Housing Development Agency, Estate Agency Affairs Board, Community Scheme Ombud Services & Social Housing Regulatory Authority: Strategic & Performance Plans 2015

Meeting report

Strategic and Annual Performance Plan 2015: Briefings of entities of the Department of Human Settlements (DHS or the Department) to the Committee:
Housing Development Agency (HDA)
Mr Taffy Adler, Chief Executive Officer, HDA began by addressing the concerns the Committee had raised about their executive composition and capacity at their previous meeting. He explained that the HDA was in the middle of restructuring at the time and he would indicate the changes as he introduced the delegation, who were:
- Ms Odette Crofton: Manager of National Programmes, including National Upgrade Support Programme (NUSP), mining towns, catalytic projects and developments
- Ms Lucia Rakgoale (new to exco): General Manager of some regions
- Mr Bosco Khoza: Regional Manager (new position)
- Mr Lebo Madiketla, who had been delayed on his flight: Inter-governmental Relations (IGR) Officer

The biggest change was that the organogram had been decentralised to have regional management positions.

He noted the summary and highlights of the five year Strategic Plan and the Annual Performance Plan for 2015. HDA had experienced substantial growth since inception. Staff members had increased from 1 to 112 today and an anticipation of 182 in the next three years.

Its activities had expanded from the original mandate (N2 Gateway and Zanemvula) to Medium Term Operational Plans (MTOPS) which support national priority projects (e.g. upgrading mining towns). The HDA was looking forward to being a developer of land.

The Grant Income increased from R63 million to R186 million, this excluded the finance that HDA manages for other entities. For example, he noted that the N2 Gateway project was worth R1 billion and Zanemvula was up to R200 million.

Good organisational stability, good financial and operational procedures had resulted in clean audits for every year of operation.

Mr Adler noted that the focus had shifted from head office to increased presence in provinces and MTOPs regions, the most significant change. The demand had moved to local authority and the Agency had grown management capacity and organisational structure to deal with this change.

Land assembly was a primary focus. Targets for land assembly and acquisitions had been exceeded and the Agency was looking to do so for the current year as well.

The Master Spatial Plan (MSP) was an important new development as a result of a mandate from the Minister of the Department of Human Settlements. HDA developed a framework document on spending that was also used by other government entities. The HDA also had two Information Systems that were increasingly being used by other departments and provinces, like the Department of Public Works. These tools were helping with land status, land location and supporting the Estate Agency Affairs Board (EAAB) in title deed searches.

HDA had accumulated extensive knowledge of project and pipeline development and mega-project management in Informal Settlement Upgrades (ISU). The N2 Gateway project had been seen as a "problem child", but he referred Members to slide 5 to draw comparisons to other popular projects, at  Zanemvula, Cornubia and Cosmo city (main comparison). All these projects started in different years. The units yield versus units completed were described as (16083:11986), (13718:6030), (15000:482) and (12300:8241) respectively.

Mr Adler stressed that Cosmo City was a greenfields development and N2 Gateway was an ISU. The two required different management and skills, particularly the community management level. With all the problems N2 Gateway had had Mr Adler urged the national department to look at figures and separate fact from fiction to see that it was in reality a major project that had succeeded.

The Minister had set out the following expectations for the HDA:
- Revitalisation of mining towns
- Implementation of 50 mega projects over the next five years
- Refocusing N2 Gateway project as a national priority project
- Creation of a credible housing database
- HDA becoming a fully fledged developer
- Develop a strategic master spatial plan

The Medium Term Strategic Framework was in accordance with the National Treasury regulations on reporting.

Mr Adler noted again that the HDA had revised its functional structure. It had three main functions. In Administration, there was a general manager who was responsible for each leg. Planning and Information had been split, to make the focus clearer on what the Agency had to do and to give regional managers greater emphasis. In line with the Minister’s request, HDA had a regional focus. Finally, Land and Housing Services were split into regions, each headed by a regional manager. At the moment there were two regions but once other provinces had signed on, there would be three.

This structure would allow for growth in capacity and an increase in the national management structure. It also allowed for movement in the organisation from senior management downwards and he added that all senior management positions were filled by internal candidates.

The HDA would be reporting on macro performance indicators, but there were detailed plans. HDA aimed to move to business units and sub-business unit development and start to look at how each unit would be accountable. The development of the master spatial plan was at the final stages and hopefully would be completed this year. Well located land would not only be identified but released for development. The target for the 2015/2016 financial year was 3 000 hectares, which linked in with the allocated 10 000 hectares.

The National Priority programmes like mining towns revitalisation, catalytic projects and NUSP were long term projects and were doing well and gathering momentum, especially the mining towns revitalisation, because of intervention by the national Department

The HDA would offer support services to all nine provinces. There were presently no agreements with Mpumalanga and North West but HDA had recently signed an agreement with Gauteng Province.

Ms Moola, Chief Financial Officer ,presented the financial overview. The HDA budget for 2014/2015 was R223.123 million, and would rise to R 278.883 million, R278.049 million, and R329.695 million and R346.180 million for the following four financial years. Spending was on target for 2014/15, with one concern about the NUSP objectives that had been submitted late, but because commitments were made, the budget would be rolled over.

The Project Management fee and provincial transfers were all on target. The Agency had not received transfers from Limpopo but as soon as there was an agreement concluded it would receive money and allocate it to the key performance areas. Expenditure was also on target. There will be a small saving on salaries, which would be allocated to operations in areas needing updating, like infrastructure and setting up of offices.

Mr Adler reminded the Committee that the Agency did not have capital funds for the acquisition of land. This was a problem, since it was within its mandate, and was something that it had not been able to address for the six years of its operation.

A short film presentation on upgrading informal settlements was played.

Discussion
Mr K Sithole (IFP) asked where the 50 catalytic projects were located. Mr Sithole also suggested that the projected number of 182 staff for the next three years was inadequate for completing the projects, since most were priority projects. He asked how many of the targeted 10 000 hectares  the Agency had already acquired. He asked about the progress on the N2 Gateway and Zanemvula Projects.

Mr H Memezi (ANC) thought that more land was needed for development and suggested that the Agency extend its targets, especially since the staff will be increasing. He would also like comments on the allegations that in some areas the land that the Agency had acquired was valued at more than the acquisition. Mr Memezi would like to see the Agency secure more land closer to working areas for the purpose of community integration, and to change segregation, and wanted to know if that was a focus area.

Mr S Gana (DA) would like to know if the medium term strategic goal of 10 000 hectares of publicly owned land was correct and wondered why it was not referring to all types of land - this could be interpreted that the HDA could acquire only land belonging to departments and the state.

Mr Gana also enquired about the ISUs. The current settlements were located close to economic activities, and he wondered how much of that already-settled land HDA was acquiring. Mr Gana asked if the Agency was also purchasing land elsewhere and then moving people to the new location because of privately owned land. He would like to see the HDA prioritise settled areas as they were close to economic activities.

Ms L Mnganga-Gcabashe (ANC) asked about the alignment of the strategic plan with the outcomes of the National Development Plan (NDP) and budget. She asked if the number of hectares mentioned for 2015/2016 and 2016/2017 was in line with the objectives of the NDP.

Ms Mnganga-Gcabashe recalled that the previous year, the Committee raised the issue of State Owned Companies (SOCs) that were not releasing land for development for human settlements to the public entities and government, especially local government. She asked if HDA had started to engage with the SOCs for donated land. Most of this land was settled already and thus of no particular value to the SOCs. If metros did not develop the land, there would be no value for the private sector as they failed to evict the people occupying it and once the government had intervened, they would then take the opportunity to charge market value to the metros.

She also wanted to know if the Agency had a source that talked to the 50 catalytic projects, and one that created contribution as funds should come from the provinces. She also wanted to know about the spread, throughout the provinces, of the projects.

Ms T Gqada (DA) asked how the Agency would ensure integration with DHS was taking place as the land was acquired,whether this had been successfully achieved in past projects and whether there had been challenges. She believed the HDA’s function was about more than just giving people houses but also about ensuring that they were integrated into the area. She raised the fact that the Agency’s scope was widening and reiterated the concern about capacity, and questioned whether, with the wider focus, it would had sufficient staff. She commented that she would had liked to see the presentation show how communities had been helped economically, whilst the Agency was assisting municipalities and the national Department, for instance how the interventions had actually helped the municipalities in their projects and how they created jobs. . She would like to see how the interventions helped the municipalities in their projects and how they created jobs.

In regard to the challenge of not having capital funds for purchasing land, Ms Gqada reminded the Agency that it had a function to assist municipalities and thought that perhaps the HDA was in fact taking away some of their responsibilities. She questioned why the Agency was seeking more funding.
The Chairperson thought it would be important to have an understanding of the relationship the HDA had with other departments with regard to land acquisitions. She wanted to know if the relationships had improved. She too expressed concern about their capacity, asked if it would be overstretched with the extra mandate and wanted to avoid capacity becoming a major concern at a later stage.

Mr Lucia Rakgoale, Area General Manager, HDA addressed all the questions pertaining to land issues. He said that to date, the Agency had acquired more than 10 000 hectares, acquired across all provinces, and this was both public and privately owned land. For evaluating the land, the Agency appointed a minimum of two valuators to determine the fair compensation for the land. The Agency would get a second opinion where there was disagreement with the land owners on the purchasing price. It was, in terms of the HDA  Act, able to expropriate land and to facilitate expropriation for municipalities in accordance with the National Housing Act.

When attempting to acquire land that had already been settled, the Agency did face historical challenges. There were areas where Department of Human Settlements had already built houses but the land ownership had not being cleared, mainly  in rural areas.  The Agency had been in contact with the relevant state departments to release the land so that township establishment process could be finalised and the beneficiaries of the stands could be given title deeds.

Mr Rakgoale said the Agency was mindful of economic activities around the areas where new land was acquired, making inroads also into spatial restructuring imperatives. So far, the land acquired had been well located and the Agency was making significant progress .

Mr Rakgoale explained that the HDA’s approach to ISU projects was to make relocation the last resort. Where an informal settlement was targeted for upgrading and the land was privately owned, the HDA secured the land. He said there had been challenges where the land was owned by government entities but managed by traditional authorities. He gave an example of land in Rustenberg, that was managed by the Royal Bafokeng tribe. The approach that HDA followed was to try to buy the land settled on if owned privately, or, where it was state owned, approach the entity and secure the property.

The previous Minister of Human Settlements concluded delivery agreements with the Minister of Public Works (PW), Minister of Rural Development and Land Reform (RDLR) and the Minister of Public Enterprises. So there was a fairly good relationship with most SOCs, notably Transnet, Denel, South African Breweries, but particularly with Transnet who was the biggest land owner out of all the SOCs. The Agency's biggest challenge was that these enterprises wanted compensation for the land. They were reluctant to donate it as it was an asset in their balance sheet, even if the land was toxic, densely populated hostels. An example was Phomolong informal settlement in Mamelodi. The land was owned by Transnet, who had agreed to release the properties to the City of Tshwane at a fee. The Agency was continuously acquiring land from Transnet. It had recently bought land in Buffalo City Municipality, as part of the Duncan Village development in the Eastern Cape Province for development. In Johannesburg’s inner city, it had acquired from Transnet for the Johannesburg Social Housing Company, for rental properties. The main challenge again, as mentioned previously, was that the Agency did not have a capital budget so when Transnet released land, the Agency must first seek funding from provincial government before making acquisitions, and that did not always yield the desired results. Transnet periodically released non-core assets, and the Department of Human Settlements was given the opportunity to acquire what was useful for human settlement.

Mr Rakgoale said that the HDA would ensure that there was integration of communities in the design of the townships. This was done in Mangaung, Sasolburg, Bela-Bela and Lephalale, where the accommodation was mixed income households and all housing programmes were accommodated. The HDA would like to do away with just building a row of houses.

Mr Rakgoale turned his attention to the relationship between the HDA and custodian departments. He said the HDA administered delivery agreements with state custodian departments. It had been  successful in getting land from the Department of Rural Development and Land Reform (DRDLR) and but not very successful with the Department of Public Works (DPW). The DPW owned properties in main provincial administration areas. Typically, this was the land that HDA desired and targeted. Mr Rakgoale said that the HDA would also look at provinces who owned well located land, mainly for new houses and tenure upgrading, where people were already occupying the land, and where HDA would help in getting the title deeds.

Ms Crofton, Manager of National Programmes, HDA,  started by addressing Ms Mnganga-Gcabashe’s question and explained that the catalytic projects programme will demonstrate elements of the MSP. It will look at projects that demonstrate integration and impact, which would be the assessment criteria for selection of these projects. These would also demonstrate spatial targeting components, hence the spread and location of the projects should be aligned with the MSP targeting and focus.

Ms Crofton gave an overview of the progress. All nine provinces and their municipalities had submitted projects. There was a pipeline of 160 projects. Together with the national DHS, the HDA had checked with municipalities for overlaps, and where these were found, asked the provinces and metros to communicate and prioritise, and then resubmit. This reduced the number of projects per province to five or six. HDA was now going into the assessment process. She made note of the fact that the projects were not mega reconstruction and development programme (RDP) projects but integrated mixed development projects that were about mobilising the private sector. The Agency also had submissions from the private sector, except from Western Cape and Northern Cape that had not submitted from their private sectors. The Agency would be going back to mobilise more broadly and target investors, banks, financiers, and then the submissions would go through the same assessments as with the governmental projects. She estimates that the assessments and recommendations would hopefully be completed this month. The existing priority projects, like the N2 Gateway, mining towns and Zanemvula would carry on.

Ms Rashida Issel, Corporate Services, HDA,  addressed the concerns on capacity. She explained that for the mining towns project, NUSP and the catalytic projects, the Agency had a core head office team supported by regional teams for implementation. The HDA assisted the DHS with programme management and created the capacity roles for the regions as they were assigned projects, thus bringing in more capacity on a project by project basis. The Agency was not managing private sector projects but overseeing them. The capacity for this function was already in place. The HDA also had oversight teams to report on the performance of the projects, as well as additional funding for bringing in additional capacity. The Agency would make use of in-house capacity, outsourcing and contractors as required.

Mr Bosco Khoza added that the issue of capacity was carefully managed as HDA had been cautious about amassing capacity without securing the projects first. The Agency had been involved with the N2 Gateway project and Zanemvula for years. In the ISU video presentation, it was shown that 70% of the projects had to do with community engagement, whilst the technical aspect accounted for 30%. The Agency had been able to leverage its relationship with other public entities in line with the needs of the projects. Big projects spanned over five to ten years, and households grew with time. The numbers for delivery had to grow in line with the household growth, so the Agency was able to leverage relationships in order to get more land to satisfy the projects' growing needs. The N2 Gateway project was 75% complete, with over 16 000 units completed. Zanemvula was 56% complete. He noted that they HDA was not keeping track only of units completed but also job opportunities delivered.

Ms Issel shared that the Agency had an internal recruitment plan, and would first look for candidates internally, before seeking external candidates. In the meantime, it would also use tools and policies of secondment, temporary employees, outsourcing and acting positions to cover gaps. It was always trying to keep the staff complement "lean and mean".

Ms Moola said that as a result of having no capital funds, the HDA had tried various mechanisms to get money. Its model was to mostly acquire public owned land, which it would not have to pay for, if possible. In the current financial year it had had some savings which were used to buy the first two buildings, which it then sold at a profit. This profit was in turn, used to assist with buying more land.

Mr Adler reminded the Committee that the MSPF governed where provinces and local authorities could buy land. To make a success of the framework, he believed it was important to follow the principles guiding land acquisitions. In relation to compensation to the private sector, Mr Adler says the SOCs argued that land was a substantial asset on their balance sheet, and hence were reluctant to merely donate, demanding market value. This issue was currently under discussion, and it may go to Cabinet. The role of this Committee would be vital as their views would be sought as to whether land should be passed between SOCs at a profit.

Mr Adler also wanted to address the issue of capacity, and said that the elements of capacity relied on planned development, but  this was not the way that the HDA operated, for it needed to take quick decisions in a changing environment. HDA was in the process of developing an internal system where it would have funds and a database of people to inform it of evictions and could then respond quickly.

Estate Agency Affairs Board (EAAB) briefing
Mr Nikita Segaba, Head of Strategy, Executive Committee, Estate Agency Affairs Board, apologised for the absence of the Chief Executive Officer, who was out of the country.

He introduced the Transformation Initiative: “One Learner-One Estate Agency” programme which was expected to expand the Estate Agency sector by 10 000 estate agents from previously disadvantaged backgrounds over the next five years. The programme would place unemployed learners, matriculants or graduates, with a practising estate agent.

From a political perspective, he explained that the Estate Agency Affairs Board (EAAB or the Board) fully understood itself to be part of the DHS's objectives of building 1.5 million houses and the EAAB will be involved in the title deeds process. Therefore, in its organisational structure a new section for title deeds was added, and the EAAB had employed a business operations executive to assist with opening regional offices. The EAAB also had a transformation manager to run all transformation projects.

With regards to its products and services, it had reached an agreement with estate agents that 50% of the interest they earned would go into the Fidelity Fund which assisted with claims for funds and claims recovery funds.

The EAAB had introduced Continuous Professional Development where qualified agents were expected to keep up to date with changes in the industry and profession.

The EAAB had the following compliance objectives or targets:
- Aim to complete 90% of complaints within six  months of receiving them. Currently, 65% of complaints were concluded in six months
- Aim to inspect 50% of practising estate agents within a five year rolling period. There were approximately 12 000 registered agents, and EAAB was currently inspecting 800 per annum
- Aim to issue 100% of certificates within 21 days for new registrations, compared to where it was currently, at 60%
- Aim to complete 100% of renewals within five days, it was currently at 90% of this target.

Most of the EAAB resources were going to the disciplinary enforcement function as there were qualified lawyers who performed this process. One of the biggest risk the EAAB was facing was with regard to compliance was the illegal trading agents in the industry, although the EAAB did have plans to mitigate this. Another risk was the lack of service delivery in their internal processes.

Mr Segaba highlighted that the EAAB was a self-funded organisation and had inadequate resources to meet their targets. It was working within the financial structure to form a strategy to gain more resources. Under its Education and Training objectives there was a new function which was to perform research and further raise awareness on property transactions and industry environment to  the greater public. The EAAB property market research and development unit was in the process of creating an information system that would provide data on market trends, and information on a quarterly basis, that would assist in strategic development especially in subsidised and affordability housing.

Resources for Education and Training would get a R36 million boost for the learnership placement programme. The funds would be received from the Services Sector Education and Training Authority (SETA) and the EAAB would be paying learners R 1 500 and interns R 2 500. The EAAB would also run education and training programmes for unsuitably qualified agents.

Mr Segaba highlighted the following risks for the EAAB fidelity fund:
- The fidelity fund was eroded due to the large number of claims received by the EAAB
- The investments strategy does not allow the Board to meet its target
- Recovery claims affected the solvency rate
- Legal costs for disciplining agents cams from the fund
- There were no limits on claims from the fund
- Theft by illegal agents was also a problem.

He noted that the EAAB did have some controls in place to try to deal with this but was looking to the new legislation to come up with regulations to assist with mitigating fidelity fund risk.

The Chairperson noted that the Committee was comfortable with the title deeds status, as a presentation was done about that programme.

Mr Aubrey Mokoena, Head of Finance, EAAB, briefly showed the 2015/2016 budget for the four main programmes namely, Compliance, Education and Training, Administration and the Estate Agents Fidelity Fund, and set out the projected budget for each (see attached presentation). He noted that the Eduction and Training budget included development of the structure that Mr Segaba had mentioned. He also clarified that the Estate Agents Fidelity Fund budget was mainly for claims from clients who had been defrauded by agents. He reiterated that the EAAB was a self-financed entity and the expected income would be sufficient to meet the projected programmes expenses and cover costs.

Discussion
Mr Memezi applauded the learnership programme for the previously disadvantaged youth. He would like to know how far the EAAB had moved on with it. He asked if it was spread across the country and if it impacted also in the metro areas. He asked the EAAB to elaborate on the module component of the programme, and whether it involved the South African Qualifications Authority (SAQA).

Mr Gana would like to know about the fidelity fund certificates. The presentation mentioned that funds were not coming in too well and she wanted to know if it was due to estate agents licences not being renewed, or whether the licences were renewed but some agents were not paying. He also asked what the EAAB’s involvement was in selling of government subsidised houses. He asked if the learnership programme training encouraged recruits to operate in those markets, because there was already informal selling of those houses. He noted the three million title deeds issued for subsidised houses built. He asked how far the EAAB had moved on the Estate Agents Practitioners Bill, which it had proposed but with which there had been some concerns.

Mr Sithole noticed that the budget figures differed in the presentation and the hard copies and asked for clarity on this point. He also noted that page 18 set out that 85% of queries received should be resolved within 48 hours, and asked how many queries in total were received daily and monthly. Mr Sithole also wanted to know what the challenges were preventing the IT systems from not meeting the business requirements. Lastly, he asked when the Stakeholders Awareness campaigns will be held.

Ms Mngana-Gcabashe recalled that the EAAB had been challenged in court for its narrow focus on real-estate agents, and wanted to know when the new legislation was likely to be completed, that would reflect the current mandate of the entity. She said that the Committee raised the issue of title deeds being held up at the Department of Rural Development and Land Reform (DRDLR) in the previous year. She asked how the working relationship was with the Department, in terms of sourcing information from it and dealing with backlogs. If the EAAB was having difficulties, she asked if the EAAB had sourced any intervention from the DHS, since it was better for two departments to interact than it was for one entity to go directly to another department to source information. The presentation clearly identified risks for the fidelity fund administration, but she said it was not so clear on how that risk was to be managed. She was particularly interested in the lack of recovery of claims paid, the lack of recovery of funds, and thefts by illegal agents. Lastly, the baseline vacancy rate for administration positions was 20%, which she thought was unacceptable in light of the fact that there were so many unemployed graduates. It might be that specialised posts could be hard to fill, but the same surely did not apply to administration staff. She requested that the EAAB report back to the Committee in three months on how it planned to reduce this.

Mr N Capa (ANC) noted that the EAAB's mandate overlapped with other agencies, thus wanted to know if there was any communication or integration programmes with other agencies. He also wanted to know if there were any partnerships with tertiary educational institutions to assist with the learnership programme. Referring to slide 20 of the presentation, he asked why the target was set at only 90% for issuing of certificates within six months, as opposed to 100%.

Mr Segaba said he project-managed the learnership process, and the targets for the 2014/2015 financial year was to place 700 learners and 206 interns. These targets were set alongside the Services SETA. The EAAB was 80% on target and was now in the interview process, then would call for documentation. It had a deadline of 31 March and, on 1 April, would be launching when the first learners would be starting with the agents, with the remaining 20% to start in late April or May.

Mr Segaba commented that since the EAAB was now a fully appointed professional body, it had the right to formulate its own study process, materials and exams, and the Services SETA no longer needed to issue certificates on its behalf.

Mr Segaba assumed the question about the fidelity fund certificates was linked to why the funds were decreasing - and that was because the EAAB had become stricter with licence renewals, ensuring that before they were renewed, there was compliance, and this meant that fewer agents were able to renew each year. Agents also needed to issue an audit report by 30 June every year. Those who did not comply were blocked from receiving fidelity fund certificates.

Mr Mokoena added that the EAAB did do inspections to identify those agents that were trading illegally, and conducted disciplinary hearings so they would eventually comply.

Mr Segaba explained how selling subsidy houses fitted into the learnership programme. He said the agents wanted to know what their benefit was, so the EAAB had responded by creating an incentive where preference was given to agents for the buying and selling of subsidy houses if they took on learners. The EAAB does encourage agents to teach selling of subsidy houses.

Mr Segaba noted that although the EAAB would be the custodians of the proposed Property Practitioners Bill, the drafting of the Bill was being attended to by the DHS.

Mr Mokoena explained the budget discrepancy queried by Mr Sithole, and said that the R10 million difference related to the removal of the projected title deeds budget.

Mr Segaba said the number of queries the Board received per month varied, but could be anything between 800 and 1000 queries per month. He noted that the integration between IT and business was not working, as sometimes IT could not fulfil their requirements.

Mr Anton Arendse, Business Operations Manager, EAAB, said the Board had a very good working relationship with DRDLR on the title restoration project. That department was a standing member in the national steering committee and was involved at provincial level, and was also involved with oversights and day to day management of projects. DRDLR had two branches, the Deeds Office and the Surveyor General, who both played an integral part. The EAAB identified two interventions. In the Surveyor General;s office, a few human settlement projects were completed but it was not clear where they were residing in the state, therefore, title deeds could not be issued. In the Deeds Registry, there were few lodgements made, the deeds were registered but never claimed by the appointed conveyancer. The EAAB was busy determining how big those numbers were.

Mr Arendse said that the Deeds Registry Office was self funded, getting its income from fees charged for deeds searches. The question was whether the EAAB could access the records without incurring costs. He said that was an ongoing conversation via DHS. In the meantime, the Title Restoration Project sought to counteract this problem.

Mr Arendse added that he believes the learnership programme would have failed if it confined learners to townships. The agencies that had already pledged to support it were not operating in townships but in the high end market. The EAAB had aspirations to see the learners move from township markets to upper property markets.

Mr Milile Kraba, Parliamentary Liaison Officer, Department of Human Settlements, clarified that the legislative programmes and the bills to be amended in the Department would reach the Committee in the second half of the financial year  2015. It was a programme determined by the leader of business in government.

Mr Nyameko Mbengo, Chief Financial Officer, Department of Human Settlements, said the Property Practitioners Bill was part of the Cabinet committee’s agenda last year and more work needed to be done on it.

He also confirmed that the R10 million budget discrepancy that was raised was a matter under discussion. The general agreement was that the EAAB could not do work around title deeds without funding. He said the matter was still under discussion and perhaps prematurely included in the presentation.

The Chairperson urged the Committee to go to the Deeds Registry office and do oversight to gain an appreciation and understanding of what was going on. She commented that she hoped for continuous updates from the DHS on the Bill, since some critical questions were raised.

Community Schemes Ombud Services (CSOS) briefing
Mr Vukile Mehana, Chairperson, Community Services Ombud Scheme said that 50% of the executive of the Scheme (CSOS) were women, but they were unable to be present at this meeting. He introduced his delegation, consisting of: Mr Themba Mthetwa (Chief Ombud), and Mr Themba Mabuya (Chief Financial Officer).

Mr Themba Mthetwa elaborated on the key priorities. He explained that CSOS was going into a new financial year, the staff had been appointed and the infrastructure had been put into place. It should have the necessary staff, systems and policies for expansion. CSOS was working with the EAAB, and was looking to expand to Cape Town and Durban.

Outlining some of the achievements, Mr Mthetwa said the Dispute Resolution model had been finalised and approved by the Board of the CSOS. It had met with various industry stakeholders including the Home Owners Association and the National Association of Managing Agents, and was having ongoing interactions. CSOS had developed a funding model which was awaiting approval by the Board, and would then be moving to consultation with the Minister before roll-out. The CSOS was working in conjunction with DHS on the launch of CSOS and operational developments. Almost all systems had been approved by the board.

He reminded the Committee that the Community Schemes CSOS services were body corporates, home owners associations, retirement villages and shared blocks.

After meeting with the DHS, CSOS had agreed to reduce its strategic objectives to four from six. The second objective was to take custody and control of schemes' governance documents, which were presently scattered between the Deeds Office, municipalities and company offices within the Department of Trade and Industry (dti). CSOS was engaged with various entities and was entering into agreements with them. It had established good cooperation with the company office of the dti, and was able to link to them electronically. CSOS was met with a challenge at the Deeds Office. The Deeds Office wanted payment to hand over the documents, but it had now been concluded that they will not be receiving payment. The fourth objective, to manage the Sectional Titles Management Act was critical. CSOS would be monitoring managing agents and requiring them to sign a Code of Conduct. It had already received a lot of complaints with regard to who should be allowed to stay in certain complexes.

Mr Mthetwa explained that the Advisory Council will be created from the Sectional Title Management Act. The CSOS was currently working on nominations for members of the Advisory Council, who will advise the Minister on amendments to the legislature related to community schemes.

Integration with stakeholders was well on the way, with stakeholders involving CSOS in their decision making. The Association of Home Owners was the most critical, and was holding regular meetings with CSOS. CSOS was also engaging with academia as new property laws were created and they urged that students be taught the changes in property laws.

Mr Mthetwa said most risks were rated low, except IT systems. This was because the unique type of organisation CSOS was, which made it necessary to be mindful as it procured IT and case management systems. However, he believed that there was a low probability of risks occurring.

Mr Mthetwa summarised the highlights for CSOS Strategic Plans for the next five years. The Dispute Resolution Facilities were in place at National and Gauteng offices. CSOS had already received about 100 complaints since October, and had let those complainants know that it could not see to them yet until the Act was finalised and signed by the President.

Mr Mthetwa elaborated on the Annual Performance Plan. He said that the CSOS already had Gauteng and National offices. Gauteng offices also serviced Limpopo , North West Province and Mpumalanga. The Durban offices also serviced Free State Province. CSOS was looking for offices in Cape Town, which will also service the Eastern Cape and Northern Cape Provinces. He reported that all of these offices were temporary, and a national office would be officially opened later. Provincial Ombuds had already been appointed in Gauteng, KwaZulu Natal and Western Cape.

Mr Themba Mabuya, Chief Financial Officer, CSOS, highlighted the principles used in compiling the budget. Currently CSOS relied on a grant but the grant would be declining in future so it needed to find other means to raise revenue, to be self sufficient, and was thus developing a funding model. Section 22 of the CSOS Act would deal with this. Cost recovery benchmarks were critical and the model should be able to recover costs even it the grant were to be zero. Other sources like interest for arrears were also considered. Mr Mabuya said this must be seen against the launch of CSOS, starting of operations in Quarter two and the implementing levy - bearing in mind that before CSOS could charge the levy, a process needed to be followed, so that revenue would not actually come in before Quarter 1 or 2 of the coming financial year. Finally, the Consumer Price Index of inflation must also be taken into account.

Mr Mabuya reminded the Committee that CSOS had targeted recruiting 22 staff members for the 2014/2015 financial year. It planned to recruit 30 staff members for 2015/2016, 35 for 2016/2017 and 47 for 2017/2018.

Mr Mabuya brought the attention of the Committee to specific following budget items. CSOS received  30 million last year and the outstanding R10 million was received this month.  So far, it had spent R5.7 million of the R30 million in the third quarter of 2014/2015. R25 million was committed to projects and supply chain management processes. The R10 million was committed to administration expenses, rental expense and procurements. He reiterated that the CSOS fully intended to rely on the Community Scheme Levy income. Its previous budget had been reduced and austerity measures introduced by the National Treasury. Its intention was to have a fully operational CSOS around the country.

Discussion
Mr Gana noted the presentation mentioned wasteful expenditure that could lead to an unfavourable audit outcome, and asked for an explanation on this point.

Mr Memezi said he was dissatisfied with the marketing and communications on the ground. He said the people needed to know that CSOS existed.

Ms L Mnganga-Gcabashe (ANC) said she liked how the risks were outlined and the mitigation plan as well as the indicators, output and quarterly targets outline. She encouraged CSOS to keep up the good work. She was, however, concerned about the expenditure variance and wanted to know if CSOS would be able to spend by the year end.

Mr Mehana said the executive board was very mindful of wasteful expenditure. It wanted to ensure a clean audit. It was a commitment by the board to maintain a clean audit from last year.

He said that there was an update on the marketing and communication front, since a Marketing Communication Stakeholder Manager was appointed to ensure that the public was informed of CSOS' existence. It was important that people knew of this service by the government of South Africa, and the entity depended on widespread knowledge. There were of course some aspects that would not concern the public, such as the collection of levies. CSOS did not want to run into the same problem as the e-tolling had, and thus needed to inform the public as much as possible, engage with stakeholders and those respected in the industry, so by the time the President proclaimed CSOS’s existence, it would be well known. So far, the CEO had been interviewed by print media, was also featured on Morning Live TV programme and the Director General was featured on Ilungelo Lakho TV programme.

Mr Mehana added that the Risk Register that was presented was the outcome of a strategy session between the board and executives. Issues of risk were reduced to performance management contracts for each executive member, to increase accountability.

Mr Mabuya added that the Marketing Communication Stakeholder Manager managed to get prime slots in the Mail and Guardian, with a long article printed and various internet publications. He said she had been already an effective appointment.

Mr Mabuya noted that the Board would also like to know of any wasteful expenditure, and he thought that Mr Gana might be referring to a delay in a tax payment, which had caused some friction, but in the end SARS agreed to write off with no extra charges incurred.

Mr Mthetwa addressed Ms Mnganga-Gcabashe on how CSOS would be spending what was left. He said a large portion of key staff members were appointed in the third and last quarters of the financial year so there would be an increase in salaries compared to quarter one. There would also be spending on major projects like the ICT project. The other expenditure included staff costs, administration costs, rent (around R5 million), and the remaining R2 million was for procurement of offices.

Mr Mehana requested help from the Committee to convince the Minister of Finance to hold back on more budget cuts. The loss of R15 million had slowed down progress. In three years, CSOS would like to be in a position where it was able to encourage the Minister to release funds to other deserving agencies.

The Chairperson said CSOS was doing well despite having R15 million taken away. She says the Committee was aware of the support that was needed.

Social Housing Regulatory Authority (SHRA) briefing
Ms Sindisiwe Ngxongo, Acting Chief Executive Officer, Social Housing Regulatory Authority, introduced the delegation as follows: Mr Khulile Bogwana: Chief Operations Officer, Ms Thalitha Shongwe: Corporate Services Manager,  Mr Dewalt Koekemoer: Stakeholders Engagement Institutional Investment Manager.

She noted that the Social Housing Regulatory Authority (SHRA) had experienced some leadership challenges but was confident that they would be fully addressed in the next financial year.

Ms Ngxongo made note that most plans were indicated as "new" which indicated that there had been changes from the previous planning. Plans were in line with the Medium Term Strategic Framework (MTSF) and the National Development Plan (NDP) priorities. In future, SHRA would also incorporate Ministerial announcements, particularly matters affecting women contractors and youth participation, in their programme. SHRA had received new funding in the new financial year by way of the Institutional Investment Programme that was approved by National Treasury. SHRA's targets were now also in line with provincial targets. In future, social housing targets in provinces would be separated out, so that the SHRA would be able to monitor them more appropriately. Under the mandate, the SHRA would also be restructuring the zones to help with delivering social houses.

Ms Ngxongo highlighted that, in respect of the Strategic Goals, it was particularly important for the SHRA to give cooperatives the necessary attention, and SHRA was making an effort to include cooperatives in its delivery objectives. It had a delivery target of 27 000 houses over the MTSF, this was 1.8% of DHS targets.

Speaking to the programmes, she noted that SHRA would like to increase the number of accredited entities in its regulatory programme. Its functions were of a regulatory nature and SHRA was hoping to be able to regulate 75 accredited entities, and 45 311 social housing units. Stock should be managed to accredited social housing institutions, and increasing the numbers of such units would enable SHRA to move faster in delivery and ensure sustainability of the sector. It This was critical because if they get more fully accredited social housing institutions, it will enable them to move faster in delivery and ensure sustainability of the sector. SHRA was planning for 52% of institutions to be accredited in the 2016/2017 financial year and 70% in the following two years. SHRA would also be piloting an automated system. A self management system by social housing institutions would enhance delivery. The aim was for 100% of audits to be undertaken by institutions themselves by 2018/2019. She emphasised that all social housing units that had been developed using state funds needed to be brought under regulation, including those delivered before the SHRA was set up, and of these, SHRA wanted to bring 80% under regulation in the following year.

Ms Ngxongo repeated that most targets under the administration programme were new because they had been revised. Having identified the previous challenges, policies needed to be put into place. SHRA was now also planning to improve internally; the vacancy rate 33% was due to the challenges the SHRA had been facing but since the leadership challenges had been addressed, this number would reduce to 5% in the next financial year. She also said the 5% benchmark was in line with Department of Public Service and Administration requirements. Most vacancies were waiting council approval to be filled.

SHRA was also working on enhancing its communication strategy, as it had noticed that the programme was not widely known. The strategy was to include government sectors, stakeholders and beneficiaries within the target market.

Moving to the Annual Performance Plan, she highlighted that in this year, SHRA hoped to achieve 60  accredited entities, delivery of 26 328 units under regulations, and 26% of stock managed by SHRA accredited institutions.

Ms Shongwe presented the finances. She said that in the 2014/15 financial year, a new line item was added - Institutional Investment Capital Budget. The initial grant was R41.9 million and this would be reduced by 4% annually. There was a reduction in the capital budget of R600 million.

Ms Shongwe showed the revenue operational grant as 3.5% of total revenue. The Restructuring Capital Grant was 93% of revenue, and the bulk of it was allocated. The operational grant was increased by 5% but, starting from the 2015/2016 financial year, National Treasury would be reducing that grant by 4% every year. The income was adequately split, with 26% going towards compensation of employees and the remainder to operational budget.

The key expenditure was found under Agency and Support as the SHRA used a lot of outsourced services. Programme related costs took up 11% of the operational expenses and automation of regulations unit was 5% of the budget. The budget split was 56% to administration, 21% to investment management, 23% to regulations. She explained that the administration costs were high because there was a clear indication that the money from National Treasury grants was not to go to compensation of employees. Operational expenses were 69%, of which 20% was for administration, 72% for institutional investment, 7% for regulations and 5% for investment management.

Ms Ngxongo took the Committee through the challenges and actions taken to address them. She noted that the internal controls inefficiencies related to administration and disbursement of the capital grant. SHRA would ensure that internal controls were enhanced. It would also enhance the organogram, to clarify separation of powers. She said the SHRA had not been able to perform certain functions because of shortage on budget, but the budget was available from next year.

Ms Nxongo suggested that the income bands needed to be reviewed. The mining towns programme under DHS excluded the target market. She would like to ensure that more beneficiaries were also brought under the programme. She would like to see an impact on private rentals, where the SHRA had had no choice but to reduce the prices.

Discussion
Ms Mnganga-Gcabashe said she was concerned that no targets were shown for three of the four quarters in the SHRA's indicators. She said that national government institutions should not be allowed to have quarters with no targets displayed.

Mr Gana believed the Committee needed to draft a proposal around rental amounts. He pointed out that rentals in units were increasing at higher than the inflation rate, but the qualifying criteria remained the same. He thought that the upper limits needed to be reviewed to be in line with inflation. He asked if it was correct for SHRA to assert that it had "a lack" of operational budget, when in fact there was "not enough" money for operational budget.  

Mr Gana expressed concern at the number of outsourced services. There was talk of consultants milking money from the system and he wanted to know if SHRA had plans to build internal capacity. Lastly, he pointed out that the numbers given did not add up, for the MTSF goals. He requested a proper break down of the 27 000 target, since the plan's figures did not correlate.

The Chairperson noted that the SHRA could be called back at any time to account to the Committee.

Ms Ngxongo clarified that the targets were mostly listed under quarter four, due to the changes in planning systems. In future, the SHRA would fine tune how many units were to be delivered under each quarter.

She explained to Mr Gana  that the figures did not add up because the SHRA was being particularly cautious. She suggested that the targets were in fact likely to exceed 27 000, as not all projects that were in the pipeline would be delivered as planned.

Ms Shongwe explained that under the institutional investment programme, issuing of grants was mostly done by service providers. She assured the Committee that the SHRA was working hard to reduce the number of consultants., and that the SHRA had been asked to submit a consultant reduction plan to National Treasury, that factored in internal appointments. The use of consultants was tied to the fact that the grant condition was clear, that none of the grant should be put to staff remuneration.

The Chairperson asked that if Members were not satisfied with the responses, this could be clarified at a later stage.

The meeting was adjourned.