Appropriation Bill 2017: Democratic Alliance & Department of Human Settlements submissions

Standing Committee on Appropriations

31 May 2017
Chairperson: Ms Y Phosa (ANC)
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Meeting Summary

DA Submission

Prior to the presentation, the ANC questioned the cover of the proposal as it clashed with a previous decision taken by the Committee that no political party present proposals. The DA agreed to change the cover of the proposal. The DA presented its proposal for amendments to the Appropriation Bill which called for 405 amendments to fund six proposals totalling R10.8 billion aimed at creating jobs, fighting drug related crime, supporting poor students, combating corruption, proving poor relief and fighting cross border crime. The amendments were budget neutral so the funding would be through cutting the budgets of other departments. 13 departments would be ring-fenced, as well as six programmes, namely Disaster Management, the Expanded Public Works Programme (EPWP), the Community Work Programme (CWP), Citizen Affairs, Electrification, and Mine Health and Safety. The DA proposed a hiring freeze which would save R1.2 billion in salaries. In total R4.6 billion would be saved by cutting the increase in spending across 24 economic classifications. The DA were not in favour of the BRICS Bank and this would save R4.5 billion. R368 million could be saved in discretionary savings and R1.3 billion could be saved on the VIP regional jet.

Members said that the Committee had the mandate to amend the bill but that it was a long process. Why had the DA made its submission so late? Members asked if the proposals were consistent with the fiscal framework. Members said it would be difficult to decide on that same day and noted that the budget process was time bound. The proposals would affect 27 departments so the submission did not appear feasible within the timeframes. There would need to be public hearings and consultations with Treasury who would have to give a report.

The Chairperson ruled that a decision be deferred so that proper consultation could take place with legal advisors.

Briefing by the Department of Human Settlements

The Department said that the Human Settlements Development Grant (HSDG) was R33.4 billion. The Departmental budget allocation was cut by R3.5 billion over the 2017 MTEF period. The biggest part of the cut was in the HSDG. Various restructuring then had to occur involving reallocations of monies in the following programmes: Social Housing Registering Authority (SHRA), the Government Employee Housing Scheme (GEHS), the Finance Linked Individual Subsidy Program (FLISP), the Development Finance Institutions (DFI) Consolidation & Capitalisation, and the Asset Verification project. The Department was targeting developing 60 939 sites and 115 332 housing units for the year. The allocation of the Urban Settlements Development Grants (USDG) to metropolitan municipalities was also affected by the cuts. The cuts were to Buffalo City - R6 million, Nelson Mandela - R7.2 million, Mangaung - R6 million, Ekurhuleni - R15.6 million, Johannesburg - R14.7 million, Tshwane - R12,7 million, eThekwini - R15.6 million, and Cape Town - R11.8 million. The total cuts were R90 million. The Department said that there were three main targets that were not performing which was the eradication of title deeds, the upgrading of informal settlements, and slow progress on FLISP. The Department spoke to the housing of military veterans’ programme, the slow performance of the social and rental housing sector, the rezoning of land without development rights, governance issues as raised by the Auditor General and the legislation the Department was working on. The most important item for the Department, was the delay in the approval of the business plans of the Eastern Cape, Free State and Gauteng because there were serious cash flow management challenges in the Eastern Cape and Free State. Gauteng was delayed because it had not performed well for the past two years and the Department felt that it needed to be sorted out and put in place proper mitigation, up front.

Members said the extent of the backlog in the Western Cape, North West and Mpumalanga was unacceptably high. What was the timeframe and terms of reference of the task team? What was the reaction of the eThekwini and Ekurhuleni metros to their budget reductions? Based on their business plans, were all six metros ready to use their allocation for the redevelopment of urban settlements? Did the Department have monitoring systems in place? When would the Department get a clean audit? Were the provinces involved in the issue of title deeds or was it driven by the Department? How was the state of intergovernmental relations? Members asked which programmes would be affected by the R3.4 billion cut in the MTEF. Members asked if the RDP houses had a standard cost or whether the cost was left to the provinces. Members asked if the Department’s database was linked to the provinces and municipalities. Members wanted a breakdown of the companies contracted in the R32.6 billion infrastructure budget, in terms of women, youth, and disabled sectors as well as on the government set asides. Members asked if the Department’s monitoring and evaluation was aligned to the targets and whether it was used in quarterly reviews. Were the staff trained on contract management?

Meeting report

Mr Figg’s Proposal

The Chairperson said that because there was no quorum, Mr Figg’s proposal could be discussed but no decision could be made.

Mr M Figg (DA) said he agreed that the matter be discussed, but that a decision had to be made later that same day because there were process time constraints.

Ms M Manana (ANC) said that a previous decision by the Committee agreed that no political documents be put forward, yet the document was clearly from the DA as evidenced by its front cover.

Mr D Maynier (DA) said it was a DA proposal, but it was raised by a member of the Committee.

The Chairperson said this would open the door for documents from the ANC and EFF and other parties also possibly having to be considered. She suggested that the cover be removed.

Mr Maynier agreed that the front page could be changed. He then introduced the proposal saying that the DA was proposing 405 amendments to fund six proposals totalling R10.8 billion aimed at creating jobs, fighting drug related crime, supporting poor students, combating corruption, proving poor relief and fighting cross border crime. He said the amendments were budget neutral.

Mr Figg said the proposal sought to create jobs by providing the EPWP programme an extra R1.5 billion to create 213 000 jobs. It wanted to increase Vote 23 by R688 million for the funding of a specialised unit, the SA Narcotics Enforcement Bureau, which was dedicated to fight drug related crime and was grossly under resourced. It was calling for Vote 15 to be increased by R3.5 billion to assist technical and vocation students receive NSFAS funding. It called for Vote 21 to be increased by R174 million to support the Public Protector which was severely underfunded and which needed R1 billion to stay afloat. It proposed relief for the poor through increasing the child grant funds by R2.8 billion and the social grant by R1.7 billion. It proposed an increase of R483 million for Vote 19 to provide an extra 945 soldiers for border duty to protect against stock theft, illegal immigration and crime syndicate operations.

Mr A McLoughlin (DA) said the money would be found by cutting the budgets of other departments, however 13 departments would be ring-fenced, as well as six programmes, namely Disaster Management, EPWP, CWP, Citizen Affairs, Electrification, and Mine Health and Safety. The DA proposed a hiring freeze which would save R1.2 billion in salaries. In total R4.6 billion would be saved by cutting the increase in spending across 24 economic classifications.

The DA were not in favour of the BRICS Bank and felt the contract had to be renegotiated and this would save R4.5 billion. R368 million could be saved in discretionary savings and R1.3 billion could be saved on the VIP regional jet.

Mr Figg said the intention of the proposal was to benefit all. The DA would send an amended document with a different cover and a detailed schedule.

Ms Manana asked when the Committee could get the detailed documents.

Mr Maynier said it was included at the back of the document as an appendix and a schedule.

The Chairperson said that the Committee had the mandate to amend the bill but that it was a long process. Why had the DA made its submission so late? She asked if the proposals were consistent with the fiscal framework. She said it would be difficult to decide on that same day and noted that the budget process was time bound. The proposals would affect 27 departments so the submission did not appear feasible within the timeframes. There would need to be public hearings and consultations with Treasury who would have to give a report.

Mr Maynier said the proposals were within the framework. On the issue of timing, he said that this meeting was the slot that was given to the DA. The timing was tight but it was still within the framework. He said the Appropriations Bill was only passed in July and that Parliament should use its powers to amend the budget.

Mr Mcloughlin said Parliament was looking at amending the Money Bills Act and that when that occurred the Committee considered the difficulty in achieving amendments.

Mr Figg said that legal advice could be sought on whether the amendment was legally compliant.

The Chairperson ruled that a decision be deferred so that proper consultation could take place with legal advisors.

Briefing by the Department of Human Settlements

Mr Figg pointed out that he only received the presentation that morning. He noted the large delegation and asked what the size of a prescribed delegation was.

The Committee Secretary said that Treasury stipulations to contain costs were that delegations be no more than three.

Mr Mbulelo Tshangana, Director General, Department of Human Settlements, said that most of the delegation were based in the Cape Town office. The Department always went as a delegation of three, the DG, the CFO and the COO. He said the presentation was submitted on time, but the Department sent a more detailed presentation later which contained more information but did not impact on the presentation.

The Chairperson asked the DG to submit the Departments cost cutting plan to the Committee.

Ms Funani Matlatsi, CFO, Department of Human Settlements, said that the Human Settlements Development Grant (HSDG) was R33.4 billion. She said the Departmental budget allocation was cut by R3.5 billion over the 2017 MTEF period. The biggest part of the cut was in the HSDG. Various restructuring then occurred involving reallocations of monies in programmes such as the Social Housing Registering Authority (SHRA), where there was a restructuring Capital Grant of R768.7 million funded. The SHRA was responsible for providing affordable housing. The Government Employee Housing Scheme (GEHS) had operational requirements of R49 million.  GEHS was negotiated by the Department of Public Service and Administration and the unions and was used to help government employees buy houses. The cost of centralising the Finance Linked Individual Subsidy Programme (FLISP) was R1.1 billion. FLISP was a subsidy programme for those earning between R3 500 and R15 000 per month. The DFI Consolidation & Capitalisation was R3.2 billion. This was for the amalgamation of three Human Settlement entities into one Human Settlements Development Bank. The Asset Verification project was for R19 million. The Department was targeting developing 60 939 sites and 115 332 housing units for the year.

She then looked at the allocation of the Urban Settlements Development Grants (USDG) to metropolitan municipalities. The transfers to metros municipalities was affected by the cuts. The cuts were to Buffalo City - R6 million, Nelson Mandela - R7.2 million, Mangaung - R6 million, Ekurhuleni - R15.6 million, Johannesburg - R14.7 million, Tshwane - R12.7 million, eThekwini - R15.6 million, Cape Town - R11.8 million. The total cuts were R90 million. She then looked at overall planned USDG targets for 2017/18 (slide 23).

Mr Tshangana said that there were three main targets that were not performing. One was the eradication of title deeds. He said it was becoming increasingly difficult to mitigate the risk in the eradication of title deeds programme where title deeds was not handed over to communities. The challenge was that provinces did not see this as important. Current issues were processed and the Department tried ringfencing this part of the budget, but provinces were still not prioritising this issue. The Minister appointed a task team of conveyancers and other professionals to identify bottlenecks in the process and to solve these issues. The only province that had not yet signed on with regards to this was the Free State.

The second was the upgrading of informal settlements. He said the Department would be working towards upgrading informal settlements. Metro municipalities was not spending their USDG, especially Cape Town and Ekurhuleni, which meant that they could not meet their targets. All provinces had structures in place to track the upgrading of informal settlements in terms of stage 2 basic services.

The third was that there was slow progress on FLISP. Government was not intervening because the property market was not performing and because of the indebtedness of individuals. The Western Cape, Gauteng and KwaZulu-Natal had the biggest number of backyarders and they were being prioritised. All four major banks signed on for this programme. He said that there might be an increase in the upper threshold to R20 000.

On the housing of military veterans programme, he said the Department struggled to cleanse the data which was the responsibility of the Department of Military Veterans. 1 424 military veterans came from non-statutory military veterans and were destitute as they did not receive pensions.

On the slow performance of the social and rental housing sector, he said that there was an unstable Board. There was no CEO and the Board was dissolved, but that was now resolved. He said that the upper income band would move to R15 000.

On the rezoning of land without development rights, he said it was not just a question of getting land, it was a package and the Department had a programme it was managing together with the Departments of Public Enterprises, Rural Development and Land Affairs, and Public Works. The Committee here was chaired by a DDG official of the Department, which helped improve monitoring.

Ms Matlatsi then spoke to governance issues as raised by the AGSA. She said that vacant positions were being filled on a contract basis until the economy improved.

Speaking to the list of legislation the department was working on, Mr Tshangana said the Department was busy with the Home Loan and Mortgage Disclosure Bill which was published for public comment. The PIE Act was being overhauled, as well as the Estate Agencies Bill and the Human Settlements Bank Bill. The latter was the amalgamation of three entitles to provide end to end funding for users and developers.

Provinces have been supported with the PHP policy on self-help. The Department was working on a draft White Paper to overhaul the Human Settlements Act.

He said the accreditation framework was revised but there needed to be linkages to performance. 41 849 of land was acquired in the fourth quarter, but the rezoning process was slow.

The Department had a draft backyard rental policy which had to go back to MinMec for approval. The USDG policy was finalised and was waiting to be tabled. The social and rental housing income bands quantum was revised and was awaiting the Minister’s approval. He said the most important item was the delay in the approval of the business plans of the Eastern Cape, Free State and Gauteng because there were serious cash flow management challenges in the Eastern Cape and The Free State. Gauteng was delayed because it did not perform well for the past two years and the Department felt that it needed to be sorted out and put in place proper mitigation, up front. The provinces were being held accountable on the 30-day payment rule and the vacancy rate was being managed.

Discussion

Ms Manana said the extent of the backlog in the Western Cape, North West and Mpumalanga was unacceptably high. What was the time frame and terms of reference of the task team? What was the reaction of the eThekwini and Ekurhuleni metros to their budget reductions? Based on their business plans, were all six metros ready to use their allocation for the redevelopment of urban settlements? Did the Department have monitoring systems in place? When would the Department get a clean audit?

Mr Figg asked why there were zeroes recorded in one of the tables on page 4. Were the provinces involved in the issue of title deeds or was it driven by the Department? How was the state of intergovernmental relations? What would happen since the Free State did not sign on yet?

The Chairperson asked what was the Department doing regarding the MPAT improvement plan?

Regarding the audit issue, Mr Tshangana said that the Department implemented monitoring and evaluation at Chief Directorate level and every unit and every beneficiary went through that system. There were three levels of monitoring and evaluation. Every project had to be registered at the NHBRC, every home builder had to be registered at the NHBRC and the Department did quarterly performance reviews with the provinces.

On why there were still compliance issues in MPAT, he said that the Department was paying for the advisory services while the provinces were paying for conveyancing. The previous year there was discussions with the Department of Planning, Monitoring and Evaluation (DPME) on the customization of the targets. The DPME felt the targets were not in line with the provinces Annual Performance Plans (APP’s). The Department gave money to the provinces, so if the provinces were not performing then the Department was also not performing. Hence, the Department tightened targets and interacted with provincial HODs and the gap between the APPs was closed.

He said the Department had a fully functioning audit committee. The major part of the internal audit’s work was to tell the Department where the problems were to be found. He said the issue was a management issue and not an audit issue.

He said there had been a one hour discussion on the capability and capacity of the management of ICT steering committee.

On title deeds, he said the Department had the task team numbers. He said the task team had a two-year contract which would end in March 2019. They would advise and solve issues such as land surveying, disputes, conveyancing, retrofit plans and township registrations. He said R306 million was ring-fenced in the previous year but this did not help. The Department would pay for the advisory services while the provinces would pay for the conveyancing.

He said Ekurhuleni had brought this on themselves. It lost money through underperformance for three straight years. eThekwini was the only one who could complain because they spent all their money. However, the cuts affected all departments. The bigger impact was in the HSDG grant not the USDG grant where the cuts were R1 billion and R90 million respectively.

He said the Department had structures in place. The Minister met all the Mayors to discuss policy with all the Mayors and all agreed to the policy.

Regarding intergovernmental planning, he had to admit that it was not perfected. The three spheres had to plan together as happened for the World Cup, where there was forced joint panning on the three spheres of government, which created a pipeline of projects. Some provinces perfected such planning while others had not.

He said Ekurhuleni and Cape Town metro were affecting the Department’s performance.

He said accruals ate into the value of the grant and into the liquidity of the province and consequently, on the 30-day payment schedule. He said the Department delayed payment to certain provinces until a new business plan was delivered which demonstrated how they were dealing with their accruals. The Eastern Cape was told it could not appoint new contractors and they agreed. The Minister wrote warning letters to the HODs of the two provinces.

Regarding payment within 30 days, Ms Matlatsi said the Department put in place controls and would be applying consequence management to staff who contravened.

Regarding disputed invoices, she said that it arose because of the time it took for an invoice to arrive at the main office from other offices when invoices were sent to these satellite offices by suppliers and this created issues around when the invoice was received. Letters was written to ensure that invoices were sent to the main office whether by the supplier or the satellite offices.

Regarding the zeroes, she said these figures did not affect the budget, so they could be removed.

She said rollovers could not be assumed to be automatic. Provinces had to show what projects was committed to. This was a Treasury requirement also.

Mr Tshangana said the biggest rollovers were for North West province who applied because of contractual obligations.

He said evaluation was done in conjunction with the DPME in the Presidency’s office.

Dr Zoleka Sokopo, DDG: Policy, Department of Human Settlements, said that a series of evaluations was done on municipalities and metros. She said the policy had to be firm yet have flexibility. The Department completed the policy. It was now looking at how informal settlements were upgraded, how to assist households, whether their quality of life had improved, and whether government improved households in terms of their assets, which thus placed an emphasis on title deeds. The Department also planned other evaluations on affordable housing.

Mr Tshangana said the Department had a new organogram but was still using the old structure as the new one was not approved yet.

Mr N Gcwabaza (ANC) asked which programmes would be affected by the R3.4 billion cut in the MTEF. He asked if the RDP houses had a standard cost or whether the cost was left to the provinces. He asked if the Department’s database was linked to the provinces and municipalities. He wanted a breakdown of the companies contracted in the R32.6 billion infrastructure budget, in terms of women, youth, and disabled sectors as well as on the government set asides.

The Chairperson asked if the Department’s monitoring and evaluation was aligned to the targets and whether it was used in quarterly reviews. Were the staff trained on contract management? How close was the Department to the realisation of the MTSF goals? How could citizens reach out to the Department?

Mr Tshangana replied that he knew that provincial HODs overcommitted to projects by 10-15%, but that this was a dangerous practise. The Tafelberg matter was debated in court and the Department opposed the transaction. The Department proposed an intergovernmental relations mechanism to help provinces raise funds. When government bodies wanted to sell an asset, other government bodies had the right of first refusal on that asset. He said provincial feasibility studies was done and the Tafelberg site was well located for social housing and the Department wanted to make unit rentals affordable. The Department asked the province to reconsider the matter. He added that even the City of Cape Town was not given a chance to purchase the site.

He said the Department done a presentation to Cabinet on the MTSF. It had all the data, but it would take a full session to deal with the MTSF. The Department would forward the information to the Committee. The MTSF was also broken down per province.

Regarding dealing with townships, he said the issue was how to deal with backyarders, because the priority was always on informal settlements. The Department took a decision to create a central needs register where every beneficiary had to be a South African citizen and it would partner with the Department of Home Affairs to piggy back on their systems.

The Department would forward a list of all the projects it was involved in, including high density projects, as well as a breakdown of the contractors involved in its infrastructure programme as requested.

He said the standard cost of a RDP house was R110 000 with allowances for geotechnical variations up to R160 000. He said KwaZulu-Natal was managing these housing costs the best.

The Chairperson said the Committee would like a copy of the Cabinet report.

The meeting was adjourned.

 

 

 

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