housing, Department of Human Settlements) gave an overview of the structure of the presentation to the Committee (see attached document).

Executive considerations included the scope and implications of the new Human Settlements configuration of the Department, the delivery of complete settlements and the upgrading of informal settlements.

Nine housing priorities were identified, i.e. housing for military veterans, interventions in the housing industry to curb the cost of construction, legislation to prevent the mushrooming of informal settlements, the provision of affordable rental housing, the development of a central planning approach, a restructuring of the funding mechanisms, the acquisition of land through a dedicated Housing Development Agency, a once-off injection of resources to address the housing backlog and the encouragement of self-involvement in the provision of housing.

Mr Joseph Leshabane (Chief of Operations, Department of Human Settlements) briefed the Committee on the Department’s strategic objectives.  The presentation included an organogram of the structure of the Department, which was aligned with the Estimate of National Expenditure (ENE) and the approved plan for the period 2008 – 2011.

Mr Leshabane summarised the purpose, sub-programmes and planned activities of each of the five major programmes within the Strategic Plan for 2009/10, i.e. Administration (Programme 1), Policy, Research, Monitoring and Evaluation (Programme 2), Housing Planning and Delivery Support (Programme 3), Housing Development Funding (Programme 4) and Strategy, Relations and Governance (Programme 5).

Mr Leshabane presented the Departmental budget for 2009/10 (Vote 26).  The total budget for the five programmes amounted to R13.588 billion for the period.  The Conditional Grant allocation to the provinces totaled R12.442 billion for the 2009/10 financial year.  A breakdown of the number of housing units provided by each province over the last five years and the delivery targets for the period 2007/08 to 2009/10 was included in the presentation.  The number of housing units delivered between 2004/05 and 2008/09 was 1.192 million.  The total delivery target for 2009/10 was 225,740 units.  The presentation was concluded with a summary of the budget allocated for financial intervention, incremental housing, social and rental housing and rural housing programmes.

Discussion
Ms M Borman (ANC) said that the Committee was concerned over the issue of housing delivery and she assumed that the increase in the Department’s budget was to ensure delivery.  She noted that monitoring and support was a recurring theme in the Department’s presentation.  She asked for clarity on the functions of the two new housing agencies mentioned in the presentation and how the Department proposed to monitor the agencies.

Mr A Steyn (DA) congratulated Ms Kota-Fredericks on her appointment as Deputy Minister of Human Settlements.  He remarked that the Committee had been concerned about the alignment of functions and hoped that the Department’s expanded responsibility would result in the matter being addressed.  He noted that the Department had listed new legislation to curb the mushrooming of informal settlements as one of its priorities.  He said that existing legislation did not achieve the desired results and asked for further details on what the Department envisaged for the proposed new legislation.  He requested further information on the interventions proposed to curb the rising cost of construction as he felt that this issue cannot be addressed by means of regulations.

Mr Steyn asked if the Department could provide benchmark data on the impact of the provision of housing on the creation of jobs and on the economy that could be used to measure progress.  He wanted to know if the Department would be linked with the new Ministry in the Presidency tasked with planning.  He asked if the occupancy audits conducted had arrived at any conclusions.

Mr Steyn remarked that the persons nominated for the Govan Mbeki Awards did not deliver extraordinary performance and felt that the awards should be granted for excellence rather than for merely doing the job.  He noted that the provinces did not participate in the awards.  He wanted to know what the Department planned to do about reducing its carbon footprint.

The Chairperson said that legislation to enable the establishment of the Social Housing Regulation Authority (SHRA) had been passed and the budget had been approved.  She asked why the establishment of the SHRA had not been completed.  She felt that the Department relied too much on municipalities to implement the consumer awareness programme and wanted to see what efforts were made by the Department in this regard.  She found that many communities were uninformed about the housing programmes in their area.  She asked that the Department submitted its policy document and details of the international agreements referred to in the presentation to the Committee.

Ms A Mashishi (ANC) requested further information on the proposed provision of housing for military veterans (see slide 7 of the attached document).  The presentation mentioned facilitation in priority projects and mentioned three projects (N2 Gateway, Zanemvula and Khutsong – see slide 33) as well as eleven other projects.  She asked for details of the eleven projects concerned.

In his response, Mr Kotsoane explained that the responsibilities of the Department extended beyond allocating funding to the provinces and developing policies for the provinces to implement.  The Department was held responsible for all aspects of the provision of housing in the country and needed to extend it’s monitoring and evaluation functions to ensure that the houses built by Government were up to standard.  There were currently 7000 housing projects underway but the Department found that the level of inspection skills in municipalities was inadequate.  The Department decided to establish its own inspectorate, with the assistance of the National Home Builders Registration Council (NHBRC).

Mr Kotsoane said that most of the current six housing agencies arose out of the Botshabelo Accord reached in 1994 in an attempt to address the problem of obtaining funding for the purchase of homes in the black townships and to encourage the private sector to invest in these marginalised areas.  With the exception of the NHBRC, the agencies had achieved their mandates and were in the process of being phased out.  Any remaining responsibilities were transferred to the Housing Development Agency (HDA).  The HDA was a new agency with the primary function of acquiring suitable land for the state for the purpose of developing human settlements and to encourage other players in the sector to invest in the settlements.  The HDA was not intended to take over any of the functions of municipalities and provinces.  Two of the agencies were in the process of being closed down and the roles of the others would be reviewed.

Mr Kotsoane explained that Government had published a comprehensive plan to implement the policy on integrated human settlements.  The plan involved other Departments (e.g. the Departments of Provincial and Local Government (DPLG), National Treasury, Land Affairs, Education and Sport).  The Department of Human Settlements was expected to have the largest social expenditure on providing infrastructure, for example the transfer of sanitation from the Department of Water Affairs.  Legislation dealing with sanitation was however included with other Water Affairs functions and needed to be separated.  The broadening of the scope of the Department required a review of its policies, key functions and responsibilities.  Norms and standards had to be developed and the Department needed to work closer with the provinces and municipalities to ensure that adequate planning took place.

Mr Kotsoane said that, although all municipalities had bylaws to prevent the mushrooming of informal settlements, the bylaws were only applied in the “white” areas.  The capacity of municipalities to enforce bylaws needed to be strengthened in order to prevent the proliferation of informal settlements.  Existing informal settlements had to be properly regulated and managed.  He said that the existing legislation was intended to protect the poor against unscrupulous landlords and Government had no intention to punish the poor.  Informal settlements tended to exist in all countries but needed to be properly managed and serviced.

Mr Kotsoane said that positive outcomes from the housing programmes of the last fifteen years had been seen.  Beneficiaries were provided with protection against the elements, given security of tenure and benefited financially by acquiring title deeds to property.  The Department planned to commission a formal study on the contribution of housing on the creation of stability, the reduction of crime, the achievement of social cohesion and many other factors.  He undertook to share the findings of the study with the Committee.

Mr Kotsoane confirmed that the Department would have links with the Office of the Presidency and was the primary source of information for the new Ministry headed by Trevor Manuel.  In general, municipalities’ plans were developed at the micro level whilst the Department operated at the macro level.  He noted Mr Steyn’s comments concerning the Govan Mbeki Awards and said that the Department supported awards being given for extraordinary contributions.  He suggested that Government officials planted trees for every trip taken and said that trees will be planted at every new home built in future.

Mr Kotsoane advised that the Department commissioned the “Breaking New Ground” (BNG) television series in 2007, the “Let’s Build South Africa” multi-lingual radio programmes, billboards and competitions to increase public awareness.  He conceded that more could be done to inform attendees at consumer awareness functions of the purpose of the function.

Mr Leshabane advised that the legislation making provision for the establishment of the SHRA was delayed because the National Council of Provinces (NCOP) decided to conduct its own public consultation process.  The legislation was only passed in November 2008, where after the process of establishing the SHRA commenced.  Care needed to be taken to ensure that all the functions of the Social Housing Foundation (SHF) were taken over by other structures.  The process of establishing the SHRA was expected to be completed before the end of the current financial year.

Mr Leshabane agreed to provide the Committee with the international agreements entered into by the Department and to brief Members on the Department’s policies.  Information on the other eleven priority projects would be made available to the Committee.

Mr Leshabane said that the policy on housing for military veterans had been finalised.  The veterans were registered and placed on the database and prioritised in terms of need.  However, the veterans had additional requirements, which went beyond the scope of the Department and which were currently being negotiated.  The focus of the veteran’s housing programme was on providing houses for the most vulnerable persons in the first instance.

Ms Borman suggested that the Department set job creation targets for December 2009 and for 2014 that could be easily monitored by the Committee.

Mr R Bhoola (MF) asked what role the youth would play in job creation programmes.  He wanted to know what role the HDA would play in cases where the acquisition of land was necessary to re-develop long-established informal settlements but there was no willing-buyer-willing-seller scenario.  He said that the Extended Discount Benefit still left homeowners with a large debt burden and asked if the Department was considering a debt forgiveness policy.  He was aware that Government planned to dispose of rental housing stock and asked if a subsidy was available for indigent persons.

Mr E Mtshali (ANC) commented on the very poor quality of houses provided and asked what criteria the Department applied in planning the houses.  He requested that the housing provided for military veterans was of a better standard in recognition of the sacrifices made by the veterans.

Mr T Botha (COPE) congratulated the Deputy Minister on her appointment.  He said that Government gave an undertaking to have all informal settlements eradicated by 2014 and he asked of the Department worked with the South African police Service (SAPS) and the Department of Foreign Affairs to prevent the growth of the settlements.  He noted that the informal settlements remained after houses had been provided with the intention to replace the settlement and wanted to know what the Department intended to do about the matter.  Re-zoning and planning took place at municipal level and the Department submitted the budget and number of housing units expected to be built to Parliament.  Every year, there were instances of the financing allocated not being spent and it would appear that the Department based its budget on a wish list rather than on reality.  He mentioned that he was on the Board of Servcon, while the agency was in the process of being closed down.

Mr Steyn asked for comment on the allegation made that over the last ten years the Department had been negligent in registering projects with the NHBRC.  He cited the example of Cosmos City, where 8000 subsidised units were rejected by the NHBRC.

Mr Kotsoane conceded that there were challenges regarding registration of projects with the NHBRC.  He said that the lack of inspection skills and expertise in the industry resulted in poor quality houses being built but gave the assurance that the Department was taking steps to address the issue.  The Department was currently training between 90 and 120 inspectors for deployment to the provinces and taking legal action against unscrupulous contractors.  Discussions were held with the NHBRC to resolve the issues regarding registration of projects.

Mr Kotsoane agreed that more data on job creation was necessary.  The Department took the creation of jobs very seriously and had initiated Youth Build and Women Build programmes to encourage broad participation by the public in the provision of housing for themselves and others.  These programmes had an element of skill development.

Mr Kotsoane said that the Department was considering assistance for poor people with incomes below R3500 per month to acquire rental accommodation.  He said that the Department relied on municipalities and provinces to inspect buildings and where houses in poor condition were found, the provinces were allowed to utilise the housing grants for rectification purposes.  Contractors found to deliver poor quality homes are prosecuted and attempts are made to recover the subsidies paid to them.

Mr Kotsoane explained that the Breaking New Ground programme originally planned to provide serviced sites in an attempt to eradicate informal settlements.  However, the Department had no control over the migration of people from rural areas to cities and from the poorer provinces to the wealthier provinces.  He said that the proposed new legislation was intended to aid municipalities to be more pro-active in terms of planning and to anticipate population growth and make adequate provision for water and sanitation rather than reacting to growing informal settlements.  Emphasis was placed on adequate planning but the assistance of other Government Departments was also necessary.

Mr Leshabane said that quality assurance in the provision of housing involved the municipality, province and the NHBRC.  He explained the complex enrollment process with the NHBRC.  In the case of Cosmos City, the issue was a disagreement between the developer and the NHBRC on the frequency and timing of the various inspections of the units.  The Gauteng Provincial Department of Housing had enrolled the Cosmos City development as a whole with the NHBRC but not the individual units.  The Department planned to provide encompassing quality control over all houses built, hence the introduction of an inspectorate within the Department.  He said that the Department was working closely with provinces to ensure that proper planning, financial control and programme support took place and the problem with under-spending of housing grants was diminishing as a result.

Responding to Mr Bhoola’s question, Mr M Dlabantu (Chief Financial Officer, Department of Human Settlements) explained that the Enhanced Discount Benefit Scheme was based on the principle of debt forgiveness.  The main programme was a subsidy scheme, intended to assist the poor with purchasing a home.  As a result of the rise in property values and improvements made by the owners, many of the earlier houses substantially increased in value and the owners were no longer considered to be poor.  He agreed that more communication needed to take place with owners and that there needed to be a balance between the financial responsibilities of the home owners and Government.  He said that the refusal of a home owner to pay property rates and for services placed an unfair burden on the State.

The Deputy Minister commented on the provision of sanitation services and the replacement of the bucket system with VIP toilets by the Department of Water Affairs.  She said that there was not enough water in some areas to provide residents with flush toilets.  Alternative sanitation systems were however under consideration.  With regard to the quality of housing, she said that the Department had moved from the original Reconstruction and Development Plan (RDP) type of housing provision to the Breaking New Ground programmes and agreed that there was still room for improvement in the provision of housing.  More monitoring needed to take place.  She said that Government planned to provide homes rather than just houses and needed to provide amenities like parks, schools and clinics in communities in order to improve the quality of life of all citizens.

The Chairperson requested clarity on the backyard rental programme mentioned in the presentation.

Mr Botha asked for further details of the upgrading of informal settlements.

Mr Steyn requested a written reply to his earlier question about the NHBRC.  He accepted that a formula was applied to calculate the amount allocated to each province and asked if a variable could be applied to take the capacity of the province into account as well.  He was aware that the Department had provided additional assistance to the Eastern Cape in 2008 but wanted to know how that province managed to double the delivery of housing units given the problems experienced during the previous year.

Mr Steyn noted a 24% increase in the Department’s budget and asked if the subsidy amount was expected to increase by the same percentage.  Payments to consultants had increased by 55% but the Committee had strongly urged the Department to make less use of consultants as the practice did not result in any transfer of or development of skills.

Mr P Ntshiqela (COPE) asked what was meant by the term “relocation” as applied to informal settlements.  He said that residents of informal settlements understood the term to mean that they would be forcibly removed with little consultation taking place between Government and the community.  He asked if relocation applied in cases where informal settlements were upgraded.

Mr Kotsoane explained that informal settlements were often established on unsuitable land, prone to flooding or under power lines.  A recent Constitutional Court ruling allowed Government to relocate informal settlement communities but required consultation to take place and specified the type of alternative accommodation that must be provided.  He said that Government did not want to be seen to forcibly remove people but had to step in where lives were endangered.

Mr Dlabantu explained that the provincial allocations were based on a formula that took ten Constitutional requirements into account as well as specific projects and priorities targeted by the province concerned.  The Department was required to intervene if a province experienced difficulty in the delivery of housing and had been granted dispensation to transfer funding from under-achieving provinces to other provinces where the latter required additional funds to complete projects.  The ultimate goal was to fix the problem and deliver housing to the poor, maintaining equity between the provinces at the same time.

Mr Leshabane said that informal settlements were upgraded in-situ, where possible.  He explained that backyard rentals generally applied in Gauteng Province, where plots in townships like Orlando, Soweto and Everton were larger.  Owners rented out shacks erected on the property and the programme was developed to replace the shacks with proper buildings and adequate water and sanitation services.

Mr Leshabane explained that that inflationary pressure resulted in an increase in the amount of the housing grant budgeted for whilst the number of units to be built remained static.  The sector experienced diminished capacity because the required skills were being drawn away.  He undertook to provide the Committee with more information on this subject.  He said that the lack of capacity placed Government’s social programmes at risk.

Mr Leshabane said that the use of consultants in the delivery of housing projects was inevitable because highly specialised expertise in the fields of legal, town planning, architecture and surveying were required.  The Department did not employ personnel with such expertise and had no choice but to make use of contractors.  The Department attempted to limit the use of contractors and he offered to provide the Committee with full details of the range of contracting skills and the costs concerned.

Mr Steyn expressed concern over the increased expenditure budgeted for by the Department.  When he was the Minister of Finance, Mr Manuel stated that Departments had to take the lead in curbing spending but this was not reflected in the Department’s budget.  Although the Department had emphasised the need to develop skills, the amount budgeted for bursaries and the provision for training and development in Programme 3 were reduced.  It appeared that the funding required was not in line with the Department’s priorities.

Ms Borman asked if the budget included provision for the additional functions and responsibilities of the Department.  She asked if the Department took the cost of future maintenance of the houses that replaced informal settlements and the provision of security services to residents into account.  In such cases, residents were very poor and could not afford to pay for property maintenance and security services.

Mr Kotsoane used the Ethikweni Municipality as an example of good management of informal settlements.  Each settlement had been identified, shacks were marked, responsible officials patrolled the areas and the inhabitants themselves were involved in ensuring that more shacks were not erected.  The management of informal settlements appeared to be successful when the community was involved and where the authority provided certainty and assurance that better housing would be provided in due course.

Mr Kotsoane said that the functions to be taken over by the Department were not yet finalised.  However, it was clear that proper planning had to take place.  Where responsibilities were transferred from one Department to another, the personnel and budgets were transferred as well.  He agreed that expenditure on travel had increased substantially but was justified as officials from the Department had to travel to areas experiencing problems with delivery.  The Department had taken steps to ensure that all travel expenditure was necessary and was properly approved.  Additional expenses were incurred by the appointment of engineers and lawyers to address the problems in the Eastern Cape.

Mr Leshabane said that the Department preferred to employ skilled, experienced personnel for the projects under Programme 3.  The study grants were conditional on the student working for the Department for three years after qualifying and the cost of exiting the arrangement was very expensive for the employee.  The Department found that the uptake had increased and expected the trend to continue.

Responding to Mr Steyn’s questions, Mr Dlabantu explained that, with the exception of Programme 3, the expenditure on training and development by the Department had increased.  Additional expenditure was incurred as a result of the restructuring of the Department.


Briefing by Department of Human Settlements on closure of Thubelisha, Servcon and the Social Housing Foundation
Mr Leshabane briefed the Committee on the progress made in the closure of Thubelisha Homes, Servcon Housing Solutions (Pty) Ltd and the Social Housing Foundation (SHF) (see attached document).

In 2008, the Minister decided to close the housing entities concerned because their mandates had matured.  The briefing included a summary of the progress made in the closure of Thubelisha Homes and Servcon, the termination and/or re-deployment of the human resources, the disposal of assets and the termination of leases and contracts.  A Steering Committee was appointed to oversee the closure of the SHF and a draft closure plan was expected to be presented to the Steering Committee on 17 June 2009.

Discussion
The Chairperson asked if the Department’s budget included provision for the closure of the agencies concerned.

Mr Steyn recalled that earlier presentations on the closure of the agencies included a timetable.  He asked if the closure process was on track in terms of the original timetable.  He noted that the closure plan for Servcon included the appointment of a liquidator, which implied that the organisation was bankrupt.  He asked for an explanation of the increased budget provision for Thubelisha in the following financial year.  He was concerned that personnel from the agencies may be transferred to the Department without the required skills.  He requested comment on the situation where Voluntary Severance Packages (VSP’s) were accepted by skilled personnel, who subsequently returned to be employed as contractors because the Department lacked the necessary skills.  He requested the assurance that the data and the integrity of the data at Servcon would be adequately secured.  He wanted to know the date Thubelisha was expected to end operations.

Ms Borman asked what functions would be carried out by the personnel employed by the agencies during the closing down period.  As a new Member of the Committee, she was unsure of the exact nature of the agencies under discussion.

Mr Leshabane replied that all personnel were required to carry out their responsibilities until the date of formal closure of the entity.  He explained that the agencies were established as a result of an agreement between Government and the banking sector during the 1990’s, with mandates that expired in March 2006.  The agencies were re-mandated until the Minister’s decision to close them down.

The SHRA was expected to take over the remaining functions of the SHF by April 2010 and provision was made for the funding of the SHF until that date.  Servcon was self-funded and the allocation to that agency was reduced.  The Department agreed to fund the costs incurred as a result of the closure of Thubelisha and included the relevant amount in the budget.  The original timetable for the closure was dependent on approval from Government at specific times and had to be revised when approval was delayed.  Thubelisha was expected to cease operations at the end of July 2009.

Mr Leshabane said that not all personnel would be transferred to the Department.  VSP’s were offered to personnel as an option but there were conditions attached concerning re-employment.  He was confident that the responsible accounting officers at the agencies will ensure the integrity of the relevant data.  He advised that, as a Section 32 company, the appointment of a liquidator was mandatory for the closure of Servcon.

The Chairperson thanked the presenters for the presentations and the Members for their attendance and participation.

The meeting was adjourned.