Department of Human Settlements on its 2012 Strategic Plan

NCOP Public Services

08 May 2012

Chairperson: Mr M Sibande (Mpumalanga) ANC

Meeting Summary

The Department of Human Settlements presentation concentrated on the provincial allocations. The presentation aimed at unpacking how the Department’ budget was to be spent, reflected on the relationship between the Urban Settlements Development Grant and Human Settlement Development Grant and how provinces and metropolitan municipalities were aligning their programmes with the grants. Issues covered were the key deliverables for 2012/13 such as Outcome 8, the National Priority Projects, and the utilisation of the USDG by metropolitan municipalities. The Chief Financial Officer provided the financial cost of the transfers to provinces and the money that had been allocated to the different strategic projects. The total budget for 2012/13 was R25 billion with Housing Development Finance taking 93% of this.

Members were satisfied with the content of the presentation. However, concern was raised about Treasury’s provincial allocation formula which some said was inaccurate. Also of concern was the lack of effective Department monitoring of projects which had resulted in shoddy housing requiring a huge rectification budget of R100 million. The Committee emphasised the need to focus on the rural population who were neglected and host communities around mining areas. The land issue was also raised – the slow rate of finalisation and what efforts were made to solve disputes such as that of the Ingwenyama Trust. The Department was urged to address the need for more rental housing, rectification and shoddy contracting.

Meeting report

The Chairperson said there was need for close cooperation between the Department and the Committee so as to empower the latter in making recommendations. Members had raised a concern with a previous presentation as its focus was not guided by the Select Committee’s requirements but tended to centre on National Assembly issues. The Committee had recommended that the Department should focus on the Committee’ line function which were provinces. The Department was also urged to address the gender imbalance as its delegation was male-dominated.

National Department of Human Settlement (NDHS) presentation
Mr Thabane Zulu, NDHS Director General, thanked the Committee for the opportunity to table the 2012 strategic focus. The Committee was concerned about the formula used in provincial allocations and how the business plans for Human Settlements would be implemented at provincial level. The Department was happy to table this presentation then before the Budget Vote to reflect on how it had carried out its provincial allocations. The strategic focus was informed by Outcome 8 (Sustainable Human Settlements and Improved. Quality of Household Life) and various Cabinet priority projects. The budget plan reflected the metropolitan and provincial allocations and priority programmes. In the last technical MinMEC, the NDHS had shared the allocation formula with provincial Heads of Department (HoDs) who had since submitted their business plan on how they intended to spend the allocation. On 10 May, the Department would have a MinMEC where the information on how the budget had been structured and the provincial allocation formula would be discussed. The Portfolio Committee had raised concerns About Treasury’s formula for provincial allocations and the Department was currently engaging on the matter.

Ms Funani Matlatsi, NDHS Chief Financial Officer, presented the draft allocation to provinces. In terms of the Medium Term Expenditure Framework and Division of Revenue Act, the NDHS received an amount of R25 billion for the 2012/13 financial year. The total budget until the 2014/15 financial year was R 30 billion. The NDHS’ budget focussed mainly on the Housing Development Finance programme which took about 93% of the entire R25 billion. The conditional grants, Urban Settlements Development Grant (USDG) and Human Settlement Development Grant (HSDG) had a total of R23 billion. The NDHS was concentrated on five programmes: Administration received R243 million, Housing Policy Research and Monitoring received R46 million, Housing Planning and Delivery Support implemented at provincial level received R236 million, Housing Development Finance constituted the largest slice of the budget with R24.5 billion. The Strategic Relations and Governance function, mainly concerned with Intergovernmental Relations (IGR) issues, had R157 million. The focus of the presentation was to dwell much on the HSDG grant with a total allocation of R 15.7 billion. USDG took R7.2 billion, and all housing institutions supporting the work of the NDHS received R912 million as capital and operational budget. The bursaries scheme and UN Habitat received R5 million which might not be used at all but was part of the transfers. The R15.7 billion HSDG allocation was the main focus of the NDHS which dealt with sustainable Human Settlements. It had been transferred to all provinces using the formula devised by National Treasury. The Eastern Cape, North West, Limpopo and KwaZulu Natal were the provinces with the bigger allocations. Included in the R15.7 billion was R204 million set aside for Disaster Relief programme in all provinces except the Western Cape. The R7.3 billion USDG was allocated to accredited Metropolitans with Eastern Cape receiving R1 billion for Nelson Mandela and Buffalo City, Free State receiving R485 million for Mangaung, Gauteng receiving R3.5 billion for Erkurhuleni, Johannesburg and Tshwane, KZN received R1.2 billion for Ethekwini and the Western Cape had R971 million. Of the HSDG R15.7 billion, about 20% of this was used for National Priority programmes.

The Directors General said that the NDHS had decided to amend the presentation it had submitted to the Committee because it dealt with the Strategic Plan and Annual Performance Plan without detailing the provincial allocations.

Mr Anton Arendse, Chief Director: Human Settlements, presented on the NDHS Business Plan in terms of the provincial allocations. This would unpack how the NDHS budget vote was to be spent, reflect on the relationship between the USDG and the HSDG grant and how provinces and metropolitan municipalities were aligning their programmes with the grants. Issues covered were related to the legislative prescripts, provincial allocations, and key deliverables for the 2012/13 year such as Outcome 8, National Priority Projects, as well as the utilisation of the USDG by metropolitan municipalities. All provincial plans had been approved and the main tranche of the Division of Revenue Act (DORA) had been paid to provinces. The provinces of Gauteng, Eastern Cape, KZN and Northwest had the largest allocations (refer to slide 4 for breakdown of figures). It was the first time that the NDHS and provinces were implementing a new business plan and it had worked closely with Provincial NDHSs and Treasury in crafting the new plan. The NDHS allocations were no longer influenced by subsidy but a significant amount had moved to items beyond the provision of shelter. The NDHS had been the primary driver of Outcome 8. About 400 000 units would be upgraded between 2010 and 2014 and about R4, 5 billion would be spent on in situ slum upgrading representing about 28% of the HSDG (refer to slide 7 for breakdown of figurers). Under the current financial year the total number of units and sites to be upgraded would be 98 000. With respect to affordable rental housing, just under 10% of the HSDG (R1.5 billion) would be spent, the bulk of it in Gauteng, Eastern Cape and KZN (refer to slide 10). About R61 million would be spent on the Finance Linked Individual Subsidy Programme (FLISP) and if that amount was added to other programmes, such as credit linked, the total affordable finance would be R215 million. In terms of land acquisition, about 3% of the HSDG would be used. Slide 14 showed prescribed minimum allocations and the realistic amounts provinces had indicated they would spend for informal settlements upgrading, rental housing stock, housing finance and land.

For the rectification programme, the NDHS had committed about R930 million. Provinces that had made the highest commitments tended to be those that had been the first in doing rectification programme. For instance, the Eastern Cape would commit R415 million for 5 700 units, KZN R274 million for 3 249 units and Limpopo R61 million for targeted 881 units.

Rural Development was a priority for the NDHS which planned to spend over R2.2 billion (about 14% of the HSDG). About R944 million would be committed to priority projects. More resources were needed in order to realise the completion of the projects. For Disaster Relief, about R71 million would be spent. In the last financial year the R180 million that had not been used for disasters had since been rolled over hence the total allocation was R550 million. In slides 21-25 on provincial priorities, pie charts represented how provinces had distributed their allocation guided by priorities. Projects that were written other were those that were important in the delivery strategies of provinces but had not been reflected in the presentation especially in Gauteng. Slum upgrading was not a priority in areas that had stable in-migration patterns.

About R7.3 billion USDG would be split among the 8 Metropolitan municipalities around the country and the HSDG grant of R4.9 billion would be spent on the Metros. If the total USDG was added to HSDG the total was R23 billion and about 54% of that money would be spent in the 8 Metropolitans. According to the National Planning Commission in 2030 about 70% of South Africa would be urbanised and the Metros were expected to absorb millions of people. About 42% of the NDHS allocations would be used for Outcome 8 and 27 other National Priority projects such as rectification and Rural Finance and 31% for NDHS mainstay programmes such as backyard rentals.

The Director General said that the implementation of the budget would be integral going forward. The issue of delivery was not about money but the implementation of programmes. The NDHS would distribute provincial business plans to Members to aid their oversight role and improving delivery. The Project Management Unit (PMU) would play a pivotal role in implementing the business plan.

Discussion
The Chairperson said the presentation had empowered the Committee prior to the impending budget vote speech. Neither the NDHS nor the Committee could function independently of the other. There was need for collaboration.

Mr Z Mlenzana (Eastern Cape) appreciated the NDHS for a good presentation adding it had come to understand the stance required by the Select Committee. How was the NDHS linking with and enhancing the capacity of accredited municipalities. When would the NDHS implement the rectification programme as it would not be allowed to persist forever?

Mr Chainee, NDHS Deputy Director: General Strategic Planning, said the accreditation of municipalities was part of the intensive integration process at provincial and municipal level which included grants such as Electricity, Transport, USDG, HSDG and the Municipal Infrastructure Development Grant (MIG). Through the National Upgrading Support Programme (NUSP) and other initiatives, the NDHS was addressing the issue of capacity. About 49 municipalities were being given support to help in informal settlement upgrading, 8 municipalities had been accredited and a further 16 helped where assistance was given not only given to officials but councillors as well.

Ms M Thembe (Mpumalanga) was happy about the presentation which had followed the requests of members. When would the NDHS capacitate unaccredited municipalities and what efforts were being done to develop rural areas? The rural areas were sidelined in the NDHS programmes. It was doubtful that by 2030 most of that the country would be urbanised. The budget had to focus more on rural areas.

Mr Groenewald (North West) thanked the NDHS for the presentation but warned that there was a need for realistic criticism, adding the NDHS should give true replies because people were demanding answers. It was nice to listen to good presentations but they were supposed to be implemented. Last year the Minister had made a lot of promises in his budget speech in the NCOP but six months down the line the Committee visited Nquthu in KZN where about 500 houses had been demolished and no construction was taking place. The Committee was very concerned about the appalling conditions of most rural areas. Most of the Members hailed from that part of the country. In Mpumalanga, the mining community had cracked houses and Members got the impression that they were not assisted in any way but relied mainly on the mines to build houses. There was a lot of infighting amongst the National government, local government and the mines. What was the relationship of the NDHS with mines?

Mr Groenewald pointed to the bad contracting that was taking place and said it would cost millions of rand to rectify the houses that had to be demolished. What efforts were being done to curb the practice? Most contractors would build houses but after they received some money, they left projects unfinished. In North West alone it would cost R70 million to renovate poorly built houses. The problem was also common in his constituency - Rustenburg especially in Vryburg. There a contractor had started a project in section 25 and after he receiving R28 million, he abandoned it to begin on a new site in section 28. There was a lot of fraud taking place and people lived in these bad houses. It was shocking that the NDHS was saying the NPC had estimated that 70% of South Africa would be urbanised by 2030 given that there was no focus on the rural areas which had more serious problems. If houses were not constructed in rural areas, people would emigrate to urban centres. He wanted to know why the USDG allocation to the Western Cape was lower compared to other Metros like Gauteng and Erkurhuleni. With regards to rental housing, was the NDHS aware of its total assets per province? Most people lived far from the cities, what was the NDHS doing to reduce travelling cost? The Kutsong project in Gauteng was long overdue. What was the progress so far and what was the estimated cost of the project?

Mr Chainee said as part of the FLISP subsidy programme the NDHS had signed an agreement with Implats in the North West to undertake a housing project for mine workers and the community in the vicinity. Working with the Limpopo province, it had entered into an agreement to build houses along Presidential Infrastructure Projects as well as the Northern mineral belt in Mpumalanga; Ermelo would also benefit.

Mr M Zulu (KwaZulu Natal) said in Ward 9 in Nongoma, houses had approved in 2009 but not allocated, did the NDHS have a monitoring mechanism for projects. What efforts were being done to engage the Department of Land Affairs and Ingwenyama Trust to settle land disputes affecting housing delivery?

Mr Chainee said that they could provide a comprehensive report on how the Housing Development Agency (HDA) had made substantial progress particularly in the identification of private and state land.

The Chairperson said the presentation was accurate and addressed matters of concern to the Committee. He was concerned about the Treasury funding model. The money allocated to the Western Cape was too much, both in the USDG and the Drommedaris project, because they were not delivering on slum upgrading despite the allocations and having no rural area commitment. Money was being used somewhere while the N2 Project was still unfinished and people lived under plastic sheeting in the area. In Nquthu and Msinga, Empangeni, and parts of the North West, they had a dysfunctional sanitation system yet the presentation never made mention of it. The NDHS had initiated a project to demolish bad RDP houses but the NDHS had not mentioned how many were identified, how many demolished and how many would be rebuilt. Did the NDHS have the capacity to monitor budget allocations outside the PMUs and why were the people inflating land sold to the NDHS. Did the NDHS have the exact size of land belonging to it? The issue of slums was mushrooming and a joint meeting with COGTA would be held to iron out the matter.

The Director General said the provincial allocation formula was of particular concern to the Portfolio Committee as well but the NDHS did not have the power to annul it as it had been designed by National Treasury. The critical issue, however, was how provinces allocated their funding, determined by priority areas. The NDHS stood guided by the Committee should there be a need to review the funding formula. It was not NDHS responsibility to direct areas of strategic importance to provinces legally. Its role was limited to advisory guidance on Cabinet decisions, the national policy framework budget vote and State of the Nation Address statements. However, the situation was affecting NDHS performance in terms of Outcome 8 because provinces decided on how and when to spent the budget on programmes. The NDHS had tried to follow Committee recommendations on rural development and the budget was beginning to show commitment in that direction.

With regards to sanitation, the Director General apologised for not reflecting the figures in the presentation but said the NDHS would present its revised strategy to the Committee. A new approach had been adopted on how to implement sanitation, particularly in rural areas. The NDHS was finalising the model as per the transferred function to Human Settlements and was hoping to complete it this week. Fundamental changes to the strategy were expected. The dysfunctionality of the sanitation system in provinces had been raised also by mayors and councillors and that had motivated the modification of the implementation strategy to relax limitation created by Treasury regulations and challenges associated with the transferred function of sanitation.

The Director General said the success of the NDHS programmes depended on effective monitoring of processes and the NDHS had established a Project Management Unit (PMU) to address the matter. At MinMEC level it had taken a decision that all provincial departments of Human Settlements should established PMUs linked with NDHS and municipalities. The NDHS was working on improving intergovernmental relations and assisting municipalities that had been identified with particular projects to ensure the implementation of the USDG. The provincial HoDs had a mammoth task of ensuring the implementation of the PMUs and success of programmes without which the capacity to implement and progress could not be ascertained. It was in the interest of service delivery that the NDHS implemented an effective monitoring system in all its mandates. The demolition and construction of bad RDP houses was to be addressed as well in the PMUs and a decision had been taken at MinMEC that the NDHS was to coordinate the national rectification programme and a budget had been set aside for that. Specific areas of focus in different provinces would be identified and a programme of action would be implemented.

The Director General said that to curb repeating the rectification process, the NDHS was putting in measures to deter any limitations that could lead to that so taxpayers’ money would not be wasted. The NDHS had engaged the Special Investigating Unit (SIU) to flush out contractors that were responsible for shoddy housing projects and a number had been identified, brought to book and some money had been recovered. If possibly the NDHS was willing to submit a status report on how the NDHS dealt with fraud and corruption. Going forward the NDHS would make sure that projects were monitored by the National Home Builders Registration Council (NHBRC) and measures had been put in place to ensure that proper business plans were submitted as well as ensuring that every new project was registered with the relevant entity so as to mitigate incompetence. Opportunistic matters related to corruption and land issues such as inflating prices were referred to the SIU for investigation. Monitoring of funds spending would be upped and if possible independent auditors would be solicited. A Human Settlements basic service task team had been set up to deal with mushrooming informal settlements, working in cooperation with relevant municipalities as well as the Department of Cooperative Governance (COGTA).

Ms Matlatsi said the provincial allocation formula was predetermined by Treasury and it was necessary to be approved as it was during the allocation time. However, the NDHS had found out that it was skewed and there was no equity especially if the need in the Northern Cape and rate of influx was anything to go by. The NDHS was currently reviewing the process with National Treasury in terms of factors to consider as well as establishing whether the money served the intended purpose. For example in the Western Cape money was being used where it had not been allocated (destitute). With reference to Drommedaris, the R59 million for the current financial year was not planned for in their business plan meaning they did not need the allocation. Thus the business plan for the project was being reviewed. On the matter of shoddy contactors, she highlighted that Limpopo had taken a decision to blacklist such people and other provinces were being urged to fallow suit. Other measures included withdrawal of certificates and removing them from the NDHS database.

Ms Themba asked the NDHS to explain the Municipal accreditation process.

Mr Chainee said the NDHS conducted compliance assessment to check whether the municipality was ready but the provincial MEC was tasked with the actual accreditation. Evaluations had been done and submitted to respective MECs and HoDs and they were currently in the process of entering into implementation protocols. The NDHS accreditation target was 27 municipalities by 2014.

Mr Mlenzane suggested that a session be held after the Budget Vote together with the provincial leadership and the NDHS to engage on the expectations of the Select Committee from provinces.

Mr Groeneward asked how the NDHS was dealing with the issue of traditional leaders on land matters.

The Director General said it was a critical matter which needed to be dealt with for the benefit of the country as a whole and there was need for interdependence between the NDHS and the local government but the Ingwenyama Trust issue rested with traditional leaders. The NDHS would forward to members the business plans of all the provinces to aid it in its oversight functions

The Chairperson emphasised the Committee’s happiness with the presentation and appreciated the presence of the Director General and his delegation. If possible the NDHS should present to the Committee on how it was going to monitor the DORA and account for monies allocated to provinces. Shoddy contractors should be exposed and the NDHS was supposed to visit the projects to verify if procedures were being followed or not as there was no monitoring in some of the projects.

The meeting was adjourned.

Audio

SC PService: Briefing by the Department of Human Settlements on their Strategic Plan and Budget Vote 2012

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