4th Quarter provincial performance, Inter-Governmental Relations Protocol between National Department & accredited municipalities, Urban Settlement Development Grant: Department briefing

Meeting report

The Chairperson recapped that the Department had been called to unpack the Urban Settlement Development Grant (USDG) grant. Although the national department administered the grant it would be implemented by the metros as well as selected municipalities. It was expected that those metros and selected municipalities would present their strategic plans before the Committee the following week. However, as there were still issues to be finalised between the department and those municipalities, the Minister had requested that that session be rescheduled, which was accepted by Parliament and rescheduled for the last week of June.

The Chairperson commended the department for having provided documents in good time.

Mr Neville Chainee (DDG: Chief of Operations) introduced Mr Anton Arendse (Chief Director: Human Settlement Planning); Mr Nyameko Mbengo (Acting CFO); and Mr Marius Hitge (Director: Grant Management).

Presentation by department
Mr Mbengo briefed the Committee on the report, which was not only on the fourth quarter but also a complete picture of the year’s expenditure by provinces.

Total allocation for 2010/11 was R15 billion, the voted allocation R16.2 billion, and the final adjusted allocation R16.29 billion.

The revised allocation for the department for the MTEF allocation over three years was R19.3 billion, and compared to the MTEF allocation, went up to R26.6 billion in the outer year of the MTEF period. Housing Development finance of R18.6 billion included the Human Settlement Development Grant (HSDG), the Urban Settlement Development Grant (USDG), the Housing Disaster Relief Grant, the departmental agencies, and Rural Household Infrastructure Development. Grants in total constituted almost 94% of the department’s budget.

Total expenditure as at 31 March 2011 was R16 billion, the adjusted allocation 16.2 billion, a variance of R199.7 million, and the percentage spent was 99%. Compensation for employees was R216.4 million.

Projections for the first quarter were to spend R3.7 billion but ended up with R4 billion, with a difference of R2.4 billion. The variance in the fourth quarter was due to the department having spent less on most programmes.

Mr Mbengo turned to the Human Settlements Grant Allocation as well as the Housing Disaster Relief Grant, giving voted allocations per province. The total voted allocation being R15.1 billion, adjustments R207 million. The adjustments were from rollovers by the Provincial Treasury, as well as additional allocations by various provinces to top up the grant, and adjustments by the National Department. The main issues were R15 billion reallocated from the national budget to Gauteng because of an emergency there; the stopping and reallocation of funds between provinces; and the movement of R100 million from North West to Gauteng because of the changes to the border with regard to Khutsong. The total adjusted allocation was R15 billion, and the total available to provinces, including allocations and various adjustments from provinces, R15 249 438 million. In total, provinces had R441 million underspent at the end of the financial year.

For HSDG for the fourth quarter, January to March 2011; the total available was R15 billion, transferred funds R3.5 billion, R4.6 billion was spent by provinces, being 31% of total available. There were provinces whose expenditure during the last quarter far exceeded what was transferred to them, such as the Free State that spent 312% of what was transferred, KwaZulu-Natal 190%, and the Western Cape 216% of what was transferred. In total provinces spent 131% of what was transferred to them.

In terms of service delivery from April 2010 to March 2011, preliminary figures at year end were that in total provinces reported that they delivered 63,546 sites, the number of houses completed was 121,879 – total delivery of 185,425. A final figure would be available after the audit was finalised.

The Chairperson thanked Mr Mbengo.

Mr Chainee commented on the Fourth Quarter Expenditure performance. It was not that the provinces overspent this quarter The department in the previous quarter had transferred money and there was under spending. The provinces normally caught up this quarter, so it was money they would have had already transferred to them. It was money that was transferred but not spent because of technical reasons.

Discussion
Mr A Steyn (DA) said he understood from the comments that it was not actually over expenditure, but it once again reinforced the concern that towards the end of a financial year there seemed to be high expenditure to get rid of the money. The Committee had asked previously that funds be transferred to provinces in relation to their expenditure, but it would appear that they were given X amount of money irrespective of what they had spent throughout the year, and therefore were sitting with excess funds. If it was a Treasury regulation then perhaps it should be taken up with Treasury, but it encouraged inefficient spending towards the end of the year.

Mr Steyn said he would like to have seen in the MTEF allocation, the Urban Settlement Development Grant, an amount that was used late in the year. Very few municipalities and provinces knew exactly what it meant and how they were supposed to use it, but they had R5.2 billion and he did not get the sense of how much of that was expended. It was a specific grant for very specific use.

Mr Mbengo responded that it should be remembered that the USDG would be implemented for the first time in the current financial year. The figure under 2010/11 was an allocation that sat with the Department of Cooperative Governance and Traditional Affairs (COGTA) as a different grant. The figure was only indicative for comparative purposes but was not with the department, it was with COGTA.

Ms M Borman (ANC) said if that spending was with COGTA and not with the department, did the department know if spending happened in that department? It was a conditional amount so whether it was COGTA or not was it investigated that that was in fact the case?

Mr Arendse responded that the conditions that were set when USDG was established were currently different with the established Municipal Infrastructure Grant (MIG) - Cities Grant. It may provide a skewed picture when compared, but one was not comparing apples with apples. The department had no control over the MIG-Cities grant, which was managed and administered by COGTA and National Treasury.

Mr Chainee added that the R5.157 was an amount that was part of the Division of Revenue Act (DORA) during the 2010/11 period; if one went back to the DORA that amount would be found. Once the audit was completed, one would get the report as to what happened with the MIG-Cities. That amount would be accounted for by COGTA.

Mr Steyn referred to expenditure by programme. Programme 4 – because of the huge amount as the development grant was 97/98% of the budget – gave a skewed picture. In terms of expenditure by programme, with the exception of Programme 4 all the others showed actually quite a large under spending. To be told that 99% of the budget had been spent gave a skewed picture and an imbalance between this huge amount in programme 4. He felt Programmes 1, 2, 3 and 5 should be looked at separately, which may alert the Committee to problems because of programme-specific under expenditure.

Mr Mbengo agreed that there was under spending in the department. There were various reasons for under expenditure, one of which was compensation at 90% because of vacant positions. Only 23% was spent on interest paid financial leases because the department over-estimated on photocopy machines. Another reason for under spending in the department was a concerted effort to save money, which meant that the department had savings that could be used to address areas that were not planned or budgeted for. The department was in the process of closing down SERVCON. SERVCON could not be closed down as it had a tax debt with SARS, and that debt had to be settled. Treasury could not give the department money to settle that debt so the department had to find savings because the only alternative was for SERVCON to sell off parcels of land that were needed for human settlement development. There were two requests to Treasury, the second of which, Treasury only responded to in April and therefore that money could not be reflected.

Mr Steyn asked for clarification on payment for capital assets, of which only 59% was spent. He was concerned because it referred to capital, which was always something that needed to be expended, and he would like to know exactly what those were.

Mr Steyn referred to the Fourth Quarter Expenditure Performance: Programme 5 (Strategic Relations and Governance) and asked why the sudden increase in the last quarter?

Mr Chainee responded that was one of the reasons why the Free State and KwaZulu-Natal were reallocated, was because the DG and the Minister requested that the department monitor and manage those spikes, which it did not do in the past. It was one of the reasons why the Free State occurrence was picked up. On the basis of what was contained in DORA, the department was obliged to transfer money on a monthly basis because it was not allowed to withhold. That had to be discussed with Treasury because if the DG withheld the money it became a compliance and sanction issue against him. It was an issue of how to make provinces and municipalities more accountable.

The Chairperson emphasised that issue. If Treasury allowed the department to withhold, and she thought it did, why was the department not willing to do what was right? Seemingly the National Department was so lenient but at the end of the day it made excuses. The problem was the department was protected but did not utilise the opportunities that were there. This was unfortunate because it was lenient at the expense of the poor. She urged the department to activate those measures and follow the processes. The citizens of the country had confidence in the government but implementation rested with the officials. The Committee was always ready to assist.

Mr Chainee responded that one of the strengthening issues of the turnaround strategy, which was in the final stages of being implemented, was monitoring and evaluation – the lack of which had been accepted as a weakness in all the department’s systems. The department would also be more activist in its approach to grant management; it would create certain conflicts but it was good for the system. The Programme 5 (Strategic Relations and Governance) spike was expenditure that covered the turnaround.

Mr Steyn referred to the transfers and subsidies. In slide 9 the total allocation was R15.5 billion, in slide 10 it was R15.17 billion, why the difference?

Mr Chainee explained that that would be “the operation of the programme”.

Mr Mbengo continued that the figure of R15.541 billion for subsidies and transfers to the institutions was all the grants and transfers to the Housing Development Agency and other institutions, and the figure on slide 10 was just the grant without monies transferred to the institutions.

Ms D Dlakude (ANC) was interested in delivery performance. In KwaZulu-Natal the Committee was shown slides by the National Home Builders Registration Council (NHBRC) where newly built houses had to be rectified. Did delivery include those houses that had to be rectified? If so, she had been told by a reliable source that one of the companies that had built the houses - that had to be rectified – had had a big party in KwaZulu-Natal, so how was the department going to recover those funds from that contractor who celebrated his shoddy work? She wished to know whether those houses that were to be rectified were included in that number.

The Chairperson thought that projects that were six months built, were being calculated as delivery.

Mr Chainee replied that the province had signed them off; he would come back to them on whether it included those six months reported by the NHBRC.

Ms Borman added that the slide on delivery performance was meaningless, there were no targets. There was no comparison. More explanation was needed.

Mr Chainee responded that the department was very concerned at the drop in delivery in terms of numbers; the problem was how to respond. It was an issue that would have to be looked at collectively as to whether to continue on the current trajectory of houses versus serviced sites. The department would look at how to resolve the issue together with the provinces.

Ms Borman said Mr Chainee had raised a very important issue. The Committee should have been given the comparative figures. It was now the fourth quarter, so there must have been a drop off. What was the department’s response to that? Rather than just saying it was a worrying factor, what was the response of the department early on when it started to happen?

Mr Chainee responded that one issue was the cost of construction and inflation. The subsidy had not increased for several years. Once the department had the audited figures it would come back to the Committee with the reasons. The department had to deliver more with less. It was not about making more money available but how to use existing money better. The department was still waiting for the figure for sites completed in the Free State and would come back with a more accurate figure, together with what the steps would be. One of the steps was what were provinces doing to change their behaviour, and one of the responses to that was the USDG.

In deliberations with eThekwini, the Committee was probably told that 25 000 were delivered. The reason was because metros, such as Ekhurleni, the City of Johannesburg, eThekwini and Tshwane, utilised some of their own funds to supplement the grant. That figure was not reported because only once a claim was submitted, approved and logged onto the HSD, did that figure filter in. Delivery would have occurred or sites serviced by some of the metros or municipalities, but would not yet be in the department’s system because it was eThekwini money and only once eThekwini was paid, would they come into the system. It was not about the Human Settlements Development Grant or about national money only, it was about what provinces and municipalities put into it, national could not be the only funder.

Mr Steyn said that if some provinces hold back the units that they built with their own money, and only put them into the pool the following financial year when they were repaid, it gave a completely distorted picture of delivery. Looking at the money spent by the provinces, for example the Free State and Mpumalanga, both had just over R1 billion. How could it be justified that they more or less spent the same amount of money, but Mpumalanga delivered almost twice the number of units. How could that be possible, because there had to be some sort of correlation? Surely that should ring alarm bells that something was wrong.

Ms Borman supported this query. Her understanding, and certainly in eThekwini, the quality of the infrastructure was improved, for example instead of doing a graded road they did a tarred road and paid for that. Did that affect the figures? It started with a certain number of units of houses or serviced sites, but the municipality added to that so it did not necessarily affect the end product/figures that the Committee should be getting. It was very complex and the Committee was asking for more and more comparative figures, but it was not making sense what the Committee was getting.

The Chairperson agreed that the housing provision data was very complex. If a municipality, for instance eThekwini, spent R1.2 billion, that was their budget. Where did the statistics for those units built with funds from the municipalities, feature? She understood that the department was accounting for the funds allocated to it, but the Committee needed a broader picture. It was still public money because municipalities collected rates, so it was important to be broadminded in reporting to the public about housing delivery.

Mr Chainee said that was correct, eThekwini did put in an additional subsidy but there were also situations where they serviced stands. The department would have to sit down together with the Committee and the Minister to look at what to measure next year because the USDG was aimed at producing and announcing a composite picture, so what was Human Settlements delivering? It was not about the housing or about the site only. Next year it would be a lot more and the focus would not be on numbers but the qualitative issue. The department was working on that, particularly in relation to policy and monitoring.

Ms Borman referred to Expenditure by Programme and asked for clarification as to why an allocation was adjusted when it could not be spent.

Mr Mbengo responded that adjustment was because people had plans and needed funding, and the department had to find savings to assist. Sometimes people did not achieve what they had planned and money was not spent.

Ms Borman said there should surely be better accounting for over spending.

The Chairperson raised concerns about delivery performance. For example, in KwaZulu-Natal the municipalities and the metro claimed that they produced 25 000 units annually. She expected KwaZulu-Natal to have delivered more than 25 000 units and she did not think the Committee could be proud of its delivery considering information presented to the Committee. They were still not delivering sufficient in order to reach what the President had expected. The challenge was to ensure that the MDGs were met in terms of slum clearance. The pace that Human Settlements was moving did not give hope

Mr Chainee responded that that was delivered and signed off by KwaZulu-Natal province. The department was looking at the rectification issue, particularly in quantifying that factor in relation to delivery.

The Chairperson was also concerned about the Free State and asked for more information on the R1.3 billion spent. The Free State withdrew 17 000 units because there was no money, but at the end of the year there was money that they could not spend. Once the Minister announced that he would relocate funds from the Free State to another province that was spending, the money disappeared and there was spiking in funding. The Committee needed answers. Where was that building material, where was it kept, kept for whom, and was there security?

Mr Chainee agreed, the department would come back on the issue of the data because there was a discrepancy in the Free State figures and it would have to be verified why out of R1.3 billion only 5 000 houses were delivered. It was an alarm bell.

The Chairperson thanked the department for the Quarterly Performance Report, the information would assist the Committee in making a complete analysis. Most of the issues would be dealt with when the department presented the annual reports. She requested a written report on the Free State issue.

Update on Accreditation
Mr Chainee explained the rationale for accreditation was that it would assist coordinated development and horizontal integration. All funding ended up in a local authority, where it was coordinated and spent. The municipality held the key in relation to the planning authority and the approval. Accreditation was about authority, accountability and responsibility.

While there was an Intergovernmental Relations (IGR) Framework Act, it sometimes was not adhered to. It was about partnership, it was purpose driven; the focus was on delivery, social contract and integration; and the focus was on human settlement priorities.

In the 2010 Delivery Agreements, municipal accreditation was a sub-output that delivery was best done at a local level and supplemented a whole range of things done by government.

In terms of the implementation progress to date, the department had the accreditation certification in March. The provinces were responsible for accrediting but there were challenges, so accredited municipalities in the provinces were in the process of strengthening the IGR to manage the process of delegating functions to municipalities. Some of the provinces had capacity, it could be supplemented and they would have to manage and assist each other, including transfer of staff. They would need to work out the operational funding. It was in the current DORA to gazette allocations to accredited municipalities and enter into a payment schedule. The municipality must prepare an Annual Housing Budget Allocation Plan and an Annual Housing Implementation Management Plan. The Committee would need to have oversight of those plans.

Included in that implementation would be funding arrangements related to the allocation of human settlements subsidy funds and to the administration and operational costs. The two types of funding dedicated to accredited municipalities were the HSDG and the USDG.

The HSDG was funding to accredited municipalities in the form of subsidies and operational costs. For Level 1 and 2, the province would hold the allocated dedicated funds and disburse against performance. Where an accredited municipality was not able to utilise its subsidy budget in a particular year, the projected unutilised portion of funds would be reallocated to other programmes and/or municipality. Punitive measures must be put in place so that citizens or communities did not suffer because of the poor performance of the municipality.

The department recognised that in accepting wider responsibilities delegated under accreditation, municipalities would be incurring higher operational costs. Funding would be provided by OPSCAP (Operational Capital Expenditure). Municipalities must not escape their responsibility for human settlement development in their areas; it was about equity and equality as to how delivery was based.

The USDG compelled greater and improved coordination of planning, funding and implementation of human settlements at the provincial and local spheres of government. The department would monitor and review municipal financial and non-financial performance and develop control systems related to the USDG and the HSDG through the province.

For the USDG monies received, the metro mayors would have to sign delivery agreements with the Minister. It was about accountability to the President and Cabinet as well as the Legislature through those processes.

Discussion
Ms Borman thanked the department; it was very exciting and moving in the right direction and touched on her concerns about communication between the provinces and municipalities. She asked whether the MECs and Mayors and people concerned knew what the IGR was all about, and what role was the department playing in ensuring that because there was a long way to go.

Mr Chainee responded that the department had made a presentation and there had been updates (together on the USDG) to MinMec and it was adopted. In relation to how it was interpreted and how it was managed, he thought sometimes there was more consensus amongst politicians than in administration, which was where some of the bigger problems lay. The department’s assumption was that it had done the work.

The question was asked - in order to have Level 2 capacity there had to be certain capacity within the municipality - was the department sure that that capacity was available?

Mr Chainee responded that the metros had always said they could not build capacity if they did not have the functions and the resources. So now the department wanted the provinces to gazette by the end of the month. The department had gone through the process and identified certain weaknesses in those metros, but notwithstanding those weaknesses it was not fatal because there would not be a situation where everything was perfect.

Which municipalities and metros were ready to begin to work towards Level 3? Whilst the province still held the moneybag, Ms Borman still foresaw some problems in that regard. Was the department not looking at municipalities to have that Level 3 status at this time?

Mr Steyn noted that the provinces were responsible for accreditation. He would have thought that should be the national department, that provinces made a recommendation and the national department reviewed and made the final decision.

Mr Steyn was concerned that it was decided to accredit particular metros but now they were looking back as to whether they could in fact fulfil that responsibility. It was like giving somebody a driver’s licence and then teaching them to drive, and that was doomed to fail. He felt they should have first checked whether all that was in place and then accreditation take place.

The Chairperson wished to believe that the department would put effort into the IGR issued between the municipalities and the provinces. It was embarrassing to the Committee as public representatives that when they arrived at a particular spot, the province would present but when getting to the district, they would find something else. The district would present and then the municipality would say they were not aware of that. Other municipalities would keep quiet and after the Committee left, the site would say that the presentation was not a true reflection of what went on. The department had a huge responsibility and would have to manage that. It was a huge responsibility and went together with accountability. The department represented the State and had to ensure the national objectives were achieved. She hoped they realised how important that responsibility was. Two years ago the department said it would amend the Housing Act, but it was not going to meet the time frame. Quite a lot could be rectified through that Housing Act. She charged the department to realise who they were in this country.

Mr Chainee concluded that accreditation was not something that the State said the department had to do, but something that the officials believed in. They had the power to change peoples lives, and that was scary.

Urban Settlements Development Grant
Mr Chainee recapped that the DHS had promised to come back to present on the USDG. It was recognised that cities were the engines of economic growth as well as poverty, and it was important that cities managed rather than responded to urban pressures, amongst which economic growth and alleviation of poverty were priorities. Cities existed because of towns and rural areas and that inter dependence, and sometimes in South Africa one did not want to lose that inter dependence because a city or a town could not function or survive without the agricultural produce that came through to the towns and cities. Johannesburg existed because of Mpumalanga, and Mpumalanga existed because of Limpopo. When towns and cities improved and grew, then that economic and rural base also became sustainable.

The provision of Bulk Connector, Link and Internal Services, well-located land and public amenities continued to plague the optimum performance of the human settlements sector, particularly metros. Provinces and municipalities came back and said they could not implement a project because there was no bulk infrastructure, or a problem with links. One of the issues that came up was that when human settlement programmes were implemented, the backlog was increased because roads or storm water had not been built, and did not have electricity, so the sustainability of that project had to be addressed. The USDG attended to some of those issues as well.

Consolidation of funding was a key issue for realisation of the human settlements mandate via the HSDG and USDG. Government had moved from housing to human settlement but had not done anything in relation to the funding, and if nothing was done, it would go right back to where it started. Funding was not the only issue but it was a key pillar and foundation of a human settlement. At some point in the future, the HSDG and the USDG would come together and the incremental approach was preferred. The department was working with Treasury to include, next year, the Integrated National Energy Programme, so that INEP grant would form part of the USDG.

MIG-Cities was established to promote integrated planning and funding of the urban built environment agenda in the large cities. The USDG was established by a Cabinet decision in 2010 with funding allocated from the HSDG and the previous MIG-Cities grant, and Treasury added R2 million.

USDG was intended as an instrument for metros to address linkage between public housing and economic growth to simultaneously contribute to the Human Settlements outcome. It was the first grant of its type. It was not a grant exclusive to metros; next year there would be an increase in towns and cities.

The USDG was intended to integrate the release of well located land to the function of planning and funding of the built environment; to encourage cities to be proactive developers of infrastructure on well located land by mobilising domestic capital; and should compel improvement in development planning and also improve intergovernmental coordination (all three spheres) of development.

USDG should address a pro poor bias including economic growth. Not either or, but both: the SDG focus should be biased towards lowering the costs incurred by poorer households in accessing serviced urban land with secure tenure.

Mr Chainee turned to the USDG Framework. The MIG-Cities grant still existed with COGTA, and that went to municipalities other than those that received the USDG. At a national level there was improved relationships between Human Settlements, Cooperative Governance, Treasury, Sport and Recreation, and Water Affairs. There was a good spirit of commitment. The Grant outcome was to enhance the sustainability of human settlements and improve the quality of household life in urban areas. The objectives were:

- Increased availability of serviced urban land parcels (reduction in average production cost and land price)
- Increased access to suitable shelter (reduction in real costs of rental for a well-located housing unit)
- Increased average density of cities (city-wide average dwelling units per hectare)
- Increased security of tenure irrespective of ownership, or rental, formal or informal structures security (number of new freehold tenure units transferred to beneficiaries, rental agreements signed and legal protection provided).
It was also about serviced stands for the gap market (working families).

Mr Chainee went through the allocation to metros. The basis was a weighted average for human settlements.

Mr Arendse updated the Committee on the planning for the USDG and also provided a preface for a presentation that the cities would be making toward the end of June. The department would look at the draft policy and the DORA framework and make copies available to the Committee. The Built Environment Performance Plans (BEPP) were plans generated by the municipalities and metros, and the aspects within those performance plans of how those metros would be using the USDG. The USDG Schedule 4 Grant was a supplementary grant given directly to municipalities. The rationale was to have the USDG as a component of the local BEPP.

One of the reasons the department had requested the briefings to the Committee be deferred to the last week in June was that it was currently in the process of evaluating and consulting with the cities on the first draft of the BEPPs and how the USDG was going to be used. The final draft of those plans was expected in the third week of June. The first tranche of payments to metros would be on 1 July, and then implementation would kick in.

The cities had to a large extent responded positively to the call of Outcome 8, but at the expense of neglecting the aspect of economic growth. The department acknowledged that there had not been a long lead time for the establishment of USDG, so when the cities present to the Committee there would be a fair amount or significant percentage of the grant was used for ongoing MIG-Cities projects.

Mr Arendse continued that a draft policy was in place and the DORA Framework and the cities by and large had attempted to work within those frameworks. Cities had access to the USDG and HSDG, but how they accessed the HSDG was a bone of contention.

USDG was meant to supplement, but some developmental programmes of some of the cities were completely grant dependant, which was not a healthy situation. The department acknowledged that there had been a big economic downturn, a lot of the cities were still heavily in debt after the 2010 FIFA World Cup, and those issues had to be taken into account when looking at the BEPP plans and their ability to deliver on commitments. At the end of the day, it was not only the responsibility of the department but also the Committee and the Minister as to how Outcome 8 was made effective.

Mr Arendse said invariably when one saw the presentations made by cities, the second slide would be spatial city patterns and the history. In very few instances was it seen that USDG was used as an intervening tool. Much was said about integration and using transport to integrate cities, or communities within cities, but spatially breaking down those patterns of the apartheid legacy was not happening enough. While the department acknowledged that there were various tools and mechanisms, the Spatial Planning and Land Use Management Bill was being discussed, and there were also financial tools and instruments and USDG was part of that. The department would like to have seen more of that happening.

A year ago the department spoke of the Human Settlements Fund and the need to change how the housing grant was used. The USDG was now the interim measure, and was part of the family of HS grants. An additional R21 billion for the human settlements function over the MTEF was allocated directly to metros. The USDG would augment and support grant allocations from provinces to municipalities under the HSDG, and had to go further to address infrastructure and land requirements to promote economic growth.

Mr Chainee added that National indicated particularly the national development imperative, which both provinces and local authorities must do, so in providing them with the money, they must have a say in how that money was utilised and allocated. National was taking responsibility and were hoping that this presentation, and particularly the points that Mr Arendse had raised, gave some indication, particularly in breaking down the apartheid legacy, it was hoped the USDG would do that. Mr Chainee recommended the book Diepsloot and offered to make a contribution of a copy of the book to each of the Members. It gave a good indication of what was happening in our communities and there was a need to break down the stereotypes of what was happening in poor households, particularly in towns and cities. Government had to respond to that.

The Chairperson thanked the department for the informative briefing. There had been some misunderstanding of the MIG-Cities Grant and she suggested a presentation on that sometime.

Ms Dlakude understood that the grant was over a period of three years, if the metro underspent or did not use the entire grant, would the department transfer money to that metro?

Mr Arendse drew the Committee’s attention to the DORA draft framework. One of the conditions around the disbursement of the grant was the submission and review of performance targets as a condition to the transfer of 2^nd, 3^rd and 4^th grant payments. The department would like to see something similar happen around the HSDG.

Mr Chainee added that transfer of the 2^nd, 3^rd and 4^th instalments would be conditional upon submission and approval of signed-off quarterly reports, and in that way would have to account to the Minister. It was work in progress but the department had built on lessons learnt.

Ms Borman added that she understood that the drafts of the cities who benefited from this grant were going to present by the third week in June. Was that like a business plan? Very often the planning took a long time before the implementation stage, those municipalities would be presenting by 29 June. The Committee would have direct oversight and be answerable to the people not getting off the ground.

Mr Arendse responded that the cities had enough projects to keep going based on the MIG-Cities allocation or commitments received over the MTEF. In that regard some of the implementations of those plans did not talk to Outcome 8 but appeared to be business as usual. In the latest implementation of the BEPP plans there had been a shift in thinking, there had been a reprioritisation of some of those plans to talk specifically to the Department of Human Settlements’ national priorities. Mr Arendse did not believe there would be a problem to move with the grant allocation. The new ones would talk specifically to Outcome 8.

Ms Borman was pleased the department had clarified the MIG-Cities grant, and also for the list of towns that had come on stream, could others be added to the list?

Mr Arendse responded that there was already discussion on expanding the list. From the aspect of growth and migration the trends that were beginning to emerge now were that people’s chance of survival were found to be better in the secondary towns of significance, such as Rustenburg and Lephalale. The irony was that those were the very centres that were less prepared and less capacitated in terms of capital and operational resources to deal with that influx and migration. Currently the list was consistent with the accreditation that had been accorded to the larger metros.

Mr Steyn also had some confusion about the MIG-Cities and the USDG Grant and initially thought the one had been absorbed into the other. The department had made that clear, however, he thought that the actual fund had been absorbed into the USDG grant. It seemed there were two sets of figures and that X was still available in the MIG-Cities grant and would be able to make a clear differentiation between the two.
The grant must not give metros the excuse not to fulfil responsibilities of basic services. The grant must augment and enhance delivery. Inevitably some metros would try to get away without doing that.

Mr Chainee responded that the MIG-Cities still existed. Those metros that did not receive the USDG would get MIG, but not both. There were large towns and cities but it was agreed with Treasury that it was not confined to lists. It was speaking about urban towns and cities. The department was moving toward the situation where it had to build capacity; it had to provide the funding, the infrastructure and the services, that the people required of them.

Mr Steyn thought that the transfers would take place very much like the current HSDG, irrespective of whether they performed or were monitored. On a quarterly basis the money would be sent across to them, which was of some concern. He suggested that there should be some motivation, such as for each R1 spent they would be given R2, with the exception that it was not for the rich metros.

Mr Chainee responded that National Treasury was in the process of engaging with the World Bank for grant assistance for a ‘Large Cities and Towns Programme’ so that that assistance could be provided.

Mr Steyn referred to the draft plans. Ms Borman and himself had attended a session at National Treasury in Pretoria. Two cities made presentations and it was initially draft. The impression was it was business as usual in terms of planning new cities. In terms of the plans to be submitted by June, was there a partnership with Treasury to guide or assist them so that when they came with the final plan it was not something that would be sent back for review and advice, because that would delay the implementation.

Mr Arendse agreed with that and the department’s engagement with the cities. It was a process. The Presidency, National Treasury, COGTA, Transport, Sport and Recreation, Energy, SALGA, and a number of built environment people formed part of the panel. The one-day sessions were in response to the plans received as well as presentations made. In those one-day sessions the cities were told to consider those aspects and use them in the fine-tuning of the plans.

Mr Steyn asked for clarification on the statement on slide 14, referring to neglecting economic growth. If a city was to use it for infrastructure and for bulk services, that indirectly contributed towards economic growth?

Mr Chainee responded that it meant there should be a focus because one was dependant on the other. Show how you assist in alleviating poverty and inequality and underdevelopment towards economic growth. The problem was in the cities that had not been focused in the correct areas where the poor were located.

Mr Chainee concluded that that gave the Committee a good sense of what was happening in the local authorities so that when the presentations came, the Committee would have a good insight, but cautioned that the Committee might want to spread it over three days.

The Chairperson thanked the department for a very worthwhile, informative session.

The meeting was adjourned.