Department of Human Settlements on 2017/18 Annual Performance Plan; DHS issues raised in SONA; with Deputy Minister in attendance

Meeting report

The Chairperson welcomed the officials from the Department of Human Settlements. She reminded the Committee that the Departmental entities will present their Annual Performance Plans (APPs) on 28 March 2017 where the Title Deeds Restoration Programme will also be further explained. She also welcomed the Deputy Minister of Human Settlements, Ms Zoe Kota-Fredericks.

Briefing by the Department of Human Settlements on their Annual Performance Plan

Mr Mbulelo Tshangane, Director-General, DHS, reported that the Department’s 2050 vision was to have effectively coordinated spatial planning systems to transform human settlements in South Africa into equitable and efficient spaces with citizens living in close proximity to  work and access to social facilities and essential infrastructure. The Department’s 2030 vision was to break apartheid patterns with significant advances being made towards retrofitting existing settlements offering the majority of South Africans access to adequate housing and a functioning equitable residential property market. In order to achieve the above the Department has been in continuous engagements with oversight bodies such as the Department of Monitoring and Evaluation, the Auditor- General (AG) and National Treasury. For qualitative targets, there were concerns on measurability which are being attended to and it showed that the outcomes approach provided space for qualitative targets that measured improved compliance for policies, improved organisational operations and improved and quality living conditions and environments.

The Department’s APP was developed in line with provincial performance plans and entities’ performance plans. The Medium Term Strategic Framework (MTSF) delivery targets are mostly aligned with entities and the Department will at the end of the financial year account for the overall sector performance.

In order to translate the MTSF priorities into strategic plan targets for 2014-2019 the Department will upgrade 2 200 informal settlements; ensure that 750 000 households benefitted from the Informal Settlements Upgrading Programme (ISUP); 563 000 individual units will be provided with the subsidy housing market; 10 000 community residential units (CRU) will be built, 35 000 private rental housing opportunities will be provided and 5 000 non statutory military veterans will be housed. A further 10 000 hectares of well-located land will be rezoned and released for new developments targeting poor and lower income households; 22 mining towns will be supported on human settlements interventions; 30% of the Human Settlements Development Grant (HSDG) budget has been allocated to women and youth contractors and 30% of the Urban Settlements Development Grant (USDG) construction budget will be allocated to women and youth contractors.

The Department was targeting to develop the following policies and legislations: policy framework, comprehensive human settlements legislation, Human Settlements Bank, a policy compliance enforced on projects in under implementation, human settlements code and seven evaluations of key human settlements strategic thrust has been completed.

A summary of the 2017/18 APP included the implementation of 50 catalytic projects, 22 mining towns will be supported on human settlements development interventions, 400 feasibilities conducted in informal settlements, 150 000 households in informal settlements will be upgraded and 7 provinces and 6 metros will be supported in the implementation of the People’s Housing Process (PHP) policy. In addition, 327 000 of the pre- and post 1994 title deeds will be issued to the owners; 1 915 CRUs will be delivered; 7 920 private affordable rental housing opportunities will be delivered and 3 000 hectares of well-located land was acquired to be rezoned and released for new developments. The Department plans to implement the Home Loan and Mortgage Disclosure Amendment Bill, the Human Settlements Development Bank Bill, the Human Settlement Bill and the Prevention of Illegal Eviction from and Unlawful Occupation of Land Amendment Bill. The employers’ contribution towards the Employer Assisted Housing will be accessed; as well assessments on the volume of loans granted by Development Finance Institutions (DFIs) for the affordable housing market will be conducted.

Nine municipalities have been assessed for accreditation for the next financial year; eight municipalities in secondary cities will be supported on their implementation of the Human Settlements Master Plan; 24 intergovernmental forums have been coordinated in line with human settlements priorities and 100% of the Department’s projects are under implementation to be monitored and verified for the HSDG and USDG.

The audit outcomes showed that the financial statements submitted for auditing were not prepared in accordance with the prescribed financial reporting framework as required by the Public Financial Management Act (PFMA) and contractual obligations and money owed by the Department were not settled within 30 days as required by the PFMA and Treasury regulations.

The 2017/18 priorities are scaling up the delivery on affordable/gap housing, accelerating upgrading on informal settlements, improving the issuing of title deeds for new subsidy houses on occupation and establishing the human settlements development bank.

Mr Neville Chainee, Deputy Director-General, DHS said eight funding units will receive funding during the 2017/18 financial year. The Social Housing Regulatory Authority (SHRA) restructuring capital grant received R765.7 million, the Institutional Subsidy received R660 million, the Catalytic Projects Programme received R2 billion, the centralisation of the Finance Linked Individual Subsidy (FLISP) will cost R1 billion, Asset verification project received R19 million, Northern Cape Backlog Eradication received R800 million and the Government Employees Housing Scheme (GEHS) received R49 million.

It was proposed that the social and rental allocations, institutional subsidies and the Restructuring Capital Grant (RCG) be consolidated and disbursed as one funding stream to municipalities and social housing institutions. This move will enhance the integrated process between the planning, funding and implementation arrangements, thus expediting delivery outcomes. The MTSF target for the delivery of social and rental housing was 30 000 units. Actual delivery of social and rental housing units was 8 452 as at 31 March 2016, and the remaining number of units required to achieve the target was therefore 21 548. The average cost of a one bedroom unit has increased by 47% over the seven years while the RCG has remained static. To address this challenge the Department was currently considering a proposal to increase the RCG quantum to R155 000 per unit, and it sought to improve performance and accountability by considering proposals to improve checks and balances in the sector and this included separation of the regulatory grant and allocations and investment functions. The RCG programme had been allocated with R768 715 million for the 2017/18 financial year. This allocation was based on R155 000 per unit which brought the shortage on RCG to R1.9 billion.

In terms of the catalytic projects programme, there was an agreement between the Department and the Housing Development Agency (HDA) to align, streamline and integrate programme and project functions. The proposal was for the HDA to function as a developer and/or implementation agent to reduce inefficiencies in provinces and municipalities in respect of key programme focusing on the catalytic projects. The catalytic projects was allocated R2 billion for the 2017/18 financial year. The FLISP programme has not been performing well in the provinces and a decision was made to centralise the programme. The proposal was to top-slice both the HSDG and USDG to allow FLISP to be managed by the Department or entity. The funding allocation for FLISP was R1.1 billion. The recapitalisation of the consolidated human settlements DFIs was proposed to ensure that the Department adequately responded to the National Development Plan (NDP) guidelines. It was projected that an amount of R10.3 billion will be shed from the USDG and the HSDG, and will be used to recapitalise the Human Settlements Development Bank with the agreed targets, outcomes and outputs. The DFI programme was allocated R3.2 billion.

The aim of the asset verification project was to have an effective monitoring and evaluation systems that contained credible and verifiable information consistent across various reports and information platforms. The National Home and Builders Registration Council (NHBRC) will also be expected to assist in the asset verification exercise on the HSDG funding. The provincial and municipal verification project was allocated R19 million. The Department’s MINMEC took a decision to target the Northern Cape to eradicate the housing backlog where it totalled 52 000 units. There will be a pooling of provincial grants to co-fund the eradication. The targeted output over the three years was 11 384 units, costing a total of R1.6 billion. The additional amounts required for 2017/18 was R800 million for 525 units; for 2018/19 it was R500 million for 3453 units and for 2019/20 it was R348.4 million for 2406 units. The amount allocated to the Northern Cape backlog was R412.6 million.

The GEHS will provide housing access support services to government employees and was administered by the state to ensure that employees have access to adequate housing on a sustainable basis. The Department was expected to undertake the function of service to the GHES. The GHES programme was allocated R49 million. In terms of up-scaling informal settlements, by March 2016 185 731 households were upgraded which represents 25.9% of the MTSF target. A total of 8 879 households were upgraded, a total of 555 390 households remained to be upgraded in three years at an average of more than 185 130 households per annum. The informal settlements upgrading was allocated R8.1 billion.

Ms Funani Matlatsi, Chief Financial Officer, DHS said the outcomes of the Medium Term Expenditure Committee (MTEC) concluded that two grants were reduced by R3.7 billion over the MTEF. The HSDG was reduced by R3.4 billion and the USDG was reduced by R282.2 million. The compensation of employees was further reduced by R20.6 million and the goods and services net increase over the MTEF is R2 million. The entities were also affected by the decrease in the budget; SHRA was reduced by R121 million, the Community Schemes Ombud Service was reduced by R93 million, HDA was reduced by R621 million and the Rural Housing Loan Fund was reduced by R158 million.

Discussion

Mr M Shelembe (NFP) said having continuous stakeholder engagements was necessary because other resources such as water and safe roads are important for the restructuring and upgrading of informal settlements. He asked how the Department ensured that they worked closely with the Department of Water and Sanitation and DPW to ensure that there was enough water and roads are erected to help them reach their targets.

Mr L Khoarai (ANC) asked for the Department’s view on the new proposed size of the government houses, and if the Department believed that a larger size was a reflection of respecting the home owners’ dignity. He said the title deeds programme must be improved and he asked if the Department was capable of achieving the 30% target of women and youth working as contractors. The Department must try to assist universities because there was a shortage of student residential accommodations in all the universities.

Ms T Baker (DA) said the Department’s targets are based on the APPs of their entities, instead of having it the other way around. She said this structure leads to under spending, and it becomes easier to achieve your targets when the entities are organised to align their APPs with that of the Department’s. She asked if there are provincial officials who are employed to deal strictly with the title deeds programme because it seemed that the municipalities are holding up the restoration programme.

Mr H Memezi (ANC) said the centralisation of the FLISP programme was a good move; however he feared that centralising the programme will not make it accessible to middle class workers in the rural areas. He requested that the Department submitted a weekly report on the title deeds programme so that the Committee can track its process, especially if the beneficiaries of the title deeds have passed on it should be easy for the descendents of the home owners to receive the title deed. The Department should ask the private sector to assist with upgrading of informal settlements and human settlements should not be the Department’s only priority, but it should also provide city for the communities. The report was informative and the Department’s plans are clear.

Mr S Malatsi (DA) said the Department did not seem to have any contingency plans to eradicate the title deeds that belonged to beneficiaries that cannot be traced. He asked if the reduction of employees will affect the permanent employees or the contract workers, and he asked the Department to explain their intent to reduce their employment numbers.

Ms M Nkadimeng (ANC) said rural dwellers moved to urban towns and cities every year in large numbers to look for work and study - adding to the number of informal settlements. He asked how confident the Department was that it will achieve its target of eradicating informal settlements by 2030.

Ms L Mnganga-Gcabashe (ANC) said the reduction of R3.7 billion is a lot of money to lose because it will affect their targets and it will lead to job losses. As such, the Department needed to revise its plan on how it will ensure that targets are achieved despite the budget reduction. The centralisation of FLISP was a good idea because the private-public partnerships were not working through the municipalities.

Mr Shelembe asked how differently will the tendering process be administered in the 2017/18 financial year, because bidders who did not bid during the first time when tenders got advertised won the tender when tenders are re-advertised the second time, which did not make sense.

The Chairperson said the mining towns are not being prioritised and she asked for a detailed report showing the provinces that are failing to make their 30 day payments.

Responses

Ms Zoe Kota-Fredericks, Human Settlements Deputy Minister responded by saying that provincial departments do not receive any additional grants if they decided to build bigger government houses than the standard recommended size. The reality was that when you build bigger houses less people tend to benefit because the budget decreases, hence the policy recommended the standard size for the houses. Student accommodation was unfortunately not the responsibility of the Department but with the Department of Higher Education and Training (DHET) and DPW. Gauteng was the only province that improved on their implementation of the FLISP programme because banks are closer to the Department, and many of the metro cities are under spending on their USDG.

Mr Tshangane replied that the metro cities achieved their targets when it came to spending their USDG, but the problem lies with the small towns outside the metro cities that are under spending on their USDG. R260 million was reduced from the HSDG and the City of Cape Town and Ekurhuleni metros under spent by R240 million on their HSDG over three years. Most of the fraud related to the tendering process was found in the supply chain department. The Department has implemented litigation studies to try and resolve the issue. The Deputy Minister was a part of a task team tasked with investigating the feasibility of free education, but she only sat on the task team as an advisor and where needed the Department advised on accommodation issues. The targets are set by the government and the entities are tasked with the implementation of strategies to ensure that targets are achieved, like the Estate Agency Affairs Board (EAAB) that was tasked with managing the title deeds backlog. Every other year the budget for mining towns was ring-fenced. The Department has signed contracts with ABSA, Nedbank, First National Bank and Standard Bank to implement the FLISP programme. The Eastern Cape and Free State have been grappling with their cash flow and this led them to miss their 30-day payments to contractors. The Minister and Deputy Minister are in the final stages of finalising the accreditation framework for provinces, but before the provinces can be accredited the metro cities must prove that they can perform effectively.

Ms Matlatsi responded saying the unfilled vacancies will be filled with employees on 3-year contracts and the employment reduction will not affect permanent employees.

Briefing by the Department of Human Settlements on the Departmental Responses to the SONA

Mr Chainee said on 1 March 2017 Cabinet approved the publication of the Property Practitioners Bill in the government gazette for public comment. The Bill repeals the current Estate Agency Affairs Act of 1976. The Bill will ensure that all segments of the market are transformed in that bond originators, bridging finance companies and other players need to be licensed in order to trade in the market. The Bill will enforce compliance with the Property Sector Charter Code, which stipulated transformation targets the property practitioners must comply with. In terms of the Title Restoration Project (TRP), the delivery had been below par and commitments by provinces and municipalities have not been honoured. The Department reconsidered the implementation modalities for the TRP and a set of specific resolutions made by MINMEC on 24 February 2017. The Department will discuss the TRP when they present their title deeds programme to the Committee.

Mr Nkosinathi Biko, Chairperson of the EAAB said that he was confident that by 2030 80% of towns and cities will be restructured into urban areas.

Mr A Carelse, Executive Manager: Business Operations, EAAB said the responsibilities of the TRP task team was to offer recommendations regarding expected delivery, and ensure that commitments and cash flow expenditure are adhered to. The task team will assume all responsibilities related to the TRP dashboard and it will have access to all records related to registration backlog within provinces and metropolitan municipalities. The 2017/18 business plan for provinces is R487 million. The Department of Cooperative Governance and Traditional Affairs (COGTA) will issue directives regarding rate clearance certificates and it will engage with specific problematic municipalities.

The Chairperson said there will be further engagements regarding the TRP on 28 March 2017 when the entities report on their APPs.

Ms Mnganga-Gcabashe agreed that questions should be left for the entities when they make their presentations.

Ms Baker asked what the major impact drivers were behind the increase of the size of the units.

Mr Tshangane replied that cost of servicing a site was R47 000 and this amount excluded the costs of industry experts such as engineers. The subsidy quantum has not increased for the past two years.

Adoption of Minutes

Minutes dated 7 March 2017 was adopted.

The meeting was adjourned.