DHS, NHFC, EAAB, CSOS 2020/21 Annual Performance Plans; with Deputy Minister

Human Settlements, Water and Sanitation

11 May 2020
Chairperson: Ms R Semenya (ANC)
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Meeting Summary

Annual Performance Plan (APP) of Government Departments & Entities 20/2021

The National Housing Finance Corporation (NHFC), the Community Schemes Ombud Service (CSOS) and Estate Agency Affairs Board (EAAB) appeared before the Committee to present their Strategic and Annual Performance Plans for the 2020/21 financial year. Each entity each touched on how the COVID-19 pandemic had affected their operations and programmes.

Members asked how the Department of Human Settlements could assist or intervene with the process with when the President is going to give effect to the Act. With the public awareness campaign of all three bodies, she asked that they increase their advocacy as their services were not known to the public. How do the three bodies see themselves featuring in the new District Development Model (DDM) released by the President with collaborating with stakeholders within the municipalities?

Members pointed out that the CSOS did not have a process in place that compelled the developers to adjust its schemes with its prior operation, hence would not be able to account fully for the developments. Are there any processes in place or underway to ensure that such mechanisms will be implemented

The Members were concerned about the advocacy measures taken by the entities to ensure their reach to the public, especially in rural areas and townships. They asked where they were in the process of those amendments becoming effective.

The Committee then discussed the amendments that would have to be made to its term programme in order to complete all its tasks within the available time.

Meeting report

The Chairperson welcomed Members and the entities in attendance to the virtual meeting.

Ms E Powell (DA) reminded the Chairperson that the Committee had not received an approved programme for the term and asked when it would be made available; the current meeting’s programme was received but not approved either.

The Chairperson acknowledged the point and agreed that it would be addressed.

Presentation: National Housing Finance Corporation: Strategic Plan 2020-2025 & APP 2020/21
Mr Samson Moraba, Chief Executive Officer (CEO), National Housing Finance Corporation (NHFC), took the Committee through the Strategic Plan for 2020/2025 and Annual Performance Plan (APP) for 2020/2021 and related budget. He briefly explained the mandate of the body. Within the human settlement sector, the entity was the one institution set up to be self-sustaining. The bank operated within the context of chapter eight of the National Development Plan (NDP) which spoke to radically revising the housing finance regime. The presentation addressed the financial architecture for human settlements. The household was at the heart of the bank, where access and affordability were the main challenges. The four pillars of the bank informed its goals; they were concerned with firstly maximizing developmental impact in terms of scaling up and being able to service millions of people. This goal also contextualised the importance of their partnership with other intermediaries, developers, NGOs, social housing institutions and other partners that facilitated their scaling up. To increase their impact, the bank’s partnerships must be increased and sustained. The entity needed to target the underserved and penetrated market including rural people and those earning sufficiently to qualify for subsidy housing. One of the instruments to achieve these goals was to partner with large-scale employers who had the ability to provide housing for their employees. Within the government context, the government housing scheme was one of these employer-assisted-type housing infrastructures that would be supported.

Secondly, the entity was concerned with transforming the human settlement sector, focusing particularly on informal settlement. Previously disadvantaged persons had not participated in this sector of the market. The aim then was to ensure that those people receive substantive loans to participate in larger projects, with particular focus on supporting women, youth and disabled people. This involved attempting to move the market to new territory. Additionality was the third pillar, which involved contributing where there was an absence of participation in the market, like in the township residential property market where the entity was partnering with the EEAB. Another area was the Rapid Learn Release and student accommodation. The bank acknowledged that finance was not the only solution and that it required the coordination, collaboration, facilitation and promotion with other partners. The last pillar was to achieve sustainability which required the balance of the bank’s development and mandate. The bank’s rating status was important because it needed to be able to borrow funds cheaply.

Ms Mandu Mamatela, Executive: Corporate Strategy, NHFC, took the Committee through a breakdown of the bank’s activities. The NHFC had four main outcomes when providing sustainable human settlements and improved quality of household life. The outcome of increased penetrations and participation of low-to-middle income households and businesses owned by PDIs in the housing market spoke to transforming the sector. The NHFC had developed plans to advance the interests of women, youth and people with disabilities. Households constituted the consumers that the commission would like to advocate for as part of its additional services offered to ensure that the housing value chain functions optimally.

Mr Lawrence Lehabe, Executive Manager: Projects Funding Programme, NHFC, took the Committee through the impact that would be facilitated with the funding over various timeframes. Mr Bruce Gordon, Acting Chief Financial Officer, NHFC, took the Committee through the budget of the NHFC. Finally, Mr Samson Moraba closed by stating that their presentation to the Committee did not factor in the effects of COVID-19 but on their return to the Committee they would have those findings to present.

Presentation: Community Schemes Ombud Service 2020/25 Strategic Plans and 2020/21 APP
Ms Ndivhuo Rabuli, Acting Chief Ombud, Community Schemes Ombud Service (CSOS), took the Committee through the body’s 2020/25 Strategic Plans and 2020/21 APP. Before the development of the dispute resolution service established in terms of the CSOS Act had provided an alternate to the lengthy and costly court process that was the only means prior to its establishment. Previously the body corporate would use the levies to take the members to court. Prior to CSOS’s regulating, monitoring and control quality of schemes government document, there were rules in operation that were found to be discriminatory. CSOS ensured that the community schemes were able to hold meetings and their AGMs so that decisions taken within the community schemes were done democratically, whereas previously it would have been taken without participation. She took the Committee through CSOS’s outcomes and the progress regarding those outcomes and the key risks.

Presentation: Estate Agency Affairs Board Five Year Strategic Plan 2021/2025 and APP 2020/2021
Ms Mohlala-Mulaudzi Mamodupi, CEO, EAAB, took the Committee through an introduction to the EAAB regarding their purpose, constitutional and legislative mandates, institutional policies and strategies, vision, mission and values. She outlined the EAAB’s strategic plan for 2020-25. As part of the situational analysis, she highlighted that in the first two quarters the entity saw an increase in property sales due to a substantial drop in property prices. In the last two quarters, however, there was not much positive growth. From a political perspective, she noted that as per the Minister’s budget speech, there was a directive to build 1.5 million houses over the next five years. With the social impact, there were recurring incidents of racism, antisocial and discriminatory behaviour within the real estate sector; a specific example was when the EAAB decided not to issue a fidelity fund certificate to a person who was convicted of racism. The EAAB has used information technology to ensure they fulfill its mandate. She took the Committee through measuring the EAAB’s outcomes for their five programmes as well as their five-year target for each of the programmes.

Due to time constraints the rest of the presentation regarding key risks and mitigations and the resource considerations budget was covered briefly by Mr Biko and Ms Mamodupi, respectively.

The Chairperson asked the Members to ask questions and engage on the presentations given by the three bodies.

Discussion
Ms G Tseke (ANC) stated that in CSOS’s own admission, the entity’s legislation was inadequate for effective enforcement of countering non-compliance. Is CSOS ready for the amendments? When will the propositions be presented to Parliament?

The entity stated that the Property Practitioners Act was signed by the President but there was no effective date. How can the Department of Human Settlements assist or intervene with the process with when the President is going to give effect to the Act? The number of community schemes registered in 2017/2018 was around 17446 and in 2018/2019 it was only 2423; what was the reason for this significant difference? With the public awareness campaign of all three bodies, she asked that they increase their advocacy as their services were not known to the public. How do the three bodies see themselves featuring in the new district development model (DDM) released by the President with collaborating with stakeholders within the municipalities? With the transformation in the value chain, she requested an indicator of the employment of women, youth and people living with disabilities; some of the entities touched on their empowerment but remained silent on the matter, particularly regarding people with disabilities.

Ms N Mvana (ANC) questioned whether it was effective to compare previous years with the current year when the difference is not noticeable. It was not the first time the bodies were being told to improve their performance. They need to make themselves known to the public. Even though COVID-19 was present, what inroads can the three bodies take to make themselves known?

Ms Powell directed her question at the EAAB, asking the body to provide further details on its anti-fraud and corruption measures, and the remedial action taken to guard against a repeat of the audit outcomes of the EAAB’s 2018/2019 audit report. The public had not had much communication from the EAAB since the lockdown commenced, other than letters of demand being sent claiming arrears to hundreds of agencies – warning agents that their FDCs were in danger if payments were not made. What remedial measures are being put in place during the crisis given the EAAB’s commitment to a stakeholder centric approach? Will state agencies be prosecuted if they are not able to submit their audit reports by the deadline because of the lockdown? Will the EAAB be approaching the Minister or the DG to request any industry-specific report for the industry that is still shut down and is struggling quite significantly? Will the EAAB waive CPD fees or grant payment holidays to struggling agencies? What measures were taken by the EAAB to operationalise their office activities on commencement of lockdown to ensure the agency’s commitment to a stakeholder-centric approach? With all three entities, there was a concern about whether they were going to approve the APPs and strategic plans or not; to what extent do the various executive management envisage that these plans will change as a result of reprioritisation because of COVID-19? It was concerning that the current process would be rendered obsolete, given the reprioritisation that may need to take place.

Ms M Mohlala (EFF) pointed out that the CSOS did not have a process in place that compelled the developers to adjust its schemes with its prior operation, hence would not be able to account fully for the developments. Are there any processes in place or underway to ensure that such mechanisms will be implemented? The SWOT analysis showed that there was considerate weight placed on weaknesses and threats rather than strengths and opportunities. The number of risks listed gave the impression that the entity would struggle to meet its targets. Can the entity provide a clearer indication of how it will achieve its targets?

Her next questions were directed at the EAAB. The proposed stipend for interns was stipulated at R2500 but this low stipend did not attract the interns and many of them left the programme. Has this amount been revised? Can the EAAB provide more detail on the learner one estate agent initiative which was meant to transform the industry, with a specific focus on previously disadvantaged persons? How far is the process? Could the entity please provide the figures measuring the advancement of development in its sector?

The last questions were directed at the NHFC. In the presentation there was an indication of consulting fees in 2019 for an amount of R4 million but this increased drastically in 2020. What is the reason for the increase? When will the establishment of the Human Settlement Development Bank be completed?

Ms N Sihlwayi (ANC) said that given the COVID-19 situation, the programmes were progressing really well, which she appreciated. Do the bodies see any challenges in terms of the process and what are the plans to mitigate those challenges? One example was that the bank spoke about being self-sustaining; how will they be affected when challenges arise? The implications of COVID-19 could end up negating the programme but this was not addressed in any of the APPs. Perhaps it was premature, but what do the bodies see in terms of COVID-19’s effect on the programme? The EAAB identified some discriminatory practices in the programme that it mitigated. What were those practices?

Ms S Mokgotho (EFF) directed the first questions at the CSOS. The entity did not have a policy, standard operating procedures, process flows and an IT system that would enable it to account properly for revenue. In the absence of such mechanisms, how does the entity account for levy collection? Are there any agencies that have failed to comply with regulations and how have you dealt with them? What are the reasons for non-compliance?

Her next questions were directed at the EAAB. The current response to advance study to entering the estate agent industry was only offered on a full-time working basis. Is the body looking into future initiatives to promote more access to the industry? What are the retention rates of interns through the one learner one estate agency programme?

Her last question was directed at the NHFC. Why did the entity save R10 million at the expense of filling vacant posts when there is a high unemployment rate in South Africa?

The Chairperson asked the three bodies that in terms of their strategy and APPs, their interest was to intervene in the areas such as incorporating the township into the market and providing affordable housing – areas where the normal state processes were not intervening. Another goal was to be sustainable even if this necessitated borrowing money from other institutions. Are your rates going to be measured aligned with the bank or less than that? Are you going to be able to reach the goal of sustainability because the majority of South African people because of the system used by the bank may not be able to qualify? Considering the situation in South Africa, by intervening in the areas that were mentioned, such as providing sustainable housing, are you not going to compromise your goals of sustainability? CSOS was not dealing with annual reports but financial statements and were offering to help it get an unqualified audit report. Does the entity have a system in place to get an unqualified financial statement? Can we get a briefing on money from the specific bank CSOS received funding from? How far is the process regarding this funding?

Ms Pam Tshwete, Deputy Minister of Human Settlements, Water and Sanitation, stated that the approach to the COVID-19 situation was to learn lessons from other countries affected by it. The situation had evolved and the entities had not factored in those changes. Surely it was going to affect the economy and programme in terms of implementation. Some of the questions that were asked did not consider that with COVID-19, the fight was against an unknown enemy. There might be changes and these were not reflected for consideration in the budget or financial plans.

Response
NHFC
Mr Sizwe Tati, Director, NHFC, stated that the board had looked into the performance plan and approved it. With the publicity campaigns, the CEO would provide details but the entity’s detailed budgets had made provision to inform communities of its initiatives. The language used in the plans was futuristic, with planning three years ahead and saying “we will'' but the performance plans were informed by history. The plans were designed long before the onset of COVID-19, but the board recently developed plans to operate around COVID-19, such as operating remotely. The CFO would address the R10 million saving.

He committed to the NHFC providing a breakdown of its rural projects. With the market failure and interest rates, as a development finances institution, the entity’s mandate was to serve that sector and that was why its products were aimed at incentivizing the private sector to absorb some of those losses. There was a natural contradiction that when entity pursued deeply into development, the costs and risks increase and these affect sustainability. The entity had managed to balance it, so as to not overcharge intermediaries associated with it. The size of the project the entity embarked on was usually the key driver in ensuring that revenue covered the cost of doing business.

Mr Moraba answered to the question of sustainability. Development banking was not what the private sector usually did and there were higher risks, hence higher charges. To that extent, the entity successfully achieved blending financing and to make sure that the funding was blended in the strongest way to balance the risk and higher charges. In this way, some of the money borrowed from institutions was at affordable rates which the entity would be able to pass on to the intermediaries it financed. Taking social housing as an example, NHFC was not pricing the risk of social housing. If banks did risk-reward pricing, social housing would not be affordable. The entity asked to see a growth in blended financing which was why it said it needed to integrate its funding and financing regime with the private sector more, using the available grants.

With the establishment of the bank, the agency was formed according to the Companies Act but the bank was established according to the NHFC Act. According to the plan that the entity had, at the end of February already, there was an alignment process that took place between the policy and the draft bill. The plan at the time before COVID-19 was that by the end of April this would be presented to Cabinet. The result was that the policy framework that needed alignment was completed and was meant to be taken to the crucial policy impact study and then tabled to Cabinet. The confirmation received was that that process could take four to six weeks but COVID-19 disrupted the process and tabled timeframes could not be met as envisioned. The process could be completed within schedule so all things being equal regarding COVID-19, it could be completed in June-July. He referred the question about the R10 million savings to the CFO.

Mr Bruce Gordon, Acting CFO, NHFC, responded to the question of how the R10 million savings came about. The NHFC was a merged entity of three entities and the roles were duplicated. Instead of retrenching people, those roles were not renewed but rather fell away. The hiring of the executive occurred quite late during the year. The entity chose to reduce costs instead of asking people to resign.

CSOS
Ms Rabuli answered the question regarding the CSOS Act. He indicated that the entity was currently looking at its amendments and once they were done, they would be placed on the legislative programme; this would allow it to be taken through the parliamentary process. With the non-compliance notice scheme, the information was obtained from the Deeds Registry Office which was then used to issue those demands. Regarding advocacy, the entity had many awareness campaigns and went out to communities, handing out pamphlets. The plan was to use television advertising in 2020.

The entity compelled developers to register when they had a new scheme, requiring them to come through CSOS and be issued a certificate. This related to the use of sectional titles and obtaining information from the Deeds Registry Office assisted the entity with that. With the SWOT analysis, the entity had a strategy in place to deal with all weaknesses. Some of them were dealt with in risk mitigation processes. They were monitored on a monthly basis. One challenge was that the entity did not have sufficient legislation to compel the developers; the necessary amendment would assist the entity. With the issue of COVID-19, and the programmes that were under threat, such as the collection of levies, the economy was not doing well. Levy collection was dependent on members of the schemes paying their levies. The economic decline would have an impact on this.

As an example of the discriminatory practices changed in the regulations, there used to be a rule that did not allow the slaughter of an animal for traditional purposes but that rule was removed. There was also a rule that compelled the sale of property through one dedicated estate agent but this was also removed. The entity currently had a SAGE system for collection but it was inadequate. CSOS would be acquiring a different system that will account for collecting all the levies that we have collected. The SAGE system did not account for the invoicing for all the levies collected and the new system would account for invoicing. CSOS had been issuing non-compliance notices for the cases where members had not registered with CSOS because there was no provision in the Act to compel them to register; going forward the amendment would deal with this. The entity currently did not have a system that collected and accounted for all its debtors. With the implementation of the IT system, CSOS would be able to address that. The entity was also in discussion with the National Treasury to obtain permission to accrue levies on a cash basis. The entity had a turnaround strategy that was developed to deal with all the audits that were raised internally and externally. In that way the entity would be able to attend to all the findings and ensure progress towards a clean audit. The case about the money that went to DBS was at an advanced stage, being investigated by the HAWKS and there had been several meetings with DBS; the processes were almost done. CSOS was collecting proof and affidavits from everyone who would be called as witnesses.

EAAB
Mr Nkosinathi Biko, Chairperson, EAAB Board, reminded the Committee that the EAAB was previously audited by a third party but was now being audited by the Auditor-General. Concerning the issue of not addressing COVID-19 and its impact, he said that the entity was very empathetic and understood the vulnerability and atrocity of its clients with the crisis and how many of them were dependent on commissions. The main function of the fund was to protect the public from the malpractice of estate agents. The work started from when it received requests. They had not been indifferent but were postponing the date on which CPDs were due – which was meant to be the end of March and granted the extension requested by the Minister, which was the end of May. The EAAB was dealing with a second round of problems on things such as CPDs; it looked at whether the law would allow it to grant postponements and whether there were any mitigations. The entity then submitted to the Minister some of the ways of dealing with the challenges. The Minister was well-briefed by the entity through its COVID-19 advisory notes and the reason this was not mentioned much in this meeting was because the matter was taken up directly with the Minister.

Ms Mamodupi indicated that at the time just before lockdown, a staff member’s spouse tested positive for the virus and had to be quarantined and there was a need to ensure that all staff members went for testing. When it was found that there were further positive cases it was then instructed that the institution should work remotely till the 21-day period had lapsed. But during that time, the President announced that there would be a countrywide lockdown and in that time staff did not return to the office. In that time, however, work was being done remotely. The entity identified priority services and those were provided remotely as well. The EAAB website was also giving updates constantly on what services were available remotely. Throughout the period, prior to the lockdown and further, the entity continued to respond to electronic queries from the public. He had personally had remote meetings on Zoom with entities such as the National Property Forum, IAFSA and REBOSA.

EAAB had gone beyond business as usual and continued to work as if there was no lockdown. After the extension of the lockdown and the move from level five to four, the real estate sector was not included; the entity put in measures to operate on 100% capacity. He indicated that the call centers would be fully operational from Monday, 18 May 2020. These were internal measures. There were also measures to address industry concerns and the impact the virus had on the industry. The EAAB were sympathetic to the needs of the industry. It was in its best interests to ensure that the industry continued to operate. The entity was funded through the contribution of its members so it was in its interests to ensure that the industry continued to function optimally. There were already initiatives put in place, as indicated by the Board Chairperson, where the entity was meeting the industry halfway, such as through providing the extensions that were requested. The requests by the industry needed to be balanced against the fact that throughout this period, the board needed to ensure that the EAAB continued to function and receive something so as to continue carrying out its functions.

Concerning the audit reports that were supposed to be submitted by 30 June, there had been a request for an extension to September. The request had been considered favourably but it was subject to further discussions regarding how it would affect the entity’s cashflow and budget. Regarding the payment holiday that had been requested to defer penalties, the resolution was that historical penalties would still be due and payable. The discussion only really related to future penalties. He believed that the discussion would only become relevant again in October 2020, when the registration fees were due and payable.

The CRO would address the anti-fraud and corruption measures. The entity welcomed the effective date of the Property Practitioners Act (PPA) as it broadened the entity’s mandate by allowing them to serve a larger audience and to expand their revenue opportunities.

Concerning public awareness and advocacy campaigns, the entity went to great lengths to ensure increased public awareness because the entity was still only known to a small and elite group of society and not the majority of the public, especially rural communities. He indicated that the entity was now speaking to the provinces directly. With its internship programme, it no longer only recruited from the major metropolitans but had entered into agreements with other provinces. The entity was also working with NGOs so that the community outreach would be much further and wider. It also intensified its television and radio interviews and made sure that it had billboards in most provinces. With the “one learner, one estate agent” programme, the entity agreed that the stipend was too small and was working on increasing it, not just by working with SITA but other entities as well.

Due to time constraints the Chairperson asked the EAAB to provide a written response and submit it to the Committee.

Mr France Mantsho, Chief Risk Officer, EAAB, responded that they have a whistle-blower system for corruption, whereby any person could address issues relating to corruption. The entity did have a corruption policy that dictated the process followed when dealing with issues of corruption.

The Director-General of the Department of Human Settlements, Mr Neville Chainee, addressed the question about the regulations. The regulations were published in the government gazette for public comment but because of COVID-19, the Department could not undertake the public hearings as part of the tabling process before it gets to Parliament. With the issue regarding transformation, it was good that all three of the entities were addressing the issue. In the PPA there was a section relating to transformation. The Department would expand on the transformation issue when it returned to Parliament, given the time constraints.

The Chairperson thanked the various entities for presenting and answering to the Committee. The remainder of the meeting was used to deal with Committee matters.

Committee programme discussion
The Chairperson stated that the secretariat had distributed the programme and as it was indicated that some of the programme items had gone beyond scheduled timeframes. Strategic plans were meant to be completed by 02 June but no slots were given. The programme was reworked to ensure that the Committee dealt with the issues that were itemed in order to ensure that it would be finalised before 02 June 2020. The Committee had to host annual report meetings before the strategic plan of the Department of Water. On 12 May, the Committee would start the process of dealing with the annual reports until 21 May when it would have a meeting again with the joint committee to consider the budget and ADPPs of the Department. On 22 May, the Committee must adopt the report of the Water Department. On 26 May the Committee would look at the entities and at the adoption of the report of the Department of Human Settlements. On 02 June, there would be the adoption of the report of the Water Department but there were the issues of provinces that were noted. Because the department’s budget and strategy plans were unaffected by those issues, the water board was expected to submit in July. From 02 June, after the Committee would have adopted reports for the budget processes, it would invite CoGTA to present their plan. The Committee would then finalise the budget as the only thing isolated from the presentation. There was a need to try to reorganise and plan to deal with the work and accommodate the work that needed to be submitted to Parliament. The Chairperson asked if the Members had any further comments.

Ms Powell welcomed and thanked the Committee for moving the annual report up in the programme. She said that she was concerned about the media reports circulating regarding the Department and its entities. On a daily basis she had been receiving internal and external reports of serious allegations regarding officials in the departments. It was the Committee’s constitutional duty to hold the executive accountable, even though the National Prosecuting Authority (NPA) decided what happened with the allegations; the Constitution allowed Members to call the Ministers to come and answer for the allegations. There was an institutional crisis and she requested that they move the provincial reports and defer it to a later stage, and call other acting executives of various entities – many which still had interim boards. She asked that these executives sit before the Committee and give them reports on the mitigating measures they would take to deal with fraud and corruption.

The Chairperson asked for questions from any other Members.

The Members’ inputs were not noted due to reception issues. The discussion at this point was purely concerning internal matters of the Committee.

The meeting was adjourned.

 

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