National Home Builders Registration Council (NHBRC), Rural Home Loan Fund (RHLF) and Social Housing Regulatory Authority (SHRA): strategic planning briefings

Meeting report

Social Housing Regulatory Authority
The Chairperson welcomed the Committee and members of the entities and invited Mr Thabane Zulu, the Director-General, Department of Human Settlements to begin the meeting.

Ms Zohra Ebrahim, Chairperson of the Social Housing Regulatory Authority (SHRA) thanked the national Department for its ongoing support in all aspects of SHRA.

Mr Brian Mcholo, Chief Executive Officer (CEO), SHRA, began the strategic planning presentation by summarising the SHRAs mandate, vision and mission. The SHRA was derived from the Social Housing Act of 2008. The mandate was to invest in social housing and be able to regulate the sector. The vision was to create affordable rental homes in integrated urban environments through sustainable institutions; and the mission was for the SHRA to regulate and invest to deliver affordable rental homes and renew communities.

The SHRA could be simply divided into investment and regulation. The investment and regulation should work together and rely on one another. How this mandate informed the strategic objectives was then outlined. There were four key objectives: 1. to make sure the Social Housing Act was implemented. 2. That there was an effective regulatory programme. 3. That there was investment in the sector. 4. To build awareness through the SHRA outreach programme.

This was the first time that there had been a regulatory authority regarding social housing, so it was important to make this known through the stakeholders. The key areas were divided into corporate services, regulations and investment. An accreditation certificate had been made. A register was being made. Reports from all the institutions were being gathered. 

The private sector had been lagging and a strategic plan to engage this area needed to be made. As accredited institutions were required and there were not enough accredited institutions this area was to be left open for development. The SHRA stakeholders were outlined under funders, delivery agents, policy developments, research and capacity builders. The capacitation model was divided into service providers that requested grants and others that received by intervention. The investment framework was outlined. The private sector was shown to deliver the most units and more investment in the private sector was needed as well as the co-op sector. Three grant types were proposed, project acquisition, pre-accreditation and specific intervention. The budgets for these grants were shown. Under regulation, a code of conduct was needed for the institutions to follow. The organogram of the SHRA was presented as well as the proposed budget allocations for operations and capital for 2011, 2012 and 2013. The key activities in the office since the beginning of 2011 were outlined and in conclusion the official SHRA logo was displayed.

Discussion
The Chairperson began the discussion by saying that new information should reach the Committee before the meetings.

Ms M Borman (ANC) stated that the 2011/12 funding (slide 21) seemed to differ from the information that the Committee received. 80 000 housing units were proposed in the State of the Nation Address - what was the entity's plan for this delivery? How many meetings had been held and what was the attendance like at these meetings? She also asked what the time frame for delivery was.

Mr A Steyn (DA) asked how many institutions were accredited and in which provinces and how these institutions were accredited without a register. Also a number of risks were identified by the Department. Did the SHRA have a plan to address these risks? Operational costs were proposed to be reduced; however, this was also shown to be an area where more funding was needed. Also the proposal of the filling of positions by October was unacceptable as this would lose almost another year.

Ms Ebrahim responded that the council started in Aug 2010 and had no administration as no CEO had been appointed and only once this had happened could the rest of the council be appointed. Council meetings happened once a month. Risk, audit and human resources (HR) sub-committees had been appointed to address the risks. The council consisted of 9 members form a range of backgrounds and with good gender equity, in fact, with more women than men on the council. As SHRA was a regulatory authority there were different systems and different mechanism and thus the administration had to be approached differently. All institutions that had been accredited before were listed and could be reviewed. Thus the entity did have a list but it was not perfect because it could not go back to 1995.  

Mr Mcholo responded that the funding of R226 million was capital and R24 million was operational and that was what the difference was between the presentation (slide 21) and  the information given previously to the Committee. The 80 000 units announced by the President had been broken down into the social housing, private sector, institutional and rental housing. The SHRA had more knowledge in rental and could participate better in that area. However it was bound by its own Act to social housing so had had to concentrate on that too. Regarding intergovernmental communication, SHRA was committed to that. A full report of the accreditation of the institutions would be given by the end of the month. The staff appointments were a phased in approach and the SHRA had already achieved what it had set out to do since being gazetted last year. SHRA was confident in achieving everything it set out to do by 2011. It planned to have a risk workshop in June to make sure it identified and mitigated risks. It also planned to appoint internal auditors to mitigate these risks. The SHRA's view was that it was more important to invest in the projects than administration. In terms of policies, SHRA recognised that it was a different entity, so it was taking a more pragmatic approach. The model that was piloted over three years had been used which had allowed investment in the projects.

The Chairperson asked for more information regarding the monitoring and donor funding.

Ms Borman said that the SHRA had to make sure the state of the stock was in good condition.   

Ms Ebrahim replied that the SHRA had had a meeting with potential donors; however, SHRA's approach had been to look at institutions that it could use as a base. And it hoped to have a workshop with the funders to leverage this up. The accreditation of the provincial institutions had just got underway. SHRA also did not want to have elaborate plans without testing their feasibility first. The social housing institutions had been using their own self-monitoring systems and SHRA hoped to identify which of those systems worked best so as to identify the most cost effective approach.

The Director-General said the Department was almost ready to present the regulations to the Committee and needed to just secure a date for the presentation.

The Chairperson concluded this portion of the meeting by thanking the SHRA and said Members were looking forward to future presentations.

Rural Housing Loan Fund
Mr Jabulani Fakazi, the CEO of the Rural Housing Loan Fund (RHLF) presented the mandate; to facilitate housing credit to low income rural households: including communal land, rural towns, small towns; to support Government’s Rural Development priority; to support Government’s effort to expedite housing delivery in rural areas through administering the delivery of the Individual Rural Housing Voucher Programme; and to focus on low income market. The vision of the RHLF was a world-class rural housing social venture capital fund that created new financial arrangements and opportunities for rural families to improve their housing, economic and living environments. The mission was to empower people in rural areas to maximise their housing choices and improve their living conditions.

The outline of the RHLF's contribution to Outcome 8 was presented, which was to encourage intermediaries to explore financing opportunities in informal household upgrading and backyard rentals. Other imperatives were in rural development, small business development, job creation by supporting intermediaries, addressing the needs of the second economy and local economic development. The RHLF had only a national office but it was an imperative to engage with provincial entities so as to understand where opportunities would lie for investment. Important partnerships were with NURCHA and the Development Bank of Southern Africa (DBSA). There was also the possibility of working with the National Housing Finance Corporation (NHFC).

Mr Hennie Potgieter, CFO, RHLF, presented the funding grants from the Department for 2011/12 and the projected increase in budget for 2012/13. The HR team was small, however a risk analyst, marketing consultant and intern client executive had just been appointed. The impact of the economic climate on RHLF was presented. The target market of RHLF was at the bottom end where most jobs were lost in the economic downturn. One of the biggest impacts was the indebtedness of the households which limited their access to funds. This had forced a conservative budget for 2011/12 but which would be affected by job creation.

The average loan size had increased due to inflation. The smaller number of people that could get loans were taking larger loans. The cash dispersions were on target. 80% of loans had been for housing and 8-0% had been outside of the metro areas. Even as the loans were growing, the interest rates had not; this was to ensure that these benefits were passed on to end users. The key targets were to add more community based organisations. This was challenging as it was difficult to find the organisations that had the capabilities, and working with these organisations was very intensive. The RHLF also hoped to appoint another intermediary to work in the provinces that RHLF had not had much contact with. RHLF had reduced the interest rates for Lendcor.

The organogram was presented. The subsidy voucher administration was highlighted as not having been budgeted for.  The presentation was concluded by stating that the board of Directors had been filled.
 
Discussion
Mr Steyn commended RHLF on its concentration on the low income areas. The large increase in staff wage needed to be explained as there was a large increase but no provision for some of the positions.

Ms M Njobe (COPE) asked for a definition of a traditional house, and if there were any awareness campaigns for access to these funds. She also asked for clarification on the consultation fees as they appeared very high.

Ms N Mnisi (ANC) asked where the 20% not going to rural areas was going as this was a rural housing fund and how RHLF intended to interact with community organisations to ensure that that the appropriate people received the funds.

Ms Borman asked for clarification on the huge increase in travel expenditure. Also the Lendcor rate of 0% needed clarification. Regarding the local economic development was there any monitoring of the beneficiary and what recourse contractors might have if they were not paid by the beneficiary?

The Chairperson asked for more information or perhaps a policy regarding the backyard dwellers.

Mr Fakazi responded that the RHLF would come back to the Committee regarding backyard dwellers as this was a new area for RHLF and it had to liaise with other departments. People accessing loans have a choice regarding the materials to build their homes. Traditional houses were defined by using the appropriate technology, such a mud houses and thatch instead of zinc.

As RHLF did work with the intermediaries it was difficult to engage with the people but it had used African Language Newspapers for awareness of the Fund and hoped to use other media such as African language radio stations.

The pilot municipality areas selected had been announced by the Department and RHLF had not been engaged in this as selection of these areas was a political process. (The pilot areas selected were not named.)

Mr Potgeiter stated that staff cost had increased as historically the CEO had only had an acting position for the last 2 years. Also the additional people had increased the budget and the COO position was now vacant and budgeted for. The travel fees were high as the RHLF was budgeting for every person to attend every meeting. Also as there were vacancies in previous years so there would now be an increase in travel costs. However it was unlikely that every member would attend every meeting. There would be also be an increase due to an auditor visiting the Eastern cape on a regular basis.

The 20% leakage was an issue; the RHLF was implementing processes to limit that and force direct use of builder suppliers. It was doing “dip-stick” samples to review the companies and implementing higher interest rates for clients that were not complying.

Regarding the legal and consulting fees increasing to R3 million, external auditor fees were increasing. The R46 – 49.5 million difference was not understood as the information that was published and that RHLF had was different and needed to be investigated.

The Department was drafting a policy based on the investigations in Alexandra, there was an opportunity to encourage backyard rental through this. The Department would secure a date to come back to the Committee on the backyard rentals. Backyard rental was a greater problem in urban areas.

A Member stated that RHLF, as a small organisation, should concentrate on some provinces and make an impact on those rather than spread itself through too many provinces and have almost no impact. He also felt that there should not be funding of mud houses. There should be minimal standards for housing and a clear way of motivating people to maintain these minimal standards.

Mr J Matshoba (ANC) asked how much was being asked from the pensioners?

In response to whether the borrowers were actually paying the builders, RHLF had not gone to the extent of talking to the builders themselves; however there was a programme in place to help the borrower manage the building process.

RHLF noted the statement that it would be better to focus on a few provinces; however, it was also under pressure to cover all provinces.

The pensioners were not required to pay interest; the loans were at zero interest rate. There was an initial fee of R57 for pensioners.

Ms T Gasebonwe (ANC) asked if there was a limit for pensioners.

Mr Potgieter replied there was a maximum loan of R2 000 for pensioners.

The Chairperson also asked for a presentation on the restructuring of the entities.

The Director-General stated that the Department was busy reviewing the Development Finance Institutions (DFIs). He also hoped that the Committee could tour and meet the beneficiaries.

The Chairperson concluded this portion of the meeting stating that the Members were looking forward to the meeting in the Eastern Cape.

National Home Builders Registration Council (NHBRC)
Reverend Mehana, the Chairperson of the National Home Builders Registration Council (NHBRC), began by stating that the huge undertaking of the mandate from the Government was something the NHBRC had taken very seriously.

Mr Sipho Mashinini, the CEO, presented the Land mark Botshabelo Housing Accord which strove for the establishment of viable, socially and economically integrated communities which were situated in areas allowing convenient access to economic opportunities, health, educational and social amenities. The Strategic Objective of the NHBRC was to 1. grow, protect and sustain the NHBRC warranty fund; 2. provide innovative quality homes that will satisfy and protect the consumer; 3. strengthen NHBRC operating processes, systems and procedures; and 4. create a learning environment and build capacities to products and services.

The National rectification programme was divided into two parts – pre- and post- 2010. Before 2002 a number of homes were not enrolled in accordance with the Act and not built to the South African Bureau of Standards (SABS) building standards and homes were not inspected. The NHBRC by its own statistics found that 2 807 595 homes had not been enrolled and were under risk for rectification. 40% of the houses under risk needed work to the value of R12 000 per house, resulting in the estimated cost of rectifying minor defects to have been R 12.7 billion. 20% of houses needed to be demolished entirely, the total estimated cost for rectifying and rebuilding would be R 58.7 billion. The NHBRC stated that if these units had been enrolled they would have been inspected and there would have been some protection of some kind as not one unit that had been enrolled had needed rectification. It was estimated that the total cost of R 64.4 billion would be needed for remedial, enrolment and professional costs. The assurance however was that every home would meet the standards, there would be a five year warranty by the NHBRC, and contractors would be trained. The NHBRC had placed technical staff in the provincial offices, a central office would support the provincial offices and there would be no need for the rectification of homes. Of 27 000 houses in KwaZulu-Natal that were assessed, 80% of the units were to be demolished. In the Eastern Cape 63% of the units needed to be rebuilt. Jobs for technical, construction, scare skills and labourers would be created through this process. Pictures of the houses that had been assessed were displayed to show the lack of foundations. Disciplinary action would be taken against the engineers that signed off on the foundations and other negligent professionals. It was highlighted that the houses presented were not old houses, many of them between six months and one year old. Some of the houses that had met all the standards on first inspection had cracks and deformities when the municipality contracted plumbers and electricians (services that were done after building the house).

Pre-2010, many of the units would be demolished and re-built. A budget for this would be submitted in the next month.

Post-2010 all houses would be inspected by the NHBRC, and warranties would be given. More training for home builders would be given. The Technical Director added that many of the issues were the maintenance of the houses, and serviceability. Thus the NHBRC needed to revise its mandate to include maintenance and serviceability issues. The NHBRC would also inspect late enrolled houses and continue to subsidise enrollment and implement a new single phase enrollment process. A picture of the vision of the post-2010 house was displayed and the commitment to not wasting money, and having to spend money on the same house twice was stated.

Mr Jeffrey Mahachi, the Technical Director, stated that the inspection of houses was critical to the success of the NHBRC and a hybrid model was introduced to reduce inspection fees. This model would also ensure the inspection of the houses as the Global Positioning System (GPS) coordinates would be needed to be inputted into the hybrid model. The inspection cost per unit was outlined and the budget for the subsidy project and enrolments. The increase in budget was explained by the reduction in the number of people but the increase in quality of services. The surplus costs were due to the branding and conference costs and that was why this budget would reduce the next year. The presentation concluded that with an assurance that the NHBRC would continue to assist all spheres of Government in the delivery of sustainable human settlements. 

Discussion: National Home Builders Registration
The Chairperson stated that there were some critical areas that needed to be addressed. The NHBRC only reported on KwaZulu Natal and the Eastern Cape; however, information on the other areas was critical and was required from the NHBRC. The Chairperson stated that the issue of quality had been already extended and was now of serious concern. The problem was not a problem of the NHBRC or Committee alone, but the solution needed to be uncovered together.

Ms Borman stated how displeased she was by the presentation. The new presentation needed to be given to the Committee and presented to the Committee before the budget meeting. There was also no rectification strategised for enrolled units.

Mr Steyn asked for two presentations - one for the strategic plan and one for the rectification process to be given by the NHBRC. Some of the pictures shown were of units built only six months ago that needed to be rectified- he asked for accountability for the NHBRC for why such newly built units needed rectification. He stated his great frustration and lack of hope for how the budget and the NHBRC would rectify this dire situation.

Mr Matshoba asked the Director-General in particular to confer with the NHBRC before the presentation to make sure everything was in order for the meeting.

The Chairperson asked for a concrete plan to be presented by the NHBRC to the Committee. The Chairperson concluded by saying that it accepted the presentation on condition that a revised presentation be made to the Committee later.

Mr Zulu thanked the Committee for its guidance and stated that separate presentations of rectification and budgets would be presented to the Committee and that the budgets would include the other provinces, not just those of the pilot projects presented.

The Chairperson adjourned the meeting.