Consideration of the Annual Reports for 2009/10 of the National Home Builders Registration Council, Rural Housing Loan Fund ; Response by the Department of Human Settlements on Human Rights Commission Report

Meeting report

National Home Builders Registration Council (NHBRC) 2009/10 Annual Report
Mr Sipho Mashinini, Chief Executive Officer, NHBRC, presented the 2009/10 annual report to the Committee.  The report had to be considered within the context of the difficult economic climate in the country.  As a result of the recessionary conditions, the strategic plans had to be modified.

The core business of the NHBRC was the protection of homeowners through the enrolment of housing programs. Protection against structural defects was provided by a warranty; regulation through inspection, enrolment of projects, the registration of builders, the setting of standards and dispute resolution. The enrolment fund totalled R2.9 billion and was created as working capital.  The fund was not sustainable if the current trend in the decline of enrolments continued. The NHBRC had attempted to arrest the cost of enrolment. With regard to dispute resolution, conciliation between the homeowner and the contractor was difficult when there was no written contract between the two parties.

The value of plans passed had declined by 13%. Coupled with the reduction in the number of houses enrolled, this posed a serious problem. A further challenge was the reluctance of commercial banks to provide loans. The economic recession had a significant impact on project enrolment and on construction in general. The statistics on financial trends were provided by First National Bank and Absa bank.  The performance of the NHBRC appeared to lag behind that of financial intuitions by approximately 6 months due to the effect of the granting or withholding of loans by the banks.

Mr Courtney Thorp, Chief Financial Officer, NHBRC, explained that the Council used International Financial Reporting Standard 4 (IFRS4), which was an insurance statement that spread income over 5 years. The NHBRC received 1,186 complaints. The NHBRC had spent R32.8 million on training.  The Council was disappointed by the extent of the enrolment of Government housing projects. Despite the bad economic climate, income (i.e. enrolment fees) had remained constant because the fees were determined by legislation. However, expenditure had increased. The NHBRC was reviewing the business model.  A net surplus of R215,687,638 was declared.

The NHBRC reported three technical provisions, i.e. the Unearned Premium Provision (UPP), the Outstanding Claim Provision (OCP) and the Unexpired Risk Provision (UPR). The UPR and OCP were used to calculate the ultimate liability, which evaluated the sufficiency of the UPR and OCP to meet future costs. Earnings were realised in accordance with the enrolment fee earnings curve.  The earned premium had declined when compared to 2007/08. Non-subsidy enrolments were not satisfactory and a loss of R682 was incurred for every non-subsidised unit enrolled. Fixed expenses exceeded income and the NHBRC was operating at a loss.  Savings initiatives resulted in cost savings of R92 million. There was a net deficit of R370 for enrolment fees.

Mr Mashinini reported that R16 million was spent on remedying a number of conciliations that were not dealt with in the previous 5 years.  As a result, a large backlog in conciliations was reduced.

A new investment policy was drawn up and a fair amount of cash was on hand to pay claims. The investment spread was aimed at maintaining capital. The net income in 2009/10 amounted to R726 million (R826 million in 2008/09). The costs of asset management services had been significantly reduced. The NHBRC had an expense ratio of 64% but expenses were increasing while revenue growth remained flat.

Discussion
Ms M Borman (ANC) remarked that the presentation presented a very bleak picture. She referred to page 14 of the annual report and the table indicating the reduction of working capital due to the extension of credit terms to provincial Departments. She asked if this item referred to Government funding that was not being released and paid over to the NBHRC.

Mr Thorpe replied in the affirmative.

Ms Borman said that there appeared to be a problem with receiving payment from the provincial Departments. Pages 48 and 79 of the report dealt with fruitless and wasteful expenditure and indicated that an amount of R8 million in interest payments was carried over to the following year (see note on page 81). Fairly substantial amounts were involved, which needed to be explained. Another note to the financial statements reported the interest in a hardware business of the Chairperson of the NHBRC. The decline in enrolments and late enrolments was reported on page 31 and she asked what the cut-off period was for enrolments and how far contractors were allowed to proceed with building if the project was not enrolled.  If the construction process was not monitored from the foundation stage, potential problems with the structure could be covered up.

Mr Mashinini replied that details of the fruitless and wasteful expenditure were available to the Committee. The interest payable to suppliers included a delayed payment to Telkom. A decentralised payment system was introduced as the previous system where payments were only made by the head office had resulted in delays in the payment of accounts.

Mr Thorpe explained the penalty payment to the South African Revenue Service (SARS).  The NHBRC was required to submit an EMP H1 audit, which was conducted by SARS since 2001.  SARS determined that an amount of R28,000 was payable. A new Oracle software system was implemented and the process had been automated. The penalties levied in 2008/09 resulted from the change of system and changing the bank account to FNB. The NHBRC had paid the amount due to SARS on time but the payment was not processed by FNB before the deadline.  SARS refused to withdraw the penalty levied for late payment.

Mr Mashinini explained that the NHBRC appointed inspectors by putting out a tender.  However, a court interdict prevented the appointment of the tendering company for a period of two years.  The company concerned took legal action against the NHBRC for failing to fulfil the contract.  The cases of four other companies against the NHBRC had lapsed.  Tau Pride was awarded a tender to conduct inspections for a number of units. The number of units delivered was less than the number contracted for.  Tau Pride claimed payment for the number of units specified in the contract on the basis that the company had capacitated itself in order to inspect the number of units tendered for. In this case, the NHBRC had a contractual obligation to the company concerned. The DHS did not deliver the contracted number of units and the NHBRC decided not to attempt to defend the matter in court. Tau Pride claimed an amount of R5 million and the parties settled for R2.5 million.

Mr Thorpe said that the NHBRC was cited for failure to follow tender procedures for insurance.  The problem was recognised and measures were put in place to prevent a recurrence. NBHRC had used a broker instead of issuing a tender for the provision of insurance services.  The amount involved was R28,000. A Bid Committee had now been established.

Mr Thorpe explained that the audit comment concerning the interest of a member of staff in a recruitment agency referred to the failure of a woman employed in the Human Resources department to declare her interest in a business owned by a close family member.  The staff member concerned was in the process of divorcing her husband and had a different surname.  The NHBRC was unaware of the connection between the staff member and the owner of the recruitment agency.  Subsequently, the NHBRC had implemented more stringent procedures to avoid a recurrence of the problem.

With regard to the incorrect VAT report, Mr Thorpe explained that the formula used to calculate the gross amount due was incorrect.  The formula used by the computer system had been corrected and SARS had audited the system. The net amount payable was correct.  The Auditor-General commented on the inadequacy of quarterly reports.  As an insurance company, the NHBRC used IFRS4 and did not budget for insurance reserves. The decision was made to link the figures and align receipts with what was invoiced.  The NHBRC had revised its policy in response to the comment made by the Auditor-General concerning leadership and the inadequacy of monitoring controls exercised by the accounting authority.

Mr Mashinini advised that the incidence of late enrolment was declining. The deadline for enrolment was 3 months after the date of occupation. Contractors had to provide a bank guarantee to cover structural defects. The NHBRC would not enrol a home occupied for longer than 3 months as it was a serious risk.  The majority of late enrolments occurred in the Western Cape and included a large proportion of non-subsidy units. It would appear that established contractors rather than new contractors were guilty of late enrolments.

Mr A Steyn (DA) observed that the presentation commenced with the statement that the NHBRC intended to provide world class customer service. During the previous five years, the NHBRC had painted a very good picture but now claimed that things were bad due to the recession. This made him doubt the previous reports.  The NHBRC had correctly identified the risk areas, as reported on pages 28 and 27 of the annual report. The NHBRC had stated that the commitment to risk management was improving slowly, which was cause for concern as the NHBRC was established in 1998. The report of the Auditor-General stated that the NHBRC had taken R105 million from the warranty fund, which was illegal. He asked for an explanation.  The NHBRC was legally prevented from investing in equity instruments.  This transgression indicated leadership problems and it would appear that the leadership of the Council did as they pleased, even if they were not legally allowed to do so. He asked the impact of the illegal equity investment was.  The settlement amount of R4.6 million was substantial and indicated that the NHBRC did not do its job. He queried the payment of bonuses to the value of R229,000 (R93,000 in the previous year) when revenues had declined. He felt that the awarding of bonuses was tantamount to reckless management practices.

Mr Steyn referred to the slide in the presentation where enrolment and performance against the targets set were indicated. The target for enrolments was 55,000.  The motivation for setting this particular target was questionable as the economic downturn had started at the beginning of 2007/08.He asked why there was no direct correlation between the number of inspections and the number of enrolments. It would appear that the NHBRC had cut back on the outsourcing to inspectors.  He asked if the inspection report was available to the homeowner.

Mr Mashinini replied that the vision of the NHBRC referred to in the presentation was something that the Council strived towards. He acknowledged that there was a lot that had not been done and that there were difficulties in providing customer services. To deal with this aspect, the NHBRC had developed a strategy whereby the builder and the inspector met with the consumer within 14 days of enrolment to make the occupant aware of what was covered by the warranty and the need for a written contract with the contractor. In the case of complexes of units, the meeting was held with the chairperson of the body corporate. Consumers were also notified by SMS of who could be contacted for further information about the property.

Mr Thorpe replied that a percentage of every Rand allocated to the NHBRC was reserved as working capital. The NHBRC did not have a separate warranty fund. The investments were made from working capital reserves, which was considered to be a distinct and untouchable ‘warranty fund’. Working capital was divided into three sections.  The delayed payment from Government amounted to R105 million.  Government funding was allocated to the provinces and the provincial Departments had to process the payments due to the NHBRC.  The National Treasury regulations allowed equity investments if the approval of the Minister of Human Settlements was obtained. The NHBRC had not obtained the permission of the Minister by the time that the Auditor-General report was compiled.  The NHBRC had approached the Minister, the Department and National Treasury in 2010 and had received full exemption. The report would reflect the situation more clearly in future.

Mr Thorpe explained that the bonuses paid were based on the performance during the previous year.  The NHBRC had signed performance agreements with staff, which entitled employees to a bonus if the agreed performance targets were met. These agreements were signed with all employees. No bonuses would be paid in 2010/11. The ratio of inspections to enrolments varied from 4 to 8, depending on the value of the building.  Overall, the number of units being enrolled had decreased but the value of the units had increased.  Units with a higher value required more inspections.  He understood that Mr Steyn was referring to a development in the East Rand and confirmed that the inspector’s report was available to the home owner. In this particular case, the person involved had requested access to the reports on the homes of other people, which was refused by the NHBRC.

Ms D Dlakude (ANC) asked what action was taken against contractors who did not comply with the NHBRC.  She questioned the payment of bonuses when so much money had to be spent by the DHS on rectification.

Mr K Sithole (IFP) referred to page 44 of the annual report.  The Employment Equity Report indicated that all unskilled employees were African. He asked how many people had been capacitated and provided with skills. He asked what educational support the NHBRC gave to emerging contractors.

Mr Mashinini confirmed that no Indian, white or coloured persons were employed at the unskilled level. The target for training emerging contractors was 6,500 but a total of 7,555 builders were trained. He anticipated that the number of emerging builders in the subsidy sector would increase. The training provided by the NHBRC was on site and was determined by the needs indicated in the inspector’s report. The level of workmanship had improved in Limpopo but and was much worse in the Eastern Cape. There was an element of ‘frontloading’ in the poor performance of builders. In many cases, the houses were built to roof height but the project was then abandoned because the contractor did not have enough funds to complete the building.

Mr A Figlan (DA) had observed a great deal of shoddy workmanship during an oversight visit to the Eastern Cape. He asked what the NHBRC’s responsibilities were to ensure that houses were built to standard and how many inspectors were available in each of the provinces. He asked what the role of the NHBRC was in the rectification program of Government and if the NHBRC blacklisted contractors who had failed to build built homes to standard.

Mr Mashinini replied that there were no building inspectors deployed in the subsidy market until May 2010.  The NHBRC had appointed companies to carry out inspections of all types of projects in all the provinces. Two inspection companies were appointed in Limpopo, one in the Eastern Cape and two in KwaZulu Natal.  Inspectors in Gauteng were not appointed by the NHBRC. With regard to rectification, the NHBRC worked on the trends over a three-year period.  Only 50% of the units planned by Government were actually built and 30% of the units completed had to be rectified.  The DHS did not lodge claims with the NHBRC as the Department had not registered the projects. 

The Chairperson remarked that the legal mandate of the NHBRC included inspections.  The Council was not absolved from conducting inspections in Gauteng.

Mr Figlan asked if inspectors referred to companies or individuals.  He failed to understand how one inspector could cover five projects.

The Chairperson asked how the NHBRC ensured that inspections carried out by companies were not compromised.

Mr Mashinini explained that the NHBRC appointed companies to carry out inspections.  The companies employed a number of inspectors, depending on the number of projects that was specified in the contract. The applicable ratio was 500 units per inspector. The Gauteng office had the capacity to cover inspections jointly with the province, thereby eliminating the need to appoint an inspection company. Contractors found guilty of shoddy work were suspended by the NHBRC.  The contractors concerned were appointed by Government and it was not unusual that contractors were re-appointed to do more work in the same area. The NHBRC had no right to intervene between the employer (i.e. Government) and the contractor. The NHBRC intended to ask for more authority in this regard when the applicable legislation was reviewed.

Ms Dlakude asked what strategy was in place to prevent corruption by inspectors.

Mr Masinini replied that a forensic investigator was appointed to investigate allegations of corruption by inspectors appointed by the NHBRC.  A fully fledged forensic team was being established to deal with corruption amongst external inspectors.

Mr Steyn noted that the total number of subsidy units registered in 2009/10 was 66,180.  There appeared to be no correlation between the number of units registered and the number of houses that was built and he asked for an explanation of the discrepancy.  He asked who was responsible for the fruitless and wasteful expenditure.  He noticed that an amount of R1.3 million in fruitless and wasteful expenditure in the previous year was not carried over. With regard to the incorrect formula applied to the VAT calculations, he pointed out that the NHBRC had appointed consultants to sorting out the Oracle system and someone needed to take responsibility for the error that had occurred. 

Ms Borman was concerned over the significant decline in the number of registrations and noted that only 66,000 units had been registered.  In view of the number of houses needed, this was cause for concern.  She noted that the NHBRC had closed all but 18 of the complaints received, as reported on page 39 of the annual report.  However, it would appear that the unresolved complaints were a major problem.

Mr Mashinini replied that the discrepancy between the number of units enrolled and the number of units completed was problematic.  A major concern was the number of projects that were blocked with construction half-completed.  It was preferable if projects were blocked at the beginning, as the uncompleted structures deteriorated rapidly, with the result that the new contractor appointed to complete the project had to deal with the degradation of the already built components and vandalism.  The NHBRC had terminated the contract with the consultant appointed for the Oracle system.  The Council had approached Oracle South Africa directly and a certified supplier was recommended to provide support.  The system had improved significantly and the NHBRC hoped to finalise the matter in 3 to 4 months.  He confirmed that disciplinary action had been taken against the persons responsible for the fruitless and wasteful expenditure.  The erroneous payment of R1.7 million to an employee was recovered and the employees responsible for the error had been disciplined.

Rural Housing Loan Fund (RHLF) 2009/10 Annual Report
Mr Jabulani Fakazi, Chief Executive Officer, RHLF apologised for the absence of the Chief Financial Officer, Mr Hennie Potgieter and presented the Fund’s annual report for 2009/10 to the Committee.

The RHLF had received unqualified audit reports since its inception.  Internal audits had found the control environment acceptable and adequate. The RHLF had complied with all legislative and regulatory provisions. A surplus of R28.9 million was declared and the Fund had achieved most of the impact targets set for the year.

An overview of the current business environment and the effects of the economic recession in South Africa were provided. The recession had resulted in a high level of job losses and over-indebtedness. It was estimated that household debt was between 70% and 80% of disposable income. The liquidity crunch was a major challenge for RHLF intermediaries, who had difficulty in raising finance from private financial institutions. The target for new loans was 37,400, of which 33,112 was achieved.  The target was that 78% of the loans granted had to be used for housing but the average percentage achieved was 84%. This translated to 27,814 of new loans being utilised for housing.

The target was that 20% of loans were granted to households earning R6000 or more per month and 65% to households earning R3500 or less per month. The actual percentages achieved were 21% and 62 % respectively. The majority of borrowers were employed in the public sector (68%), followed by those employed in the private sector and in informal employment. The RHLF had exceeded the target of disbursing 80% of available loans outside Gauteng by 8%. The majority of borrowers were women. In terms of developmental impact, the number of loans granted in the Presidential Rural Nodes and the total value of these loans had decreased when compared to 2009.

A positive variance was reported for the financial performance in the key performance areas versus the budgeted objectives, with the exception of the number of end user loans financed and loans receivable impairment percentage. The annual surplus from operations after taxation was R11,164,000, against a target of R9,879, 000. If the disposal of an investment was included, the surplus increased to R28.9 million.

Discussion
Mr Steyn noted that Mr Fakazi was in an acting position when the annual report was published and asked when his position had changed. He asked if the Fund had made a healthy profit when the investment mentioned in the presentation was disposed of.  He noted that the Chairperson of the Board had only attended two Board meetings during the year.  He asked if the interest charged on loans had been reduced by the RHLF.

Mr Fakazi confirmed that his appointment was made permanent September 2010. He advised that the Fund had made a healthy profit in the disposal of the investment in Bayport. RHLF had helped to establish Bayport and invested in an equity share. Bayport had experienced significant growth.  The Chairperson was the Managing Director of Postbank as well but had since resigned her position on the RHLF Board because of her commitments to Postbank.  The RHLF took the matter of interest rates seriously and had reviewed the situation at the intermediary level with a view to lowering the cost of access to financing to the end user. This topic would be discussed during a workshop. The funds received from Government were interest-free.  The RHLF could utilise these funds to subsidise the interest rate needed to ensure that the loans provided at the lower rate were used only for housing. The Fund had informed the intermediaries accordingly and made the proviso that the savings would be passed on to the consumer. The challenge was that the Fund was dealing with unsecured credit and needed to have sound scientific monitoring mechanisms in place.

The Chairperson asked when a report would be available on the matter and if the RHLF could ensure that the interest rate savings were implemented by the following year.

Mr Fakazi replied that a corporate plan was in the process of being developed and that the Fund would indicate how the matter would be dealt with when the plan was presented to the Committee.

Ms Dlakude asked how many offices the Fund had in the provinces and the total number of loans that had been granted.  She asked what monitoring mechanism was in place to ensure that the loans were used for housing.

Mr Fakazi explained that the RHLF was a wholesale finance company, which operated through intermediaries. In terms of the current business model, it was not considered to be necessary to have offices in the provinces and the cost of maintaining additional office premises would result in less money being available for lending purposes. The RHLF had provided 7711 loans in the Eastern Cape with a total value of R26 million; 1159 loans in the Free State worth R5.6 million; 3900 loans in Gauteng worth R31 million; 12800 loans in KwaZulu Natal worth R40 million; 1,400 loans in Limpopo worth R13 million; 2500 loans in Mpumalanga worth R17 million; 116 loans in the Northern Cape worth R1.3 million; 1400 loans in the North West worth R14 million and 1800 loans in the Western Cape worth R11 million.

The Chairperson said that the intermediaries did not clearly inform end-users that the funding was provided by the RHLF.

Mr Fakazi agreed that this was a problem that the Fund was attempting to address.

Mr Sithole queried the discrepancies between the remuneration of non-executive directors reported on page 48 of the annual report.

Mr Fakazi explained that directors were paid a fee per sitting.  Certain directors served on more than one committee and were compensated for attending more sittings than other directors.

Mr Steyn asked what the provision for bad debt was. He noted that loans to the value of R84,9 million had been approved, of which R56.5 million had not yet been drawn by clients (see page 80 of the annual report). He understood this to mean that only R30 million had actually been disbursed.

Mr Fakazi replied that there appear to be an error in the annual report as the Fund had approved loans totalling R84 million and had actually disbursed loans to the value of R56.5 million. The provision for bad debt was 16%, in 2009, which was subsequently raised to 21% in the current year.

Mr Steyn asked what the difference was in the financial statements between ‘group’ and ‘company’.

Mr Fakazi replied that the Fund had equity investments in certain intermediaries.  The dividends earned were reported at the group level.

Mr Figlan asked if the RHLF intended to lower its interest rates in line with the commercial banking sector.  He asked what interest rate was charged by the RHLF.

Mr Fakazi replied that the interest rate charged by the Fund was 12%.  The maximum rate allowed by legislation was 35%.

Mr Figlan asked if this meant that the RHLF had not decreased the rate charged.

Mr Fakazi replied that the Fund did not charge 35% but needed to ensure that their intermediaries had lowered the rates charged to their clients as the Minister of Finance had lowered the maximum rate allowed in the National Credit Act.

The Chairperson pointed out that the RHLF was responsible for ensuring that the end-user was not taken advantaged of and subjected to exorbitant interest rates charged by the intermediaries.

Ms Borman said that the annual report was very encouraging and indicated that the core business was being attended to. She asked what percentage of loans was not used for housing purposes and how the RHLF monitored how the money was used.

Mr Fakazi replied that the information was included in the presentation.  During the previous year, 16% of loans were used for other purposes, mainly education. Intermediaries had to submit monthly reports on how the loans were utilised and the Fund conducted district surveys.  The internal audit committee visited intermediaries to verify the information provided to the RHLF.

Mr Figlan noted that the percentage of loans granted to self-employed people had not increased.  He asked if this category of users was informed of the availability of financing from the RHLF.

Mr Fakazi agreed that the low number of self-employed people applying for RHLF loans was a matter of concern.  The intermediaries had to carry out credit checks on applicants and the RHLF had very little leverage in this regard. The Fund was exploring ways of making funds available through the financing of community co-operatives, without the involvement of intermediaries.

The Chairperson thanked Mr Fakazi for the presentation and hoped that the issues raised by the Members would be considered by the RHLF.

Briefing by the Department of Human Settlements on the recommendations of the Human Rights Commission regarding the National Housing Programmes
Mr Louis van der Walt, Director: Human Settlement Policy Development, DHS, presented the briefing to the Committee.  The HRC report on the investigation into issues of rule of law, justice, and impunity arising out of the 2008 public violence against non-nationals was submitted to Parliament.  The report included certain recommendations concerning the Department.

The recommendations included that the Department formulated a policy on the partial formalisation of infrastructure, informal dwellings and property in at-risk informal settlements in consultation with the Department of Home Affairs (DHA) and the Department of Cooperative Government and Traditional Affairs (COPTA); that the Department adopted a management perspective on the issue of undocumented migration into informal settlements and engaged with residents of informal settlements in order to raise awareness of existing polices and obtain information about the challenges faced in this regard, with a view to develop appropriate polices and manage the ownership and sale or rental of shacks and RDP houses.

The Department’s responses were that MINMEC had approved a new National Housing Programme for the Upgrading of Informal Settlements (UISP) in August 2004. The UISP followed a phased approach of development, which first identified and registered the inhabitants of settlement before determining what emergency interventions were required. The next phase was to provide emergency services. The phased approach was specifically introduced to allow for shack numbering, identification of emergency services needs, establishing community profiles, requesting the DHA to intervene where immigrants were detected and the provision of emergency services and interventions. The Department had agreed with COPTA to address the issue of bulk and other services and the funding thereof. Since 2004, the provinces have focused on emergency pilot projects.

The main challenge was the overwhelming magnitude of the problem.  Between 1.2 and 2 million households resided in informal settlements and more than 300, 000 new families were added to the total population of South Africa annually. The Department did not have the required capacity for implementation or the necessary funding to deliver at the scale required. The DHS was unable to control the informal selling of shacks or subsidy dwellings. Prioritising high risk areas was difficult because many communities were living in abject conditions. The Department was required to follow a balanced development approach, focusing on rental housing and the gap market. Managing obstructive informal settlement leadership was a very difficult task. Upgrading projects were community-driven, which meant that the process was drawn out and time-consuming. 

The Department agreed that informal settlements posed a substantial risk with regard to allowing access for emergency vehicles and fire prevention. The solutions were de-densification and resettlement, both of which were very sensitive aspects.

The Department did have a good National Housing Programme in place that specifically catered for the re-development of informal settlements. However, the capacity to implement the programme was a major challenge. No policy adjustment was necessary but the focus needed to be on the ability to implement the policy. The target was to provide housing for 400, 000 households by 2014.

Mr M Mapisa added that the DHS had a good working relationship with the HRC.  An annual panel discussion was organised by the HRC with people from the communities and officials from the Government Departments. The DHS was represented on the panel and participated in debates on the issues with the communities in order to find solutions.

Discussion
The Chairperson asked if that the issues raised by the HRC with Parliament had been raised with the Department.

Mr Mapisa replied that the recommendations of the HRC were never brought to the DHS. The DHS was not complaining about the oversight as there was a good working relationship with the HRC and the Commission was well aware of the Department’s efforts. The report to the Committee had been presented to the HRC as well.

The Chairperson said that the Department should have included the HRC recommendations in their Annual report.

Mr Steyn asked when the recommendations were sent to Parliament. He said that the upgrading of informal settlements was generally done in line with legislation and asked how the DHS circumvented all the legislative requirements if the intention was to give foreigners access to subsidy housing.

Mr Van der Walt replied that informal settlement upgrading was not intended to provide residents with subsidised housing but was about the upgrading of the infrastructure in the area. The issue of beneficiaries only came into play once houses were built or upgraded.

Ms Dlakude asked what the policy was on the payment of contractors who failed to complete housing projects.

The Chairperson pointed out to Ms Dlakude that the presentation and the HRC report did not deal with that topic.

Mr Van der Walt offered to respond to the question if desired.

Mr Mapisa said that the Department’s response was limited to one specific paragraph on page 14 of the HRC report.

Mr Van der Walt replied to Ms Dlakude’s question and explained that the MEC might not approve a contract if the contractor was not registered with the NHBRC. Payments to contractors who failed to complete the project should not occur.

The Chairperson asked that the discussion returned to the specific responses to the xenophobic violence that had occurred.

Mr Van der Walt said that the recommendations of the HRC dealt with the upgrading of informal settlements to allow for an environment where the police could safeguard foreign nationals and police more effectively.

Mr Sithole asked when the policy on informal settlements would be finalised by the Department.

Mr Van der Walt replied that the ultimate product that the DHS wished to deliver was a completed house. Phase 1 of the UISP was the upgrading of basic services and infrastructure. The upgrading of housing structures was the next phase. Once phase 1 had been completed in an informal settlement, the area became a formalised township, where housing could be provided.  The accepted definition of an informal settlement was an area that was illegally occupied in an informal manner.  The DHS was not criticising the HRC, but the recommendations might have been different if the Department had been requested to make an input on the report.

The Chairperson asked for clarity on the comment that a lack of shack numbering and records of the occupants hampered the protection of occupants. She asked the Department to provide specific responses to the issues that were raised and indicate which programme addressed the problem.  The Department’s responses had been too generalised and the report from the DHS needed to be more detailed.

Ms Borman said that the challenge was exercising control over informal settlements.  The settlements were very crowded and it was not feasible to provide all the occupants with a nice piece of land. She asked where human rights fitted into a situation where people had to be moved because the land occupied could not accommodate everyone. Another problem was people occupying shacks in the backyards of dwellings in formal areas, who were not eligible for RDP housing.

The Chairperson said that the Department needed to consider the entire HRC report.  On page 41 of the report, it was stated that the vulnerability to public violence was exacerbated by the lack of the ability to formalise informal settlements. The report said that during the review of the population policy, the Department of Social Development (DSD) had noted that the scale of migration was resulting in unsustainable settlements from a service delivery level. The HRC called for much more to be done by Government. The lack of road infrastructure hampered the policing of the area and the prevention of public violence. As much as the Department was committed to upgrading informal settlements, she asked how the Department monitored compliance with safety and settlement guidelines. She found the Department’s report to be too academic.

Mr Van der Walt replied that the HRC report had confirmed the concerns of the DHS.  The Department was fully aware of the conditions prevailing in the settlements. Municipalities were simply unable to manage the pace of urbanisation.

The Chairperson interjected and said that the Department was being too general.  The DHS was responsible for these settlements and the blame can not be shifted on to the municipalities. She wanted to know what efforts were being made by the DHS, as the responsible Department. The Committee was not rejecting the Department’s report but the report should have covered the response to the specific issues raised by the HRC. There was a need for a dedicated housing unit in each municipality.  The issues that were raised needed to be addressed and responded to directly, not generally.

Dr Zoleka Sokopo, Chief Director: Research, DHS, replied that the challenge was the report itself.  There was a difference between the recommendations and the findings. The HRC report did not acknowledge where the DHS already had the recommended policies in place.

The Chairperson said that the DHS needed to respond to the HRC report as a whole, not just the section on page 14. She asked Mr Mapisa to refine the report from the Department as the image of Parliament would be tarnished if the Department continued to report in a generalised manner. 

Mr Mapisa thanked the Chairperson for her advice and agreed that the Department would revise its report as suggested. A more detailed response to specific issues would be formulated and the actual measures in place would be included.  Additional information on the working relationship with COPTA, the DHS atlas of informal settlements and information on community liaison officers would be included.

The Chairperson said that the revised report was awaited.  She thanked the Department for attending the meeting.

The meeting was adjourned.