National Home Builders Registration Council, Social Housing Regulatory Authority & National Urban Reconstruction and Housing Agency 2013/14 Strategic Plans and Budget Votes

Meeting report

The Chairperson welcomed everyone and noted the agenda for the day was long although she would try to shorten it.

There were apologies from Mr J Matshoba (ANC), who was attending a CoGTA meeting, and Ms M Njobe (COPE).

National Home Builders Registration Council
Mr Mongezi Mnyani, Chief Executive Officer (CEO), National Home Builders Registration Council (NHBRC), noted the structure of the NHBRC had been approved by the Minister and was now being implemented. The council had the highest authority within the structure. Its objectives were to represent the interests of housing consumers by providing warranty protection against defects in new homes; to regulate the home building industry; to provide protection to housing consumers in respect of the failure of home builders to comply with their obligations in terms of the Act; to establish and promote ethical and technical standards in the home building industrty; to improve structural quality in the interest of housing consumers and the home building industrtu; to promote housing consumer rights and to provide housing consumer information; to communicate with and to assist home builders to register in terms of the Act; and finally to assist home builders through training and inspections.

There was a division between the executive manager of business services and the executive manager of corporate services. The mandate of the NHBRC was grounded in this business division.  The technical unit, quality assurance, customer service and enforcement fell under business services, while legal services, stakeholder relations, human capital and business management solutions came under corporate services. The position of CEO and Chief Financial Officer (CFO) had been filled and over the weekend of 23 and 24 March the position of chief operations officer had been advertised. Business manager advertisements would also go out but the council did not want these positions filled until the CEO position had been filled. There was a recruitment drive to fill all the executive management positions by June to fully implement the mandate of the organisation.

The regulation framework of the home building industry included: registration and grading, technical and ethical standards, and renewal or voluntary withdrawals. The housing consumers protection process ensured protection for the home builder and the housing consumer through enrolment, inspection (quality assurance), occupation certificate (for recourse by housing beneficiaries), warranty cover, complaints (customer services), conciliations, remedial work and recoveries. Support for this value chain was needed from the committees, provinces, municipalities and the private sector.

The key products and services of the NHBRC were the enrolment of new homes, home builder registration, home building inspections, homebuilder training and development, and litigation and legal advisory services. Inter-Government Relations (IGR) needed to be worked on before going onto litigation. Geo-technical investigations, materials engineering and new green building technologies had not received attention from the organisation and sector as a whole. Norms and standards were needed to lead the sector in collaboration with the Council for Scientific and Industrial Research (CSIR) and others as this was important to implement going forward.

New business initiatives involved a review of quality assurance, effective cost control system, enforcement of home builders and compliance, improved business process and the establishment of mobile offices to reach difficult areas (especially where satellite offices would be ineffective) and to make the NHBRC visible.

Home builders could be incentivised through the introduction of the grading system; better access to information, which could be achieved if provincial offices supported municipalities and encouraged decentralisation; training of home builders and youth; and an extension warranty to cover green buildings.

The primary objectives for repealing the Housing Consumers Protection Measures Act, 1998 (Act No. 95 of 1998) were to strengthen the regulator efficacy of the NHBRC; to provide more protection to housing consumers; and to introduce effective enforcement tools and appropriate penalites or sanctions to encourage compliance with the Act. Amendments to the Bill were on track. He said it would be submitted to Cabinet in the second quarter and would come to Parliament in the third quarter so it should be proclaimed by the President before the end of the year.

Training of homebuilders was being looked into, especially track training. The Eric Molobi Innovation Hub provided accredited courses. Training was accredited through the Construction Education and Training Authority (CETA). Learners were job viable after undergoing the training. BHBRC had trained over 22 000 homebuilders and youth from the 2006 financial year.

The council had set itself short-term plans in order to address a number of short-comings in the execution of the mandate. The first was the establishment of an Enforcement and Compliance Division without which the NHBRC would be toothless so it must be done for the core function to be fulfilled. The second goal was to transform the organisation into a viable and modern organisation with sound corporate governance, a risk management profile which needed to be monitored and implemented by all managers and world-class processes and a system with a strong and reliable IT platform base. The third goal was to drive the growth and development of NHBRC to be relevant and support the initiatives of Government.

The medium to long term plans were to establish partnerships, implement vigorous inspection models, accreditation and sustaining the warranty fund.

Of the NHBRC’s contribution to National Outcomes (Outcome Eight), the most critical was ensuring compliance to norms, standards and quality within the sector, assisting the public and private sector in improving programme and project management through training and skills transfer, assisting the state in the implementation of the rectification programme and improving the capacity of government to monitor and oversee human settlements. There was also the protection of the interests of the public within the human settlements sector; assisting government in the development of appropriate norms and standards in the provision of services, infrastructure and housing as a whole; the development of appropriate policy and legislative frameworks in ensuring compliance to norms and standards in human settlements development and protection of all stakeholders from poor workmanship; improving coordination and cooperation with the Department, Provinces and Municipalities in monitoring, compliance and adherence to the norms and standards set for development; and finally, assisting the Department in the improvement of governance and performace in the sector. 

The statistics for valuable final products were given. The number of enrolments and renewals were increasing and showed the situation was not downward-looking. 100 percent of interdicts had been issued to ensure compliance. There was also 100 percent compliance with building norms and standards and 80 percent reduction in the building of homes outside the set standards and norms. The numbers were also growing in the areas of intervention. However, the numbers for new registered builders were fluctuating, which was an indication of market interventions being needed in certain aspects. This applied also to the enrolment of homes (non-subsidy) which decreased dramatically after 2008.

Factors affecting the performance of NHBRC from the market industry included: house prices were projected to deflate in real terms over the next 18 months; South Africa’s GDP forecast was predicted to grow at a slower pace; and Headline Consumer Price Inflation was expected to remain below the 6 percent level up to the year 2014.

Factors that impacted the affordability of property and accessibility of mortgage finance against the background of trends in property prices were: economic growth, employment, inflation, interest rates, household income and debt, and finally consumer confidence. These factors would remain key to the housing market.

Presentation by the Acting Chief Financial Officer, NHBRC
Mr Songezo Booi, Acting CFO, NHBRC, turned to matters of finance beginning with major fixed expenses. The permanent staff cost increased by 16 percent from R257 006 960 (2012/13) to 297 233 599 (2013/14) because of increased Quality Assessors (QAs) and IT employees. Staff cost increased by 215 percent from R4 281 293 (2012/13) to R13 477 179 (2013/14) which related to permanent staff costs and a new staff project which was in the blueprint phase. In legal fees there was a 17 percent increase from R7 650 000 (2012/13) to R8 950 000 (2013/14) due to interdicts and arbitration costs and an increase of 68 percent in marketing fees, from R10 650 000 (2012/13) to R17 900 000 (2013/14) to make the NHBRC visible especially through radio campaigns.

There were drastic increases in operating expenditure between the 2012/13 and 2013/14 financial years, due to a drive by the council to enforce regulation. The costs were a hybrid model between in-house capacity and outsourcing. In terms of technical services, this was due to the rectification projects in the Eastern Cape and Kwazulu- Natal. These things had not been budgeted for before.

Looking at the summarised income statement, the net surplus for the 2013/14 budget was at a deficit (108 972 618) due to increased inspection costs year-on-year and increased staff and IT costs for data-lines and connectivity. The interest earned was relatively stable due to market returns which were above Consumer Price Index (CPI).

Capital expenditure for 2011/2012 had been affected by the need for computer equipment in relation to an increase in staff numbers and office furniture for the new NHBRC office in Johannesburg. Motor vehicles had been purchased for the two new mobile offices. Office equipment referred to the overhaul of the IT infrastructure for better connectivity and R90 000 000 was budgeted for the acquisition of a new building, although the NHBRC was not yet sure whether they would buy or build from scratch.

Mr Mnyani said everything was a work in progress on which the Committee would be constantly briefed. He appreciated the comments from the Committee on oversight visits and noted they would be working on it.

Discussion
Mr S Mokgalapa (DA) welcomed the NHBRC, saying they were not lost to the housing industry. He picked up that the presentation constantly referred to value for money, public interest and compliance and enforcement which should be the core mandate of the NHBRC and they should be commended for this. There was a new CEO doing things differently especially in terms of quality insurance which was tied to public interest.

Mr Mokgalapa wanted to see a scaling down of rectification as it was fruitless and wasteful expenditure. This was also agreed on by the Deputy Minister. He emphasised inspections as an alternative.

He noted that the Auditor-General (AG) was very sceptical about the use of consultants and outsourcing and urged the NHBRC to find a balance between outsourcing and internal capacity. It was important to hold contractors accountable through enforcement and compliance to alleviate the problem of rectification.

He was pleased that the NHBRC had called for the improvement of Inter-Governmental Relations (IGR) instead of litigation- something which the Committee had always championed. He said they needed to focus on the enrolment of projects in the provinces and for this they needed to be harsh. He wanted to see more consequences and he was interested in the recoveries project to hold contractors accountable.

Looking at expenditure, he noted there was a lot of duplication and large amounts of expenditure on staff (R297 million) in which he questioned the discrepancy between permanent staff and staff costs. He also wanted clarification on expenditure on consultants as a process of rectification. He asked if there was monitoring of the balance between in-house capacity and consultants. He said he did not want to see irregular expenditure occurring.

Ms M Borman (ANC) praised the presentation. Staffing was critical in any entity or programme and she questioned the vacancies in managerial positions and the time frame for the filling of these posts. As part of the objectives of the council, it was critically important to keep a clean organisation in terms of corruption, especially as corruption was a big problem in the housing sector. She could see an attempt at this was made. She asked how access to information could be made better. She was also concerned about inspections, particularly, the huge discrepancies between inspections carried out in the different reports. She was concerned about the increase in the costs of staffing and said an eye needed to be kept on this even though the NHBRC gave an explanation for it. She was pleased that the green building technology innovation was being looked. She asked if it was part of what was being done with the CSIR and that body of people. It was quite expensive but she wanted to know how the NHBRC would be starting on this.

Ms P Duncan (DA) was also concerned about the amount of money being spent on staff. She felt the principles of business needed to apply to government to balance between staff and implementation. She wanted more discussion on the owning of homes being and an asset which could be used to access finance. She asked if the NHBRC would put a training model in place for the training of inspectors. She was thankful for the introduction of the grading system but the training process for contractors needed to be reviewed so that rectification could be reduced. She felt a harsh approach to contractors who did not deliver should be adopted so that after a period of time they could be blacklisted. She asked whether Environmental Impact Assessments (EIAs) were done when informal settlements were upgraded, and wondered if the NHBRC could play a role in this.

A Member asked how long it took to train the homebuilders and if rural areas were also being focused on in the establishment of mobile offices. She questioned how people, especially ordinary people, were made aware of the NHBRC offices. In terms of expenditure, she asked why the computer equipment was not part of office expenditure. 

Another Member queried how the council was going to deal with the stigma of corruption, especially in terms of housing inspectors. She was glad the North West was feeling the heat with regards to geo-tech reports and felt the other provinces who did not want to comply needed to be dealt with. Looking at access to information, she noted three provinces were mentioned and asked why the others were not.

The Chairperson asked how the council was going to select the youth for training. She felt the NHBRC needed to work with Public Works on the issue of training. She asked how the training would link with the Human Settlements course. She said the NHBRC needed to work with the Engineering Council to close gaps and combat working in silos. She asked what was meant when the NHBRC said they would assist the state in the implementation of rectification. She asked how the NHBRC would align their new IT system with that of the provinces.

Mr Mnyani welcomed the comments and said the council would take them forward for improvement. Looking at inspections, he said the NHBRC was trying to be smarter and more effective by making sure they had the necessary internal skills and ensuring internal capacity for scrutiny and monitoring. The NHBRC was busy with big projects where multiple inspectors were needed for the different phases and milestones because by having only one inspector per project was where corruption crept in. The NHBRC and provinces needed to be assisted by the national Department in enrolment. This was being dealt with as an area of concern. He also emphasised internal capacity in provinces. Contractors should be held accountable and this was an important area in need of improvement so that it did not come back to the warranty fund of the NHBRC. He said the NHBRC could not do this on their own and needed to collaborate.

Mr Mnyani turned to vacancies, he said there were quite a lot but it was his brief as the CEO to stabilise the organisation and this was one area to normalise. About 12 managerial positions needed to be filled in national and provincial levels and adverts for these positions would be going out as soon as the job specifications were prepared. The budgets to fill these positions were there. He did not want to specify a timeframe that he could not fulfil but if everything went well, these executive and management posts should be filled by June. He was working with the HR division around the clock and help would be received by the recruitment specialists.

On the mobile offices, the strategy was to look at rural provinces in bigger areas. Better access to information was taken seriously and was a consequence of an increase in the marketing budget. The programme was starting small on radio but was needed to build the reputation of the NHBRC and gain trust. On youth training, he noted the idea was to take the young people through the mentorship programme together with the national Department and the National Youth Development Agency (NYDA). He said the IT change was more for the NHBRC organisation and would assist in listing all the enrolments in the system. In terms of the grading system, rectification needed to be avoided and the geo-tech inspections needed to be improved. Provinces lacking the capacity to do this would be assisted by the NHBRC.

Mr Awelani Malada, Manager: Strategic Planning and Research, NHBRC, said the IT system would be implemented in two phases, where the first would be inwardlooking and the second would be more outwardlooking, which would include being able to monitor different projects at different phases through linking onto the system. Looking at the training of inspectors, a Memorandum of Understanding (MOU) was in place with the Engineering Council of South Africa to discipline incompetent inspectors or those giving irrelevant advice. The Engineering Council was also to certify and accredit home inspectors due to there being no training courses for such a qualification. This process was currently being discussed so that NHBRC, and others, did the training and it was recognised by the Engineering Council. A green building technology partnership was in place with the CSIR and South African Bureau of Standards (SABS) to roll out green or alternative building initiatives. He said the NHBRC was assisting the Western Cape’s Government’s Human Settlements Department in rolling out a number of green home-building initiatives for compliance with standards. Subsidy enrolments had increased amongst the provinces.

Mr Booi said that the increase in salary costs was due to the increase in quality assessors. He explained the difference betweeen computer equipment and office equipment. On other staff costs, relocation costs and staff uniform costs were included in the amount. More detail could be found in the Annual Performance Plan.

Mr Malada said that the amount of time training took was dependent on different courses. Training actually occurred during the implementation of projects.

Ms Bornman questioned the discrepancy between E&E and the number of subsidy and non-subsidy inspections in the presentation.

Mr Malada said this would be relooked and addressed.

Ms Duncan asked if the IT programme would go out to tender. She wanted the NHBRC to provide the Committee with a detailed report on inspectors. She was concerned about the MOU with the Engineering Council of SA because rectification showed that something had gone wrong. Regarding the training of youth, she asked if they were equipped with the skills to one day get a job based on the outcome basis.

The Chairperson interjected noting the problem was with corruption and rectification. 

Mr Mokgalapa queried the link between training and Further Education and Training (FET) colleges.

Mr Malada said the IT system did go out on tender, last year, and was awarded to Al Indigo.  The detailed report on inspectors could be provided to the Committee. Rectification was needed when there was a problem with design, material or workmanship. With design, it was a professional issue like with engineering. With materials, it might also not be a contractor problem but workmanship was the fault of the contractor. Engineers needed to be disciplined when at fault so a MOU was established. Collaboration with the FET colleges was being worked on but the NHBRC first needed to get the courses approved and accredited by Sector Education and Training Authority (SETA).

Mr Mnyani said they would come back once the Council had approved the new inspector model.

Social Housing Regulatory Authority
Ms Zohra Ebrahim, Chairperson, Social Housing Regulatory Authority (SHRA), said SHRA would report knowing the council’s term would come to an end in August. It was a three year term and had been gazetted in August 2010. The office had only been functioning since January 2011 after the appointment of a CEO but the council predated this by four months. She thanked the Committee for the support given to the council since the outset and in enabling the function of SHRA. One of the products from this council was the State of the Sector Report, which was a first in the human settlements field. The institution had started with nine employees and had now reached 34 but she was worried about how lean the organisation was. She did not think this was sustainable, although there was a more than able management.

Mr Brian Moholo, CEO, SHRA, talked about the contents and overview of the presentation. He then turned to the strategic framework and key drivers.

The key stakeholders in the business environment where the National Housing Finance Corporation (NHFC) and financial institutions, like banks, the Housing Development Agency (HDA), provinces (agreements still need to be entered into with Gauteng, Limpopo, Mpumalanga and Northern Cape), municipalities (who were now getting accredited and there were agreements with metros like the City of Cape Town, Johannesburg metro, Nelson Mandela Bay, EThekwini and Erkhuleni). Other stakeholders were the Department of Human Settlements, SHIs (Social Housing Institutions) and Nasho (National Association of Social Housing Organisation), beneficiaries, the Portfolio Committee and National Treasury.

Mr Moholo discussed the strategic thrusts in the business environment with the first being to build the organisation. This meant looking at flexible and creative social housing solutions and for institutions to get the basics right, especially for the accreditation of institutions.

He then turned to the structure of the organisation noting they were looking to add additional people, especially in research and project management in the CEOs office, and to look at the vacancies in middle management. Under regulations, more staff were needed for inspectors/assessors. Complaints came from products and institutional sustainability. There were problems with municipal bills and taxes.

The objectives of SHRA were to be a reputable and reliable regulator, to be a good custodian of state resources and to use cutting-edge technology and best brand systems to achieve business results. Good staff needed to be backed up by technology and systems to perform at their best or optimally.

The first strategic objectives was the incremental implementation of the Social Housing Act. This meant further development of SHRA footprint as a national regulator, fully developed internal operational environment to support the business including risk management and performance management, providing the platform for efficient and effective regulation and investment programmes, development of comprehensive rental programme as support for Outcome Eight, rollout of subsequent phases of SHRA outreach programme including agreements with various stakeholders, like provinces and to establish a baseline.

Another important strategic objective was for efficient and effective regulation of the social housing sector. This meant the development of subordinate legislation for approval, to ensure the annual accreditation of qualifying entities and accessibility of the register, which was going well and to ensure the effective compliance and monitoring of the sector which would come in the coming year. Efficient and effective investment in the sector was another strategic objective. What was needed for this was to ensure the optimal use of the Restructuring Capital Grant (RCG) in the delivery of social housing units, ensuring the optimal use of capacitation grant funding mechanisms to support regulation and investment programmes, rollout of private sector and co-op housing strategies to make use of the various models, to form alliances and partnerships with local and international donors to create more adaptive funding models and leverage more finance for the sector, for example, through the French Development Bank and, in terms of the baseline, to ensure the maximum number of units yielded by the optimal use of the RCG.

It had taken a long time but SHRA was finally on top of risk management. The regulations manager had been replaced and they outsourced internal auditing. There was a fraud prevention plan in place. 

Regarding investment in social housing, in 2011 there were 1041 units. In terms of accreditation, 45 entities were involved in this process in 2013 while 30 entities were involved in regulation in 2013.

Turning to budgets, capital grants had grown to R678 693 000 (2013/14). Institutional grants were in place to get institutions going on social housing. Inspections would be carried out on the units and R52 788 000 was budgeted for 2013/14, which had grown tremendously. In terms of expenditure, he highlighted social contributions and other administrative expenses which involved office equipment and telephone costs.

Ms Ebrahim explained the different tiers in accreditation and that it only lasted for one year. It forced SHRA, as the regulator, to not be complacent about an institution’s accreditation and to keep reviewing it on an annual basis. She said there was, pre-, full and half accreditation and this accreditation needed to be monitored quarterly.  SHRA was the recipient of additional funding from National Treasury as they were satisfied with SHRAs performance to date.

A SHRA representative said that accreditation for 2013/14 was currently at 52 institutions while eight had already achieved full accreditation and this number could grow to ten once the assessment was complete by the end of next week. 

Returning to budgets, Mr Moholo noted the operational budget, in contrast to expenditure, was quite low. He said social contributions referred to medical aid. Other administrative costs were expenses like office equipment and telephone.

Discussion
The Chairperson wanted clarification on the additional amount in the budget. She felt social housing was overloaded with money, suggesting fiscal dumping, and asked if SHRA had plans for this money.

Ms Borman noted this was a very well-run organisation. She questioned certain discrepancies between the different reports. She also asked who was responsible for the administrative collection of rental payments once the social housing units were completed. She was particularly interested to find it if there were back-logs in the rental payments.

Mr K Sithole (IFP) appreciated the informative report. He asked where the creation of new cities was earmarked. He also asked if there was an impact from moving from renting to buying houses. He wanted to know what informed the Restructuring Capital Grant (RCG) amount.

Mr Mokgalapa wished the SHRA chairperson well and thanked her for always being available to the Committee. He was worried about the lack of involvement and investment in social housing by the metros - was it because of a lack of understanding or were there other issues at play? On the budgets, specifically capital grants, he wanted to know where these units would come from. He also wanted more information on the RCG, what money was used and what criteria was used in handing out these grants. He wanted to know how many units were accredited. He also wanted a breakdown of social institutions there were in the new eight metros. He endorsed the need for a full session on social housing.

Ms Ebrahim said fiscal dumping did absolutely not occur. Part of the way social housing worked was to ensure a pipeline of projects ready to go at any given time. Part of this process was accreditation, investment and checking of business plans. There were more projects than funding available for SHRA. The original funding given to SHRA by Treasury was increased because of the ready pipeline of projects in almost all of the provinces.

Municipal entities predated the formation of SHRA to some extent so they had historical problems like over-expenditure. There were good and not so good entities. Just before SHRA started, all the problematic institutions were municipal entities for some or other reason. She said this was some and not the entire problem. SHRA was the regulator and not the fixer-upper or referee. SHRA’s mandate could be extended by the Minister but felt the basics should be right before moving onto greater things.

Looking at the new cities, the idea was to look at new ways of using space and restructuring zones. Particularly looking at the divide between rich and poor populations across colour lines which meant huge spaces of beautiful land was not used. She highlighted an example in the Eastern Cape, which was not a panacea. The objective was to create quality rental living space to correct past imbalances. In terms of rents, the money was not collected by SHRA but by social housing institutions and management agencies. Because of the history of rental and Black Local Authorities and cities between 1983 and 1986 there were no new rental spaces during that time. This was the basis for rentals in better quality living conditions for a general improvement in life.

Mr Moholo said the agreement with the City of Cape Town made it possible for the City to expand its reach on who participated in social housing and this was the basis to use with other metros. This was done through the incorporation of many actors within the city boundaries, not just relying on the municipal entity, like the Cape Town Community Housing Company formed by the City of Cape Town. Metros invested everything into one institution which was not always successful. Restructuring zones were very important as the social housing subsidy could only be used in restructuring zones. He highlighted the problem with district councils. Turning to capacity grants, he said there was a queue of good projects but only so much could be taken on. He would forward the Committee the information on where the projects would be located, which was also available on the SHRA register. Most of the projects were located in the Eastern Cape and Buffalo City with a few in Nelson Mandela Bay. This was in terms of social housing and the delivery of good products.

Ms Duncan said that Spatial Development Frameworks (SDFs) of municipalities were critical for SHRA when considering at spatial reintegration - without looking at this, things would stay the same. Next time SHRA should comment on this. She wanted to know the impact of the Amendment Bill on SHRA. She wanted a report on which zones the Minister declared. She felt SHRA should also concentrate on rental housing in industrial development zones. 

The Chairperson warned about SPFs and Integrated Development Plan (IDP) outreach.

A representative from SHRA noted they were currently not really affected by the draft Amendment Bill but their comments were included and their amendments. The restructuring zone list was gazetted.

The Chairperson said the rental structures of the provinces should not be discriminatory.

Mr Vusi Fakudze, Chief Financial Officer, SHRA, said the process had been started and nominations would soon be called for the new board. The current board served one term of the two terms so they were still eligible if they were nominated by the public.

The Chairperson said an opportunity could be created for a workshop even for two or three hours in the evening.

National Urban and Reconstruction Agency
Mr Viwe Gqwetha, Managing Director, National Urban and Reconstruction Agency (NURCHA), began by looking at NURCHA’s mandate which was to ensure the availability of bridging finance to small, medium and established contractors, building low and moderate income housing and related community facilities and infrastructure. NURCHA was the leading portfolio on affordable housing lending programme, subsidy housing lending programme and infrastructure lending programme. NURCHA was also the programme and fund management portfolio in terms of contractor and financer development programme, provincial and municipal support programme and account administration.

Mr Gqwetha gave an overview of the strategic plan in the operating environment, including the international economy in terms of subdued economic recovery prospects, sourcing international concessionary funding and an importance for Development Funding Institutions (DFIs). For the South African economy, there had been a slowdown in lending towards affordable end user home loan market and higher input costs and reducing contractor profitability which affected a number of variables in the contracting environment. In local and provincial government there were administrative and capacity constraints in contract and programme management and procurement of service providers and budgetary expenditure remained a challenge. NURCHA’s five year strategy was in the first year.

There were a number of programme challenges and responses to subsidy housing. The implementation of the certified-based lending had reduced project volumes and caused a decline in the default rate. NURCHA lent directly, which discontinued the intermediary model. This was positive as it meant dealing with departments directly in the IGR and speedier responses to emerging risks. The vigorous collection drive to recover the delinquent book, the development and implementation of the Contractor Finance and Development Programme (CFDP), together with the Department, to look at non-financial services such as mentoring and accredited training (R20 million grant from government), lending and targeting women, youth and disabled for two year participation for those already working as contractors but were too high a risk to stand on their own.

Regarding the programme management portfolio, NURCHA had taken a proactive approach to contract management and service delivery challenges by taking away the intermediary model.

In programme challenges and responses to infrastructure, there were high provisions and major concerns. In programme challenges and responses to affordable housing, there was sufficient funding for this programme due to governments recapitalization (R300 million over three years) and leveraged funding facilities with the private sector. There was also a drive to improve the geographical spread beyond Limpopo, Gauteng, KZN, the Western Cape and Mpumalanga.

Ms Adele Struwig, Manager, NURCHA, discussed the loan book performance saying the provisions as a percentage of book debts remained high due to interest on the outstanding amount, on a monthly basis, from long outstanding defaults some dating back five years. NURCHA was intensifying its debt collection strategy with specialised debt collectors. The strategy allowed for varied types of interventions and legal instruments to be used including litigation, project rescue, acknowledgment of debt and liquidation. The strategy was success-based to minimise fruitless legal and administrative expenses. Last year R61 million was written off in debt and this year, R92 million would be written off to bring everything under control but the legal actions in these cases would not be abandoned.

Mr Gqwetha highlighted that programmes and fund management were critical support in turning around around the Free State DHS, supporting implementation of the Eastern Cape Rural Housing Project and in a fund management role for the Vulindlela Enhanced People's Housing Process (EPHP).

Mr Sindisa Nxusani, CFO, NURCHA, highlighted targets (audited and forecasted) noting that 2011/2012 was not a good year in the achievement of targets. For these years, 30 contracts had been signed, which was the goal; the value of loans, where NURCHA made its money on interest and fees, was more than was budgeted for; the target for houses built and sites serviced was met; and 15 contracts were signed while the target was 19. He also discussed the statement of financial position.

Mr Gqwetha looked at the two key drivers of strategy, the first was relevance to the developmental mandate to improve delivery of affordable housing, leveraging private sector and donor finance into development areas, retain and grow with subsidy housing programme and intervention to improve service delivery in the sector through programme management, fund management and to build the relevant expertise. The second one was to restore organisational sustainability (arrest the erosion of shareholder capital) emphasising the work of the Department.

In conclusion, NURCHA had the required competence in both the lending and programme management portfolio to drive the strategic priorities of relevance and sustainability, NURCHA had received a clean audit every year since inception – testimony to its systems, capabilities and governance structures, NURCHA had a diversified skills base and was able to provide sound technical, management and financial advice to the human settlements sector, worked closely with others DFI’s, interacted actively with both the public and private sector and aimed to ailing its deliverables to the Outcome Eight targets.

Discussion
Ms Borman felt a discussion should not ensue but proposed an urgent workshop to resolve some difficulties as affordable housing was extremely important and needed to be well financed. There was not enough time to do justice to the discussion then.

Ms Mokgalapa agreed with Ms Borman’s proposal. He said social housing and NURCHA needed to be married with NHBRC for synergy.

The Chairperson felt the presentations today were good and these entities needed to be commended for their efforts.

The Members wished Ms Duncan a happy birthday.

The meeting was adjourned.