Human Settlements entities: HDA, NHBRC, CSOS, RHLF, SHRA, NURCHA, EAAB, NHFC 2013/14 Annual Reports

Human Settlements, Water and Sanitation

15 October 2014
Chairperson: Ms N Mafu (ANC)
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Meeting Summary

The Housing Development Agency (HDA) briefing focussed on achievement of its two main objectives namely (1) to identify, acquire, hold, develop, and release well-located land and building and (2) to provide project management support and housing development exercises. The HDA provided a governance report, performance in terms of key strategic objectives and financial performance. Members of the Committee appreciated overall performance and sought clarity on its performance in Limpopo, on its role on the issue of social transformation, and dismissal of employees, and on the difficulties to get land lots developed.

The National Home Builders Registration Council (NHBRC) focused on its strategic objectives, products and services, governance and objects councils, governance, trends for complaints lodged and resolved and conciliations handled. The Chairperson appreciated the fact that the NHBRC had moved from a qualified to unqualified audit opinion. Members expressed their concern with the irregular expenditure over a period of three years. They suggested that it should brief the Committee on its performance progress on quarterly basis.

The Estate Agency Affairs Board (EAAB) spoke on its mandate, vision and mission, organisational structure, corporate governance report, integrated human capital report, annual financial statements, performance information report, audit report, and the way forward. Members felt that the EAAB was not doing enough in terms of investigations and handling complaints. Members sought clarity on number of complaints received, investigated and resolved; on how many estate agents were inspected; on how many licences were issued and what measures were in place to ensure that they were compliant; and on how corrupt officials were dealt with.

The Social Housing Regulatory Authority (SHRA) briefing provided an overview of the organisation, performance information and annual financial statements. The Committee felt that the SHRA was performing poorly in terms of finance, in respect of preventing irregularities. Clarity was sought on how irregularities could be prevented.

The National Housing Finance Corporation (NHFC) focused on business performance, corporate governance, risk management, customers, and financial performance. The Committee expressed concern that people from rural areas were not accessing the services offered by NHFC. Clarity was sought on Ms Houslan, who was not attending meetings, on why most of the targets were not achieved, why it was lagging behind, and why it was not responding to the need to eradicate social inequality.

The National Urban Reconstruction Housing Agency (NURCHA) spoke about its mandate, core products, impact since inception, turnaround strategy, affordable housing programme, subsidy housing programme, programme and fund management, and financial performance. Clarity was sought on housing subsidy loans and whether they were paid back.

The Rural Housing Loan Fund (RHLF) briefing focused on its mandate and policy context, business environment, stakeholders perspective, finance, and corporate governance. The Committee congratulated the RHLF management for having a clean audit. Members sought clarity on issuance of grants, on dealing with unemployment, and why it seemed like more focus was paid to Gauteng than other poor provinces.

The Community Schemes Ombud Services (CSOS) briefed the Committee on its mandate, key priorities, strategic overview, organisational structures, performance information, governance, human resource management, audit committee report, audit report of the Auditor General, and financial statements. Members sought clarity on the staff needed to fill vacancies and on why CSOS spent more money on conferences, especially travelling, and on the appointment of the two member of management.

Meeting report

Housing Development Agency (HDA) on its 2013/14 annual report
Mr Taffy Adler, HDA Chief Executive Officer, noted that the HDA was a national development agency that promotes sustainable communities by making well-located land and buildings available for the development of housing and human settlements. As an organ of the state, it was accountable through its Board to the Minister of Human Settlements. It had two main objectives:
• Identify, acquire, hold, develop, and release well-located land and building
• Provide project management support and housing development exercises
The following were programmes or strategies to achieve these objectives:
• Ensure that residential and community developments are sustainable, viable and appropriately located;
• Ensure that job creation was optimised in the process of residential and community development
• Introduce and manage a land inventory and information system
• Ensure that community participation took place.

He noted that its achievements included 3 819 hectares of land released and acquired for human settlement in the 2013/14 financial year. A total of 16 properties were held by HDA and 27 leases were in place. Fifteen implementations of protocols with provinces and local municipalities were in place with four new protocols signed with the Mpumalanga Department for Human Settlements, Buffalo City Municipality, City of Cape Town and City of Johannesburg. Twenty two sustainable human settlements projects and programmes were supported.

With regards to programme performance, Mr Adler stated that the HDA received an unqualified audit report. Financial, supply chain and risk management reporting, systems and procedures continued to improve. Specific focus was placed on the improvement of human resources and IT.

With regards to the HDA workforce, it recruited 21 staff members and completed 95% of the HDA job profiling. Nearly 42% of the staff were professional practitioners and employment plans were in place with 50% of staff being women and 87% were black Africans.

He noted the intergovernmental relations support, land assembly support, and projects and programme support provided (see document).

In terms of statement of cash flow, he stated that the cash and cash equivalents was R177 701 million in 2014 and R308 413 million in 2013.

At the end of presentation, Mr Adler screened a video on housing development.

Discussion
The Chairperson sought clarity on the number of women in management.

Ms L Mnganga-Gcabashe (ANC) appreciated the HDA overall performance but commented that the HDA targets were inadequate in that the HDA did not effectively discharge its mandate. She suggested that the HDA should develop a plan on how it would effectively serve all provinces. She sought clarity on the HDA performance in Limpopo.

Mr H Memezi (ANC) sought clarity on the HDA’s performance in Limpopo. He remarked that the land in Limpopo was being developed by the private sector which the HDA should have been developing in the interests of the public.

Mr S Gana (DA) sought clarity on dismissal of employees and how long it would take to replace them.

Mr N Capa (ANC) expressed deep concern about social transformation. He remarked that the HDA was supposed to have a black management board. He sought clarity on what the HDA was doing to develop or upgrade informal settlements.

Ms T Baker (DA) sought clarity on properties that were held by the HDA and properties leased and whether there was a plan to develop them.

The Chairperson sought clarity on the challenges faced by the HDA in getting land lots to be developed.

Mr Adler, referring to the employment equity plan, reiterated that 87% of staff was black Africans and that 76% of staff in management was women. Three staff members were dismissed due to forgery and fraudulent matters. Referring to Limpopo, he stated that the HDA provided support in development and upgrading of informal settlements. He noted that the HDA was waiting for the province to work on implementation and to deliver services. With regards to acquiring land, Mr Adler replied that there was no problem in acquiring public land. To acquire private land was a challenge due to a number of factors as it had to go through various processes. With regards to training, Mr Adler said the HDA provided training to a number of municipalities. It also assisted on studying projects and determined their readiness or reviewed them

Ms Odette Colton, General Manager: HAD, explained that the province of Limpopo had received support for the period of three years. Support was subject to renewal and the request to renew is made by the province. The HDA was waiting for the renewal demand. Limpopo was facing the problem of human resource capacity. It was experiencing a shortage of staff. There was a discussion between the HDA and the province of Limpopo concerning the services that it might need. The HDA had identified some land that it needed to develop.

Ms Colton said that the HDA assisted provinces in terms of investigation and made recommendations on the basis of the findings but it rested entirely with the province in question to act on the recommendations. It was a province that took such decisions. The HDA was assisting the provinces in acquiring land and there were some joint projects aimed at developing land. The HDA’s services were not permanent but temporary. The HDA conducted workshops on land development and how people could make application concerning acquisition or land tenure security. Its services further included upgrading informal settlements, provision of technical support to provinces, and it collaborated with the Department. The Department ought to come with a planning strategy and the HDA could do assessment work.

In relation to informal settlement upgrade, she stated that it was not just about upgrading but also rolling out projects that would increase economic activities. In terms of acquiring land, the HDA could do evaluation, do negotiation, but in terms of negotiation, it could not exceed the highest evaluation.

Concerning training people with disabilities, Mr Adler replied that training people with disabilities was difficult because they could not be equipped with low skills but managerial skills. Social transformation lay at the heart of HDA. The HDA targets were set out in line with its Annual Performance Plan. The HDA was not an independent entity; it appealed to the government for its budget. He identified communication between role players as a challenge and working with formal settlements as a tiring work.

National Home Builders Registration Council (NHBRC) on its 2013/14 annual report
Mr Mongezi Mnyani Chief Executive Officer: NHBRC took the Committee through presentation that dealt with its vision and mission, strategic objectives, products and services, governance and objects councils, governance, trends for complaints lodged and resolved and conciliations handled.

He noted that its strategic objectives included:
• To improve visibility and accessibility in the market while enhancing interaction with our stakeholders
• To position the NHBRC as a leader in knowledge creation, technical and technological building solutions through strategic partnerships
• To provide diversified services and products in line with changing building requirements and needs
• To grow, protect and sustain the NHBRC warranty fund
• To provide innovative quality products and services that will delight the customers
• Strengthens NHBRC operating processes, systems and procedure
• Create a learning environment and build capacities to products and services.

As regards governance, the following committees were noted:
• Industrial Advisory Committee
• Technical Claims and Advisory Committee
• Human Capital and Remuneration Committee
• Audit and Risk Management Committee
• Registration Committee
• Bid Adjudication Committee (tender committee)
• Fund Advisory and Finance Committee
• Disciplinary Steering Committee.

By means of tables and graphs, Mr Mnyani explained overview summary performance, enrolment categories in non-subsidy sector, registration and renewal in non-subsidy sector, plans approved versus homes enrolled, trends for complaints lodged and resolved, conciliations handled, remedial works done per stages, home and project enrolment in the subsidy sector over the last seven years, subsidy inspections, homebuilder training, training by categories and youth trained for the last seven years, its employment equity plan, disciplinary committee hearings, code of conduct matters handled by the NHBRC, recoveries for 2013/14, progress updates, business response, leadership role, and Auditor General’s assessment of NHRC control environment (see document). In terms of employment equity, he noted that 48% of staff was male whereas 52% was female. In terms of business responses, irregular expenditure dropped from over R400 million to R24 million in 2014. The NHBRC came with new travel arrangements to address irregularities.

As regards its audit action plan 2014/15, he noted that it was driven and coordinated by finance, strategy development and monitoring, and the internal audit.

Concerning budget for 2013/14, the total revenue was R733 million. Net income was R339 million. Insurance claims and loss adjustment expenditure was R2 million. In actual terms, expenditure was R518 million and the surplus was R214 million. The NHBRC statement of financial position was presented. Mr Mnyani concluded by stating that the NHBRC received an unqualified opinion from external auditors.

Discussion
The Chairperson appreciated the fact that it had moved from a qualified to unqualified audit opinion. She expressed her concern with the irregular expenditure for the period of three years. She suggested that the administration should brief the Committee on performance progress on a quarterly basis.

Ms Ntobongwana sought clarity on training of homebuilders and training of the youth. She asked whether people with disabilities were included in the training programme.

Ms Baker sought clarity on plans approved versus homes enrolled in terms of non-subsidy inspections in the past seven years. Did the NHBRC exceed its targets? How many inspections were conducted in each province?

Mr M Shelembe (NFP) seconded Chairperson’s comment on irregular expenses. He sought clarity on why the NHBR was not improving in its financial performance.

Mr Sithole (IFP) sought clarity on home and project enrolment in the subsidy sector. What were the criteria for new home enrolment?

Mr Gana seconded the Chairperson’s view on irregular expenditure. What were the challenges faced in the prevention of irregular expenditure? He sought clarity on whether there were claims being received concerning subsidy houses and on the R2 million of insurance claims and on whether subsidy houses recipients were given the required information in terms of making claims.

Mr Capa commented that the entity should focus on improving its financial performance especially on eradicating irregularities.

Mr Memezi sought clarity on the procedure an individual who wanted to build a house should follow and what were the mechanisms in place to educate the disadvantaged community on how to register.

Ms Mnganga reiterated that the NHBRC had to report to the Committee on quarterly basis so as to monitor its performance. The NHBRC should comply with policies that govern funds because any cent spent would be audited.

Mr Mnyani replied that the management would put an action plan on how to report on the Committee quarterly so that the Committee would be able to provide guidance. Irregularities were picked up in the first year and second year of auditing. The persistence of irregularities was due to the irregular contracts that were still running as they could not be terminated. He commented that the management was not reckless but it was trying to contain irregularities.

Referring to training, he replied that the training programme was not funded. The NHBRC collaborated with the National Youth Development Agency (NYDA). It was the NYDA that availed youth for training. They indeed included women and people with disabilities. In the context of the latter, the problem was to identify the training that suits the demand in the labour market. That was a challenge.

Referring to inspections, he noted that there were more than 200 inspectors who could inspect between four to five houses. Inspectors had cars and petrol allowances and they could inspect between 15 and 20 inspections per month. With reference to issuing tenders, tenders are first advertised.

Regarding irregularities in terms of money, paid by provinces, only one province, Eastern Cape, was lagging behind. Normally the provinces paid within 120 days but this period had been reduced. The provinces should comply with the financial management legislation.  Other provinces were complying with it and there was no problem.

Referring to claims, he explained that the NHBRC only ratified claims. The claim could be made by individuals whose houses were enrolled or not enrolled, including the RDP houses. The RDP houses ought to be enrolled and the house-owners needed to be educated on what they had to do with their houses. Some of the houses were not enrolled. There was a need to help them, especially to resolve the issues related to housing.

Estate Agency Affairs Board (EAAB) on its 2013/14 annual report
Mr Bryan Chaplog: EAAB Chief Executive Officer, spoke about the EAAB mandate, vision and mission, organisational structure, corporate governance report, integrated human capital report, annual financial statements, performance information report, audit report, and the way forward. The primary mandate was to regulate, maintain and promote the standard of conduct of the estate agents having due regard to public interest, issue fidelity fund certificates to qualifying applicants, prescribe the standard of training of state agents, investigate complaints against estate agents and institute disciplinary proceedings against offending estate agents where required and manage and control the Estate Agent Fidelity Fund. The secondary mandate of the EAAB was the supervisory board of the estate agency profession pursuant to the Financial Intelligence Centre Act and report, on anti-money laundering and terrorist financing activities (see document).

With reference to the financial statements, he noted that the revenue from issuing fidelity fund certificates (FFCs) declined due to some estate agents who were still battling with complying with audit report requirements. Yet, revenue from exams increased due to more estate agents enrolling for exams to meet regulations deadlines.

By use of graphs and table, he provided its operational overview, integrated human capital report, annual financial statements, key performance annual targets, audit report, and audit report journey.

He stated that the way forward was to establish regional centres, participate in finalising the Property Practitioners Bill, intensify consumer awareness campaigns and increase inspections.

With regards to employment profile, he noted that 18 posts were vacant. The number of staff was 74 and 39 staff were African female and 4 staff were coloured female.

With regards to financial statements information, he stated that the income was R80.5 million; expenses were R74.6 million; operating surplus or deficit was R5.9 million; and net surplus or deficit was R8.7 million. Operating expenditure decreased due to less inspections performed. The Fidelity Fund had assets of R571 million and the claims approved by it were R5.8 million.

Mr Chaplog stated that 56% of targets were not achieved as they did not meet the SMART criteria. He concluded his presentation by stating that the EAAB had received unqualified audit opinion since 2009/10 financial year.

Discussion
Ms Baker sought clarity on the huge difference between claims made in 2012/13 and 2013/14 and on how many inspections were carried out and how many agencies were inspected.

Mr Gana, with reference to disciplinary cases, sought clarity on the number of complaints received, investigated and resolved and, with reference to licensing, on number of renewal FFC issues and on why the renewal of licences decreases in 2013/14.

Ms Mnganga-Gcabashe sought clarity on how many estate agents were inspected, how many licences were issued and what measures were in place to ensure that they were compliant.

Ms Ntobongwana sough clarity on how the EAAB dealt with officials who were corrupt and whether they did pay back the money.

Mr Chaplog replied that it was difficult to deal with estate agents who were not submitting their reports because of the gap in the law. He suggested that an amendment was needed to insert a clause in the legislation stating that if one missed the deadline, he/she should be disqualified. It was crucial to meet all deadlines. He noted that there were no other irregularities in the annual report that were embarrassing.

Referring to claims, he acknowledged that consumers were losing their money due to the behaviour of state agents. The claim process was subject to the exhaustion of all legal remedies available – if the matter was not resolved, a complainant could not lodge complaints with the EAAB.

Referring to corrupt officials, he replied that the Board recovered the money and paid it back. Licences were taken from the corrupt officials. There was a problem where officials did not have the money to pay back because the Board did not have the power to attach their property. Where there was no money, the Board’s power was limited.

With regards to skills, he commented that the big firms were not retaining young people as the small firms did. There were challenges too in terms of training young people.

The Chairperson appreciated the responses provided. She suggested that in cases where they could not recover money, the Board should rely on other mechanism available such as the police force and the Hawks. She said that she would like to have the responses in writing.

Social Housing Regulatory Authority (SHRA) on its 2013/14 annual report
Adv Seeng Ntsaba-Letele, Acting Chief Executive Officer, provided an overview of the organisation, performance information and annual financial statements. The aim of social housing was to provide housing opportunities for low to medium income households, restructure cities and empower residents and provide clean, healthy and safe environments within proximity to services, transport routes, clinics, schools and economic opportunities. The SHRA was responsible for regulating the social housing sector in South Africa and administering and approving disbursement of Restructuring Capital Grant (ie capital and institutional investment grants). Its mandate was drawn from an Act of Parliament.

With regard to performance information, she noted three strategic outcome oriented goals: to be a reputable and reliable regulator, to be a good custodian or steward of the state resources, and to use cutting-edge technology and best brand systems to achieve business results.

The SHRA operated three core programmes: the investment programme, institutional investment programme, and regulations programme. They were supported by the corporate services programme which comprised of finance, information technology, human resources and supply chain management. She explained the performance of each programme and indicated that the most of targets were exceeded (see document).

With regards to its audit report, she stated that the Audit Committee had complied with its responsibilities and that it had reviewed and discussed the annual financial statement with external auditors. The SHRA received an unqualified audit opinion and the external auditors raised concerns about irregularities in expenditure with regards to provincial special projects amounting to R93 603 283 and use of capital budget for operational requirements amounting to R20 253 060.

The SHRA total assets were R484 596 973 in 2014 and the liabilities were R11 962 290. Revenue from non-exchange was R650 151 000 and operating surplus was R470 894 859. She concluded by providing programme costs per province (see document).

Discussion
Ms Baker, referring to the slide on page 9, she sought clarity on what were the turnaround interventions and who was accountable for the projects?

Mr Gana referring to irregular expenditure and fruitless expenses, sought clarity on measures being taken to prevent irregularities in the future.

Ms Mnganga-Gcabashe expressed concern about liabilities.

The Chairperson sought clarity about the cash flow statement as it pertains to provinces.

Adv Ntsaba-Letele stated that when irregular expenditure was discovered, a forensic investigation was launched to determine what was going on and where possible dismiss the person responsible. It was the institutional investment programme that was sitting with the stocks. These stocks were not audited and credited. They were mostly based in Mpumalanga. With regards to cash flow from provinces, there were special arrangements between the SHRA and the provinces to send financial statements to SHRA.

National Housing Finance Corporation (NHFC) on its 2013/14 annual report
Mr Samson Moraba, Chief Executive Officer: NHFC, focused on business performance, corporate governance, risk management, customers, and financial performance. With reference to the NHFC background, he noted that it was established in 1996 as a development finance institution. It was a state owned company with total assets of R3, 1 billion and R716 million liabilities by 31 March 2014. Its main business – or mandate – was broadening and deepening access to affordable housing access to affordable housing finance for low-to-middle income households with an income of between R1 500 and R15 000. The NHFC was self-sustaining entity, which paid income tax.

He noted the following strategic focus areas:
• To optimise the balance sheet
• To promote ownership and accountability within the organisation
• To increase utilisation or leverage of private sector capacity
• To capacitate and elevate research and advocacy function.

Its strategic pillars were sustainability, leveraging, growth of asset base,

Mr Moroba described in brief how the NHFC delivered on its mandate. It had developed strategic alliances and partnerships with developers, investors, and housing development funds through investment in equities, mezzanine and junior debt capital structures in projects or companies that operate the affordable housing market (see document).

In terms of corporate governance, the NHFC conforms to the requirements of the King III Report and the Protocol on Corporate Governance.

In terms of employment equity plan, the NHFC employed 72% Africans, coloured 17%, Indian 2%, white 9% and no foreigner. Females comprised 55% of the staff.

In 2014, 12 537 housing opportunities were created and 16 038 job opportunities were facilitated. The number of beneficiaries benefiting was 321 111.

Concerning challenges, he noted that funding remained critical to NHFC growing its loan book and that there were delays in housing project development processes in the housing market and high indebtedness of households had both constrained the supply and lending respectively, in the NHFC market.

Concerning financial statements for groups, he indicated that, in actual terms, the total income was R249 757 000; operating profit was R88 214 000; surplus before tax was R35 188 000; and surplus after tax was R16 071 000. These groups were Cape Town Housing Community Company, Housing Investment Partners (HIP) and Trust for Urban Housing Finance (TUHF).

Concerning financial statements for NHFC, he indicated that, in actual terms, the total income was R259 416 000; operating profit was R107 730 000; surplus before tax was R51 767 000 and surplus after fax R31 513 000. The total assets and liabilities was R482 million. Loan debtors were grown to 11% but were in line with level of disbursement.

He concluded by showcasing the NHFC projects, including Harmony Village, Cape Town, 424 Commissioner Street, Johannesburg; 120 End Street, Johannesburg; Lakenven Social Housing Project (Phase 1 and 2); Mettle – Karino Development, Nelspruit; Kenwick Close, East London, Space, Kimberly; and Freshco; Bloemfontein.

Discussion
Mr Shelembe expressed his concern that people on the ground were not feeling the NHFC’s work. They were not aware how they could be assisted and in many cases, people could not qualify for the NHFC programmes. He sought clarity on how people who could not qualify were assisted and how it intended to improve its service for wider accessibility.

Mr Sithole referring to the NHFC management meetings, he said that Ms Houslan was not attending and asked for clarity on why that was the case.

Ms Mnganga-Gcabashe remarked that the NHFC was operating within a critical market whereby it could close the gap in the housing demand and that its programmes should create jobs for the sake of social and economic transformation. She sought clarity on why most of the targets were not achieved, why it was lagging behind, and why it was not responding to the need to eradicate social inequality.

Mr Moroba replied that Ms Houslan resigned from her management post. Because of her resignation she could not attend all meetings. Despite her resignation, her name was appearing.

National Urban Reconstruction Housing Agency (NURCHA) on its 2013/14 annual report
Mr Viwe Aqwetha, Managing Director, spoke about NURCHA’s background, mandate, core products, impact since inception, turnaround strategy, affordable housing programme, subsidy housing programme, programme and fund management, and financial performance. 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. He proceeded to highlight the success of the turnaround strategy, including:
• Growth affordable housing with R300 million capitalisation;
• Rein on provision for losses in contractor lending book
• Introduced contractor finance and development programme
• Managed change process successful and fully internalised lending business process
• Introduced programme and fund management stream successfully.
In addition, NURCHA reported surplus following years of losses, achieved an unqualified audit and improved collaboration with provincial and local government stakeholders in the human settlement sector.

He noted that the number of loans signed was 944 subsidy housing, 175 affordable housing and 281 community facilities. Houses in loans signed were 344 146 subsidy housing and 35 973 affordable housing; houses or projects 250 133 subsidy housing and 29 794 affordable housing and 184 community facilities. Value of loans were R1 336 billion for subsidy housing; R1 497 billion for affordable housing, and R632 billion for community facilities. Value of projects was R8 912 billion for subsidy housing, R5 813 billion for affordable housing and R3 848 billion for community facilities.

He said that the NURCHA was facing some challenges in its turnaround strategy. There was a threat to organisational sustainability and high levels of provisions for losses. He noted that the NURCHA had shifted from an old business model (focussed on contractors) to new business model (focussing on direct lending).

He took the Committee through graphs, explaining the financial performance since 2008/9 financial year, total provisions versus total debtors, historical and projected income, affordable housing since inception, refinements contractors finance programme, and breakdown of income sources (see document).

In terms of financial performance, he noted that net surplus before administration expenses was R82 184 000, operating surplus was R7 308 000 and surplus was R3 815 000 for the financial year. NURCHA had total assets worth R650 153 000, including liabilities.

Mr Aquetha concluded by stating that the turnaround strategy was implemented successfully and that the operational presence in provinces was in line with business activity and keeping the market stakeholders engaged.

Discussion
Mr Gana sought clarity on the housing subsidy loans and whether they were paid back and on GAP housing on which he commented that the number seemed to be high.

Ms Mnganga-Gcabashe appreciated the NURCHA collaboration with other provinces and its indirect approach to finance them. She said that though NURCHA performed well, the Auditor General raised the issue of non-compliance with the procurement process.

Mr Aquetha replied that there was improvement in securing remuneration. Otherwise noticeable irregularities predated 2010/11 financial year. The challenges that the organisation was facing were historical. Referring to financing GAP housing, he replied that the GAP housing freezing came with affordability.

Mr Aquetha replied that there was improvement in securing remuneration. Otherwise noticeable irregularities predated 2010/11 financial year. The challenges that the organisation was facing were historical.GAP housing was affordable and no contract was "frozen" due to non-payment. Due to affordability, the number of recipients went up

Rural Housing Loan Fund (RHLF) on its 2013/14 annual report
Mr Jabulani Fakazi, Chief Executive Officer, spoke about the RHLF mandate and policy context, business environment, stakeholders perspective, finance, and corporate governance. The primary mandate was to facilitate people to have access to incremental housing finance for low income rural households. The RHLF policies revolved on human settlement, comprehensive rural development programme, SMME development, and the National Development Plan. The policies were developed in line with the State of Nation Address, which emphasised three aspects: improving infrastructure, spatial restructuring and job creation.

With respect to business environment, he noted that economic growth remained slow throughout the financial year and the unemployment rate remained high at 25.2% in Q1 of 2014. With respect to the business environment, inflation remained steady, but hit the 6% ceiling in March 2014. Interest rates were still low but level of indebtedness remained a concern. There was a decline in granting unsecured credit.

Mr Fakazi provided the achievements of RHLF over five years, focussing on loans granted, development outcomes, provincial distribution, loans granted in rural nodes, annual disbursement to intermediaries, and annual surplus (see document).

In terms of organisational performance in 2013/14, he noted that the RHLF achieved visibility and enhanced its ability to attract commercial lenders and developmental partners for rural housing delivery. It broadened and deepened the reach of rural housing finance. It built lending capacity and competitiveness of the retail intermediary network.

In terms of financial perspective, he stated that the budget was R47 084 million and average interest earned on loans granted was 12.2% and income from financial investment was R9 359 million. The expenditure was R16 694 million and underspend related to research and marketing accounts that were not spent. Operating surplus before taxation was R33 490 million and R27 480 million in actual terms. He commented that the final total capital at the end of the previous year was higher than forecast. The RHLF had total net assets of R385 063 million and liabilities of R143 907 million. Concerning audit outcomes, he noted that the RHLF received an unqualified audit report and a clean audit. There were no issues raised by the external auditors.
 
Concerning the 2014/15 outlook, he stated that the RHLF was expecting another tough year ahead due to sluggish economic growth and inflation that remained high (see document).

Mr Fakazi concluded his presentation by remarking that the key development and financial targets were achieved and that the RHLF’s surplus was below budget as a deliberate strategy to lower the cost of credit for the benefit of the borrowers.
 
Discussion
Ms Baker commented that the grants issued in the Eastern Cape were insignificant.

Mr Sithole sought clarity on how they dealt with unemployment.

Mr Gana, referring to page 30 of the Annual Report, remarked that the information provided was confusing and illogical as they were not organised. He singled out figures appearing on that page. He seconded the remarks made by Ms Baker. He commented that most of the RHLF programmes and activities were based in Gauteng and sought clarity on why it was not visible in the rural areas, such as Limpopo, Mpumalanga and Eastern Cape and why a high budget of R59 million was allocated to Gauteng.

Ms Mnganga-Gcabashe remarked that the RHLF activities should focus on developing the rural areas because these are areas that need development most. They were in need of facilities and they should therefore have access to the RHLF services.

Mr Fakazi responded that the allocation of budget was a challenge. Many of the people who applied for a loan were from Gauteng. He acknowledged that he would develop a plan to ensure that people from rural areas are equipped with the necessary information so that they could apply for loans. Such a plan was an awareness campaign. In some provinces, the RHLF did not reach the rural areas because there were no intermediaries, for example, Eastern Cape. He emphasised that he wanted to see more improvement in RHLF services, especially reaching the rural areas.

Mr Gana congratulated the RHLF management for having a clean audit. The Auditor-General did not make any negative comment on the RHLF financial statements.

Community Schemes Ombud Services (CSOS) on its 2013/14 annual report
Mr Themba Mthethwa, Chief Ombud, gave a briefing on the CSOS mandate, key priorities, strategic overview, organisational structures, performance information, governance, human resource management, audit committee report, Auditor-General report, and financial statements for the year ended 31 March 2014.

He noted that its mandate and main functions included:
• To develop and provide a dispute resolution service
• To provide training for conciliators, adjudicators, and other employees of the service;
• Regulate, monitor and control the quality of all sectional title schemes governance documentation as may be determined by the Minister;
• Take custody of, preserve and provide access to electronically or by other means to Sectional Title Schemes governance documentation as may be determined by the Minister;
• To manage Sectional Title Schemes Management Act as provided by the relevant Acts.
And that the key priorities included:
• Establish a world class dispute resolution service with the community schemes characterised by organisational excellence and a conducive organisational culture;
• Promote good governance of community schemes by developing and implementing appropriate guidelines to enhance stability and harmonious relationship among the parties
• Roll-out massive educational campaign to educate and train stakeholders with community schemes and public at large;
• Enhance community scheme tenure alternative tenure option; and
• Appropriate organisational system, controls, and measures to enhance financial, economic and organisational efficiency.

He stated that some strategic outcome oriented goals were not achieved due to non-operational activities. Due to challenges of capacity and financial resources, CSOS was unable to man the human resources division. Human resources policies were approved and would be reviewed in the 2014/5 financial year. He noted that both the Chief Ombud and chief financial officer had since been appointed in 2013/14.

With regard to audit committee report and Auditor General report, he stated that the audit committee was satisfied that the going concern of the entity was not under threat and that the entity would continue to operate in the foreseeable future. The opinion expressed by the Auditor General was that financial statements presented fairly, in all material respects, the financial position of the CSOS as at 31 March 2014 and its financial performance and cash flows for that financial year met requirements. The statement of financial position was presented as follows: CSOS total assets were R17 million; total surplus was R16.8 million; and total liability was R14 000. The statement of financial performance reflected totals of revenue, expenses and surplus or deficit. The budgeted income was R20 million but R17 was received.

Discussion
Ms Ntobongwana sought clarity on staff that would be needed to fill vacant positions.

Mr Gana sought clarity on why CSOS spent more money than budgeted on conferences, especially travelling, and on the appointment of the two members of management.

Mr Mganga-Gcaashe remarked that the CSOS did not meet its targeted objectives and that a budget would be increased if they achieve their targets.

Mr Memezi wished the CSOS management well in their work and stated that it was clear that they needed more money to carry out their work. However, the management should wait until the following year. Budget should not be spent on meetings or conferences but on its services.
 
Mr Mthethwa replied that the CSOS had budgeted for 22 employees but it had been without leadership for a while. The human resources were needed because he was looking at opening new branches in Gauteng, Western Cape and Kwazulu Natal. Money was needed to operate effectively. With regards to appointments, he acknowledged that the CSOS had been without executives and now he was delighted to announce that it had a complete management team.

Referring to attending conferences, he replied that the people who attended the conferences used their own cars. Costs seemed to be high because it included the attendance fees or training fees.

The Chairperson sought clarity on whether the matters raised by the Auditor General were being considered and what they were doing in terms climate change

Ms Mthethwa replied that the Auditor-General concerns were receiving his full attention and he was convening meetings to see how those issues raised could be avoided in the future. He concluded by stating that the CSOS was working on strategies to make sure that its services were marketed.

The Chairperson remarked that most of the housing entities received an unqualified audit. Their reports were very explicit. She thanked them for responding to the Committee’s questions. She appreciated the fact that they were meeting the Committee half way and that she was expecting that the CSOS would report to the Committee regularly. She reminded Mr Mthethwa and other entities that they were working for the people but not on their own behalf.

Meeting was adjourned.

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