Department of Housing on Disestablishment South African Housing Trust Limited Bill: briefing

PUBLIC SERVICES SELECT COMMITTEE
22 February 2002
DEPARTMENT OF HOUSING ON DISESTABLISHMENT OF SOUTH AFRICAN HOUSING TRUST LIMITED BILL: BRIEFING

Chairperson: Ms P Majodina (ANC)

Relevant Documents
Draft Provisional Programme
Disestablishment of the South African Housing Trust Limited Bill [B3-2002]

SUMMARY
The draft provision programme of the committee was discussed by members, and the following issues were raised:
- general planning of the 2002 programme;
- the Strategic Planning Workshop scheduled for 12-13 March 2002;
- the problems surrounding the RDP houses; and
- the oversight function of this committee.

The Department of Housing briefed the Memorandum of the Disestablishment of the South African Housing Trust Limited Bill [B3-2002] to the committee. The following issues arising from the presentation were addressed by both the Acting Director General and the delegation from the South African Housing Trust:
- the reason for the transference of the assets and liabilities to the South African national
  government;
- the current status of the assets and liabilities of the South African Housing Trust;
- the allegations of corruption by directors of the South African Housing Trust; and
- current measures taken by the Department of Housing to continue to provide low-cost housing.

MINUTES
The Chair welcomed members to the first meeting after the State of the Nation address by President Mbeki and the presentation of the national budget for 2002 by Minister Manuel. Members were encouraged to analyse the documents to find important issues relevant to powers and functions of the committee. The composition of the committee had been somewhat rearranged. The committee now had former members of the Select Committee on Land and Environmental Affairs cluster, and members from the committee on Public Services had been relocated to that select committee. This change would be officially effected as of next week.

Draft Programme
The items on the draft programme were discussed:
- 25 February 2002: Local and central government would meet to discuss the proposed plans of
action for the areas in desperate need of attention, including whether foreigners were entitled to   temporary housing.
- 1 March 2002: The aim of the provincial visits was to effect better planning and commitment of
resources by the cluster. The aims of these visits would complement the fact that March 2002  
had been designated the Human Rights month. These visits would then not take place on  
March 4 2002, as originally planned. The primary problem was that in these areas the infrastructure  needed to support the housing community was not located within the vicinity of the houses. This  problem has to be addressed as a matter of urgency.
- 4-8 March 2002: Here the provinces will be briefed on the Bill, and members are urged to pla properly so that enough time is allocated to receive the mandate from their respective
constituencies on the Bill.
- 11 March 2002: The Road to Safety Strategy Document would form the basis of this workshop. A brief document on this issue would be provided to members by the next meeting of this committee,  together with a summary of the document. This strategy document would then complement the  “Arrive Alive� campaign, as it sought to incorporate the aim of that campaign throughout the year, so that the festive periods are not the only times at which adherence to road safety is strictly enforced.
- 12-13 March 2002: All three ministers from the cluster were invited to attend this workshop, yet only  Minister Omar had confirmed so far. Confirmation from the Ministers of Public Works and
Housing were expected soon. The MEC's should also be invited in the spirit of co-operative
government, so that a clear indication from the provinces themselves may be ascertained on the
matter. The proposed venue is Robben Island.

This was not the final version of the programme for 2002, it merely served to provide members with an outline of important matters to be discussed during the first half of 2002.

Discussion
Mr T Ralane (ANC) asked why the member's training originally scheduled for 28 January to 1 February 2002 had fallen away.

The Chair replied that this had already been done by Parliament.

Mr Ralane referred to the provincial visits scheduled for 1 March 2002 and urged that the committee visit as many provinces as possible, especially the poorest provinces and those most in need of attention. This committee should also convene before the visits to discuss and fix its “terms of reference� for those visits in terms of its objectives.

It did not seem plausible to invite all three ministers to the strategic workshop planned for the 12-13 March 2002, as there was a wide range of issues to be addressed by each minister. It was suggested that only Minister Omar be invited on those two days, as he is the only Minister to have confirmed his attendance to date.The Department of Transport specifically,had several important issues to address this year.

Thirdly, the programme reflected that the constituency period took place between 25 March and 19 April 2002. It was important for members to define their terms of reference here as well, with regards to the stated objectives. These included increasing the services provided at the shelters, as well as increasing the quality of shelters provided. 1,2 million units had been erected to date, and already numerous problems had surfaced. These included the affordability of houses as well as the dual responsibilities and functioning of the Department of Housing (the Department) and local government structures. The relationship between these two structures was vital here. The problem was that, in the Western Cape, residents were granted homes by the Department after a long wait, only to then be evicted by the local government structure because they are unable to pay the rent. This matter had to be looked at further.

Fourthly, this committee's proper exercise of its oversight function must form the basis of all its decisions and deliberations during 2002. Indeed, more than anything else this year, this committee had to examine:
- the way in which it enforced this function;
- compliance with this function; and
- issues of corruption within governmental departments.

Mr T Mahla, a member of the Gauteng provincial legislature and the Housing Committee, referred to 1 March 2002, and requested that another date be fixed for the provincial visits, as Parliament would be hosting the Africa Union Conference on those dates.
 
Secondly, the strategic workshop planned for 12-13 March 2002 seemed to involve other stakeholders as well, as this would not only involve this committee. In view of this development it would be useful for members of this committee to have a preliminary workshop, so that further understanding of the issues to be discussed at the strategic planning workshop may be attained. A study group would be useful.

Mr Ralane approved of the draft programme, but cautioned that certain government departments should not be left behind in forging new relationships with other departments. The established relationships should not now fall by the wayside, and of particular importance here, are the departments of Transport and Housing. It had been suggested that the Department of Public Works receive significantly more attention this year, and key issues in the Human Rights month of March should be identified to assist that department. A balance thus had to be struck between the attention given to each department.

Chief M Mokoena (ANC) fully endorsed the draft programme for 2002, especially the increased attention given to the problem with the Reconstruction and Development Programme (RDP) homes. It was requested that a meeting be arranged with the Department of Housing (the Department) and the Department of Local Government to clarify the recent problem with the RDP houses. It had been reported in last week's print and electronic media that these houses are being auctioned for a mere R10. The owners of these houses are evicted because they are unable to repay an electricity bill of R250, for example, with the result was that they are forced to become squatters. In fact, the municipality official stated proudly on the news broadcast that the houses had been sold for a mere R10, “simply because the owner could not pay�. This reasoning and course of action was devoid of all logic, for it did not make sense that an asset worth significantly more that R250 is sold for a mere R10, with the aim of recovering the initial debt owed being the R250 bill. Thus the proposed meeting had to be convened as a matter of urgency, because the South African government had committed itself to improving the quality of life of its people. It was futile to provide low-cost housing for South Africans, only to have it stripped by local municipalities.

Secondly, the strategic planning workshop scheduled for 12-13 March 2002  was an �excellent idea�. It was however suggested that one of the departments be removed from the agenda of that workshop, because there were too many issues to be examined. The workshop would be more productive if a day were set aside for a single department.

Mr Ralane contended that this proposal would allow the problems to be addressed more effectively in the workshop, but it created the further problem regarding the department to be omitted from the proposed schedule. Perhaps a joint meeting with the other select committees in this cluster could be scheduled to meet with the respective department at the workshop.

The Chair commended members showing commitment and initiative this early in the year. A joint meeting could be arranged, but the first step here was to meet with the local government structure and public service department, so that crucial issues would be discussed.

The preliminary process to the 12-13 March 2002 workshop was important, as this committee had to devise its own strategic plan so that members might be better prepared for the workshop.

The concern regarding the possible Africa Union Conference was noted, and this committee would be able to finalise its own schedule as soon as the date for the conference had been fixed.

The problem with the RDP houses raised by Mr Ralane was an important issue, as those houses were specifically built for those citizens. An audit of the local government structure was needed, so that it may be ascertained which citizens could afford the houses.

The concern raised with the attention to be given to the Department of Public Works was an important issue and should be addressed as soon as possible. That department did not pass a single Bill during 2001, and Minister Sigcau had been encouraged to get hands on experience with the inner workings of the department and the challenges facing it.

The Chair contended that Mr Ralane's call for this committee to first establish its own terms of reference before joining the workshop on 12-13 March was important, and duly noted.

Mr Ralane suggested that this committee broaden its plan in providing quality housing in South Africa in general, especially in view of the massive problem with the fight against squatting and the theme of the African Renaissance. South Africa had an overwhelming influx of foreigners, and the adoption of a broad principle on the provision of housing could possibly accommodate the increasing amount of immigrants. There were 2 options here: either the army and South African Police (SAP) could be authorised to escort the immigrants back across the border; or the government could opt for naturalisation.

The reality of the matter was that the tenants sell these houses to foreigners, pocket the money and resort to a life of squatting, and the cycle was thus perpetuated. If the problem with squatting was to be solved a “bigger housing plan� with regard to the RDP houses had to be devised and implemented as soon as possible.

The Chair drew the members' attention to the minmec meetings in the programme.

Mr V  Windvoel (ANC) suggested that the state department itself be invited to attend the strategic planning workshop scheduled for 12-13 march 2002, so that they could explain the position and provide valuable input.

The Chair agreed with the proposals made by Mr Ralane and Mr Windvoel.

South African Housing Trust Limited
Disestablishment of the South African Housing Trust Limited Bill [B3-2002]
The Acting Director General, South African Housing Trust Limited,Ms U Madida took members through the Bill. It was requested that the disadvantages and advantages in retaining the Trust, as well as the reasons for the transferring of the assets of the Trust be made clear to members.

Discussion
Mr Ralane requested the department to explain what had happened to the clients of Nu-Way Housing Developments (Pty) Ltd (Nu-Way) and Khayalethu Home Loans (Pty) Ltd (Khayalethu).

Mr C Stevens, Chairperson of the Trust, stated that the chairperson of the Trust in 1999 implemented a decision handed down by Parliament itself to dispose of the Trust and its liabilities. The two subsidiary companies of Nu-Way and Khayalethu were sold as going concerns to black empowerment groups. Khayalethu was sold to a company whose primary course of business was totally unrelated to Parliament. The net result was that these businesses were now trading and growing.

The Acting DG added that the clients of Nu-Way and Khayalethu had been taken over completely by the new owners, as those businesses had been sold as a going concern.

Rev P Moatshe (ANC) requested clarity on the R40m non-refundable grant made to the Trust by the South African government.

Dr F Barnard, Chief Director in the Department, replied that the government had planned to add a further R40 000 in an attempt to save the Trust, but nothing happened and the local bond markets liquidated the Trust (especially the home loan sector).

Chief Mokoena inquired as to the value of the assets and defunct liabilities which the government was now taking over.

Mr Stevens informed the honourable member that approximately R571m worth of liabilities had now been transferred from the Trust to government, and ran till 2008. These took the form of various stock issued years ago, including to Eskom. The Bill provides that the processing of this loan stock should be done properly by the National Treasury of the government.

The assets of the Trust stand at approximately R70m, following the sale of the 2 subsidiaries. It had been decided that the Trust would transfer the R70m to the National Housing Finance Corporation, which was wholly owned by the South African government. The net result was that the Trust was now a mere shell.

Dr Barnard added that financial implications for government were not significant here.

Dr P J C Nel (NNP) asked how much it would cost the government to reimburse those directors of the Trust who had since retired.

Mr Stevens replied that there were no financial indicators here, because no fees are attributable to the directorship as there were no employees in the Trust. There were thus no personal stakes involved, and the only reason the Trust had directors was because it was required to do so by law.

A member then expressed his surprise at the few words said by the department and the Trust delegation. It had to now be accepted that the Trust was now a thing of the past. Also, it was suggested that all relevant information be provided to assist this committee so that matters were not unnecessarily repeated.

Mr Ralane reminded members that disadvantaged South Africans wrote to President Mbeki personally to ask him for assistance with housing. As this was a section 76 Bill, it had to include public hearings, and this was an important opportunity for this committee to make valuable input on this matter. Consultations with the Minister of Housing could then also be undertaken, so acquire further understanding of the matter.

Mr J Mkhaliphi (ANC) questioned whether the winding up of the Trust was done timeously. Secondly, the Department was requested to provide this committee with a progress report on its accomplishments to date.

The Acting DG replied to the first question by stating that all efforts had been made to ensure that these arrangements were properly made.

Mr Mahla informed the committee that it had been reported that the Trust's assets had been bought by its former directors. Could this be the case?

Mr Stephens replied that he had no knowledge of such transactions, and the process of applying and the awarding of tenders was “completely open and transparent�. Furthermore, the Trust is a section 21 company, which meant it does not function to provide directors and stakeholders with a realisable profit at the end of the day's business, but rather operates “not for gain�. The dissolution of Trust via liquidation was not elected, because this route would effectively relieve the Trust of all its debts and obligations, which was not the intention behind the dissolution. Instead, it was decided to justly and equitably wind-up the Trust, so that its duties and obligations would be transferred to the South African government.

Mr Mkhaliphi stated that when reference was made to the public hearings, the representatives should be able to respond to the matter being discussed.

Mr Ralane requested clarity of the issue that the proposed clause 3(b) of the Bill refers to the “national debt�, and if the two subsidiaries were really sold off, why and how could they now be part of government?

Mr Stephens replied that the answer to this question was twofold: firstly, the government had acquired the liabilities of the Trust which currently stood at R570m in loan stock, which was not really considered a debt of the subsidiaries, but was the only proper means of financing the Trust. Secondly, the subsidiaries were divested without any recourse to government.

A member suggested that this was a separate matter. The Department was requested to explain the commitments, if any, it had made to the clients of the subsidiaries. The Department was not being asked to explain the reasons for not relying on or employing SCOPA, but the Department should make full use of this opportunity of addressing Parliament so that the process might be completed more efficiently. The allegations of corruption leveled against the directors earlier had to be investigated further, and any possible conflict of interest had to be prevented.

The Chair called on the Department to respond.

Mr Stevens replied to the member's question by stating that the Trust and its subsidiaries do not share any common directors, and the disposal of the Trust's assets were effected by the holding company alone, and the subsidiaries were not even remotely involved in the transaction. The subsidiaries could therefore not have exerted any sort of significant influence over the process.

The Acting DG agreed with Mr Stevens.

Mr R M Nyakane (UDM) referred to the phrase “affordable housing� in the Bill, and requested the Department to explain alternative measures that had taken effect affordable housing, since the Trust was now a thing of the past.

The Acting DG replied that institutions had been put in place to provide this service, including the provision of end-user finance and working capital schemes. The problem here was that the contractors who submit tenders for these projects, were unable to secure loans from the financial institutions because of strict requirements of these particular loans. The result was that the National Housing Finance Corporation had to be approached for loans to the intermediaries, so that a series of smaller loans amounting to the total sum may be procured by the contractors. The Department had thus put measures in place to ensure the “clients were not hurt�.

The Chair approved of the measures taken by the Department and stated that several important issues had been unearthed here. It was good that the Department had informed this committee of these concerns, as both bodies could now endeavour to arrive at a joint decision on such matters, especially with regard to the problems with the financial institutions. The Department was hereby encouraged to maintain regular communication with this committee.

Mr Ralane requested the Department to supply members with a written copy of their presentation.

The meeting was adjourned.