Nurcha; NHFC; HDA; RHLF on their 2017/18 Annual Performance Plans

Human Settlements

17 March 2017
Chairperson: Ms N Mafu (ANC)
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Meeting Summary

The National Urban Reconstruction Housing Agent (Nurcha), National Housing Finances Corporation (NHFC) and Rural Housing Loan Fund (RHLF) presented a consolidated presentation on its Annual Performance Plan (APP) for 2017/18. The presentation covered financial performance after consolidation, operating costs and profitability, liquidity and efficiency of operating expenses. The presentation also discussed housing opportunities and capitalisation of the Human Settlements Bank.

The Committee questioned what would become of the assets of the three entities now that they were consolidating, if assurance could be provided that housing would be provided to the rural areas, what was meant by the decrease in liquidity and clarity on the decrease in housing opportunities – Members were concerned with how the decrease in housing opportunities influenced the National Development Plan outcome for 1.5 million housing opportunities. Members emphasised the need to reverse the legacy of apartheid so the previously marginalised were empowered – was the NHFC empowering those previously disadvantaged? It was highlighted that the establishment of the Human Settlements Bank was a golden opportunity for the Committee to deal with the issue of transformation. It was emphasised that the Bank ought to be geared towards radical economic transformation especially when compared to other banks. The Bank would be launched 21 April 2017 and the Committee expected to be briefed on the launch.

The Housing Development Agency (HDA) then presented its five year Strategic Plan for 2017/18 – 2021/22. The presentation looked at a transformation plan, the need for the HDA to become a human settlements development agency, challenges, its root causes and how the HDA was addressing these challenges. The presentation also touched on the HDA new business delivery model and targets and objectives.

Members questioned how the HDA was empowering the previously marginalised, disability and women empowerment targets, direct capital granted by National Treasury and how any hectares the HDA received from the Department of Public Works. The Committee noted that practical implementation of transformation was key – it also allowed the Committee to monitor progress. Other questions centred on the signing of protocols for ensuring provinces remained accountable to the HDA, catalytic projects, filling of vacancies and internships for young graduates. 

Meeting report

Opening Remarks

The Chairperson opened the meeting by reminding Members that Parliament would be in recess until 28 April 2017. In the week of 2 May 2017, the Committee would have to commence the Budgetary Review and Recommendation Report (BRRR) process. To save time, a consolidated report on three entities would be presented today, namely, the National Urban Reconstruction Housing Agent (NURCHA), Rural Housing Loan Fund (RHLF), and National Housing Finance Corporation (NHFC). The Housing Development Agency (HDA) would then present on its own. She urged Members to pose questions on any of the specific entities.

Apologies

Apologies were noted for Ms T Baker (DA), Mr S Malatsi (DA), Mr M Shelembe (NFP) and Ms O Mokause (EFF). Not that it was required for such a meeting of the Committee but there was indeed a quorum. The Chairperson apologised for the inconvenience of conveying the meeting on a Friday. Apologises were also noted from the DG of the Department of Human Settlements who was tasked with the Blue Downs Military Veterans and Imizamo Yethu matter.

Briefing on Consolidated Annual Performance Plan of the NHFC, NURCHA and RHLF

Mr Samson Moraba, CEO, National Housing Finance Corporation (NHFC) reiterated that the NHFC was the entity in which both NURCHA and the RHLF would be consolidated into – the presentation thus consolidated the Annual Performance Plans (APP) of all three entities. The financial performance was depicted in order to give effect to the transition to individual entities, to the NHFC and, lastly, to the Human Settlements Development Bank. He said he would present the annual performance plan. The consolidation of the three entities was predicted to reflect in the financial figures.       

The financial performance, as in the presentation, depicted the performance of all three entities after they had been consolidated. Liquidity, as from 2018 to 2019, steadily increases. The operating costs and profitability graph showed there was a steady rise in 2017 and 2018.The efficiency of operating expenses graph showed that there were efficiencies that would benefit as a result of the consolidation. However, of great concern to the Committee was the housing opportunities graphs since there had been a decrease from 2018/19 and 2020. This was because there had been no new funds given to the entities for these periods. This was a “base zero of the Human Settlement Bank”.

Mr Moraba committed to come back to present to the Committee in June after the capitalisation that the Human Settlements Bank required in terms of housing opportunities. The presentation also covered the total impact that would be experienced in the market place because of the operational consolidation. The presentation also discussed an analysis of the benefits of the housing from a financial perspective, housing opportunities perspective and benefits that would result such as liquidity, profit before tax and efficiency.  What remained was the approval of a business case and the enabling Act then capitalisation would be given to the Human Settlements Bank which would result in a higher impact and greater efficiency.

It was affirmed to the Committee that the NHFC had been hard at work with the operational integration. It would also finalise the business case and enable legislation for the Human Settlement Bank which it planned to take through the approval process by the end of May.
                                           
The Chairperson said that the three entities had been hard at work in the process of consolidation because the financial year was about to come to a close.

Discussion

Mr K Sithole (IFP) asked what was going to happen to the assets as the three entities were now consolidating. He wanted to know if the NHFC would be able to give the Committee assurance that it would provide housing in rural areas as the RUF did despite the decrease in housing opportunities.

Mr H Mmemezi (ANC) appreciated the summarised and consolidated report. He referred to the decrease as from 2020 on the liquidity graph and asked what this meant. He also sought clarity on what the efficiency graph in advantages as from 2013 until 2020 implied. Since the country was 23 years into democracy, the Committee, in line with the Constitution, must reverse the legacy of apartheid in all its dealings so that the previously marginalised were empowered. Had the NHFC been empowering those who were previously not empowered in the past?

Ms L Mnganga-Gcabashe (ANC) appreciated the presentation and acknowledged the various apologies. The establishment of the Human Settlement Bank was a golden opportunity for the Committee to deal with issues of transformation - if the issue of transformation was shelved aside it would never be dealt with. At some point in time, the Department, and the consolidated entities in the formation of the new Human Settlements Bank, were looking at the issue of transformation - were loans and assets being built around the issue of transformation? She then asked how the liquidity was linked to transformation. She requested the executive summary consolidated report.

The Chairperson asked for clarity on the decrease in housing opportunities. How did the decrease influence the outcome of the National Development Plan (NDP) and the target of the Department to have 1.5 million housing opportunities by the end of the term? She asked how the NHFC was going to mitigate that housing opportunities did not continue to decrease. She agreed with Ms Mnganga-Gcabashe in regards to the transformation of the Human Settlement Bank especially since the financial sector of the country remained untransformed. The new Human Settlements Bank had to be exemplar and should move towards radical economic transformation.

Mr Motaba, in regards to the housing opportunities, explained that the graph showed medium term expenditure for the next three years. The graph for housing opportunities depicted the status as planned without any new money being allocated. This would change after the NHFC had gone to National Treasury to ask for capitalisation for housing opportunities. In terms of transformation, one of the pillars of the NHFC was indeed transformation. A deliberate effort to bring about transformation that the NHFC had been implementing was to bring investors to invest in sectors they usually would not. The NHFC promised to also make available a risk market for emerging contractors and start-ups. The NHFC’s goal had been to create black property entrepreneurs so there may be a turn in the ownership of property. However a number of the transformation projects required project preparation and risk funds since effective transformation required money.

Mr Sango Ntsaluba, Non-Executive Director, NHFC, supported Mr Motaba’s explanation and remarked that the cost of credit for housing finance needed to be adjusted for low income persons.

Mr Viwe Gqwetha, Managing Director, NURCHA, responded to the question pertaining to efficiency and explained that, when dealing with transformation, it would be best to innovate products that at first did not carry much volume. There were extra costs required to initiate projects geared towards transformation which at the early stages would be regarded as inefficient. The grant from government to subsidise such projects was an effort to reduce these costs.

Mr Motaba elucidated that how the bank was funded would determine how much would be used for risk projects. The drop in cost to income ratio was a good sign. Overtime, this should be coming down. In regards to liquidity, the capitalisation of this picture would change. Both assets of the NHFC and the RHLF would be consolidated.

The Chairperson said that as the three entities were almost concluding with the process of consolidating, key policy funding implementation was critical. The Committee had to see an evident shift in the Human Settlements Bank towards being a transformed bank as compared to banks such as ABSA and Standard Bank.  The Human Settlements Bank would be launching on 21 April 2017 – the three entities, NURCHA, RHLF and NHFC, would be expected to come back and explain what it was launching.

Housing Development Agency (HDA) Five Year Strategic Plan 2017/18 – 2021/22

Mr Pascal Moloi, CEO, HDA, began the presentation by outlining the HDA’s transformation plan was centred on becoming a human settlements development agency. This was done according to the request of the Minister. The human settlements sector showed a need for the HDA to become a human settlements development agency because of the following challenges: high need for housing, insufficient public sector delivery, declining private sector delivery, lack of transformation and fragmented funding framework.  A number of the root causes for these challenges was a result of growth in population and under expenditure at municipal and provincial level. The HDA was committed to address and respond to the sectoral challenges by improving national spatial planning, providing more rapid urban settlement planning, mobilising other public and private resources and contributing to youth empowerment. The new HDA business delivery model focused on providing a panel of professional service providers and had governance and administration as its core. In regards to targets and objectives where more effort was required, building capacity for project financing, sustaining functional businesses and providing leadership and systems to implement the HDA’s mandate needed more effort.

The Chairperson stressed that the HDA is a very important entity for Human Settlements.

Discussion

Mr Mmemezi appreciated the report and mentioned that the HDA used to be the wealthier entity in terms of budget. The Committee had recently learnt from its oversight visits in Durban that estate agents remained white people and were granting housing opportunities to the wealthy at the expense of the previously marginalised. There were a number of black estate agents who were saying that they had not received any opportunities - how much the HDA empower the previously marginalised?

Mr Sithole noted that there was no project assigned to the disabled. He asked if the 40% target for women empowerment was achievable. If there was only an office in Gauteng, how did the HDA balance its service delivery? He then asked how exactly many hectares the HDA had received from the Department of Public Works.

Ms Mnganga-Gcabashe thanked the HDA for the report. She recalled the Committee’s discussion on transformation and appreciated how the HDA presentation extensively covered transformation. The Committee however wanted to see this being implemented practically and would monitor the progress. She sought clarity on the direct capital granted by National Treasury. She asked whether the name on the organogram “George” was a name or a surname. The HDA was asked if it had signed its protocol agreement - this was a necessity in ensuring the provinces remained accountable to the HDA. How many of the six metros in Durban were equipped to be developers and implementing agencies?  She supported the annual performance plan as presented.

The Chairperson confirmed that when the Committee conducted oversight visits the presence of the HDA was confirmed. However, in the Free State, many of the mining towns seemed to confuse the role of the HDA – she asked the entity to resolve this confusion. In terms of technical skills, the HDA was asked if it was equipped in this regard. She mentioned that the HDA had to give a list of their catalytic projects and had to give a date as to when it would give the Committee this list. She appreciated the new model that the HDA had presented. She further asked if the many vacancies were funding related and, if so, when it hoped to fill the vacancies since this determined when the HDA would be able to fulfil their mandate. The entity was encouraged to report on how many internships it had opened for young graduates.

Mr Moloi said that the point on transformation was noted. The HDA was engaging five property developers to command more than 19 private proposals.   The Department had challenged the HDA to operate in line with the radical economic transformation goal. The HDA had, for the first time, a service provider database. In regards to the 40% minimum women empowerment target, this was a proposal that would equip such a group in the boardroom to have a voice. The HDA would work on fulfilling the target related to disabled employees. There was no exact number of the land acquired from the Department of Public Works.

On the matter of transformation, the HDA would subscribe to the transformation code which had been approved for all bodies.  The operating budget of R160 million paid for salaries, equipment and rent and was not capital money. The HDA did not have capital to deal with bulk. He confirmed a non-signed operating protocol would create a problem in future however this was not something that could be changed overnight. The issue of flexibility of meeting large commands in skills had to be considered. The HDA had been sending letter of allocations to provinces in order to improve their capital products in the projects they were asked to develop. In regards to skills, this required more funding.  In terms of housing targets, he was not sure about the service delivery of the six metros however, going forward, the HDA would be partnering with the provinces and metros. Regarding the failure to sign protocols, this point was taken. The list of 45 approved catalytic projects would be made available to the Committee on a quarterly basis. In regards to vacancies, there was funding available to fill the most critical vacancies, one of them being in Mpumalanga - a medium operating plan was already signed last month. On the issue of funding flows, there was a constitutionality problem which would be managed with caution.  

The Chairperson thanked the HDA for their presentation and said the Committee would have to monitor its progress periodically.

Ms Mnganga-Gcabashe said, with the amendment of the number of disabled persons employed by the HDA, she accepted its presentation.

The meeting was adjourned. 

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