Department of Human Settlements & Department of Water and Sanitation 2019/20 Quarter 2 Performance

Human Settlements, Water and Sanitation

19 November 2019
Chairperson: Ms R Semenya (ANC)
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Meeting Summary

The Department of Human Settlements and the Department of Water and Sanitation reported on their performance for the second quarter of the 2019/20 financial year.

The Department of Human Settlements (DHS) said it had spent R12.9 billion of its R33.8 billion allocation. This included the transfers to metros and provinces, and represented 38% expenditure against the targeted 50%. It commented that it was prudent not to transfer moneys to the provinces without the money being utilised, as it ended up being returned to the National Treasury if it was not used.

Four provinces -- North West, Northern Cape, Free State and Gauteng -- had spent way less than 50% of the funds available to them for the Human Settlements Development Grant (HSDG). Under the Title Deeds Restoration Grant, R547 million had been allocated by Treasury, and R209 million had been transferred to the provinces and stood at 85% of the unspent funds against the allocated funds. The provinces had therefore underperformed on this programme. The Department had achieved 55% of its performance targets for the second quarter. Areas that required attention included the key recommendation that the Department should include only audited figures from the provinces in the Departmental annual report.

The Members were in agreement that the Committee should create time for the officials in the provinces and departmental entities that had not performed well, to attend a Committee meeting to address the issues of non-performance. The title deeds situation was particularly concerning, and they sought clarification from the Department on what measures it had taken to address the matter.

The representative from the Department of Water and Sanitation official gave a breakdown of the performance of their four main programmes. The overall performance was at 83% for administration, 69% for planning, 42% for infrastructure and 58% for regulation.

Only 17 municipalities had submitted strategic self-assessments under the water services and local management programme, which was a voluntary process. The Departmental budget structure was divided into four programmes, and expenditure to date was 44% for administration, 34% for water planning and information management, 31% for water sector regulation, and 37% for water infrastructure development.

The Chairperson commented that the Department had not highlighted any money transferred to municipalities, or how it had been used. A Member that the Department was stuck in its old failures and he was beginning to lose hope regarding the progress it was making.

Due to time constraints, the Department’s responses would be presented at the next committee meeting.

Meeting report

The Chairperson conveyed apologies from the Minister, Deputy Minister and Ms E Powell (DA), and invited the Departmental officials to make their presentation.

Department of Human Settlements: Second Quarter Expenditure Report

Mr Joseph  Leshabane, Deputy Director General (DDG): Programme and Project Management Unit, Department of Human Settlements (DHS), said the presentation would focus on the departmental expenditure for the second quarter, and also covered the overview of financial performance and grant performance. The Department was implementing the approved annual performance plan as adopted, and was addressing the deficiencies identified in the first quarter. The report was being presented after the Ministers and Members of Executive Council (MINMEC) report that had focused on the non-performance of grants in the provinces.

Ms Funani Matlatsi, Chief Financial Officer (CFO), DHS, said that of the R33.8 billion allocated to the Department, it had expended R12.9 billion, including the transfers to metros and provinces. This meant expenditure stood at 38%, against the targeted 50%. The Department had made this decision as it was prudent not to transfer moneys to the provinces without the money being utilised, as it ended up reverting to Treasury if it was not used. Also, it was better to reserve the money rather than transferring it to the departments’ bank accounts, where it would earn less interest.

The expenditure by economic classification was:

  • Compensation of employees -- 43%;
  • Purchase of goods and service -- 36%;
  • Payments for financial assets -- 100%;
  • Transfers and subsidies to provinces and metros -- 38%; and
  • Payments for capital assets -- 26%.

 

Transfer of payments to provinces for the Human Settlements Development Grant (HSDG) was R8.9 billion, and the Urban Settlements Development Grant (USDG) was R2.5 billion. The Social Housing Regulatory Authority had received R65.7 million for operational costs, and R323 million for restructuring the capital grant.

Four provinces -- North West (39%), Northern Cape (28%), Free State (30%) and Gauteng (40%) -- had spent way less than 50% of the funds available to them for the HSDG. The Department had had separate meetings with these provinces, and the officials had been required to provide recovery plans, particularly on the programmes that were lagging behind, such as the upgrading of informal settlement programmes. The HSDG delivery of serviced sites and houses stood at 30 519 houses completed, against a target of 37 019 houses. The CFO commented that the Department had achieved the second quarter goals.

Under the USDG, the metros’ financial year began in June, so at the time of closing the Department’s second quarter books, the uptake of funds for projects had been low, and stood at 9%. The programme that had been allocated most funds in the metros was the housing and human settlements programme, at R4.97 billion, which contributed to the upgrading of informal settlements.

Under the Title Deeds Restoration Grant, R547 million had been allocated by Treasury, and R209 million had been transferred to the provinces and stood at 85% of the unspent funds against the allocated funds. The provinces had therefore underperformed on this programme.

Under the provincial emergency housing grant, the CFO referred the members to the Department’s previous presentation where areas where the funds were utilised had been highlighted. The provincial allocation for this grant was R276.9 million. R82.3 million had been transferred to KwaZulu-Natal for various disaster programmes in the municipalities in April.

Mr Leshabane gave an overview of the performance of the following four programmes -- administration, human settlements policy and strategy, programme monitoring and delivery support, and housing development finance. He said there had been 100% compliance with statutory tabling and prescripts, considering the adjustment on the submission of the annual performance plan from 30 September to 31 October.

The target to complete the internal audit plan had been set 45%, and the Department had achieved 15%. It had put a pause on the completion of the internal audit plan to focus on the performance audit of provinces. It had achieved 100% compliance on the investigation of disputes lodged with the Department. The legislative programme had been achieved, as the Property Practitioners Bill had been signed into law, the Home Loan and Mortgage Disclosure Amendment Bill had been submitted to the Cabinet, the Housing Consumer Protection Bill had been approved by Cabinet on 21 August, the Human Settlements Development Bank Bill had been drafted, and the Prevention of Illegal Evictions (PIE) Amendment Bill was being reviewed.

The DHS had implemented 77% of the annual human resource (HR) implementation plan. It had had achieved its six initiatives on international cooperation aligned to DHS priorities. It had partially achieved stakeholder partnerships mobilised towards human settlements development programmes.

The performance on the uptake of project readiness of the nine provinces was presented. The Department had to assess which programmes were at risk. It had targeted to conduct feasibility studies on 50 informal settlements, but had conducted them in only 42. It also had a target to conduct 100 informal settlement upgrading plans, but had achieved 40 as there was unrest in Mpumalanga’s Ehlanzeni and Gert Sibande Districts.

Housing for military veterans was lagging behind due to the difficulty of identification of the list of beneficiaries for the project by the Department of Military Veterans.

The programme on the revitalisation of distressed mining communities had been implemented at 23 local municipalities. The Inter-Ministerial Committee on land reform had supported the release of 14 000 hectares of state land for human settlements. 10 770 title deeds had been registered against the target of 13 000 title deeds. Provinces had not been prioritising the issuance of title deeds to houses that had been completed, and measures had been put to ensure the township register was open at the time the houses were being built.

Mr Leshabane concluded that the Department had achieved 55% of its targets for the second quarter. The areas that required attention for improved performance included the key recommendation that the Department should include only audited figures from the provinces in the Departmental annual report.

Discussion

The Chairperson said that the Committee should create time for the officials in the provinces and entities that had not performed well to attend a Committee meeting to address the issues of non-performance.

Mr M Mabika (DA) said that the title deeds situation was concerning, and asked the Department what measures it had taken to address the matter. The provinces were not prioritising the title deeds issue. He also enquired about who stood to benefit from the unutilised money that was returned to the Treasury from the provinces. He asked the Department to clarify how it dealt directly with municipalities, and whether the provinces were bypassed.

Ms S Mokgotho (EFF) recapped the part of the presentation where the DDG had stated that less money had been spent on building houses for the poor, and enquired what measures had been taken to ensure that the same did not happen again. The Department had achieved 15% on the internal audit, and yet it had stated that it was implementing plans to ensure there was an improvement in the monitoring of audit plans. She asked why there was a contradiction between the two.

Mr M Mashego (ANC) referred to the challenge that the DHS had no access to the money transferred to the provinces, and enquired what measures had been taken by the Department to monitor this. He also enquired whether the advisory committee board members had been appointed by the Cabinet and what their mandate was, as their credibility had been challenged.

Ms G Tseke (ANC) said that the provinces should be called upon to account as to why they were not spending the money transferred to them. What steps had the Department taken to act on the Minister’s commitment to issue title deeds every Friday. Departments had a tendency to submit bills towards the end of the year, which was disadvantageous in terms of the time allocated for public participation. She requested the Department to submit the pending bills early in the year, and urged it to fast track the issue of housing for military veterans. She finally asked it to clarify the issue of shifting funds for goods and services, to cover the theft of goods in the Department.

Mr X Ngwezi (IFP) referred to the performance of the expenditure of grants in the provinces, and said that there was need for action to be taken as the demand for housing was high. Harsher steps needed to be taken against officials who were not implementing the budgets. He asked what had led to the delay in the delivery of title deeds.

Mr S August (GOOD) enquired why the Department was cutting the budget for provinces that were non-performing and letting the poorer communities suffer. What measures were the Department taking to ensure the provinces delivered on their projects? He wanted to know whether there was a project management problem with the roll out of title deeds in the provinces, and what action had been taken.

Ms L Arries (EFF) asked whether there would be integration in the land and housing allocation programme, and why the Department had not attained its target for the delivery of housing in the Free State and North West.

Ms N Sihlwayi (ANC) referred to non-performing provinces, and asked whether the Department had clear challenges that made the provinces underperform. Were the sites ready for houses to be put up, and what was the status of the ownership and title deeds?

The Chairperson commented that it was important for the officials of the provinces to be called upon to account on the issues raised by the Members. The Department of Defence should also be called upon to deal with the concerns regarding the allocation of houses to the military veterans.

Department’s response

Mr Leshabane said that the intergovernmental fiscal framework provided that allocations to the three spheres of government were voted on the basis that they were allocated to the provinces following an equitable formula. If a province was allocated an amount and they could not spend, it reverted to the fiscus and not to the Department.

The Department had identified the provinces where the allocations were not being spent and had re-allocated them to other provinces to ensure the housing demand was reduced. As the Housing Development Authority (HAD) had been established to assist the provinces, it should be called up early in the financial year to account on measures taken.

He confirmed that the Department did not bypass the provinces, but dealt directly with the metros which were the direct beneficiaries of the grants.

The Department had taken a conscious decision to delay the audits, as there was a limited team that could undertake the internal audits. There was need to prioritise the provincial audits first. He said it was a good initiative for the provinces and entities to attend a meeting with the Committee and account.

With reference to the project readiness matrix, the law required the Department to first check that the projects were ready before funds were released. The Department had liaised with the necessary parties regarding the land released for resettlement to enable them to respond to spatial transformation.

The title deeds programme was dependent on the establishment of township settlement programmes. For example, engineering certificates had to be issued and the beneficiaries singled out.

Ms Matlatsi said there was no shift of funds for goods and services, as this could only be done after the midterm review.

The Chairperson said that the issue of the title deeds should be further clarified when the provinces were called upon to account. She emphasised that there was need for a regulation to cater for the issue of individuals who wanted to sell the houses. She proposed that the state should be the first beneficiary so that it could redistribute to other beneficiaries.

Department of Water and Sanitation: Second Quarter Expenditure Report

The Department of Water and Sanitation (DWS) gave a breakdown of the performance of their four main programmes. The overall performance was at 83% for administration, 69% for planning, 42% for infrastructure and 58% on regulation. It had underperformed on the expenditure of the annual budget, achieving 37% against a target of 40%. This was due to the vacant posts across the programmes as a result of the cap on compensation of employees and infrastructure projects. The recovery plan was that the Department was in the process of filling the vacancies through reprioritising infrastructure projects.

Performance in water planning and information management had varied between 50% and 100%. Integrated planning had been delayed for Orange and Crocodile West programme due to the complexity of two systems which the internal staff had found difficult to integrate. An external service provider had been sought.

Only 17 municipalities had submitted strategic self-assessments under the water services and local management programme, which was a voluntary process. A socio-economic impact assessment on water and sanitation was still ongoing, and a dispute between the Department and the service provider had led to non-completion of the report.

The National Water and Sanitation Bill had not yet been tabled due to the amalgamation of the Water and Sanitation and the Human Settlements departments. It was prudent to first have a joint top management meeting before the bill was tabled.

Under strategic infrastructure development and management, the Clanwilliam construction of the bulk raw water projects was at 5% completion. The projects under this programme had been delayed because the memorandum of understanding (MOU) for access to communal land for the pipeline servitude, and the fast tracking of the procurement processes for the appointment of the environmental coordination officer and the occupational health officer was yet to be finalised.

Other projects were awaiting construction permits. The sub-contractor in the Goedertrouw project had gone into business rescue, which had occasioned the delay. The officials presented the recovery plan for each project. There had been a delay in the construction of the dams under the dam safety rehabilitation plan. The number of large regional bulk infrastructure project phases under construction was 47, against a target of 51.

The number of the existing bucket sanitation backlog systems in formal settlements to be replaced with adequate sanitation services had not been achieved because of procurement delays.

The Department was in the process of reviewing the terms of reference for the economic and social regulator. 143 out of 236 applications for water use authorisation had been finalised.

The 25% financial management programme was not achieved. Its inability to recover debt had increased from 150 days to 178 days, mainly due to the persistent problem of the municipalities and water boards not settling their debts. The recovery plans included interventions through the Inter-Ministerial Task Team and recommendations from an advisory panel.

The Departmental provided details of its expenditure against its R16.5 billion annual budget, and said it had spent R6.1 billion (37%) in the first six months. Transfers and subsidies had amounted to R3.9 billion, representing 43% of the annual appropriated budget of R9.1 billion. The Regional Bulk Infrastructure Grant to provinces under direct transfers stood at 27%, and the indirect transfers, which related to payment of invoices, was at 18%. R567 million (71%) had been transferred to the water boards. Direct transfers under the Water Services Infrastructure Grant (WSIG) to the provinces stood at 23%. Mpumalanga had spent 255% in respect of indirect transfers.

The Department presented a summary of expenditure narratives on under spending on the compensation of employees, goods and services, transfers and subsidies, payments for capital assets and accruals and payables category. On the budget adjustment process, it had reprioritised the infrastructure allocations from under spending projects to those with the capacity to absorb. It had further reprioritised funding towards the Blue Drop/ Green Drop programme, to improve drinking water and waste water quality management.

The Departmental specifications, evaluations and bid adjudication committees were now functional, and all the procurement requests had been processed. Total commitments now amounted to R3,999 billion, and project management interventions were under way. The rollovers that had been received from Treasury were being directed to the Vaal project. The Regional Bulk Infrastructure Grant (RBIG) related projects that had been affected by the Adjusted Estimates of National Expenditure for the provinces, was also highlighted.

The 30-days compliance report showed that in September, the number of invoices that had not been paid and were older than 30 days stood at 169. The total income from the Water Trading Entity stood at R7.7 billion. The water sales debt balance as at September was R15.2 billion, which represented an average increase of 5% from March. All customer categories were lagging behind in terms of the settlement of the water use debt, and there were follow up processes in place.

Discussion

The Chairperson commented that the presentation had not highlighted any money being transferred to municipalities, or how it had been utilised. This was important for transparency and accountability, to enable the Committee to exercise its oversight role effectively.

Mr Mabika said the problems of the Department were far from over when considering all the programmes. He sought clarification why the department was underspending on most of the programmes and gave an example of programme 3, where the Department had stated that the programme did not proceed as there was no favourable tender. He sought further clarification on the allocation of grants to the provinces, aand how the Department arrived at decisions to allocate particular sums of money to some entities and provinces. He further sought to clarify what the delay in the delivery of performance bonuses meant.

Ms Mokgotho asked what the reason for the overspending on the WISG project in Mpumalanga was.

Mr Mashego commented that the Department was stuck in its old failures, and he was beginning to lose hope with the progress it was making. The officials had taken the Committee many steps backwards after previous meetings with the DG. The Committee had agreed with the proposals, but the Department now needed to present a programme on how to implement them, indicating how it was reaching out to the municipalities to teach them how to integrate the system.

The Chairperson responded to Mr Mashego’s concerns, and said that the current meeting was in regard to the second quarterly report. It was a backdated routine report presented to the Committee. The deliberations and proposals made during the previous meetings would be discussed.

Ms Sihlwayi referred to the bulk raw water projects under construction, and asked why the Mzimvubu project was still under construction after many years. Why did Gauteng did not have an allocation? Why did the Eastern Cape not have any WSIG? She was happy to see that there was a budget considered for Vaal River. She also enquired how the Western Cape had dealt with the programme on desalination, and whether other provinces could benefit from their experience.

Ms T Marawu (ATM) asked the Department to paint a clearer picture to the Committee on what had been covered in the report.

The Chairperson sought clarification on why there was overspending in Mpumalanga. She observed that most of the municipalities’ financial years ended in June, and there was a need for the Committee to locate where the money was being spent. She asked the Department to clarify the provinces and the municipalities where all the projects were based. How far was the Department in complying with the issues raised by the Auditor General?

Due to the time constraints, the she asked the Department to attend the meeting next week to respond to the issues raised.

The meeting was adjourned.

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