Servcon: Transitional plans, strategies to deal with repossessions and informal settlements

Meeting report

Servcon presentations: Management of Transitional Period
Mr Lindikhaya Mpambani, Acting Chief Executive Officer, Servcon, gave a presentation on Servcon’s plans for the transitional period, its proposed solutions to curb increased repossessions due to the current economic downturn, and plans to avoid the overloading of the subsidy system owing to increased informal settlements (see attached document).

He stated that Servcon’s original mandate regarding the non-performing loans came to an end in 2006, when remaining properties were transferred into a wholly State owned entity (SOE). Since then Servcon had focused on finalising its remaining portfolio, the normalisation processes in provinces and the acquisition of suitable land. Forty pieces had been acquired in seven provinces. He then described the closing process. He noted that Servcon had halted agreements with Provincial Departments of Housing (PDoH), had tried to transfer staff to the Housing Development Agency (HDA) or other public institutions, and would transfer its immovable and some of the movable properties to the HDA, while the rest of the movable properties would be sold to staff or given to charity, provided that National Treasury gave its approval. To date not a single one of the 143 staff members had secured an alternative position.

Mr Mpambani then dealt with plans for the curbing of the increased repossessions, as a result of the economic downturn that was affecting people’s ability to pay. Servcon’s mandate did not cover those properties falling into arrears or repossession from 1 January 1998. All properties repossessed after the National Credit Act came into effect would be managed by National Credit Regulators. On a governmental mandate, Servcon was developing a business model to deal with the problem, consolidating existing research and embarking on new research to confirm Servcon’s capability to cater for this sector.

Mr Mpambani then began to explain the plans to avoid the overloading in the subsidy system. He said that the Housing Data System did not always reflect the information on the ground. To this effect Servcon had entered into Service Level Agreement with provinces to perform information audits.

Discussion
Mr A Steyn (DA) interjected at this point, and asked that Members could, before hearing the rest of the presentation on the new areas, ask questions on what had been said so far.

The Chairperson agreed and opened the floor for discussion.

Mr Steyn said that he had many questions. He firstly noted that avoidance of overloading of the subsidy system had been mentioned. He questioned how this was to be achieved other than supplying more houses. He said that he believed the overload was an effect of supply and demand.

Mr Steyn asked that Members could get more clarity on what was being done during the audit, and in particular whether that audit was checking the quality of the houses or checking that the occupants were the legal beneficiaries.

Mr Steyn said that there were still 206 houses that had not been dealt with, as Servcon became a wholly State–owned entity, and he asked what was the status of these houses, in particular whether they were vacant, rented out, and who owned them.

Mr Steyn noted that there had been a discrepancy in the presentation when it dealt with the acquisition of land. At one point, 40 pieces of land were mentioned, but at another point the figure of 42 was given. He asked for clarity. He also asked if the pieces were purchased from the private sector or transferred from other public entities, and who had funded this procurement.

Mr J Mc Gluwa (ID) asked why the entity only served certain provinces. Servcon was a national institution, but the audits had only applied to four provinces, and the number of rectifications in the Eastern Cape and Limpopo had been left out. When it came to land located in Lesotho there had also been no indication of the way forward in terms of construction and development. Limpopo and North West had not been mentioned at all.

Ms M Borman (ANC) said that as a new Member she was still trying to get her head around all the issues. She asked how the Housing Development Agency would deal with acquired land, and did this include any land that would be used by HDA.

Mr R Bhoola (MF) asked if any suitable land had been identified in the Provinces that had not been mentioned in the presentation.

Mr Bhoola also wanted to know how the collection of rates and service bills was handled, in cases where homes had been sublet by the original beneficiaries.

Mr Bhoola asked, in connection with the fact that no new Service Level Agreements (SLA) were entered into with Provinces; what the possibilities were of discontinuing the agreements and transferring the staff to the Provinces, where such agreements did not exist.

Ms T Gasebonwe (ANC) asked if Servcon could provide reasons as to why the houses had been deemed not to be resalable.

Mr Mpambani addressed these questions in general first, and then moved on to more specific answers. He explained that the overloading of the subsidy system related to problems with information from three sources; the Housing Subsidy System (HSS), the Deeds Office and the occupants on the ground. Ideally the three databases should communicate with each other, so that the occupant of house no 1 should be the same person who was allocated the house in terms of HSS and should also be the person named on the Title Deed of the house. However often these three sources of information did not match. The allocation process was not sufficiently structured and Councillors, Provincial officials and Municipal officials had all been allocating houses. If, for example, the beneficiary on the top of the list could not immediately be located, then the officials, with best intentions at heart, would allocate the available house to the next person on the list. When they did not inform HSS it resulted in the databases being incorrect.

He said that a further problem was that a beneficiary, who perhaps was registered to own house No 19, would in fact be occupying house no 10. The municipalities would send out the bills according to the information on the Deeds Office records. So, a bill addressed to the owner of house no 19 would arrive, but the occupant, who was not the owner, would simply disregard it, so the municipality would not receive its money. The audit was supposed to address these issues, to ensure that the occupancy of houses was correctly reflected in the HSS and the Deeds Office.

Mr M Mdakane (ANC) wanted to know if the problem had been resolved now. He pointed out that it had to be borne in mind that there was inward migration in many urban areas, so people who had been granted a house in one area would move to another in order to be closer to their workplace. This also resulted in the original beneficiary not living in the RDP house that had been allocated to him or her, which in turn was one of the reasons that local residents accused the municipality of corruption in awarding houses to foreigners who did not qualify for the houses. It was imperative that this problem was resolved.

The Chairperson wanted to know if this undertaking had been part of the initial mandate.

Mr Mtshali asked if all poor areas had been visited during the audit. The way Mr Mpambani had described the situation was, in his view, not reflective of most cases. The common scenario was that people were registered to receive a house, but by the time the allocation actually happened the house would be awarded to someone else, such as taxi owners, municipal workers and teachers.

The Chairperson said that the point Mr Mtshali was raising was very important one because it was a serious allegation about what was happening in the housing delivery programme.

Mr Steyn commented that what Mr Mpambani had described was not a situation of overloading the subsidy system but a problem of synergy. He asked what would be done when an Exception Report was created. If the records were simply changed to reflect the true occupancy, this might result in the legalisation of ownership to persons who were not supposed to own the house at all. Councillors were also not supposed to allocate houses and he asked what was being done about that.

Mr Mpambani said that the Exception Report provided for various scenarios. One example from Musina, where there had been allegations that houses were allocated to foreigners, was that the original beneficiaries were erecting shacks in the backyard of their house in order to rent the house out to Zimbabwean immigrants. This was not an illegal practice since the correct beneficiaries were utilising their houses for their own financial benefit, but it did give rise to allegations of corruption in the allocation of houses.

There was a second example relating to teachers benefiting from houses. The system allowed developers to appoint their own conveyancers to allocate the houses. Although there was suppose to be a clause in the house contracts stating that the original beneficiary had to be the occupant for the first eight years, many of the conveyancers had not included this clause in their contracts. This had resulted in people selling their houses for a much-devalued price, as low sometimes as R10 000 or R20 000. Considering that the cost of erecting the house alone was R50 000, the real value of the house and the land should be in the range of R150 000. However, since the contracts did not contain that eight year clause, this too was not an illegal practice. The substance of the matter was that people were creating many of the problematic situations themselves.

With regard to the question on the Exception Reports, he explained that houses that were occupied by the wrong persons had to be relinquished, so that the title deeds could be matched to the occupation. However, beneficiaries were reluctant to relinquish their current contracts since they were scared that their house would be taken away from them. Servcon had proposed that it should go to all the settlements to check the occupancy house by house, and that all the houses occupied by the incorrect beneficiary had to be relinquished, and then the deeds would be reallocated.

Mr Mpambani said that there had been cases where officials had behaved in an unscrupulous manner and done what they were not entitled to, but that was a separate issue that had to be dealt with. 


Mr Mpambani explained that prior to the establishment of the HDA, there had been discussion that Servcon should change its mandate. Servcon had, however, been told to continue to do the land acquisitions in the meantime. Then the problem relating to the audit had been identified. Gauteng, to give but one example, had  initiated a programme to ensure that allocations were correct, by checking that all those who were on the beneficiary list were still alive and still qualified for the houses.

Mr Mpambani addressed the question of why Servcon had not been active in all provinces. Servcon’s activities had depended on the provinces’ capacity to fund projects, since Servcon had not received its budget requirements from the National Treasury. 

The Chairperson wanted to know if the information relating to the irregularities had been reported to the National Department of Housing (as it was then named).

Ms Phekane Ramarumo, Chairperson of Servcon, said that she had some additional comments to make. She stressed that Servcon was not responsible for the allocation of houses, but had identified the problem relating to the allocation and had advised the relevant provinces on how they should deal with those issues. For example, Servcon would come in where the developers had abandoned the projects, or where houses had to be rectified due to improper construction, and would provide reports to the Province. “Normalisation” was a very broad term, and involved rectification of houses, restoration of titles and normalising databases and other issues. Servcon had not managed to cover the entire country, but whether Servcon was present or not, a gap would remain in the market relating to those activities.

Mr Mpambani referred back to some of the previous questions. He noted that Mr Steyn had asked about the 206 houses not yet dealt with. There were now only 62 houses remaining. The challenge was that people did not want to sign the contracts for rectification, since they misunderstood the position and believed that Servcon simply wanted to repossess their houses. Servcon was busy finalising this process and had even mobilised the local communities to try to convince the occupants that their houses would not be taken away from them.

Mr Mpambani said that only one piece of land had been bought from the private sector, whilst the others had been purchased from Transnet. Transnet had been instructed by Parliament to sell the land, but had insisted that the land was purchased at market value, since otherwise this would create bookkeeping and balance sheet problems. This process had not been taken over by the HDA. Other suitable pieces of land belonging to the Department of Public Works had been identified, and the process of ensuring that those pieces were followed up by the HDA was underway. In Gauteng three buildings had been purchased, all close to transport stations, which made them suitable for sustainable development programmes. The acquisition of land, as questioned by Ms Borman, related only to pieces that were registered to Servcon.

Mr Mpambani then dealt with the funding. He noted that before the SLAs had been entered into, there had been private market research about how much the Government would be charged for the land. It had been very difficult for the Government to muster the required funds, so in some cases the Provinces had purchased the land, although since they were not allowed to hold certain pieces of land, Servcon had been registered as the owner. The HDA would take over that process as well. Finally, some land had been purchased for the surplus that Servcon had made. Essentially, therefore, there had been a mix of funding used.

Mr A Figlan (DA) noted that his constituency was Mandela Park in Khayelitsha. An audit had been done in that area, but the persons who had been right-sized were still waiting for their new deeds. He asked whether there was any indication when those deeds would be received.

Mr Mpambani stated that he did not have that information now, but that he would find out and convey the information to Mr Figlan.

Mr Mc Gluwa said that in some areas residents had been presented with bills that did not relate to them. For example someone had received a water bill of R20 000, when he did not even have a water meter. In another case a bill had been made out to a certain address, but when this was checked the address was a church, not a residential property. Some areas did not have street names, which meant that the residents could not have accounts. He asked what was being done about this.

Mr Mpambani said that the decision to put houses on the ground was political. The timeframe that had been set had meant that houses were erected before the necessary legal steps had been taken, nor all the planning issues dealt with, resulting in residents not having addresses. This in turn resulted in problems with the title deeds and so on. Once the promulgation was completed it had to be ensured that the occupant of a certain house corresponded to the beneficiary in terms of the HSS, and that this person in fact was the registered owner. This involved officials actually going to the areas to get the information. One suggestion was to ensure that the consumers were being educated so that they knew how to deal with different situations, such as how to re-register the house if the original beneficiary died. He noted that it was a very cumbersome process to get addressed. In Thembisa, for example, the allocation of street names and addresses had taken 18 months, and this was an established area. There were many stakeholders involved in this process, such as Telkom, the Post Office, Department of Home Affairs, as well as community leaders, so the processes had to be initiated nationally.
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Mr Steyn asked if Servcon was looking for employment for its contract staff as well as for the permanent staff. He noted that Servcon staff were apparently home loan experts, and he asked how their skills were to be utilised by Provinces.  He could not understand why home loan experts had been employed by Servcon in the first place, since the entity had never been in the business of granting loans. He did agree that when Servcon closed down there would be a gap in the market, since the job they were doing now in terms of the audit would not be done by another agency, but in that case the people who were involved with the audits should be suitable for employment by the Provinces. 
Mr Bhoola said that he too was concerned by the transfer of staff, and stressed that their skills had to be used for the Provinces’ benefit. He also noted that the Labour Relations Act set out certain rules, and enquired whether there was likely to be a problem in adhering to that Act.

Mr Steyn also enquired about the timeframe for the winding down.

Ms Ramarumo said that the Servcon staff members were not home loan experts, but financial experts. The staff members on contracts did also have expectations of continued employment due to the Minister’s instruction that no staff member should be forced to leave his or her job. This also related to Labour Relations Act issues. Servcon was due to conclude its activities on 1 September. After that date a limited number of staff members would be retained to deal with the final close down, but there was reason to be concerned about the rest of the staff since Servcon had not been able to guarantee a single transfer so far. The persons working for Servcon had been transferred there at the commencement of their employment. and now they were in a predicament that was not of their own making. Servcon therefore needed to ensure that their employment could be continued.

Mr Mdakane asked where were the five pieces of land allocated in the Western Cape. He noted that in Langa there was an abandoned building that was owned by Transnet, which was being used for many criminal activities, and to try to put a stop to that people had moved in. This building was in a very poor state, and he wondered if Servcon could negotiate with Transnet about this property.

Ms Mashishi said that it was very important to conduct awareness campaigns about the law of succession. She also questioned whether the ages of the beneficiaries had been checked, since there had been many complaints from communities that some houses were actually occupied by children.

Servcon presentation on human resources
Mr Audi Mehl, Labour Practitioner at Servcon, gave a presentation on the human resource issues related to the closure plan. Servcon was working with employee representatives to ensure consensus on Section 189(a) of the Labour Relations Act, to avoid or minimise the number of dismissals, change the timing of dismissals and mitigate the adverse effect of dismissals. The Minister’s letter instructing Servcon not to cause involuntary dismissal to any of its staff members had raised expectations among the existing 143 staff members, including the 78 contract workers. In practice, Servcon staff members had to apply and compete for jobs, which did not amount to the transfer they were expecting. Letsoalo consultants had interviewed and compiled CVs and Employee Skills Assessment Questionnaires for all the affected employees, and their profiles had been delivered to the offices of the National Department (formerly of Housing), which would in turn arrange meetings with various Provincial Departments to investigate the possible placement of these staff.

Discussion
Mr Morris Mngomezulu, Acting Chief Director, National Department, said that earlier in the week, there was a similar meeting with Thubelisha relating to its closing-down procedures. During that meeting specific information was given relating to the closing-down strategies, but nothing like that had been provided today. He asked exactly what brief had been given to Servcon relating to the meeting today.

Mr Mpambani noted that the invitation to Servcon had said that it should brief the Committee on plans in place to manage the transitional period, solutions to curb increased repossessions due to the current economic down turn, and plans to avoid overloading of the subsidy system due to the increase in informal settlements. The instruction was therefore much broader than simply to relate the closure plan. Also, taking into account that the Committee was not necessarily involved in the implementation of the closure plan, the closure plan had already been dealt with generically in the presentation when it was explained why Servcon was in transition, how Servcon’s staff were going to be managed, and how Servcon’s assets would be managed and so on.

Ms Borman noted that initially Servcon had had a mandate that extended until 2006. It seemed as if it had been a time-limited operation from the beginning. Given this, she would have expected it to have formulated a plan much earlier on how to deal with its staff when the time of closure came, and she asked for comment.

Mr Steyn was sympathetic to people losing their jobs, but said that it must be remembered that when people entered into contract employment, they were aware that their jobs were time-limited. He did not see that Servcon had any obligations to reemploy the contract workers, nor to seek their employment elsewhere. Secondly, he pointed out that the fact that Provinces were reluctant to accept Servcon staff, although there were funded and vacant positions, seemed to indicate that that the Servcon staff did not have relevant skills. He noted that not a single person had been transferred, and he wanted a frank explanation as to why this was so.

The Chairperson said that the Committee members were raising valid points, but it had to be realised that Servcon had a legal commitment to staff that it could not ignore.

Mr Mdakane said that the Minister had highlighted that Servcon should be humane when dealing with the close down. However, how Servcon did this was its own responsibility and he did not think that the Committee should be interfering in this process.

Mr Steyn noted that during the HDA briefing the Committee had made it clear that it did not want to see a wholesale transfer of Thubelisha and Servcon into the new Agency. Although these entities had done a good job in some cases, they had also committed some serious mistakes. The establishment of the HDA was not simply a continuation of what had been happening under a different name.

The Chairperson instructed the Servcon delegation to finish their close down presentation.

Mr Mpambani said that most of the issues had already been dealt with through the questions. In summary, looking at what could be done to curb the increased repossessions, Servcon staff had experience in managing housing on the community level, which could be useful. Their skills could also be of great help to Provinces when it came to monitoring the allocation of houses, developing strategies to standardise allocation, and providing oversight of the allocation. In some cases people were complaining that they had been on the waiting list for a house for 15 years, and that nothing was being done. Gauteng and the Eastern Cape had been particularly concerned about this, and Servcon had been involved dealing with the allocation process. Servcon did not necessarily want an extension of its mandate, but there was expertise that Servcon possessed that could be utilised on a provincial or national level or even in a consortium.

Mr Mdakane said that in two months time Servcon was to be closed, and it was very important that it was ready for that. Servcon should also prepare a handover report to be given to the Committee, to enable Members to carry out their oversight duties efficiently.

Mr Mpambani said that it needed to be clarified that 30 September was the date when Servcon operations would cease. Servcon had until 31 March 2010 to finish its administrative fold-ups, including collating reports, de-listing the public entity and de-registering the company. The priority now was to ensure that on 30 September staff members who were not involved in the close down could move to other jobs.

Mr Mdakane clarified that when he referred to effective oversight, Members would need to ensure that the problems experienced by Servcon were not again recurring in the HDA. They would have to be able to interrogate these issues in the future.

Mr Mpambani said that a detailed handover report would be compiled province by province and given to the Department as well as to the Committee.

Mr Steyn asked if Mr Mpambani and the rest of the management had considered opening a private consortium to provide their services to the provinces since, as they had said, without Servcon there would be a gap in the market.

Mr Mpambani said that this was precisely what they had in mind with a consortium. However, they had to make sure that National Treasury would continue to endorse the process. If not, it would be fruitless. The Department saw the private consortium as a last resort, but unless funding was given soon, this might be too late.

Other Committee business
The Chairperson noted that the Committee’s draft programme had to be approved by the Chair of Chairpersons, so that matters were in place on resumption after the recess. She drew attention to the items on that draft programme. In particular she noted that the Department would appear before the Standing Committee on Public Accounts (Scopa) on 5 August. A briefing session by the Department on the special Auditor-General’s report would be held before that meeting, so that the Committee had an indication of how far the Department had moved with the task set by Scopa.

Mr Mc Gluwa asked whether it would not be a duplication to hold a separate Committee interrogation on the Auditor-General’s report.

The Chairperson answered that in a sense the Committee may cover the same issues, but this was part of the Committee’s oversight function.

Mr Steyn asked if the Committee would also be asking questions during the joint Scopa meeting.

The Chairperson said that she would make enquiries.

She noted that there would be a strategy planning workshop on 5 and 6 August, and a joint oversight visit to the N2 Gateway was proposed for 12 August.

Mr Mdakani suggested that the date for the strategy workshop must be changed, as it clashed with an ANC party caucus.

The Chairperson thanked him and said this would be done.

Mr Steyn wanted to know if the Committee could get a report from the Department on the progress of the N2 Gateway project before the visit.

The Chairperson noted that at the last meeting a management committee had been elected, on the assumption that it would be the same as previous committees. However, since this Committee was now smaller, the management committee should have five, and not seven members, with three from the ANC and two from the opposition. This would be rectified on return from recess.

The Committee had received an invitation to participate in a capacity building programme, which was a thorny issue last year, and had prepared an application. The Committee did not have sufficient funding to participate, but only had about one third of the cost. There was a possibility that the Committee could receive funding from a United Nations fund, but a response was awaited.

The meeting was adjourned.