Department Human Settlements responses to 2016 SONA & budget, Community Residential Units Programme, interventions into mining towns

Human Settlements, Water and Sanitation

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

The National Department of Human Settlements (DHS) presented the Departmental responses to the 2016 State of the Nation Address and Budget Speech. It was noted that economic growth was a key aim of the 2016 SONA, and the DHS had now stipulated a certain level of local content that must be used in all projects.  A nine-point plan had been integrated into every government department and programme funding costs were estimated at R298 billion, which excluded multiplier effects such as steel, cement and bricks. A major effort was made to align government employees' housing scheme, and development of integrated settlements remained key, with good alignment between transport and infrastructure. The subsidy regime allowed non-South Africans to benefit from rentals, but they could not benefit from subsidised rent. There was work with cooperatives. A major challenge was that DHS faced a R3.8 billion reduction in budget. Members questioned the effects of the local content policy on production and importation of products such as steel and cement, especially from China, queried how and why non-South Africans were benefitting from the human settlements programme, and queried the apparent discrepancy in the figures of the reductions. They also asked for a comparison of how small scale business and conglomerates benefitted from the programmes, asked about women's participation in cooperatives and how provincial budgets were managed.

The DHS then presented a review of the Community Residential Units (CRU) Programme. There are 181 public sector hostels owned by provincial governments and/or municipalities, which fell under the Social Housing programme. CRUs, which fell under Social and Rental Interventions programme, would be accessible to households earning up to R3 500 per month. Since 2007, 29 837 units were developed or refurbished, and R9.5 billion had been spent. The CRUs were run through 70 projects in eight provinces, excluding Eastern Cape, and most units cost a little over R300 000. The programme challenges included  high costs when existing buildings were demolished to make way for new buildings, the spending of the grant on infrastructure upgrades rather than its intended purpose of top structures, lack of knowledge about the implementation tool-kit and mistaken allocations to current residents or those outside the threshold of earnings. Overall there had been poor management. A number of remedial measures were proposed, including using this as a capital grant for redevelopment of existing public sector hostels, shifting new build CRUs to Social Housing, raising the income limit to R5 500 per month, setting specifications, norms and standards, setting cost limits on new construction and improving management and services and amenities. Members strongly supported the Chairperson's suggestion to have a workshop at which all the different programmes and their main issues could be examined. Members wanted to know how politicking was affecting the management of the CRU, wondered how the Department would achieve its aims with the reduction of its budget, wanted more detailed costings for demolitions, which Members did not think made particular sense, and one Member suggested the need to instil a culture of good maintenance in residents. Members also pointed out another problem of people running businesses within the hostels. The Department was asked to research the difference in the qualification criteria of the CRU and the Social Housing.

Finally, the Department gave details on the national and Provincial Department's intervention in mining towns, pointing out that the Special Presidential Package had identified 15 priority mining areas, in five provinces, for the DHS to run interventions. Twelve labour-sending areas in two provinces were currently being prioritised. The challenges were set out, including poor planning and pipelining, non-prioritisation of Informal Settlement Upgrades, problematic negotiations with mining companies and communities, and poor access to traditional authorities. Officials from provincial Departments of Human Settlements assisted in answering questions posed by the Committee. These included questions around targets and whether they were met, challenges around the beneficiary list, the role of Eskom, and site services especially in Limpopo, Tauten and Free State. Members noted that houses were still being constructed without accompanying services, and the standard in Free State was criticised as poor. Underspending in Gauteng was questioned in particular, and Members queried the absence of representatives from Limpopo and Tauten. They requested clarity on the budget allocations, donations of land, funding of houses by private companies and said that the report did not contain sufficient depth.  One Member requested a special report for Marikana, and the point was made that this was not exactly a distressed mining community because mining was ongoing in the area, although there were several poor communities around it. The Chairperson requested progress reports on water and sanitation in the next report and noted several gaps in the report, which were ascribed to it being a work in progress. 
 

Meeting report

Department of Human Settlements (DHS or the Department) Responses to State of Nation Address 2016 and budget speech
The Chairperson welcomed Members to the meeting on Women's Day. She announced that Mr Mbulelo Tshangana, formerly Acting Director-General of the Department of Human Settlements, had been appointed as Director General.

Mr Neville Chainee, Deputy Director General, Department of Human Settlements, stated that the key foundation of the 2016 SONA is economic growth, based on a nine-point plan that is integrated into each government department. The programme funding costs were estimated at R298 billion excluding multiplier effects – and here he explained that multiplier effects such as steel, cement and bricks impact on the housing and settlement industry. The DHS has adopted designation, which stipulates the level of local content that must accompany projects.

The DHS is aligning the government employees’ housing scheme, as 60% of current government employees do not have access to housing.

The Human Settlements programme has been allocated to a sub-committee, which was now dealing with development of integrated human settlements, with alignments between transport and infrastructure. Between 30% and 40% is allocated to the construction and related Bus Rapid Transport (BRT) system. 30% of all funding is allocated to women enterprises and professional undertakings, while 10% is allocated to youth enterprises. Work has begun on cooperatives and small-scale human settlement development. The subsidy regime allowed non-South Africans to benefit from rentals, but they could not benefit from subsidised rent.

Ms Swazi Taitai, Director: Parliamentary Liaison, Ministry of Human Settlements, presented the budgetary aspects of the 2016 SONA response. She stated that the DHS budget is affected by the economic downturn, with a R3.8 billion reduction in its budget. The breakdown of reductions is:
- R1.6 billon reduction in the Human Settlements Development Grant for 2016/17.
- R807 million reduction of the Urban Settlements Development Grant
- R16.7 million reduction in goods and services budget in 2016/2017, R17 million in 2017/18, and R20.5 million in 2018/19
- R28.9 and R43.1 million reductions in compensation of employees respectively for 2017/18 and 2018/19.

Discussion
Mr K Sithole (IFP) queried double budgets. He also asked about the management of the Gauteng Province budget. Finally, he requested officials to be sent to a municipality in Gauteng to check what was being done there.

Mr H Chauke (ANC) sought clarity on the production and importation of cement, especially from China and the drop in steel production. He expressed concern over local manufacturing.

Mr S Gana (DA) expressed concern over China’s likely response to restrictions on the importation of cement or any other building material. He expressed surprise that non-South Africans could benefit from the human settlement programme. He requested the difference between the rates paid by foreigners, and subsidy rentals. He also expressed concern over the contradictory figures given by the Minister on the budget of the DHS, which he said were inconsistent with the disclosure of budget reductions made in the presentation. He wondered why there was a discrepancy of around R1.5 billion.

Ms V Bam-Mugwanya (ANC) asked whether small scale businesses benefitted from the human settlements programme, and how this compared to how conglomerates benefitted. She noted that municipalities and small towns are neglected in beneficiation programmes.

Ms L Mnganga-Gcabashe (ANC) noted the importance of electricity to the transport arm of the human settlements programme. She stated that electricity supply must be aligned with the DHS programmes. She also expressed concern over women’s participation in cooperatives. She requested to hear of consolidation measures that affect Medium Term Strategic Framework funds.

Mr Chainee responded that the DHS has signed an agreement with the metro rail. The DHS had taken initiatives, but these would need time to mature. He admitted that the country as a whole had not done well with respect to beneficiation of raw materials and compared it to the USA, which does not allow the importation of railway materials. South Africa needs to be able to make trade-offs between costs and internal benefits such as employment and economic development. In line with beneficiation, no materials should be bought from outside South Africa, and this applied particularly for cement. Dangote Cement was partnering with South Africa and had set up a facility, and that was acceptable because it was another African company.

Mr Chainee pointed out that the main theme of the budget is consolidation. Because of current constraints, which are not limited to the DHS alone, there are budget reductions across the board. However, the DHS would be able to cope with this. The human settlements programme is about redirection, reprioritisation and obtaining value for money.

He pointed out that there are strict regulations regarding local content in procurement, especially with regard to small scale businesses and cooperatives (SMEs), but the DHS has not done well in encouraging SMEs.

There is misalignment with respect to electricity, and substantial work needs to be done in this area.

Ms Taitai stated that the Minister’s presentation indicated a budget of R62 billion for the Human Settlement Development Grant (HSDG), but that amount was for a designated period. The Urban Settlement Development Grant (USDG) has a budget of R34 billion for a three-year period. R25 million was allocated to the DHS for projects and management capacity, in the allocation letter and although this might give the impression of an additional amount of R25 million in the budget, this was in fact not significant because the reductions in the budget had amounted to more than this R25 million received. However, the DHS planned to use the money for human settlements development.

Another representative of the Department noted that the figure of R130 billion featured prominently in the budget speech as the value of integrated land development projects. It was a descriptive way of speaking about catalytic projects being engaged in. The key underlining point was that the mandate of the DHS must be able to enhance human settlement development across the country.

The Chairperson suggested that Mr Chauke’s question relating to beneficiation in the construction sector materials should rather be answered in the following week, when the meeting would deal with the Annual Performance Plan and budgets.

Review of Community Residential Units Programme briefing
Dr Zoleka Sokopo, Acting Deputy Director General: Policy, DHS, outlined the DHS review on the Community Residential Units Programme. She noted that there are 181 public sector hostels owned by provincial governments and/or municipalities, excluding hostels used by municipal employees. These hostels were part of the social housing programme. The Community Residential Units (CRU) subprogramme fell under the Social and Rental Interventions programme. These units would be accessible to households earning up to R3 500 per month.

The findings of the CRU indicate that an estimated 29  837 units were developed or refurbished, with a  budget of R9.5 bn, since 2007. The programme applied to only 79 projects in all provinces with the exception of the Eastern Cape. The average cost per unit was R319  301. The majority of units were two or three bedroom units.

Dr Sokopo outlined some of the challenges with this programme, which included:
- There are high costs for demolition of existing buildings and site rehabilitation.
- The CRU grant was meant to fund the construction of top structures, but was used to finance infrastructure upgrades.
- The implementation toolkit was not used nor known by implementers.
- The majority of allocations were driven by automatic allocation to current residents, and stock was also allocated to people earning above the income threshold of R3500. The lowest estimated rental was R800 per month
- Overall, the programme was poorly managed.

To remedy these challenges and problems, the following steps were now proposed:
- To use the CRU as a capital grant for redevelopment of existing public sector hostels
- To shift new build CRU to Social Housing and adjust the income limit to R5  500 per month
- To approve set specifications, norms, and standards
- To set cost limits on stock to be constructed
- To change the terminology of “hostel” to “affordable rental”
- To improve the CRU management
- To negotiate funding for CRU engineering services and social amenities with municipalities.

Discussion
The Chairperson remarked that workshops are needed for the Committee to properly understand the issues at stake, since there was not sufficient time to go through all the concepts during Committee  meetings.

Mr L Khoarai (ANC) requested clarification on the CRU management and the role of politics in that. He noted that there are no hostels in the Eastern Cape. He sought assurances on the DHS’s ability to meet its targets, given reductions in the budget.

Mr Sithole echoed the Chairperson’s call for workshops. He queried the figure of 23 construction projects in Gauteng, saying that only a few were apparent. He also requested plans for the budget allocated for demolitions.

Ms Mnganga-Gcabashe also supported the Chairperson’s request for a workshop. She asked whether the proposed plan to shift from CRU to social housing had taken into account the varying conditions in the requirements at the time of the proposal. She also raised concern over completion of programme management, and called for this to be addressed in the workshop.

Mr H Memezi (ANC) also was in favour of having a workshop, and said that it should try to explain the background to the CRU. Human settlements remained problematic because of the nation's past. The public needed to be inculcated with a culture of maintaining property well. He said that “historical apathetic mentality” made it difficult for government to implement proper settlement programmes. The workshop should try to articulate the best approach to the CRU and provide a picture of what has already been invested. 

Mr Gana also supported the idea of workshop. He questioned the continued relevance of the CRU in light of its prohibitive costs and suggested that perhaps the units might be handed over to Social Housing institutions. He also felt that the qualifying income level needed to be reviewed, in light of wage increases. The current approach of building where hostels already stand made the costs of building plus the costs of demolition astronomical.

Ms Mnganga-Gcabashe noted that municipalities find it difficult to collect rentals from refurbished hostels. The revenue is stagnant, and the DHS is not getting value for money. The chief culprits are those running businesses within the hostels, who are refusing to pay the bills and these businesses were also making the environment non-conducive for human habitation. This revenue collection discouraged funding for hostel programmes. She requested information in the workshop on revenue collection, and noted that access control in the hostels did not feature in the presentation.

Mr Chainee welcomed the idea of a workshop.

The Chairperson requested Dr Sokopo to research in detail the difference in the qualification criteria of the CRU and the Social Housing, and present in detail at the workshop.

Special Presidential Package for the Revitalisation of Distressed Mining Communities – Human Settlements Interventions in Mining Towns
Mr Chainee disclosed that the DHS had invited colleagues from the provinces to participate, and that the Special Presidential Package had earmarked 15 priority mining areas, in five provinces, for the DHS to run interventions aimed at revitalisation of distressed mining communities. Twelve labour- sending areas in two provinces had been prioritised.

The challenges with the interventions included the following:
- Lack of planning and pipelining of projects
- Informal Settlement Upgrades (ISU) not prioritised in planning of provinces and municipalities.
- Insufficient planning capacity at municipal level
- Problematic negotiations with mining companies
- Consultation and communication with communities
- Poor access to traditional authorities on land titles
- Application of policy to address complexities of integrated projects

He recommended that the Committee note the overall progress report on human settlement interventions regarding the revitalisation of distressed mining communities.

Discussion
Mr Chauke sought the overall targeted numbers for the project, whether the targets were met and the percentage of deliverables achieved. He requested more detail on the budget allocation and its status. He noted that the beneficiary list remained one of the biggest challenges and had given rise to several contestations. One example was Marikana. He noted that there was no reference to the role of Eskom in the presentation.

Mr Sithole asked whether representatives of Limpopo and Gauteng were invited. He queried site services, especially in Gauteng, Limpopo, and the Free State. He expressed concern at the construction of houses without accompanying services and remarked that the standard of houses in the Free State was not up to that of other provinces. He sought clarity on donation of land, and the funding of houses by private mining companies.

Mr Khoarai asked why there was such underspending in Gauteng that the Premier of Gauteng had to intervene. He queried non-spending highlighted in some areas of the report, and noted the absence of any statement as to the particular challenges in the Free State.

Mr Gana stated that Marikana deserved a special report because it had a very special situation; for instance, houses were built there but beneficiaries were not identified, and mine workers had allocated houses to themselves. Unlike most of the other areas, Marikana did not neatly qualify as a “distressed” mining community because mining was ongoing there and it was thus not a ghost mining town. As a result of the events of 2012, it was, however, included in the programme and there is still a police presence there. Much was happening there which required a separate full report.

Mr Memezi commended the depth of the report. He amplified that though Marikana may be an active mining community, communities around it are distressed, and for this reason it did deserve attention. He noted that whilst there may not be agreement on a special report on Marikana, more in-depth reports and analysis was needed in future reports on all mining communities. Parliament has a responsibility to ensure peace and order in mining communities. If people take over houses in a disorderly fashion, the Committee must step in. Revenue generation in hostels should be taken seriously. He expressed concern that the report on Gauteng was “thin” despite the fact of this province's many distressed mining communities. He expressed satisfaction on the involvement of labour-sending areas, considering that the people in these areas were being used largely as “a reserve of manpower”. He felt, overall, that more information was needed on each of the provinces and municipalities, even beyond what a one-day workshop can provide.

The Chairperson called on officials from the provinces to respond.

Ms Carol Tladi, Chief Director of Planning, Free State Department, responded to the question of bulk infrastructure in certain mining towns. A study by the Department of Water and Sanitation was done in 2013/2014, regarding the availability of bulk infrastructures. Following findings of serious shortage of infrastructure in two areas, intervention assistance projects were launched. Accordingly, her Department’s intervention projects were advised to build on ongoing projects. Close to R1 million had been spent this year in the municipality on various projects. It was not correct to suggest that there were no challenges in a certain community. The biggest challenge remained as mine workers staying in informal settlements.

Ms Hazel Ithaca, Mpumalanga Provincial Department, reported that there is improvement in performance. Informal settlements have been prioritised.

The representative from the North West Provincial Department responded to questions raised about Marikana. He stated that new programmes were under way in Marikana. There is a list of all approved beneficiaries. Marikana is volatile and the community feels entitled to all the programmes, with the result that the residents here would unduly interfere in programmes, try to dictate wages, and block roads, all of which contributed to the particular challenges. However, programmes were ongoing and completion of units was improving. A policy had been adopted to draw up a beneficiary list before completing units. About 150 units were illegally occupied before completion. A court order had been obtained against illegal occupants.

Mr Chainee responded that the Gauteng Provincial Department had been invited to make input into the process. There were substantial infrastructural shortages in most of the areas where massive interventions were ongoing. There were procurement issues here, and clarity would be provided  in a report. The discrepancy between sites and units was occurring in informal settlements. This was largely because upgrading and servicing in these areas had been slower, with more contestation that in other areas, and the planning of projects was more aspirational than realistic.

Mr Chainee spoke to donations of land, saying that some interventions were done by way of a partnership between the DHS, private sector/companies, and communities. In some cases, mining companies owned land donated by communities. Government was funding 95% of interventions, including Marikana, so the government investment was higher than the land donations.

Mr Chainee conceded that provision of energy supply is problematic because Eskom attended to this directly and it had suffered capacity constraints. There were thus lapses of time between the building of the houses and the time when they were finally electrified.  The DHS intervened by calling upon the Department of Energy to intervene with Eskom. One of the problems was that the areas now chosen for interventions were not prioritised in the past, and this meant that progress was slower. As a result of national interventions, however, there had been improvements, which would get better in the next quarter. The DHS was stabilising, and would in future be improving on weaknesses and failures.

Mr Chainee repeated that in the last financial year, a specific amount of R1s billion was earmarked for these areas. For the next financial year, approximately R1 billion had been earmarked and it would also be ring-fenced so that it could not be used for any other areas.

The Chairperson requested progress reports on water and sanitation in the next report. She noted that the report had several gaps, which may be excused on the ground of work in progress. The Committee wanted to hear formally why there was not a report on Limpopo and Gauteng, but the Committee was grateful to the delegation.

The meeting was adjourned. 

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