Department of Human Settlements 2019/20 Annual Report; with Deputy Ministers

Human Settlements, Water and Sanitation

24 November 2020
Chairperson: Ms M Semenya (ANC)
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Meeting Summary

2019/20 Annual Reports

The Committee convened on a virtual platform to be briefed by the Department of Human Settlements on its 2019/20 Annual Report.

The presentation by the Department spoke to performance trends analysis quarterly, per programme, over the past five years. For the year, the Department achieved 63% of its targets – 25% was partially achieved and 12% was not achieved. Highlights for the year included:

  • The Department convened a Human Settlements Indaba
  • Signing into law of the Property Practitioners Bill.
  • Housing Consumer Protection Measures Bill enacted into law.
  • The Medium Term Strategic Framework for the 2019-2024 financial year was finalised.
  • A total of 69 513 houses and 51 166 serviced with developed
  • A total of 374 additional projects were registered during 2019/200

The Committee was taken through the performance of each of the Department’s programmes.

The presentation spoke to informal settlements upgrading plans developed and informal settlements assessed per province.

On the audit outcomes, the DHS had received an unqualified audit opinion on Annual Financial Statements. It had received a qualified audit opinion on performance information due to the following reasons:

  • Method of calculation for measuring the planned indicators was not clearly defined
  • Related systems and processes were not adequate to enable consistent measurement and reliable reporting of performance
  • Material findings on the usefulness and reliability of the reported performance information (the affected targets are listed below)

Based on an assessment of the MTSF targets and outputs for 2014-19, it is evident that the Department has to reconfigure its organisation and structure, to improve programme and project planning, monitoring and oversight in the provinces and municipalities

The Committee asked the Department to explain the inconsistency between its expenditure and performance - The DHS had spent 98 percent of its budget, yet had achieved only 63 percent of its targets. The Department had achieved 62,5 percent of its targets during the reporting financial year, compared to 82.6 percent in the previous financial year – it was expected the Department’s expenditure to be commensurate with the targets it achieved. This meant the Department’s performance had regressed under the new leadership. Members also asked whether the Inter-Government Relations Policy (IGR) waslinked to the District Development Model (DDM), acting positions in the Department, disciplinary action taken against officials, and plans to address internal and external audit findings. Further questions probed the rapid land release strategy, organisational structure of the Department, administration of title deeds and transformation in the procurement sector.

Members were concerned nearly 64 percent of the total personnel costs were concentrated in management and supervision salary bands. Concern was also expressed on the under expenditure on the urban settlements development grant (USDG) transfers. The Committee wanted to know more about the under performance of the Nelson Mandela Bay Municipality. Members found it worrisome that of the 50 943 service sites that the DHS had delivered last year, only 898 new title deeds had been issued. This was concerning since the DHS was perpetuating assert poverty by not issuing these. The title deeds programme had been at the core of the DHS’ work for a long time, but still it had failed to address the backlog.

There was discussion on the capacitation of provinces and municipalities as the performance by the Department was, to a certain extent, commendable since it was burdened by municipalities that could not do their work. According to the AG, the performance of the DHS was measured in view of the support it offered to municipalities. What was this support? The DHS could not be the panacea for all municipality ills. There was a need to address poor service delivery by the municipalities

Meeting report

Department of Human Settlements Annual Report 2019/20

Mr Mbulelo Tshangana, Director-General, Department of Human Settlements (DHS); Mr Neville Chainee, ddg: Strategy and Planning, DHS, and Ms Lucy Bele, Acting CFO, DHS, took the Committee through the Department’s Audited Annual Report for the 2019/20 financial year.

Mr Tshangana spoke to the departmental performance trends analysis quarterly, per programme, over the past five years. For the year, the Department achieved 63% of its targets – 25% was partially achieved and 12% was not achieved. Highlights for the year included:

  • The Department convened a Human Settlements Indaba in recognition of the centrality of partnerships and plans for the next five years providing an opportunity for partnerships and commitments in delivering the Medium Term Strategic Framework (MTSF) 2019 – 2024 targets were tabled.
  • The relevant approval processes were effected to allow for the signing into law of the Property Practitioners Bill.
  • Relevant Cabinet Processes were undertaken to ensure that the Housing Consumer Protection Measures Bill is enacted into law.
  • The Medium Term Strategic Framework for the 2019-2024 financial year was finalised.
  • A total of 69 513 houses and 51 166 serviced with developed. This includes social rental and community residential.
  • A total of 374 additional projects were registered during 2019/200 – there are currently 18 193 projects in various stages of development
  • A seamless executive and administrative transition occurred between the fifth and sixth administrations

Mr Chainee took the Committee through the performance of each of the Department’s programmes.

The presentation spoke to informal settlements upgrading plans developed and informal settlements assessed per province.

Ms Bele presented the overview of the financial performance

On the audit outcomes, the DHS had received an unqualified audit opinion on Annual Financial Statements. It had received a qualified audit opinion on performance information due to the following reasons:

  • Method of calculation for measuring the planned indicators was not clearly defined
  • Related systems and processes were not adequate to enable consistent measurement and reliable reporting of performance
  • Material findings on the usefulness and reliability of the reported performance information (the affected targets are listed below)

Based on an assessment of the MTSF targets and outputs for 2014-19, it is evident that the Department has to reconfigure its organisation and structure, to improve programme and project planning, monitoring and oversight in the provinces and municipalities. The monitoring and oversight improvements includes the following:

  • Active monitoring of control measures across the sector,
  • Resolving conflicting sources of information and improving alignment, through uniform system and reporting capacities.
  • Ensure customisation and uniform performance indicators and targets across the sector and established across the human settlements sector
  • The need for a revised policy and funding framework and structure to better deliver on the objective of human settlements rather than only housing.
  • Improved contracting for targets within responsibility and accountability of the Department.        
  • Review the current concurrent system of roles, responsibilities and accountability, to ensure that the National Department and Minister, is provided with the required ability to intervene in planning, governance, programme and project management failures.
  • The review of key programmes which continue to underperform including the title deeds, to allow for direct National programme and project implementation.
  • Ensure alignment between targets and outputs based on policy and funding priorities and targets

[See presentation attached for further detail]

Discussion

Mr M Tseki (ANC) asked the DHS to explain the inconsistency between its performance and expenditure. The DHS had spent 98 percent of its budget, yet had achieved only 63 percent of its targets.

The DHS had performed poorly in respect of programme three, which had to do with Human Settlements Policy, Strategy and Planning (HSPSP), and which lied at the core of its work. This was concerning.

Due to the fact that informal settlements were volatile in nature, the DHS had to be worried about its targets in this area. There was a need to revise the targets.

The Department had told the Committee that it achieved 100 percent on risk management and anti-corruption. What was the difference between the two? In Palm Ridge, Gauteng, there had been a long-term complaint on the selling of houses in that area. Was it possible for the DHS explain this, in light of its claim that it had achieved 100 percent on risk management and anti-corruption?

Was the Inter-Government Relations Policy (IGR) linked to the District Development Model (DDM)? The DHS had not explained its targets and performance on the IGR. Why?

Ms R Mohlala (EFF) asked how many acting positions there were within the DHS at the end of the reporting financial year.

How far was the Department regarding the implementation of its organisational structure in December 2020?

In terms for personnel cost per salary band, salary band 9-12, which was highly skilled supervisions, represented 37,9, percent of the total personnel cost, with total of 186 employees. This was also the salary band that had the highest number of employees, similarly to salary band level 13 to 16 which had senior management and represented 24 percent of the total personnel cost, with a total of 67 positions. This meant nearly 64 percent of the total personnel costs were concentrated in management and supervision salary bands. The Department had to provide more details on this and explain the potential impact of the new organisational structure on the salary bands.

The turnover rates for salary levels 3-5 and 6-8 were significantly higher compared to other salary bands. Was this due to contracts that had ended?

The DHS had told the Committee that during the reporting financial year, it had taken formal disciplinary actions on two employees, and informal disciplinary actions on nine employees. A total of 13 terminations had been reported during the same period. Was it possible for the department to provide further details on the reported figures and context on the disciplinary actions taken?

On programme four, the Department told the Committee that the under expenditure of R390.2 million on the urban settlements development grant (USDG) transfers had to with the withdrawal of funding form the Nelson Mandela Bay Municipality due to a lack of performance. What were the reasons for non-performance by the metro, and what support had the Department offered to improve performance?

The Auditor-General (AG) had found that the DHS had developed a plan to address internal and external audit findings related to performance information. However, senior management had not monitored implementation of the plan in a timely manner. What were the reasons for this and what steps had the DHS taken to ensure implementation of the plans will receive priority?

Why had the DHS waited for the intervention of the AG before correcting some misstatements?

Ms E Powell (DA) congratulated the DHS for having received an unqualified audit, even though there were still some significant issues.

For programme two, in the area of Human Settlements, why had some metros, including Tshwane, failed to submit their USDG plans? What problems had these departments encountered? How was the DHS going to allocate funding to these metros provided they had not submitted their business plans?

Why had there been delays in concluding the rental policy framework component of the policy framework of the human settlements? Had the Department issued instructions to provinces to work towards policy shifts as envisioned in the human settlement policy framework prior to its official finalisation and presentation to Cabinet? Had the Department of Human Settlements, Water and Sanitation (DHSWS) consulted the public on the draft policy framework?

The National Housing Finance Corporation (NHFC) had not submitted a business plan. What systematic challenges prevented the entity from doing this?

Of the 50 943 service sites that the DHS had delivered last year, only 898 new title deeds had been issued. This was concerning since the DHS was perpetuating assert poverty by not issuing these. The title deeds programme had been at the core of the DHS’ work for a long time, but still it had failed to address the backlog. Notwithstanding the dismal performance, by when would the title deeds restoration programme going to be abolished in the upcoming financial year? What plan did the DHS have in place to address the backlog?

Senior management had not monitored the plan to address internal and external audit findings related to performance information in a timeous manner. What monitoring and evaluation plan did the Department have in place to address this?

As had been asked by Mr Tseki, what were the reasons for the inconsistency between the Department’s performance and expenditure under programme three?

The DHS had told the Committee that poor performance and under expenditure in Gauteng, Free State and Northern Cape had resulted in withholding of payments. What plan did the Department have to capacitate performance in these provinces?

How was the rapid land release strategy going and impacting existing housing regulation, policy and legislation? When was this going to be finalised and presented to Parliament?

When was the DHS going to complete its organisational structure? The Minister had signed this off in October 2020. The completion of the organisational structure was important since this significantly addressed some of the problems the DHS faced.

There had been under expenditure of R390 million on USDG in the Nelson Mandela Bay metro due to underperformance - What was Deputy Minister Tshwete’s view on this? What were the reasons for the underperformance?

The Department had achieved 62,5 percent of its targets during the reporting financial year, compared to 82.6 percent in the previous financial year. This meant the Department’s performance had regressed under the new leadership. In the Minister’s view, what were the reasons for the regression?

Why had the Housing Development Agency’s (HDA) Annual Report not been tabled?

Ms N Tafeni (EFF) was concerned about the middle-class workers earning between R3 500 and R7 000. These workers did not qualify for RDP houses, and did not meet the requirements for bonds. What was the Department’s view on this?

As had been asked by the previous speakers, when was the Department going to complete its organisational structure?

Mr X Ngwezi (IFP) expected the Department’s expenditure to be commensurate with the targets it achieved. This had not been the case. As had been said by the previous Members, the Department had spent more than it had achieved. What were the reasons for this?

Whilst it was commendable that the DHS had received an unqualified audit opinion, it was concerning that this was not reflected in its performance during the reporting financial year. The Department’s performance indicated there were problems with service delivery, and this undermined the unqualified audit opinion.

Ms N Sihlwayi (ANC) said the performance by the Department was, to a certain extent, commendable since it was burdened by municipalities that could not do their work. According to the AG, the performance of the DHS was measured in view of the support it offered to municipalities. What was this support? The DHS could not be the panacea for all municipality ills. There was a need to address poor service delivery by the municipalities. When was the AG going to assess service delivery or performance by the municipalities?

The AG discovered that the Department had failed to submit the Standard Bidding Document (SBD), which was crucial for procurement. This had affected service delivery. The Department had to explain how this happened. Did it not have an office responsible for ensuring compliance with procurement processes?

The DG had told the Committee that the municipalities planned to hand over title deeds cases to the Department. What weaknesses existed within the municipalities that they could not administer title deeds?

The municipalities were not able to deliver the USDG plans. What were the reasons for this?

The Chairperson asked about transformation in the procurement sector. When was the Department going to deliver the 30 percent that had been set aside for women?
 

Responses

On the inconsistency between expenditure and performance, Mr Tshangana said whereas the Department’s performance report was limited to completed housing units, the expenditure report expanded to cover all funds disbursed to entities. In this view, there were houses that had not yet been not completed during the reporting financial year, but had been accounted for in the expenditure report. In addition, the Department had spent money on planning.

On the idea of the DHS revising its targets in the informal settlements, Mr Tshangana said the AG had suggested the same. The Department had to invest in making its support targets technical and smart.  Poor performance by the municipalities and provincial departments ultimately translated to poor performance by the national Department. This was regardless of the fact that the national Department may have offered support to the municipalities. Therefore, the Department had to find a different way to contract with municipalities in areas of underperformance. The AG had suggested that the Department learn from other Departments dealing with problems of concurrence.

The Committee said the national Department was not a panacea for municipality ills - Mr Tshangana said this point had been previously raised by the Minister of Human Settlements in 2000. The Minister had complained against municipalities using capacity as an excuse for poor performance. In cases of continued excuses, the Department had to apply consequence management since this was an indicator of incompetence. The Department could no longer act as a nanny department.

On risk management, Mr Tshangana said this was forward looking since it focused on mitigating problems that an entity anticipated to face in the course of its business. For the Department, the effectiveness of its risk management plan was reflected in the audit findings. An audit was backward looking since it focused on assessing whether an entity achieved its plans. The fact that the Department had received an unqualified audit opinion meant that it had achieved 100 percent on risk management. The DHS was aware of the situation in Palm Ridge, and its internal investigators had been working on the matter for quite some time.

On the organisational structure, the DHS’ work on this had been affected by a compensation of employees (COE) budget cut by National Treasury. National Treasury had made budget cuts on this because it wanted to deal with the wage bill. Whilst the cut was rational, it had affected the Department since it was not going to be able to fill the positions approved by the Minister. The DHS had proposed moving the COE budget to goods and services so that the Department could still obtain the expertise it required at a contract level.

The Committee had asked for reasons for non-performance by the Nelson Mandela Bay metro - Ms Bele said the Nelson Mandela Bay metro had been put under section 216 of the Constitution. Specifically, section 216 stipulated that government institutions that did not comply with the control measures put in place by National Treasury would not receive the USDG. The Department had received a letter to stop disbursing money to Nelson Mandela Bay. Since this money appeared under expenditure in the Department’s books, the Department applied for a roll over on behalf of Nelson Mandela Bay. The money had been approved and the DG had sent a letter to National Treasury to advise on the way forward. The Department was still waiting for a response. The poor performance around the USDG had to do with the Department’s decision to place the metro under section 217 of the Constitution due to some irregularities uncovered within the municipality.

The Committee had asked why the Department had transferred the USDG to metros that did not have approved plans. Ms Bele said the Department had instituted USDG transfers in May 2020 when the plans had already been approved. The metros had submitted their draft plans for 2020/21 before the end of the reporting financial year in March 2020.  

Mr Tshangana said the Department had a history with providing accurate financial statements to the AG. The misstatements that the AG had picked up were not substantive and the DHS had immediately dealt with these.

Ms Bele said the Department had not made any financial misstatements. The misstatements were for the audit of performance information which the DHS had received a qualification. The misstatement had been immediately fixed. However, the AG and the DHS had disagreed on the type fix and the misstatements that had been fixed.

On the metros’ failure to submit USDG plans, Mr Tshangana said the USDG was not a schedule five grant. It was a schedule four grant that was intended to leverage funding for other funding institutions. This was the area most metros struggled with.

The Committee had asked whether the Department had issued instructions to provinces to work towards policy shifts as envisioned in the human settlement policy framework - Mr Tshangana said these were not policy shifts but policy priorities. The DHS used the words “programme” and “policy” interchangeably. This had to do with the fact that policies were implemented through programmes. For example, the informal upgrading programme was a policy. The Department had not committed to policy shifts but prioritised those programmes that sought to address the most pressing needs in South Africa.

On title deeds, Mr Tshangana said in the past, the Department had taken shortcuts in planning the issuance of these. As a result, there had been problems and the Department had to start the entire process from scratch, which ultimately delayed the programme. In order to avoid repeating the same mistake, the Department had to restructure the programme, as well as scale up planning.

On the HDA, it had asked for an extension to table its report by end of November 2020. Ms Sindisiwe Ngxongo, Acting DDG: Corporate Services, and Chief Operations Officer (DHS), said the HDA and its auditing firm were affected by COVID 19. For this reason, the HDA had requested late tabling. It was going to table its Annual Report by end of November 2020.

Ms Bele said the HDA had not signed its audit report yet. The audit committee had sat on the matter and the Department awaited the results.

On the title deeds restoration programme, Mr Tshangana said this was not being abolished but getting mainstreamed into the Human Settlement Development Grant (HSDG). This would enable the DHS to deal with the pre-94 and post-94 title deeds backlog. The DHS was not ringfencing the programme.

The Committee had asked about capacity within the Department. Mr Tshangana said the DHS had begun appointing specialists. For example, the Department had appointed Mr Kenneth Brown, on an independent contractor basis, to help with procurement in the department and provinces.

On the middle-class workers that could not qualify for RDP houses, and could not meet the requirements for a bond, Mr Tshangana said this related to gap housing. The Department had introduced the Finance Linked Individual Subsidy Programme (FLISP) to assist these earners. In addition, the land release programme also targeted the middle-income earners.

Mr Tshangana confirmed that poor service delivery had undermined the significance of the DHS’s unqualified audit opinion. The Department was going to work on reconciling the two.

On transformation in respect to procurement, Mr Tshangana said this was a problematic target due to the fact that there was no political will. However, the Deputy Minister had started visiting Premiers and MECs to address the matter and there had been significant improvement. It appeared as if most Premiers had not been aware of the target. This had to do with the fact that some of the issues the Department discussed at MINMEC did not get reported to Premiers and the provincial cabinet. The Department was working on a strategy to tip the procurement scale in favour of women.

Ms Bele added that the DHS had gone on roadshows with the Deputy Minister to discuss transformation in the area of procurement. The provinces had made its plans on what they were going to do to include women in the procurement process. The DHS had advised the provinces to ensure their plans did not affect compliance with the procurement processes.

On the audit findings, the Western Cape had received a clean audit with no matters, Eastern Cape non-qualified with a few findings, KZN non-qualified audit with few matters, Gauteng qualified audit , North West disclaimer, Northern Cape non-qualified with no matter, Limpopo non-qualified with few matters, Mpumalanga non-qualified with a few irregularities, Free state requested.  The Department was working on assisting the provinces that had performed poorly.

The Committee had complained that the Department was not taking into account recommendations by the internal audit and external audit (AG). The Department had an internal control unit that compiled an action list on all issues raised in audit reports or management letters and identified the responsible DDGs for the issues. The Department had a functional audit committee that held regular meetings. The action list was reviewed by the internal audit committee.

On the non-tabling of the NHFC strategy plan, Ms Ngxongo said the Department had received two dates for the tabling, namely 12 March and 14 April. The NHFC had tabled the plan electronically on 14 April. However, the proof of tabling was dated 17 April possibly due to technical errors. This resulted in non-compliance.

Mr Chainee said by the end of the reporting financial year, there were 24 vacancies in the Department. There are 16 vacancies above senior management and eight vacancies below senior management.

On disciplinary actions, the DHS had one ongoing and one finalised case.  In addition, it had an ongoing contractual dispute that was before arbitration.

There was a direct correlation between the vacancy rate and performance of the Department. Programme three had the highest vacancy rate and had suffered in terms of performance. The budget reduction by National Treasury did not allow the DHS to permanently fill the vacancies.  A permanent filling of the vacancies had financial implications in the near future. For that reason, the DHS had filled the positions on a contractual basis. The DHS had used the goods and services budget to fund the employees.

There was also a direct co-relationship between the turnover rate and the performance of the Department. Amongst the reasons for a high turnover rate across all bands included a high number of employees working on a contractual basis and movement of non-employees to the private sector. What was important to note was most employees had not resigned as a result of grievances.  However, they had noted internal communication problems during exit meetings.

On salary bands, in certain instances the Department had what it called “always d post”.  Always d posts found themselves below level 12. An always d had higher chances of getting a higher renumeration compared to other people working in the same level.

The DDM and IGR were closely related. The DDM had been adopted and implemented post 1 April as COGTA had been busy putting in place the mechanics. The Department had a strong concurrency function underpinned by the IGR and better contracting. For these reasons, it was able to implement the DDM.

On capacity building programmess in provinces performing poorly, Mr Chainee said within the HSDG and USDG, there was an operational grant available to supplement capacity in municipalities

The Committee had asked about title deeds and the discontinuation of the grant. The DHS’ current subsidy and funding regime ensured and allowed for the registration of title deeds. The title deeds registration grant did not mean registration of title deeds was a standalone aspect.  The grant had been introduced due to a backlog that had developed over a period of time due to a number of problems including planning and development failures.

The rapid land release programme was not limited to people earning below R3 500. It was open to anyone who fell within the gap market.

The Committee had asked about how the Department responded to audit outcomes - Mr Chainee said on an annual basis, when the audit was complete, the Department tabled all issues under an audit action plan. The DG and the CFO were responsible for this plan. The DHS had an audit committee that maintained oversight of the plans.

The Committee had asked about delays in concluding the rental policy framework. Ms Nonhlanhla Buthelezi, Chief Director: Operational Policy Frameworks, DHS, said under the Rental Amendment Act, the Department broadened the scope of the framework to include backyard rentals, social housing and Community Residential Units (CRUs). The process required consultation and there had been delays due to travels between provinces. As a result, the Department was unable to conclude the process. The DHS had tried to supplement the process using the Social Economic Impact Assessment. However, at the end of the financial year, the Department had not received a final report from Department of Performance Monitoring, Planning and Evaluation (DPME). 

Deputy Minister Tshwete thanked the delegates for the comprehensive responses. She agreed with Ms Sihlwayi on the point to do with the measurement of the DHS’ support to the municipalities. The Department could not act as a nanny for the municipalities. It appeared logical to invite COGTA for a joint meeting in order to get reasons for a lack of performance by the municipalities.

On the Nelson Mande Bay metro, the DHS did what it was told by Treasury. Ms Bele had told the Committee that the DHS had been told not to transfer the USDG to the metro.

The Chairperson said the Department must include the recommendations of the AG in its action plan. She made some closing remarks.

The meeting was adjourned. 

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