Human Settlements entities - Social Housing Regulatory Authority; National Urban Reconstruction Agency; and National Home Builders Registration Council: 2012 Strategic Plan

Meeting report

Opening remarks
The Chairperson said Parliament was rising on Friday and that had impacted on the work of Committees, as they would be expected to sit only in the mornings. Wednesday was normally the Committee's day, but there would be a whole-day briefing by the National Planning Commission. Once Parliament had risen, there would be little time for Committee meetings, as there would be public hearings on the budget. Other entities would make presentations on Friday, and there were only three – the Social Housing Regulatory Authority (SHRA); National Urban Reconstruction and Housing  Agency (NURCHA); and the National Home Builders Registration Council (NHBRC) - scheduled for the day. The Committee wanted to get a sense of entities' strategic plans on how they hoped to deliver. The overall picture had been set up by the national Department but it was critical that institutions were listened to as well. The intention was to ensure objectives were aligned with the Department, and entities delivered on the budget they were allocated.

Social Housing Regulatory Authority (SHRA) presentation
Mr Brian Moholo, Chief Executive Officer (CEO), Social Housing Regulatory Authority (SHRA), said SHRA had been established and was operational. 2011 was a period to ensure that the budget was used. As a result of the support afforded by the Department of Human Settlements (DHS), SHRA had more than doubled the units that it had planned in a short space of time. The institution processed 33 applications for accreditation; half of these were conditionally accredited. During the year, some institutions improved their condition and, consequently, four were fully accredited.

There were about six projects launched;  two of these were launched by the Minister. SHRA had worked with National Treasury and DHS on the funding models for social housing. The entity had also engaged international role-players in countries like Canada and Netherlands. SHRA received an unqualified audit opinion; and had agreements with two provinces and the National Finance Corporation.

SHRA had finalised the regulations for the Social Housing Act last year and had introduced performance management system within the company. SHRA as a company had to pursue and develop strategic objectives as determined in the strategic framework. There would be minimum requirements and core competencies that had to be developed. This was a must-win battle although it was not entirely up SHRA to determine. The entity needed to develop ways to measure success and business growth. There would be three-to-five-year realistic horizons that would determine exactly what was expected of personnel.

Mr Moholo said SHRA was the only regulatory body under the Department. This necessitated that the entity thoroughly understood the market. SHRA would be a world class organisation driven by highly skilled personnel. The entity was looking at attracting the best individuals within the rental housing sector. He said SHRA was looking to source funding for best designed housing estates that were environmentally sustainable. The Restructuring Capital Grant (RCG) had to be targeted strategically. The entity would ensure investment in communities that enhanced social mobility and tenants' access to basic needs for healthcare, education and transport. New developments had to cater for people's needs and basic services.

The entity wanted to renew communities and regulate the affordable social housing sector. Situational analysis had determined that the need for social housing had grown by two and seven percent in all provinces. Half the population in South Africa was the target market, and it was expected that these people would more than likely reside in social housing estates. These were the people who earned a monthly salary of about R3 500-R7 500 a month. The challenge was huge. Said since inception of the social housing concept in 1997 until 2008, 43 000 units were built. But with the introduction of the RCG, 10 590 units were built in three years.

The challenges included the issue of co-operatives as related to social housing. Co-operatives were included in the policy. But the sad reality was that the co-operatives were non-existent at the moment. It was a challenge for SHRA to ensure social housing co-operatives were mobilised, despite being mandated by the Committee to look into that.

Ms Zohra Ebrahim, Chairperson, SHRA, interjected and said there had been a series of meetings with the National Association of Housing Cooperatives (NAHC). Despite meeting this Association five times in 18 months a lot of ground work had to be done before co-operatives could operate as per the Act's requirements. The Association claimed co-operatives had been in existence for a while in the but had never accessed a government grant. Engagements were continuing.

Mr Moholo said the other challenge was getting private sector involved in the social housing. A pilot project had been started to fund five private sector projects. Main-streaming social housing would still be a challenge. The private sector was varied in terms of size did not help the situation. There would be small entrepreneur companies as well as big corporations.

Another challenge was, as indicated in the Cities Report (2011), that there was no more space for new developments. This pointed to a creation of highly dense areas, and SHRA also needed to consider the recommendations from the National Planning Commission (NPC). This indicated that the future in South Africa lay in social and rental housing. The issue of ownership might be the wish but policy might not be achievable in the short-term. He said people would rely on social and rental housing in the short-term. Not too many young people would have the money to take out mortgages. Social and rental housing were the key instruments that Government could use to enable people to grow.

There was clear progress on the structure developed last year; there was an encouraging movement that the entity had developed. SHRA was not establishing the office, but was performing and growing the organisation. He said there had been one resignation at the SHRA council and the entity was looking at how to get additional members. The Council committees – human resources (HR) and ethics, audit and risk, investment, and regulations – had been established and were all functional. The proposed new structure included the Cooperate Services; Knowledge; Regulations; and Investment Managers. These were critical to the entity as they would keep it informed of what was happening in the social and rental housing sectors. At the moment the entity had about 21 staff members, but the new structure would push the number to 30.

There were a lot of institutions that were not doing well in the sector and SHRA wanted to address that problem. SHRA had prioritised what it wanted to do this year. The entity wanted to build organisational capacity for performance and effectiveness. Also staff development and expanding knowledge and skills for personnel were top priorities. The entity also wanted to build business infrastructure. Last year when SHRA started there were things that were not done and this had impacted on the business operations of the entity.

SHRA would ensure compliance with regulations requirements within time-frames. Alignment with the sector, research and development would also be another priority. SHRA would continue to educate people about social housing.

Mr Eugene Perumal, Corporate Services Manager, SHRA, said the entity had three strategic objectives two of which were externally focused. The first one was the incremental implementation of the Social Housing Act that spoke about further developing SHRA footprint as a national realtor. The objective spoke to issues of proper functioning; internal operational environment; and providing a platform for efficient and effective regulation and investment programmes. But also the roll-out of subsequent phases of the SHRA Outreach programme including agreements with relevant stakeholders.

The second objective addressed the issue of effective regulation of the sector. It spoke to developing subordinate legislation for approval. The objective wanted to ensure annual accreditation of qualifying entities and accessibility of the entities register. This would ensure effective compliance and monitoring of the sector, but also deploying interventions as per the Act and Regulations where necessary. The Act gave SHRA powers to intervene when instances of mismanagement had occurred, or there was failure to comply with the regulations.

The third objective dealt with efficient and effective investment in the sector. It looked to address issues of optimal use of RCG in the delivery of social housing units. SHRA had improved in its 2011 delivery target of 1 702 to 4 143 units; it hoped to live up to this achievement in the next five years. He said the objective would look at ensuring optimal use of capacitation grant funding mechanisms to support regulation and investment programmes. The private sector was involved in pilot projects and SHRA looked to rolling out private sector and co-op housing strategies.

There had been ten applications, from co-ops for accreditation, whose results would be availed at the end of the month. He said SHRA wanted to form partnerships with local and international funders. The view would be to create more adaptive funding models and leverage more finance for the sector. The social housing model used Government as well as the private sector money. SHRA was looking at ways of optimising funding for the sector.

There were three target areas and they included investment in social housing, accreditation and regulation. For 2012, SHRA had been able to deliver over 4 000 and the number would be increased for the year 2013. The second target area was accreditation. SHRA looked to accredit 40 entities. The number would gradually go up as time moved on. The process of accrediting would later include the private sector, delivery agents and the co-ops. He said co-ops did not need the formal kind of accreditation but SHRA was looking at some form of accreditation for them.

The third area would be regulation. The regulations unit would intervene in some of the institutions and projects. For 2013 SHRA looked at intervening in at least 30 entities, this would grow gradually with time. A further breakdown of this from a performance indicator perspective would be measures like the number of units approved and project feasibility grants awarded. SHRA's objective was to grow the social housing sector, and for that to happen there had to be gear-up funding. He said there was a need for intervention especially when one looked at the number of grants issued. Estimates were that SHRA would have delivered 27 948 units by 2017, and 245 institutional grants would have been awarded.

The budget for SHRA had risen from R245 million in 2012 to R668 million in 2013. This was a sizeable increase, and SHRA was grateful to both the Department and Treasury for believing in what the entity was trying to achieve.

Ms Ebrahim explained that the institutional grant was the one that SHRA got via the provinces. She said this was mainly channelled into the projects that were done in partnership with the provinces. It was important that provinces were aware of the projects and were committing funds. She said capacitation was not done by SHRA as it was forbidden by the Act. SHRA looked at institutions that applied for the capacitation grants and was able to assist the social housing institutions.

Mr Vusi Fakudze, Chief Financial Officer, SHRA, said in terms of financials the entity was liquid and foresaw no challenges in terms of the cash flow going forward.

Discussion
Mr S Mokgalapa (DA) said the issue of the unqualified audit opinion was encouraging and SHRA needed to follow that trend. With most State Owned Enterprises the tendency was to continually misappropriate funds from the fiscus. He asked about the processes from receiving an application from a social housing company to the actual delivery. What was the turn-around time? He asked if SHRA could indicate how it dealt with red-taping. He shared the view of SHRA that the rental and social housing would be the only viable way going into the future to alleviate the backlogs. He asked how SHRA ensured that people got quality housing and affordable rental. He was encouraged also by SHRA's was working with private sector money. He asked if there were trusted mechanisms that ensured that private sector funding was well looked after and maintained. Also how did SHRA ensured that the institutions had capacity to deliver social housing? He said this was a challenge to DHS as well. He asked if the SHRA used services from the National Home Builders Registration Council (NHBRC), as it was the custodian of compliance and standards in the housing sector. He sought clarity on the kind of compliance the entity did.

Mr R Bhoola (MF) said he was concerned by the monitoring and evaluation of institutional grants. He asked if there was a policy directive that would ensure sustainable good homes as per the aspirations of SHRA. He asked if there was a working relationship with the provinces. KwaZulu-Natal (KZN) was fast developing in terms of human settlements and there was dissatisfaction with the homes built in that province. This called into question the role of NHBRC. NHBRC was in turmoil in KZN.

Mr Bhoola wanted to know about the financial implications of the new  bloated structure of management. He asked if there were defects in the functioning of the old structure that necessitated the change, and asked if the added responsibilities could not have been accommodated in other sub-units. He asked if SHRA had any control on entities especially after it had been approved to manage housing developments. A lot of emphasis had been placed on capacity building; from independent observations this aspect was in turmoil. He asked if evictions and protests would dealt with in light of advancing good governance. He sought clarity on the R83 000 housing subsidy provided by Government.

Ms J Sosibo (ANC) enquired about the reference that SHRA wanted to be world class organisation resourced by highly skilled personnel. She asked why was it so difficult to establish co-ops after 18 months. She wanted to know if the vacated position in the council was budgeted for.

The Chairperson questioned SHRA's performance against the statistic of 28 000 units by 2017 as it related to the 80 000 units quoted in the State of the Nation Address by the same year. She sought clarity on the rental policy, and said the Department did not have a holistic rental policy. So in a way SHRA was ahead of the Department. The Department and its institutions did not take Parliament seriously. When there were sessions, delegations selected issues that favoured the entities' objectives, not the national objectives.
The Committee had been talking about SHRA. How long was the Committee supposed to be talking on SHRA issues? She said the Act needed to be amended and yet the entities were silent on this. Cooperatives had long been discussed as they impacted on the issue of ownership. How could this issue be addressed without amending the Act. Cooperatives were oppressed, and SHRA had made a presentation that suggested that co-ops were non-existent. Co-ops were there and it was the responsibility of Government to develop them. One day the Committee would have to call co-ops, entities and the Department all under one roof, to hear concerns. She was unhappy with the issue of co-ops. The claim that there would be a roll-out of co-ops and private sector strategies was unfortunate as there still existed loopholes in the legislation. The Committee would not compromise on social housing co-ops as it was a policy issue that had been taken. Although the Committee agreed with SHRA on rentals, ownership could not be left behind. Houses were expensive but the approach needed not focus on rentals but ownership, as Government could not promote renting for extended period of time. She said the Department wanted to avoid the issue of co-ops and promote only commercial housing, and that would forever put it on a collision course with the Committee. She wanted to know when Parliament would be allowed to ratify the agreements signed with international organisations.

Mr Neville Chainee, Chief Operating Officer, Department of Human Settlements (DHS), replied that all human settlement entities were part of the Department, and were not operating in competition to the Department. He said in the same measure the DHS did not want to duplicate capacity and expertise. The Department funded SHRA's operating budget. This institution was suppose to be an extension of the DHS mandate. One of the constraints at the Department was around rental housing programmes that were taken away. This happened when the social and rental housing programmes were funded with international donor grants. That resulted in the sector believing that it could operate outside of the Department. He said a substantial amount of expertise sat outside the Department. In the last 18 months, or the period post the establishment of SHRA, DHS was trying to lure back that expertise and reassert itself as a policy driver, funder, regulator and an innovator in this sphere.

The Department had reinstituted the National Rental Housing Task Team, and SHRA was a partner. Part of the Task Team's programme was to consolidate the national rental code that covered all the aspects of rental housing. DHS had indicated that one of its concerns was that rental housing had not been affordable to the lowest earners. No one took care of households that earned below R3 500 a month, and there were substantial numbers of such households. The Task Team was doing an amount of work on this and DHS would be happy to present progress to the Committee around May. The Committee should not be under the impression that SHRA was leading the Department.

Mr Chainee said DHS had asked the policy unit to prepare a paper on the cooperatives in human settlements. The policy would find its way into all the various programmes that DHS undertook. Cooperatives were hard work not only in human settlements. He said what SHRA was doing was to find a place for cooperatives in the social and rental housing sector.

As to the ratification of the international agreements by the Committee, DHS had requested a compilation of a detailed report from the unit.

The Chairperson said the contention was that the Department appeared not to be taking the Committee and Parliament seriously. DHS was generalising when it spoke of co-operatives in social housing. When would the Department ensure that legislation took care of issues around housing cooperatives? She said a special day was needed to deal with the matter. The Committee would not agree, however hard DHS tried to convince it. This had been a long standing issue.

SHRA responses
Ms Ebrahim said social housing was a small portion of the housing spectrum. SHRA existed only since January last year, and the council existed before that without any support. From the outset the entity had been supported and had worked closely with the national Department. SHRA would not be where it was had it not been for the Department, and as a result it had been very aware of its responsibility.

The Council was bound to follow the Act that created it. SHRA could not extend its mandate as it would be doing something it was not supposed to do.

The Act that preceded the creation of SHRA created spaces that were imperfect for implementation. The SHRA's predecessor, the Social Housing Foundation, had as core business capacitation. She said even co-ops accepted that there were issues around capacitation and therefore asked any group that could provide that. She said it was not as if SHRA was doing nothing around co-ops; there were ten applications that SHRA was processing. There was only one co-op (Joshco) that pre-dated the system.

The portion of social housing that SHRA was supposed to be looking at was 24 000, and by going to the 28 000 it was exceeding the targets. SHRA looked at areas where people had to pay back.

The Chairperson said the issue of the numbers needed to be looked at when the Committee dealt with business plans.

Ms Ebrahim said some of the balance in the numbers was with the private sector as well. The way the Act was drafted it signalled that SHRA was responsible for the investment and accreditation of institutions to which the state money flowed. It also said SHRA was responsible for the way the sector operated. She said SHRA's mandate was narrowly defined. SHRA was involved with the Department in rethinking the rental legislation.

SHRA did not go into relationships with outside funders. There was an agreement between the South African Government and Netherlands on social housing.

Because SHRA put huge amounts of money into projects and on behalf of human settlements, and because it was a regulator; it had rigorous processes of evaluation every three months. The entity visited the actual sites. SHRA also got continuous reports, and had as a result appointed inter-relationships manager.

The council member who had resigned had taken up a deputy director-general (DDG) position in one of the Government departments. The matter had been raised with the Minister and he had indicated that he would like to meet with the entities to suggest additional names.

As to the strategic objectives SHRA was aware that it operated as part of a broader mandate, but was particularly governed by the Rental Act. She said the entity was in a difficult position of having to comply with the Act and at the same time grow the sector. There were shortcomings.

The entity was unhappy with having to study other countries' clusters and models. SHRA wanted to learn and show that South Africans were capable.

Mr Moholo said it took SHRA about six weeks to finalise applications for funding. This was all the processes from application assessment to the final decision. Within a period of two months a decision would have been made, but funding depended on whether the institution approved met the requirements. He said from there SHRA would enter into an agreement whether the checks and balances were actually there.

It was for the institutions themselves to prove their capacity to be accredited. It was not for SHRA to ensure that these institutions were capacitated; it was for them to convince SHRA to accredit them on the basis that they had capacity as a social housing institution that Government money could be invested in.

SHRA would engage the NHBRC on the inspections, and it had concluded discussions with the National Urban Reconstruction and Housing Agency (NURCHA) around technical support.

SHRA provided institutional support to the provinces so that they could come up with particular strategies to implement their rental housing. The Western Cape and KZN had strategies, and SHRA was in the process of assisting the Eastern Cape and the North West. The strategies took into account whatever capacity the provinces would have.

The start-up organisational structure was lean and it was realised along the way there were areas that were not covered, and would impact negatively on performance. The responsibility could therefore not be given to existing staff members.

It needed to be remembered that social housing was one instrument when it came to ownership and rentals. Government and the Department had other instruments that would enable people to own property.

There had been a lot of discussions around the issue of cooperative housing. SHRA would see how many cooperatives qualified for accreditation. There were ten pending applications. Mr Moholo was hopeful that out of the ten a lot of them would be accredited and that would make them eligible to receive more support from Government and SHRA.

National Urban Reconstruction and Housing Agency (NURCHA) presentation
Mr Viwe Gqwetha, Chief Operations Officer, NURCHA, said NURCHA wanted to ensure bridging finance to small, medium and established contractors that were building houses for moderate and low income earners and related infrastructure. It was NURCHA's vision to build partnerships around innovative bridging finance solutions. NURCHA initiated programmes and took risks to ensure a sustainable flow of finance for the construction of low-income and affordable housing. This was done in partnerships with all the role-players in the human settlements sector.

Last year there were issues of sustainability around NURCHA as a result of losses that the Agency experienced. This matter was dealt with for the last two years. In the next five years NURCHA would be proactive in stabilising the business finances and the lending environment within which it operated. It was in this context that the strategic plan was seen in order to restore sustainability within NURCHA.

The Chairperson interjected and said what was being said did not reflect on the presentation.

Mr Gqwetha apologised and said he had just added a slide to the presentation to provide context.

The restoration of the entity's sustainability was around the drive to recover delinquent loans. He said it was noted in the previous years that contractor and employer failures led to the defaults. Employer failure included not paying contractors. NURCHA would not retreat from the space it operated in but was developing new models that would sustain contractor payments.

Part of the work NURCHA did was diversify income streams. This was a logical area of extension because it was part of normalising the lending environment. Another point was to keep to the mandate and ensure relevance to Outcome 8 of the development targets. NURCHA put a lot of energies into the gap housing category of the market. Job creation and enhancing the delivery capacity was an important aspect of the work NURCHA was doing.

The entity had developed a capacity over a period of 14 years that it would want the Department and other entities in the sector to utilise. The strategic objectives were driven by the current business and development of the existing lending programme to utilise the available resources. There were new innovations around the contractor finance. The second area was reviewing NURCHA's relevance to Outcome 8. The policy context, where the issue of jobs and protection and employment creation, remained informative.

There was a need to focus on gap housing and the supply of services in communities and developing integrated communities. NURCHA operations were impacted by variables in both the finance and the construction sectors, as they operated on both. The international funding had decreased. The local banks were in and out of the social housing financing. Changes in the international finance scene impacted domestically as well, but also the continued poor performance of the contractors NURCHA lent to. The industry was competitive and many companies were forced to tender on margins that were least sustainable. This, together with poor performance by employers it made it easy for contractors to default on the loans.

NURCHA had been capitalised by Government for an amount of R300 million in the next three years. R100 million had already been paid. This had allowed NURCHA to taking a bolder step in raising funds. There had been a noticeable low volume of traditional business. NURCHA was using its competencies to address gaps that would affect lending.

The R100 million had enabled NURCHA to raise further funding, mainly with two partners. There would be some level of comfort in the affordable housing construction in the next three years. He said gap housing project prices were affected by three things: location; bulk infrastructure (public sector funding flow key), and the price of land. Location became important because if it was good the uptake of houses would generally be good, and room for default was marginal.

NURCHA was looking to deliver 18 000 affordable units in the next five years and this was more likely to improve. Collaboration among entities could open opportunities to deliver especially if the Housing Development Agency (HDA) got well located land.

Discussion
The Chairperson stopped the presentation as there was a lot of new information that Mr Gqwetha had changed along the way. She asked the Committee that NURCHA be allowed to come again to make another presentation where all the information had been consolidated.

Mr Mokgalapa said NURCHA needed to understand that the Committee had to own up to the information it provided. It would be virtually impossible to stand in front of Parliament on behalf of NURCHA without the necessary figures.

The Chairperson said NURCHA should comeback on Friday with the rest of the entities, or organise with the Committee secretary for another date. Parliamentary planning was an issue. The Committee would need sufficient time with each of the institutions that had been recapitalised.

National Home Builders Registration Council (NHBRC) presentation
Dr Jeffrey Mahachi, Acting Chief Executive Officer (CEO), National Home Builders Registration Council (NHBRC), said the entity was interested in the protection of the housing consumer.  NHBRC looked at improving emerging home-builders through various interventions. The organisation wanted to improve visibility and accessibility in the market. It had to this end appointed a manager for stakeholder liaison, marketing and communications (Ms Jackie Mfeka). NHBRC was also in the process of establishing a call centre that would look to reduce the number of complaints and address those within the acceptable turn-around times. He said NHBRC wanted to position itself as a leader in the knowledge creation, technical and technological advancements.

Key products that NHBRC offered were to enrol new houses; register all home builders; inspect buildings and; train and develop home builders. The organisation also had to provide litigation and legal advisory services and geo-technical and materials engineering services. NHBRC believed that most of the municipalities did not have the professional competencies to conduct the geo-technical investigations. NHBRC would assist and that could reduce turn-around times in terms of approving projects.

The Council had established a number of committees to improve governance structure. The task of the committees, especially the Industry Advisory Committee, was to ensure industry compliance in all projects. The Council wanted to grow and protect the warranty fines by providing innovative and quality products especially those that would delight customers. Importantly, the organisation envisaged strengthening the operating systems, procedures and processes. A relook of the organisation indicated that systems were not adequate and did not address the critical issues that NHBRC had to deal with.

NHBRC had reviewed the enterprise resource planning system and would want to revamp it. He said the organisation wanted to provide world class information technology (IT) systems. It also needed to improve learning environment and capacity to improve on product and services.

In the short-term there was a need to enhance the regulatory function of the Council. The critical issue was to protect the consumer and regulate the home building industry. Towards this purpose two divisions – the enforcement and compliance and quality assurance – had been established in the organisation. He said the divisions had to ensure that every new house had to be enrolled and every builder was registered. Any builder that did not comply to the technical requirements should be prosecuted. The quality assurance division would ensure that every single house was inspected. The NHBRC was using a hybrid model, and was thus outsourcing the critical skills in provinces where the volumes were high.

The NHBRC was looking at how best it could establish partnerships with municipalities especially when it came to inspections and quality assurance. Also in order for the NHBRC to enhance its role it sought an amendment of the current Act and the regulations. As things stood, the Act and regulations did not give the NHBRC the necessary power to ensure compliance in the industry.

Other short-term plans included transforming the NHBRC into a vibrant and modern organisation. It needed to look at employing sound corporate governance and risk management profile. NHBRC also looked to put in place world-class processes and system with a strong reliable IT platform base. The short-term vision should drive growth and development of the organisation in order to support the initiatives of Government. The organisation was looking at finding a role in the upgrading of informal settlements as proclaimed by the President.

In the medium-term NHBRC needed to establish partnerships with other role players, and relook at the inspection models. A determination needed to be made with regards to outsourcing and in-sourcing. The organisation also needed to look at the review of the legislative framework. The accreditation of Eric Molobi Training Centre also needed to be looked at. He said it was important to have an inspector-accredited module, as there were currently none in South Africa currently. Once that accreditation was obtained from the Construction Education and Training Authority (CETA), every inspector would have to have a formal qualification.

NHBRC was busy getting staff to operate from the provincial departments and municipalities so as to ensure compliance to norms and standards.

Mr Courtney Thorp, Chief Financial Officer, NHBRC, said that last year the residential building market was still under pressure. The household consumption expenditure accelerated, and previously owned houses were actually cheaper than the new houses. The National Credit Act had put a lot of consumers under pressure to take out bonds. The NHBRC budget was in line with DHS. NHBRC had also budgeted for the rebuilding and assessments of defected units in KZN.

Late enrolments had decreased from present levels. The market was moving into building smaller units. The NHBRC data showed that 58% of the growth was in the affordable category – R500 000 or less; and 30% was in the R500 000 to R2 million category. There was a negative growth in the category R2 – R5 million. The NHBRC was de-registered for Value Added Tax (VAT) by the South African Revenue Service (SARS). This meant expenditure would be up by 14% and there would be no movement in the income but in expenditure.

The Companies and Intellectual Property Registration Office (Cipro) was de-listing corporations that did not comply all over the country. The only immune province was the Western Cape and for this reason the province would bring a lot of new builders into the market. NHBRC had budgeted for 12 000 home-builders this year. It was difficult to predict where the market would be in the next five years time. NHBRC had increased the number of inspectors from 69 to 157 plus eight personal digital assistant (PDA) specialists.

Discussion
Mr Mokgalapa said the NHBRC was still doing badly on its mandate to ensure quality housing. In many projects there was poor workmanship. He said he did not see how the organisation was turning around poor workmanship especially in light of the degradation project where a number of homes have had to be destroyed because they were badly built. He hoped the quality assurance division would do its job thoroughly. NHBRC was an entity concerned with quantity rather than quality homes. He asked what the organisation was doing about shoddy work of the contractors. NHBRC had failed to sensitise communities and contractors on the advantages of using alternative building technologies. He asked for an update on what was happening with the CEO, as Dr Mahachi was only acting.

Ms Sosibo said she concurred that the organisation was chasing quantity not quality and the slogan of ensuring quality homes was just that. She asked if home-builders were previously not registered with the NHBRC. She wanted to know if the organisation awarded bursaries only to its internal staff. She wanted to know how long would the upgrading of informal settlements take. She disputed the statement that the second owned houses were cheaper than the new ones on understanding that there would be upgrades and  that house prices generally increased.

The Chairperson commended NHBRC for coming out clearly and proposing the review of legislation. The Committee needed that commitment, to identify the gaps in legislation. She sought clarity on the medium-term objective of establishing a regulatory and compliance division. This implied that provinces were not enrolling projects, and indicated that the employer (Government in this instance) was not complying with norms and standards. The relationship with the Department needed not be cosy, but be that of purpose and NHBRC needed to ensure that. She commended the organisation on the turn-around strategy on its IT systems. This had been discussed a while ago. More information was needed on the Eric Moloi College. She wanted to know how many units had had to be rectified in KZN and Eastern Cape as a result of negligence on NHBRC's account. She asked if the outsourcing of services was aligned with the municipal inspection processes.

Responses
Dr Mahachi replied that a number of South African houses had been built poorly. He said most of these were not enrolled by NHBRC; these houses were either People's Housing Process (PHP) or rural housing projects. NHBRC had made a request to the Department that every house was inspected.  The organisation needed to reach out as possible whether houses were in rural areas or not.

NHBRC was in the process of placing the quality assurance staff so that they operated from provinces. The staff would be dealing with officials and would be more hands-on on projects. The sign off of projects would be done by quality assurance staff members down the at the municipalities and provinces. Municipal staff would work hand in hand with NHBRC staff and this working relationship would be tested in KZN.

NHBRC could not prescribe to the Department or municipalities to use alternative technologies. He said NHBRC had instead run a number of competitions that encouraged the use of alternative technologies. He said there were two legacy projects done in Cape Town (CT) – Blue Downs and Drankenstein Municipality; and one in Pretoria (Soshanguve). He said another one was considered in KZN and the Eastern Cape. In few months time NHBRC should be able to report comprehensively on the use of innovative technologies.

The organisation awarded 60 bursaries this year in the built environment.

NHBRC would not know how long informal settlements upgrading would last but NHBRC would provide support where it was required.

There were no statistic on how many defective houses had had to be rebuild on account of NHBRC. The houses in the Eastern Cape and KZN, that had had to be destroyed, were all not enrolled with NHBRC.

Mr Thorp replied that the Member was correct. The cost of second owned houses could not remain the same over a period of time as a result of inflation. Many South Africans were under a lot of pressure from indebtedness and the new Credit Act. They were actually selling below the asking price.

Rev. Dr Vukile Mehana, Board Chairperson, NHBRC, said registration of home builders was NHBRC's mandate.  But it was discovered that there was a lot of corruption when this competency was de-centralised to provinces. It was easy for suspended builders to outmanoeuvre the system and resurface on the database. It was decided that the function would be centralised to head office, so as to ensure control and tighten the registration of builders.

Rev. Dr Mehana agreed with the Committee Chairperson, on the division of enforcement and compliance unit, that the owners of NHBRC went against the organisation. This was a challenge. He commended the Minister for inviting NHBRC to attend the Minister's meeting as that contributed to building good relations with provinces. Together with the appointment of of the stakeholder relations manager, sitting in the Ministers' meetings would harmonise relationships. Also the increased number of quality assurers from 69 to 157, at a cost of well over R15 million was to ensure that quality was taken care of.

Rev. Dr Mehana replied that there was an ongoing disciplinary hearing against the CEO (Mr Sipho Mashinini). By the end of March the process should be completed. The matter was heard by a former judge of the Labour Court. The charges were very serious and he, Rev. Dr Mehana, would be testifying on Saturday. The Council's next move would be informed by the outcome of the process. But in the event that Mr Mashinini was found guilty, the Council would move to appoint a new CEO immediately as the organisation could not function for too long without leadership.

Closing remarks
The Chairperson commended the Department for giving the institutions all the necessary support.

The meeting was adjourned.