Housing Development Agency, National Home Builders’ Registration Council, National Housing Finance Corporation, NURCHA, Rural Housing Loan Fund: Strategic Plans 2009/12

Meeting report

Housing Development Agency (HDA) Strategic Plans 2009-2012
Mr Taffy Adler, Chief Executive Officer, Housing Development Agency, tabled and presented on the Strategic Plans of the HDA. He stated that the mandate of the HDA was based upon its founding legislation, and that the focus of the HDA was large scale impact by facilitating local government capacity, as well focusing on social infrastructure in order not to just create houses, but homes. The HDA’s major strategies were aimed at ensuring availability of land and effective project structuring. In terms of project management the HDA would look at the issue of proper facilitation. An essential component of the HDA would be ensuring proper project funding.

Mr Adler outlined the first 100 days of the HDA’s existence , stating that it had initiated the building of 75 000 units in KwaZulu Natal, in the largest single project which stretched from Umhlanga to Verulam. He added that the most important aspect was that it was setting up inter-governmental consultative bodies, with an oversight function, technical steering committees and sub-committees for correct structuring of projects. Mr Adler stated that the HDA was working in the Northern Cape to overcome the housing backlog and that it would be meeting with the Premier to solve the housing issue in the Western Cape. Mr Adler then outlined the HDA’s projected financial statements (see attached document).

Mr Adler stated that challenges that the HDA faced included the acquisition of State land. He asked, in terms of the process of land audits and negotiation with entities, that this Committee enforce the policy that first call on State land to be identified for human settlement. The second issue relating to land acquisition from the State was the cost. In the Western Cape land was transferred at no cost and therefore, in line with this, profit should not be a factor. He added that another issue was co-ordination with other departments, as development could not go ahead if bulk servicing was lacking. Mr Adler stated that in terms of funding flows, HDA would try to get the money to where it was needed. He stated that, in terms of Priority Development areas, if HDA developed a plan with government departments, they were allowed to oversee the project and help cut through the red tape.

Discussion
The Chairperson thanked Mr Adler for an informative presentation and stated that after the Housing Development Agency Act was passed the Members had been very anxious about the housing issue and thus were very keen to see the emergence of the HDA. She added that the past Committee was very frustrated over the inability to deliver housing, and as such would support the HDA in whatever capacity it needed in order to ensure a solution to the speedy implementation of proper housing.

Ms M Borman (ANC) commented on the social aspect of the HDA and added that it was necessary not to just build houses, but actual communities. She added that she looked forward to working with the Agency. She noted that problems seemed to revolve around cooperation with all the different spheres of government. Ms Borman asked for further comment on funding from provinces.

Mr Adler stated that there needed to be adequate preparation and consultation around these issues and that if one could fund a proposal that had been adequately canvassed with role-players, then it should take into account issues arising around roles and responsibilities, and stated that it should be possible to compile a list of roles and responsibilities and then to deal with it. One area of tension arose between proper planning and getting the delivery done.

Mr A Steyn (DA) asked whether, in terms of facilitation of project management, the HDA intended to send teams into the provinces and metros, or if they intended to build local capacity. He asked if, in the case of the Johannesburg Inner City project, it would not be better rather to leave this alone, as it was proceeding well, in favour of rather devoting more time to projects that were not functioning as well.

Mr Steyn asked whether there was not a need for political oversight in the oversight Committee.

Mr Steyn requested that Mr Adler furnish the Committee with report on the HDA pilot projects.

Mr Steyn questioned whether provincial funding would be received incrementally, or all at once.

Mr Steyn asked whether or not there was a cost in the transferring of State land, and stated that if this was the case then transferring the land to the HDA and then back to the province would result in a duplication of costs. He also questioned why State land had to be purchased t in the first place.

Mr Adler replied that the funding would be an issue and a challenge that this Committee would have to manage more than the HDA. He added that the HDA would like as much control as possible and that it made sense to put HDA project money with the HDA. In terms of capacity the HDA had taken very careful cognisance of the need to develop capacity. He said that the HDA aimed to support wherever needed and assist local structures to identify needs and work on them.

Mr Adler said, with relation to the land transfer issue, that HDA would do whatever was most appropriate to the project and that whatever was most effective. Mr Adler replied that he saw no problem with the Committee providing political oversight, as long as it sat within the correct framework as part of the oversight body and did not have a ‘floating’ mandate. He added that the 100 day report had some detail about the pilot projects but that he would comply with Mr Steyn’s request for additional information.

Mr A Figlan (DA) asked how much land was available.

Mr Adler replied that he did not currently have an answer.

Mr Steyn reiterated his question about leaving the Johannesburg Housing Corporation (JHC) to manage the Inner City Johannesburg development, and the question of provincial funding.

Mr Adler replied that in terms of the JHC and land transfers, there was a little bit of work to be done on policy framework and that after that was done HDA would let the JHC run the project, while HDA would manage according to an oversight mandate. He added that HDA would prefer funding to be received in a one-off payment, since experience had shown that projects funded through increments did not gel together as well as up-front funding.

Mr Joseph Leshabane, Chief of Operations: International Relations, Management Information, Strategic Management, Entities Oversight, Communications, and Transformation, Department of Housing (Human Settlement), added that allocations out of government grants were appropriated out to provinces. With regards to the HDA, money could not be allocated to an entity that was not working properly at the time of budget allocation.

An ID Member asked what the view of the HDA was with regard to previously disadvantaged areas. He added that he believed in affordable housing, but stressed the need to settle people into areas with proper structures.

Mr Leshabane replied that the HDA would implement fast tracking measures that would be determined, and that in time the HDA would develop a package.

National Home Builders Registration Council (NHBRC) Strategic Plan Briefing
Ms Kgomotso Mahlobo, Acting Chief Executive Officer, National Home Builders Registration Council outlined the objects of the NHBRC, which were lifted directly from its governing legislation. She also set out the NHBRC’s strategic objectives and the NHBRC’s priorities for the Medium Term Economic Framework (MTEF) period, including key risk areas; provincial involvement and government structure (see attached presentation)

Mr Courteney Thorp, Chief Executive Officer, NHBRC, outlined the budget (see document for details) and gave the figures for distribution of enrolment for non-subsidy houses, with a projected income of R408 million in total. He noted that there was a substantial increase in the subsidy market. The revenue trends in the non-subsidy market were disturbing as they projected a 20% fall, but actual levels were far higher. Expenditure was composed largely of accreditation costs and inspection fees. He added that the enrolment fee figures charged were not actually adequate to cover expenses and claims for both subsidy and non-subsidy houses.

Discussion
Mr Steyn stated that he was worried that enrolled houses were costing more than the fees being charged. He added that it had been difficult to study all the figures and reminded the NHBRC that Members needed to receive the reports well before the presentations to the Committee were made. Mr Steyn asked about the disparity in the document between the figures given in respect of complaints and conciliations. He said also that he had been receiving complaints that matters referred to the NHBRC had not been responded to. Furthermore, he asked why there was not a proper correlation between enrolments and inspection fees. 

Ms Mahlobo replied that because people enrolled houses on one date, but would only build them at a later stage, there would not be a correlation between the figures as at the dates of enrolment and completion.

With regard to complaints, Ms Mahlobo stated that not all complaints were valid, and some were superfluous, but for reasons of record keeping they were noted.

Ms Mahlobo noted that the report was provided this morning, but that the late addition circulated to Members was an adjustment pack from the Department.

Ms Borman stated that it seemed that the NHBRC was down on all its performance targets.

Ms Mahlobo stated that if the NHBRC was down on the targets projected for complaints, then this amounted to the Council in fact performing better, not worse, and that the same applied for being above enrolment targets. She added that there had been a delay with project funding, but that it should pick up later in the year as the interest rate declined.

The Chairperson stated that she was concerned over the action that the NHBRC wanted to take by way of punishment, and asked what the reasons for non-enrolment were. She added that she was not convinced that the NHBRC had done enough to inform the public.

Ms Mahlobo replied that the Act empowered the NHBRC to punish individuals for non-compliance with the Act. She added that the NHBRC was already working on a publicity campaign, and had also embarked upon a massive road show and was addressing the problem of accessibility via mobile offices. Factors leading to underestimation of enrolment value included contractors and owners enrolling houses at a lesser value in order to save money on the fees, without realising that this would be to their detriment in the event of a claim.

The Chairperson told Mr Leshabane that in future late document submissions would not be acceptable. She asked what the NHBRC’s relations with the Eastern Cape Provincial Government were, as the latter had indicated that they were reluctant to let the NHBRC do rectification. The Chairperson also added that her question was not around beneficiaries, but reasons for late enrolment.

Ms Mahlobo replied that late enrolment was an issue, as houses were likely not to be inspected at the correct phase of building and as such the NHBRC would not be able to guarantee the quality of the house.  She added that in the Eastern Cape the NHBRC was involved in terms of facilitating remedial work, their first involvement was evaluating old houses from 2002, and after this was completed the Eastern Cape asked the NHBRC to facilitate technical remedial work. Ms Mahlobo stated that they were involved in project management.

Mr Steyn stated that he had misunderstood the complaints issue, but that it should be presented more clearly. He asked about the alleged non-registration of subsidised houses by government departments.

Ms Mahlobo replied that in future the NHBRC would clarify the complaints issue.

National Housing Finance Corporation (NHFC) Strategic Plan briefing
Ms A Egberts, Chief Operating Officer, National Housing Finance Corporation outlined the NHFC presentation. Since there were time constraints, she merely listed the strategic objectives (see attached document for full details and then went through the Financial Performance, which she noted as being ultimately successful.

Ms Z Adams, Chief Financial Officer, NHFC, outlined they key areas of the budgeted income statement, as attached to this presentation, and stated that the NHFC’s main source of income was lending.

Discussion
The Chairperson noted that this Committee needed to take part in the transformation of the NHFC.

Presentation by NURCHA
Mr Cedric de Beer, Managing Director, NURCHA, stated that he would skim through the presentation. He stated that NURCHA was a joint venture between government and the Soros Economic Development Fund. The stated mandate was of providing bridging finance to contractors building low and medium income projects, and that 80% of those financed were smaller contractors. Mr de Beer added that in terms of programmes, NURCHA was about to reach R10 billion in project support, with, to date, 225 850 houses being built. He projected loans being at the value of R12 million.

Mr de Beer added that in terms of loan value division by province, 60% of affordable housing programmes were occurring in Gauteng. He stated that NURCHA’s business plan was environmental and took into account the current economic climate. Mr de Beer expected to see larger contractors coming back to subsidy housing markets. He noted that NURCHA was based in Johannesburg, but added that five regional offices would be opening, allowing NURCHA to commit to eight provinces.

The total estimated balance sheet figure was at R500 million, he added that over 14 years government’s contribution had been approximately R100 million and as such hoped that more funding would be forthcoming.  Mr de Beer noted that the projected income for the year, of R2.87 million was very low.

Discussion
Ms Borman asked what the figure of R5.9 million under the 2009/2010 budget, stated as other investments on page 14 was.

Ms Sindisa Nxusani, Chief Financial Officer, NURCHA, replied that it reflected the money that was waiting to buy shares from smaller stakeholders.

The Chairperson stated that very soon the Committee would be making oversight visits and that they would prioritise these institutions.

Rural Housing Loan Fund (RHLF) briefing
Mr Jabulani Fakazi, Acting Managing Director, RHLF, stated that the RHLF was the result of a South African – German bi-lateral agreement. Mr Fakazi stated that the RHLF’s aim was to maximise rural lending and that it operated within the Breaking New Ground policy context. He added that incremental housing was the core business as rural housing loans improved the quality of rural communities.  Mr Fakazi added that it also contributed to Small, Medium and Micro Economic development and job creation and that it worked in all provinces through intermediaries.

Mr H Potgieter, Chief Financial Officer, RHLF, stated that current economic conditions were tough and that the RHLF’s  clients were affected the most and that it had to take these factors into consideration when preparing the budget. He added that the main challenge was the increased amount of bad debt risk, although at present it was well managed at the current stage. Mr Potgieter stated that the second risk was leakage as most people were very keen to get loans, but had to use them to sustain basic living. He stated that the third challenge was the high interest rates, as the RHLF was itself obliged to borrow, so it could not pass on as low an interest rate as it wished. Mr Potgieter noted that RHLF would be receiving some funds from government, but also stated that the lack of funding constrained the 2010 growth rate. He added that the cost revenue curve was very stable at below 30%, and that disbursement according to provinces found 70% of loans being targeted outside of Gauteng. Mr Potgieter added that there was moderate growth in revenue and that costs were almost static.

Discussion
Ms Borman asked what monitoring or controls the RHLF had around leakage and why it had not received any money from the Department for 2009/10.

Mr Fakazi replied that it was very difficult to monitor, as it was an unsecured loan; each borrower was supposed to submit a monthly housing report. He added that RHLF was encouraging its intermediaries to use building suppliers as disbursers of the loans. Mr Fakazi stated that the lack of funding was not a reflection of bad performance, but rather reflected a governmental focus on other priorities.

Mr Leshabane stated that for many years the government had not been capitalising the RHLF, but after deciding that there was a need to lower costs to rural areas, the Government would be doing so.

Mr Steyn stated that as 80% of loans were used for housing, he imagined that the RHLF had no control or monitoring function over the end use of the loans.

An ID Member stated that while the organisation was supposed to provide nationwide wholesale disbursement, the provincial breakdown contradicted this, as it was quite clear that there was a focus on Gauteng. He added that there was a need to focus on the Northern Cape and the Eastern Cape.

Mr Fakazi stated that the focus on Gauteng was a result of many issues, including borrowers working in Gauteng, but building in their home provinces. He added that RHLF would certainly try to spread to all provinces.

Hon Zou Kota, Deputy Minister on Human Settlements, said that it would be necessary to see a project funding breakdown from the NHBRC. She added that she was pleased to hear that  interest [for rural borrowers would be dropping.

The meeting was adjourned.