Department of Human Settlements on the Medium Term Budget Policy Statement (MTBPS)

Human Settlements, Water and Sanitation

10 November 2009
Chairperson: Mr M Mdakane (ANC)
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Meeting Summary

The Acting Director-General of the Department of Human Settlements briefed the Committee on the Medium Term Policy Statement for the period 2010 to 2013.  No major new allocations or reductions were envisaged for the adjusted medium term budget.  The Department replaced the previous Department of Housing and was currently engaged in formulating strategic plans for the net five years.  The provision of housing remained the major area of responsibility and the Department needed to maintain and accelerate housing delivery within the context of the development of the broader community.  The key factor was the coordination and alignment of all the entities involved in the provision of housing and the development of communities.  The Department was in the process of reviewing the funding structures and identifying the key service delivery priorities.  An analysis of the national, provincial and municipal plans, policies, programmes and grants had been undertaken and a coordinated plan would become available in March 2010.  The Department planned to strengthen the monitoring of the housing grants allocated to the provinces.

The original budget allocation for 2008/09 was R10.6 billion. A mid-year adjustment increased the total allocation to R10.928 billion, of which R8 million was not spent.  As at 30th September 2009, the Department had spent 56% of the budget and was slightly behind schedule. The Department did not anticipate overspending during the remainder of the year and was managing the under-spending of the allocated funds.  The funding requirement was expected to increase from R12.6 billion to R15 billion in 2010, R17 billion in 2011 and R19 billion in 2012. The Department had developed funding proposals for the capitalisation of housing institutions, priority projects, the enhancement of capacity within the Department, bulk infrastructure projects in key areas and land acquisition (particularly in urban areas.)

Members asked questions about the responsible party that would drive the coordination between the Departments, the lack of skills training in the sector, the use made of alternative sources of energy in housing developments, blocked projects and the rectification programme, the amount of R7.7 million budgeted for Thubelisha, the amount of R3.3 million budgeted for salary increases, the following up after the housing grants had been transferred to the provincial authorities and the differences between the actual figures and the targets set for the number of credit-linked subsidies, PHP beneficiaries and accredited municipalities.

Meeting report

Briefing by the Department of Human Settlements (DHS)
Mr Mziwonke Dlabantu, Acting Director-General and Chief Financial Officer, DHS, advised the Committee that the mandate of the Department was a complex and contested area but the Department was currently engaged in the development of strategic plans for the next five years.  A draft of the strategic plans would be made available early in 2010.  The budget adjustments of the current financial year would not include any major new allocations or reductions.

He re-confirmed the broad framework under which the Department operated and said that the provision of housing remained a pillar in the broader concept of sustainable human settlements. The Department needed to maintain and accelerate housing delivery in conjunction with the development of the broader community. The Department remained committed to structured integrated settlements. The Department wanted to strengthen the settlement focus, to deliver not only shelter in the form of houses but also the development of the surrounding environment. A key factor was macro-coordination and alignment by the various entities involved. The Department was in the process of identifying the key service delivery priorities. At the same time, the Department wanted to align the plans with longer-term goals.

The alignment of funding was a major contributing factor to qualitative issues such as incomplete houses and housing provided without bulk services. The Department wanted to resolve these challenges and had started a process of analysing all national plans, policies, programmes and grants that impacted on the DHS mandate. The Department had uncovered a few contradictions, for example housing targets were not aligned to the way the Municipal Infrastructure Grant (MIG) targeted beneficiaries.  The Department was in the process of negotiating with the relevant Government Departments to correct this issue. Provincial and municipal development plans were assessed in a similar manner. A co-ordinated plan should be available in March 2010.

The Department seeked to enhance the monitoring of the housing grants allocated to provinces in order to enhance accountability, efficiency and quality control.  The development of affordable, quality rental housing stock was a priority.  The rural housing programme was under review, in conjunction with the Department of Rural Affairs.

The original budget allocation for 2008/09 was R10.6 billion. A mid-year adjustment yielded an increase of R341 million.  Of the total allocation of R10.928 billion, R8 million remained unspent.  As at 30th September 2009, the Department had spent 56% of the budget and was slightly behind schedule. The Department did not anticipate overspending during the remainder of the year and was managing the under-spending of allocated funds.

The Eastern Cape received an allocation of R981 million. Originally the Eastern Cape was allocated R1.3 billion but adjustments were made during the year when it became clear that not all the funds allocated would be spent by the province.  By mid-year, the Eastern Cape had spent R715 million (54%) of available funds.  The Free State had spent 61% and Kwa-Zulu Natal 54%.  Gauteng was over-committed and National Treasury was reluctant to grant additional funding in cases where revenue collections were not taking place.  Gauteng would have to deliver a credible plan for managing resources to National Treasury.

Indicative figures pointed to a growth in the funding requirement from R12.6 billion to R15 billion in 2010, which was still nowhere near enough for the eradication of informal settlements. The expected requirement for 2011 was R17 billion and R19 billion for 2012.

The Department had developed funding proposals for the capitalisation of housing institutions, priority projects, the enhancement of capacity, bulk infrastructure projects in key areas and land acquisition (particularly in urban areas.)

Discussion
Ms M Borman (ANC) commented that the Department’s plan appeared to be huge. She was concerned about the coordination of a large multi-sectoral project and wanted to know who ultimately drove the coordination of the various Departments involved. She felt that the provision of housing should create jobs but more training was required to provide the necessary skills. No mention was made of alternative energy sources in the plan.

Ms M Njobe (COPE) asked what was being done differently by the Department to achieve the desired results.

Mr T Botha (COPE) wanted to know if there was a difference in the strategy of the DHS compared to the previous strategy of the former Department of Housing. He wanted to know if there were any projects that were blocked by the Department of Energy because of the energy shortage and if there were any that were halted because of a lack of water or bulk reticulation services. He remarked that earlier, many provinces were unable to spend their budgets because of the non-alignment of the budgetary process with the project plans. For example, provinces approved and granted funding to municipalities when the Environmental Impact Assessment (EIA) approval was still outstanding and the project had been halted. All that was achieved was the transfer of non-spending from the provincial to the municipal authority. Provincial projects were often ready from a budgetary perspective but were not ready for implementation for other reasons.

The Acting Chairperson advised that four Members of the Committee would be accompanying 43 Members of Parliament in a countrywide co-ordinated oversight visit in the near future and that housing would be the major issue wherever they went.

Mr Dlabantu agreed that the plan was ambitious and that coordination would be a challenge. The question was raised as to how relevant the Constitution was to reality when Constitutional requirements blocked the execution of the mandate as a result of a lack of resources. He had no answer who would ultimately be responsible for driving the process and the Department needed to discuss the matter with the Planning Commission in the Office of the Presidency. The Department had initiated coordinated planning on the understanding that coordinated implementation could not occur without coordinated planning in the first instance. He conceded that the job creation programme did not target skills training but was aimed at encouraging the use of labour. He said that the previous Department’s role was limited to the development of policy, norms and regulations and the allocation of grants to the provinces. The Department wanted to increase capacity and to be more ‘hands on’. The Department employed staff to monitor service delivery and wanted to enhance the information technology (IT) systems to monitor and administer the housing grant throughout the entire process to the delivery of the final product. The lack of bulk services and water supply had blocked prioritised projects in Port Alfred and in the Northern Cape.  Project submissions by provinces now needed to include full planning and assessments of all areas that could potentially result in the project being stalled. He advised that the Department was currently researching cost-effective alternative sources of energy, such as solar energy in pilot projects.  He felt that ESKOM could do more to promote the use of solar energy and Government entities should be at the forefront of utilising alternative sources of energy.

Ms Borman asked if a complete audit had been done on what needed to be corrected in the rectification program and where the funding for this programme would be coming from.  She noted that an amount of R7.7 million was allocated to Thubelisha for the termination of contracts. She asked if the termination costs were not included in the costs associated with the closing down of Thubelisha. She noticed that in the first six months, only 28 individual credit-linked subsidies (i.e. housing development finance) out of a projected 700 were approved.  The number of beneficiaries approved in the People’s Housing Process (PHP) was only 4026 out of 12500 and the number of municipalities provided with capacity development accreditation totalled only 5 out of a target of 18.  She asked what the reasons were for the substantial differences between the actual figures and the targets.

Ms Njobe asked if the amount of R3.3 million allocated for increased salaries was because of the re-organisation of the Department from Housing to Human Settlements or for more staff.  She wanted to know which categories of staff would benefit from increased salaries. She asked if the Department followed up when housing development grants were transferred to the provinces or waited until the provinces submitted reports at the end of the financial year. She wanted to know who was responsible for the grants after the funds were transferred and what the respective responsibilities were of the national and provincial Departments.

Mr Dlabantu replied that the decision was made that the national Department would be responsible for the rectification of problems that were not attended to by the provincial Departments.  A portion of the provincial grant would be utilised for the rectification programme.  The R7.7 million allocated for Thubelisha reflected a deficit in the funding requirements that was not funded by National Treasury. The Department was requested to investigate if the Thubelisha staff could be absorbed by other Government Departments in an effort to minimise job losses. The R7.7 million budgeted for was a provision for the termination of contracts and retrenchment packages of those members of Thubelisha’s staff that would be retrenched.  The credit-linked subsidies were being re-negotiated with the banks in an effort to develop a more suitable product. Municipal accreditation would not reach the projected target of 18 during the current year as the Department was in the process of auditing the capacity, structures and processes because it was responsible for the administration of subsidies.  The PHP programme had always been a rather slow and the figures shown were based on a plan that was provided by the provinces. A lot of work had been done that was nearing completion. PHP was a challenge but the programme was desirable because it encouraged people to find their own housing solutions. The allocation for salary increases was in recognition of the effects of increased inflation since the budget was drawn up in 2008/09.  An increase in the staff complement was budgeted for but at the previous salary scales. The number of staff had grown from 146 to 500 and was expected to increase to more than 600. The Department did not follow up on every rand of the grants allocated although it was an issue that needed to be more fully addressed. In the past, there was no follow up once the funds had been transferred to the provinces. The Department wanted to change that scenario and was considering other infrastructure grants (apart from sanitation) that should fall within the ambit of the Department to allow seamless service delivery through the allocation of a single grant. Alternatively, discrete processes needed to be in alignment but someone would still have to be in authority to ensure that the Department’s requirements were met.  If the DHS had the mandate, then the Department should also have the resources and the authority if it was to be held accountable for the delivery of the desired results.

The meeting was adjourned


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