NHBRC, DHS, RHLF, NURCHA + NHFC 2016/17 Annual Report, with FFC input

Meeting report

NHBRC: Annual Report Briefing

Ms Thitinti Moshoeu, Executive Manager: Business Services, National Home Builders Registration Council (NHBRC) listed the key events at the NHBRC in the year under review as follows:

• Growth in new registrations from 4 384 to 4 879 and growth in new renewals from 12 602 to 13 342, bringing the total active home builders to 18 222, as against 16 986 in the previous financial year.

• Growth of enrolments in the non-subsidy sector from 49 640 to 51 990, while late enrolments within the same sector moved from 1 030 to 1 287. The total home enrolments have moved from 50 670 (2016/2017) to 53 277 in the year under review.

• Inspection of 113 379 and 94 528 on-going home construction works under the non-subsidy and subsidy sectors respectively.

• R8 164 518 spent on claims against NHBRC over remedial works on houses that could not be rectified by home builders.

• Remarkable growth in compliance plans, from 73% in 2015/2016 to 77% in 2016/2017.

• Suspension of 142 home builders for various offences relating to lack of compliance with the NHBRC mandate, while 445 home builders were referred to the NHBRC disciplinary committee.

• Staff strength of 670 as at 31 March 2017, of which 626 were permanent and 44 temporary staff; 238 male and 302 female.

• Training of 7 619 people in the year under review -- 3 570 male and 4 049 females. These comprised emerging home builders, military veterans, artisans, people with disabilities and youth.

• Irregular expenditure of R6 180 773 in the year under review. This could be attributed to leases (i.e. new leases contract), security contract, insurance and information communication technology (ICT) contracts. Measures had been put in place to mitigate irregular expenditure in the 2017/2018 financial year.

• The external audit opinion for NHBRC was unqualified, with some matters of emphasis and no material findings.

Ms Moshoeu said referred to EIQ system challenge at the beginning of the year. Only 18 defects were still pending out of the 60 defects reported, while issues with the pending defects were currently being resolved.

Mr Shafeey Abraham, CFO: NHBRC, reflected on the issues of emphasis raised by the Auditor General (AG), and grouped them under three major sub-headings:

1. Contingent liabilities, which resulted from the nature of the NHBRC as a regulatory entity;

2. Performance information and achievement of targets; and

3. Irregular expenditure.

In other to rectify and stop these issues, continuous workshops were on-going to ensure good understanding of performance information, accurate documentation, correct reporting as well as proper accountability of accurate numbers on monthly basis. These would correct all issues raised with performance and achievement of targets. As for the contingent liability, NHBRC would further engage the AG to work out modalities on how to declare losses brought against the entity, which was a major part of these liabilities. Matters relating to irregular expenditure would be dealt with in detail as his presentation proceeded. Key financial achievements were:

• Growth in the warranty fund profit, from R19 million in 2016 to R54 million in 2017;

• Growth in the investment portfolio, from R258 million in 2016 to R415 million in 2017;

• Net cash generated from operations amounted to R17 million, while R879 million was earned as total income after actuarial adjustment. This was an improvement on R801 million earned in 2016, bringing the total operating profit to about R77 million, which was in line with the actual budget.

He said that unlike previous years, when the NHBRC struggled to bring administrative costs under control, administrative costs went below inflation in the year under review, amounting to R715 million. Irregular expenditure was also reduced, from R13.6 million in 2015/2016, to R6.2 million in 2016/2017. He added that control processes and procedures had been put in place which would eradicate irregular expenditure in coming years.

An overview of NHBRC’s income status over the last six years was given. Operating profit had been on a steady growth, particularly in the last three years. Investment income in 2016/2017 amounted to R411 372 303, which resulted in a total profit of R488 273 300 in the year under review. This gave the entity financial stability and guaranteed continuous operation in the coming years.

Discussion

Mr H Mmemezi (ANC) commended the NHBRC on delivering a detailed report. However, he observed that the entity was not doing as well as it had in the past. People representing the entity, such as inspectors, were not doing their job very well. He cited a situation where inspectors who were supposed to display the good image of HNBRC now colluded with contractors to compromise standards in home building. This was an issue that must be addressed as a matter of urgency. Suspension of inspectors and contractors should not be prolonged more than necessary. Appropriate sanctions should be implemented in good time because “justice delayed was justice denied”. Also, irregular expenditure had now become a frequent feature in NHBRC annual report, despite the AG’s recommendations over the past years. He said this was unacceptable, and requested a commitment that this would not repeat itself in the 2017/2018 financial year. NHBRC should also beware of approving the lion’s shares of available contracts to a few “big contractors” without proper consideration for the small sub-contractors and previously disadvantaged “nobodies” who were meant to be assisted as a priority.

Mr M Malatsi (DA) said the NHBRC presentation indicated some level of stability within the entity after the recent leadership problem, but he was curious to know the training modalities adopted by the NHBRC. How was the effectiveness of training being measured, and what methods were put in place to track the progress of the trainees, especially after the training? What were the effects of the recent leadership instability on the administrative and financial performance of NHBRC?

Ms L Mnganga-Gcabashe (ANC) commented that the issue of non-compliance as contained in the AG report could be well justified. Oversight and monitoring of both inspectors and contractors had not been adequately implemented. Members of the Committee had encountered some cases during its oversight function in North-West Province, where funds had been released for a long time, but there were no houses on ground -- to the extent that major municipalities were no longer willing to work with the NHBRC. She urged the national NHBRC to visit the North-West Province and see the bad performance of the entity by themselves. The entity could also do better than what the Committee had seen on the ground when they visited Mpumalanga.

Ms Mnganga-Gcabashe requested more information on the consequence management strategies put in place to ensure subsequent performance improvement, and the specific time at which the AG and National Treasury would be engaged for consultation. Why was an appropriate measure not in place to mitigate the missed completion date, and the issue of interest on late payments, which also fell under irregular expenditure?

The Chairperson said while the Committee appreciated the noticeable decline in irregular expenditure in the year under review, the entity should not forget that the quarterly submission of their progress reports had been recommended during the 2015/2016 performance briefing. This periodic review was necessary to guide the entity before the end of each financial year. He said the NHBRC had been in the media for the wrong reasons, citing recent media alerts on the suspension of some top executives as a development that was embarrassing for Committee. She asked for a reaction to this in relation to the stability assurance of the entity. The issue of blocked projects -- projects standing still – had been observed in all provinces during the oversight visits, and concerns about training were also raised. The Department should look for ways to deal with the issues appropriately.

The Chairperson asked whether the NHBRC was monitoring the 30 days’ payment of contractors by the department and provinces, adding that business activities had been crippled for many contractors due to the lack or delay in payment. The revelation about ICT contractors continuing their job after expiration had to be clarified, especially as it related to some of the root causes of irregular expenditure. Procurement of goods and services without proper due process also needed to be clarified, and measures put in place to deal with quality assurance issues should be well documented.

Response by NHBRC

Ms Julieka Bayat, Acting Chairperson: NHBRC, accepted the constructive criticism by the Committee Members. Since the NHBRC now had a vibrant CEO, the expected positive changes would be delivered in a not too distant time. All four NHBRC council members had been provisionally suspended after a group of staff had petitioned the council over some irregularities they had observed involving the council members. A private service provider had been hired to conduct an investigation and the provisional suspension had been substantiated after some anomalies, which involved these members, were revealed in the report of their investigation. Stability was ensured during this period by appointing an acting CEO to oversee the day-to-day running of the entity. Thereafter, the council had pushed very hard for the appointment of a new CEO.

She expressed disappointment and displeasure over the relationship between the NHBRC and the provincial authorities, adding that she had visited North-West province with a member of staff before. A repeat visit would be made to North-West, as well as to other provinces.

Mr Rhetola Margathe, Council member: NHBRC said that the council was equally worried about the stability of the NHBRC, and had set-up a human resources committee which was to work on re-organisation, and he hoped that there would be visible result before the end of December. Though the Council had been to North-West earlier and even made some commitments, there would be a re-visit to check the remaining problems yet to be resolved. The concern of Members over irregular expenditure and the lack of proper monitoring had also been identified by the council, and a task team had been set up to look into the root causes of such disappointing situations. Contractors and inspectors that compromised NHBRC standards would be black-listed and made public so that it would be difficult for the contractor to come back. Modalities would be put in place to harmonise and monitor the progress of on-going projects and, as requested, a working document to this effect would be put in place before the end of January 2018.

Mr Abraham said issues about ICT contractors which appeared in their report were historic contributions, and all projects had been concluded.

Ms Moshoeu said that out of about 7 000 women that had been trained, 100 had set up their personal businesses and were about to graduate. There was collaboration between the NHBRC and entities such as the Black Business Council and other sister entities. This had been approved by the council. The NHBRC was also assisting their trainees with the registration of businesses, so that they would not end up as sub-contractors. In this category were eight women who were recently assisted. To the best of her knowledge, the projects blocked were due to issues bordering on lack of compliance, poor workmanship or other standards-related issues. Engineers had been deployed to provinces to monitor activities of the NHBRC in each province and check the suitability of contractors and project sites.

Mr Joseph Leshabane, DDG: Deputy DG: Project and Programme Management, DHS, said it was inevitable for the NHBRC to brace up and put some standardisation measures in place in order to win the heart of industry. Linkages between various regulatory agencies in the sector should also be strengthened to have a seamless system of inspection.

Mr Mziwonke Dlabantu, the new Chief Executive Officer, pledged his readiness to bring positive changes to NHBRC activities, stating that some of the challenges were not new to him.

The Chairperson said there seemed to be a consensus from all stakeholders about what was happening at the NHBRC, which made the task of rebranding the entity an easy one. What was left now was for the Board and management team to put all hands on deck, solve the problem of unaccredited inspectors and rise to the challenge of rebuilding the entity. She said that the Committee would be expecting a blueprint of their plan on every issue discussed before the December holidays.

National Urban Reconstruction and Housing Agency: Annual Report Briefing

Mr Viwe Gqwetha, Managing Director: National Urban Reconstruction and Housing Agency (NURCHA) gave a brief recap of NURCHA activities in the last five years, highlighting key areas of intervention. The organisation was in the process of consolidation with the Human Settlements Development Bank (HSDB). It had been a challenging year, but NURCHA had achieved a surplus of R20 million after impairments. The R117 million Public Investment Corporation (PIC) facility was still retained with NURCHA, and agreement had been reached to carry-over the facility to HSDB.

R8.440 billion projects had been executed under affordable housing, R11.563 billion under subsidy housing, while infrastructure and community facilities amounted to R3.972 billion, bring the total intervention delivered by NURCHA since inception to R23.975 billion. In the year under review, 28 new projects were signed under subsidy housing, giving a total of 55 active projects under subsidy (both old and new). Out of these 55 projects, only five could not be completed due to capacity constraints. Under affordable housing, eight new projects had been signed up until lending was suspended between November 2016 and May 2017, due to a shortfall in lending capability. There were now 30 total active projects under affordable housing across the country.

NURCHA was developing collaborations and cordial relationships with partners across government spheres and private institutions. Hands of fellowship had also been extended to emerging developers, with a 33% share in affordable housing. Women had been assisted, and 51% of contractors under the subsidy housing portfolio were women. There was high staff morale with satisfactory productivity and zero resignations in 2016/2017.

Contractor Finance and Development Programme (CFDP) initiative projects had been successfully implemented in Nelson Mandela Bay Metro and the total summary of loan repayments as at March 31, 2017 was R149 562 409 (total overdue), R245 119 243 (total not yet due), and R17 108 499 (impairments). These made the total outstanding loans amount to R394 681 652. The provincial spread of this loan was GP:50%, EC:15%, WC:9%, LP:9%, KZN:8%, MP:6%, and FS:3%.

Mr Nxusani presented the aspects of the report that dealt with governance issues. The company had a total of 11 Directors (eight non-executive and three executive directors), four committees (audit, fncom, HHCTC and remuneration committee) and four board meetings were held during the year under review. An unqualified audit opinion was received, but there was emphasis of matter relating to development finance institution (DFI) consolidation. R13.4 million in irregular expenditure was recorded for the year under review -- R10.5 million of this related to contracts signed in 2016 while R2.9 million had to do with a contract signed in 2017, and the remaining part related to a tender that did not appear on e-Tender due to anadvertisement failure. Appropriate actions have been taken for non-compliance against the employee involved.

42% of NURCHA’s income comes from programme management fees, 38% from investment on loans, 9% from interest on money market investments, 7% from fees on loans for construction, while the remaining income comes from other sources. Within the year, R137 293 million was earned as revenue from exchange transactions, while the surplus for the financial year was R20.320 million. He concluded that the company had sufficient resources to continue operating, with or without consolidation.

Discussion

Mr Mmemezi commended NURCHA executives for a clean financial year and an unqualified audit opinion. However, the issue of the failure of the advertisement on the e-portal should have been argued with the AG. The contractor development programme of NURCHA was good and laudable, but the entity should also focus on the “small” hardworking contractors so that the resources could be spread across all potential beneficiaries. Under-performance was not a welcome development. It was good for the company to put all budgeted cash released to them to profitable use.

The Chairperson acknowledged the proper management of the consolidation process by NURCHA. Employee sanctions were good, but consequence management was important for organisational growth. This was important considering the staff involved with irregular expenditure of the company. The NURCHA report was so far satisfactory, but the project in Nelson Mandela Bay should be replicated throughout the country.

Response by NURCHA

Mr Gqwetha said the company welcomed the positive response by the Committee and would focus more on the corrections as suggested.

Mr Neville Chainee, Deputy Director General, DHS, commended the management team at NURCHA, especially with the way they had managed the transition process.

Rural Housing Loan Fund (RHLF): Annual Report Briefing

Mr Jabulani Fakazi, CEO: RHLF said that despite the tough financial year, the Fund was performing satisfactorily. Three start-up companies were supported under the transformation imperatives programme -- Kabo Financial Services, Lehae Housing Finance Limited and the Igatsha Rural Development Finance Limited. These were entrepreneurs who had clients registered under them. Community-based organisations supported were the Shiyendele Building Club and the Thusanang Basadi Building Club. The community-based projects were mainly pensioners who could not wait for too long to enjoy a quality life style. Boikago SACCO, a cooperative loan and savings society based in North-West, was also supported.

The RHLF was currently working with over ten cooperative societies to deliver its mandate. In summary, 43 187 loans were disbursed in the 2016/2017 financial year and the agency had confirmed that 99.3% of the loans were used for housing. On the five years medium term strategic framework targets, the RHLF currently sat on 53.7% targets achieved, with 60% time elapsed. Rural nodes were prioritised in loan disbursement, however, and R28 542 779 had been used to support special presidential packages (SPP) in mining towns.

Mr Bruce Gordon, CFO, said 13 projects had been visited and the level of achievements by loan benefactors had been impressive. R286 867 million was disbursed to retail intermediaries. The organisation considered training as being critical to corporate development. R479 000 was spent on staff training of postgraduates at various levels. The capital base of the RHLF included a KFW bank cumulative grant, a KFW/DBSA loan, and a DHS cumulative grant and profits. The audit opinion on the financial statement was clean, with no material findings and no any instance of material non-compliance.

Mr. Fakazi said tough market conditions persisted all through the year under review, but the company had been able to manage the situation. A growth of 2.5% was achieved despite tough economic situations, and the major focus of the team was now on DFI consolidation.

Discussion

Mr Mmemezi commended the RHLF team for a detailed presentation, fortheclean audit report and for representing the Committee well in their activities. This showed that the entity had a proper understanding of its core mandate. The ability to carry-on with the smooth running of the entity despite working on consolidation, was also highly commendable. He was expecting to hear the big names in mining industries and the Chamber of Mines as part of their capital base. However, he was disappointed that none of them had been responsible to the entity. RHLF executives were urged to contact the mining companies and the Chamber of Mines, and seek their assistance in the coming financial year.

The Chairperson said the RHLF had impressed her and the Cmmittee with the clean audit report. Every observation raised by the Committee at their last presentation had been incorporated in the 2016/2017 annual report. This showed that the entity embraced correction, and she urged them to carry on the good work with the HSDB after consolidation.

Response by RHLF

Mr Fakazi said the comments of the Chairperson and Mr Mmemezi were noted and well appreciated. The RHLF was currently in talks with the Marikana Housing Development Company and the Committee would be briefed appropriately on the outcome of their discussions. The Chamber of Mines had been engaged twice, but none of this had yielded a result. He promised that his team would go back again and discuss funding with them.

Financial and Fiscal Commission: Annual Report Briefing

Prof Daniel Plaatjies, Chairman: Financial and Fiscal Commission (FFC) pleaded with the Committee to always make full use of the Commission in dealings of the Parliament. Several presentations had been made to the government concerning human settlements. Implementation of some of the FFC’s recommendations was yielding positive results in six metros: Ekurhuleni, Tshwane, Johannesburg, eThekwini, Nelson Mandela Bay and Cape Town. Though the 2015/16 recommendations to government were all accepted, there had been no progress on their implementation.

Ms Nomfundo Vacu, FFC Researcher, said the housing sector had gone through a number of policy changes, especially in the last seven years. These included adoption of outcome 8 of the National Development Plan (NDP), state guarantee funding for the housing gap market, and the establishment of the Municipal Human Settlements Capacity Grant (MHSCG) to assist metros on the housing function shift. Some of these changes had resulted to several uncertainties on the housing function shift. Revision of the accreditation approach was also yet to be finalised for implementation, and there had been a “slow down” on the accreditation to all levels for 2015/2016. Other events were the transfer of the sanitation function to the Department of Water and Sanitation (DWS) and an increasing contraction in the number of houses delivered per annum. Housing affordability was highly influenced by economic variables such as inflation, interest rates and unemployment. The high rate of unemployment in South Africa and recent increase in interest rates by the Reserve Bank and other commercial banks had resulted to high housing prices which deterred access to houses, especially for low income earners.

Mr Sabelo Mtantate, FFC Researcher, said increasing informal settlements and inadequate housing were the major problems of metros. The housing backlog had increased from 1.5 million in 1994 to 2 million houses in 2017. The housing gap was growing higher within the housing gap market (households earning between R4 000 to R17 000 per month). The most pressing need within the housing gap market was between households earning of R4 000 and R17 000. The continuous decline in the housing units delivered per annum could be attributed to a lack of sustainability of the current delivery model, increased costs and a change of policies. Government had constructed over four million housing units since 1994, but an estimate of between 700 000 and 900 000 of government subsidised houses were yet to be transferred to their eligible beneficiaries. The backlog on title deeds was a negative constraint for beneficiaries wishing to improve their own housing conditions, or were passionate to climb up the housing ladder. Developable and well-located land that was suitable for housing was also limited, and the only option for government was to consider multiple storey units. Another alternative which the commission had always championed was to consider brownfields development as opposed to greenfields, and there must be incentives for this alternative.

Mr Mtantate said there had been a decline in the real and nominal growth rate of the total DHS allocation between 2011/2012 to 2016/2017. A slight increase was expected in 2017/2018, all things being equal. 97.5% (R29.9 billion) of the total allocation of R30.6 billion went to conditional grants and this had been the trend over the years. The average spending performance of the Department ranged between 98% and 99% of the allocated funds, which was remarkable. The spending performance of the Department in the four programmes -- administration, human settlements policy, strategy/planning, human settlement delivery support and housing development finance -- was good, but the FFC had concerns over the Department with respect to material under-spending, mainly on the compensation of employees, implementation of the National Urban Settlement Programme (NUSP), which was running behind schedule, and the State Information Technology Agency (SITA) not providing required services as per the service level agreement that could not be paid.

The AG had observed that the financial statements of the Department for 2015/2016 and 2016/2017 were not prepared in accordance with the Public Finance Management Act (PFMA), and again there had been fruitless and wasteful expenditure due to inadequate preventive controls. The following was recommended by the commission:

• The DHS should undertake a review of the FinanceLinked Individual Subsidy Programme (FLISP) so that individuals who were single and without dependants would be included as beneficiaries, and also implement the programme in a standardised manner.

• Provincial departments of Human Settlement and other key departments should align their delivery plans particularly for the new human settlements developments.

Discussion

The Chairperson noted that FFC presentation would have been better at the DHS and in the presence of key officers of the department. The Committee had earlier recommended a bilateral discussion between the FFC and the DHS, especially on policy review and accreditation. She asked Mr Leshabane for clarification and an update on this.

Mr Leshabane said the meeting between FFC and the Department was still outstanding. The Department had not ignored the recommendation of the Committee but there was an on-going policy adjustment programmes which had made it a burden for the Department to reach out to FFC.

The Chairperson said regardless of whatever may be going-on, the meeting should have been held. He asked the Department to organise the meeting and report back to the Committee on November 7, 2017.

Mr Mmemezi said it was very disappointing to hear that the Department was yet to organise the meeting with the FFC. The entire Committee was in support on the deadline given by the Chairperson to the Department to submit the report. He commended the chairperson of the FFC for building a second layer in the Commission by bringing the young staff along to the Parliamentary briefing. All the problems identified by the Commission in the report were welcomed but it was would be better if appropriate solutions were given for each problem, especially with the issue of title deeds.

Mr M Bara (DA) thanked the Commission for the presentation and expressed his disappointment on the fact that the Department had not met with FFC. The issues raised were true reflections of what the Committee Members had observed as well, and it had been coming up repeatedly every year without proper resolution. Under-spending must be addressed since the fund was made available for specific projects in the first instance. Demand and supply of houses was like “a bottomless pit” which may never be filled, especially with increasing population growth. A review of the housing policy was urgently needed to reflect the current challenges in the country.

Ms Mnganga-Gcabashe said she was also in support of the deadline given to the Department by the Chairperson. Most of the recommendations by the FFC had indeed been itemised to the Department since last year. Issues focusing on accreditation were part of the main reasons the meeting was recommended, and the transfer of the sanitation functions to the DWS needed to be justified convincingly with the FFC. The decline in housing unit delivery and under-spending were also issues that required urgent attention by the Department.

Response by FFC

Prof Plaatjies said both the FFC and the Department must discuss and come to an agreement in the best interests of progress otherwise it would be a cyclic move year after year. The work of the Commission was to give recommendations to Parliament and the portfolio committees, based on views and opinion of the Commission. He promised to dig into what had been happening around title deeds and report their findings. Though the current situation was not good enough, South Africa would be better placed within the next 20 years with respect to the availability and affordability of housing if the right measures were taken.

Mr Mtantate said a meeting had been held between the FFC and the Department on 6 November 2015, where issues about accreditation were discussed. It was clear that the Department had decided to re-schedule the accreditation framework, and what the FFC was pushing for was that the process of finalising their new approach should be fast-tracked so that implementation would proceed and the challenges would be addressed.

Mr Chainee responded on behalf of the Department. He said it was already in possession of a framework which reflected most of the concerns raised at the meeting, adding that the meeting fixed for November 7, would be a good opportunity for the Department to make the necessary submissions.

Mr Leshabane said consulting with the FFC would require some legal process. While the department was not having any problem with the development, he just wished to bring it to the notice of Committee Members.

The Chairperson said the Minister, through the DG, undertook to interact with the FFC. The legal implications were well understood, but for the FFC and the Department to be on the same plane with regards to several developmental issues such as accreditation and adjustment of policies, the discussion had to take place. The PC would be expecting feedback from both the Department and the FFC by November.

National Housing Finance Corporation (NHFC): Annual Report Briefing

Mr Samson Moraba, CEO: NHFC, gave a brief background on the establishment of the NHFC in 1996. It had been capitalised with R390 million as a DFI which was 100% owned by the government, but it now had total assets of R3.3 billion and total liabilities of R358 million. It was established as a self-sustaining entity, which implied that NHFC was not on an annual allocation. The target group of the NHFC were the low-to middle-income households with monthly incomes between R1 500 and R15 000.

Over the years, the NHFC had created value through social housing rentals (39%), privately-owned rental housing (29%), home ownership (16%), incremental housing (6%) and strategic partnerships (10%). Through these interventions, the company had built confidence in the market, and banking institutions were beginning to come into partnership. Nedbank was at the moment financing some inner-city development projects. The projects used to be in Johannesburg before, but now they had been extended to KZN, Durban, PE and Cape Town. The NHFC also collaborated with the private sector. Notable among them was Old Mutual, with the partnership resulting in the establishment of a company called the Housing Investment Partnership, which had delivered about 3 000 housing units to date. The NHFC had put R7.4 billion into the affordable housing market and through the various partnerships, an additional R19 billion had also been contributed to the affordable housing market by the private sector. R400 million had gone to the development of the inner-city from the NHFC while private sectors had also put a total of R2.1 billion into the inner-city project.

Ms Zonia Adams, CFO, said R83 million was declared as profit before tax in the year under review, while 514 000 cumulative housing unit opportunities were delivered through NHFC’s direct funding interventions and partnerships. She said the NHFC as a company had 54 staff and an additional 17 from its subsidiaries, giving it a total of 71 staff (47% male and 53% female).

Mr Lawrence Lehabe, executive manager, said 36 153 housing opportunities had been facilitated through disbursements and leveraged funds. There were137 381 beneficiaries, and 8 802 jobs were facilitated through the process, and R1.634 billion had been pulled into the sector. There was R45.576 million profit after tax in the year under review.

Ms Adams noted that the company’s target was exceeded in the housing programme and beneficiaries. The audit opinion on finance was unqualified, with no material findings. No issue of non-compliance with laws and regulations was discovered. The key focus of the company was now on completion and approval of the HSDB establishment documents such as policy, enabling legislation, business case and capitalisation towards a fully integrated HSDB.

Mr Moraba said out of the four major lenders to be carried over through consolidation to the HSDB -- one from NURCHA, two from NHFC and one from RHLF -- only two had consented to the terms of the agreement, while a response from the other two was being awaited. It was, however, optimistic of their positive opinion. The three entities were yet to receive PFMA approval from the National Treasury. The approval was being awaited to allow conditional precedence of a donation agreement with which NHFC could now take the assets and liabilities of NURCHA and RHLF into their balance sheet. Once these two steps were completed, the three entities would be a single entity. The policies of the three entities had also been reviewed with a view to forming a single working policy. He noted that whatever was best practice within each entity had been identified for adoption in the HSDB, with the assurance that no employee should be worse than where he/she was coming from after consolidation.

Discussion

Mr Mmemezi said the NHFC must have worked very hard to be exempted from debt. Targets had been met and even surpassed, noting that he was well pleased with the level of staff satisfaction especially as the three entities were planning to be merged together.

Mr Malatsi said the NHFC was a shining example of an organisation that was working. He urged them to continue with the good work, even after consolidation.

Ms Mnganga-Gcabashe said the Committee was happy with the smooth transition, especially with the consideration for improved staff welfare. She asked for more clarification about the PFMA.

The Chairperson referred to the synergy between the three entities and asked for the projected time that the HSDB would take-off.

Response by NHFC

Mr Moraba said when the two earlier mentioned outstanding conditions were resolved (the two funders and PFMA approval), all conditions pertaining to consolidation of the three entities to a single one would have been fulfilled. Thereafter, a single entity would be established and the next step would be formulation of a business case about the bank, and enabling legislation which actually was a Parliamentary process which would ultimately result in the creation of HSDB. He noted that these were the processes -- the three entities were handling the operation aspects while the Department was in the best position to answer questions involving other aspects.

Mr Leshabane said the process was in two phases. There was the amalgamation which had been well discussed, noting that the Department was in the stage of developing a business case and drafting of the bill that would ensure a proper take-off and smooth running of the HSDB. It may be difficult to give a particular timeline, because of the complexity of the processing issue. There was a business case already, but it had to be subjected to scrutiny by the relevant personnel outside the Department, and similarly the draft legislation was subject to those processes. Once those processes were completed, it would come down to the Committee. He confirmed to the Committee that the Treasury and the budget process had confirmed that the capitalisation of the Bank had been agreed to in principle and what they were waiting for was the legislation which he had talked about.

The Chairperson welcomed the response from NHFC and the contribution of the Department. She said that the Committee had accepted the invitation of the three entities and would visit them before the HSDB took off properly.

The meeting was adjourned.