Department on Estate Agency Affairs Board /Auction Alliance matter; Human Settlements Development Finance Institution: Draft Remedial Housing project; National Housing Development Agency on Human Settlement Catalytic Projects Programme

Human Settlements, Water and Sanitation

01 March 2016
Chairperson: Ms N Mafu (ANC)
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Meeting Summary

The first presentation was aimed at updating the Portfolio Committee on the constitutional court action between Auction Alliance and Estate Agency Affairs Board. There had been allegations made about Auction Alliance’s unlawful business practice and illicit money laundering.  The Estate Agency Affairs Board (EAAB) had undertaken an inspection at the Auction Alliance offices, resulting in a search and seizure of material and documents, but Auction Alliance had then challenged the constitutionality of section 32A of the EAAB Act on the basis that it infringed on its right to privacy. It had been successful and the section was declared to be unconstitutional, with provision made to delay that ruling, so the Board was considering the amendments necessary, which affected not only its own Act but also the Financial Intelligence Centre legislation. Members of the Committee were generally pleased with the presentation and were supportive of the decisions the EAAB had taken during the trial. They were reassured of EAAB’s ability to monitor unlawful business practice as well as to identify businesses that were misappropriating funds.

The Department of Human Settlements (DHS) then presented an update on the consolidation of Human Settlements Development Finance Institutions (DFIs). This consolidation was to take place through a three phased approach between 01 November 2015 and 01 April 2017. Phase 1, Operational Transactions involved the operational integration of existing entities into National Housing Finance Corporation (NHFC) would take place through a buy and sell transaction.  The payrolls for Rural Housing Loan Fund (RHLF) and National Urban Reconstruction and Housing Agency (NURCHA) would be transferred to NHFC. Phase 2, Consolidation addressed the change in Management and would be setting the foundation for Phase 3. Phase 3, Optimisation, would take place from 01 April 2017, where all entities would be merged and operate as a single entity. Full integration of all systems and processes and implementation of new products or service lines would take place. This phase could only begin once the necessary legislation had been formally declared. There would be liaison with National Treasury to complete the transaction by 01 April 2016. This would lead to finalising the Buy and Sell with the Board. Members were concerned whether jobs would be lost, but were reassured that this would not happen. Members agree dto keep a close eye on the Consolidation process.

The third presentation, by the Housing Development Agency (HDA), was on the Human Settlement Catalytic Projects Programme, but it was noted that this was work in progress as no details could yet be provided of the private sector, until after the Ministerial announcements. The HDA had a mandate to deal with spatial reorganisation, to try to rectify the lack of social and economic integration in South Africa.  The process followed for the identification of projects and project assessment had been analysed, and funding requirements estimated. The project mandate was to identify and implement 50 national priority catalytic projects that would align well with the Human Settlements Master Spatial Plan, ensuring high impact, integrated, and sustainable human settlements that clearly demonstrate spatial, social and economic integration. There would be wide consultation with all spheres and sector departments affected by the project. Intensive planning would be taking place and joint ventures would be established. Members were pleased with the presentation and the concept, and felt that integration of all racial groups was being considered. Members asked how far off the HDA was, from the target of 1 500 housing opportunities that the Minister had mentioned, how many job opportunities would be created, how many of the 50 catalytic projects were finished, how HDA would deal with people queue jumping when houses were made available in informal settlements, and which provinces were involved. They sought assurance that municipalities were committed and clarity on the role of the private sector.

The final presentation was on the Draft Remedial Policy for Housing that was to be administered by National Home Builders Registration Council (NHBRC).  In May 2015, the Minister of Human Settlements had disclosed that the government budget would no longer be used to rectify houses. Since then, the rectification programme had begun and ministerial directives had been put in place. The Policy aimed to contribute to the improvement of the functional residential property market and ensure that legitimate expectations for housing pre-1994 were in fact fulfilled.The programme would facilitate a self-help approach and encourage beneficiaries to advise government on sub-standard work in need of remedial action, and particular beneficiaries were targeted. Contractors would be held accountable for shoddy work. Members asked for details of particular provinces and asked how work would be supported. One Member thought that the Committee needed to monitor progress before approving the programme and stressed that owners and managers of companies should be held liable. It was noted that the process of monitoring was ongoing. 

Meeting report

Estate Agency Affairs Board /Auction Alliance legal issues: Department of Human Settlements (DHS) briefing
Mr Neville Chainee, Deputy Director General: Strategy and Planning, Department of Human Settlements gave some background information about Auction Alliance and said that allegations had been made about this property company’s unlawful business practice and illicit money laundering.  There had been allegations that Auction Alliance had been facilitating ghost bids where the buyer would be bidding against themselves, and this would be used to drive high sales for the property.  The company owner’s response was that he had taken part in vendor bidding; where a seller would be bidding on their own stock to drive up bid price. He said that the practice was "internationally and nationally regarded as an acceptable and lawful auction industry practice."

Although the Estate Agency Affairs Board (EAAB) had undertaken an inspection at the Auction Alliance offices, resulting in a search and seizure of material and documents, this approach had been confronted with resistance. Some of the information would have been preserved with the accounting firm, KPMG. Auction Alliance had challenged the EAAB on the search and seizure of documents, in the Western Cape High Court.  According to Section 32A of the EAA Act, the inspections could be carried out and searches could be conducted without search warrants, but the Auction Alliance challeged the constitutionality of that section, claiming that it infringed the company's right to privacy.  Section 32A of the EAA Act and Section 45B of the Financial Intelligence Centre (FICA) Act were declared invalid by the Constitutional Court, but the invalidity had been suspended until February 2016. Further investigation had taken place and the legal case was still going on.

Mr Chainee noted the implications of the court case on the EAA Board (EAAB) and highlighted the measures it had undertaken in response to the Constitutional Court ruling. In relation to the FICA, cash submitted above the amount of R25   000 had to be accounted for, with reports from Financial Institutions being required, to attest to the legitimacy of the money.

A Compliance Monitoring and Assessment Framework had been developed by the EAAB to ensure that the Board continues to monitor compliance with the Act. Moving forward the EAAB would be strengthening the enforcement mechanisms to ensure that any complaints would be followed up and prosecutions would take place for businesses found guilty of misappropriating funds. It was mentioned that the Framework would be rolled-out during the second quarter of 2016.

Discussion
The Chairperson asked if the Property Practitioners Bill was now going to be used in place of Section 32A of the Estate Agency Affairs Act.

Mr K Sithole (IFP) stated that his question was based on the briefing Mr Neville Chainee had given, and noted that some of the points made had not been included in the documents; he asked if that information could be made available in writing.

The Chairperson clarified that the briefing was based on what had been published in the media and in the news.

Mr Sithole asked if the EAAB was doing anything to try to counter the ruling on invalidity.

Mr H Memezi (ANC) said that the Portfolio Committee appreciated what the EAAB had done thus far. It was clear from the report that EAAB was an entity that managed to operate in areas that the government was unable to reach. He asked if there was a quick way of ensuring that the necessary amendments were passed without waiting for months.  He wanted to know how the Department could help the EAAB hasten the procedures as the Committee would be interested in helping.

Ms V Bam-Mugwanya (ANC) agreed that the Board had put together a good presentation. She asked about the EAAB's involvement in the provinces, noted that there was prevalence of false transactions and wanted to know how cases in other provinces would be handled. She was concerned about the racism in the property business and wanted to know what EAAB would be doing about it. She was also worried about over inflated property prices, in cases where the seller was trying to exclude a person of a specific race from buying the property.

The Chairperson asked how far the Property Practitioners Bill was from being passed.

Mr Chainee said that a full summary on what he had said would be provided to the Committee, and said he had given only a very brief explanation of the background information to the legal case.

He made an appeal to the Committee to give its opinions on the Property Practitioner’s Bill as well as continue providing support for sanctions against the racism that it was said was being practised in the property business at the moment. He believed that it would help enforce integration through fair business practice. He emphasised the need to break down racial barriers that still existed within certain societies in South Africa.  The raising of prices to prevent a group of people from buying property was unlawful behaviour and the EAAB wanted to be able to deal with such cases accordingly. He also reassured Ms V Bam-Mugwanya that EAAB made its inspections nationally and that all provinces were being reached.

The Bill had to be discussed within the Departments and that it still had to undergo adjustments. The Bill would be presented to Cabinet before 13 April; the delay was due to the socio-economic study.

Human Settlements Development Finance Institution (DFI): DHS briefing
Mr Mbulelo Tshangana, Acting Director General, presented the update on the Consolidation of Human Settlements Development Finance Institutions.  He introduced Ms Funani Matlatsi as the new Chief Financial Officer of the Department of Human Settlements before proceeding with the presentation. He mentioned that the Consolidated Human Settlements Development Finance Institutions (DFIs) would involve teams under the leadership of the Department of Human Settlements (DHS or the Department). The consolidation was important and significant and should be implemented urgently. The goal was to provide a sustained impact on Human Settlements. Thus far, 4 million houses had been delivered, however there was a backlog of 2 million households that needed a particular focus now. The Human Settlements DFI would be established through enabling legislation as a Government Development Finance Enterprise, being a schedule 3 entity in terms of the Public Finance Management Act.

The consolidation was to take place through a three phase approach.
Phase 1, Operational Transactions, would take place between 01 November 2015 and 30 April 2016. The operational integration of existing entities into National Housing Finance Corporation (NHFC) would take place through a buy and sell transaction.  The payrolls for Rural Housing Loan Fund (RHLF) and National Urban Reconstruction and Housing Agency (NURCHA) would be transferred to NHFC.

Phase 2, Consolidation, would proceed from the 01 April 2016 till 30 March 2017, where the change in Management issues would be addressed. The key outcome of Phase 2 would be to set the foundation for Phase 3.

Phase 3, Optimisation, would take place from the 01 April 2017, when all entities would be merged and operate as a single entity. Full integration of all systems and processes and implementation of new products or service lines would take place. This phase could only begin once the necessary legislation had been formally declared. Liaison with National Treasury would take place in order to have the transaction completed by 01 April 2016. This would lead to finalising the buy and sell with the Board.  An amendment of tax had also been applied for with SARS to remove the R78 million to R80 million tax charge. Legislation is to be introduced in October 2016.

Discussion
The Chairperson made it clear that the Proposal for Consolidation was a work in progress and clarified that the goal for completion was April 2017.

Mr S Gana (DA) asked about the buy and sell acquisition. He asked if there was a possibility that current employees would lose their jobs. He was concerned whether this factor had been considered, or if it had been assumed that every employee would be absorbed into the newly merged NHFC unit. He also asked how much it would cost to the Department as it had appealed for the large tax exemption.

Mr Sithole was also concerned about the staff members of the three entities.

Ms M Mokause (EFF) asked for clarity on the participation of the private sector to clear the backlog for Human Settlements, currently at around 2 million households.

Mr N Capa (ANC) agreed with Mr Gana and said that he thought that the NHFC had perhaps assumed that the Portfolio Committee knew everything although it was not clear on some points. He believed that some of the information was being taken for granted by the NHFC; therefore it had not been made clear, as it was under the assumption that the Portfolio Committee was perhaps aware. If unions knew that their members were about to lose their jobs, surely they would’ve been against the merger. Ha asked what the implications of the reduced cost on the Consolidation was. He also wanted to know how each entity would be equally represented within this new venture and how NHFC would make sure that none of the incoming entities were marginalised. 

The Chairperson wanted clarity on the function of Social Housing Regulatory Authority (SHRA) during the integration of NHFC, Rural Housing Loan Fund (RHLF) and National Urban Reconstruction and Housing Agency (NURCHA).

Ms L Mnanga-Gcabashe (ANC) also wanted to know what would be happening with SHRA. She also emphasised the need to ensure that there would not be job losses. She asked how each of these entities would play its part during the consolidation, although she appreciated the Department’s principal role.

Mr Tshangana reassured the Committee that none of the employees were going to lose their jobs and that in fact the consolidation enterprise was just integrating into something a lot bigger and better. The institutions were becoming a DFI consolidated entity with the goal of improving the consolidation itself. The Chairpersons of the Boards of each entity had been briefed on what would be expected from them. He informed the Portfolio Committee that the NHFC Board was reconstituted and that the names of the members would be disclosed at a later stage. He noted that the cost of the new DFI would be covered by the DHS; excluding the R7 million that would be covered by GTEC in terms of work streams, legislation and integration.

NHBRC mentioned that the country is in a state of flux and that the future of the people needed to be brought forward. He emphasised that the Human Settlement structure had always been left behind although it had managed to deliver 4 million houses thus far. He also admitted that there was a 2 million houses backlog. The Minister had agreed with the banking sector to penalise poor practices in the human settlements sector and the financing strategy would help elevate the position of the DHS. The NHBRC reassured the Committee that none of the entities would be marginalised. NHBRC had also paid its dues to NURCHA, and everybody would remain employed and occupied.

RHLF confirmed that it too was fully behind the consolidation. The consolidation had been drafted and brought forward, and there had been no prospects of job loss. Ultimately, job creation would be a part of the implementation.

The Chairperson said that the Portfolio Committee would be monitoring the process closely.

Human Settlement Catalytic Projects Programme: Housing Development Agency Update

Mr Pascal Moloi, Chief Executive Officer, Housing Development Agency, said that the presentation would not go into the details regarding the private sector until the Minister had made his announcement. He would however outline the project mandate, objectives and rational for spatial targeting. The National Development Plan had set out the needs of the sector, including the principles for spatial development. The Human settlement Catalytic Projects Programme (the Programme) was intended to tackle issues of integration as well socio-economic challenges the Department wanted to target. The process followed for the identification of projects and project assessment had been analysed.  The funding arrangements for each project were estimated and Housing Development Agency (HDA) also recommended a few projects and housing opportunities.

The HDA believed that human settlement patterns remained dysfunctional across the country and that the inadequacies in the provision of housing and infrastructure remained a challenge.  The project mandate was to identify and implement 50 national priority catalytic projects that will align well with the Human Settlements Master Spatial Plan, ensuring high impact, integrated, and sustainable human settlements that clearly demonstrate spatial, social and economic integration.

The Catalytic Projects Programme plans to consult with and get support from all spheres and sector departments affected by the project. Intensive planning would be taking place and joint ventures would be established. HDA recommended that the Portfolio Committee endorse, support and or approve the declaration of 65 projects (44 Government led and 21 Private Sector led) including the 12 merged projects in support of the NDP Objectives.

Discussion

Mr Tshangana suggested that everything had been well covered in this presentation.

The Chairperson was impressed with the presentation, which had included all the information that the Committee had requested. HDA had taken into consideration the integration of different racial groups which had been a prior concern.

Ms T Gqada (DA) also felt that the presentation had been well prepared and was pleased that the issue of integration had been addressed. She mentioned that the Minister of Human Settlements had announced that, during her five year term, she would like to see 1.5 million housing opportunities. She asked how far from that target HDA was at present. She had noticed 29 projects with timelines of between five-ten years and wondered if the target would be reached. She was also interested to know how many job opportunities would be created from this project, and how far HDA now was with its heir planning process.

Mr Sithole thanked the Department for its well-prepared and detailed presentation. In 2014 the Minister of Human Settlements had mentioned doing 50 catalytic projects, and so he wanted to know how many had been completed. He asked how HDA would deal with people queue jumping when houses were made available in informal settlements.

Mr Memezi spoke about the population growth and immigration problem in Gauteng and asked if HDA had taken that factor into consideration when allocating land for projects. He also mentioned the presentation of the National Development Plan and how HDA had spoken about the need to shift funds to cater for informal settlements. He asked if that had been completed and which provinces had bought into the idea.

Mr Gana pointed out that from the 50 catalytic projects target, HDA had only mentioned 44, and so he wanted to find out what was happening with the other six. He was surprised that there had been a large number of projects to take place in Limpopo. He stated that there would be 6 000 Government based projects and 200   000 private sector developments. He was concerned about the large number because most people were migrating out of the province and so he asked who would be purchasing the private property.  He also asked if land had been identified and secured for the number of properties to be built in Mpumalanga.

Mr Memezi emphasised the project’s economic factor and the equal share of all companies in the Programme.

Ms Mnanga-Gcabashe applauded the Department's work and was pleased to find that planning was in line with the National Development Plan (NDP). She was concerned, however about whether othe structures, including the municipalities, had been brought on board with the plan. She asked whether HDA had structural engineers in place for the delivery of quality housing. She also asked how many jobs were to be created from the project and whether these would be temporary or permanent jobs. Finally, she ended by asking for clarity on the role of the private sector.

Mr Capa asked that the restructuring mentioned be made before 2050. He said that by 2030 there must be measurable progress.

Mr Moloi said that the target for 1.5 million housing opportunities would not only include housing by the Programme, but was inclusive of contributions from all the projects currently in place. He mentioned that at the moment there had been a proposal for 103 projects and not just 50, and although each project was still subject to scrutiny, the final figure should be more than 50, which the Minister believed could be carried out successfully. The goal of the Catalytic Project Programme was to ensure that the areas which had been identified were close enough to access public transport. The idea was to ensure that workers spent less than 50% of their salaries on transport by 2050. 

The provincial housing departments had supported the work to be done and DHS expected an increase in activity in Limpopo especially in Lephalale and Thabazimbi. The increased developments would not only include private housing but schools, libraries and others. The numbers were not surprising. 

Mr Tshangane said that there many of the projects were going to be implemented, but dealing with crowding was going to be a work in progress.  He clarified that the work done by the private sector would probably exceed that coming from the Government. He stated that the designs, layout and the progress report regarding the project would be made available throughout the process.

The Chairperson noted that the Programme would leave behind a good legacy.

Draft Remedial Policy for Housing
Ms Nonhlanhla Buthelezi, Chief Director: Operational Policy Framework, DHS, noted that the proposed Remedial Policy for Housing was to be administered by NHBRC. The Policy was founded on the reflection of the Minister of Human Settlements in August 2014 during the budget speech, noting that the DHS had spent R2 billion on rectifying houses. In May 2015, the Minister had disclosed that the government budget would no longer be used to rectify houses. Since then, the rectification programme had begun and ministerial directives had been put in place. She went through the background and framework of the policy mentioning the new terms to be used in the Policy (see attached presentation). A situational analysis was presented to the Committee. The Policy aimed to contribute to the improvement of the functional residential property market and ensure that legitimate expectations for housing pre-1994 were in fact fulfilled.

The essence of the programme was to facilitate the use of the ‘self-help’ approach as well as to encourage beneficiaries to advise government on sub-standard work in need of remedial action. The programme has also outlined a number of important beneficiaries targeted. A funding plan has been proposed and the programme plans to continue to monitor contractors and hold them accountable for their shoddy work. A national register of contractors is to be kept so that action against contractors who do not comply with the standard can be taken. This would include blacklisting defaulting contractor companies.

Discussion
Mr Sithole asked about the Kwa-Zulu-Natal districts, pointing out that nothing was said about them in the presentation. He asked if those not presented upon would be excluded and also asked how many companies the Department had already blacklisted. He asked how many housing situations had been rectified and if any companies had paid back the money they had owed.

Ms Mokause also noted that the Northern Cape had not been a part of the presentation and also wanted to know whether the Department would be looking more deeply into its situation. She asked if the Department would be working hand-in-hand with other departments to identify the houses, and how it would be done.

Mr Capa pointed out that the use of the word “remedial” was binding which would imply that companies should be accountable for the quality of work they produced. His concern was how DHS could guarantee payment from companies who had either disappeared or had been liquidated. He also asked for clarity on the targets for pregnant women.

Mr Gana noted the good work by the National Home Builders Registration Council. He however refused to support the policy yet, as he felt that it was still in its early stages, and appealed to the Committee that only when the full policy had been made available should the Committee consider its appoval. This Policy was seeking to rectify houses built before 2011, but he wanted to know what was in place about houses built and contractors paid after this period. He asked for clarity on the blacklisting of companies and recommended that both the company owners and the people running the company should be blacklisted, and he also emphasised that the policy must be quite clear. He asked if the contractors would not get their final pay until receiving approval from the NHBRC. He also asked who would carry the cost of houses that might need rectification after approval had been given.

Mr L Khoarai (ANC) supported the Policy but believed it should include all houses built up to 2015. He was also concerned about his home-town in the Free-State, which was not listed within the presentation. He asked how much would be spent on each province so that it could be followed up. He also agreed that the policy had to be exact about who got blacklisted and how.

Mr Memezi appreciated Ms Buthelezi’s presentation and mentioned that the Policy should make use of information provided by the people to prevent having to make amendments at a later stage. He also mentioned that Gauteng was under represented as KZN and the Eastern Cape had reflected high numbers for remedial action. He emphasised that there would be a problem if a situational analysis were not clearly done. He also agreed with Mr Gana and Mr Khoarai and asked that the ID numbers and lists of the members within blacklisted companies be consistent with the Policy requirements. He emphasised the need to actually complete the blacklisting process, noting that the idea had already been going on for five years.

Ms Mnanga-Gcabashe agreed with her colleagues and asked if each province had been looked into, in order to come up with a detailed Policy. She cited the lack of structural engineers on a municipal, provincial and national level, and asked that consultants not be used in place of structural engineers.

The Chairperson pointed out that Eastern Cape had done its own rectification procedures and had demanded a reimbursement from the government. She asked how HDA would deal with such situations and how they would be classified.  She asked how remedial and rectification projects would be taken up for self-help cases.

Mr Mnanyi responded to the Member’s concerns about the list of towns that had been provided, saying that indeed this list was not exhaustive but a full listing would be provided for each province. Full assessments would be done once the Policy had been complete.

The DHS had currently been looking through the Treasury Register of the companies identified for misconduct. Before a company would be blacklisted, it would have had to have gone through all disciplinary procedures and exhausted the process. The budget for the Remedial programme would be provided at a later stage.  He pointed out the 12 000 housing units were currently being assessed by the Department’s service providers.  He said that the programme would be catering for houses covered by NHBRC and a payment sign off would be done for quality houses. 

He emphasised that the current list of figures was based on the business plans the DHS had received, but all the towns mentioned by the Members were a part of the programme. He said that the remedial and rectifying programmes would be clarified within the Policy. Full-time structural engineers had been appointed at no cost to the municipality concerned.

Ms Buthelezi said that the key aspect was identifying a timeline for which no Policy had been in place to ensure that housing was lawfully covered. She also mentioned that an amendment had been made in 2011 which was why the DHS had looked at remedial procedures for houses that had been built before that date. She reassured Members that a full report would be provided once all consolidations had been complete. She also mentioned that the programme had viewed pregnant women under the ‘urgent and at high risk ‘category, but a full break down of how these women fit into the Policy would also be provided at a later stage. She mentioned that those who had been identified under self-help meant that they were able to afford to rectify housing themselves, and therefore would not be reimbursed. She said that even though the programme had been trying to make improvements to housing, DHS had constantly encouraged beneficiaries to not only rely on what the government was doing but to empower themselves as well.

The Chairperson asked that HDA keep the Portfolio Committee on Human Settlements informed as the policy procedure continued. S

Adoption and Approval of Minutes
The Committee approved the minutes of the previous meeting.

The meeting was adjourned.

 

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