Department of Human Settlements entities on their mandate, annual performance plans and budget for 2014/15

Human Settlements, Water and Sanitation

23 September 2014
Chairperson: Ms N Mafu (ANC)
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Meeting Summary

The entities of the Department of Human Settlements (DHS) presented on their mandates, annual performance plans and budgets for 2014/15.  The Chairperson said the meeting objective was to give members an overall understanding of what each entity did. The budgets of the entities would be interrogated at the next meeting in November 2014.

The Social Housing Regulatory Authority’s (SHRA’s) current signed off annual performance plan target showed 5 668 units had been approved.  The target needed to be revised to 3 700 units as a result of budget virements of R230 million to the National Housing Finance Corporation.  Maladministration had been discovered in terms of the Provincial Special Projects (PSPs), where SHRAH was provided funds from the provinces to disburse to the PSPs in various provinces. 

The Committee discussed the difficulties SHRA had been experiencing, considering the social housing challenges. It felt that the reduction in the Medium Term Strategic Framework (MTSF) targets exposed the difficulties and the entity’s lack of planning skills.  Members interrogated the maladministration claims, the subsequent actions taken by SHRA, as well as the preventative measures put in place to avoid a repeat of maladministration and or corruption within the entity.

The National Home Builders Registration Council (NHBRC) products and services included the enrolment of new homes, home builder registrations, and forensic engineering investigations, assessment of houses for rectification and litigation and legal advisory services. There was an increasing demand within the property market for well located land and housing due to the population increase.  The inflation rate was around 6%, and this had a direct impact on construction materials.  There was an emphasis on the training of youth and home building training, which had a combined budget of R30 million.

The Committee discussed the role NHBRC played in the home owners sector, and asked what the warranty period for rectification was, and who paid for the rectifications. Were the current 223 home building inspectors enough to service all nine provinces?  Members focused on the protection of consumers in terms of the notices NHBRC issued to alert consumers of suspended home builders.  The training of youth, women and people with disabilities was discussed, and NHBRC was asked to classify their training initiatives, rather than clustering the programmes.

The National Housing Finance Corporation (NHFC) said its mandate aimed to deepen access to affordable housing finance.  There was a 700 000 housing backlog, based on demand, and in the last three years new housing stock, as supplied, averaged 20 000 to 30 000. Due to the current financial climate, borrowers were indebted and there was severe pressure on consumers. Management and the board had been managing the risks associated with the liquidity crisis through rigorous cash management processes and the reprioritisation of disbursements and approvals. A R230 million cash injection was expected in the second quarter, as approved by the Department and National Treasury.

Committee members discussed the long term sustainability of the Corporation.  In light of the liquidity crisis, Members asked about the R230 million cash injection approved by the Department, but also stated that the budget of NHFC would be interrogated at the next meeting. 

The Housing Development Agency (HDA) said over the last five years, over 11 000 hectares of state-owned land had been released for human settlement development.    Of the acquired land, approximately 55% could be used to build 126 876 high yield housing units and 253 752 low yield housing units, while the rest would be dedicated to infrastructure and social amenities. The MTSF targets indicated 1.4 million housing opportunities in quality living environments by 2019, 50  catalytic projects implemented and 10 000 hectares of well-located land rezoned and released for human settlement development. 

The Committee asked for elaboration on where the bulk of the state-owned land had been released and whether HDA had had to expropriate land where negotiations had failed.  They asked if HDA negotiated for land donations from state entities, and if any money had been paid to traditional leaders for the sale of land.  Some members wanted know if the eradication of the bucket system programme, which HDA assisted with in the Western Cape, could be extended to other provinces.

The Rural Housing Loan Fund (RHLF) said its mandate was to provide access to housing credit to low income rural households in order to enable them to improve their housing and living conditions. The presentation gave examples of South Africans that were beneficiaries of the Fund, who would ordinarily not have had access to loans through commercial finance institutions. Though there were constraints on funding resources, amongst other challenges, the Fund was able fulfill its mandate but hoped to significantly increase market coverage.

The Committee focused mainly on the RHLF marketing strategies, and stressed the importance of making the Fund more visible to those that needed it most.  Members emphasised that RHLF was a very important entity in the human settlement development sector, and expansion of the Fund was key.

The National Urban Reconstruction Housing Agency (NURCHA) said its mandate 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. Its turnaround strategy had seen improvements in the delivery of affordable housing, and had restored financial viability and changed the delivery model from intermediary-driven to direct lending. Financially, the books were showing a growth from R82m to R132m, but during 2012/13 the organisation had had to write-off R61m. It contributes an average of 10% of new houses in the affordable residential market and is reviewing current funding partnerships.

Members wanted to know about the areas in which the R61m write-off had happened, and remarked that the entity was relevant for emerging contractors. They indicated they liked NURCHA’s involvement in training builders in rural areas;

The Estate Agency Affairs Board (EAAB) said its major focus was on transforming the estate sector, and funding to drive the process would come from the public and private sector. It reported that its income streams remain depressed to adequately fund the enhanced regulatory machinery and transformation initiatives. To address some of its challenges, it is trying to push for legislative reforms and to form partnerships with conveyancers, the Deeds Office, South African Revenue Services and the Hawks.

Members enquired about the composition of the EAAB board. They asked if the organisation had links with other government departments. They told the Department to inform the Community Scheme Ombud Services that the Committee needed a written explanation of why it had failed to appear before the Committee. 

Meeting report

DHS on decisions to put Social Housing Regulatory Authority (SHRA) under administration and way forward

The Chairperson welcomed everyone to the meeting and said this item of the agenda would be closed.  Everybody, except for Department of Human Settlements (DoHS) delegates and Portfolio Committee Members, was excused.

Social Housing Regulatory Authority (SHRA)

SHRA Acting Chief Executive Officer (CEO), Adv Seeng Ntsaba-Letele, said SHRA was a public entity that regulated the social housing sector and invested in social housing projects.  The sector which SHRA regulated consisted of social housing institutions (SHIs), which were non-profit companies that acted as “landlords” in terms of the Rental Housing Act.  The overall aim of social housing was to restructure cities through targeted investments.

SHRA’s Medium Term Strategic Framework (MTSF) target over five years was to have 27 000 units approved, with 3 700 units targeted for 2014/15.  The focus for this year was the creation of an enabling environment for social housing and a change in approach to delivery.  SHRA’s target for 2013/14 was 5 429, but it had achieved approval for only 2 279 units.  There had been a number of inadequate applications and the current signed-off annual performance plan (APP) target showed 5 668 units had been approved.  The target needed to be revised to 3 700 units as a result of budget virements of R230 million to the National Housing Finance Corporation (NHFC).  Since 2012, the entity had made generous investments in the social housing sector, but as a result of an insufficient budget to fund operational requirements, the entity was dependent on the capital grant.

Maladministration had been discovered in terms of the Provincial Special Projects (PSPs), where SHRAH was provided funds from the provinces to disburse to the PSPs in various provinces.  At a meeting with the Investment Committee in February 2013, some of the PSP projects were submitted for approval by management, but they were referred back to be assessed.  The projects were never again presented to the Investment Committee for approval, but it became evident that management proceeded to fund projects that did not meet the criteria to be funded.  Furthermore, irregularities occurred on these projects, as certain contractual conditions were waived by the then CEO, the Corporate Services Manger (CSM) and the Investment Manager.  In December 2013, the Council suspended the CEO and the CSM.  The Investment Manager was not immediately suspended, but was also charged pending the process of the disciplinary hearing to commence.  Both the CSM and the CEO resigned after failed cases lodged to the Commission for Conciliation, Mediation and Arbitration (CCMA).  The Investment Manager’s case was finalised in July 2014 and he left the organisation after being found guilty on all charges.  A case had been opened at the South African Police Services and the matter had been transferred to the Commercial Criminal Court and was under investigation by the Hawks.

Discussion

The Chairperson cautioned members not to interrogate the APPs of the entities, but rather to ask clarifying questions based on the presentations.

Mr K Sithole (IFP) said the APP of 2012/13 showed that SHRA had failed dismally.  The housing target for 2014/15 was 5 668, and he asked how this target would be achieved with all the problems in the entity.  He also asked why the Investment Manager was not immediately suspended.

SHRA Chief Operations Officer, Kulile Boqwana, said SHRA found in 2012/13 that projects that were being approved were not necessarily projects that were ready to break ground.  Projects that were funded in 2011/12 had also not been kick-started.  Management had then decided that projects that were not ready were not supposed to be funded.  SHRA decided to work with institutions on better projects so that they could be funded to promote delivery.  

Adv Ntsaba-Letele said it was the decision of the Council to suspend the most senior employees of the organisation, because the decisions had been taken by them.  Usually those in the highest authority committed theft by delegating to lower officials.  Penalties also differed according to the level of authority, although the charges were the same.

Ms P Ntobongwana (EFF) asked whether the illegally withdrawn money had been paid back.

Adv Ntsaba-Letele said the money had been paid into projects that were not approved by the Council.  Investments by SHRA had to go through quick scan tools to ensure viability for funding and then through the Investment Committee to recommend to the Council for approval.  This process was never followed, because the Investment Committee sent them back to go through the quick scan process.  The expectation was that the projects would be checked for viability and re-submitted to the Investment Committee.  It was later found that the projects were funded and some of these projects were outside the restructuring zones.  It was also found that what was on the ground did not directly translate to the stolen money.  The criminal investigation by the Hawks would be able to trace if the money ended up in people’s bank accounts and whether it could be recovered.

Ms T Gqada (DA) said regardless of the housing challenges in South Africa, reducing the targets from 5 668 to 3 700 was not good.  It seemed there was a serious problem with how the entity planned, because of the virements.

Mr Boqwana said it became clear towards the end of 2013 that the NHFC needed money and the Department had requested SHRA to consider giving NHFC R230 million within the current year’s allocation.  Because of the drop in allocation, SHRA had no choice but to decrease the target to 3 700 units.  The Social Housing Investment Plan said the entity was given the capital funds to deliver the units, but also money to help the delivery of those units.  Institutional investment money was allocated as part of the capital and because it was operational in nature, it should be separated.

Mr S Gana (DA) asked for clarification on how SHRA actually got the money back from the SHIs.  He asked how the SHIs regulated whether the beneficiaries of social housing legally qualified, how SHRA dealt with the evictions of people not able to afford the rent, and what happened if SHIs went under.  He asked if the money that was illegally withdrawn was actually used to build something. or if the money had disappeared.

Mr Boqwana said no institutions had been liquidated so far, but section 12 of the Act required that SHRA should help struggling institutions.  SHRA, with the help of the Department, intervened when an institution wanted to sell its stock in the private market. 

Ms L Mnganga-Gcabashe (ANC) said the MTSF period should be amended from five to three years.

Mr N Capa (ANC) asked SHRA to clarify their staff component, saying this related to the fact that perhaps the work done by service providers could be done within the entity.  He asked whether the Minister was present within the Council, and what preventative measures had been taken to avoid a repeat of the maladministration.

Mr Boqwana said the Minister appointed the entire Council.

SHRA Corporate Services Manager, Ms Thalitha Shongwe, said SHRA no longer just gave the money over to the institutions. Funds were dispensed according to expected expenditure.

Mr H Mmemezi (ANC) asked if it was an area of interest of SHRA to increase their target market to include an people with an income of up to R15 000, and said it was in fact expected of entities to increase, and not decrease, their targets over the years.  The rental market was particularly difficult and he asked at what percentage SHRA was collecting.

Mr Boqwana said SHRA collected at an average of 93%, except for one institution which was struggling to collect at 58%.

The Chairperson said the entity would have to return for a more detailed engagement in November.  There would be no follow-up questions due to time constraints and all the unanswered questions would be addressed at the next meeting. 

National Home Builders Registration Council (NHBRC)

NHBRC Chief Executive Officer, Mr Mongezi Mnyani, said NHBRC was a world class warranty organisation that ensured the delivery of sustainable homes.  The Council aimed to provide innovative quality products and services.  Products and services included the enrolment of new homes, home builder registrations, forensic engineering investigations, assessment of houses for rectification and litigation and legal advisory services.  Key focus areas were the development and implementation of the new inspection model, to improve turnaround times on registration and home enrolment, and to develop an education, training and development strategy.

Poor quality in the sector could be attributed to a combination of inappropriate designs, materials and methods, non-registered and incompetent contractors and a lack of quality control.  The NHBRC inspector was appointed by a legislative Act to conduct risk-based inspections and to enforce compliance.  The Council had developed an internal training programme to assist graduates, youth and unemployed artisans to ensure that technical standards, as set out in the NNHBRC home building manual, were understood and applied.  The Council aimed to create an internal pool of inspectors that could be utilised within the construction industry.  During 2010, NHBRC had made a decision to amend the Housing Consumer Protection Measures Act after experiencing several challenges relating to its effective implementation.  The Council resolved that the Act should be repealed, as opposed to amended, given the extensive nature of the clauses requiring attention.  Challenges within the subsidy housing sector included departments and municipalities not adhering to construction schedules and the appointment of unregistered home builders.  In 2012/13, the NHBRC adjudicated 103 cases against home builders, and 328 cases were adjudicated in the 2013/14 financial year.

Medium-term economic growth was forecast at just above 2% and interest rates were forecast to increase during the course of the year in an attempt to contain inflation.  There was an increasing demand within the property market for well located land and housing due to the population increase.  The Reserve Bank stated the inflation rate was around 6%, and this had a direct impact on construction materials.  NHBRC charged a registration fee of up to R750, an annual fee of up to R600, and the home building manual cost R100 per builder.  The overview of the budget allocations gave an indication of the programme allocations for 2014/15.  There was an emphasis on the training of youth and home building training, which had a combined budget of R30 million.

Discussion

The Chairperson asked why only the targets for youth training were classified, and not those for women and people with disabilities.

Mr Mnyani said the training targets for women and people with disabilities were classified under training for home builders.  There was a women-empowering programme, for which the target -- on instructions from the Minister -- had been increased from 20 to 100 women.  The training targets for the youth were specific directives from the Department.

Mr Sithole asked how many houses were being assessed for rectification, because this was not included in the mandate.  He asked if the number of youths targeted for training could not be increased to address the high levels of unemployment.

Mr Gana asked if NHBRC gave money back to builders to rectify a defect on a house, for what period a house was covered from the day of completion, and what happened if the builder was no longer registered with NHBRC.

Mr Mnyani said NHBRC did remedial work and paid for it, but the builder of the property was liable for the cost of the work.  The warranty period was five years from day of occupation, and it covered only structural defects.

Ms Mnanaga-Gcabasha asked if the total of 223 home inspectors did not delay the process and if the NHBRC could identify, maybe at the next meeting, how many structural engineers were employed and/or suspended by the Council.

The Committee was told the initial target was 400 inspectors, but the demand for home inspectors differed from province to province.  NHBRC also rolled out a tender to increase the home inspector registry in case the demand increased.  The Council would provide the numbers on the engineers at the next meeting. The Committee should request the Engineering Council of South Africa (ECSA) to come and account to the Committee.  Engineers did a lot of damage in the sector, but there was no way to hold them accountable.

Mr Mmemezi said the presentation was encouraging, and the legislation needed to be brought up to standard.  He asked if the suspended builders were updated on the list and published.  He asked if the suspended builders were allowed to re-register at some point in the future.

Mr Mnyani said the NHBRC’s website was updated as soon as a builder was suspended or received a note against his or her name.  There was a specific section on the website called ‘know your builder,’ and in collaboration with the Department of Trade and Industry and the Companies and Intellectual Properties Registration Office (CIPRO), NHBRC had established an identification system.  This system helped builders to be identified, even through the identity numbers of the owners or directors of building companies.

National Housing Finance Association (NHFC)

NHFC Chief Executive Officer, Mr Samson Moraba, said NHFC was a state-owned development finance institution with a principal mandate to broaden and deepen access to affordable housing finance.  The target market for NHFC was low to middle income households with a monthly income between R1 500 and R15 000. This market segment was able to contribute towards housing costs, but unable to access housing finance from financial institutions.  Strategic objectives of NHFC included providing robust, timely and relevant market research and promoting lasting social, ethical and environmental development.  Other objectives included mobilising funding into human settlement space, and facilitating increased and sustained lending by financial institutions to the affordable housing market.

The strategic session attended by both the NHFC Board and EXCO in May 2014 had provided insight that was essential in informing the 2015–2019 strategic plans. These included:

-           Infrastructure deficit was significantly hampering economic growth and socio-economic development;

-          GDP growth forecast is on a downward trend;

-          Household indebtedness remained high, aggravated by rising living costs.

The following significant factors consistent with the re-organisation objectives were reconfirmed as critical for the NHFC to ensure realisation of its strategic plans;

-          Ensuring that the capital structure of the NHFC was enhanced through the raising of debt and equity funding in the short and medium term;

-          Enhancing the pricing model of the company;

-          Enhancing the operational structure of the company;

-          Growing the loan book and mix of business at a satisfactory rate.

NHFC Chief Financial Officer, Ms Zonia   Adams, gave an overview of the NHFC financials, and said the APP had been submitted in January 2014 and approved by the shareholders. In view of the NHFC liquidity crisis and emerging economic and business trends, the APP had been reviewed and the strategic plan was aligned to the MTSF.  There was a 700 000 housing back-log in the affordable housing market. Supply of new housing stock had averaged 20 000 to 30 000 per annum in the last three years, which was significantly below demand.  Borrowers remained significantly over-indebted, especially in the affordable housing market. There was an unsecured lending “bubble” in the last 12 months, and this was an indication of the severe pressure experienced by consumers. There was poor consumer confidence which was affected by a number of factors.

Management and the Board had been managing the risks associated with the liquidity crisis through rigorous cash management processes and reprioritisation of disbursements and approvals. A request for R230 million had been approved by the DoHS and National Treasury, but there had been delays in the flow of funds and they were expected to come through in the second quarter. The restructuring of both the NHFC and its subsidiary had been approved for implementation in the 2014/2015 financial year.

Discussion

Mr Capa said there was nothing in the presentation about shareholder support, and asked if there was reason for that. He asked about the possible cash injection proposed to the Department and whether NHFC experienced any difficulties in recovering loan repayments.

Mr Sithole said, in a follow-up to Mr Gana’s question, that NHFC stated the long-term sustainability of the Corporation depended on the build-up of reserves and external debt funding, and he asked for this to be clarified.  He asked if NHFC had any vacancies.

Mr Moraba said NHFC had not come back for recapitalisation in 18 years, but a request for R1 billion had been made for the next 10 years, because that amount would be supplemented externally.  The medium term loans were repaid over five years, and the collection rate was around 95%.  The long term loans were repaid over 20 years at approximately the same collection rate.

NHFC Corporate Strategist, Ms Mandu Mamatela, said through the restructuring plan, only the most critical vacancies would be filled to save costs.

Ms Mnganga-Gcabashe said the budget would be interrogated at the next meeting. She asked NHFC to review the three pages on the budget, because the numbers did not add up.

Housing Development Agency (HDA)

HDA Chief Executive Officer, Mr Taffy Adler, said HDA developed and led a national sector-wide land assembly strategy and programmes for sustainable human settlements, and provided land and housing development support.  Over the last five years, over 11 000 hectares of state-owned land had been released for human settlement development.  The Joint Coordinating Committee (JCC) on state land release had been established and a policy outlining the criteria for identifying and transferring land to HDA had been approved.  Implementation protocols had been formalised and signed with provinces and metros and the Zanemvula and N2 Gateway housing projects had been stabilised and were performing well.

Mr Adler gave an overview of the land acquired and released by the Agency as of September 2014.  Of the acquired land, approximately 55% could be used to build 126 876 high yield housing units and 253 752 low yield housing units, while the rest would be dedicated to infrastructure and social amenities.

The MTSF targets indicated 1.4 million housing opportunities in quality living environments by 2019, 50 catalytic projects implemented, and 10 000 hectares of well-located land rezoned and released for human settlement development.  The HDA showed total expenditure at approximately R193 million, which was 100% of the budget.  Key performance highlights for the first quarter included state land released for human settlement development in KwaZulu-Natal, the Eastern Cape and the Free State.  Other highlights were the development of the Human Settlements Master Spatial Plan, the land assembly support provided to assist Lwandle evictees in the Western Cape, and involvement in the human settlements component of the National Mining Towns Intervention.

Discussion

Mr Sithole asked for clarification on the bulk of state-owned land available for human settlement development, in terms of provinces.

Mr Adler said there had been significant hectares of land released in the North West Province mining towns of Rustenburg and Madibeng, primarily because of the critical response needed to upgrade informal settlements.

Mr Gana asked for elaboration on communal land in terms of payments to tribal chiefs.  The very first time HDA had presented to the Committee, it had been mentioned that acquiring land owned by state entities was problematic, and he asked how the issue was being dealt with. He asked in how many instances the HDA had recommended that the state should expropriate land, because land owners did not want to sell, or the land value had not been agreed to.

Mr Adler said the current agreement with the Department of Rural Development and Land Reform stated that state-owned land got released for housing for free, and there had not been any instances where traditional leaders had been paid in exchange for land for housing development.  There had not been expropriation of property yet, but there had been a few attempts made which had eventually been resolved through negotiations.  There were a few in the pipeline, where the Minister’s permission to expropriate would be requested.

Ms Mnganga-Gcabashe asked, since HDA was quite active in KwaZulu-Natal, why it did not have a listed office.  She asked why project planning was not linked to project packaging, but was instead linked to township establishment.  She also asked on the JCC, if HDA negotiated for donations and clarifications on the implementation protocols signed with provinces and metros.

Mr Adler  said state land owned by the entities did not get released to HDA for human settlement development for free.  Some of the land had been donated and donation agreements were signed instead of sale agreements.

HDA had signed an agreement with KwaZulu-Natal to establish an office in the next few weeks. Work in the province had been on land assembly and pipeline planning.  There were signed agreements with Tshwane, Ekurhuleni and the Nelson Mandela Bay Municipality.  Negotiations with Mangaung and a range of interactions with other metros were ongoing.

Mr Capa asked if HAD, acting as the implementation agent for the Western Cape Bucket Eradication Programme (BEP), was limited only to the Western Cape, or could it be extended to other provinces.

Mr Adler said the Department allocated different parts of the country to different entities, and the Western Cape was allocated to HDA, because of the existing infrastructure of the Agency in the province.

The Rural Housing Loan Fund (RHLF)

RHLF Chief Executive Officer, Mr Jabulani Fakazi, said the mandate of RHFL was to provide access to housing credit to low income rural households in order to enable them to improve their housing and living conditions. RHLF delivered on its mandate through intermediaries and provided funds to commercial intermediary lenders, ring-fenced facilities for community-based organisations, targeting member-based organisations (such as unions) to facilitate housing credit for members.

Mr Fakazi gave examples of the people that were beneficiaries of RHLF. These were people who worked in the public and private sectors that built houses from loans they received from RHLF intermediaries, Moliko and Lendcor.

RHLF, Chief Financial Officer, Mr Bruce Gordon, gave a brief overview of the financial position and performance of the entity.  The RHLF achieved its mandate within the constraint of its funding resources. The target market was vast, and more needed to be done to significantly increase market coverage. Tough market and economic conditions and a high level of indebtedness posed a challenging outlook.  Lastly, the RHLF business model resonated with the active citizenry advocated in the National Development Plan (NDP), where people drove the building process and the improvement of their living conditions.

Discussion

Mr Mmemezi said he wanted know what more needed to be done to address the growing target market. It would be good if a separate marketing document could speak to that.

Mr Fakazi said the target market was huge, because 40% of the current population lived in rural areas.  RHFL’’s mandate also included those living in small towns.  Unfortunately, the only way the Fund could expand was if additional funding was provided.  The Department had been approached several times for an increase of the allocation, but the constraints the Department was under had to be understood.  For the new financial year, the Fund would possibly get a grant allocation and would attempt some strategies to generate funds to increase the footprint of RHFL.

Ms Mnganga-Gcabashe asked if RHFL operated in KwaZulu-Natal.

Mr Fakazi apologised and said it was an oversight.  RHLF operated in all provinces, with the most business done in KwaZulu-Natal and the Eastern Cape. Limpopo was a province RHFL needed to increase their impact in, because of the big rural population.

Mr Gana asked how well known this Fund was, what intermediaries were used, and if the possibility had been considered to put banners in the retail outlets to market the services.  He asked that RHLF explain their value chain, as well as the interest paid on repayment of loans.

Mr Fakazi said RHFL was not well-known, but marketing had been done through the local radio stations, local newspapers and the National Registration Database.  Marketing, however, needed to be done through the availability of intermediaries, because RHFL did not want to make promises that could not be delivered.

Mr Gordon said usually intermediaries charged the maximum interest rate allowed by the National Credit Act, which was currently approximately 32%.  Of the intermediaries used by the Fund, 75% had lowered their interest rate by 12%.  The intermediaries approached RHFL with a business plan, which the Fund would present to the Credit Committee.  A risk assessment of the client was done,and RHFL paid the intermediary and the intermediary then funded the client.  The client had to repay the intermediary and the intermediary in turn repaid RHFL.  RHFL’s risk was limited to the intermediary, whether the client paid them or not.

National Urban Reconstruction Housing Agency (NURCHA)

Mr Viwe Gqwetha, Managing Director: NURCHA, said the core mandate of his company was to ensure the availability of bridging finance to small, medium and established contractors which were building low and moderate-income housing and related community facilities. The core products of the company were the business of lending and programme management. Lending business dealt with affordable housing through ownership and rental, while programme management focused on fund management, programme management support and contractor finance and development programmes.

The contractor finance programme dealt with three types of contractors: the developer/contractor, the traditional contractor, and the Contractor Finance and Development Programme (CFDP). The developer/contractor has a national presence, handles at least ten projects at a time, and has a turnover of more than R300m a year. The traditional contractor has a provincial focus, deals with three projects at a time, and has a R100m turnover. The CFDP has a municipal focus and handles one project at a time.

NURCHA’s five-year strategy had seen improvements in supporting service delivery in the sector and leveraging private sector and donor finance into development areas. There had also been an improvement in the delivery of affordable housing. Further, it had restored financial viability, diversified income sources and changed the delivery model, from intermediary-driven to direct lending. The strategy was aimed at addressing losses which amounted to R134m, and the R61m which was written-off during the 2012/13 financial year.

The new business model of the organisation has adopted a proactive risk management approach to address sources of risk, in partnership with departments in the human settlements sector. It has tightened the risk management processes and lending rules by introducing certificate-based lending. It has also improved the performance of the loan book.

The company has successfully effected forward planning practices for multi-year pipeline projects, in line with the MTEF indicative figures, and streamlined contract administration processes and systems with human capabilities. It has set up collaborations on contractor finance and development programmes. NURCHA has also promoted access to funding at concessionary rates, and granted funds to scale up small contractor development.

NURCHA has completed the first block of training 39 village builders on building skills at the Border Technical College. It is a Construction Education and Training Authority (CETA) financed training and the programme paid stipends and transport. The programme is covering the three municipalities of Ntsika Yethu, Mhlontlo and Umzimvubu.

He concluded that NURCHA contributes an average of 10% of new houses in the affordable residential market. It is reviewing current funding partnerships and is in search of an appropriately priced mix for competitive pricing and organisational stability. The organisation is collaborating with provinces to enable an easier flow of finance to contractors and is planning to grow its Contractor Finance and Development Programme.

Discussion

Mr Sithole wanted to know about the areas in which the R61m write-off had happened.

Mr Gqwetha explained the write-off was the result of accumulated bad debts that had happened during 2011/12 financial year. The turnaround strategy had improved the way they did things.

Mr Mmemezi remarked that the entity is relevant for emerging contractors, and indicated he liked its involvement in training builders in rural areas. He asked NURCHA to go into detail next time about projects it is carrying out in rural areas.

Estate Agency Affairs Board (EAAB)

Mr Bryan Chaplog, Chief Executive Officer: Estate Agency Affairs Board (EAAB), told the Committee that the primary mandate of his organisation centred on managing and controlling the Estate Agents Fidelity Fund; regulating, maintaining and promoting the standard of conduct of estate agents, having due regard to the public interest; issuing fidelity fund certificates to qualifying applicants; prescribing the standard of training for estate agents; and investigating complaints against estate agents, and instituting disciplinary proceedings against offending estate agents where required.

Its secondary mandate involved acting as the supervisory body of the estate agency profession, pursuant to the Financial Intelligence Centre Act. It was obliged to take all steps required to prevent, identify and report on anti-money laundering and terrorist financing activities. Its expanded mandate included the title deed restoration project and transforming the real estate sector.

In its effort to transform the real estate sector, the EAAB is in the process of rolling out the ‘One Learner – One Estate Agency’ programme that would introduce approximately 10 000 new interns over a three-year period. Funding would be received from both public and private sector partners. Plans are on the cards to increase the transformation target group licences.

The organisation was working on the process of eliminating the title deeds backlog of pre-1994 and post-1994. With regard to compliance, 65% of complaints had been resolved within six months. 800 estate agents had been inspected and 75% of Financial and Fiscal Commission (FFC) certificates had been issued to compliant newly registered and currently registered estate agents. Concerning the Fidelity Fund, there had been a 30% increase in interest collected from estate agents’ trust accounts.

On the issue of education and training, an increase has been recorded in the implementation of consumer education programmes in the affordable and subsidy housing market plan. The consumer education project implementation plan document had been completed. 90% of National Qualifications Framework (NQF) Level 4 and 5 candidates who enrolled, completed the Professional Designation Examination (PDE), receiving results.

Regarding administration, 60% of the audit findings raised had been resolved within the agreed turnaround time. The vacancy rate had been decreased by 20%. 85% of queries received from stakeholders had been resolved within 48 hours.

The EAAB said that its funding came from the following sources:

-          levies paid by estate agents;

-          examination fees;

-          income generated from selling study guides;

-          a management fee charged for managing and controlling the Fidelity Fund;

-          fees charged for CPD training;

-          interest on investments of surplus funds.

-           

It was noted that administration and staff costs were going to increase significantly due to inflation, and the establishment of regional centres and roll-out of the title deeds restoration project. Income streams remain depressed to adequately fund the enhanced regulatory machinery and transformation initiatives. In order to address some of its challenges, the organisation is trying to push for legislative reforms; to form partnerships with conveyancers, the Deeds Office, South African Revenue Services and the Hawks; and to professionalise the real estate sector.

Discussion

Mr Sithole wanted to know what had caused the delay in opening provincial offices, and how the organisation planned to address the issue of transformation.

Mr Chaplog explained that both issues were being handled by the Board. Already the opening of provincial offices had started, and the Board was expending its energies on addressing gender issues.

Mr Capa asked if the organisation had links with other government departments.

Mr Chaplog said his organisation was working closely with the Departments of Public Works and Rural Development and Land Reform on a structured programme.

The Chairperson enquired about the composition of the EAAB board.

Mr Chaplog stated the Board comprises 15 members. Five come from the consumer interest bodies, five are lawyers and the other five represent the professionals (estate agents).

The Committee discussed what needed to be done about the Community Scheme Ombud Services (CSOS), which had not arrived for the presentation. The organisation had only sent the presentation document to the Committee.

Mr Mmemezi said it was a bad sign that the organisation had failed even to send a representative to address the Committee.

Mr Gana commented that the Committee deserved a better explanation from the organisation. The Committee should be given reasons for sending only the report and not coming to present it to the Committee.

The Chairperson told the Department to inform the organisation that the Committee needed a written explanation of why it had failed to appear before the Committee. She commented that this was a sign that the Department was not managing its relations with the Community Scheme Ombud Services well.

The meeting was adjourned.

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