Department of Human Settlements on its 2013/14 Annual Report

Meeting report

Welcome and Opening Remarks
The Chairperson welcomed all Members of the Committee and the delegation from the Department of Human Settlements (DHS). The purpose of the meeting was to be briefed by the DHS on the annual report and financial statements for 2013/14, in preparation for the Budgetary Review and Recommendations Report (BRRR).

Brief: Department of Human Settlements
Mr Thabani Zulu, Director-General: Department of Human Settlements (DHS) said the 2013/14 financial year marked the coming of age of South African democracy, while on the other hand it marked the ongoing process of government’s efforts to provide shelter as a socio-economic right. Guided by the national Department, provinces embraced principles of integrated planning, project implementation and synergy in deploying funding. Through collaboration and coordination, provinces as delivery agents, brought in an outcomes-based approach as they discharged their responsibilities to change the human settlements space.

The Department had revised the finance-linked individual subsidy programme to improve the ability of households in the income category R3 501-R15 000 to access mortgage finance for housing, thus increasing access to housing finance and the provision of shelter and basic services. The Department had held engagements with private sector companies, such as Pathfinder Development Company, as well as employers such as Harmony Golden, to encourage investment and encourage access to affordable housing finance. The National Sanitation Programme Unit (NSPU) planned to monitor 144 Municipal Infrastructure Grant (MIG) projects, and a total number of 152 MIG projects were being monitored across nine provinces. The Rural Household Infrastructure Grant (RHIG) business plans had been received from 24 benefiting municipalities and funds had been transferred to municipalities to implement RHIG.

The management of the Urban Settlement Grant continued to receive attention in the devolution of powers to the local sphere of government. South Africa was a prominent member of UN HABITAT and continued to advocate and play an instrumental role for the support of human settlements programmes in Africa.

Mr Zulu said the overall achievement by the national Department of Human Settlements during the financial year 2013/14 was 79% -- of 126 targets planned for the period under review, 99 were achieved while 27 were not achieved.

In terms of communication and outreach, the Chief Directorate had participated in all Ministerial outreach programmes, and face-to-face communication had taken place in communities, with a help desk set up and individual queries logged in for further investigation or solved on site. This had done in collaboration with municipalities and provincial Departments of Human Settlements. Public engagements included exhibiting during the annual Rand Show, Pretoria Show, South African Housing Foundation, and the BRICS Conference. About 4 500 generic publications were distributed to the Government Communication and Information System (GCIS) library in Parliament and to Thusong Service Centres in Mpumalanga and Limpopo, in their regional languages. Door to door campaigns were carried out and publications were handed over to members of the communities during the campaign, like on 6 August in Oudtshoorn and 2 October in Lerato Park, in Kimberley. Community imbizos hosted by the Minister and Deputy Minister were held across the country.

As part of the DHS strategic planning, the draft terms of reference for the Green Paper were developed.  The Rental Housing Strategy Framework had been developed, was based on discussion papers about the affordability of rental housing and object subsidies in rental housing. Draft sector-wide reporting indicators were also developed. Consultation on the draft 2014-2019 strategic plan was conducted across the sector. The draft evaluation report was submitted to the technical working group for comments. The draft terms of reference (ToR) for the review of the Programme for Human Settlements Chapter of Municipal Integrated Development Plans (IDPs), was developed. The progress report on the support rendered to municipalities on the assessment of the Housing Chapters of the IDPs was drafted.

The enhanced people housing process involved the finalisation of the human settlements policy on community-based housing cooperatives, and DHS had engaged a service provider to develop the policy. The Small Enterprise Development Agency (SEDA) had been engaged to explore possible collaborations and funding mechanisms for human settlements cooperatives. The DHS participates in the Department of Trade and Industry’s Inter-Governmental Coordination Committee on Cooperatives, which will provide an update on human settlements cooperatives. There would be an advancement in self-built methodology. Oversight visits had been conducted in the Western Cape, KZN and North West Province to evaluate the implementation of the programme and deliver the required Peoples Housing Process (PHP) capacity development workshops. There would be support to provinces in the upgrading of informal settlements through the PHP. KZN province and eThekwini metro would evaluate progress regarding the upgrading of informal settlements through the PHP, and assessing the monitoring and evaluation assignment on the impact of the Upgrading of Informal Settlements (UISP).

In the international relations programme, the Department had led a team of South African government officials and academics to the 7^th World Urban Forum (WUF 7) in Medellin, Colombia. Outcomes from WUF 7 would support the concept of the long-term planning approach to urban policy and implementation and management thereof, such as the National Development Plan (NDP) – Vision 2030, as well as respective city visions, which could look as far ahead as 2055. The DHS was leading the country preparations for the Third United Nations Conference on Human Settlements and Sustainable Urban Development (Habitat III) in 2016. It was finalising the national report on achievements in the last 20 years, what the remaining challenges were and what it hoped to have included in the New Urban Agenda to be adopted at Habitat III.

With the Stakeholder and Inter-Governmental Relations (IGR) programme, the Department had successfully launched the Cornubia Integrated Project in April 2014. The Graskop Project had been handed over from the government of China to the South African government. A Memorandum of Understanding (MOU) had been signed with the Council for Scientific and Industrial Research. Preparations for the national Govan Mbeki Awards were well underway with several successful provincial award ceremonies already hosted. 

Mr Zulu said that with regard to the upgrading of informal settlements, the target for 2014 of upgrading 400 000 households in informal settlements, with access to secure tenure rights and basic services, was achieved. The total number of households assisted to date was 447 780 households, which represented 111.9% of the 2014 target. The number of municipalities benefiting from the National Upgrading Support Programme in 2013/14 had risen from 35 to 50. Technical assistance was in place in 47 of 49 NUSP municipalities, plus an additional three municipalities that had requested support. The 50 municipalities represented more than 700 informal settlements.

Actions taken to address challenges include a revision to the current social and rental housing policies, and the development of a back yard rental policy was also receiving attention. A declaration of additional restructuring zones was being attended to, and a monitoring tool for private rentals would be put in place. The DHS would also undertake the design and costing of higher density housing typologies.

Mr Nyameko Mbengo, Acting Chief Financial Officer: NHS, said that for the 2013/14 financial year the Department had received an unqualified opinion from the Auditor General, with emphasis of matter. The Department had spent R108.6m of its allocation of R133.6m pertaining to implementation of the Rural Housing Infrastructure Grant (RHIG). The Department had also been allocated an amount of R106.7m to be transferred to municipalities, but these transfers were made only in March 2014, so a significant portion of the grants had been unspent at 31 March.

On predetermined objectives, changes to objectives, indicators and targets in programmes 2, 3 and 4 were not approved. Material changes were made to indicators and targets reported in the annual performance report without these changes being approved by the Minister. Reported indicators and targets were not consistent with those in the approved annual performance plan. In terms of measurability, the Departmental indicator targets were not specific. The Auditor General could not measure the required performance. Significantly important targets were not reliable when compared to the source information or evidence provided.

Mr Mbengo said effective, efficient and transparent systems of risk management and internal control with respect to performance information and management was not maintained, as required by section 38(1)(a)(i) of the Public Finance Management Act (PFMA). The financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework, as required by section 40(1) (b) of the (PFMA).

Funded vacant posts were not filled within 12 months, as required by public service regulations, and the required human resource plan was not in place. Proper control systems to safeguard and maintain assets were not implemented, as required by the PFMA and Treasury regulations.

Management’s response to the audit outcome had been to develop an action plan as a tool to address all the findings raised by the Auditor General. The action plan was populated with all the findings and circulated to the responsible Deputy Director Generals and Chief Directors for planned actions that were aiming at addressing the findings and mitigating or eliminating the risk of the similar audit finding being raised again in future. Planned actions being were monitored on a monthly basis by the CFO branch, whereby managers were required to provide progress and evidence to support what had been done. The Auditor General provided a feedback on a quarterly basis in the form of a dashboard report from which the Director General was expected to come up with commitments that would address discrepancies identified during the assessment.

Discussion
Ms P Ntobongwana (EFF) asked how many employees had been suspended by the Department, and at what cost.

Ms T Baker (DA) asked why the sanitation register was not maintained. This was a cause for concern, because of the backlog in the provision of sanitation was sitting at 1.4 million in 2012/13. Without a proper register, how did the DHS know where they needed to go and how they would get there?

Mr S Gana (DA) asked the Department to clarify the 21% gap between the 75% achievement of its targets and the 96% spending of its budget. He asked what mechanisms the Department had to address the backlog in spending on the Rural Infrastructure Grant (RIG). What was the Department doing in terms of senior management service (SMS) members disclosing their financial interests, since the number of disclosures had dropped to zero in the 2012/13 and 2013/14 financial years. He also sought clarity on the comment made by the Auditor-General, where services for RIG had not been done but money had been paid before the services were delivered.

Mr M Shelembe (NFP) asked for clarity with regard to the delay in receiving invoices, questioning why one would not want to be paid because of delaying invoices. He asked why money was transferred so late to municipalities, because the DHS claimed municipalities were development agencies for the department nationally. He asked how often the DHS met with the Office of the Auditor-General because there needed to be improvements with issues such as the human resource plan. What were they doing to fill the critical posts in the Department?

Mr L Khorai (ANC) asked for clarity with regard to the six branches of the Department that were mentioned in the presentation because according to his understanding, the Department had five branches. He recommended that the Department should also use political party constituency offices as communication venues to help communities obtain access to information about the Department. He asked whether the Department had advertised its vacancies according to the requirements for such positions, because there were posts that were going to be re-advertised, which caused a problem with the vacancy rate. Was the Department complying with the President’s requirement that service providers should be paid within 30 days after rendering their services?

Mr N Capa (ANC) noted that there was no mention of a lack of capacity within the Department in that report. The report had stated that there was a process of meeting the AG for quarterly reports and that kind of monitoring would assist in correcting previous mistakes. He asked who actually made the changes that were done without being approved, and was there any corrective measure to change that situation so that such things were not done by competent people in the Department.

Mr H Mmemezi (ANC) appreciated the detailed input from the Department. With regard to the delayed invoices, he asked what the Department did when it saw that the invoices were not coming in, because that situation would affect it at the end of the day. He asked what the planning processes of the department were, because under-spending remained a crime and was not acceptable, because whatever they were doing should be informed by proper planning. Had any action been taken against officials who claimed to have qualifications they did not have?
Some of the matters of emphasis in the AG report were coming up again and again -- why did the department not fix them, and how they could trust the Department to fix them this time around?

Mr Gana asked the DG to explain the issue of Limpopo, where a third of the money had been taken but still there were challenges in that province.

Ms L Mnganga-Gcabashe (ANC) said that the RIG was intended to reduce inequalities and poverty in rural areas. Therefore, if for three financial years there had been under-spending, it meant they would not realise the goals of the National Development Plan. The planning for rural development, whether in terms of infrastructure or delivery of houses, was less than for urban areas. In fact, the DHS was supposed to be doing far better in the rural areas because the planning was much easier than in urban areas. Therefore, the rural provinces should be the ones that were leading in terms delivery, whether it was sanitation or housing. The Financial and Fiscal Commission (FFC) was making an example of some of the reasons why the Department had been failing to release funds early to municipalities. It was high time that they, as a Committee, took a decision to look at the funds being transferred to the Department of Water and Sanitation.

Ms T Gqada (DA) asked what the progress was on the use of land for housing settlements. She asked how they had run the Department if there was no HR plan in place. What was the problem with regard to the filling of vacancies for people with disabilities?

The Chairperson asked the Department to clarify the vacancy rate of the Department, which was very high.  She asked for details of the 60 cases reported in the corruption watch, none of which had been resolved. Was it because of the reporting pattern, or had none really been resolved? 

Mr Zulu thanked the Chairperson and Members for the questions and comments. With regard to the transfer of funds to municipalities, one of the challenges of a transferring officer was to transfer money without satisfying himself what the money was intended for. They could do that only by getting a simple business plan that could tell them how the money to be transferred would be used. This was one of the preconditions required by National Treasury. Some of the delays were related to this particular situation. That was the major reason why there had been a delay in the transfer of money, besides the fact that the model for the project had changed in that particular year, as had been advised by Treasury.

Regarding the RIG issue raised by most Members, the DHS had dealt with Treasury and submitted a formal request to transfer all sanitation-related programmes to the Department of Water Affairs and Sanitation. It was hoped that when the mid-term budget came, some of the aspects of that matter would be dealt with. However, as a Department they had taken that initiative, with the underlying objectives outlined by Members. They also hoped that this would improve the management of this particular programme and all the challenges that had been highlighted would be dealt with. This included the responsibility for bucket eradication, which was money that had already been ringed-fenced within the grant of the HSDG for the implementation of the programme.

As a Department they were prepared to ring fence all the money that had been gazetted and make sure that all of it was effectively transferred to the relevant Department and then monitor the spending, because the money was still gazetted under the DHS. In two years’ time, there would be a mechanism to ensure that it had not affected the formula of the National Treasury for dispensing funds for HSDG purposes to the Department.

Mr Zulu said that on the issue of financial disclosures, he had always recommended cross checking information, but this did not seem to be happening, which was becoming a problem for some of them. If there was a zero financial disclosures for two consecutive years, it was a serious indictment on their accountability and responsibility. However, they had been very consistent with financial disclosures with SMS members and he had signed some of the financial disclosures from senior managers himself. He would request the Committee to cross check that part with the Public Service Commission (PSC), because the information came from them as a Department, then goes to the Minister, and from the Minister to all SMS members. He would also cross check that information, but knew that most of them had disclosed as required by law. Failure to do so would result in consequences.

Mr Zulu said it was true that some of the reasons for the DHS not spending their budget meant that somewhere and somehow, their plans were not up to speed, or they did not know what they were doing, or they were delaying delivery on various aspects of their work.

With regard to the issue of the Special Investigating Unit (SIU), they had received invoices at a late stage and could not effect some of the payments, because they had needed evidence of the work done, indicating that there was value for money from the contractual arrangement. A number of meetings had been arranged but could not take place because of cancellations. He had offered to present himself at those meetings with the executives of the SIU, and expressed his frustration that as an accounting officer, he did not simply pay invoices above R5m without properly checking whether the work had been done, which was the main challenge. However, the matter was receiving attention and his office had confirmed that a meeting had been arranged with the SIU. The work they were doing with them had declined in the last two years and some of the investigations were being done internally by the Department to make sure they were dealing with the backlog. The challenge was still to be circumspect as an accounting officer, not to see an invoice and without proper evidence attached to it, simply make payments which would compromise one’s accounting responsibility.

Mr Zulu said that with regard to how often they met with the AG’s office, there was an established structure within the Department which communicated with the AG’s office on a day to day basis, especially with regard to the various findings. The DHS had a standing audit committee, of which he as an accounting officer is a member, and which met on a monthly basis where he was briefed about progress they were making on various audit findings. Those meetings were recorded and there were minutes of meetings. And it was true that some of the matters that had been raised were recurring, and it had not been easy to deal with them, in particular the issue of making sure the assets that were delivered from the RIG projects were properly registered, which was one of the most challenging areas. Again it was because there were too many players – the DHS gave money to municipalities and they should have those assets registered. However, the AG was saying at the end of the day that the DHS have those registers as well. This meant the Department should do whatever it took to know where the projects were. At some point, he had to send his team to physically check the existence of those structures in areas where money had been transferred, to satisfy themselves on record. It was a momentous task, but because it was an instruction they had to do it. In fact, if they had not done so, they would have received a disclaimer in the current year under review because they had to demand information from service providers and from municipalities and make submissions to the AG, which was to some degree satisfactory. They were hoping therefore that when the process was transferred, there would be better management of all sanitation problems, particularly in rural areas.

Mr Zulu acknowledged that there was a lack of capacity in the Department because the level of vacancies was around 14%. Even though they had improved, they were still 4% above the threshold, which was something they were dealing with. The Minister had also taken some measures to deal with the situation, especially with the area of senior managers where there were vacancies, and had made some proposals for him to implement as a matter of high priority.

On the issue of strategic plans and targets that had been changed, the AG was using two reports. The DHS’s executive management were taking responsibility for that, because they realised once they had a privilege of reviewing their plans, they were cast in stone, but they had needed to ensure all processes were completed. In that particular instance, the process could not reach be concluded, resulting in an audit finding. They were putting measures in place to deal with this.

Mr Zulu said that they were working very hard to assist Limpopo. They had been having meetings with the leadership and would come up with measures to deal with the situation. It was not going to be an automatic and seamless process, because once they had a challenge in a particular year it took time to go back to where they were, because the pipeline became affected. In the same vein, he was answering the question of targets versus delivery in terms of finance, because in one particular year they did not spend money on targets because of their pipeline planning, but had spent money on non-performance areas, like purchasing of land and doing feasibility studies for a particular project. They could not count those as delivered targets, since it required pipeline planning. They needed to know in the first year, second year and third year what they were going to be doing and if their plan could not talk to that, they would be “thumb sucking” when they put forward their plans and delivery targets. Therefore, at times one would find there was a misalignment between what the money should buy in a particular year and what the money should deliver in terms of the targets.

The DHS’s approach now was not about putting together housing projects. It wanted to see what the USDG was buying in a particular area, and what the MIG was buying, and wanted to see integration so that they did not have housing projects without the provision of basic services, which was against the spirit of an elevated mandate. This approach was much more comprehensive, and pipeline planning took time to deliver, so the financial performance and the target performance would not be on the same line if the planning was not done properly.

The Chairperson thanked the DG for his presentation and responses. The Committee was looking forward to their next engagement in the near future.

The meeting was adjourned.