Human Settlement budget: public hearings: day 2

Meeting report

Presentation by the National Treasury
Ms Marissa Moore, Director: Transport and Housing, the National Treasury presented a broad overview on the Human Settlements 2010 Budget Vote 30. The National Treasury had increased the total amount of the grant by R1 billion for the third year of the Medium Term Expenditure Framework (MTEF) period 2010/11 to 2012/13. The grant would increase to R17.9 billion. The responsibility for providing sanitation services had been transferred from the previous Department of Water Affairs and Forestry to the Department of Human Settlements (DHS). The transferred amount of R1.2 billion was expected to be increased over the MTEF period and was intended to support the provision of on-site sanitation and water supply services in rural areas. An amount of R100 million was made available to municipalities for the 2010/11 fiscal year, R350 million for the 2011/12 fiscal year and R750 million for 2012/13.

The President had indicated in the 2010 State of the Nation Address that more needed to be done to make provision for the housing gap market. The Minister of Finance subsequently announced that a grantee scheme would be introduced, which was Government’s commitment to address the issue of the gap market. The proposed amount was R1 billion. As yet, no formal policy on financing the gap market had been formulated. The background to the issues and the different options that were being considered were presented.

The National Treasury was concerned about the quality of output (i.e. the standard of the houses being built). The two key players were the Provincial Departments, which were responsible for the engineers signing off the work delivered and the National Home Builders Registration Council (NHBRC), which had been mandated since 2002 to enrol subsidised housing projects and housing units. The National Treasury was concerned over the limited number of houses that had been enrolled with the NHBRC. Statistics available indicated that only 7,000 houses out of a total of 270,000 built in 2008 were enrolled. Enrolment of these houses ensured that the quality of construction could be guaranteed and it was important that there was a clear understanding on what the challenges were. The waiting lists of beneficiaries were supposed to be transparent and free from corruption.

Discussion
Mr A Steyn (DA) had noted that the provincial budgets reflected a greater emphasis on rectification than on the building of new housing stock. He asked if the budgets for building new houses and for rectification could be ring-fenced. He felt that the focus on rectification was taking a step backwards in the provision of housing.

Ms Moore replied that the proposal to ring-fence the funds made available was a Constitutional matter. The MEC with the responsibility for housing retained the right to decide on how the budget would be applied. The decision could however be influenced by policy.

Mr Steyn was concerned that R1.2 billion for the provision of sanitation services was being added to the Local Government authorities.  In many cases, municipalities had MIG funding, which was not used to provide bulk infrastructure as intended but for social building purposes.

Ms Moore replied that the responsibility for sanitation was a function of Local Government according to the Constitution. Money was allocated by the National Treasury in accordance with the Constitutional requirements.

Mr Steyn welcomed the introduction of a standard contract but doubted that such a contract would result in a change in the behaviour of contractors. Problems with the quality of construction were picked up too late or not at all and little was being done to prevent the problems from occurring.

Ms Moore shared the concerns expressed by Mr Steyn.

Mr Steyn felt that the payment of the outstanding debt to the bank through the grantee scheme would not assist the individual who had lost his home. The number of homeless people would continue to increase and he felt that this issue needed further consideration.

Ms Moore replied that the one of the unintended consequences of opening up the fiscus to an unrealised risk was that a disincentive to pay the debt was created.

Ms M Borman (ANC) asked how the system of the beneficiary registers could best be strengthened.

Ms Moore advised that the Presidency had called for the accreditation of the metropolitan municipalities in the recent outcomes document. This would allow for more consolidation of responsibility and retain accountability.

Ms Borman said that the limited number of enrolments with the NHBRC was of great concern. The NHBRC had also claimed that it was owed money by the National Treasury.

Ms Moore replied that the amount owed to the NHBRC had been over-stated. The issue was the reasons why houses had not been enrolled as budgetary provision for this purpose had been made. It was necessary to understand the problem and to determine if the reason for the non-enrolment was a problem with capacity or a problem with inspection.

Mr T Botha (COPE) asked why the threshold for the subsidy had remained between R3,500 and R7,000 when interest rates and the cost of houses had continued to rise. He asked if more people would not be excluded from benefiting from the subsidy scheme as a result.

Ms Moore agreed with Mr Botha’s concerns. There was need to realign the subsidy market with the gap market so that it addressed the actual poverty situation.

Mr Botha asked what the National Treasury would do differently with regard to the gap market in order to ensure that banks accepted their last risk insurer position. This proposal had been rejected previously.

Ms Moore replied that the National Treasury needed to decide which elements had to be changed in order to make things work. The real reason for the breakdown of discussions between the Government and the banks was that Government wanted a 15% black ownership of the houses built whereas the bank wanted 10% black ownership. There was a need to focus on providing houses to people rather than on who should get housing.

Mr Botha asked how the National Treasury planned to improve municipal infrastructure, which placed an additional burden on developers.

Ms Moore replied that the choice was between providing housing with the full package of services that went with the house and providing land for development. 

The Chairperson asked if the incentives provided by the Youth Development Scheme would be paid directly to the employee.

Ms Moore replied that the intention of the announcement made by the Minster was to reduce the risk to the employer.

The Chairperson thanked the National Treasury for the presentation.

Private Submission by Ms Sylvia Hammond
Ms Sylvia Hammond presented two broad submissions, which included suggestions.  She was delighted that the name of the Ministry was changed to “Human Settlements”. Her areas of concern were relevant and could contribute to the focus on “human settlements” rather than simply “housing”.

The first submission was on Nation Building and emphasised that houses should not merely be built for communities but that community involvement encouraged personal contributions and donations. She suggested that the process involved the identification of suitable pockets of land for the extension of existing services, setting up tenders benefiting local contractors, labour, skills and suppliers of materials and involving local horticultural and garden societies for the “greening” of the areas. This would encourage the supply, donation, installation and transfer of skills and create sustainable maintenance jobs.

The second submission focused on the need to create a “Garden City Movement”. This would involve integrated city and country walking and cycling pathways with small neighbourhoods that were situated within larger area facilities to provide easy access to work. The suggestions made included promoting human settlement development as a collaborative effort, which focused on nation building. Community involvement could be encouraged with workshops (Community Development), skills could be developed (Higher Education) and sustainable jobs could be created (Economic Development).The last suggestion included providing incentives to involve employers in public/private partnerships and tax incentives for small private employers to provide housing for employees.

Discussion
Ms Borman said that concept laid down in the presentation created a far more caring society. She asked how the atmosphere could be created with the current situation where so much had been done but there were still significant backlogs.

Ms Hammond replied that certain physical realities needed to be acknowledged but the issue was about not perpetuating these realities.

Mr Steyn said that the Department had started to recognise some of the issues that were raised by Ms Hammond. Her presentation provided much food for thought, which he hoped that the DHS had taken note of. To date, not much emphasis had been placed on the greening of settlements but the Department had been challenged to plant trees at every house that was built.

The Chairperson thanked Ms Hammond for her presentation.

Briefing by the Department of Human Settlements on the Conditional Grant Business Plan for 2010/11
Ms Julie Bayat, Chief Director: Priority Project Facilitation, DHS presented the business plan of the Department for the 2010/11 fiscal year. The key performance areas of the Department had not yet been approved. The briefing included a summary of the Human Settlements Programmes of each province and a synopsis of the provincial priorities. In accordance with the requirements of the Public Finance Management Act (PFMA), each province had to submit an annual report. As at 9 February 2010, only five provinces had submitted their reports. Only the Gauteng and North Westprovinces had submitted budgets in accordance with the funds allocated. The Eastern Cape andNorthern Cape provinces had over-projected their budgets and the Western Cape province had under-projected its budget.

The Human Settlement delivery priorities were guided by the Cabinet Lekgotla, SONA, MTSF and Outcome 8. One of the priorities included in Outcome 8 was the acceleration of the programme to upgrade informal settlements to 500,000 households by 2014. Provincial priorities in accordance with theIntegrated Residential Development Programme were provided. The relevant percentages were60.77% for the Northern Cape,10.58% for the Eastern Cape and 4% for Gauteng. Project-linked subsidy priorities were 34.25% in the Western Cape,30.56% in the North West and 19.52% in Gauteng.  Provincial priorities for Informal Settlement Upgrading were 40.56% in theNorthern Capeand 14.98% in the Western Cape.  

The major challenges experienced by the DHS were obtaining provincial business plans timeously and the non-alignment of provincial and national priorities. This created a risk that the targets of Outcome 8 of 500,000 houses and 30,000 rental units by 2014 would not be met.

Discussion
Mr Steyn remarked that the information provided by the Department was devastating. The reason for introducing the MTEF planning process was to ensure that planning was done over a three to five year period. As it was now the end of March, the fact that certain provinces had not submitted their plans indicated that they did not know what they were doing. The issue needed to be taken up with the Minister of Human Settlements. He asked what legislative powers the Minister had to ensure that provincial priorities were in line with the national priorities.

Mr Anton Arense, Chief Director: Planning, DHS replied that the Division of Revenue Act was the relevant legislation.

The Chairperson asked what needed to be done to ensure the alignment of priorities. The President had already provided the policy direction through the Outcome 8 but despite this, the provinces were not focussed on the targets.

Ms Bayat replied that the issue needed to be addressed at a higher level as the Department could not dictate to the provinces what to do with their budgets. The issue had to be resolved at the political level.

Mr Steyn asked if the role of the Department was limited to the transfer of funds to provinces or if the Department had the power to approve the use of the funds as well.

Mr Arense explained that the provincial Head of Department had to approve the province’s business plans and had to ensure that the plans were substantive and compliant. The plans were then approved by the Director-General of the DHS before they were submitted to the National Treasury.

Ms Borman asked where the Department stood legally with regard to influencing the provinces.

Mr Martin Maphisa, Deputy Director-General, DHS responded that the PFMA was very clear. The accounting officer for the province was the Head of Department and the Head of Department took full responsibility.

The Chairperson said that the Department and the provinces had had ample time to prepare the plans in accordance with the President’s State of the Nation Address. She suggested that the Department of Human Settlements obtained the approval of the Minister and that another meeting was scheduled for a later date to brief the Committee.

The meeting was adjourned.