On the virtual platform, the Department of Human Settlements presented its Annual Performance Plan (APP) and Strategic Plan. Due to Cabinet’s decision on budget cuts and COVID-19 vaccination rollout, the Department had to readjust its performance targets.
During the discussion, there was consensus among Members that the drastic increase in the amount for hiring consultants was unacceptable. Members questioned the rationale for hiring consultants and urged it to capacitate in-house employees and use smart technology. Members expressed confusion on the increased ravel budget despite the country remaining under lockdown.
Among other important issues, Members enquired about the COVID-19 rental relief programme and its funding model, withholding grants to some provinces due to non-compliance, title deeds backlog, reduction of certain targets such as housing units from 450 000 to 300 000, 40% designated allocation for women contractors, informal settlement upgrading, some provinces shifting grant funds to pay employees, grant for Estate Agency Affairs Board (EAAB) and housing beneficiary lists.
The Chairperson noted an apology from the Minister.
Human Settlements 2021/22 Annual Performance Plan
Due to poor connectivity, Deputy Minister Pam Tshwete could not make her opening remarks.
Director-General, Mr MbuleloTshangana, proceeded to brief the Committee on the Department 2020/25 Strategic Plan and 2020/21 Annual Performance Plan. The DHS five-year planning and responses to challenges were outlined. Its goal was to pursue a coordinated developmental path within ‘spaces’. DHS priorities included spatial integration, environmental management and climate change, rural economy, human settlements, basic services and public transport. The main outputs to be achieved by 2024 were outlined. Several of its targets had been revised as a result of COVID-19 and the budget constraint.
Mr Joseph Leshabane, Deputy Director-General: Project and Programme Management, presented DHS revised Annual Performance Plan (see document).
Ms Funaneng Matlatsi, Chief Financial Officer, spoke to the DHS budget allocation for the 2021/22, 2022/23, 2023/24 financial years. The budget cut would amount to R486.9 million over the 2021 MTEF period. This budget cut constrained DHS capacity in carrying out more projects and resulted in the revision of its performance targets.
Ms M Mohlala (EFF) noticed the drastic increase in the DHS allocation of funding spent on consultants, business and advisory services. She wanted to know the causes behind the increase.
Ms Mohlala did not understand the increase in the DHS allocation for travel in all programmes and requested it to explain.
Ms Mohlala said that as the Provincial Emergency Housing Grant (PEHG) and Municipal Emergency Housing Grant (MEHG) received more exposure, provinces and municipalities are more and more likely to utilise this grant. However, given the budget cut which was going to be more severe than 2020/21, she asked how DHS planned to provide adequate support to provinces and metros.
Ms Mohlala noted the Residential Rent Relief Scheme for Covid-19 in the DHS Annual Performance Plan. She asked DHS to elaborate on how the programme was funded and how DHS sourced its beneficiaries.
Ms Mohlala was concerned with the cut in compensation for employees at the Housing Development Agency. She asked how the compensation had been reduced and if it was achieved through not giving employee increases.
Ms Mohlala offered gratitude to the Deputy Minister over the decisive action to intervene in the forceful removal of a family in the Ethekwini municipality. She commended the Deputy Minister’s role in ensuring that people’s rights, dignity, and integrity of the family are intact.
Ms S Powell (DA) said that she had ten questions for DHS.
Question 1: DHS withheld the Human Settlement Development Grant (HSDG) transfer to three provinces due to non-compliance with reporting requirements. Those were Eastern Cape, North West and Free State. She asked what the causes were that those provinces could not adhere to Division of Revenue Act (DORA) and whether the challenge had been addressed.
Question 2: Under Programme 4, the operational transfer scheduled for December was not transferred due to the non-compliance of DHS internal processes. She asked the reasons for the non-compliance and if the issue had been addressed.
Question 3: Under Programme 5, spending was R198 million which was 51.5% lower than projected due to transfers not made on the National Housing Finance Corporation (NHFC) Finance Linked Individual Subsidy Projects (FLISP) allocation. The cause of the non-transfer was again due to non-compliance to the entity’s internal financial management processes. She asked the reason for this non-compliance and if the issue had been addressed.
Question 4: Ms Powell agreed with Ms Mohlala that the APP shows DHS is relying heavily on consulting firms across the board. However, Compensation of Employees cost remains the same. She expressed her concern and asked DHS to explain the causes for the increase in using consultants.
Question 5: Goods and Services has increased from R75 to R99 million. It is a 25% increase and it was driven by the use of consultants increasing from R26 to R48.9 million. She questioned the rationale for the use of consultants instead of utilising DHS employees.
Question 6: What was the plan to deal with the title deeds backlog since the Title Deed Restoration Grant was declared a priority for DHS.
Question 7: To address priority four of the MTSF which was spatial integration, DHS plans to eradicate some of the title deeds backlog and issue title deeds to qualifying beneficiaries. What percentage is targeted under this approach?
Question 8: Provinces and municipalities are more likely to utilise the emergency housing grants as they receive more exposure. However, the budget cut would negatively affect the grant and she recalled that an official had confirmed this. How is DHS going to assist provincial departments given the budget cut and to spend this grant on what it supposed to be spent. The Western Cape provincial government had to spend R350 million of the grants on security against land invasions.
Question 9: The items contributing to overall Goods and Services increased from R53 to R72 million were as a result of the use of consultants. She questioned why DHS had to spend an exorbitant amount on consultants while it had the Housing Development Agency (HDA) which was specifically mandated to fulfil that role.
Question 10: How much DHS has been spent on the Residential Rent Relief Programme which was an initiative to address rent relief due to COVID-19.
Mr M Tseki (ANC) asked about the causes for the budget revision across all DHS Programmes. He asked why there was such a big change in number of housing units from 450 000 to 300 000.
Mr M Mashego (ANC) wanted to understand why there was an increase in the travel allowance subsidy despite the country is still under lockdown and many meetings could be held virtually. [Due to poor connectivity, Mr Mashego could not continue].
The Chairperson asked how DHS and the Committee could monitor the prioritisation of households headed by the elderly, children and disabled people.
The Chairperson asked if a mechanism was in place to ensure that the adopted programmes are being implemented. She asked in light of the incompatible spending and service delivery outcome in the Western Cape.
The Chairperson asked if the new beneficiary list of households headed by the elderly, children and disabled people would be made available to the public.
The Chairperson noted that there were areas in Johannesburg where people allocate themselves houses without going through proper standard procedures. Hence, she asked if DHS had a system in place to prevent such incidents from happening again.
Mr Mashego reconnected to the virtual platform and proceeded with his questions. He reiterated that he was confused by travelling expenses increasing whilst the country was under lockdown. In fact, travel costs should be decreasing.
Mr Mashego understood budget reduction in the Medium-Term Expenditure Framework (MTEF) as being if the budget could not be spent within this sector, it would be better to reallocate the funding and use it elsewhere. He commended the Department's good performance despite the budget cut. He endorsed the continuation of the subsidy application.
Mr Mashego appreciated the DHS initiative to upgrade informal settlements. He noted that more and more informal settlements had been built over the years and DHS must make it its duty to upgrade them and turn them into decent liveable houses for people.
Mr Mashego pointed out that the report did not address if the national department or the provincial department is mandated to issue title deeds. Some old townships still had not been legally given the name ‘township’ thus disqualifying them from getting title deeds. He asked DHS to expedite that process.
Mr Mashego disagreed with the DHS explanation that it did not have sufficient funding to fill vacancies as Compensation of Employees amounted to R100 million and it had reached its max. DHS needed to take its available funding into consideration before it signs an agreement with a prospective employee.
Mr Mashego said that the Western Cape and KwaZulu-Natal used the DHS grant to pay employee salaries instead of the designated projects. Hence, what was often found was that although those two provinces had spent their grants, the outcomes were often not delivered. He asked if DHS had a solution to this and what consequence management measures had been put in place.
Ms G Tseke (ANC) complained about the DHS increased use of consultants and increased travel costs.
Ms Tseke said that there was no mention of public private partnerships in the DHS plans over the medium term as she thought PPPs were very instrumental. She asked if DHS would consider entering into such terms to build its own capacity.
Ms Tseke asked if a grant had been disbursed to the Estate Agency Affairs Board (EAAB) as she did not see any mention of this.
Ms Tseke sought clarity on the priority development areas. The number mentioned was 94 areas but in the DHS Annual Performance Plan the figure was 136. Could it confirm if it was 94 or 136? How was it dealing with incomplete housing projects in all areas?
Ms N Sihlwayi (ANC) remarked that 40% of the budget needed to be allocated to designated groups. The APP is so generalised that it would be very difficult for the Committee to oversee and monitor the implementation process. She highlighted the need to "programmatise" the designated budget into categories. For instance, which provinces are identified for which programme and in which area. Also, she suggested more emphasis could be put on material supply in the disability sector. The Committee would need to know how many of those projects there were and how much had been budgeted for each programme.
Ms Sihlwayi urged DHS to intervene in the capacity challenges faced by municipalities. Some municipalities across the country are unable to deal with township establishments which is their mandate including land identification and land engineering etc. She asked how DHS is going to deal with that. She emphasised the importance of this as it is an area that delays what the country wants to achieve. This point was linked to the R56 billion budget cut for the Housing Development Agency which in her view was a huge cut. She asked if DHS had a plan to cushion the negative effects.
Ms Sihlwayi questioned if it was right that DHS continually had unspent funds. She believed that key to the unspent budget was because municipalities were unable to identify their key areas of focus to spend the money on. Officials must remember that the budget was to identify weaknesses and to resolve those weaknesses.
Ms Funani Matlatsi, DHS CFO, explained that the budget cut was informed by a number of factors such as inflation, foreign exchange rate and non-performance. In this instance, provinces and metros have been having low performance in all the grants which has led to some funds being reduced in future. For the past two financial years, there has been an economic meltdown and slow economic growth resulting in budget cuts. What DHS now does is to ask provinces to review their levels of implementation of their projects to prevent any further funds being lost or taken away by the National Treasury. The purpose was to retain funds within DHS.
Ms Matlatsi remarked that this year's budget was cut within the current 2021/22 financial year. The cause for project non-performance in 2020/21 was due to the lockdown effect. For the first five months of 2020/21, the lockdown had affected procurement and projects could not start on time. The failure of project spending was most prominent in the Eastern Cape and North West with the leading challenge being procurement delays. With the shortage of staff and much of 2020 wasted due to the lockdown, there was very little that DHS could do.
Ms Matlatsi explained the rising expenditure of DHS. From April to September 2020, there had been little movement of funds within DHS. Major cost factors such as advertising, use of consultants and travelling only started to pick up from October when the lockdown level had been lowered. In line with lockdown regulations, DHS had not done any international flights. But there was domestic travel as the Committee was aware of the Deputy Minister’s road shows which were supported by department staff. Although virtual meetings are doable in some cases, in other cases physical meetings do have the advantage of showing their projects in their entirety. Even so, DHS still underspent its operational budget by 22% as of 31 March 2021.
Ms Matlatsi confirmed that DHS had allocated only R5 million to Covid-19 expenditure. Of the R5 million fund, only 3% had not been spent and DHS did not increase the R5 million in 2021/22.
Ms Matlatsi agreed about the wrongdoings in the Western Cape and KwaZulu-Natal. She assured the Committee that the National Department has already indicated and directed provinces what they should be doing as provided by the Division of Revenue Act which was to put aside 5% of the budget to accommodate the hiring of professional staff. The issue of provinces such as KZN and Western Cape spending development budget on staff salaries would be dealt with. National Treasury was forceful in its stance and would deduct that amount of funds that those two provinces had used on staff salaries which was about R10 million in this financial year.
Ms Matlatsi agreed that the Estate Agency Affairs Board (EAAB) was challenged due to the lack of registration fees for new estate agent trainees. That decision had been taken by EAAB as a means to get more funding. Then EAAB requested DHS to provide a relief fund to it. As a result of the request, DHS had to go back to its budget and transfer R24 million from all its programmes to accommodate this challenge reported by EAAB as a result of COVID-19.
Ms Matlatsi explained DHS agencies had reported on the rising cost of employee remuneration. She again explained that there were a number of factors that affected the reduction. National Treasury has been trying to reduce the amount the country spends on its wage bill because it is too high. Hence, DHS has adopted the stance that had transpired last year for public servants not to receive an increase. The matter is at the Public Service Coordinating Bargaining Council at the moment.
Ms Matlatsi confirmed that DHS has made all transfers to its entities for 2020/21 as far as mandates dictated. By December 2020, DHS had transferred all funding to its entities including the Social Housing Regulatory Authority (SHRA) which had not complied with provision requirements, R300 million to the National Housing Finance Corporation (NHFC) as well as R24 million to EAAB as of 31 December 2020.
Mr Leshabane, DDG: Project and Programme Management, confirmed that DHS had introduced the Informal Settlement Upgrading Partnership Grant because of the DHS targeted approach to informal settlements rather than having a general funding available for all informal settlements. The DHS approach to informal settlements was firstly to require all municipalities and provinces to make a submission on the upgrade of existing informal settlements or possible relocation. The problem was related to the capital side of the Upgrading Programme. Capacity for township establishment has two sides to the story. On the one side, the municipality must process the required decisions from a land use management point of view. Any developer must prepare and submit an application for township establishment. From the Subsidy Programme, it is a funded activity that township establishment is part of housing planning that needs to meet all the housing requirements. Capacity means that DHS needs to ensure that all projects are appropriately packaged and the technical and legal requirements are met.
Mr Leshabane replied that for the Title Deed Programme, it was vital to ensure that township establishment is completed. If township establishment is not completed, there would be no prospect for transferring ownership to a beneficiary. To be able to do this, the first step was to ensure that all townships are formally established. This is where DHS is putting the bulk of its effort at the moment. Also, there were a number of title deeds that were registered but still have not been handed over to beneficiaries. The DHS focus is ensuring that provinces hand over those title deeds to municipalities rather to beneficiaries. He pointed out that some beneficiaries cannot even be traced which was taking a lot of the Department's time to find those beneficiaries. Further, DHS was dealing with properties that were contested between siblings or original beneficiary and a buyer of the property. DHS assisted in resolving those disputes. Some provinces do not have capacity in record keeping. Hence, in this financial year, the National Department has to step in and employ full time people to do this.
On persons unlawfully occupying subsidy houses when project had not been completed, Mr Leshabane replied that even though houses may look complete from the outside, when a project site is handed over by a contractor, there were still health and safety requirements that contractors needed to comply with. Hence, when people occupy those houses, they are not legally qualified to be handed over. This caused problems and DHS then needed to seek eviction. DHS is working with provinces and municipalities to address this. The solution includes two elements. The first was to allocate those stands on which those houses were built to beneficiaries so that the beneficiaries are known in the area. The second was the security arrangement which DHS requested contractors provide.
Mr Leshabane explained that in 2020 DHS published 94 priority development areas for public consultation. Through that public consultation process, provinces and municipalities requested more areas to be identified. Hence, it resulted in the change to 136 which was what DHS was working with going forward.
Mr Leshabane outlined the DHS solution to deal with the incomplete housing projects. In the past, the National Department used to require provinces to audit these projects and indicate what measures they were taking to complete those projects. DHS has now taken one step further requesting provinces to include those projects in their delivery and business plans every year for DHS to review. DHS allocates budget funding according to the completion of these projects.
Mr Leshabane acknowledged that there had been incidents where funds were misappropriated or contractors had not completed the work. Thus the importance of including physical inspection of those projects as well as the financial and legal aspects which needed to be considered. Then DHS would be able to ensure that those ‘criminal elements’ would not be awarded contracts again.
Mr Leshabane explained that DHS had approved beneficiaries to occupy rental units either through its Community Residential Units or Social Housing Programme. What DHS subsequently observed was that tenants insisted that subsidy houses must be given to them and refused to pay rent. In those scenarios, DHS has to refer to the lease agreement and exercise the requisite remedial clause in the agreement. He assured the Committee that DHS was on the ground with the Social Housing Regulatory Authority (SHRA) and the municipalities that administer these units to ensure that a solution be found which does not collapse the rental housing value. DHS has had instances which it had to intervene and mediate contestations.
Mr Leshabane said that DHS had adopted its turnaround strategy on the Title Deeds Programme. He explained that DHS was struggling to meet its earlier targets due to tight fiscal measures. However, DHS realised that if it scales up serviced residential stands, it would allow more people to received houses quicker even though they would still need support from government.
Mr Leshabane explained the use of consultants. He confirmed that DHS had a limited amount for Compensation of Employees. As there were capital programmes to be completed, DHS would from time to time supplement its capacity by bringing in additional resources such as consultants to support the implementation of a capital programme. DHS simply cannot afford to hire more staff on a permanent basis.
Mr Mbulelo Tshangana, DHS Director-General, replied that DHS had various forms of public-private partnerships (PPP). But the type of partnerships in the Human Settlements sector differed from the typical public-private partnerships as in National Treasury’s model. For instance, there could be a piece of land that was owned by a company, where services are done by the metro and an interchange on the road is taken care of by Public Works in the province after consultation with South African National Roads Agency (SANRAL) at the national level. From projects like this, it can be seen that DHS does have PPPs. Going forward, DHS has already received invitations from private developers expressing their interest in working with DHS. Those private developers come with land and funding. The consensus was that the current PPP policy does not facilitate in building those partnerships. Even National Treasury describes the current policy as too bureaucratic and cumbersome which needed to be reviewed and amended. This will be addressed in the new Public Procurement Bill. He assured the Committee that DHS always works with the objective to partner with private developers and was guided by Section 217 of the Constitution which requires when an organ of state contracts for goods and services, it must do so in accordance with principles of fairness, equitability, transparency, competitiveness and cost-effectiveness.
Mr Tshangana confirmed that funding for the Rent Relief Programme had been secured. The implementing bodies were the National Housing Finance Corporation (NHFC) and Social Housing Regulatory Authority (SHRA). However, the Minister was not happy with the progress of the Rent Relief Programme as DHS had been spending so much time perfecting administrative processes, frameworks and disbursement. He could confirm that in terms of the Rent Relief Programme rollout, SHRA was way more advanced than NHFC as NHFC had had some operational budget issue which was now resolved.
Mr Tshangana explained that the beneficiary list was not made public. The management of the list differs from province to province. The initiative had begun in 2016 when the then Minister had instructed the DHS ICT to work together with the Housing Development Agency to develop a central database. But the issue is that the database needs to be maintained over time and updating of the database happens at municipal and provincial levels. The challenge lies with the uneven performance among provinces on updating the database. For instance, KwaZulu-Natal as a province had been battling to update this database and had to take opportunities such as projects to update information. Eastern Cape did not perform well in this either. The poor performance of provinces in managing and updating the database constrained the National Department’s ability to make the list public.
Mr Tshangana responded about the Department's reliance on consultants. He reminded Members that the alternative option was permanent appointments. Since Compensation of Employees (CoE) is capped, DHS is unable to appoint more employees to capacitate itself. Members must be aware of the country’s bigger debate on the growing public wage bill which currently stands at R500 billion, an incompatible amount for an emerging economy such as South Africa. Treasury and the Department of Public Service and Administration (DPSA) had long devised creative ways to cap government’s CoE amount. There are only two ways to bring in resources to get the job done. One was through utilising the Goods and Services budget to hire consultants and the other is appointment of more people which has been ruled out because of the public wage bill concern. He assured the Committee that those independent contractors and consultants are all former directors-general or deputy directors-general. The domain in which DHS falls is the built environment space. The expertise that this department requires such as engineers, designers, land surveyors do not come cheap in the private sector.
Mr Tshangana commented on the 40% budget set aside for women and reassured Members that the Deputy Minister was very focused on implementing this idea. She has been on the road travelling to provinces and municipalities and had raised this same concern as raised by Members to Premiers and MECs. She wanted to see the 40% being programmatised. He acknowledged that some provinces had not been doing well on this. DHS is partnering with the Department of Women, Children and People with Disabilities. Both departments have signed a memorandum so that national government is able to hold provinces accountable on the 40% budget set aside. Moreover, the overarching theme the 40% budget would contribute to is the National Strategic Plan on Gender Based Violence which the President launched. DHS would report on the progress of the implementation of the 40% budget in due course to the Committee. He guaranteed that should the implementation not go as anticipated, DHS will take away the budget and create a standalone, fully-fledged budget for women in the next financial year.
Mr Tshangana commented on the economic impact of COVID-19 on the Department's budget reduction. DHS has many competing demands but it understands the need to prioritise the vaccination programme. DHS would make do with the little budget it has. So far he believed that the budget was substantial enough to complete its set programmes in the Annual Performance Plan.
Mr Tshangana acknowledged the informal settlement upgrading challenge and admitted that it would be a huge task for DHS. However, he pointed out that the phenomenon of informal settlement is prevalent amongst most emerging economies such as Brazil and India. The newly-created informal settlement upgrading grant shows that DHS is taking a proactive rather than a reactive stance in dealing with informal settlements.
Deputy Minister Pam Tshwete reiterated the call for 40% budget spend for women and pointed out the lack of political will to implement this. More women are participating in politics, becoming MECs and making road shows. Hence, it is vital that a women’s budget needs to be reflected to show government’s commitment to empower women. She appealed to the Committee to assist DHS as it would need the Committee to invite women contractors along with MECs to come before the Committee for more interaction and discussion. She commended the performance of Mpumalanga and Limpopo provinces.
Follow up questions
Ms Powell said she was disappointed at the DHS response. In a nutshell, the DHS strategy to circumvent the impact of the public sector wage cap was to use more consultants. Further, she found it unacceptable that although more capacity is hired, the performance targets have been reduced. For instance, under Programme 2, the budget for consultants increased 79% from R26 to R49 million; however, the outputs DHS has set such as housing units and social housing have been substantially reduced. She asked what measures DHS has put in place to capacitate in-house staff members and utilise smart technology and systems.
Mr Tshangana clarified that the reduction in targets was a result of the capital budget cut, not a result of the reduction of compensation of employees. Due to the capital budget cut, DHS cannot keep the same number of targets. For instance, the grant component has been reduced significantly. The reduction of targets have been approved by National Treasury, the Department of Planning, Monitoring and Evaluation and the Presidency.
Mr Tshangana said that there is nothing wrong about hiring consultants in principle. The more pertinent issue was if DHS was getting value for money that it had spent on them. Hiring consultants is a prevalent practice among provincial governments. In the provincial budget, there is always an operation support component that assists packaging all projects including township establishment, design, consulting and hiring of engineering companies. The official’s job is to manage them. The wage bill for DHS currently stands at R400 million and will be stagnant for the next two years. To find additional capacity, DHS builds working relationships with both the public and private sector in order to get the job done. For instance, in the geo-spatial configuration space, DHS partners with the Department of Science and Innovation as well as with the private sector. To fully capacitate DHS, it would need a capital budget of more than R1 billion to have adequate capacity to support all provinces. The R800 million is insufficient.
Mr Tshangana said that project packaging work cannot be achieved by DHS internal staff with only 600 employees. Even in provinces, provincial departments had even fewer employees. The majority of employees at head office had been recruited to provide policy development skills which is the main job of a national department. These employees do not have the skills for project packaging. Very few engineers want to work for government because of the low salary that they would get. Those engineers would rather work with government in an independent contractor’s capacity than working for government. He recommended having a session with the Committee to explain the skills set for the sector as well as the current skills set within the government structure.
The Committee adopted its second term programme and the meeting was adjourned.
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