Appropriation Bill [B3-2016]: hearing with Department of Human Settlements

Standing Committee on Appropriations

10 May 2016
Chairperson: Mr N Gcwabaza (ANC)
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Meeting Summary

The Department of Human Settlements (DHS) gave inputs to the Committee on the 2016 Appropriations Bill. The briefing covered the revised strategic plan targets for 2015-2020; a summary of the Annual Performance Plan (APP) priorities and APP targets per programme, the budget allocation and comment on the  focus areas as identified by the Committee. The DHS commented specifically upon what had been done on Supply Chain Management (SCM) and improving value for money, how the DHS was complying with the Public Finance Management Act (PFMA) and described the types of subsidised housing and their associated costs. The Department’s targets, which would be implemented through the Human Settlements Development Grant (HSDG) and the Urban Settlements Development Grant (USDG) included eradicating the backlog of confirming 100 000 title deeds; the delivery of housing through 15 catalytic projects, nine human settlements interventions in mining towns, conducting 500 feasibility studies in informal settlements, providing 175 000 households with basic services, developing 115 000 housing opportunities and the completion of the operational integration of Development Finance Institutions (DFIs). The budget had been decreased by R3.7 billion, but the DHS was not intending to reduce the targeted outputs. The DHS was very wary of filling vacant positions that could not be sustained financially, and would have to prioritise carefully which posts were critically needed for the HSDG and the USDG, before filling other vacant posts. The bulk of the Department’s allocation went to Programme 4: Housing Development Finance, which accounted for R29.9 billion of the total R30.6 bn budget. The main challenges were in relation to intergovernment relations and the perceived, as well as real corruption in the award of tenders. There were problems in persuading the provinces to comply with norms and standards, to improve the prioritisation of MTSF targets, to integrate planning, funding and development, not to dispose of well located land, and in improving the overall alignment of provincial and municipal planning, funding and implementation. Mitigatory attempts included a revised structure for the DHS, which would be regionalising its operations, stabilising the delivery of housing units, consolidating the DFIs and holding municipalities and provinces accountable for transfers received.

Members asked if the posts that were vacant were strategic ones, and commented on the amounts allocated for planning and policy, and for payment of employees, and asked for allocations on goods and services. They asked what was being done to address lack of capacity in inter-governmental relations, and what was being done to stop corruption, and suggested that oversight visits should be paid to catalytic projects. They questioned some of the targets, in relation to availability of the HSS database, the title deeds backlog, availability of IT services, and why budgets had been given to Mpumalanga that were not apparently coupled to targets. They were interested whether the DHS was likely to achieve its mandate with the decreased budget. They commented that upgrading of informal settlements had not started, and there was slow progress on rental housing units, and a query about Balfour was still not resolved. The DHS was asked to explain the difference between social housing and community residential housing (formerly hostels). They were worried about repeat findings by the Auditor General on non-compliance in relation to beneficiary subsidies and asked how this was to be addressed. The AG’s findings had found that subsidies to beneficiaries did not comply with the requisite accounting entries and that this was a repeat finding. Members questioned the size of the delegation and the length of the presentation document, and thought that the APP was not clear on what the DHS wanted to achieve. They were very critical of the backlogs, which meant that home owners were unable to access loans. They asked what direct impact the budget cuts would have on urban informal settlements. Further questions related to consequences for corrupt officials, who was to blame on inter-government relation breakdowns and the report on payments within 30 days. They wanted more details on the communication strategy and the cost, and on the feasibility studies in informal settlements, and also asked about the allocations for disaster relief, and the responsibilities on water and sanitation. 

Meeting report

2016 Appropriation Bill: Department of Human Settlements input

Mr Neville Chainee, Acting Chief Operations Officer, Department of Human Settlements, spoke to the priorities as set out in the Strategic Plan for the Department of Human Settlements (DHS or the Department) for the period 2015 – 2020. These included the following: to upgrade 2 200 informal settlements; to provide 750 000 households with basic services; to provide 563 000 housing subsidy opportunities; to develop 27  000 social housing units and 35 000 affordable rental housing opportunities.

He then spoke to the Department’s priorities as outlined in the 2016/17 Annual Performance Plan (APP). The Department’s targets, which would be implemented through the Human Settlements Development Grant (HSDG) and the Urban Settlements Development Grant (USDG) included eradicating the backlog of confirming 100 000 title deeds; the delivery of housing through 15 catalytic projects, nine human settlements interventions in mining towns, conducting 500 feasibility studies in informal settlements, providing 175 000 households with basic services, developing 115 000 housing opportunities and the completion of the operational integration of Development Finance Institutions (DFIs).

Ms Funani Matlatsi, Chief Financial Officer, DHS, spoke to the Department’s budget which had decreased by R3.7 billion from the original allocation of R33 205 964 billion, down to R30 690 856. She stressed, however, that there would be no reduction in the targeted outputs. She said the Department would have to guard against filling vacant positions that could not be sustained financially and would have to prioritise which posts were critically needed for the HSDG and the USDG before filling other vacant posts. The bulk of the Department’s allocation went to Programme 4: Housing Development Finance, which accounted for R29.9 billion of the total R30.6 bn budget.

Mr Chainee then spoke to the focus points the Committee had raised; namely, value for money and Supply Chain Management (SCM). With regard to value for money, he said Government should not be seen as a price taker but as a price maker. He said the Department was conforming to the Public Finance Management Act (PFMA) with regard to the 30 day payment rule for invoices. He then spoke to the subsidised housing types. There were three types, relating to square metres of, respectively, 40, 45 and 50, and the total costs of these were R110 947, R164 136 and R188 884 respectively.

He then spoke to challenges in inter-governmental relations (IGR) and the perceived, as well as real corruption in the award of tenders. The challenges in IGR were as follows:
- getting provinces to comply with norms and standards
- improving the prioritisation of MTSF targets by provinces and municipalities
- the integration of planning, funding and development
- ensuring municipal adherence to reserving rather than disposing of well located land
- improving the alignment of provincial and municipal planning, funding and implementation.

He then spoke to the Department’s efforts to mitigate these challenges. The Minister had revised the organisational structure of the Department because the Department would be regionalising its operations. The graph reflecting the delivery of housing units, which had been dropping, had now been stabilised and 10  000 more units had been delivered than in the previous financial year. The Department had commenced with the consolidation of the three DFIs. The Department would be holding municipalities and provinces accountable for transfers that they received, and the Department had instituted early warning systems to alert it of anything that was not on track.

Discussion

Mr M Figg (DA) asked if the 18 vacant posts were strategic posts. He thought that the R83m allocated for policy and planning was perhaps exorbitant, and he further worked out that if R383m was spent on compensation of 634 employees, this which worked out to an average of R640 000 per employee, which was also very high. He wanted to know the allocations for specific items, in respect of the R375m allocated to goods and services spent? In terms of Inter Governmental Relations (IGR) challenges, what action was being taken regarding a lack of capacity? He asked about progress that had been made to stop corruption.  He said it would be useful for the Department to go out and do oversight visits on the human settlements catalytic projects.

Ms M Manana (ANC) said the Committee members had been given a document, in advance of the meeting, that differed from the one now being presented. She asked if there was a reason why the target for the availability of HSS Database Systems was only set at 90% and not 100%. What was the total number for the title deed backlogs, and why was Mpumalanga given a budget allocation for title deed backlog eradication yet had a zero target for eradication? She asked if the DHS would be able to achieve its mandate, given the budget decrease of R3.7 billion. She commented that the upgrading of informal settlements had not started yet, even though the planning and preparation had been completed, and there had been slow progress on rental housing targets. The Auditor-General (AG) had found that subsidies to beneficiaries did not comply with the requisite accounting entries, and that this was a repeat finding. She said she had received a letter from the Mpumalanga Province that the province would be appointing a contractor for a matter in Balfour that she had raised eight months previously, and wanted to know when this appointment would take place. Local councillors knew nothing about any work being done and the letter she had received had no date.

Mr A McLoughlin (DA) asked why the Department had come with eleven delegates when only three had interacted, and also asked why the presentation document was not restricted to the maximum requested of twelve pages. He said the Annual Performance Plan (APP) did not reflect the results or outcomes the Department wanted to achieve. According to the AG’s findings the Departments’ report was one of the worst. What was being done about this? He said the backlog in title deeds was holding up the economy because home owners could not access loans. What direct impact would the Department’s budget cuts have on urban informal settlements? He heard the DHS on its plans to stop corruption, but he said there were no consequences for perpetrators, only internal disciplinary hearings. He wanted to know the difference between social housing and community residential housing. He asked if there was any action on IGR,  because municipalities were saying provinces were at fault, and provinces were saying municipalities were at fault.

Ms S Shope –Sithole (ANC) said she was pleased to hear that there had been improvement in payment within the 30 day period. These payments were especially important for small contractors. She asked, however, that the Committee receive a report on payments. 

The Chairperson asked why the target for the availability of IT services was 90% and not 100%, and what was the cost of these services? He also wanted clarity on the 100% target set for the communications strategy and asked if this was the 500 000 consumers mentioned and he also wanted to know the cost of the communications to these 500 000 consumers? He wanted more information on the feasibility studies conducted in informal settlements. He pointed out that some provinces had not been given an allocation for disaster relief. Regarding water and sanitation costs, he asked how much of the cost was for this Department, and how much was for the Department of Water and Sanitation? He said the presentation did not appear to indicate anything on hostel upgrading and asked about this.

Mr Mbulelo Tshangana, Director General, DHS, apologised that the correct documents were not given to Members in time. He noted that eleven people were present because the Department had three meetings scheduled for that day: it would be making presentations to the Standing Committee on Appropriations and to the Select Committee on Social Services, and there was a meeting with the Minister to discuss the catalytic projects. He noted that the 18 vacant posts were critical posts and that there were more critical posts that needed to be filled but could not be filled at present, because of the budget cuts.

He spoke to the R83 million on policy and planning, saying it cost about R36 million to package a project, and that policy development and planning was the bulk of what the Department’s activities were about. He said a project’s funds would in any case not be released unless there was a business plan, as this was a specific requirement. In relation to the question about the R375m spent on goods and services, he said that if positions could not be filled then the services of town planners and other consultants had to be contracted for feasibility and the planning of services.

In regard to Vulindlela, he said 11 500 out of the 25 000 units had been completed at a cost of R3 billion. The Peoples Housing Project was one in which cooperatives and NGOs participated in building houses. The flagship project had to be phased in over a number of years because of budget constraints. The National Home Builders Registration Council (NHBRC) was also involved in the construction process.

He explained that the work on the title deed backlog eradication was tied in to the budget available. The Department wanted to deliver 800 000 title deeds, but needed to reduce this number because it knew that it could not achieve it with the budget granted. The monies for title deeds would be ring fenced in the budget. He agreed that Mpumalanga had a budget allocation for title deeds yet had a target of zero title deeds, and he said the challenge was that “title deeds” included township and sub divisions and in some cases beneficiaries had moved on. It was a complicated exercise but R15m had been ring fenced for Mpumalanga, who had still to come back to the Department on the number of title deeds it wanted to transfer. He said it was a challenge to make sure all settlements had services and security of tenure, as informal settlements could have 850 000 households.

Mr Tshangana said the Department did have a letter from the province on the Balfour issue. This was a blocked project that the Department was trying to unblock. He said he would get all the information in place on the matter and contact the Member before she went back to Balfour.

In relation to the quality of houses, he said that all builders had to be registered with the NHBRC, whose website included a blacklist of builders. All builders in the Peoples Housing Project also had to be registered with the NHBRC.

The DHS was involved in the water and sanitation issues because it had a duty to monitor the performance of metros.

He explained that hostel upgrading was now referred to as Community Residential Units. The Department was working on standardising unit costs.

Mr Tshangana indicated that the findings of the AG had to be distinguished, because some related to the sector and others to the National DHS.  A number of provinces had not had a clean audit and this was being looked at. The Department itself, however, had been given an unqualified audit and had quarterly meetings with the AG who had said that there was no reason why the Department should not get a completely clean audit.

He explained that the DHS was indeed trying to educate consumers on the value of their property and how to manage this asset. R500 000 had been set aside for transactional support and education, on how to sell their houses after eight years.

Mr Chainee explained that a 90% target had been set for compliance on IT services, because of the issue of IT operationality, between the system used nationally and that used at the provincial level for the housing subsidies. There were still compliance challenges that needed to be sorted out. It should be 100% operational by the following year. He also noted that this related back to the need for the alignment of APPs and strategic plans of the provinces with those of the national department. He confirmed that the report on payments would be made available to the Committee.

Mr Chainee said that the consequences for corruption included the fact that the DHS had a blacklist of contractors who fell short of what was expected.

In relation to the findings of the AG on journal entries, he said that there were situations where a person died after applying for a housing subsidy. It was only fair that the subsidy still be given to the family. The Department had indicated to the AG that the Department could not cancel the subsidy in these cases and the Department had to assist in the case of those who died intestate.

Ms Matlatsi commented on the disaster relief allocations of zero to some provinces, and said the assessment had been done by the National Disaster Management Centre (NDMC) and then the relevant Treasury and the NDMC together would decide on the allocation for an area.

Mr Tshangana noted the comment on construction timelines. The DHS would be looking at effective procurement and would have a report on how to manage this process. Some provinces, for example, were using a panel of contractors. The Department wanted to standardise and stabilise the process for all provincesm to generate value for money.

Mr Tshangana affirmed that the DHS should be able to meet its targets, f there were no poor provincial, municipal or contractor performances.

The Chairperson asked whether there was a register recording home ownership to prevent a person from applying for a home more than once.

Mr Tshangana said the Department did have a central system in place so that people could not apply more than once for RDP houses. The biggest challenge was in informal settlements, where people did not qualify for subsidies because they had already qualified for RDP houses elsewhere.

Ms Shope – Sithole asked that the Department should be asked to do a presentation of the system to the Committee in future.

The meeting was adjourned

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