Western Cape Adjustments Appropriation Bill; with MEC

Human Settlements (WCPP)

27 November 2019
Chairperson: Ms M Maseko (DA)
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Meeting Summary

Documents handed out: Western Cape Adjustments Appropriation Bill 2019

The Western Cape Department of Human Settlements explained the budget allocation adjustments contained in the Western Cape Adjustments Appropriation Bill for the department.

Members asked why the emergency allocation was applicable only to the Cape Town Metro when other regions also need this emergency allocation. Members raised concern why George has an adjustment of R146m and an explanation of this large scale adjustments to the Human Settlements Development Grant (HSDG) allocation. Members asked the number of contributions it would be making to bulk infrastructure especially in the City of Cape Town and for assurances the backlog will not be increased and that the speed of implementation will be sufficient to support the top structures.

Meeting report

In his introductory remarks, the Western Cape Minister of Human Settlements, Mr Tertuis Simmers, said the meeting is to take cognisance of adjusted estimates of the provincial revenue expenditure. A few points to note is that the infrastructure expenditure to end September stood at R56.4% or R1.1billion against the main budget of R2.1billion. The expenditure is above the national benchmark of 50% and Western Cape is the only province that managed to attain this.

Key challenges that impact service delivery:
• There is the lack of bulk services which restricts the capacity to roll out residential developments and upgrading of informal settlements. This escalates costs and is worrisome to local governments.
• Land invasions and vandalism. A case in point is Velddrif which is adding a burden to service delivery costs. It is becoming more apparent that law enforcement is unable to enforce the law on land invasions.
• Rapid rate of urbanisation not only to the City of Cape Town but on its outskirts. Popping of informal settlements is becoming more frequent. It places demand on services from local government and partners. Sadly the budget is not aligned to what is happening in the province and this is becoming very concerning and in the next three years, instead of allocating more funding to the province, the contrary is the case.

The adjustment budget contained in the Western Cape Adjustments Appropriation Bill provides a 5.7% or R121.74m increase to the budget of Western Cape Department of Human Settlements (WCDHS). The rationale for the budget movements were all explained. They include R83.33m transferred to the WCDHS for the Provincial Emergency Housing Grant utilisation budget which came at the latter part of the provincial cycle. R3.415m from the National Department in July 2019 utilised for the December 2018 Wupperthal disaster which was unforeseen and unavoidable. In the 2019 cycle there is revenue of R34.5m approved for bulk and related infrastructure services that fall outside the Urban Settlements Development Grant (USDG) realm. They include the Belhar CBD site and R10m for innovative housing solutions in George. The realities WCDHS faced moving to the new financial cycle is that challenges are mounting and they have direct and indirect impact on the Department’s ability to deliver services. It also creates the need for the Department to work smarter together to find innovative mechanisms to deal with present realities. These cannot be wished away and it cannot be business as usual too.

Mr Thando Mguli, WCDHS Head of Department, said to put the Committee at ease, the delivery of the Department is on track and presently exceeding expectation and the additional funding being received is a clear demonstration of the Department’s capacity to deliver and spend allocated funding. Anticipated additional funding indicates that the Department is a good performer and that will appear in a special adjustment budget sometime again in January 2020. It is moving on a path to accelerated delivery which will exceed expectation. The Department is comfortable that its resources are well managed and performance is exceeding targets.

Mr D America (DA) said he noticed on page 186 some programmes in subprogramme 3.3 with regards to reclassification of financial incremental interventions which amounts to R95.9m. Could the Department provide more clarity on what this means? On sub programme 4.2 on housing, property maintenance, goods and services provision for municipal service costs; what does this entail? Is it rates? The R10m to George municipality; what is the intention for this allocation? On page 191, there is the summary of revenue appropriation for housing development for R86.7m for emergency housing grant specifically allocated to Cape Town metro; why is this emergency allocation only to the Metro when other regions are also in need of this emergency allocation?

Mr B Herron (GOOD) also referred to the incremental financing. Why the provision of R43m for transfers to households through various municipalities? Looking at the Bill for funds to various municipalities, what we see are R53m and not R43m; can this discrepancy be explained? On page 19 of the Bill on the transfers to municipalities, the HSDG and adjustments to it, the Committee needs some explanations there. On page 20, in George there is an adjustment of R146m, can it be explained why these large scale adjustments to HSDG allocations to those municipalities?

Mr P Marran (ANC) asked for an explanation on the R10m to George and if it is linked to non metro areas. Five out of the seven non metro areas are in the Southern Cape of which George is one. Is this R10m linked to the priority area programmes?

Mr A van der Westhuizen (DA) said he trusts some of these programmes may have been identified before the elections in May. On page 186, Programme 3 on housing development, there is almost R25m for bulk infrastructure constraints that we have in many of our growing communities and demands on them is higher as environmental legislation is required; can the Department elaborate on the number of contributions it would be making to bulk infrastructure especially in the City of Cape Town? The Committee wants to be assured that the backlog will not be increased and that the speed of implementation will be sufficient to support the top structures.

Mr Francois de Wet, Chief Financial Officer, WCDHS, in response to the R43m re-allocated from transfers to municipalities said this was money from the previous year that was received up to December and was then loaded into the main budget. The Department waited and got business plans from some municipalities and then allocated to those specific municipalities. Bothasig needed a top-up of R1m for a community hall, Mossel Bay, there is the Khayelitsha project that needed a top up of R13m for an old project, Oudtshoorn there is a bulk infrastructure project and additional R4m is going for bulk services there and in Saldanha Bay there was an application for a R13m pit toilet eradication project. These monies were taken away from the Department’s budget and given to the municipalities to address their specific needs.

On the re-classification of financial interventions, there was an initial amount of R243m, the up scrape amount was R100m and a lot of money was allocated for consultancy but when the projects were approved, those consultation fees have been capitalised and moved to specific projects. The incremental interventions funds were mostly shifted to the catalytic projects. On the R24m return for bulk infrastructure within the Department, it is for the catalytic projects and it is being accelerated. City of Cape Town does not have enough USDG funds available for the Department but WCDHS does not want the projects to be stalled because when that is done, the projects are normally vandalised.

On movement of funds from provincial to municipal services, WCDHS has a lot of land and the City of Cape Town needs to pay for water service charges but not for rates because that is treated separately. On the R83bn for housing development, that was a schedule five grant from the National Department of Human Settlements (NDHS) for provincial disasters in Silvertown and Kosovo communities and that is why it is being spent within the Metro. Every year the Department has a budget allocation for revenue collection. R60m was allocated for revenue but in the end R140m was collected and the difference is being returned to Human Settlements. The R146m is being spent by the Department itself in conjunction with the municipality but contracts are signed directly with the contractors. The R3.4m emergency grants were from the grants from the NDHS.

Western Cape Minister Simmers added that the reason extra money was granted to the George project is because the project was for an informal settlement situated for 28 years on a previous dumping site that has become toxic and the area needed to be detoxified and people needed also to be moved. The municipality was first asked if they have capacity to utilise any additional funding by 31 March. From the West Coast, even the central Karoo and Overberg area, they were also asked the same questions and they said no. As the HOD has alluded to, with the special adjustment in January, should the Department get additional funding, it will ask the same question. The reason WCDHS has done very well in utilising and spending its funds is because it ensures that the projects can absorb the funds allocated. In other provinces, the opposite is happening and the departments here work smart. The West Coast is not left behind and one can see that additional funding has been allocated to Cedarburg, Swartland, Stellenbosch, and Cape Agulhas.

Ms Phila Mayisela, Chief Director: Human Settlement Implementation, WCDHS, noted that the reason for the restructure of the Transhex projects is because of the implementation of alternative building technologies on the top structure assets. The contractors also had some challenges with agreements, enrolments and certifications that they had to overcome. Initially WCDHS could not find any responsive bids and had to re-advertise to find responsive and compliant bids.

The Chairperson referred to page 186 on the money for spending on bulk infrastructure. Is the Belhar CBD one of those projects? What is the reason Belhar is to be funded by the Department and why is the City still having the money yet it is not spending on bulk services?

Mr Mguli replied that contrary to perception contracts are not awarded to the same contractor for Human Settlements contracts in the province. Anyone can verify this statement from last year’s annual reports. There, one can see which contractors were given contracts and also ascertain the quantity and value of the contracts awarded. The fortunate part is that new contractors are continually being engaged as players in the mainstream of the construction industry. The WCDHS priority projects are 22 in number and it starts from greater Retreat, to the Southern Corridor, Belhar, Transhex, Plettenberg Bay, George, Knysna,  Malmesbury and Saldanha. There are 22 provincial priority and catalytic projects driven by this Department in cooperation with the municipalities. Belhar has a catalytic and a better living project currently being implemented with people already living on it and construction is still in progress there now. The Belhar CBD project is a provincial and part USDG-funded project. A claim has been submitted to the City and the Department is waiting to be paid for some of the bulk services that were put into the development which meet the criteria of the USDG. If the application is approved, it will reimburse the Department for work already done. For now, work cannot be stopped while waiting for the city to approve the submitted application. The bulk infrastructure provided to Belhar CBD did not only benefit residents of Belhar CBD alone but the broader residents which include both high and low income earning residents.

A member of the public, Mr Johan Rademeyer, an ex councillor from Drakenstein, said his plea was that WCDHS should have a look at the situation with gap housing outside the metro. We have had USDG backwards and forwards and that fund is not applicable to municipalities out of the big metros. The five big municipalities around the Metro are the bulk that holds up the greater Cape Town because all the spillover comes to nearby municipalities outside Cape Town and they have no funding to deliver services. With the Integrated Urban Development Grant (IUDG) available to the municipality, he has worked with engineers for 40 years and they are getting their USDG. Everyone is getting their fingers on that funding and in Drakenstein, R12m in additional allocation was granted to them but that is now disappearing into the big pool where they are putting services into the ground. Some of this funding should actually be allocated to mitigate against the complaints levelled at developers.

The intention of getting people into the gap market is to create wealth and twenty years down the road we want those people to be able to go to a bank and borrow using their gap houses as collateral. The plea is that the Western Cape Minister should fight a lot harder to enable the B municipalities to grant the construction industry something similar to the USDG but in the IUDG so that top structure can be supplied –same as the metro is supplying; a better product for the betterment of our environment and our people. We are battling to get gap housing going outside the metros not only in the Western Cape but across the country.

Mr Mguli in response said Mr Rademeyer touched on important items and the Department does not differ from his views and fortunately Human Settlements is already very busy. Gap housing is being constructed outside the metro in various locations in the Western Cape and properties have been released at no cost by this Department outside the metros. WCDHS agrees that the municipalities need support and it is being provided within the ambit of its authority. The Department has mixtures in gap housing realm such as Gap, FLISP, Open market,  Rental and everything to make this community integrated. The Department wants developers who have the appetite to work with government to pitch in those areas where the Department is working. The Human Settlements family has resolved to have Human Settlements development areas, 20 of which have been identified. The reason for this is so people do not just build where they deem fit but in specific areas that has been prioritised as critical urban development areas. Should they go there, infrastructure budgets will be channelled there.

The Chairperson thanked Mr Rademeyer for his contribution and hoped that the Department will have an open mind to his contributions and suggested that the private sector should be engaged to ascertain how they too can contribute to the housing policy.

The meeting was adjourned.

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