Urban Settlements Development Grant performance by Nelson Mandela Bay & Buffalo City Metros

Meeting report

Introduction by the Chairperson
The Chairperson acknowledged the presence of the accounting officer for the province, the MEC for Human Settlements and Safety for the Eastern Cape, plus the Head of Department for Human Settlements in the Eastern Cape. The focus of the meeting was to have the two municipalities account for Urban Settlements Development Grant (USDG) performance with regards to Outcome 8: the upgrading of informal settlements, the provision of basic services and the availability of land for human settlements.

Comments from the Eastern Cape MEC for Human Settlements and Safety
The Eastern Cape MEC for Human Settlements and Safety, Ms Helen Sauls-August, thanked the Committee for its effective oversight. Human Settlements was the pinnacle of government service delivery and it was important for stakeholders to understand the magnitude of the deliverables and output. The Eastern Cape had huge service delivery challenges and the USDG was going to be used to speed up service delivery in the province. There was a lot of pressure on the metros as they were the centres of immigration and unwarranted urbanisation and this had a direct impact on their service delivery. It was important for the metros to account how the USDG was spent in line with the plans submitted.

Nelson Mandela Bay Metropolitan Municipality presentation
The Acting Mayor for the Nelson Mandela Bay Metro, Mr Balu Naran said that the NMBM was facing a number of challenges which were going to be highlighted in the presentation. Based on the statistics, NMBM had a backlog of more than 71 000 houses to be built and the need was growing on a daily basis. The challenge was not only about building houses but also putting in the infrastructure to meet the demands of the citizens and the growth of the city. Major projects were being carried out and these projects kept attracting more people into the city. The city was hopeful that the expectations could be met although the city had faltered in some respects and the political leadership of the city was committed to filling the many vacancies in the city so as to improve capacity and performance with regards to service delivery. There were two adverts out for the appointment of a Municipal Manager and a Chief Financial Officer.

The Acting Municipal Manager for the NMBM, Mr Themba Hani, commented that the municipality’s organisational arrangement which was last reviewed in 2003 was in the process of being reviewed and this process was going to beef up the capacity within the municipality.

The Assistant Director for Human Settlements in the NMBM, Mr Joseph Tsatsire, presented and began by noting that the municipality had 254 007 formal households as against 22 411 households in informal settlements. There were 81 informal settlements, 49 000 backyard shacks, and over 23 000 bucket toilets in the informal settlements. There was a total housing backlog of 71 411 units.

The 2011/12 USDG financial performance showed that a budget of R502 626 000 was allocated and the actual amount spent was R525 027 509 indicating a spending of 104%. The USDG was spent on human settlements, electricity and energy, roads and storm water, water services, sanitation services and public health. 100% of the USDG funding was spent and the remainder 4% was covered from internal funding.

USDG allocations were R592 870 000 for 2012/13, R727 986 000 for 2013/14, and R845 778 000 for 2014/15. For the 2012/13 financial year, the NMBM had allocated R165 868 446 for human settlements, R132 401 554 for water services, R232 600 000 for sanitation and R62 000 000 for roads. This allocation was in support of the eradication and upgrading of informal settlements. The municipality planned to transform the current townships into sustainable human settlements, provide bulk services for new development, acquire land for housing delivery and provide reticulation services for housing delivery thereby eradicating the use of the bucket system. The Committee was presented with nine major human settlement projects within the municipality.

Mr Tstatsire reported on 2011/12 outputs comparing key performance indicators and targets against actual performance.

The methodology was the elimination of informal settlements as well as the use of buckets, reduction of flooding and the provision of serviced sites. The municipality had key sector plans to eradicate informal settlements involving the Informal Settlements Upgrading Plan, the Seven Year Housing Plan (2009-2016) and a Relocation Plan. The municipality was also involved with land asset management and control, social housing strategy, spatial development framework and service master plans. On the strategy for the eradication of the bucket system, the NMBM had approved a housing delivery programme. The Bucket Eradication Programme in terms of the plan submitted to provincial and national would cost approximately R4 394 million over a five year period.

The municipality was aligning the USDG with the Human Settlements Development Grant (HSDG) by preparing serviced sites in advance of applying for project approval for house construction. There was a continual process of three phases: serviced sites, project application and house construction. These processes were monitored through a readiness matrix. For provincial and municipal co-ordination, meetings were held monthly to discuss HSDG project management. Reporting was being extended to include USDG matters such as the readiness matrix, alignment, communication issues, expenditure and deliverables.

Constraints on the eradication of the bucket system
The municipality was awaiting a response from the National Department of Human Settlements for the Metro Business Plan on the Sanitation programme. USDG allocations were inadequate to meet the demands of the municipal programme. The NMBM had considered various sanitation options to eradicate buckets in informal settlements which led to the proposal to construct communal toilet blocks. As a result of the high cost, the business plan was developed for an integrated approach to bucket eradication.

Based on the current situation, the NMBM will have to consider an interim position to eradicate buckets while human settlements are being established. Therefore, NMBM will have to revisit its position with regard to an interim communal block sanitation and develop a business plan to support the funding of this approach to the Provincial/ National Sanitation Programme Managers. NMBM will allocate a portion of USDG funding to implement localised alternative sanitation options for informal settlements.

The delivery of integrated human settlements was critical but the allocated funding streams had to be aligned directly to the delivery mechanism.

The Acting Municipal Manager for the NMBM, Mr Themba Hani, commented on the overspending of the USDG, saying the municipality had spent all of the USDG and had used some of its internal funds for USDG projects.

Discussion
Mr S Mokgalapa (DA) said that the municipality had to hasten filling of vacant post. The problem was that the municipality knew the challenges but it did not prioritise. The presentation did not explain how the USDG had assisted in dealing with the backlog. How many informal settlements had been formalized and how many bucket toilets had been eradicated within the municipality? The municipality was spending most of its money on roads and storm water drainage and sanitation were not prioritized.

Ms M Njobe (COPE) asked why there was overspending when the backlogs were not being handled. The Committee needed reasons for the overspending. How was the overspent money going to be recovered? In the presentation, NMBM was looking at building communal toilets to assist in eradicating the bucket system but communal toilets were no better and were not going to bring any dignity to the people. Were there any contractors who had abandoned projects in the municipality?

Mr R Bhoola (MF) asked what the municipality was doing when it found people who were facing the challenge of poor credit reports. The plan of the municipality to eradicate the bucket system had to be aligned with the USDG, the HSDG and other internal strategies. What was the reason for the paralysis of the unlocked development plans and what was the progress in terms of emerging contractors?

Ms J Sosibo (ANC) asked why there was the huge backlog. How often did the municipality clean the buckets in the informal settlements? How was the municipality planning to recover from the overspending? Was the Transport Department assisting the municipality with regards to the funding for roads and storm water drainage?

Ms M Borman (ANC) said that the report was not adequate as it did not provide any good information. The backlog was so huge and there was no clear plan on how to address the challenge. The Committee wanted to see delivery which was planned, quantifiable and could be monitored. The report was not detailed and there was no information to assist the Committee with its oversight role. The report was muddled and there was no focus. This showed that there was no coordination in the municipality. The report had many words and statements which could not be quantified. The report spoke of eradicating the informal settlements by 2016, had the municipality worked out the costs? The details provided were unrealistic and not measurable.

Ms N Mnisi (ANC) said that the municipality was using the USDG on projects which were not supposed to be covered by the grant. How was the municipality making use of the other grants which could assist them in providing services to communities?

The Chairperson said that the municipality had to establish in clear terms what the purpose of the USDG was. The NMBM had always used the USDG for the wrong purposes. The USDG was solely for infrastructure intended to enhance sustainable human settlements. The Committee did not accept what the report was saying as the USDG had been misappropriated. The Committee wanted the municipality to address the issue of sanitation. Sanitation was a Millennium Development Goal and an international commitment. The NMBM had a big problem when it came to sanitation. The NMBM lacked the political will to address the sanitation issue. The NMBM had previously made a presentation to the Committee which was unsatisfactory and the current report was another unsatisfactory presentation. The municipality kept talking about integration but the report showed nothing to prove that its plans and strategy were integrated. There were no details with regards to a land audit.

The Chairperson asked the NMBM to provide the Committee with its financial statements so that it could investigate the overspending. What did the presenter mean by revolving funds? Who approved the municipal plans and were they aligned with the provincial plans? The municipality had to liaise with other departments to benefit from the funds which it could get from those departments. The officials needed to source grants which could help it complement the USDG. The Chairperson asked what the municipality’s budget was for the gap market, and how many units had been built? The Chairperson identified many errors in the presentation and said that the minor errors were a representation of the bigger errors within the municipality. The constraints and challenges faced by the municipality were not clearly outlined.

Mr Themba Hani replied that the presentation submitted by the focused on the USDG and a demonstration of the constraints faced with regards to sanitation.

The NMBM Director for Human Settlements, Mr Calvin Brummer, said that in terms of the eradication of informal settlements, the metro had started with a programme of upgrading, relocation, and green field relocations. The municipality had upgraded 19 informal settlements and there were 36 informal settlements to be relocated by 2016. The municipality had relocated about 18 000 households to serviced sites and 11 000 units had been developed. The municipality was prioritising families living in stressed areas and this was included in the seven year plan which the municipality was running. A shack-to-shack upgrade was better than staying in a stressed or high risk area.

Mr Brummer said that there was no contractor in the municipality dealing with human settlements who had abandoned a project or a site. The funds for rectification came from the HSDG and not from the USDG. The municipality had 39 000 families living in informal settlements and there was a basic study on this but no study had been done on the backyarders. The positions of the families changed overtime and the municipality did detailed studies in terms of specific projects. The municipality had purchased three parcels of land. The USDG had just been running for one year and the process to acquire land was a long process so the municipality was still in the first phase of land acquisition using the USDG.

The Chairperson asked how big the parcels of land were.

Mr Brummer replied that the parcels of land were only about 2.5 hectares as they were small parcels of land. There was a full land audit which had all the details on municipal land and this could be provided to the Committee.

The Acting Chief Financial Officer for the NMBM, Mr Selwyn Thys, said that the municipality’s budget was not overspent. All the USDG allocation was spent but the extra 4% was sourced from the municipality’s internal reserves. On the matter of detailed spending, the municipality reported on a regular basis to the Department of Human Settlements on the specific projects earmarked for the USDG and the actual spending. The information could be provided to the Committee. The municipality usually included in its budget the grants as allocated by the Division of Revenue Act (DORA). The municipality was working with other departments to source the various available grants in accordance with the DORA.

Ms Borman asked if the National Department was satisfied with NMBM’s planning, budgeting and performance in using the USDG.

The Chief Financial Officer of the Department of Human Settlements, Ms Funaneng Matlatsi, said that a recovery plan was needed for all the metros. The recovery plan was going to include the concerns raised by the Committee which were the same concerns raised by the National Department. There needed to be a meeting with the National Department, the Provincial Department and the municipality to address the challenges identified. From a strategic point of view, the plan needed to be reviewed and amended and adjusted to fit the recovery plan which the Department had presented to the Committee. The National Department had committed itself to improve the plans and it was struggling to determine what the USDG was specifically set out for in terms of the budgeting and planning. The alignment of the USDG and the HSDG was there but it had to be made practical.

Ms Matlatsi said that the National and Provincial departments and the municipality were going to have a meeting and come up with a systematized plan.

The Chairperson asked when the meeting was going to be held and when could the Committee expect to have the systematized plan.

Ms Matlatsi replied that the plan could be brought to the Committee when Parliament returned from recess.

The Chairperson said that the municipality should reprioritize as it worked on the recovery plan. The metro should also engage in collaborative planning in terms of intergovernmental relations.

Buffalo City Metropolitan Municipality (BCMM) USDG performance presentation
The Acting Chief Operations Officer, Mr Thabo Matsiwane, provided a strategic overview, the financial performance and non-financial performance.

In a strategic overview, the Committee was presented with some of the major challenges in housing and remedial actions. There was limited land in proximity to the city and there were land invasions and uncontrolled growth of informal settlements. There was the challenge of limited capacity of bulk services to meet the demands of new developments and the municipality was faced with the challenge of complex and time consuming procurement processes. Illegal occupation of serviced sites and top structures and the slow progress of allocating housing to those with special needs continued to pose as challenges. Mr Matsiwane outlined the status of land acquisition, integrated human settlements and strategic goals and priorities. The BCMM future spatial development was outlined in terms of strengthening the urban core, human settlements and spatial patterns.

Overview of the housing need and backlog
The municipality had 154 informal settlements within the urban areas and 40 000 free standing informal dwellings in urban areas. The total housing needed in BCMM stood at 121 000 units. The estimates for reversing the backlog in the municipality over the next 20 years were presented. An amount of R 1.3 billion was needed for water, R2.1 billion for sanitation, R450 million for electricity, R1.2 billion for roads and storm water drainage and R2.6 billion for housing. The bulk of informal settlements were identified in the Mdantsane area and in the Central East London, Beacon Bay and Gonubie area.

On the performance with regards to Outcome 8, the BCMM five year housing delivery plan was going to fit into the targets as identified by the Provincial Department of Human Settlements.

USDG 2011/12 Financial Performance
With regards to spending levels, spending as per payment at the end of 2011/12 was 36.9% of the total USDG allocation of R423 million. The budget was adjusted downwards by R48.5 million due to project under spending. An internal review was done and the poor spending was attributed to poor planning, the budgeting for many projects in one financial year, legal challenges, disjointed USDG project coordination and ineffective project monitoring. The total USDG funding was R423 446 097 and spending was 36.9%. Funding to be redirected for land acquisition totaled R85 648 317.

Non-financial Performance
On bulk infrastructure, 2 400 rural toilets were provided and 25 kilometres of roads were surfaced. Bulk water and sanitation infrastructure projects were committed and rural household projects were provided. A progress report on informal settlements upgrades, transport planning and operations and human settlements was also provided.

On the utilization of roll-over funding, an application was made to the National Treasury on 30 August 2012 to request for the roll-over of R182 million of the unspent conditional grant funding for committed projects. Mr Matsiwane presented to the Committee the 2011/12 USDG capital expenditure per project as at 30 June 2012. The outline detailed project description, the approved budget, the budget adjusted, the expenditure and the variance against approved budget. A total of 70 projects were presented.

With regards to the alignment of the USDG with the HSDG, the alignment of the 2012/13 to the 2014/15 targets was funded from the HSDG and the internal services and other bulk infrastructure upgrade was funded from the USDG. The BCMM outputs for 2012/13 and the outer years were outlined.

In the execution of the BCMM’s capital investment programme over the next five years, focus was going to be placed on maintenance, land acquisition, upgrade and improvement of the infrastructural network of the Metro. The municipality required support from various key national and provincial departments to enable the successful development of sustainable human settlements for its future development trajectory. A multi-year budgeted approach had been mainstreamed in the municipality’s project planning for the current financial year. As part of a turnaround strategy, the metro had resolved to establish an Enterprise Project Management Office to drive, unlock high impact projects, coordinate, support, monitor, evaluate and report on the grant funded projects (see document for full details of presentation).

Discussion
The Chairperson said that the report was an honest report and actually showed the situation on the ground.

Ms Borman said that the BCMM was trying to deliver as per its mandate. She asked if better management by the municipality could improve the situation of illegal land occupation. BCMM had 150 informal settlements within the urban area so what was the required number of housing units in the informal settlements? A big concern was the under spending and there was no excuse for under spending considering the huge backlog.

Ms D Dlakude (ANC) said that the provincial and local authorities had to give the BCMM the support it needed to continue delivering services. Was the BCMM accessing grants from the Department of Transport so that it could get assistance with its roads and storm water projects? Were the housing projects enrolled with the National Home Builders Registration Council (NHBRC)? Were there any bucket systems being used in the municipality and were the informal settlements serviced?

Mr Mokgalapa said that the municipality was doing a good job in unlocking the problem of deserted projects and correction of defaulting contractors. Was the BCMM not placing a lot of priority on other social issues and using its USDG on wrong projects? Were there not other grants which could be used for the projects rather than using the USDG? How many informal settlements had been formalized? The spending of only 36% of the USDG was unacceptable.

Ms Njobe said that it was true that the metro was still in a transitional period but the transition should not be prolonged as it was going to raise questions as to whether the municipality was ready to become a metro.

Ms Mnisi said that the USDG had to be spent on the right projects. It was interesting to see that the budget for sanitation was the largest.

Ms Sosibo asked if the staff component of the municipality was sufficient or were there still a lot of vacancies.

The Chairperson asked what the situation with the Cuban professionals was. Had the BCMM benefited from the deployment of officials from the Department of Public Service and Administration (DPSA)? What was the municipality doing to access the various grants which were available in certain departments? It was important for the municipalities to access the other grants so as to complement the USDG.

The MEC for Human Settlements in the Eastern Cape, Ms Helen Sauls August said that the Chairperson and the members had given the way forward on the challenges facing the municipality. In the province, use had been made of the Cuban professionals although there was a problem of language and communication. The province was engaging with the various municipalities with regards to the housing needs register and how it should be done. Both the NMBM and the BCMM had the potential to rise above the challenges which they were facing and there was the need to make the human settlements function central to the delivery of services in municipalities.

A Councillor for the BCMM, Ms Nomiki Mgezi, said that BCMM appreciated the comments and that the municipality was going to take the concerns which were raised seriously and would ensure a more hands-on approach to service delivery.

The meeting was adjourned.