Human Settlements Provincial Department 2015 Business Plans; DHS on Auditor-General findings on 2015/16 Annual Performance Plan

Meeting report

Mr Mbulelo Tshangana, Acting Director General, Department of Human Settlements (DHS), introduced Mr Neville Chainee as the new Deputy Director General of Planning and Strategy.

Mr Chainee said the presentation had been put together after spending a week in consultations with the provinces and the eight metropolitan municipalities on the Urban Settlements Development Grant (USDG).

The Human Settlements Department’s 2014 - 2019 Medium Term Strategic Framework (MTSF) focused on achieving the following outcomes:

• Ensuring that poor households had adequate housing in better living environments;

• Delivering settlements that were spatially, socially and economically integrated;

• Supporting the development of a functionally and equitable residential property market; and

• Improving institutional capacity and coordination for better spatial targeting.

Qualitative targets were to be achieved through policy reforms, while quantitative targets would be achieved through the Human Settlements Development Grant (HSDG)

The programme and project planning enablers contained proposed directives that prohibited expenditure on certain programmes and projects, limited expenditure on others -- like line items -- set minimum numerical and budgetary targets, and required compliance with the grant framework. The date for the signing of delivery agreements with provinces and metropolitan municipalities was still to be determined. An extension had been requested for the submission of the 2015/16 business plans to allow sufficient time to meet the requirements of the assessment process and minimum targets. There was no intra year revision of approved business plans.

A four-stage national business plan assessment process was proposed, with assessment against the HSDG framework, the MTSF (numerical assessment), the Spatial Investment Framework (Housing Investment Partners and priority areas) and project readiness

The delivery agreements containing MTSF targets had been finalized, as well as the provincial directives. Priority investment areas had been identified. A project readiness matrix had been finalised and implemented, and so were the terms of reference for the establishment of a Human Settlements Project Assessment Committee. Also, a developing checklist for the Grant Framework Assessment had been finalised.

Still to be done in respect of the national assessment process was the finalisation of the Catalytic Projects prioritization and approval; approval of the Mining Town Strategy and Implementation Plan; urgent consultation on alignment between provinces and municipalities on targets and delivery agreement numbers, and application of the HSDG and the Urban Settlements Development Grant (USDG).

Mr Chainee went through the MTSF targets, as well as the annual targets to meet the five year targets. The presentation also looked at the funding requirements against the available Medium Term Expenditure Framework (MTEF) funding, which broke down the annual targets and costs, the required MTEF allocation of grants, and how much had actually been allocated per grant.

The Department’s challenges and failures were covered. There appeared to have been no strategic intention applied to achieving the national MTSF targets and outputs. There was a lack of appreciation that the HSDG and USDG were national grants embedded in the National Development Plan (NDP) and government policy frameworks. There was a lack of leadership and vision to ensure developmental innovation and initiative to achieve the MTSF targets. There was reluctance to reprioritise programme and project focus, and there had been a lack of alignment not only with the national government Human Settlements mandate, but also between the provincial and municipal mandates. There seemed to be an attitude of “if you want us to do this then give us the money and if we don’t get the money, we carry on as before.” Furthermore, there was poor alignment, consultation, coordination and application of all national grants, including the USDG and HSDG. There had also been the non-submission of business plans by the due dates of 28 November 2014 and 6 February 2015.

Plans and funding had not been aligned to the Division of Revenue Act (DoRA) allocation. There had been incomplete project information; a withdrawal and revision of plans due to changes in regional plans; unsigned plans; calculation errors in the template; poor or no revision of funding prioritisation; and delivery numbers below expectation, with catalytic projects still to be included.

Proposed Remedial Measures

The National Department had met with the provinces and metropolitan municipalities to review both the HSDG and USDG business plans. In all instances, the provinces and municipalities had been requested to revise the USDG and HSDG outputs, targets and outcomes against the MTSF and delivery agreement targets. The revision of business plans needed to be done before the end of April 2015 and signed off by the Director-General by 15 May 2015.

There had to be a restatement of national directives on the allocations, with proposed maximums on unit costs for all activities. The programme and project management branch, in conjunction with the planning and monitoring divisions, needed to allocate specific capacity to Gauteng, Limpopo, Free State and the Northern Cape.

The proposed approach to the utilisation of the USDG was that the receiving metropolitan municipalities had to ensure that the targets contained in the municipal outcome and delivery agreements were achieved, and were funded from the approved municipal capital budget, and must exclude any HSDG allocations.

A national Planning and Coordination Forum for Human Settlements had to be established to provide quarterly reports to the technical Ministers and Members of Executive Council (MinMec) with the specific objective to manage, monitor and oversee the Upgrading Informal Settlements Programme (UISP), Integrated Residential Development Programme (IRDP) and social and rental housing programmes.

Special funding dispensation needed to be applied to the catalytic and mega projects upon approval by way of the USDG and HSDG Division of Revenue Act (DoRA) frameworks.

The Housing Development Agency (HDA) would be appointed to act as the implementing agent, where required for the catalytic projects, in conjunction with the provinces. Also, all land acquisition and the servicing of sites for metropolitan municipalities would be funded from the USDG.

Mr Tshangana stressed that there were five-year targets that the sector wanted to achieve and nothing less was expected from the municipalities and provinces to make sure that the Department’s target of delivering 1.5 million housing opportunities was achieved. He added that in the current financial year, four provinces (Gauteng, Free State, Limpopo and Northern Cape) had been listed as having high risk business plans. With the exception of the Northern Cape, these were the provinces that had also failed to meet their targets in the last financial year. It was also important to note that the Department was not willing to review the targets downwards mid-way through the year of implementation, as had happened in the previous financial year. Revising business plans did not help -- instead it camouflaged and hid poor performance. The readiness matrix had been introduced to assess whether the business plans submitted made sense.

Inputs by Provinces

The Chairperson called on all provinces to have an input on the challenges and failures highlighted in the Department’s presentation.

KwaZulu Natal

Mr Mdu Zungu, DDG and Acting HOD, said the major issues that the province currently faced was that they had spent a lot of money and time on rural KwaZulu-Natal (KZN), and looking at the current plan, the province was now moving a large amount of money to urban areas – eThekwini would be one of the areas that would be benefiting. The province was also spending time on aligning the HSDG and the USDG. The provinces needed to look at densely populated areas, due to migration, as there was a need for human settlements infrastructure. These were issues that the Department had wanted the province to focus on, and now looking at the draft budget of the Department and the province’s plans, there were finally commonalities.

Regarding the R1.2 billion for rectification, the matter needed to be contextualised. The province was looking at the old assessments that had been done by the National Homebuilders Regulation Council NHRC, looking at the old stock from the early 1980s which were units that were now being transferred. There were huge backlogs in the province from informal settlements to social and rental housing. To sum it up, there was a holistic approach to the R1.2 billion.

Limpopo

Ms Zesuliwe Mkhize, Deputy Director General, said the issues raised by the national Department had been true. She briefed the Committee on how the provinces ended up where they were, and how they were planning to get out of it. The province had entered into an agreement with the Housing Development Agency (HDA) years ago, and was thus the leading province in terms of planning and good project pipelines. Unfortunately, in December 2012, when the Department was ready to appoint contractors ahead of the schedule, the procurement process had gone terribly wrong and this had led to a R1 billion tender that was cancelled. For 2013/14, the province’s grant had been withheld because National Treasury had done a detailed forensic report that recommended that the contracts be cancelled and proper processes be followed. This was why the province currently did not have a HOD, as he was on suspension, and the provincial department had also lost senior officials -- chief directors and directors -- as a consequence of this process.

Since then, the province had engaged the national Department and Treasury to assist the province to get out of their current situation. The provinces had worked with both offices, where the Chief Procurement Officer had piloted a process to enhance and tighten the procurement process of the department. This had led to the Department procuring houses only last October for 2014. In his State of the Province Address, the Premier had admitted that the pilot had failed, as the province could procure only 1 500 houses. The Department had labelled the province’s business plan as high risk, as the province had momentum only from the contractors that had been on site since last October, who were working to deliver what the province should have delivered last year. Hopefully, they would be exiting the site in July and the province was planning to get more support to compensate for their shortfall

In terms of the MTSF, the main reason for the shortfall was that the province had lost two years of service delivery and needed to make up for this in the three years that was left. To do this, the province had started working with its partners. Though the province had low results in the readiness matrix, it was important to note that the province’s planning had resumed fully and the HDA had been reappointed for the next three years. The province was also dealing with the Finance-Linked Individual Subsidy Programme (FLISP) and had a revised funding model for banks.

Ms Mkhize admitted that the province should have done much better regarding informal settlements, given that it was only the procurement process that had been affected and planning could have advanced under the HDA. There was a challenge with mining towns, as the informal settlements land around them was privately owned. However the mines had made land available to the Minister to develop.

The province was committed to delivering on the five-year targets, but it was going to be a very tall order. One of the main strategies of the province was working with the main players in the housing delivery sector, so that the limited resources available were augmented.

Gauteng

Ms Unathi Ndobeni, Chief Financial Officer, agreed with the presentation made by the Department. The province had met with the national Department twice and had looked at the business plan. The province’s initial targets had not been acceptable and the province had had to go back and look at its targets again. One of the reasons that the business plan had been rejected by the Department was the cost per unit -- the cost per unit for Gauteng was higher, and the province had found out that this was due to the professional fees. Another reason was that the province had not consulted enough or coordinated with the municipalities in the province.

The reason for the underperformance in 2014/15 was due to replacement of asbestos roofs and hailstorm damage, which had cost the province around R1.3 billion. Another reason for underperformance was poor planning between the province and the municipalities -- in some instances, money for housing was used for USDG-related projects.

The province was committed to deliver on the five-year plan. It was aware that it was working on a deficit, but was planning on working very hard to achieve the targets.

The Chairperson said Gauteng was one of the provinces with a high deficit number and asked the CFO to confirm that the province was indeed committing to meet the targets.

Ms Ndobeni confirmed the commitment of the province to deliver on the five-year outputs.

North West Province

Mr Alfonso Manuel, Acting Chief Director: Housing Development, acknowledged and accepted the challenges that had been raised by the Department. One of the reasons that might have contributed to this was that innovative ways had been deployed to see how best the province could meet the MTSF targets. The province had met with the Department to assess its business plan, and had revised it.

The province had also taken a conscious decision not to budget for things that would not be yielding numbers for the province. For example, the budget for the rectification programme had been moved to priority programmes such as the Upgrading of Informal Settlements (UISP) and the buying of land in mining towns. The revised business plan had prioritised the UISP programme. The province had established a “provincial crack team” to influence issues around bulk services, looking at catalytic projects and bulk infrastructure.

The province was committed to meeting its delivery targets within the MTSF period.

Mr K Sithole (IFP) asked if the delegation from the North West were in an acting capacity in their positions.

This was confirmed by Mr Manuel.

Mr Fannie Motsumi, Acting Chief Director: Planning and Technical Services, added that as part of the business plan revision, priority areas that had been identified were around mining towns. The province had identified seven informal settlements that it wanted to impact on, and this was reflected in the revised business plan. Due to the influx of people in Rustenburg, the mushrooming of informal settlements had been out of control, and the province would be focusing its energy on dealing with this. Out of the R2 billion that the province was receiving this financial year, 42% of the budgeted funds would be for that. As with the other provinces, North West also wanted to contribute to the MTSF targets.

Western Cape

Ms Cristobel Johnston, Deputy Director General, confirmed that the Western Cape had submitted its business plan on time and the feedback from the Department had been that the province should consider the rectification programme and the Community Residential Units (CRUs). The provincial department had gone through an extensive process of looking at the project readiness matrix, and only projects that were ready for implementation had been considered for the business plan.

The province was committed to achieving its targets and there were very few concerns that had been raised by the national Department in terms of the province’s business plan. One of the areas that the province needed to work on was working more closely with the City of Cape Town and prioritising the right projects.

Mpumalanga

Mr Kebone Masange, Head of Department, said the presentation had been a true reflection of the challenges that were faced by the province in meeting its targets. The Executive Council was committed to meeting the targets, as agreed upon by the President, Minister and the MECs. The province had analysed the problems of the Department to come up with a turnaround plan. They had since found that the Department was engaging in projects that were integrated. In an area like eMalahleni, for instance, there were six to seven informal settlements, and there were no services in these areas at all. The provincial department had been directed by the Executive Council to embark on integrated human settlements, and this would of course take a lot of time to plan. Though the report was a true reflection of the current state and deficits in the province’s output, the province assured the Committee that it would recover.

Currently, the province had embarked on a massive programme of servicing sites. A master plan had been approved by the Executive Council. The plan set out clear targets of what the province needed to do and also evaluated the infrastructural challenges faced by all municipalities in the province. The major concern for the province was with the fast growing towns around mining areas, where there were mushrooming informal settlements, with the main three being eMalahleni, Govan Mbeki and Steve Tshwete. Another challenge was the misalignment of priorities.

The province had largely been focusing on developing rural areas, as there were no bulk infrastructure challenges. Holwever, the Executive Council had asked that they focus 80% of their grants to fast growing towns and mining towns, which was where the informal settlements were. In this integrated approach, the province would be working closely with the municipalities.

The Eastern Cape and the Northern Cape were absent without apologies. The Chairperson asked that the national Department find out why these provinces regarded the meeting as not important, and report back to the Committee before the end of the meeting.

Discussion

Mr L Khoarai (ANC) asked if there were timeframes to finalise the outstanding issues under the National Assessment Process. Also in the provincial breakdowns in all the provinces, there had been no delivery on title deeds – there were zeros. He asked if this meant that no title deeds had been issued throughout the whole country, and what the cause of that was.

The provinces had spoken about the not having good relationships with municipalities, but what were their roles to assist the municipalities? When the Committee had visited Limpopo, they had recognised this problem between the municipalities and the province – how would this be dealt with by provinces, as it affected service delivery?

Mr Tshangana said the Director General had signed an implementation protocol with the HOD, and the Minister had signed an N2 Gateway Project agreement, to get started on turning things around in Limpopo. The province used to be a good performing province -- they had mastered the art of pipelining, planning and packaging their projects in time. The Department was working with the province and looking at their business plan to ensure it was in line with targets.

Ms Ndobeni admitted that Gauteng was behind in terms of issuing title deeds. With post-1994 stock, the province’s backlog was 109 195, and on pre-1994 stock the backlog was 13 429. For 2015/16, the target for post-1994 stock was 6 000 and 4 000 for the pre-1994 stock. Delivery in 2014/15 had been 5 118 for the post-1994 stock, and 2 690 for the pre-1994 stock. The province had fallen behind due to it using three different units for this function, but since then the function had been centralised to one unit so that it could be managed properly.

Mr Sithole said the report was very disturbing. A report previously given by the Department to the Committee had indicated there had been some improvements, but this report indicated that the Department was going back to where services were not being delivered in the provinces. Even more disturbing was that capacity issues, in municipalities and provinces, had not been addressed under remedial measures.

Mr Sithole asked about the comprehensive holistic approach to the CRU targets provincially and nationally, as the targets varied from province to province. In all provinces -- with the exception of Gauteng, KwaZulu Natal and the Western Cape -- under the 2014/2015 figures they had a zero under FLISP, the Integrated Residential Development Programme (IRDP), Social Housing and the CRU. What did the provinces feel when they saw this?

Also, regarding KwaZulu-Natal, it was concerning that they were going to be taking money that was supposed to be going to rural areas and moving it to urban areas, especially to eThekwini. EThekwini was always the primary target for any sort of service delivery in KwaZulu Natal. The USDG was specifically for eThekwini, so why would the province then still shift money from rural areas to EThekwini? Also, with the shifting of money from Limpopo to other provinces due under spending and lack of planning, what was the national Department currently doing to assist the provinces with their planning programmes?

Mr Tshangana said the Department had noted that there were provinces that were struggling capacity-wise. There was a model that the Department wanted to present to the Committee which had been started in Nelson Mandela Bay, on how the Department had intervened to assist the metro. The same model had been used in Limpopo, although at a higher level, where the Department had deployed professionals to help turn the organisation around. Capacity was a challenge.

Mr Chainee added the Department had allowed for a 5% Operational Capital Budget Programme (OPSCAP) as part of the HSDG, which allowed provinces to supplement their current capacity. 5% of R16 billion was a substantial amount of money to buy capacity. The private sector only wanted to go into projects that were nice and affordable. There was very little involvement of the private sector, except for when they got involved as professionals in projects.

Mr Manuel confirmed that they had submitted their business plan during the meeting. He added that the province was not denying that it had capacity problems -- that was one of the main challenges. Regarding the Planning Chief Directorate, the province had started a recruitment process but had not found a suitable candidate, hence the position was still not filled. For the Housing Development Chief Directorate, the manager responsible was under precautionary suspension, and the HOD was in an acting capacity as the original HOD had resigned.

Mr Zungu spoke on the urban/rural prioritisation. Looking at the last financial year delivery, above 16 000 units had been delivered and R1.5 billion spent on rural development, compared to urban areas. This year there was over R600 million going to mega projects, and these were not only in eThekwini, but also at Mhlathuze, which had been targeted for 10 000 units. The sub-cabinet committee was looking for proper planning in the province and prioritisation.

Ms V Bam-Mugwanya (ANC) said it was regrettable that the Eastern Cape was not present in the meeting. The Committee was very concerned about the performance of Gauteng -- it did not seem as though they would be meeting the five year target considering the magnitude of the work they needed to do, regardless of what they were saying. It also seemed that Mpumalanga was having a problem. They had stated that the Executive Council was committed, but there was no synergy. There was also the question of the 80% of resources that would be directed to fast growing towns, but there were always problems raised with Bushbuckridge -- the distribution of funds did not seem to be reaching Bushbuckridge. This did not make sense, as the province claimed they were targeting these towns. The issue of title deeds was again a concern as it seemed there was little to nothing done by provinces.

The Department noted that there was lack of leadership and vision to ensure the developmental innovation and initiative to achieve MTSF targets, but it was not clear what could be done – there was lack of leadership and understanding of what was supposed to be done. It was therefore not clear what means could be devised to up skill people. It seemed that the provinces were having staffing issues; there were a lot of “acting” people in positions.

Mr Tshangana said the lack of leadership was applicable to all three spheres of the Department. The best test of leadership was the performance reviews. It was worrying that acting HODs and only one HOD were present in the meeting– this was the first test of whether the targets and figures were taken seriously. All the figures presented had been in the HOD’s performance agreements -- the HOD’s performance agreements were their annual performance plans (APPs), yet they were not at the meeting when they were invited to come and account to the Committee.

Mr Masange spoke on the executive commitment of Mpumalanga. By saying there was executive commitment did not mean there was any less from the administration. This was to highlight the general commitment of the province to integrated human settlements. Bushbuckridge was a national commitment, and funds were administered by Water Affairs, and local government had set aside money to address the water challenges. But the water issue was no longer something to worry about as it was being addressed, with the involvement Rand Water.

Ms T Gqada (DA) said the presentation did not give a good picture of what was happening in the provinces. There was still a lot to be done. It was concerning that as part of the Eastern Cape priorities, there was no budget for land purchases, yet the province complained that they did not have enough land to build houses. This was the same issue with Free State – the purchase of land was not part of their priorities. Regarding Gauteng, it was not convincing how Gauteng had responded to the issues raised.

Another area that was worrying in Gauteng was the disaster management or emergency budget. They also had not prioritised purchasing land. In KwaZulu-Natal, it was perhaps time for the National Home Builders Registration Council (NHBRC) to be involved in the rectification programmes of the provinces. They should be involved and tell the Committee how this issue should be mitigated, as they were an entity that the Committee fully trusted. It did not make sense that so much money was spent on rectification.

When the Committee had visited Limpopo, there were land parcels. Could there be feedback on how far the province had progressed in acquiring those pieces of land? Again, there were the same land issues in Mpumalanga -- nothing had been mentioned about land and land acquisition. The Northern Cape also had no land purchasing budget, and there was no emergency budget. With regard to North West, it was concerning that everyone was in an acting capacity. This is a staffing issue, and again land acquisition did not form part of the top priorities.

Ms Gqada asked for clarity from the Western Cape on what “EEDBS” was. It was also concerning that once again, land was not a top priority as there was an issue of land in the province. Also, the DDG of the province had mentioned that they wanted to get rid of the CRU from planning. She sought understanding on this matter, as the work of the CRU had been evident in getting rid of the apartheid way of living.

Mr Tshangana said the challenge in the Western Cape and the CRU was that the bigger part of the CRU budget had gone into the rectification of the flats and not into providing new housing opportunities. The solution was to scale down on the rectification component of the CRU, because there had been new CRUs created in Langa and other places. The CRU programme would not be done away with, but the Department needed to ensure that it created new opportunities.

The EEDBS was one of the housing programmes called the Extended Enhanced Discount Benefit Scheme. It looked at the old municipal and provincial stock handed over to people, which they had been renting for years. The Department had taken a decision many years ago that these units should be handed over to the individuals who had been renting, so that they had an opportunity to own the stock. The programme was running in three provinces, to release the government stock to the people.

Limpopo added that there were four pieces of land that had been identified but which could not be acquired due to two of them being way above the evaluation estimates, while the other two had environmental issues.

Mr Manuel said that there were pieces of land that had been purchased in the last few years, and a proposed process to start planning for that land with the HDA. The province had taken a decision not to buy any more land, as they might not be seeing the numbers that they were envisaging over the MTSF. The focus would be on the land that the province had already bought.

Mr Masange said the Department had purchased a number of land parcels in the past. Some of them were problematic, as they were not well located, but the province was working on these pieces of land instead of moving on to the purchase of more land. The Department was also working with municipalities to identify sites where proper planning and land surveying had been done, and which only needed to be serviced.

Mr N Capa (ANC) spoke about the transferring of funds from non-performing provinces to those that were. However, how did the provinces explain this to their constituencies? Also, regarding KwaZulu-Natal, and at different times concentrating on developing rural areas and then urban areas, why were the programmes not approached holistically so that one did not focus on rural development and then move to urban development, and rather deal with development all at once? In Gauteng, the province had mentioned the issue of professional services, like consultants – how could this be prevented, as the province still needed them? There was an issue of how the Department would deal with them to ensure that they did not become a problem.

Most of the provinces had indicated that they would meet their five-year targets, despite the deficiencies, but they had not indicated how they would do this – what actions and steps they would take to overcome these deficiencies.

Mr Tshangana stressed to the senior officials of the provinces that if one metro failed to meet its target, the whole country was affected, and if one province failed to meet its target, the national targets were affected. The contracting arrangements had therefore been signed to help reach the national targets, and there needed to be consequences for not meeting targets.

Mr Tshangana added that over the years the DHS had performed very well, and had managed to do this because they had got a pool of Professional Resource Teams (PRTs). These were built environment specialists, consulting engineers and town planners. This team of 15 people would package projects so that there was a busy pipeline, and in the year of implementation the project would be ready to go. However, what had become of concern was that this planning had taken a significant amount of money from the budget – there was a point where Gauteng was paying about R360 million for the professional work. The even bigger concern was that a major part of the budget was going into professional work and planning, but there was no output. Provinces needed to get the balance right. There was nothing wrong in getting professionals to help one package the work of the province. What Gauteng had done was to fix the price they would pay the professionals -- they became price makers instead of price takers.

Mr H Mmemezi (ANC) said there were areas that were not clear, like the 1.4 million housing opportunities versus the 1.5 million target of the Department. It was not acceptable that the unit cost of an RDP house could skyrocket to the prices mentioned in the presentation. Value for money was key. FLISP in provinces such as Gauteng and KwaZulu Natal -- in the metropolitan areas -- was important, and the provinces and the Department needed to do whatever was necessary to make use of it. The government did not want to force the middle classes to go to the streets in protest because they had been waiting for services. As professionals, officials were promising that they worked well under pressure and were creative. They needed to deliver on all these promises now that there were challenges. South Africans were looking for a reduction in informal settlements and backyard dwellers. There needed to be consequences for officials that did not deliver.

Historically, Gauteng and KwaZulu-Natal were best performers for the Department Human Settlements, so the drop in delivery numbers was unacceptable. This had started with some contractors that had not been paid, and some that had been paid before the projects had been completed. Gauteng needed more land - that was a priority.

Mr Mmemezi said milestones on when to pay contractors should be agreed on. This would be a uniform system for when contractors would be paid, and would reduce the number of projects that were paid for while they were incomplete.

Mr Tshangana said that it was only in the Enhanced Peoples Housing Process (EPHP) programme that it was allowed to pay in tranches. In other programmes, the rule was that one paid on the basis of milestones. This was in the contracts, which was why there were inspectors and NHBRC inspectors.

Ms Ndobeni said that the Department was also looking at re-skilling its own officials so that they could be used more efficiently and made accountable for their performance. The Department had also fallen behind in terms of delivering on FLISP, so it was looking at capacitating the unit that was responsible for this function. The province had created awareness around FLISP, and was expecting more applications. Ms Ndobeni reiterated that the province was committed to meeting its targets.

Ms L Mnganga–Gcabashe (ANC) said that KwaZulu-Natal had had to separate repairs of the former R29 township four-room houses and the extension of former R29 two-room houses. This was why the province had had such an inflated rectification budget and everyone had been shocked. Also, on the Integrated Resource Plan (IRP) 2015 targets, she asked for the zeros to be clarified. The other targets were too high and unrealistic. In the Western Cape, there was a zero under the USDG in the City of Cape Town, and of all the metros it was only the Western Cape that had so many zeros and blank spaces. This all boiled down to a lack of proper planning. In Mpumalanga, the misalignment of projects showed that there had been no proper planning, and there was no project pipeline in place in time. On North West in 2015/2016, there were zeros for FLISP, Social Housing and CRU, and this was unacceptable. There were junior staff and managers in these divisions sitting in their offices for 12 months, receiving salaries, 13th cheques and a string of other benefits, yet they considered it acceptable to produce reports with zeros and blank spaces. Heads needed to roll. The Department and provinces should never again bring a report to the Committee like this, if there were no consequences for staff that were clearly not performing.

The Gauteng targets were unrealistic, and they needed to go back and sort them out. Another big problem was that of no targets on title deeds. Limpopo needed to go back to the drawing board and give districts and municipalities potential responsibilities, and not centralise everything on Human Settlements. The province did not have to wait for the accreditation of municipalities to give them responsibilities, and funds to implement projects.

Mr Tshangana said the Department was concerned about the City of Cape Town. Last year, they had had a rollover of R286 million on the USDG. The USDG was supposed to help Human Settlements achieve all the informal settlements upgrading targets. If metros were not spending the USDG, this meant that the sector would forever be working to deal with the deficit. Mr Chainee had stressed the deficits, as the government was in year two of the MTSF, and based on previous experience, if one missed the first and second year, one would struggle to recover, so the deficit needed to be dealt with now.

Ms Mkhize said for 2015/16, the province would be preparing one municipality for Level 2 Accreditation, and another three would be provided capacity enhancement for Level 1 Accreditation.

Ms Johnston said the Western Cape had decided to scale down on the CRU, as it was not creating new opportunities. Regarding having no sites produced by the USDG, in the Western Cape the province had paid for sites from the Human Settlements Grant and had then applied to the City of Cape Town for bulk infrastructure funds, and that was how it had been reported.

The Chairperson said that when Gauteng and its metros had been invited by the Portfolio Committee, they had presented only one metro and two had been absent. She thought that the province should have the courtesy to give feedback on why those metros had undermined the Committee.

The presentation had also referred to an analysis against the project readiness matrix. This was an exciting scientific approach that tried to show the vision and planning of the Department. However, how accurate was it? North West and Gauteng’s business plans had been turned back to be revised. North West had committed to resubmitting by the end of business on 21 April, and Gauteng had committed to make their submission by 24 April. She asked the national Department to send the Committee a one-line letter confirming receipt of the business plans as they received them from the province.

The Chairperson said it was concerning that the Gauteng unit costs were too high. She asked for the findings on the study that had been done according to the housing code to cost the units in order to have control on the pricing. It was assumed that this study would formalise and create a uniform approach across the country.

Mr Tshangana said the readiness matrix was a tool that was used to check the state of readiness of all the projects in the provinces’ business plans. It helped classify the projects as to whether they were high or low risk, and determined the level of readiness -- for instance, if contractors were on site already. In some instances, one would find that a project was on the business plan, but the province had not gone through the planning approvals. That would make a project a high risk project, where the province would not deliver on the numbers it promised, or meet targets. For the Department to meet the MTSF targets, in the current financial year it was required to deliver 150 000 sites and 134 000 top structures, but the matrix indicated that only 108 053 sites and 96 816 units could actually be delivered.

Ms Ndobeni said the municipalities that not attended the meeting would be asked to respond to the Chairperson in writing.

Ms Liza Johnson, General Manager: Monitoring and Evaluation, KwaZulu-Natal, said that their HOD had been booked off since last Friday, 17 April.

The Chairperson asked that this be formal apology be forwarded to the Department in writing.

Deputy Director General’s remarks

Mr Chainee said the deficits not only addressed the informal settlements upgrades, but also the backyard dwellings. There had been a substantial amount of money put into planning and land acquisition, but the Department was not yielding the numbers, so where had the money been spent in relation to land and planning, and what were the figures? These were questions that provinces had been asked when they were asked to look at their plans again.

Regarding reprioritisation, it was not good to have a simplistic application of this. However, looking at it in basic terms, if there was a backlog of 400 000 households and one was building 10 000 new opportunities a year, it meant that it would take over 200 years to eradicate the backlog. The subsidy was a R110 000 for the construction of a house, another R43 000 was paid for servicing and another R6 000 for land. This meant the total cost of a new opportunity was R159 000, but there were instances where the cost of building an RDP house went up to R300 000, R600 000 and even over R1 million.

On the USDG, across the board there was a lack of coordination and alignment between the HSDG and USDG. Provinces had been asked to go back and rework how they would better align the two grants. There was a substantial amount of money being spent, but the Department could not tell what the USDG was buying. There could not be instances where some municipalities spent R250 million on chemical toilets, and R50 million on permanent services.

The provinces had been asked to go back and had been given a deadline of 24 April to submit their revised business plans.

Mr Tshangana added that the public catalytic projects would be finalized by 12 May, and there would be a list of all of them announced, 12 May was an important date, as it was the day of the Minister’s budget speech. The advert for the private catalytic projects would go out over the weekend of 24 April to ask private developers to submit a list of catalytic projects, and the HDA was working on it.

The Department was working on the approval of the mining town strategy and implementation plan with the Presidency and the Department of Performance, Monitoring and Evaluation, and this would also be finalised. On the consultation on alignment between provinces and municipalities on targets and delivery agreement numbers, and the application of the HSDG and USDG, the process had started, hence the contracting arrangement between the national Department and municipalities and between the national Department and provinces. The Minister had met all the mayors from the eight municipalities.

The Chairperson asked that all provinces that had not brought their HODs to submit their apologies and reasons in writing so that this could be forwarded to the Portfolio Committee.

Response to findings of Auditor-General

Mr Tshangana said that the Department had had an interactive relationship with the Auditor General (AG) since last year. Some of the comments put forward by the AG were applicable to the draft submitted in October of the previous year. During the AG’s presentation in the previous Committee meeting, they had indicated that there were indicators that were not in the strategic plan but were in the APP, so there had been a question of alignment between the two documents. The Department was of the view that most indicators in the APP were in the MTSF, and what they had not mastered well was aligning the APP with the strategic plan in order for all three documents to be aligned.

The AG had also spoken on indicators that were not Specific, Measurable, Achievable, Relevant and Time-bound (SMART). The built environment dealt with tangible indicators and it was easy to get the indicators to be SMART -- one either delivered a house or a serviced site, or one did not. However, there were areas where the Department had not outlined some SMART indicators, like technical indicators, so what the Department planned to do was look at the issues outlined by the AG and demonstrate how they would be addressed.

Mr Chainee said the Department acknowledged the importance of ensuring that it drafted and recommended a credible strategic and annual performance plan aligned to the MTSF for approval by the Executive Authority. This was the only issue standing between the Department and a clean audit. The Department had, for the 2015/16 financial year, ensured that the strategic plan and annual performance plan were consistent with the MTSF. A commitment to improved compliance to the National Treasury guidelines and the SMART principles was expected, with improved human resource capacity being employed in the Department to draft, compile, monitor and oversee the implementation of the strategic plan through a robust and credible annual performance plan.

The role and guidance of the office of the AG was acknowledged, and the Department was committed to ensuring improvements in compliance by the Department in relation to the National Treasury guidelines and the SMART principles in relation to the strategic and annual performance plan of the Department.

The Department would ensure the relevant officials responsible for the drafting and compilation of the APP were trained in the crafting of indicators consistent with the National Treasury framework, as well as the SMART principles. A draft of the APP would be submitted for internal audit verification to ensure compliance with the National Treasury guidelines, as well as SMART principles.

Quarterly reviews and reports on monitoring and implementation of the APP by branch and programme managers to a responsible Deputy Director-General would be instituted and include reports on progress in the implementation of outputs and targets.

There had been inconsistencies between the strategic plan for 2014/15 to 2018/19, and the APP for 2015/16. A draft of the APP would be submitted for internal audit verification to ensure compliance with the National Treasury Guidelines, SMART principles and ensuring all inconsistencies were removed between the strategic plan and the APP. The Department would also ensure that the timeframes for the planning and budgeting cycle were consistent with the National Treasury guidelines as well as lead times for planning and budgeting were adequate to allow for adequate management of programmes and project preparation, planning and implementation. As per the AG’s recommendation, a process would be established by all programme and project managers to ensure there was a technical indicator for each performance indicator in the strategic plan and APP. Relevant control measures were being put in place to deal with inconsistencies in other areas.

Mr Tshangana asked if the AG and the Portfolio Committee would allow the Department to amend its APP. Specific comments had been made about what needed to be done, and the Department had made all the corrections. Therefore, the key question was whether the Department would be allowed to effect the changes, which meant the APP would have to be amended.

Discussion

The Chairperson said the Committee had heard the responses of the Department, but the Committee would not answer the question during the meeting – the Department would receive a response in due course. The AG had listened to the reply with the Committee, and the important thing had been that the Department had responded to its request and had dealt with issues that the Committee wanted them to deal with.

Mr Mmemezi said he also appreciated the response of the Department, and their owning up that they had not done things correctly. The AG had also said that in provinces, professionals were not following the frameworks and guidelines. The Committee wanted credible APPs, and performance indicators that were SMART.

Ms Mnganga–Gcabashe supported the Chairperson’s position. The Department would get a response to its request after due process had been followed.

Closing remarks

The Chairperson said the meeting had been interactive and eye opening, and would make it easier for Members of the Committee to do their doing oversight work with the provinces and the Department in future. This had been made even easier by the commitments made by the provinces at the meeting. She commended the six provinces that had responded to the call to attend the meeting. She also asked the officials present to tell their principals that when Parliament called provincial departments to meetings, it expected the HODs to attend and not send representatives.

The meeting was adjourned.