Human Settlements Development Grant irregularities in Free State: Ministerial briefing, Departmental briefing on Recommendations of 6th World Urban Forum

Human Settlements

22 August 2012
Chairperson: Ms B Dambuza (ANC)

Meeting Summary

The Minister of Human Settlements briefed the Committee on the results of the Ministerial Task Team report and the performance of the Human Settlements Development Grant for the Free State Province. The Auditor-General had conducted an audit, and many very serious irregularities had been uncovered. The Free State had experienced leadership instability, capacity problems and poor information management. It was now discovered that managers had allocated resources to suppliers without approval from the MEC, although the new MEC had taken a bold stance and had dismissed a number of these managers. Budgets had not been linked to specific projects and timelines, checks were not done on beneficiaries and “ghost houses” whose beneficiaries were unable to be verified were listed. There were serious issues around advances of payments to suppliers and contractors, to the extent of R481 million, and “shocking” amounts of irregular expenditure. Some houses were built beyond the stipulated policy and sizes, and the allocation of these had to be investigated. There was now a shortfall in funding, which meant that any future allocations would be used to plug the gap. The Minister suggested that the Auditor-General should present and explain his report, and that National Treasury, who was following up the process, should also be called in. He and the national Department of Human Settlements (DHS) were following up on all instances and the DHS would be formulating a report.  

Members appreciated the Minister’s frank briefing, and insisted that a special audit be conducted by the Office of the Auditor General, and that National Treasury be involved in the process. They enquired about the capacity of the DHS to handle the situation and isolate the root causes of the issues. They pointed out that the Eastern Cape provincial department also showed problems. All Members were insistent that timeframes for completion of the investigations be set and communicated. The Minister responded that he was fully appreciative of his responsibilities both to Parliament and the public, would ensure that, in future, no appointments would be made of those without capacity, agreed to facilitate the special audit and undertook to deal with corruption and mismanagement.

The Department of Human Settlements briefed the Committee on the 6th World Urban Forum which was to be held in September, and to which the DHS would be sending a delegation of 12 people. The World Urban Forum was set up by the United Nations to examine pressing issues of rapid urbanisation and how this impacted on communities, cities, economies and policies. South Africa’s participation was in line with foreign policy objectives and provided the opportunity to participate in the debates, share challenges and seek solutions. It had consulted widely in preparation for the Forum and was particularly interested in learning more on development of an Urban National Policy, towards a White Paper on Human Settlements, planning for rapidly-urbanising cities, densification strategies, alternative sources of funding for services in informal settlements, and encompassing youth as transformers of cities, as well as catering for women, children, the elderly, and persons with disabilities. Members asked several questions about the composition of the delegation, and expressed concern that only at this late stage was the Committee being told of the Forum, whilst political representatives were apparently not included. They commented that often when officials only attended such conferences the information gained was not used constructively as officials could not translate it into policies. They asked about youth involvement, and whether other South Africans would attend. Members urged that the delegates ensure that the right information was presented, that the term “urban” had to be properly defined, and that there must be a focus on strategies to transform informal settlements to developed towns and cities.

Meeting report

Ministerial Sanitation Task Team report and expenditure of Human Settlements Development Grant in Free State:  Minister of Human Settlements briefing
Mr Tokyo Sexwale, Minister of Human Settlements, noted that when visiting Parliament he was fully cognizant of his responsibilities as a Member of Parliament, not just a member of the Executive, and also of the need to account to the people of South Africa.

He noted that the Ministerial Sanitation Task Team (STT) was due to finalise its report in the week of 27 August 2012 and suggested that it would be useful for the Committee also to take a briefing on that report.  

Mr Sexwale said that there had been some serious questions asked around the expenditure of the STT. The Office of the Auditor-General (AG) had conducted an audit at the Free State Department of Human Settlements, and had met with officials of the Department. The picture that was emerging was not good. The situation had been discussed at MinMEC and it was agreed that the Portfolio Committee should be informed about the situation. Mr Sexwale was taking critical steps to address the matters raised, and he had been in discussions with the National Treasury. He would also table the full report of the AG at an appropriate time, but warned that it cited many very serious issues.

The problems in Free State basically arose from leadership instability, capacity problems and problems with information management. Senior Managers had allocated resources to suppliers without approval from the MEC. However, the MEC was a bold lady who, having found out about the problem, had dismissed some senior managers. She was new to the position but had managed to detect problems. Some of these problems included the fact that budgets were not linked to specific projects and timelines. There were no checks on beneficiaries. Some houses that were listed as having been received on the lists from the provincial department could not be verified and these were referred to as “ghost houses”. There were serious issues around advances of payments to suppliers and contractors. A huge amount of irregular expenditure was noted, which Mr Sexwale described as larger than he had seen before, and to a “shocking” degree.

Advances that were made in terms of the grant did not tally over the last three years and the current financial year. He gave the example of advance payments of R481 million on behalf of contractors given to suppliers. There were problems that some houses were built beyond the stipulated policy and sizes. This in turn raised the questions of who was being allocated these houses.

Mr Sexwale noted that service delivery progress, and the process of the dignifying of people, were being hampered by the conduct of certain individuals. During the last financial year, it was recorded that the Free State had a huge gap in human resources.  In this financial year, the Free State provincial department had ended up with a major financial shortfall, and any future financial allocations would in effect be used to try to plug this gap. He suggested that the Auditor-General should be invited to present and explain the AG’s report to the Portfolio Committee. He also proposed that the Committee should interact with the National Treasury who were also following up on the process, having alerted the national Department to the problem.

Mr Sexwale said that there were clear indications of wrongdoing somewhere. However, he and the national Department were committed to resolving the issue. At the moment, the national Department was making assessments and would shortly be making its recommendations shortly. Mr Sexwale acknowledged his own responsibility as the Executive authority. This briefing was in the nature of an introduction as there was far more that would emerge on the situation in the Free State.

The Chairperson thanked Mr Sexwale for the briefing. She said that this was now the second instance of problems in this Department, as the officials from the Eastern Cape had already been called by the Committee. She asked that Members confine themselves, at the moment, to raising issues from this presentation on which further clarity was needed.

Mr J Matshoba (ANC) agreed that the Committee should call for the Auditor General and the National Treasury to provide presentations on the matter.

Ms J Sosibo (ANC) asked Mr Sexwale if there was a problem with the MECs in the Free State, noting that the current incumbent was the third MEC to be appointed for human settlements since 2009.

Ms P Duncan (DA) asked how the Minister felt about seeking assistance from the Department of Performance Monitoring and Evaluation, which played an important role. She also asked what the Minister was intending to do about the Free State situation.

Mr S Mokgalapa (DA) said that the situation now presented by the Minister’s report was in fact similar to what the Portfolio Committee found when it did its oversight. The Minister and the national Department of Human Settlements (DHS) had made interventions. However, he asked how much time was anticipated to resolve the matter. The problems seemed to be increasing each year.

Mr K Sithole (IFP) asked if the DHS had the capacity to deal with the matter.

Mr R Bhoola (MF) thanked the Minister for the honest report and assessment. He believed that the Committee would have to assess the report thoroughly. He urged the need to intensify the role of oversight and to take the issue of monitoring and evaluation further. These manipulative and fraudulent actions were likely to set the finances of the Free State back ten years.

Ms M Borman (ANC) said that the country was in a week of mourning, and there was general dissatisfaction and unrest. It was important for the Minister to give definite timeframes to the Committee in regard to the proposed actions and recommendations.

Mr Sexwale said that monitoring and evaluation was relevant, but it was important for Members to remember that service delivery was not just the concern of one department. The departments worked as a team, and there were high level collaborations between the Department of Human Settlements and other monitoring end evaluation bodies. In relation to the question on capacity, Mr Sexwale said that the Ministry was going to ensure that in future no officials would be appointed who lacked capacity, and this was particularly true of the Free State.  Time was of the essence and the Ministry was going to act as fast as it could. He agreed that it was important for Parliament and the Ministry to interact, as all the instances of corruption and mishandling needed to be uncovered. It was in the interest of the people of South Africa to have all the issues out in the open. He agreed that service delivery protests could not be answered by calling in the South African Police Service (SAPS) alone, as SAPS could not cover up for the lapses and failings of officials, and this also laid SAPS open to being discredited through no real fault on their part.

The Chairperson said that the Committee was very dissatisfied with the situation in the Free State. It would be important for the Minister to assist the Committee in identifying the relevant issues. The Auditor General had to be involved in the process, and special audits were needed.  However, she thought that no external auditors were going to be used. In a previous meeting, held between this Committee, the Standing Committee on Appropriations, the Department of Human Settlements, the Department of Cooperative Governance and Traditional Affairs, the South African Local Government Association and the National Treasury, it had been agreed that all the stakeholder departments and institutions who were concerned with the grants and service delivery in general had to work as one team, and expend even greater effort on resolving the serious issues of service delivery and sanitation.

Mr Sexwale said that he would facilitate the audit by the Auditor-General. He also gave an undertaking to deal with the corruption and mismanagement in the Free State.

Ms Borman said that the audit had to be done as soon as possible. It was important for the Minister to communicate the timeframes to the committee.

Mr Mokgalapa welcomed the undertaking and commitment by the Minister and said that the Committee was willing and ready to cooperate with the Ministry.

Mr Bhoola said that the undertaking by the Minister was a major indicator of progress.

South Africa’s Participation at the 6th World Urban Forum: Department of Human Settlements (DHS) briefing
Mr William Jiyana, Chief Director: Stakeholder and Intergovernmental Relations Coordination, Department of Human Settlements, outlined the background and rationale for South Africa’s participation at the 6th World Urban Forum (the WUF). This had been structured to include dialogue sessions, networking events, roundtables, youth and women assemblies and exhibitions. The 6th WUF was going to be hosted in Naples, Italy from 1 to 7 September 2012, under the theme “Urban Future”.

The WUF was established by the United Nations to examine pressing issues of rapid urbanisation and how this impacted on communities, cities, economies and policies. South Africa’s participation at the WUF was in line with the country’s foreign policy objectives, which included strengthening of the cause for Africa. The WUF provided an opportunity for South Africa to participate in the debates, share challenges and find solutions to topical issues of human settlements and urban development.

The dialogue sessions were going to be held under the sub-themes of: Urban Planning, Equity and Prosperity, Productive Cities, and Urban Mobility. The Department of Human Settlements was developing a concept for participation in the exhibition that would encompass all spheres of government policies, in line with the themes of the event.

In preparation for the WUF, the Department of Human Settlements had established an internal task team that dealt with content, logistics, exhibition and development and management of the programme for participation. The preparatory process involved partners from the United Nations, Departments of Cooperative Governance and Traditional Affairs, Tourism, Water and Environmental Affairs, Metros, the provincial Departments of Human Settlements, housing institutions and civil society organisations. The first preparatory workshop had already taken place on 8 June 2012 and a follow up session was held on 26 July 2012. The follow up session provided political principals with feedback from the previous preparatory meeting, and was intended to seek endorsement on the way forward, in terms of content development and key messages.

Mr Jiyana said that the content for the WUF was being developed around the status of South African human settlements, the right to adequate shelter, as enshrined in the Constitution, the success of human settlements programmes, the settlement patterns in the country, urban-rural linkages, and challenges in providing housing and basic services. The content also included the Urban Future and Vision 2030. Particular areas of interest, where the DHS was hoping to learn lessons from others, included development of an Urban National Policy towards a White Paper on Human Settlements, planning for rapidly-urbanising cities, densification strategies and alternative sources of funding for services in informal settlements. Another area of interest was how to enhance the involvement of youth in human settlements and use the youth as transformers of cities. There was also interest in how other cities had included women, children, the elderly, and persons with disabilities and ensured that these vulnerable groups were safe and benefited from city wide strategies.

Ms Borman asked how large the South African delegation attending the WUF would be, and wanted to know who would be covering its expenses.

Mr Jiyana replied that the Department had a team of 12 delegates, and their expenses were being paid by the DHS. Anybody else was able to apply to attend the WUF, so although these would be the only delegates for whom the DHS would be paying, it was not sure how many South Africans in total would be attending the Forum. However, as far as it could, the DHS was trying to coordinate all South Africans whom it knew were attending into one team, so that they carried a single message and could speak in one voice.

Ms Sosibo asked if that delegation included mayors and municipal councilors.

Mr Jiyana replied that the Department had contacted Mayors and municipal councilors, asking them to indicate whether they were interested in attending the WUF, and it was now up to them to confirm attendance for the WUF.

Mr Mokgalapa said that forums such as the WUF were information and policy sharing platforms, which required the presence and voice of politicians, not only officials. He commented that officials were in a habit of attending these conferences by themselves and gathering the information, but because the implementation of the information gathered required the intervention and will of politicians, the exercise was often wasted, as implementation did not result.  He gave an example of the White Paper that Mr Jiyana had mentioned, saying that this was a very serious issue, yet this was the first time that the Committee was being made aware of it. He commented that the Committee Members should have been  given better information on the WUF and invited to play a key role alongside the DHS. 

Mr Jiyana replied that the organisers of the forum were not very well-versed with South African protocols and politics, so they had considered that Ministers were the relevant politicians who should carry the information to their respective governments and countries. It was important for the Department to engage in lobbying, and ensure that some of the protocols and procedures were changed to accommodate the politicians. 

Mr Sithole asked how many youth were involved in the delegation to the WUF, and, if none were involved, whether the Department planned on involving the youth only at a later stage.

Mr Jiyana said that the youth were invited for the Forum, and the Department wanted to learn new strategies from the WUF on how to include the youth in its policies and operations for urbanisation.

Ms M Njobe (COPE) asked who comprised of the delegation, and how inclusive that delegation was. For instance, she asked if it included women, youth, children and persons with disabilities. She also wanted to know if the DHS had consulted with experts and academics on the subject matter. She asked if Africa participated actively on the WUF, or whether it concentrated upon developed nations. She also asked what could be done to reverse rural-urban migration.

Mr Jiyana replied that the WUF was open to everyone who was interested in the theme. The Department had extended the invitation to experts and academics. These people had initially shown interest, but when they realized that the DHS was not going to pay their expenses to attend, they had withdrawn.

Ms Duncan said that it was important for delegates to give the right information at such forums, and not to paint false pictures. She gave an example of the issue of densification, and the statement that South Africa was “running out of land”. That statement was not in fact true. Instead, the main problem was how properly to plan for use of the land that was available.

Mr Jiyana replied that the information given and presented by the delegation was backed by research and verified data. The information reflected the real situation in South Africa. The truth was that many people preferred living in the urban areas, and that although there was substantial land in the rural areas, people simply did not want to live there.

Mr Matshoba reiterated that the Committee had not been told enough about the WUF. It was not right for the DHS to be taking such serious steps, in an international Forum, which had huge policy implications, without informing the Committee. If DHS did not disclose such serious matters to the Committee, then the Committee would not be able to play its oversight role, and would be prevented from adequately representing the people.

The Chairperson said that it was incorrect that the Committee was not informed of this well ahead of time. She reminded the officials that the Committee was in the habit of going on study tours with officials from the Department. This was also supposed to be the case when the DHS engaged on serious international issues. The organisers of the forum might well have made a mistake, but it was important for the officials from the Department to communicate efficiently with the Committee on the issue.

The Chairperson said that the term “Urban” needed to be classified and defined. She felt that doing this would help in the presentation of the challenges faced, and coming up with possible recommendations. A major concern of the Committee was that the officials and delegates should learn and acquire strategies on how to transform informal settlements to developed towns and cities.

The Chairperson said that after attending international forums such as the WUF, the Department of Human Settlements had to make plans to organise its own local and national urban forums.

The meeting was adjourned.