Department of Human Settlements 2014/15 Annual Report briefing to NCOP

NCOP Health and Social Services

18 November 2014
Chairperson: Ms L Zwane (ANC)
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Meeting Summary

The Department of Human Settlements briefed the Select Committee on its 2014/15 Annual Report. The department received an unqualified audit although it had hoped for a clean audit. DHS was disappointed with the audit results because it received various matters of emphasis such as its pre-determined goals were not SMART and record keeping was not done thoroughly. DHS achieved 79% of its 126 annual targets. The department serviced 48 193 sites and provided 105 936 houses during 2013/14 which created 53 278 employment opportunities. However, the National Upgrading Support Programme was under-achieved by 4%. DHS presented plans for improving its audit results.

The Committee was concerned about the lack of bucket eradiation in the Free State. The Department explained that many areas there had bulk water challenges. NDHS has been top-slicing 5% of the Human Settlements grant to assist in the eradication of the bucket system and installation of new toilets that cost R86 000 each. The Committee noted that sanitation would become the sole responsibility of the Department of Water and Sanitation by March 2015. The Committee thanked the department for addressing the findings raised by the Auditor-General. However, next time, the department must show evidence of these improvements. The audit outcomes for each province should also be provided and any financial management issues such as shifted targets in the Annual Performance Plan. A briefing on the Rental Housing Amendment Bill would be provided at a later date.

Meeting report

Mr Wonder Nkosi, Chief Director, Department of Human Settlements, presented the National Department’s annual performance. He apologized for the Minister, the Deputy-Minister, and Director-General’s absence.
DHS achieved 79% of their annual targets; out of 126 targets, 99 targets were achieved and 27 targets were not. The Department serviced 48 193 sites and 105 936 houses during 2013/2014 and created 53 278 employment opportunities. The Upgrading Informal Settlements goal of upgrading of 400 000 households in informal settlements with access to secure tenure rights and basic services was over-achieved by 111.9%.
The National Upgrading Support (NSPU) programme was under-achieved by 4%. The NSPU planned to monitor 144 Municipal Infrastructure Grant (MIG) projects and a total number of 152 MIG projects were monitored across the nine provinces. The Rural Households Infrastructure Grant (RHIG) Business Plans were received from 24 benefitting municipalities and funds were transferred to municipalities to implement RHIG.

Mr Nkosi looked at departmental expenditure versus performance (targets/outcomes) in terms of its:
- communication and outreach
- delivery agreement (Outcome 8)
- job creation
- accreditation of municipalities
- financial issues
- responses to audited outcomes / action plan.

Examples of DHS communication and outreach are as follows:
- The Chief Directorate participated in all Ministerial outreach programmes and face to face communication with communities. A help desk was set up and individual queries were logged for investigation or solved on site. This was 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, BRICS Conference.
- About 4500 generic publications were distributed to GCIS library in Parliament and Thusong Service Centres in Mpumalanga and Limpopo in their regional languages.
- Door to door campaigns were done and publications were handed over to members of the communities during the campaign, for example, 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.
- Other outreach programmes were done by officials during Youth and Women Builds.
- Sanitation Week held in Ward 5 at Makhaza in Khayelitsha - 25 April 2013
- Launched Walmer Finance Linked Individual Subsidy Programme (FLISP) project - 09 May 2013
- Community engagements on the Budget Vote in Du Noon – 22 May 2013

Actions taken to address challenges included the following:
-  Revision of current Social and Rental Housing Policies in process;
-  Development of back yard rental policy receiving attention;
-  Declaration of additional restructuring zones being attended to;
-  Monitoring tool for private rental to be put in place;
-  National Department will undertake the design and costing of higher density housing typologies;

Performance indicators from the 2013/2014 Strategic Plan were presented on Strategy and Planning:
- Draft Terms of Reference for the Green Paper developed
- Rental Housing Strategy  Framework developed; the discussion paper about the affordability of rental housing and discussion paper about object subsidies in rental housing
- Draft sector wide reporting indicators developed
-  Consultation on Draft 2014-2019 Strategic Plan across the sector
- Draft evaluation report submitted to the Technical Working Group for comments
- Draft ToR for the review of the Programme for Human Settlements Chapter of Municipal IDPs developed
-  Progress report on the support rendered to municipalities on the assessment of the Housing Chapters of the IDPs drafted.

Other programmes discussed were: the Programme and Project Management Unit (PPMU); Enhanced People Housing Process; International Relations; Stakeholder and Intergovernmental Relations; National Upgrading Support; Increased Provision of Well-Located Rental Accommodation.

On accreditation and assignment of human settlements functions to municipalities, 74% of 2014 target were achieved with: Level 1: 8 District/ Local Municipalities; and Level 2: 20 Metros/ District Municipalities/ Local Municipalities; 4 implementation protocols still outstanding: Mangaung Metro, Nelson Mandela Metro, Tlokwe and Rustenburg; No Metro was assigned.  National Treasury in the process to resolve the funding procedures and transferring of assets and projects. The assessment for the readiness of the metros to receive level 3 accreditation was conducted for: City of Johannesburg, City of Tshwane, Ekurhuleni Metro, City of Cape Town, City of Tshwane and eThekwini Metro. To assist the metros, the Municipal Human Settlements Capacity Grant to the tune of R900 million was introduced over the MTEF starting in 2014/15. 

An additional 3 831.2 hectares of land was released by the HDA for future human settlements development. Over the four year period of Outcome 8, a total number of 11 308.7 ha (both donated and acquired) of land was released.

Mortgage Default Insurance Scheme: Although various discussions were held between the National Department, National Treasury and the Reserve Bank an agreement could not be reached and approval of MDI is still outstanding.

Finance Linked Individual Subsidy: Revised Policy implemented in April 2012 – need for additional amendments  identified and are receiving attention; An additional 24 projects and 1 372 subsidies were approved in the 2013/14 financial year.

Tables were presented on expenditure of the Human Settlements Development and Urban Settlements Development Grants, and the loans granted by Development Finance Institutions. Total number of loans made available by banks to the GAP market was 68 028.

Financial Performance
Mr Nyameko Mbengo, Acting Chief Financial Officer, Department of Human Settlements, reviewed the department’s spending and budget adjustments.R20 million was not spent. The original budget was R28 110 463 000 and R120 million of this was approved as rollovers to 2014/15. The most amount of money was spent on Housing Development Finance and administration and listed some of the transfer payments. Unallocated funds during 2013 ENE was R44 million toward the Human Settlements Development Grant: Disaster relief. Declared Unspent Funds were R20 million toward the National Upgrading Support Programme.

The reasons given for underspending were as follows:
-  Funds provided for the Special Investigating Unit (SIU) have not been fully utilized.
-  The SIU not invoicing the Department or not providing the department with supporting documentation on work performed and invoiced.
-  The Department held various meetings but could not resolve the matter.
-  Funds provided for the leasing of additional office accommodation have not been fully utilised. 
-  The unspent portion of the Property Management portfolio is in respect of leasing of both 240 and 260 Justice Mahomed Street buildings. 
- The Department of Public Works (DPW) entered into a seven year lease agreement on behalf of the Department for these buildings, effective from 01 January 2011 to 31 December 2018. 
- A dispute arose between the DPW and the landlord that led to a delay in planned building refurbishment and tenant installation as well as the subsequent occupation of the additional office accommodation
- Delay in the implementation of the National Upgrading Support Programme (NUSP) which takes up 30% of the Branch’s budget has contributed to the current low spending rate
Other major contributing factor applicable throughout the Department is under spending on compensation of employees which amounted to R38.4 million and can be attributed to the following:
-  Delays experienced in qualification verification by the South African Qualifications Authority (SAQA) for               candidates who have been recommended
- Posts that had to be re -advertised due to the fact that no suitable candidates could be found
- Problems are experienced with non-disclosure of criminal records on applications disqualifying selected candidates

NDHS received an unqualified audit with matters of emphasis. These were:
- Material underspending of the vote
- Predetermined objectives: Programme 2, 3 and 4
- Changes to objectives, indicators and targets not approved
- Consistency of indicators and targets
- Measurability of indicators targets
- Reliability of reported performance information
- Non-Compliance with laws and regulation
- Strategic planning and performance management
- Annual financial statements, performance and annual reports
- Human resource management and compensation
- Asset management and liability management.

The Department’s response to achieve a clean audit in 2014/15 has included:
- An action plan was populated with all the findings and circulated to responsible Deputy Director Generals and the Chief Directors for planed actions that are aiming at addressing the findings and mitigating/eliminating the risk of the similar audit finding being raised again in future
- Planned actions are monitored on a monthly basis by the CFO branch, whereby managers are required to provide progress and evidence to support what has been done. The progress is reported to the Auditor General, Audit Committee and EMT.
- The Auditor General provides a feedback on a quarterly basis in a form of a Dashboard Report whereby the Director General is expected to come up with commitments that will address discrepancies identified during the assessment.

The Acting Chairperson remarked that the Committee appreciates and commends the detailed breakdown of information, especially on the municipalities.

Mr D Stock (ANC, Northern Cape) appreciated the department’s honesty about their performance. He requested information on the backyard dwellers policy consultation. He also asked if the department has developed policies for the Citizen Residential Unit Programme.

Ms P Mququ (ANC, Eastern Cape) spoke in her vernacular language.

Mr M Khawula (IFP, KwaZulu-Natal) said that the Hostel Development programme leaves a lot to be desired and asked what can be done to minimize challenges in order to speed up the process so that people are housed in a family unit. He questioned how the districts fit into Human Settlements. He asked what percentage of unspent funds was not approved as a rollover to 2014/15. He is concerned that the rural RHIG grant is not spending money in the neediest areas. Houses should be built where people need them the most.

Ms M Tlake (ANC, Free-State) asked what is stopping the eradication of the buckets.

Ms T Mampuru (ANC, Limpopo) agreed that the department gave an honest review. She asked what mechanisms can be put in places across all departments to ensure compliance.

Ms T Mpambo- Sibhukwana spoke in her vernacular language.

The Chairperson remarked that the Rental Housing Amendment Bill must be explained to the Committee in further detail later, specifically the intended effect on the backlog and the Bill’s environment. The Chairperson asked what will be done if the department cannot match the private sector’s starting salaries and how are its recipients selected for the R9 million bursaries it allocates per annum. The Chairperson wondered what qualifications are considered when selecting bursaries and if the recipients are tracked. People in the provinces have complained that when service providers submit invoices to the department for payment, the department is not compliant yet with the 30-day payment rule for invoices. The Chairperson asked how this could be addressed. The Chairperson asked if the Anti-Fraud and Corruption Plan was finished yet as that was intended to be completed in the 1st Quarter of 2014/15. She also asked about the Green Paper which was critical for the direction of the NDHS. She wanted information about SPLAMA, where it was operating and what are the challenges.

Mr Nkosi, NDHS Chief Director, replied that they do have a policy on backyard dwellers. The operationalisation is challenging. There are  challenges about funding and the nature of services and structure to be provided. There have been pilot studies in Cape Town and Johannesburg. The policy details can be shared with the Committee. It has been packaged together with SALGA - the two of them could present the policy.

In answer to the question on the Community Residential Units (CRU) programme (which started as a hostel redevelopment programme), this programme is in place. It  has been implemented since the Breaking New Ground policy ten years ago. It is one of 33 programmes implementing the integrated human settlement policy. There have been issues about norms and standards, about the subsidy quantum, it is an expensive programme; it costs R300 000 to R400 000 per unit. The challenge is not so much on the technical issues, the challenge is more on the social side. Both the CRU and Upgrading Settlements programmes consume a lot of our time, due to lots of communication needed going back and forth with the beneficiaries. Currently in most of the hostels, the beneficiaries are not paying. The challenge is how do you enforce this? The target market is required to pay a fee which is not exorbitant. In some cases, the payment rate is at 20%. The units must be maintained and often beneficiaries do not maintain them. Therefore, they need to use the grant for maintenance. There are lots of these management challenges. It is a financial issue, and less of a technical issue. In terms of expediting it, the project will be delivered but when it comes to allocation and payments, the process slows down. Jabulani has moved faster. The beneficiaries often do not want to pay when it comes to allocation of the units. The capacity is there, but the social issue must be addressed.

Yes, on the question of skills, head hunting is allowed. Most professionals want contracts and do not want to work permanently for government. The best approach is to offer a short-term contract and negotiate payment; the Minister must then approve these appointments. That is the approach the department has taken. In managing its 80 billion budget, NDHS must set the price and fix the fee, instead of accepting individual prices. It has a panel of professional consulting teams it can employ such as environmental specialists, town planners, architects and such. Similarly, National Treasury has a similar unit, G-Tech, and it appoints these professionals and negotiates - making the price not taking the price. That works and it shortens the turn-around time and NDHS adopted this approach.

The question on why districts are involved in human settlements. This happened in the Northern Cape and KwaZulu Natal This approach did not work well in the Northern Cape. Where it works well is if the district is a water service authority. The services are in place before you put on the top structure - which has happened in places in KZN.

In reply to why the Rural Household Infrastructure Grant was not spent, more than five years ago at the beginning there were two implementation agencies, IDT and Mvula Trust. Due to the sector capacity, Treasury started to scale back. When the DHS took over this function, it brought in an extra six service providers to implement it. Looking at implementation, National Treasury had to correct it to be a direct grant to the district municipalities, the water service authorities, and not to the local municipalities. It took time to correct this financial error. This affected performance.

In the first wave of bucket eradication in the Free State in 2005, buckets were replaced. But some places had no bulk water supply. Therefore the buckets were replaced with VIP toilets that do not require water. However, poor maintenance results in a full toilet in less than three years. Some communities instead of opting for  VIP toilets decided to wait for flush toilets or for closed-circuit toilets. Bulk water supply is a challenge in the Free State so there are more than 6000 buckets but no water. NDHS top-sliced the Human Settlements grant by 5% in the last two years to assist with eradication (the bulk of this R1.9 billion is going to Free State for this). The former executive authority of Water Affairs and of Human Settlements made a resolution to use water boards to expedite bucket eradication. Starting in November 2013, 11 000 buckets have been eradicated to date with R250 million last year and R330 million this year. The unit cost is R86 000 per toilet. The department works with the Department of Water and Sanitation to deal with this challenge.

Why is it difficult to provide evidence documents. Auditing is not very complicated because it is simply documentation of every exercise. If the targets are not SMART, then auditing evidence is hard to provide. Some of the provinces did receive clean audits.

The Rental Housing Bill should be presented to the Committee in detail at a later date. The Green Paper’s intent is to amend the Housing Act. The Department of Human Settlements focuses on housing. The Green Paper will be concluded in this financial year, and the White Paper is targeted for the next financial year. The list of monitoring and evaluation of the outreach programmes broken down per province will be shared with the Committee.

Mr Nyameko Mbengo, Acting CFO, replied that there are four programmes in the NDHS and the Minister’s budget is under Programme 1 and achieved 74%. The total roll-over request by NHDS to Treasury was R461.9 million and only R120.5.million was approved by Treasury. There is a bursary scholarship program that costs about R9 million. There is a selection process to select students from each province. After completion of studies, the Provincial programmes often provide these students with internships or full-time employment with the department.

The Chairperson got the impression that this programme is for the department. The Chairperson asked if these students were contracted to work for the department after the programme.

Mr Mbengo replied that students can apply to work with government, but they are not obligated to if the department does not have a funded position for them. They can apply elsewhere. The problems of the late payment of service provider invoices has not been eradicated, but there are measures in place to minimise the number of late invoices. It has improved; however, there is no analysis of how different provinces are performing. The provinces must comply with the National Treasury and report to it. However, in future, NDHS must not reply on Treasury but must go down to the provinces and check that compliance is in place.

The Chairperson questioned why the department asks for money and receives it, but there are unfunded vacancies.

Mr Mbengo suggested that a report on the scholarship programme be constructed and provided if the Director-General would allow it.

The Chairperson asked if the vacancies being referred to are funded.

Mr Mbengo answered that the ones noted in the Annual Report are funded. Two months ago there were 108 funded vacant positions. However, the budget for compensation of employees for next year has been cut by R54 million by Treasury. Some of these vacancies must be frozen because there would be no money to pay them if they were filled now. The department must link positions to the cut accordingly.

Mr Mbulelo Tshangana, NDHS Chief Operations Officer, added that there is an anti-fraud and corruption policy in place. Internally there is in place an audit committee, a whistle-blowing policy and the Fraud Prevention plan. This was intended to be completed by 1st Quarter, but it is still in process.

Mr Nkosi spoke about Spatial Planning and Land Use Management Act (SPLUMA), saying the Department of Rural Development is the custodian of the Act. It must set the broad parameters and principles. There are sector issues - such as Human Settlements Master Plan (and COGTA) which must be in line with SPLUMA. The actual implementation of the SPLUMA is in the sectors.

The Chairperson thanked the department for a straight-forward presentation that addressed the issues raised by the Auditor-General. Next time, the department must show evidence of improvements. The Chairperson is happy that the department is unsatisfied with their unqualified audit. Next time, the issues identified by the AG should be addressed. The audit outcomes of each Province should also be included. They must report on financial management issues such as shifted targets in the APP should also be identified for the next financial year. The Committee is concerned that the Acting DG is the also Chief Director of another entity. The Chairperson wonders how they manage to comply with the APP tasks. Since the sanitation function will be solely the Department of Water and Sanitation’s responsibility after March 2015, the Committee will not be asking about that.

Minutes were adopted for 7th November and the 11th November. The Committee Report on the visit to the OR Tambo Municipality in the Eastern Cape was also adopted. 

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