NHBRC, SHRA, HDA, NHFC, RHLF, EAAB, NURCHA, and CSOS on their 2014/15 Annual Reports

Meeting report

National Home Builders Registration Council (NHBRC) on its 2014/2015 annual report

Mr Mongezi Mnyani, Chief Executive Officer: NHBRC, took the committee through the presentation which dealt with the NHBRC mandate, its vision and mission, products and services, housing consumer and regulation processes, governance, key focuses, targets, performance and challenges. He said the Council hoped to publish a home building index and manual.

Products and services were listed. Of note was the estimate of 15 000 active home builders which had gone through training and development, which they hoped transfers to good quality work on the ground. The training included youths, women, veterans and people with disabilities.

The NHBRC had a regulation process which links the entity with home builders and housing consumers in a triangular scheme. Among other things in the consumer protection process, they dealt with complaints and pointed out that the turnaround time for resolutions had been reduced from 180 days to 90 days.

In terms of NHRC alignment goals, the entity aimed to become the regulator of choice by restructuring business services and building technical capacity. Engineers had been placed at municipalities and other outlets to close the gap in completed assessments. Additionally, operations would be standardised and consumer rights promoted.

Although most targets had been met, the target for the renewal of registration of home builders had fallen marginally short by 0.04%. This was as a result of home builders renewing their registration only if there were building prospects available to them. The target for the number of inspections done -- 223 176 – had been exceeded. However, the number did not reflect the number of houses inspected but rather the number on incidents of inspection, as one home could be inspected up to four times in different aspects, such as the foundation or sub structure. They target of youth training had been missed by 41%.

Disciplinary Committee hearings had seen 233 home builders being suspended for not conforming to norms and standards. A total of R11 million had been used for claims, which the NHBCR said was low given the amount of money spent on inspections.

The income statement had shown a significant improvement in the annual surplus, and liabilities had been contained to R90 million through good management. The entity was 267% funded to cover liabilities, making the NHBRC strong and sustainable. However, the performance information audit had been a concern.

Discussion

Mr N Capa (ANC) said that quantifying the inspection model would be helpful. Clarification was sought regarding the non-compliance issue, as the presentation had not offered a cost-based costing analysis, making the reasons that had been provided liable to being subjective.

Mr K Sithole (IFP) requested more detail about inspections. How many houses in total had the NHBRC inspected? The entity had 200 inspectors, but most houses were not being inspected, particularly in Gauteng. He asked how many youths, people with disabilities and women had been trained. On irregular expenditure, he sought clarification on what system was in place to address this problem.

Mr H Mmemezi (ANC) said his matters of interest had already been raised. Generally, the report was encouraging, especially regarding the youth training. The presentation was detailed and well done.

Mr S Gana (DA) sough clarity on what was being done about the irregular expenditure of the NHBRC’s CEO, who had awarded a contract beyond his delegated ability. How was it being handled? Were there any consequences? Matters had been handled differently when there was a previous R12 million of irregular expenditure, and employees had been dismissed. On the topic of inspections, Mr Gana calculated that they had inspected about 50 000 houses, given the four stages of inspections. This was not reflected in the presentation, and the target had then not been met.

Ms L Mnganga-Gcabashe (ANC) asked why engineers were registering and enrolling subsidies, as this was an administrative function. Regarding expenses, a reduction of R52 million between 2013 and 2015 was not enough, and something must be done about it. Could the NHBRC unpack the expenses of R627 million?

The Chairperson said she not happy with the youth training, as the target had not been met. There were unemployed youths everywhere, and not reaching the target of 2 000 was unacceptable. On the topic of debt, the Department had had to deal with high rectification programmes as a consequence of the NHBRC not doing acceptable work. How had this come about? The audit outcome had been unqualified and opinion-based for three years in a row, and that was not convincing that much was being done to rectify the situation. Details were sought about percentages of training for women, veterans and people with disabilities, which had not been included in the presentation.

Mr Mnyani replied to questions about inspections and the model. The NHBRC had started training officially in March 2015. The numbers showed a decline in the remedials done and this would be taken to the audit team for a further breakdown. There was a relationship between remedials and inspectors which helped explain this decline. Emphasis had been made on the change to an in-course model which ensured quality and control of inspectors. The improvement had not been convincing over the 2014/2015 financial year, but there was hope for improvement.

There had been a movement away from ratio targets and a new focus on NHBRC inspections of construction. This was advice taken from the Department. The ratio could be complete only upon the completion of the house. In future, the presentations would have more specific figures for inspection stages by means of numbers of each stage, by province. In future, the Council would be able to indicate the number of houses it had inspected, by subsidy and non-subsidy. This would show a direct correlation between ratios, numbers and stages.

In terms of renewals and enrolments, the NHBRC was measuring turnaround times. The Department had discouraged measuring the turnaround, and rather focusing on the numbers. The NHBCR wanted to give the best service, so turnaround appeared at a level 2 scorecard.

Regarding the question on technical engineers, Mr Mnyani said that engineers had different skill sets and geotechnical engineers were doing assessments, not administration. It was a very specialised field, and they were wearing boots and gloves on the ground.

Responding to the concern over expenses, he said that the number of inspectors had increased and this was an increased cost. As revenue increased, so would costs.

The NHBRC aimed to eliminate irregular expenditure altogether. Policies, processes, control and human capital practices had been checked and reviewed, and it was now in the implementation phase.

The NBHCR aimed to correct performance information indicators. A holistic approach was being used and had put the entity in a better place than in previous years.

On transformation, the previous focus had been on women’s empowerment and youth, with a target to train 100 women, which had been achieved. Recruitment for a new programme was currently under way. Through the transformation committee, it had become clear that it was not only about training but also about areas such as an incubation programme. The focus for military veterans had been on integration, rather than training. People with disabilities had been an internal process. Between October 2015 and March 2016, there would be huge improvements.

The Chairperson said that a more in-depth meeting was needed, so the NHBRC must plan to come back.

Social Housing Regulatory Authority (SHRA) on its 2014/2015 annual report

The team from SHRA introduced themselves. They were Ms Sindisiwe Ngxongo, Acting Chief Executive Officer; Mr Vusi Fakudze, Acting Service Manager; and Mr Manye Moroka, Council member.

SHRA said that the Council had been comprised of 12 members, but now had 11 members following the resignation of the chairperson owing to an overload of work commitments. Another issue to be placed on record was that SHRA had had a strategic council meeting on 11 and 12 October 2015 to consider irregular expenditure issues which had not been dealt with. SHRA asked Members not to be too harsh, as the problem was being worked on.

The presentation went through expenditure framework, targets and achievements, strategic framework, performance, the audit, financials and challenges.

The SHRA programme had four main parts to the mandate, which were administration, investment management, institutional investment and regulatory action.

There had been only one performance indicator for this financial year due to budget constraints -- social housing units. 5 389 units had been approved, against the targeted 5 668. The approved units were being unpacked to translate to delivery on the ground.

The external audit showed irregular expenditure, but had made it clear that this was not related to supply chain issues. The irregular expenditure was a result of projects which had been approved in an improper manner. The recall grants fund had done a risk mitigation exercise, whereby previous dismissals had been recalled. The funds were not in the hands of SHRA.

Revenue had decreased slightly, from R6.5 million to R6.3 million.

Challenge highlights for the year included the construction of a credible pipeline. The challenges were related directly to the credibility of targets. Since the funding model was a tripartite model, all members needed to be involved to ensure targets were met. Social housing would expect the banking sector to play a role. The initiative was led by the Department, but SHRA was heavily involved.

In the SHRA financial statement, the theme had been transition, with the aim of a better entity to improve on delivery in order to accommodate the target market.

Discussion

The Chairperson asked the entity to confirm that they had not met their target.

Ms Ngxongo confirmed that the target had not been met.

Mr M Shelembe (NFP) asked about irregular expenditure which was present every year. Was there no supply chain management cycle that was followed? This indicated that the people in charge were doing wrong, and were aware of it. How long had there not been a Corporate Services Manager? Had he given a month’s notice before resigning, because two months was enough time to start advertising for a new person and give someone the job?

Ms Mnganga-Gcabashe asked what the plan was to come out of transition. SHRA needed to review its targets and budget, because if it could not spend its entire budget then there was no need to increase it. There needed to be a plan to get this right.

Mr Gana seconded the issue raised about the capital budget. What impact was the low spending going to have? There had been mention of issues around approval, but only 5% had not been approved. The missing link was the actual units -- were 5 000 projects still in the pipeline? He said that at the last meeting he had raised the issue of the income ban, and asked what impact it was having on SHRA’s ability to operate. Lastly, Ernst & Young had raised issues about the market -- what was the feeling of the SHRA council in the long run? Would the market respond accordingly, and would slow investment continue?

Mr Mmemezi says that his concerns had been captured by other Members. In larger cities, there was reliance by the community on institutions to make a difference, so when would there be better results for the people?

The Chairperson said that in other words, SHRA needed to move out of transition.

Mr Moroka said the council had made a resolution to link budgets to products. Council members had been tasked to become involved in areas which they knew well. The tripartite agreement would be actualised. Decisions made by the invalid council had been looked into and regularised. In doing so, space had been made for investments. The capacity of SHRA was not in tandem with the budget set aside by the Department. When SHRA came back in six months, the report would be more complete.

Ms Ngxongo responded to remarks and questions about SHRA’s plans. The plan was to link all the approvals of the previous years. There had been consolidation on how many units were required in each province and the timeframe, given budget constraints. The meeting earlier this month had been to start this process. Approvals and delivery would be translated into performance on the ground. SHRA had been working with the Department to make amendments but in terms of time frames, there would be a concrete plan with the Department by the end of this financial year.

On the issue of transition, SHRA agreed that the transition period had run out and there would be a different picture in the next financial year.

Mr Fakudze spoke on irregular expenditure and said that SHRA shared the Committee Members’ sentiments. The irregular expenditure had been incurred through non-compliance with regulations. The nature of this was that projects had been approved by a council smaller than seven -- a non-compliant council -- thus making it irregular. SHRA had not incurred irregular expenditure from the supply chain.

The post of Corporate Services Manager had been vacant since April 2014. This was being dealt with by the council.

The Chairperson said that the irregular expenditure needed to be explained further in writing. SHRA reported to the Department, and the Committee needed a response from the Department.

Housing Development Agency (HDA) on its 2014/2015 annual report

Ms Rooksana Moola, Acting Chief Executive Officer, said that a permanent CEO was officially starting on 15 October 2015.

The HDA had achieved 22 of its 24 targets for the 2014/2015 financial year. Municipal profiles included the prioritised mining towns.

Programme 1, Administration, had received a clean, unqualified audit. The major focus area had been to implement a process to report of irregular expenditure. The HDA now published the names of all suppliers on the website. The strategic plan would be changed, despite the initial belief that it was fine.

The Agency had received R101 million in grants from the Department. The main expenditure had been R12 million for land and land related costs. The highest expense was employee costs. The deficit of R6 million was a result of being unable to recover funds from Eastern Cape municipalities.

The HDA project regulations had yielded positive feedback from the provinces in which it operates. The only challenge was for it to become a public developer for government. There were gaps, however; and work was proceeding to be 100% ready.

Discussion

Mr Mmemezi said he wanted to check if the HDA was ensuring that no government land moved into the hands of the private sector, as that would make integrating communities very difficult. The government must acquire more land from the private sector.

Mr Sithole asked about how far the Joe Slovo initiative had progressed. In the Eastern Cape, most land belonged to Public Works, so what was the HDA doing to assist in the Eastern Cape? He asked why there were offices in only six provinces.

Mr Capa sought clarity on the relationship and interaction with municipalities in the project of land acquisitions. Was there resistance or cooperation? What was being done about land grabbing?

Mr Gana said acquiring land was a process which took a long time -- what was being done during that time? The HDA had taken on a lot of responsibilities, such as housing for miners, but these responsibilities must be secondary to the core mandate of HDA. This had not been the case in the last 12 months.

The Chairperson said the master spatial plan had been fast tracked, but it was unclear as to where it was, and a further explanation was required. At the last meeting, an issue between the HDA and the government over land acquisition had been raised -- has this been normalised? The HDA was everywhere and was slowly becoming its own department, so it needed to come back and provide a progress update. There were problem areas which had to be unpacked.

Ms Moola responded on the fast-tracking of the master spatial plan. The HDA had presented it to the Department which now needed to implement it, as the Agency had done its part.

The HDA was everywhere, which was concerning. The entity was stretched, but was receiving help and had a plan. There was a need to become more proactive, as it had a lot going on at the moment.

Ms Odette Crofton, General Manager: HDA said that ad hoc requests were being closed down, as protocol would now be followed. The Eastern Cape had indicated that they would be working with the Agency. The Western Cape did its own land acquisitions. The HDA had signed with Gauteng. The HDA procedure ensured the land was valued twice or three times to ensure effective housing could be built on it. The valuations process ensured there was value for money, which had a paper trail.

The relationship with municipalities and the Department of Public Works was getting better. There had been pressure to release strategic land, but nobody had signed as yet. If this went through, it would help with informal settlement upgrading and the housing of miners.

Regarding the Joe Slovo rectifications, the City of Cape Town had taken over the rectification of rental properties in the M2 Gateway Project, so funding would have to be addressed by the City of Cape Town.

In response to the concern of the HDA having only six offices, Ms Crofton clarified that the remaining three offices would be opened before the end of this financial year.

On land invasions, she said that once the land was given to the HDA to hold, the HDA worked with the municipality to prevent invasions through regular inspections. Sometimes the land was leased out to prevent an invasion.

National Housing Finance Corporation (NHFC) on its 2013/2014 annual report

Mr Samson Moraba, Chief Executive Officer, NHFC went through the presentation, which included the business model, corporate governance, business performance and financial performance. The NHFC was a development finance institution which was completely state-owned. Delivery was carried out through partnerships with the private sector through strategic partnerships. Generally, the private sector would let the government take the first risk in a market before entering.

Everything done by the NHRC on the supply side was dependent on how many home loans banks were giving. The job of the NHRC became difficult when banks were not giving loans.

In terms of outcome impact, the NHRC contributed 37% of financing to the medium-term strategic framework. The target for the value of approvals had not been met. This had come as a consequence of a weak SHRA pipeline, which had delayed the accreditation of applicants.

The NHFC was at an advanced stage of consolidation. It was self-sustaining in terms of funding, and was now retaining a surplus. The hope was it would not have to pay tax, like other development finance institutions.

Discussion

Mr Sithole sought detail on inner city development, particularly the number of projects funded by the entity. What was the NHFC doing to assist with the negligible impact caused by the opening of the SHRA?

Mr Gana said that it was good to hear that the entity was not asking for money this year, and recognised that the money they received from SHRA had been helpful for the entity. These were positive developments. He sought clarity on the link with SHRA, specifically how its performance affected the NHFC. Lastly, he noted that the NHFC would be a new development finance institution, and asked if all similar entities would come together to work towards a consolidation.

The Chairperson said that the investment branch of SHRA was to be consolidated under investments. SHRA must not become a scapegoat for NHFC under-performance. The NHFC was meant to be more flexible that a corporate bank -- how did it assist the people who were being rejected by the corporate banks?

Mr Moroba responded to the questions related to the SHRA. SHRA had indicated that they were the regulator in the social housing sector, so cooperation was in place. The NHFC would take over the investment function of SHRA, which would provide an improvement in the capacity and mechanisms. Additionally, it removed the burden from SHRA so they could focus on social housing delivery. This entity was dependent, and consequently the success of SHRA did have an impact on the NHFC’s performance. The NHFC could make more revenue in this sector if SHRA was focused and saw results. Social housing was an area where people needed assistance, and the NHFC was working on it to provide more.

Inner city development was the more profitable side of the NHFC. The focus had been on Gauteng, KwaZulu-Natal and the Eastern Cape, and there had been a large impact. People wanted to be close to their place of work, so the need was still great. The NHFC had started to look at Bloemfontein, Mpumalanga and Limpopo. The NHRC would come back to the Committee on the number of projects, but as an indication, a major role had been played in negotiations to reach development terms. A programme with the Gauteng Partnership Fund was under way, focusing on previously disadvantaged entrepreneurs.

Consolidation was being done in phases. The NHFC was currently in the phase of a fast tracking process. From 1 April 2016, the entities would be one, but legal constraints may take two years. It was a group effort, with excellent collaboration.

The NHFC had piloted an innovative product with Old Mutual. Repayments based on income would be done through the employer, so that increases could be tracked. This worked better than paying a fixed amount, as it accommodated the individual.

Over-indebtedness was an issue. The demise of the African Bank had dampened the market, so the NHFC was currently looking at alternative options. It acknowledged that it was the bank that approved a loan according to a criterion.

Rural Housing Loan Fund (RHLF) on its 2014/2015 annual report

Mr Jabulani Fakazi, Chief Executive Officer, presented on the RHLF mandate, business environment, stakeholder’s perspective, finance and governance. The single output focused on ensuring incremental loans for low-income rural households.

Most targets had been exceeded, and those not achieved were due to adverse market conditions.

As a government-owned entity, the RHLF had to take government policy into account, particularly the National Development Plan. In order to continue the goal of transforming the micro finance industry, willing entrepreneurs were being sought.

The credit industry had faced challenges, such as the collapse of the African Bank. Consequently, the loan criteria had become tighter, making it harder for borrowers to get a loan. The rejection rate for a loan could be up to 90%. The demand for the product offered by the RHLF was huge, but most people could not afford loans because of market conditions.

Mr Bruce Gordon, Chief Financial Officer, went through the four main areas of strategic planning. He said there had been under-achievement on stakeholder loans, but the correct usage of loans had been exceeded. The current value of loans in place was R386 million, compared to the target of R430 million. There had been difficulty with community-based intermediaries, as people could not afford a loan from the RHLF.

Expenses were below budget. South African Revenue Service (SARS) had provided RHLF with a tax exemption of R30 million. The budget for training had been increased. The audit was clean.

In terms of risks, there was a lack of ongoing funding, and only 1% of the rural market had been reached. Debt levels of retail borrowers were the result of over-enthusiastic lending. There was an inability to earn an adequate return on equity – the RHLF should aim to exceed the interest rate, and this may become a problem.

Mr Gordon spoke on a key project of individual warehousing. The project involved subsidy funds so that people could build a house themselves when provided with the building materials.

Discussion

Mr Sithole asked how many black home lenders had been supported. Since the RHLF had no office that people could go to, what was the marketing strategy?

Ms Mnganga-Gcabashe asked how far the entity had come with its market strategy from the previous Committee meeting.

Mr Gana asked about an issue regarding loans to pensioners. When borrowing from the bank, an insurance fee was paid, while Shoprite had sold insurance to pensioners. Could one check whether morally and ethically, these operations were good? The answer did not have to be provided now. Secondly, when the NHFC had presented, the matter had not been raised, but now he sought a proper briefing on consolidation. Villages were so far apart from each other that mega projects would not work. The biggest losers would always be from the rural areas. A proper report was requested.

Mr Capa expressed concerns over the RHLF’s marketing strategy. From the perspective of a person from a rural area, they do not want to be in debt, even though they needed the loan. Thus there should be a convincing factor which told them they were not being put at risk.

The Chairperson asked for clarity on the training done by the RHLF.

Mr Fakazi responded to the concern about people from rural areas not wanting to be in debt. This could be true, but they also wanted to improve their housing conditions, so they did take loans. If they did not like to be in debt, then they repaid the loan when they could. Many people did not have an option, and the government subsidy programme may help with any apprehension about taking loans.

A consolidated entity would enable the RHLF to do more, as more funds would be available. He did not want to leave the Committee in any doubt, and the RHFC would provide more information at the request of the Committee.

Mr Gordon responded to the issue of insurance. 75% of clients paid 21% interest and did not pay for insurance. Other clients did charge for insurance. The RHLF checked the insurance rates and turned down potential borrowers due to previous insurance practices. There were insurance issues out there which would be looked into.

Mr Fakazi said that the RHFL could do more but intermediaries first needed to be identified so that delivery could be furthered in those areas.

The market strategy remained an issue. Being a wholesale funder, the RHLF did not have provincial offices. It was important to share more with people in the target market. The RHLF needed to look at all its strategies in order to have effective delivery.

After approving intermediaries, they were provided with what was needed. The RHLF builds them to be financially sustainable and they eventually become partners with this entity. Going forward, the intermediaries needed to take the offer of the low interest rate product and pass it on in order to become sustainable.

The Chairperson said that the Department needed to brief the Committee on development finance institutions.

Estate Agency Affairs Board (EAAB) on its 2014/2015 annual report

Mr Bryan Chaplog, Chief Executive Officer: EAAB, presented on the mandate, strategic overview, operational overview, corporate governance, performance, financials and the audit report. The EAAB mandate included regulating estate agents and promoting regard for the public good.

In 2013, a low number of estate agencies had submitted audit reports, but after being informed that they could not renew their licences without doing so, 90% of them had submitted reports.

There was a R600 million fund used to protect consumers and assist with recovering stolen money. The number of claims had been going down, which showed that estate agents were toeing the line. Some claims were not approved, based on incorrect merits. Another key focus area of consumer protection was inspections.

On performance indicators, emphasis was made that some areas were out of the control of the EAAB. For example, the number of claims received could not be controlled, but how many were dealt with could be controlled. Licensing targets had been based on the number of estate agents who were expected to come for renewals, but not all had come forward. There had been over-achievement in terms of growth. Education and training targets had not been met, as there had been uncertainty about how many people would register. The EAAB aimed to improve on its performance indicators.

Mr Chaplog conveyed the message that a house was an asset, and should be sold only at the right market value with the aim of purchasing a better house.

Interns had been developing over the years with the aim of them becoming business owners. The EAAB was funding programmes which provided bursaries for matriculants and graduates. There had been many success stories which showed that the programme was effective.

The audit had been unqualified. It had uncovered estate agents who were misappropriating trust funds. The EAAB took legal action against them.

Concerning financial health, the EAAB was self-funded and able to operate in the short term, thanks to sufficient reserves. The EAAB was mindful that more needed to be done to grow the market of estate agents. The regulations had become more complex. Millions of housing consumers were not aware of their rights when dealing with estate agents. In the long run, this required a review of the EAAB’s funding. Currently, there was a flat funding model which did not encourage entrepreneurship, and this needed to be changed. The EAAB had made a loss of R2.6 million.

The fidelity fund existed primarily to assist with consumer losses. The annual number of claims had decreased, so the fund was still adequate to deal with all the claims. The EAAB was looking at investment opportunities to increase the fund in the long term.

The EAAB was currently going through a legislative review and expected the bill to be in the Minister’s office by the end of this month. The bill was long overdue and would cater for transformation.

Concerning deed titles, there needed to be an update. The EAAB had previously been unsure about the number of outstanding title deeds. Progress had been made through a system which matched ID numbers to title deeds. A committee had been created to operate with the Registrar to help deal with the backlog.

Discussion

Ms Mnganga-Gcabashe asked if the target for outstanding deeds had been met. Regarding compliance, supply invoices had not been settled within 30 days, and the economy was affected if people were unemployed because their businesses had been destroyed. This needed to be rectified.

Mr Sithole wanted to know who conducted internal investigations. Regarding transformation, what system or mechanism would it apply in the EAAB? The entity was large, with sufficient funds, yet there were 24 vacancies. How did the EAAB intend to fill these?

Mr Mmemezi said the entity should be encouraged to move forward in the difficult environment. He expressed positivity over the training programme and suggested that young people be trained by more experienced workers. The numbers going through the training programme must increase.

The Chairperson asked the Department to confirm that the bill would be complete by the deadline of February 2016. The Minister had given the EAAB two things to do -- title deeds management and the one learner, one programme initiative. The report on title deeds needed to be better, as it did not say much in terms of progress.

Mr Chaplog responded to issues of invoices. The EAAB was aware that this was a government priority which would empower new businesses. Many invoices it received could not be paid, as they were not compliant with the requirements of the auditor. They could not be paid until they conformed to EAAB contracts.

The EAAB approached the courts to permit it to have control of the trust accounts for investigation purposes. In some cases, estate agents had misappropriated more than the assets they owned, making the money irrecoverable. This increased debt. R8.8 million was the amount misappropriated by estate agents.

The EAAB had a 20% vacancy rate, but it had created and filled 28 new positions. The aim was to fill all positions in time.

Mr Chaplog said the entity was focused on transformation. Training had been a key focus area and had met with a positive response from the market. The programme would continue and contribute to transforming this sector.

Regarding the title deeds, the EAAB would come back to the Committee and provide a more holistic response.

National Urban Reconstruction Housing Agency (NURCHA) on its 2014/2015 annual report

Ms Mafu stepped down as the Chairperson, and Ms Mnganga-Gcabashe took over temporarily as Acting Chairperson. She asked NURCHA to focus on performance and the financials.

Mr Viwe Aqwetha, Managing Director: NURCHA, went through the presentation which included the mandate, impact, programmes, performance and financials. A key focus had been on the company’s recovery after it had been running with various faults. NURCHA had been on course regarding the development mandate.

It had achieved a net surplus of R10.5 million, which was an improvement on the previous financial year. Other highlights included a net reduction in losses of R2.4 million and intensification of organisational change.

Total assets were valued at R614 million. R216 million had been set aside for project investments, and R65 million had been used. The target for affordable housing built and serviced had been missed -- the budget had allowed for 1 950 houses, and 1 606 had been achieved.

NURCHA believed that everything was under control and that there was no cause to worry. In this time of change, the focus has been on the implementation of strategy.

The presentation ended with images of NURCHA projects.

Discussion

Mr Gana said it was good to see entities making a surplus, and not asking for money. One mechanism which was important when considering debtors was the one in place to recover the money. The money was coming from the state, so the entity was in control of the payment. There appeared to be a system failure or deliberate action not to collect from particular contractors. The presentation had not referred to the money given to contractors in the subsidy space. How much of this money had been recovered in full?

The Chairperson asked if there was a recovery plan in place for bridging loans for contractors, which was needed to deal with defaulters. Was there a cash flow problem, or were there delays in the invoicing process? NURCHA’s investments were short of target, as only 30% of its investment budget had been used and there needed to be an explanation. The auditor’s finding of NURCHA not getting three quotes for services needed to have consequences.

Mr Aqwetha spoke about the recovery plan, and said that the results had been good over the last three years. Contractors had gone into liquidation before they entered into a contract, and there needed to be collaboration in managing risks for contractors.

Concerning investments, there were times when projects were still developing, and when they matured they would require funds. A number of projects were still in the draft stage, and NURCHA expected to have its lending capacity exhausted by the end of the financial year.

In the last month before a contract expired, contractors failed to provide the services they were meant to continue supplying. NURCHA had to decide either to abandon the project or to appoint a new contractor. If the latter was the case, then the board had to condone the transaction.

Community Schemes Ombud Services (CSOS) on its 2014/2015 annual report

Mr Themba Mthethwa, Chief Executive Officer: CSOS, said that the period under review was from the 1 October 2014 to 31 March 2015.

The CSOS had been constrained by legal processes and lack of financial resources. He asked the Committee for funding. It aimed to be self-funded in the near future. There was no reliable database as yet, but it was a priority and challenge. There needed to be investment in good IT systems.

The internal audit had revealed no serious problems, but showed that there was room for improvement. The Audit Manager had been appointed on 1 April 2015.

There had been four targets and two have been achieved. The overall achievement had been 55%.

Ms Mafu resumed as Chairperson.

CSOS’s main source of revenue was from the government, and interest income. The budget was an issue of growing concern, as R20 million would come from levy income, but this could not be received as CSOS could not bill clients yet.

The Chairperson said that in simple English, CSOS was asking for assistance.

Mr Mthethwa said that CSOS will not be generating its own income until the 2016/2017 financial year and would need help until the second half of 2016.

Three things would happen before CSOS opened its doors to the public. Firstly, it had to finalise consolidation and bring it to the Committee; secondly, it had to prepare to become a legal entity to advise; and thirdly, it had to be launched formally to the public.

Discussion

Mr Capa said he had missed the explanation regarding the R17.3 million which had not been committed in the previous year, and asked what had happened to it. Secondly, it seemed that CSOS needed to develop a way of advertising itself.

Mr Gana said that the request for funding had been noted. The Department was present and had heard this request. CSOS was still developing, but there was a huge demand for its services. Was it operating at a low level? What were the 18 staff members doing?

Ms Mnganga-Gcabashe said that this presentation had shown that the new management of CSOS had tried its best. Regarding more funding, the delays on its side were the reason the entity would suffer for the 2015/2016 financial year. The request for funding could be taken further after CSOS had spent what it currently had. Secondly, two quarterly reports had not been prepared and submitted to the Minister. An internal audit function needed to be established and the Department needed to monitor the irregular spending shown in the audit.

Mr Mthethwa responded on the issue of the R17.3 million. CSOS had started a few days before the financial year had ended, and had operated with no funding through 2013. In October and November of 2013, the Department had said that funds could not be transferred without a Chief Executive Officer and Chief Financial Officer in place. These positions had been filled in February 2014 and the Department had transferred the money, but it had reached the entity too late to spend as had been sent back.

The awareness campaign was being vigorously worked on. There would be a public launch but this could not be done until the President proclaimed the CSOS. The launch would form part of the awareness campaign.

Regarding the staff, a policy had been put in place so they were working. What was technically legally expected of the CSOS was that it could not make adjudications, so work was being done at a low level to resolve cases through mediation and conciliation. Activity was happening, but no adjudication.

Concerning the audit, a team had been appointed and was producing good reports. In the two quarters that no reports had been supplied, only two people had been working so there was little capacity. It would not happen again.

Ms Mnganga-Gcabashe noted that out of the 23 staff members, 50% were woman.

The Chairperson thanked the entities, and acknowledged that senior leadership had come forward to present.

The meeting was adjourned.