Department of Human Settlements on its Annual Report 2011/12

Committee: Human Settlements

Chairperson: Ms B Dambuza (ANC)

Date of Meeting: 11 Oct 2012

Summary

The Department of Human Settlements (DHS) presented its 2011/12 Annual Report. It had received an unqualified audit report, but several matters of emphasis were raised, and the Department was quite clear that it realised the seriousness of this, particularly since some were repetitions from previous years, had put initiatives in place to address them and was determined to improve its status. There were significant areas of underspending, and much of the presentation focused on these. Overall, the Department spent R22.5 of the R22.8 billion budget. Most of the under-spending related on moratorium placed on filling vacant posts and programmes that could not get started. The Rural Household Infrastructure Grant (RHIG) had shown underspending since being transferred to DHS. It had achieved only 30% spending, with R70 million underspending, and a rollover was requested. The Urban Settlements Development Grant (USDG), which was in its first year, also showed unsatisfactory performance. RHIG was an area of under-spending since the grant was transferred to DHS. Other issues raised included a failure of the DHS to comply with requirements to pay invoices in 30 days, and incorrect matters of Supply Chain Management, resulting in a review of that policy. In future a Bid Specification Committee would be vetting advertisements prior to evaluation in an attempt to improve procurement. It was indicated that there were some matters where the DHS was not entirely in agreement with the Auditor-General, and these would be detailed and presented in a separate report on another occasion. In general, it was accepted that the findings on asset management were a challenge, and more attention was needed to proper protection of state property. There was significant work that had to be done that involved provinces and municipalities, especially around utilisation of the grants. Some of the aspects that were incorporated into the Turnaround Strategy were fully debated. During the discussion Members also raised a number of points about this strategy and what it was hoped to achieve.

DHS noted that the entities’ performance was also being checked, both to ensure that they aligned with the DHS priorities and to try to achieve improvements. The Social Rural Housing Authority had approved four social housing institutions and 14 were conditionally approved. The Housing Development Agency (HDA) had a vital function around release of land. There were challenges in the gap housing market and there were attempts to stabilise the National Home Builders Registration Council, which had shown worrying lack of compliance with financial reporting standards.

Most of the R6 billion grant funding was transferred to provinces, as well as R180 million for disaster relief, and only some of the underspending related to the DHS itself under Programme 4 (which concentrated on grants). Other significant areas of underspending related to posts that were not yet filled, although this was now under way.  The DHS spending had translated into delivery of 179 197 housing opportunities, on 58 serviced sites, and 120 000 top structures. Sanitation remained an issue, and was noted as a matter of emphasis.

Members commented that the findings by the AG were quite serious, and questioned several of them, asking for more clarity. They asked if the DHS had mechanisms to improve expenditure in the provinces, particularly Eastern Cape and Limpopo. The accreditation of municipalities came under question, with some Members commenting that lack of capacity in this sphere remained a huge problem. Several queries were raised on the filling of vacant posts.

Members asked for comment on the 99% spending but only 73% achievement of targets and it was explained that some programmes may not show direct financial implications. Members were concerned at recurring problems of IT, questioned possible conflicts of interest of employees, and said that there should never be rollovers, as the needs on the ground should be met. There was in fact funding in the country, so the excuse of lack of funding was incorrect, but the money was not being properly spent. One Member agreed with the Financial and Fiscal Commission that the RHIG should be phased out. Members commented on the need for better alignment of budgets, particularly in relation to sanitation and housing backlogs. The purpose of the USDG had to be reconsidered and understood, and it was recommended that specific spending of provinces should be checked carefully. Members were very critical of reports that the National Housing Finance Corporation (NHFC) allegedly charged 48% interest on money lent to individuals, which was completely unacceptable. They were critical of the Housing Development Agency, whose impact was not clearly seen, and were worried about the severe problems of irregular expenditure at the National Homebuilders Registration Council, urging the DHS to ensure accountability. They also questioned why Thubelisha was not yet wound up.

The DHS then gave a presentation outlining the purpose, process and scope of the Spatial Planning Land Use Management Bill. Although this Bill was being driven now by the Department of Rural Development and Land Reform, the DHS had given substantial input and had isolated several issues that would impact upon its work, which were fully summarised. It was noted that spatial planning took a visionary approach, whilst land use management concentrated on how land could or could not be used. One of the likely problems was the mismatch between the desire for new settlements in well-located land and the fact that this land was likely to be more expensive than land further away from hubs. The implications of the 2010 Constitutional Court ruling in relation to municipalities was explained, as well as the future obligations of municipalities. There were likely to be several areas of contestation between different interest groups. Members raised some points of concern and agreed that it would be desirable to hold joint meetings with the Portfolio Committee on Rural Development and Land Reform, in the lead up to the finalisation of the Bill.


Minutes

Opening remarks
The Chairperson noted that initially the Department of Human Settlements (DHS or the Department) had considered the Spatial Planning and Land Use Management Bill (the Bill), but Cabinet had since decided that this Bill would be coordinated and overseen by the Department of Rural Development and Land Reform (DRDLR). The Bill had a clause that provided that it should take precedence in the case of conflict with any other planning Bill. This Committee needed to be proactive and consider the Bill seriously. There would be a joint meeting with DRDLR to check progress. Unless matters were properly dealt with, DHS would find itself without land for human settlements. DRDLR had been dealing exhaustively with the Bill, and the validity of input from DHS at this stage might be limited.

Department of Human Settlements 2011/2012 Annual report
Mr Thabane Zulu, Director General, Department Human Settlements, said the Department had received an unqualified audit report, with emphasis on matters in respect of restatement of corresponding figures, and material under spending on the Rural Household Infrastructure Grant (RHIG). The Department was unhappy with the status of the report because for two consecutive years DHS had received unqualified audits with matters of emphasis, and that had to be elevated to the next level.

It was indicated, in a meeting with the Auditor General (AG) that an “unqualified report” did not mean a clean audit opinion and DHS would want to improve on that. The interactions with the AG were directed towards devising a strategy on how best to achieve a clean audit, and how to deal effectively with matters of emphasis.

RHIG had shown under-spending since the grant was transferred to DHS. The Department had agreed with the AG that the issues of emphasis were not systemic, and there was commitment to address the issues, including the 30-day payment rule and measurable performance indicators. The DHS noted that when there were no questions around the authenticity of invoices there was no reason not to honour commitments to service providers within 30 days, and systems were being put in place to ensure that this would happen. If invoices were not attended to within 30 days, a query needed to be raised.

Another issue was alignment of the performance indicator information around predetermined objectives, which was one of the matters of emphasis. There was a need to improve procurement and asset management regimes. If procurement systems were improved, this assisted with compliance. As a corrective measure, the Department had therefore revisited its supply chain management (SCM) policy and had decided to establish a Bid Specification Committee (BSC) to vet proposals and adverts prior to the evaluation process. This would improve the management of the procurement regime at the Department. Various committees would be adjudicating bids prior to awarding contracts. That would require review of the supply chain management policies.

DHS would also have to provide sufficient training for those involved in asset management units. Findings on asset management were a recurring issue, and were a challenge for all government departments, because of lack of required skills in looking after the State properties. The review also hoped to ensure improvement on monitoring and oversight overall, from municipalities to provinces to national. With the help of MPs, the Department would ensure effective monitoring of provinces as implementing agents, and the grants administered by the municipalities. This would include reporting on business plans, since some of the challenges related to how business plans were drawn, implemented or deviated from. It was an area requiring improvement.

DHS also recognised the need to improve alignment and strategies of entities to yield better results, and this must be linked to the Turnaround Strategy. DHS had already begun close scrutiny of the strategic plans submitted, to ensure that they supported the overall objective of human settlements.

DHS had started the process of reviewing the Finance Linked Individual Subsidy Programme (FLISP) policy in order to ensure that beneficiaries of the policy actually gained from it. The Turnaround Strategy would improve the management of administrative responses to government developmental challenges, through better focus.

In the area of intergovernmental processes, DHS had some good results especially the engagements with Parliament. There were more interactions with provinces through the Heads of Departments (HOD) sitting in the MinMEC meetings. DHS visited a lot of municipalities but a lot of work still had to be done. The Department had unlocked issues at municipalities relating to implementation of projects of national importance, including bulk services at Lephalale, and Gonubie.

Mr Zulu admitted that there had been challenges with the implementation of the Urban Settlements Development Grant (USDG), especially given that this was its first year of implementation. A lot more still needed to be done, because programmes were not aligned with the Grant. Interventions had been made to ensure grant money was used for the purpose intended. Despite some progress, there was also still a challenge around incorrectly aligned programmes, and it was necessary to be decisive. The grant money was meant to unlock bulk services, but it was necessary to guard against municipalities using the funds without consulting with the provinces. The DHS was trying also to intervene to ensure accountability for the grant. There was a need to improve provincial and municipal performances in respect of Outcome 8 and the strategic projects.

Mr Xolani Xundu, Chief Director Communication, DHS, described the Outreach Programmes of the Department. He noted that a number of campaigns had been undertaken, including "each one settle one". Another campaign was the International Habitat Day that coincided with the Human Settlements Indaba held in Port Elizabeth. The Department was active in social campaigns like the 16 days of No violence against Women. There was an outreach in Beaufort West on the International Aids Day.

Mr Xundu said the Northam Affordable Housing launch with AngloPlatinum was critical, given the current living conditions at the mines. Another key issue was the Jabulani Hostel redevelopment in Soweto, which was a flagship project in the Hostels Revitalisation programme. During the year the National Home Builders Registration Council (NHBRC) International Housing conference was held in Cape Town. The Department organised stakeholders to build houses for the poor during the Youth and Women’s months. Hosting municipalities were in charge of these campaigns. DHS had tried to ensure that throughout South Africa, people benefited from the work of the Department. Another programme was the Vision 2030 Summit hosted in Port Elizabeth, coincidently, with the International Indaba summits.


 Mr Neville Chainee, Acting Chief Operations Officer, DHS, spoke to Outcome 8, which he described as a behavioural and prioritisation change that had improved reporting and accountability. All DHS reports were on the Presidency's website. The Presidency used the Department as a benchmark on accountability. The four key targets of Outcome 8 were the upgrading of informal dwellings, the National Upgrade Support Programme (NUSP), accreditation of municipalities, and access to basic services.

Upgrading informal settlements still involved a substantial amount of work, and provinces and municipalities had to be aware of the requirements, especially how to utilise the USDG. Under the National Upgrade Support Programme (NUSP), 49 municipalities were targeted for intervention. The accreditation of municipalities was another matter, and DHS had considered accrediting two municipalities. Access to basic services, especially sanitation, was now the responsibility of the DHS.
A lot of work had been done on the release of land for human settlement developments, and the challenges with the Department of Public Works (DPW) were being addressed collaboratively with the Presidency. The Housing Development Agency had given a presentation on this, and noted that it had identified and assessed over 17 000 hectares of state land.

One key area for government was to improve the densities of urban settlements. R1 billion had been allocated for the Mortgage Default Insurance Guarantee. The consolidation of the Human Settlements Development Finance Institutions (DFIs) had proceeded well. The Sustainable Human Settlement and Basic Services Task Team reported on progress through the Presidential Infrastructure Commission.

Mr Chainee said over 81 000 employment opportunities were created. There were about 54 301 direct jobs created as a result of expenditure and the programmes, and further indirect jobs were created on the supply of materials and construction. Protocol on the implementation review was only signed after the December deadline.

In terms of the funding framework, he noted that in 2013 all provinces would have to gazette the allocations approved to metro municipalities. The Turnaround Strategy, and all it entailed with regards to the organisational structure and filling vacancies, was approved. The President also approved DHS's strategic annual performance plan.

Entities Performance
Mr Chainee said there had been an intensive process of checking the Annual Reports of all the entities, and DHS had indicated an alignment with all the entities. The AG had also highlighted points, as included in the presentation. The DHS had a responsibility to fund the Social Rural Housing Authority (SRHA). Regulations and applications for institutional accreditation were approved last year. In that regard four social housing institutions were approved, and 14 were conditionally approved. In respect of the Housing Development Agency (HDA) he noted the important point about release of land. Custodian departments engaged with included DPW, DRDLR and the Department of Public Enterprises (DPE). In regard to the National Urban Reconstruction and Housing Agency (NURCHA), there were challenges in the gap housing market. The National Home Builders Registration Council (NHBRC) Board had been approved and there were stabilisation measures, since some substantial issues were raised around the NHBRC's performances as well as compliance with the financial reporting standards. The National Housing Finance Corporation (NHFC) had made progress, but there were some issues arising out of the market in which it operated.

Presentation of
Financial statements
Ms Funani Matlatsi, Chief Financial Officer, DHS, said the Department had R22.8 billion, with all the adjustments, for the year under review. It was important to note the roll over funding received from National Treasury (NT) of about R64 million, as well as additional funds that amounted to R182 million. DHS had failed to spend R226 million - R101 million of that sum was requested for rollover funding, and R64.5 million of that was approved. DHS had received R180 million for disaster relief, and a further R2.4 million for higher salaries adjustments. The Department spent R22.5 billion of the R22.8 billion budget.

She explained that most of the under-spending related to the moratorium placed on filling vacant posts and programmes. The workings of Programme 1: Administration were affected by the Special Investigating Unit (SIU), and could not use its entire budget as a result of the changes in its scope. R18 million was unspent, and was surrendered to the National Revenue Fund. A further cause of underspending was delay in receiving invoices for lease accommodation, from DPW. Non-filling of non-critical posts, because of the Turnaround Strategy, was another factor. However, some of these posts were now being filled, and this should improve both capacity and spending.

Ms Matlatsi noted that 70% could not be spent on capital of the Rural Household Infrastructure Grant (RHIG), and DHS had requested a rollover. RHIG did not perform satisfactorily, having underspent by R70 million.

Programme 4 was where most of the grants were housed. The full amount - about R6 billion - in grant money, as well as the R180 million for disaster relief, were transferred to the provinces. Only a portion of the money that related to the operational budget for the DHS itself could not be spent. At that time, the Disclosure Office only had four members, but was now operational with a full staff complement. An amount of R3 million from previous financial year, earmarked for future social housing projects, could not be used. A request was made to National Treasury (NT) for a conversion of those funds into the operational budget of the Department, but there had been no approval.

Programme 5 had underspent by 37% as a result of vacancies, delayed payment of invoices to State Information Technology Agency (SITA) and problematic procurement services. A process was under way to set up the IT at the Department and a portion of the money would be spent there.

The Human Settlements Development Grant (HSDG) took most of DHS budget at almost R15 billion. There were challenges in the Free State, which had spent only R1.8 of the R2.1 billion received. It had issues around rectification of the pre-1994 stock; and could not procure. DHS, nationally, did not request rollovers on behalf of provinces, since provinces had to request these themselves from their provincial treasuries.

Limpopo was affected by the Section 100 interventions as it was under administration. That had affected the functions of DHS in the province. Monies meant for the projects were converted by the province for other projects.

Ms Matlatsi noted the result of the DHS spending of 98% of budget. It translated into 179 197 housing opportunities, on 58 serviced sites, and 120 000 top structures. She noted that every aspect of building a house involved specific processes with cost implications.

Ms Matlatsi reiterated that the DHS had received an unqualified audit, but it was not happy with this result. DHS was committed to putting more effort into improving on all the matters raised by the AG. Two matters of emphasis - restatement of figures and sanitation - were put into the Annual Report. There were disagreements with the AG on the matters raised, but it was eventually concluded that commitments would be noted, in the Disclosure Notes, as required. She noted that sanitation, as also reported on in the Annual Report, was something that affected everyone.

Ms Matlatsi noted that the DHS would be expected to explain the underspending. The main reasons included the delays in the start of the RHIG programme, and unavailability of building materials. There was resistance at implementation phase by some municipalities to the model; these disagreements had since been resolved. DHS was perturbed by the assertion that it did not meet the 30-day payment period as prescribed in the Public Finance Management Act (PFMA) but there were reasons behind this. DHS had, however, realised that this would lead to continuous problems, and might even lead to qualifications and for this reason had addressed the issue, with controls now in place by way of checklists and a new register. Apart from providing after-hours boxes to collect invoices, staff were encouraged to provide invoices to managers for processing more regularly.

Ms Matlatsi also noted the issues of irregular expenditure. DHS had a difference of opinion with the AG on the evaluation of irregular expenditure. The AG believed there was a need to differentiate the bids, between tenders above or less than R500 000, as well as sourcing of quotations. The Department did not see anything wrong with not having evaluation criteria when requesting quotations, but the AG differed on this, because of the value of the amounts. DHS had now agreed to put evaluation criteria on all matters of the supply chain management.

Mr Zulu concluded that the DHS was generally happy with progress in this financial year. It hoped to sustain the unqualified audit opinion and achieve more improvements. The Department urgently wanted to institute a very effective performance management system, and it should ideally be aligned to the Turnaround Strategy. There would be no vacancies at the Department by the end of the year, since the appointment process for two deputy director generals posts were awaiting Cabinet approval, as well as posts for other chief directors. The establishment of the Programme Management Unit (PMU) was an excellent move that would ensure a systematic way of managing projects and the budgets

Discussion
Mr S Matshoba (ANC) said he welcomed the report, but wanted to know how far this was from being a qualified audit opinion, given the quite serious findings by the AG.

Mr K Sithole (IFP) enquired about the reasons why the Eastern Cape and Limpopo were underspending, and asked if the Department had any mechanisms to help improve expenditure of the grants in those provinces.

Mr Sithole asked if there was any progress on the material under-spend of the Mvula Trust and of the Independent Development Trust on RHIG. He particularly sought clarity on the underspending of sums of R51 and R32 million.

Mr Sithole enquired about the accreditation of municipalities, wanting to know if there were timeframes for this process and how long the Department was willing to wait. He also asked if the Department would help the under-spending provinces and municipalities, as they appeared to struggle with issues of capacity. He cited Buffalo City, who had underspent by 80%.

Mr Chainee said the Guarantee Fund was in place and the adjustment would reflect the guarantee of R1 billion.

The Chairperson interjected to note that it would have been ideal to have separate pages that dealt with contentious issues. She cited the performance of RHIG, in particular, and commented that it would have been most useful to get a progress report on what was happening currently. In those provinces that had spent, it would have been better also to show on what projects the money was spent. The Annual Report essentially concentrated on the financial side of the Department, and the Committee was familiar with issues it raised. However, the Committee had hoped to get a report on how challenges were addressed, not the same kind of reporting that had been given in January.

Mr S Mokgalapa (DA) said the Department was honest in setting out some of the issues. He was concerned that many of the senior posts were held by those in acting positions, and he asked why this was so, as surely those positions were critical.

Mr Zulu replied that, in the past, there was not enough emphasis on management culture. He recommended that the DHS be allowed to make a full presentation on measures put in place to deal with the matters of emphasis raised by the AG, during the course of the year. This would enable Members to see whether DHS had done anything to improve the audit results over the last three years.

Mr Zulu added that there was no moratorium on vacancies, and reiterated that there would be no vacancies in the next year. The vacancy rate for 2011/12 arose as a result of filling the new structure. The Department wanted to involve branch managers in the process of hiring staff. He reiterated that two new Deputy Director Generals were being appointed for the PMU and the Chief Operations Officer post. He would ensure that there was a nil vacancy rate at the Department for the next financial year.

Ms N Borman (ANC) interjected to ask asked if all the vacancies were funded.

Ms M Njobe (COPE) commented that turn around and moratorium on filling of vacancies impacted on all programmes. She commented that the moratorium on filling posts had led to under spending generally on the Department.

Mr Zulu replied that these were all funded vacancies and could cause under-spending if not filled, even into the following financial year. There were some vacancies in the structure that were not funded, but could be filled by using the money saved as a result of delays in making funded appointments.

Mr Zulu noted that approval would only be given for Acting posts if the advertisement process had started, so there was a precondition of dates for advertisements being given, failing which the submission for appointment would be refused. This forced the manager to facilitate the process of appointing.

Mr Mokgalapa commented that the Committee hoped DHS could get an unqualified audit opinion that was improved, or even a clean audit. He commented that some of the non-compliance was “repeat offences” and this was of concern. For the past three financial years DHS had been receiving non-qualified audit reports with matters of emphasis. He cited an example of non-adherence to NT regulations and questioned why this was repeatedly raised. He commented that the NHBRC had now followed suit in transgressing the fundamental basic supply chain management principles. General lack of understanding of the supply chain management laws came out clearly in the interactions with the AG, although it was not clear at exactly which level of management the confusion reigned.

Mr Mokgalapa also asked why the Department was not following the SMART measurables on predetermined objectives, and commented that targets could never be unclear. He also questioned why spending of 99% of the budget nonetheless resulted in achievement of only 73% of the targets. He questioned specifically when the DHS would align its budget with the performance targets, so that when it budgeted for R2 billion and certain targets, it achieved both. He was worried to see targets that did not match with the expenditure. DHS also needed to understand its core expenditure, and the money had to be followed more closely, instead of simply “dumping” the money at the provinces.

Mr Zulu said the figure of 99% expenditure and 73% delivery were not necessarily directly linked to the financial performance. He explained that some programmes did not have direct financial implications but perhaps formed part of other programmes. He said that if there were effective performance management systems in place, then financial management became more easy, and a department would be able to provide the information required by the AG. The most important aspect was identifying correct targets for achievement. Not only must the targets be correct, but the outputs must be directly linked to service delivery. The PMU system that DHS wanted to instil would address this as it would generate reports on its own. The National Department did not deal with tangible delivery units, like the provinces did, but instead it managed the process. DHS was looking to review its current performance management systems. Many matters seemed not to function across departments, especially in relation to how targets were structured.

Mr Mokgalapa said the AG informed the Committee that there was insufficient IT verification of employees at the Department. Although the AG could not find any “ghost employees”, the possibility of them could not be ruled out. The Department needed to move with speed so as to ensure that it verified employees.

Mr Zulu replied that the IT issues were a recurring concern to the AG. The IT system in government was associated with SITA, and there were complex issues. DHS had engaged with SITA on how best to improve IT systems at the Department. However, there was a strategy in place, approved by the Minister, and a recovery plan in the event of disaster was included.

Mr Mokgalapa asked if any senior officials had other business interests, whilst employed in the public service, and, if so, what was being done to address conflicts of interest. He commented that the figure of 113 cases referred by the SIU, but only two closed in this year, was unacceptable, and called for a report on the 111 outstanding cases.

Mr Mokgalapa failed to understand why, in the first place, rollovers were needed. The needs, on the ground, for housing and sanitation were huge. If money was not spent and had to be rolled over, this reflected poor planning and poor management, and this in turn made it far more difficult to motivate for extra funding from the fiscus, if whatever funding was given had to be returned. It was a damning indictment for the AG to comment that there were no clear targets and measurable outputs, and this issue must be resolved in the next year.

Ms Matlatsi said she would prefer not to comment on rollovers, but reminded Members that this money was committed. It was not an excuse to assume that rollover funding would apply if spending did not happen. She agreed that it could be interpreted as lack of management and planning. DHS would come back and present action plans on all the issues raised by the Public Service Commission (PSC), Financial and Fiscal Commission (FFC) and the AG.

The Chairperson commented that the AG had indicated that the IT system at DHS was too easily accessible to hackers, which posed serious risks for information. The Committee had to be assured that this was not deliberate, and she urged the DHS to close the gaps.

The Chairperson also noted the comment about disagreements with the interpretation of the AG and said that the DHS should prepare a full report of these issues, to attempt to reach the situation not of criticism but of correction on the issues. The AG indicated to the Committee that the Turnaround Strategy did not link to the Human Resource (HR) Plan, which was also non-existent.

Ms Matlatsi replied that DHS would revert on the issues with the AG and indicate an action plan. The main issue was about the contingent liabilities, but it would form part of the DHS report.

Mr Chainee added that the AG had raised compliance and business approach issues, whilst the DHS was concentrating on service delivery, but it was hoped that matters of emphasis on performance indicators would not appear in the following year.

Mr Mokgalapa said the excuse of lack of funding was unacceptable, as there was a lot of money in the country, but it was not being properly spent. The less said about RHIG, the better; he was very concerned that DHS might be headed for a qualified report on this under-expenditure and under-performance. He recommended that this grant should be phased out, as the FFC had suggested, and that termination clauses be included in some programmes.

Mr Zulu replied that the RHIG was the most challenging of the Department's work. In this financial year DHS was doing all in its power to correct the grant spend. He said he agreed that the Department needed to take the lead on sanitation and it had already taken a stance to ensure that sanitation became the critical component of human settlements, especially given that this was a major area of underspending in DHS.

Mr Mokgalapa commented that something needed to be done with SITA as absence of a clear IT policy impacted on other programmes.

Mr R Bhoola (MF) said performance should be measured against framework and legislation. Expenditure had to be translated into the output on the ground. He said he agreed with the call for a new approach, accepting there were challenges of the budget, but taking greater cognisance also of demographic shifts, targets, population, growth and the 2030 vision. He concurred on the need for policy alignment that would regulate budget use.

Mr Bhoola said there was a need for new thinking around provision of land to address the housing backlogs. The violence at the kwaMashu Hostels was not simply a matter for the police but DHS had to find some social solution. He believed that the budget had to be better integrated in relation to sanitation. Mr Bhoola agreed that the USDG grant may have had some teething problems, but said that there was also a need to look at the issue of municipalities using this funding to provide infrastructure that Municipal Infrastructure Grants (MIG) had not covered. There was a need for greater accountability in the work of the DHS. Corruption and unaccounted funds took the human settlements budget backwards.

Ms Matlatsi replied that guidelines had been developed and agreed on with the metros. She said the guidelines stipulated exactly how the USDG could be spent.

Ms Njobe sought clarity on how auditors in provinces could help to highlight weaknesses in systems, to identify issues as they arose, not only at the end of the financial year. There had to be integration at the provincial sphere to ensure monthly reconciliations, since if these were produced on time, it would be easier to provide detailed audit reports.

Ms Njobe found it hard to believe that service providers could not provide invoices on time, and commented that many business failures were due to government failing to pay on time. This had to be corrected, although she noted the comments on measures already taken.

Ms Matlatsi replied that the issue was not so much about the DHS putting measures in place but about how suppliers were affected by failure to pay. However, DHS would ensure that plans were implemented in the current financial year.

Ms Njobe said there was a need to look at and define the actual purpose of the USDG. Most municipalities had indicated that they used the money to “patch” other municipal projects for which there was short-funding. It was disappointing that R70 million had not been used on sanitation, especially given the indignities of outdated sanitation for those in the rural areas. She commented that the rural people always seemed to get poorer service; the quality of toilets in Mzimvubu was extremely poor. DHS needed to be consistent with standards.

Ms Njobe also raised concerns with rollover funding, saying that the figures involved were also very high. She asked if it was a case of over-budgeting. The Department needed to look at human resources and capacity, and improve substantially.

Ms Njobe enquired if the Department was satisfied with the reasons provided by provinces, especially the Eastern Cape, for under-spending. Good reasons were needed. People were waiting for delivery, which was not happening, despite money being available. DHS should take a very strong action against provinces.

Ms Matlatsi replied that disaster money was received during adjustment process, but the process was delayed because business plans had to be requested. The money was going to be transferred in February, and most provinces should be able to have spent the money by the end of the financial year.

The Chairperson interjected that Gauteng's expenditure had to be followed up, to try and ascertain the projects on which the money was spent on, since there were indications that the spending was not focused enough. DHS should follow up and see the kinds of projects that were receiving funding very close to the end of the financial year.

Ms Matlatsi replied that DHS was tackling the issue when it conducted provincial visits. The report to be prepared would indicate exactly how the money was spent.

Ms Matlatsi replied that the Eastern Cape, who had said that it could not spend, would be visited in the following week. DHS was trying to avoid having this province put under administration again. In addition, the province was largely rural in nature. There was a need to check the real issues, not merely rely on reports.

Ms Borman said there had been a huge improvement since 2009, and hopefully DHS would move into achieving definite plans against measurable and quantifiable targets. She sought clarity on the informal upgrade programme, and the confusion around this in the Report.

Mr Chainee replied that DHS had consulted with the FFC on this point. There was a legal and compliance requirement for the rollout, and how the assignment would be done. Discussion had been held on the fiscal framework, and there were agreements on the process and roadmap. However, capacity issues in municipalities were causing some delays.

Ms Borman asked for cost of hosting the Indaba in Port Elizabeth, commenting that while the idea was good, the turnout was appalling.

Mr Xundu replied that the PE Indaba had cost the Department R1.2 million, on venue hire, facilities and the working sessions.

Ms Borman commented that job creation was an item reflected across all departments and she wondered if perhaps efforts were not being duplicated. She asked if “jobs created” meant jobs specifically in building houses, or whether the calculation might overlaps with job opportunities that could also be counted by other departments.

Ms Borman sought clarity on the National Housing Finance Corporation (NHFC), who allegedly charged 48% interest on money lent to individuals. She said although the information was scant, she had been given to understand that the NHFC worked with a loan shark. These were the kind of attitudes that needed to be rigorously prevented.

Mr Chainee replied that the exorbitant rates of interest were taken seriously. This had been taken up with other stakeholders. It was scandalous and shocking that government could charge people 48% interest, and there was no justification for it.

The Chairperson said she was unhappy with the campaigns, and particularly that none of them were geared to sanitation. DHS needed to lead these campaigns, even if the function had not been wholly transferred to it, particularly since there was a public perception that DHS was not taking sanitation seriously. More effort had to be put into it. She asked if anything was done about the Kigali Conference resolutions on sanitation.

The Chairperson said although the HDA had worked well, the work was not seen and Members did not get a sense of the land that was released by the Agency. There was a need for a breakdown of the number of hectares and the number of units that could be built on this land. In addition the cost of employees was far too high at the HDA, exceeding the proposed targets. She commented that the expensive feasibility studies needed to correlate with tangible projects. She also sought clarity on HDA's operating expenses for agency support outsourcing, and the consultancy fees. She said that none of the policies researched or developed by HDA had been brought to Parliament. She also wanted to know more about the surplus of R17.8 million.

The Chairperson also agreed with an earlier comment that the NHBRC would never get rid of the problems, and said that the Director General had to put very stringent deterrents in place to discourage irregular expenditure. The institutions were taking an advantage of the situation.

Mr Mokgalapa said there was a need to provide more leadership on the NHBRC. It got a qualified audit opinion, and the AG had suggested that a full investigation might even uncover more than the R210 million in irregular expenditure so far detected. The new Board should be instructed to institute an investigation. NHBRC had not detected nor disclosed irregular expenditure, as required by the PFMA, and unless this was corrected it would continue to get qualified audit opinions. He reminded DHS that it administered the entities, and the matters could not simply be left to their boards. They should submit monthly financial reports, because any of their errors impacted on the DHS. He also was concerned that no action was taken when allegations of misconduct were raised at the entities.

Mr Chainee replied that entity accountability was a challenge, because of undermining. The attitude had been that management of the entities should be informing the DHS, and the latter was trying to put the accountability and reporting to rights. It was not always a question of making them accountable. However, NHBRC and the HDA would be appearing before Parliament.

The Chairperson also sought clarity on Thubelisha and Servcon, saying that despite a recommendation to wind up these two companies, they still operated, with huge sums earned on interest.

Ms Matlatsi replied that interest had been generated by Thubelisha but was used for the process of winding up the company. No money would come from NT and within the next month the whole company should close, with any money generated on Thubelisha's account being returned to the National Revenue Fund. The issue was no longer in the hands of the Department, but the liquidator.

The Chairperson indicated that any unanswered questions must be replied to in writing.

Spatial Planning Land Use Management Bill update by DHS
Mr Anton Arendse, Chief Director, DHS, said that his presentation had tried to outline the main issues in relation to the Bill, which had been under the custodianship of the DRDLR. This location was appropriate, given the dispersed nature of planning laws across government. The Municipal Structures Act and the Development Act were related to this Bill, and it must also be remembered that it related to aspects of local government and the obligation to put together an Infrastructure Development Plan (IDP).

The Department had been actively involved, at various points, with DRDLR in drafting the legislation, and had been part of a task team, involving DRDLR and the Department of Cooperative Governance and Traditional Affairs (COGTA) in 2008. DHS had made submissions and comments around the Bill.

Mr Arendse defined land use management as the process of managing the land that was used in various ways. There were competing interests for land, be they business or socially orientated. While DHS identified land for housing, other departments saw it for a different purpose. In simple terms, land use management dealt with how best to make use of land, taking into consideration issues of efficiency and equity. It attempted to deal with land in a mutual inclusive and an integrated manner. Spatial planning, on the other hand, took a more visionary approach on how space was to be developed, in contrast to the regulatory approach of land use management, that concentrated on how it could or could not be used. The two could never be treated as mutually exclusive.

Very little had been done on land use management and spatial planning prior to 1994. The challenge lay in land markings that defined issues of how a city would grow, and where investments would come. Land regulation began to impede on investment. Some pieces of legislation, like the Environmental Impact Assessment Act (EIAA), had taken the lead on determining how and where development should take place. A lot of this happened in the absence of an effective planning law. A number of important enactments were made after 1994. These included the Development Facilitation Act (DFA) of 1995, the Green Paper on Planning of 1999 and the Municipal Systems Act (MSA) of 2000, which had placed an obligation on municipalities to prepare the IDPs and spatial development frameworks (SDFs).

Mr Arendse said that in 2010 the Constitutional Court ruled that municipal planning remained an exclusive competence of local government. This ruling did not in any way limit the role that provincial and national governments had to play in respect of planning. Whilst national departments identified priorities with provinces, the municipalities remained the principal development agents for implementing the projects.

Mr Chainee explained that the transformational nature of the land use management and spatial planning at municipal level was not achieving the objectives. In the future, this would lead to tensions around the Bill, and when it came into operation as an Act, there would no doubt be major interest-clashes and class battles in courts, because of its ground-breaking nature. There would be tensions between DHS, provinces, and municipalities. The constitutionality ruling might have been a victory for municipalities, but the question must be asked as to whether it was actually a victory for transformation. Most municipalities had not transformed zonings and did not have town-planning Acts. These were important aspects that went to the heart of how slowly the country had implemented legislation.

Mr Arendse said the Bill sought to ensure that the system of land use management and spatial planning promoted social and economic inclusion. The Bill differentiated between the rural and urban land but obligations were the same across municipalities. It also spoke to the determination of norms and standards. Although the Minister of DRDLR was a custodian, the Bill allowed for any other minister to ask DRDLR to prescribe norms and standards. It was possible, therefore, for the DHS to request DRDLR to set the norms and standards in respect of density.

DRDLR was also preparing to develop a lot of other supporting documents, like the Spatial Development Framework (SDFs) and the guidelines for municipal land use management. The product of all of this was the land use scheme (a document that detailed the municipal plans on land use). But, as with most pieces of legislation, the viability of the Bill would be tested by whether it could be implemented. All three spheres of government should prepare SDFs. Consultation would be done with other departments and with other spheres. SDFs would be reviewed in five years to ensure they were aligned to the IDPs.

The concerned national departments were expected to support and monitor the capacity to implement the Bill. They also had an obligation to review national planning laws and policies and national norms and standards. The provincial sphere was expected to oversee SDFs. The bulk of the work resided with municipalities, including compilation of IDPs, SDFs, Land Use Schemes; and regulating re-use of land on municipal space.

Mr Arendse identified the alignment of programmes with key tenets of the Bill as the most likely to impact on human settlements programmes. The intent of the Bill and SDFs was to remedy how that happened. DHS could exercise some control on how the HSDG was used. Some provinces acted as developers and implementers of projects and there needed to be a closer cooperation not only on the spending but also on where the projects were located. In some cases, provinces had put money into municipal projects that were not been deemed a priority for those municipalities. This was evident in places where municipalities, for example, built houses where there were no services or roads, a clear indication of misalignment. The Bill suggested that municipalities and provinces had to have closer discussions on where, when and how the money was spent on municipal spaces.

Mr Chainee said DHS supported the Bill, as it believed that it went quite far to address DHS concerns around policy, plans, integration and funding. DRDLR had been alerted into necessary amendments, to avoid any opposition, and so the Bill must be seen as a collective responsibility of all the sectoral departments.

Discussion
Ms Borman said the land issues were paramount to achieving progress. She viewed the Bill as a weapon that would shift away from apartheid ways. It impacted largely on human settlements so she believed that DHS had to carefully examine the Bill, on its own, and make a meaningful contribution, and this Committee agreed it was to be taken very seriously.

Ms Njobe wondered whether the motivation for the Bill had anything to do with the National Development Plan (NDP) that the National Planning Commission had released, and whether it dealt with the possible contestations. However, she felt that allowing other ministers to request the Minister of DRDLR to prescribe guidelines had a potential to cause tension among ministers, and wondered if the Bill said how any tensions would be resolved.

Ms Njobe asked how the Bill impacted on existing long-term plans on land use, and thought it would take a long time to reach the objectives.

Ms Njobe wanted to know if South Africa had any objectives to nationalise land, as was the case in Zambia, where land could only be leased. The willing buyer / willing seller principle had not worked, due to resistance from those who had stolen the land. She wondered if the Bill was assisting in promoting collective responsibility over the land, and trying to overcome resistance.

Ms J Sosibo (ANC) sought clarity on the custodianship of the Bill, as it pertained to land pieces that were identified for housing developments. She asked for further detail on the statement that there would be contestations once the Bill was operational. She also asked that the role of HDA be contextualised if the Bill was passed.

The Chairperson noted that the inclusionary housing had been cut off from the definitions of the Bill. It was critical that DHS closely monitored the Bill, as there was a possibility of its policies being compromised. The core departments needed to be listed in the Bill.

The Chairperson cautioned that “chaos” could ensue from planning undertaken at municipal level. Municipalities were resisting development from the National Department. The IDP process was not credible and IDPs were not accurate, because thorough processes were not followed and some local leaders deliberately did not announce IDP meetings. There had to be a clause that specified that officials from national and provincial had to be part of the IDP process. In general, she commented that intergovernmental relations were not working, and matters should not be taken for granted. The human settlements intergovernmental relations worked mainly because the Committee invested a lot of time on this, but this could not necessarily be said of other committees, including the Portfolio Committee on Rural Development and Land Reform. There was a need to have directives so that officials were involved at the preparatory phase of the IDPs. Communities were sidelined when officials did not want to account and be asked questions. These were issues that had to be discussed with DRDLR. She would write to he Chairperson of that relevant Committee to meet on the Bill.

Mr Chainee said he agreed that the value of many IDPs was zero, and had to be raised. People were still waiting for value out of the Accelerated Shared Growth Initiative of South Africa, dating back a few years, and there was a need to evaluate who was really in charge.

Members had raised important points. The Bill spoke about planning and land use management, and that was dependent on land ownership, and this in turn would determine contestation on the Bill.

Mr Chainee said that DHS understood the crucial nature of the Bill. DHS was well-placed to police the Bill and manage its responsibilities and oversight. It had raised the issue around the regulatory impact assessment that had to be done for the Bill. The real work would start when the Bill was enacted, and it must be made to succeed.

The Chairperson interjected to say that whilst she agreed, every small point must be clearly defined. Officials needed to be honest on the issues.

Mr Arendse repeated that the real test of legislation lay in how it could be implemented. DRDLR was visiting the whole country to determine readiness among municipalities.

In relation to the concerns about the possible duplication, he noted that the Bill spoke to how land would be used. The process of acquisition of assembly and adding value to the land still resided with the principal implementing agent, whether province, municipality or the HDA. Land was fairly cheap on the fringes of towns and cities. In many instances this contradicted what was said in the housing code, Breaking New Ground and Development Facilitation Act about having compact cities. When SDF and land use schemes were prepared, this would determine where land would be acquired, and there might be a mismatch between the desire to have spatially efficient and compact cities on land that was well located in terms of infrastructure, public amenities and income generation, and the fact that this land would, by implication, be far more costly. This might have an impact on the DHS’s ability to deliver.

Mr Arendse said he would go back and study the inclusionary housing issue, but any minister was supposed to be able to ask for prescribing of norms and standards around programmes that were important for his or her Department.

Mr Arendse added that DHS, both nationally and provincially, could not engage municipalities at the tail-end of the development of the IDPs and agreed that provincial governments needed to be more involved in the crafting of those IDPs.

Ms Borman sought further clarity on what needed to happen, given the constraints of time, and when this Committee would work through the Bill.

The Chairperson clarified that she would indicate the readiness of this Committee to the Chairperson of the Portfolio Committee on Rural Development, so that a joint session could be arranged. One possibility may be to hold joint meetings for consideration of the Bill. It was likely to be passed quite soon.

Ms Njobe asked whether DHS was aware of the reaction of the communities on the Bill, especially if a lot of work had already been done.

Mr Chainee replied that DRDLR was best placed to answer that question.

The meeting was adjourned.