The Department of Human Settlement (DHS) gave the Standing Committee on Appropriations details of its expenditure and performance against its targets for 2014/15 and for the first quarter of the current financial year.
The allocation for the Human Settlements Development Grant (HSDGs) for the previous year had been R17 billion. There had been a rollover of R289 million from the previous financial year which had culminated in a total of R17.3 billion as the available amount. The allocations had been transferred to provinces, which had spent R16.9 billion -- an under-expenditure of R400 million. With regard to the delivery performance of provinces, there had been a target of 45 652 sites, while the top structure target had been 105 796, and the overall target had been 151 448 structures. The provinces had delivered 143 911 overall, which meant that there had been a total variance of 7 537. While many provinces had exceeded their targets, the actual delivery by Gauteng -- which had received the biggest allocation -- had been lower than other provinces.
In terms of the delivery of the Financed Linked Individual Subsidy Programme (FLISP), allocations made to provinces had been R71.6 million, but the actual spending at the end of the financial year had been R35.5 million, with four provinces reporting no expenditure at all.
The Urban Settlement Development Grant (USDG), including a R585 million rollover, had resulted in an amount of nearly R10.9 billion being available. Part of it had been transferred to local authorities, and at the end of the financial year, expenditure had been R5.5 billion, or 48.3%. There had been an allocation of R690 million for the rectification programme. The actual expenditure, however, showed an overspending of R757.6 million.
The Municipal Human Settlements Capacity Grant (MHSCG) amounting to R300 million had been provided to six metropolitan municipalities in the 2014/15 financial year. The purpose of the grant was to provide capacity to municipalities. It was a collaboration between the DHS, National Treasury, the Department of Cooperative Governance and Traditional Affairs, and was aimed at providing assistance to municipalities due to an outcry for capacity and technical support.
At the end of the first quarter up to 30 June 2015, the Department had spent 18% of its R690.6 billion allocation for operational expenditure, amounting to R124.2 billion. Details of the expenditures by province were provided, together with explanations for over- and under-expenditure.
There had been increasing pressure on the DHS to improve its monitoring, evaluation, reporting and capacity outcomes. A revised structure had been approved by the Minister for the activation of necessary processes for approval, particularly in relation to the human resource constraints at the national Department. The Minister had also expressed concern at the decline in delivery over the past couple of years.
The discussion on the presentation emphasised the issues of capacity within the municipalities and provinces, as well as within the Department; the shifting of the capacity grant from the municipalities to the Department; the reasons for under-expenditure within the Department; projections from institutions that failed to request funds to implement programmes; implementation of the national upgrading support programme; the efforts put in place to address under-expenditure within the Department; the effectiveness of the accreditation process, as well as the effectiveness of the capacity grant; the alignment of the departmental financial year with that of the municipalities; the placement of the burden of the cost for rectification; efforts put in place to curb situations of beneficiaries selling their houses and returning to informal settlements; non-performance by municipalities, even when funds had been allocated to them; the efforts put in place to address the lack of technical and operational capacity for programme and project planning, implementation and monitoring; progress on achieving the targeted delivery on the housing units for the housing subsidy programme, as well as the completion of municipal assessments for the six accredited municipalities; the need to train Chief Financial Officers on budgeting in order to avoid situations of projected figures that were unnecessary; the measures put in place to monitor the work done by entities; the absence of targets and units in comparison to the allocation of funds and overspending or underspending in respect of those targets; the need to place more emphasis on title deeds; the overlap between the DHS and the Department of Water and Sanitation; the provision of electricity to the upgraded informal settlements; the need to address the title deeds backlog; and the need to phase out the rectification programme, since it amounted to a double subsidy.
Grants report for period ending 31 March 2015: Department of Human Settlements (DHS)
Mr Neville Chainee, Deputy Director General (DDG): Strategy and Planning, DHS, said that the total of the DHS grant transfer payments at the end of 2014/15 had been R28.7 billion, while the total for 2015/16 and 2016/17 would be R30.2 billion and R32.4 billion respectively.
Mr Nyameko Mbengo, Acting Chief Financial Officer, DHS, said that the Department had to present all grants at the end of every financial year to provinces and local authorities. The allocation for the Human Settlements Development Grant (HSDGs) for the previous year had been R17 billion. There had been a rollover of R289 million from the previous financial year which had culminated in a total of R17.3 billion as the available amount. The allocations had been transferred to provinces, which had spent R16.9 billion -- an under-expenditure of R400 million. The initial allocation to Limpopo had been R1.2 billion but because of the performance during the financial year, R559 million had been shifted to another province, leaving Limpopo with R659 million. But even with that, Limpopo had underspent by R308 million by the end of the financial year. KwaZulu-Natal (KZN) on the other hand, had overspent by R3.2 million and it had had to approach its provincial treasury to address the situation. Overall, the actual expenditure for the previous financial year had been 98% and there had been a 2% underspending.
With regard to the delivery performance of provinces, there had been a target of 45 652 sites, while the top structure target had been 105 796, and the overall target had been 151 448 structures. The provinces had delivered 143 911 overall, which meant that there had been a total variance of 7 537. The Eastern Cape Province had exceeded its target by 23%. Mpumalanga had also exceeded its target by 42%, the Northern Cape by 3%, North West by 56%, and the Western Cape by 14%. The biggest allocation had been made to Gauteng, and it had achieved 70% of the targeted serviced sites, as well as 85% of the top structures. With regard to the total delivery performance, KZN had led with 33 325. Next had been Gauteng, with 20 381. Although Gauteng had received the biggest allocation, its actual delivery had been lower than other provinces in the previous financial year.
In terms of the delivery of the Financed Linked Individual Subsidy Programme (FLISP), allocations made to provinces had been R71.6 million, but the actual spending at the end of the financial year had been R35.5 million. With regard to the units, the Department had been given 1 193 units. There were provinces such as Limpopo, Mpumalanga, Northern Cape and North West, with no delivery in respect of this programme. These provinces also had no report with regard to expenditure.
There had been an allocation of R690 million for the rectification programme. The actual expenditure however showed an overspending of R757.6 million. This had been due to the fact that there were some provinces that had overspent on this programme. For example, the Eastern Cape had spent R471.5 million against its budget of R362.4 million; Free State spent R102.5 million as opposed to its budget of R93.4 million, Gauteng had spent R31.7 million against its budget of R12 million, and North West had spent R40.4 million as opposed to its original budget of R5.6 million. Overall, there had been over-expenditure, and the Department had requested more information on this programme.
The Urban Settlement Development Grants (USDGs) had been transferred to metros. The total allocation for this grant had been R10.3 billion. There had been a rollover from the previous financial year that amounted to R585 million, which had resulted in an available amount of nearly R10.9 billion. Part of it had been transferred to local authorities, and at the end of the financial year, expenditure had been R5.5 billion, or 48.3%. It should be noted that the municipal financial year had gone beyond the departmental financial year.
Mr Chainee clarified the difference between the various grants and programmes. FLISP was a subsidy that was provided to households earning between R3 500 and R 15 000 a month. The Department provided grants to these household in respect of earning mortgage funding. The Rectification Programme, on the other hand, was a programme where the Minister had issued a directive for it to be stopped. It had essentially been a programme that provided funds to rectify instances of employment of poor workmanship by provinces, resulting in collapsed buildings. With regard to the difference between the HSDG and the USDG, the HSDG in terms of the Division of Revenue Act (DORA) was a provincial grant that went to provinces for the funding of national housing. The provinces would then undertake household structures or the delivery of programmes through various mechanisms. The USDG, on the other hand provided funding to the eight metropolitan municipalities, and the funding went towards the totality of the human settlement programme. The grant provided opportunities to municipalities to build clinics, libraries, and other social economic facilities. It was particularly aimed at the development of metropolitan municipalities.
Mr Mbengo added that the USDG was a supplementary grant that was intended to supplement the country’s budget for metropolitan municipalities.
The USDG funded most of the capital projects within municipalities, including sanitation services; water services; roads, stormwater, and transport; electricity or energy; social services and public facilities; human settlements/human infrastructure; waste management; economic development and planning, and so on. The way the money from the grant had been spent and what programmes or services they were spent on in various metros, were highlighted in the presentation. The actual deliverables in respect of the services were highlighted, such as the actual amount of informal settlements that had been upgraded, as well as the number of kilometres of roads that were also upgraded. (See attached document).
Mr Chainee clarified that there was a difference between the end of the financial year of national departments, which was 31 March, and the end of the financial years of metros, which was 30 June. The first transfer of the USDG was paid on 1 July each year. It would only be fair to measure the metros from 1 July until 30 June of the next year.
The Chairperson said that the information given in the presentation could be misleading because it showed that all the metros had underspent by R5.5 billion at the end of March, when their own financial year had not yet ended.
Mr Chainee continued with the presentation by touching on the third grant, the Municipal Human Settlements Capacity Grant (MHSCG). This grant had been provided to six metropolitan municipalities in the 2014/15 financial year -- Nelson Mandela Bay, Ekurhuleni, City of Johannesburg, City of Tshwane, eThekwini, and City of Cape Town. Mangaung and Buffalo City had not received any grant for the previous financial year, but they would receive it in this financial year. The purpose of the grant was to provide capacity to municipalities. It was a collaboration between the DHS, National Treasury, the Department of Cooperative Governance and Traditional Affairs, and was aimed at providing assistance to municipalities due to an outcry for capacity and technical support. R300 million had been transferred but municipalities had spent only R25 million (8.5%), leaving R274 million as the remainder, although the grant had been transferred for only one month as of 31 March 2014. The expenditure of 8.5% had been therefore the expenditure for one month.
The revised allocation of 2015/16 to the Department for the first quarter had been R30.9 billion, which included grants and operational funding for the Department. The Medium Term Expenditure Framework (MTEF) allocation in relation to the departmental budget for various programmes was highlighted. R435 million had been allocated to administration; R74 million to human settlements policy, strategy and planning; and R169.8 million to programme delivery support. Most of the departmental budget -- R30.2 billion -- was allocated to housing development finance because the programme managed the bulk of all the transfers for the HSDG, USDG and the MHSCG.
Mr Mbengo highlighted the allocation in respect of the transfer payments for grants. Of the total allocation, there had been a total of R28.8 billion for grants. Transfers to entities constituted R1.2 billion, and departmental transfers had been R9.9 million. The details of the total allocation to various programmes, including the expenditure for the first quarter of the financial year were highlighted (see slide 36 of the attached document). From the allocation of R30.9 billion, R4.6 billion (15%) had been spent in the first quarter.
The Chairperson asked for clarification on the MHSCG and the transfer to households amounting to R44 million of the allocation, under transfer payments.
Mr Mbengo replied that the MHSCG had been the grant allocated to assist metros to build their capacity to prepare for bigger assignments, or to address their capacity shortcomings.
At the end of the first quarter up to 30 June 2015, the Department had spent 18% of its R690.6 billion allocation for operational expenditure, amounting to R124.2 billion. The total transfer payments had been R30.2 billion, while the actual expenditure had amounted to R4.4 billion. However, transfers to the tune of R4.3 billion had been made only in respect of the HSDG to provinces. No transfers had been made in respect of the other two grants because the grants were transferred to municipalities, and their financial year began only on 1 July. At the end of June, no transfers had been made to metros. At the end of the first quarter, transfers had been made to only two public entities – the social housing regulatory authority and the Housing Development Agency (HAD). These were the only two entities that had claimed their allocations. R3.2 million had been paid for bursary schemes and money had also been paid for the UN Habitat in respect of membership fees. The Department had ended up paying an amount higher than had been originally budgeted for the UN habitat.
The DHS had projected that it would have spent R5.1 billion by the end of the first quarter. The Department, however, had spent R4.5 billion (90%), leaving a variance of R534 million. The bigger portion of the variance had been in respect of transfers to public entities. It had been projected that the public entities would have claimed their allocation before the end of the first quarter. The variance had been from projections made in respect of the social housing regulatory authority, community schemes, ombuds services, the National Housing Finance Corporation, National Urban Reconstruction and Housing Agency and the HAD, where a significant amount had not been claimed. These entities submitted claims for lesser amounts than had been projected by the Department.
The other reasons for the under-expenditure for the first quarter included spending less on investigations within the Department which were still under way; late invoicing by the Department of Public Works (DPW) on the operational budget; delays in the implementation of the national upgrading support programme; and advance payments to the government communication and information system (GCIS).
Mr Chainee said that as at 30 June 2015, the amount available for HSDG transfers to provinces had been R18.2 billion. With regard to the provisions of DORA and ground framework, R4.3 billion had been transferred to provinces in the first quarter. The provinces, however, had spent R3.7 billion, leaving an unspent amount of R624 million. In terms of the provincial expenditure, 24% of the funds had been transferred to Eastern Cape, and it had ended up spending the entire 24%. Free State on the other hand had spent 95% of the first quarter transfer; Gauteng 52%; KZN 91%; Limpopo had overspent by 153%; Mpumalanga had spent 84%; Northern Cape 93%, North West 112%; and Western Cape 85%.
The projected delivery performance in relation to housing units and top structure showed a correlation between the under-expenditure and the delivery. The Eastern Cape had projected 2 829 units but had delivered 2 873. Gauteng’s annual target was 14 901 sites and 25 000 units. Its total delivery had been 14 000 units. However, at the end of the first quarter, it had delivered 268 units and 3 640 top structures. Its delivery performance had been therefore below the projected target. They had managed to attain 2% and 14% of their performance targets for sites and units respectively. The other concerns were in Mpumalanga and the Northern Cape. Of the R4.2 billion that had been transferred to provinces, R1.1 billion had been indicated as money spent for work-in-progress on foundations, roofs, wall plates, and finishes on those sites.
In relation to the FLISP programme that the Department had been monitoring, movement had been noticeable in only three provinces – the Eastern Cape, KZN, and Western Cape.
The Department had been concerned about some of the unit costs highlighted in the rectification programme, and had sought more information from the provinces on these costs. For instance, the delivery performance for Free State had been 29 units, but the cost had been R25 billion; the delivery performance for Eastern Cape had been 577 units, while the cost had been R95 billion.
As part of the ground framework, the Department provided provinces with capital from the available grants so that they could implement capital projects. This had been what the operational capital programme had been about. The Department however monitored and measured the funds in order to ensure that there had been no over-expenditure and also that the money had been spent for what it had been intended. The total allocation for Operational Capital Budget Programme (OPSCAP) in this financial year was R805 million, and the expenditure at the end of the first quarter had been R190 million.
R10.2 billion had been transferred to the municipalities as USDGs. The rollover from the previous financial year had been R585 million. The total amount that had been available to municipalities from 1 July 2014 to 30 June 2015 had been R10.8 billion. The cumulative expenditure of all the eight metros for that period had been R9.9 billion, which meant that the percentage spent had been 91.8%. The percent of under-spent funds for the metros was highlighted. The under-expenditure realised in Ekurhuleni and the City of Cape Town, which had been 26.6% and 9.9% respectively, was a big concern for the Department. This was because they both had had rollovers from the previous financial year. The rollover for Ekurhuleni had been R180 million while that for Cape Town had been R286 million. The substantial portion of the USDG funds were spent on housing, roads and stormwater; while the largest chunk was allocated to water and sanitation.
The financial and non-financial performance of Buffalo City as at 30 June 2014 was highlighted.
The Department indicated the number of poor households receiving water and sanitation. The Department had recommended that 50% of its grant should be allocated to poor households living in informal settlements and backyards, to provide water and sanitation to them, as these issues called for urgent attention. Nelson Mandela Bay was one of the metros that had been performing well in terms of providing water and sanitation throughout the informal settlements.
With regard to the MHSCG, R300 million had been transferred to municipalities as at 30 June 2015. R83.3 million (27.8%) had been spent by municipalities, leaving a variance of R216.6 million that was still unspent.
There had been an increasing pressure on the Department to improve its monitoring, reporting, outcomes and outputs, especially with regard to some of the municipalities. The challenges facing the Department therefore included a lack of technical capacity, the availability of funding, poor commitment to meeting the medium term strategic framework (MTSF) targets, as well as the inheritance of poor programmes, or no programme pipeline.
It had been noted that the Minister had approved a revised structure for the activation of necessary processes for approval, particularly in relation to the human resource constraints at the national Department. The Department had made submissions to the National Treasury to allow for operational and grant funding reallocations that would mitigate certain operational and capital budget under-expenditures. Submissions had also been made on the draft DORA bill and framework to allow the Department to improve expenditure outcomes. The Department took full responsibility for the proper utilisation of the various grants. There was a capacity constraint within the Department, however, which had been indicated. Certain steps had been taken to address this constraint. The Department was ensuring that the MTSF that had been adopted, would be achieved. The Minister had expressed some concerns at the negative performance in terms of delivery for the past couple of years.
The Chairperson sought clarification on the capacity grant since most of the municipalities had not spent the grant that had been transferred to them.
Mr Chainee replied that R37.7 million had been transferred to Nelson Mandela Bay as an MHSCG. It had spent R13.8 million, leaving an amount of R23 million. Money from the grant had been spent on the compensation of employees, the training of staff, professional and technical services, and office equipment. It was important to note that the Department had asked the metros to indicate what they needed the grant for before transferring the funds to them. R52.3 million had been transferred to Ekurhuleni, and it had spent only R1.5 million after four months of the transfer of the grant. In other words, it had only spent 3% of the total amount that had been transferred by the Department. The City of Tshwane, on the other hand, had received a transfer of R47.5 million from the Department. It had spent R35.3 million and had been left with R12 million. This amounted to 74% of the grant that had been spent. Tshwane had spent the bulk of the money on professional and technical services, which had been a good step in addressing the capacity constraints. R52.4 million had been transferred to eThekwini and it had spent R13.8 million. R50.3 million had been transferred to the City of Cape Town and it had spent R18.7 million. The bulk of the money had been spent on the compensation of employees and office equipment.
The Department had been yet to receive reports from the other metros. It had been also noted that this grant had not been transferred to Buffalo City and Mangaung.
An additional R100 million had been realised between the period of 1 July 2014 and 30 June 2015. Metros had been asked to provide reports on their expenditure for the previous transfers and how they would utilise the R100 million if transferred to them in the next batch.
The Chairperson noted that the report of the first quarter had not been encouraging, as most of the metros had barely spent the funds that were allocated to them.
Ms M Manana (ANC) said that some houses had been built in Mpumalanga in 1999. People were told that 37 of those houses were available but in actual fact, they were not. The issue had lingered for too long, and the Department had been asked to address the issue.
Ms C Madlopha (ANC) wanted more clarification on departmental under-expenditure. She also wanted to know how the Department had been able to make projections on programmes that should have been implemented by institutions, but which the institutions had made no request for; what the Department had done to resolve issues of institutions not coming forward to request for funds to implement programmes; an explanation on the late invoicing by the Department of Public Works; the reason for the delays in the implementation of the national upgrading support programme, as well as the people or factors responsible for the delay, and the constituencies in which such delays had been identified; clarity on the projections for the four major programmes of the Department in order to assist the Committee in conducting its oversight functions, to see whether the projections had been met at the end of each quarter; what plan had been put in place by the Department to change the trend of under-expenditure of the grants in the second quarter; if there had been any shift of funds from one province to another due to the failure to spend; if there had been any benchmark required by the Act for provinces to spend a certain amount; an explanation for the over-expenditure for UN Habitat, the source of the extra funds that had been not budgeted for, and if the money spent had been within the benchmark of the Act.
Mr A Shaik Emam (NFP) wanted to know how effective the accreditation process for the metros and municipalities to coordinate the distribution of houses had been; how effective the capacity grant was; if a proper process for the reporting of the financial year of the municipalities that would align with the Department’s financial year had been considered; what the mandate of the national Department in terms of allocating the grants had been and if the Department had a say over the projects and who the municipalities or provinces made allocations to; if the Department could intervene in challenges faced by metros and provinces after transferring the grants to them; the impact of under-spending and over-spending highlighted in the presentation; who had been bearing the cost of the amount allocated for rectification; if efforts had been put in place to identify the contractors that had been involved in shabby jobs that had led to collapsed buildings, and the need for rectification; if the Department had an idea of the increasing demand for housing on an annual basis, in order to understand the seriousness with which housing had to be provided in the country; the efforts that had been in put in place to curb situations where people sold their houses only to return to the informal settlements; how many new informal settlements had emerged, after the eradication of 1 813 informal settlements by the Department; if the upgraded households -- apart from the 377 households provided with electricity by the Department -- were yet to have electricity; if the Department had been meeting its target with respect to capacity; what mortgage finance entailed; and what process had been put in place to facilitate public-private partnerships to roll out houses to people, and make them less dependent on the state.
Mr M Figg (DA) sought clarification on the HSDG funds transferred to the Eastern Cape, which had been R4.9 million for 289 units, while the expenditure under ‘delivery performance’ reflected a higher expenditure of R7.6 million for 155 units. With regard to the rectification programme, R362 million had been allocated to the Eastern Cape, and it had spent R471 million. He wanted to know if there had been any approval or authorisation for the additional expenditure. Clarification was also sought on the non-performance of the municipalities on each project, since there were no outlined targets against which their performance or non-performance could be measured; the 18% operational expenditure by programme as at 30 June 2015, which reflected an under-expenditure; the late invoicing by the DPW, and if there had been a report on work done but which had not been paid for, especially since the issue of advance payments made to the Government Communication and Information System (GCIS) had been also highlighted; whether contractors got paid based on the amount of work completed; and what would happen to the unspent funds allocated to metros to implement programmes.
Ms R Nyalungu (ANC) wanted to know what efforts the Department had been making to address the challenge of the lack of technical and operational capacity for programme and project planning and implementation monitoring; if the Department had been able to achieve its target of completing two municipal assessments out of the six municipalities to be accredited for the first quarter with regard to its human settlements policy, strategy and planning programme; which municipalities had been accredited for housing assignments; if the terms of reference for the consolidation of the institutional capacities for all informal settlement upgrading support programmes targeted to be developed in the first quarter had been achieved; and if the targeted delivery of 28 591 housing units for subsidy housing in the first quarter had been achieved.
Ms S Shope-Sithole (ANC) was worried about the housing issues that had lingered for a while, and were to be addressed by the Department. There was a need to have a thorough discussion with National Treasury about the DHS. The country, through Treasury, usually borrowed money to fund departments, provinces and municipalities based on the plans forwarded to the Treasury, and interest was charged on this borrowed money. It was high time every member of society began to think of the economic situation facing the country. The economy had been not growing sufficiently.
She wanted to know what had been being done with all the unspent money, in comparison with the vast amount of people in need of housing; as well as the efforts put in place to address the challenge raised by the Department about being under-resourced to monitor and evaluate the effective spending of funds. It had been suggested that the total of the unspent funds by provinces should be made known; visits should be made to provinces to identify their reasons for not building houses; CFOs should be trained on budgeting in order avoid instances of projected figures that were unnecessary; Treasury should use the unspent funds to service the national debt; and an organogram of heads of departments, Directors General, CFOs, and programme managers should be developed to assist with explanations on the budget.
Mr N Gcwabaza (ANC) said that the Department should be worried about the decline in its expenditure over the last three or four financial years. Even though there had been a slight increase, the overall expenditure had been still below the 25% mark that the Department should be at. He expressed concern over the rollovers in the provinces. There was a relationship between the rollovers and the lack of capacity to spend, the lack of planning, and lack of skills. Funds had, however, been allocated for the development of skills in the provinces, and in some instances, the funds had not been used. The issue of poor levels of commitment to meeting the MTSF targets at entity, provincial and municipal levels had to be addressed urgently. He wanted to know if there had been any justification for the over-spending in Limpopo and North West; and the extent to which the DHS had engaged the relevant departments in order to strengthen the integrated planning and implementation or approach to the problem related to mining towns.
Mr A McLoughlin (DA) raised a concern about the Department’s efforts to capacitate municipalities through the capacity grant, 18 years after the Housing Act had been passed. Clarification was sought on the 100% expenditure reported under transfer payments; the contradiction between the HSDG allocations made to KZN, the over-expenditure and the 100% expenditure reported therein; the reason for allocating money to Gauteng for rectification and the over-spending, when there were no targets; the reason for the under-spending reported in Mpumalanga for the rectification programme, when there were no targets; the number of offices and staff the DHS had, as well as the actual function of the Department itself, especially with respect to monitoring; the overlap between the DHS and the Department of Water and Sanitation (DWS) in achieving the same thing, and passing the same functions to the municipalities and provinces, which led to a waste of effort in the long run; the number of created jobs (as indicated in the report) that were permanent posts, and how many were Expanded Public Works Programme (EPWP) jobs; the 58 800 jobs that were yet to be created as at 31 March 2015; the effort the Department had been putting in place to monitor the work done by the entities, since they were not requesting funds to implement projects; the delays in the implementation of the national upgrading support programme; how the Department reported advance payments as part of its reasons for under-spending; the absence of targets and units in comparison to the funds allocated for OPSCAP; how many of the targets had been achieved for USDG, considering the expenditure performance; the actual targets with respect to the funds utilised for title deeds; the 97 title deeds that had been issued; and if eThekwini had no offices, since the report showed that funds had not been spent on office equipment. He suggested that the Department should place more emphasis on issuing title deeds to people, as this empowered people in so many ways.
The Chairperson said that a lot of resources from the capacity grant should be kept by the Department, since it needed to be capacitated. Other provinces in need of capacity should be assisted on request, instead of transferring money to provinces and metros which were not spending it. It had been suggested that support should be given to the Minister to phase out the rectification programme, as it amounted to a double subsidy. Once houses were built, contractors should be penalised for shoddy workmanship that showed up in the buildings. Households should also take responsibility for their houses, rather than asking the government to fix every problem that arose at the house.
Mr Chainee responded to the issues raised. Apologies were made with respect to the delay in addressing the prolonged housing issues in Mpumalanga, as money had been allocated for rectification in that province.
In relation to the USDG and HSDG, housing had been a concurrent function between the national and provincial departments. It had been not a municipal function. The implementation functions, however, lay within the provinces. The provinces acted as developers and implementing agents. The national Department provided the policy, legislation, funding, frameworks, and the allocations. The national Department, therefore, had to respect those concurrent responsibilities in terms of the Constitution. Municipalities were, however, accredited after displaying the necessary capability, and DHS assigned responsibilities to them. But in terms of the ground frameworks and the DORA, transfers could be made directly from the national Department to these accredited municipalities.
The USDG grant had been a supplementary grant. It had been a schedule four grant that was directly transferred to the municipalities and formed part of their capital budget. The DHS had to respect the powers and functions of municipalities within that framework. The USDG targets highlighted in the report were targets set by the municipalities.
Two schools of thought existed with respect to the funds. One was that the money be given to the municipalities, and they should be allowed to set their own targets; while the second school of thought, which had raised an issue between the DHS and National Treasury, had been for the DHS to be responsible for determining the targets for the municipalities. Once the DHS discovered that the targets were not reasonable and did not meet the MTSF, it should be given the powers and ability to take action. The Department should no longer be the dumping ground anymore, in terms of accountability and the monitoring of targets. When money was transferred, the Department expected accountability in return. In relation to entities that had not requested money, the DHS had gone ahead to ask them to provide reasons for this. It was avoiding a situation whereby funds were transferred and they ended up not been spent by entities.
The DHS had indicated a lack of technical and operational capacity for programme and implementation monitoring in the Department. It was therefore not only about inspecting projects, but also included interrogation of the planning, project readiness, reasonableness, and whether the project met the priorities. The DHS had alerted provinces on the unacceptability of spending money on rectification because it would amount to a double subsidy, and in fact the funds should be directed towards providing water and sanitation for households. The ground framework for the USDG therefore showed that a minimum of 50% was recommended for informal settlement upgrading.
Each entity was asked to present its annual performance plan (APP) at the beginning of every financial year. A financial plan was drawn out of the submitted APPs. The DHS was now holding the entities accountable for their APPs, because the entities had to meet the mandate of the MTSF. The processes were currently being integrated.
The delays in the National Urban Settlements Programme (NUSP) was linked to some of the contracts that were running behind schedule. This was because there had been a slow response from municipalities to approve the work. Municipalities had been asked if informal settlements were not a priority to them, and if they were not, they should be made a priority.
In a few instances, some service providers had submitted invoices late, but the Department did not make payments without invoices. The only exception was with regard to the GCIS, where advance payment was made in relation to the work that had to be done for the Department. This had been in terms of the consolidated government policy. All other communication and marketing had been done through the processors.
With regard to the decline in expenditure, it was noted that the two programmes that had shown full expenditure were strategy and planning, and the programme in the project management unit. There had been a direct correlation between these programmes and their expenditure in relation to the vacancies available. The DHS currently had 100 vacancies, of which the majority were in two of the key service delivery-focused areas of the Department -- that was strategy, policy and planning, as well as programme and project management. The DHS had made a submission to Treasury in relation to how it could utilise the MHSCG funds that had not been spent, to supplement the capacity of the Department. The DHS, however, took full responsibility for the money that had been spent, although the mitigation boiled down to concurrent responsibilities. Submissions on the measures that had been taken to improve the capacity of the Department would be made available to the Committee. The Minister had approved the revised structure that would allow for regionalisation, which would in turn allow the DHS to appoint regional specific chief directors to focus on the provinces. In essence, regionalisation would assist in improving the programme and project planning, and monitoring at the municipal level.
The transfers within programmes were allowed within the framework of the Department.
Limpopo had a rollover of R308 million from the 2014 financial year. It had requested those funds and had activated the contracts in the new financial year. The over-expenditure noticed in Limpopo and North West had been done in consultation with the provincial treasuries, who took responsibility for that over-expenditure.
The Department was a member of UN Habitat, based on its international obligations. The payments made with respect to UN Habitat had been within the limits. However, the exchange rate had deteriorated from the time the money had been approved.
DHS was committed to the accreditation process. However, the framework had been amended to indicate that the accreditation and assignment would occur on the basis of demonstrable capacity to deliver on the programmes. The Department did not want to accredit or assign, and end up with situations of poor performance and poor outcomes. The DHS had therefore been reassessing and re-evaluating the process, because there had been some loss of capacity over the years.
With regard to the financial impact of the non-alignment of the financial years, it had been suggested that if the national Department approved its budget at the end of March, it would give municipalities the ability to plan for three years, so that when their budgets were approved at the end of the year, they would not have any excuse or reason for not performing. In reality however, there had been no proper programme and project planning, and the national Department had had cause to intervene in some of the issues that it never envisaged would occur in relation to programme planning, project planning, implementation and the poor outcomes.
There had been a report on the interventions made by the DHS in eThekwini, particularly in relation to the alignment within the province and the municipality. There had been some Inter-Governmental Relations (IGR) issues identified there, part of which had been that a substantial amount of money had been allocated to the eThekwini municipality that was yet to be transferred.
As part of the revised structure of DHS, the Minister had issued a directive to phase out the rectification porgramme. Provinces now had to justify through compelling reasons, why there should be rectification. In each instance where there had been expenditure for rectification, it would be subject to a deviation approval by the Minister. The NSPHRC had been there to oversee workmanship, structure and integrity, and had been undertaking the blacklisting process.
In terms of the FLISP annual target, it had been noted that in previous financial year, there had been poor levels of commitment to meeting the MTSF targets. If the MTSF had been a government-sanctioned strategy framework, with targets to be met, the responsibility would lie with the Department to meet those targets. FLISP had been part of that target. Provinces were not meeting these targets, and were being held accountable through the interrogation of their APPs; quarterly reviews; monitoring and oversight from the DHS’s monitoring and evaluation unit; inspections; a CFO forum that interrogated expenditure; as well as the mandatory record of all units spent by provinces and municipalities, the purpose for which they were spent, and the outcomes at different phases with regard to the housing subsidy system (HSS). The reports presented to the Committee had been the steps taken by the Department. The DHS had, however, indicated its inability to undertake some of the monitoring and also to take proactive steps.
With regard to the work done, the PFMA did not allow the Department to pay on a cash basis prior to the work signed off for on the invoices. The DHS occupied four buildings in Pretoria that were leased by DPW, which provided all the maintenance services to the Department.
Contractors were paid at approved milestones. There were five different milestones in the housing code, which were based on value for money. There had to be approved general plans, township establishments, and service completion certificates.
With regard to the overall target, it had been suggested that the DHS should transfer money to the provinces and municipalities, who would then determine what the targets should be. The DHS, however, believed that the targets should be jointly agreed upon. The Department had therefore made submissions on the draft DORA bill and framework that would help in improving the expenditure outcomes. This meant improved accountability of municipalities and provinces to the Department. The DORA provided that indiscretions should be resolved through monthly transfers. The transfer process sometimes might be problematic.
The DHS had submitted a revised structure, as well as applications to the National Treasury on the improvement of its technical capacity. The DHS had not asked for money, but had reallocated and reprioritised its funds so that the revised structure would be within its existing envelope. The DHS had an acting DG, and three DDG posts that were vacant.
The rollovers indicated a lack of capacity. There had been a strong correlation between rollovers, lack of capacity, and poor outcomes or outputs. The DHS however felt that the ground framework for the HSDG and USDG allowed provinces to tap into the grants to provide capacity. There was 5%, amounting to R1.5 billion within those grants, which could be spent on capacity.
The organogram in relation to the provinces could be made available to the Committee.
The overspent amount by KZN for the last financial year had been R3.2 million, and the amount had been approved by its provincial treasury.
With regard to the overlap between the DWS and DHS, it had been noted that each sphere had a specific response and that there had been no duplication at this stage. The DWS had been responsible for overall bulk and regional bulk, while the municipalities were responsible for regional and internal services funded by the DHS. There had been no overlap with the USDG in this regard.
The municipalities had had to utilise the EPWP based on the directives from Cooperative Governance and Traditional Affairs (COGTA), National Treasury and other departments.
There were no targets for OPSCAP. This was because, based on the business plans requested from provinces on an annual basis, the allocation of R18 billion had to be utilised on OPSCAP, or it had to be ensured that the technical capacity would be employed that would meet the targets.
A target had been set for the eradication of the title deeds backlog in the MTSF, which had been approximately 970 000 title deeds. The entire budget of the DHS for the next period of five years spoke to achieving these MTSF targets. Each province and municipality therefore had a target in this respect. The R30 billion referred to had been targeted for the current financial year.
The targets for energy had been linked to the integrated national electricity programme (INEP) grants. Part of the house connections had been dependent on how much the municipalities received from the Department of Energy in order to connect houses.
With regard to the efforts put in place to facilitate mortgage finance, the Minister had announced a programme of catalytic projects and the DHS was in the process of finalizing them. 77 projects had already been identified that would be able to deliver housing opportunities worth R1.2 billion over the next five to ten years. This had been a partnership with the private sector. 44 of these projects were private-sector led projects.
Mr Mbengo said that the issue raised on title deeds had been very critical, since it would positively impact on many people. The DHS had therefore been working on determining the level of the backlogs on title deeds. It had been estimated that in order to completely address the backlog, the DHS would need about R1.5 billion. The Department had approached Treasury, and this had formed part of its MTSF submission.
Payments were made to the GCIS to assist DHS in marketing and communication. The GCIS usually gave an estimate on the work to be done, and advance payment would be made. However, this advance payment could not be charged against the grant until the work had been done.
The DHS operated on a cash basis of accounting. The report presented to the Committee had been based strictly on this basis.
On the issue of whether the percentage of expenditure for the first quarter should be 25%, it was noted that the expenditures were based on cash flow projections over the financial year. The percentage had therefore been based on the projections made.
Mr Chainee said that there had been a ring-fenced amount for the 22 mining towns in the DORA framework. An inter-ministerial committee (IMC) had been set up by the President, and had been coordinated by the DHS’s performance monitoring and evaluation system. Substantial progress had been made in this regard.
Mr Shaik asked why the 2014 DORA directive that had identified and agreed that six metros would take over the responsibilities for the houses as a result of all the service delivery protests that had taken place at local level, and that the capacity must be provided by the national Department, had yet to be implemented. He also wanted to know the ratio of the demand for housing to the supply of housing and the measures put in place to ensure a balance in that regard; and if the reconstruction and development programme (RDP) houses were being retained by the people they were allocated to, or if those people were selling the houses and going back to the informal settlements, as well as the duplication with regards to the allocation of houses for same partners living together.
Mr Figg said that the title deeds backlog had to be addressed urgently. The current figures on the backlog were problematic, however. It had also been discovered that an amount had been requested from Treasury. He wanted to know if the amount would be sufficient to solve the backlog and capacity problems. The target on the upgrading of informal settlements had also been problematic. There had been a shortfall in this regard. Clarification was sought on how the targets would be achieved.
Mr Gcwabaza highlighted the area of good practice of the DHS, which had been the conversion of hostels into family units. It also included the building of new structures. This should be prioritised in the budget on this project.
Mr Chainee said that the backlog of the title deeds for post and pre-1994 had been 970 000. The DHS was now managing the eradication of this backlog at the national level. There was a programme at the steering committee which involved the provincial departments. The DHS had been working together with the Department of Rural Development, provinces, and municipalities to address this backlog. Based on the initiatives taken by the DHS, the backlog had dropped to 773 000. The DHS had asked National Treasury to ring-fence an amount of money equivalent to the eradication of the backlog over the next three and a half years within the existing envelope, and not an additional allocation.
The 750 000 informal settlements referred to 750 000 households in 2 200 settlements. The DHS was not happy about the progress in meeting the targets for the informal settlements. The figures of DHS’s business plans had, however, improved in the current financial year in this regard.
Ms Lucy Masilo, Chief Director, DHS, said that during the 2013/14 financial year, DORA indicated that there may be assignments of the housing functions to the metros. A new administration had come in during the 2014/15 financial year, and it had placed the assignment on hold, but not the accreditation. There were six metros that had been accredited on level two, but there were some that were yet to be accredited. It had been only the assignment that had been placed on hold, because a revised approach that would involve all the members of the executive council (MEC) had been necessary. A revised assessment and evaluation tool for the municipalities had been required. The capacity grant had already been voted when the decision to put the assignment on hold had been made.
Mr Mbengo said that research had indicated that beneficiaries indeed sold their houses. As a result, not all the people occupying those houses were the original beneficiaries. However, there had been a system in terms of the Housing Act, called the Housing Subsidy System, that recorded all beneficiaries. It was therefore not possible to reapply for housing, since every application had to go through that system. There was however a need for more effort to be placed on consumer education for beneficiaries in order for them to understand the value of the title deeds, what they can use the title deeds for, and the value of the housing subsidy they got.
Mr Chainee reiterated in his closing remarks the key issues around the need for capacitation at the provincial and municipal levels, as well as the fact that the DHS had taken proactive steps in trying to resolve this issue. The solution was not to downgrade the funding, but to look at ways in which capacity could be improved through the various grants. There was a substantial amount of capacity that could be employed by the Department in order to improve its monitoring and evaluation. It was not asking for any additional money to improve its capacity. It was only working towards ensuring value for money.
The Chairperson suggested that the all the money that remained unused by metros should be taken back for the Department to use in improving its capacity.
Ms Shope-Sithole suggested that Limpopo and Mpumalanga should be brought before the Committee to explain the reasons why they were not building houses.
The minutes of three previous meetings were considered and adopted by Members.
The meeting was adjourned.