NHBRC & HDA 2021/22 Annual Performance Plan, with Deputy Minister

Human Settlements, Water and Sanitation

28 April 2021
Chairperson: Ms R Semenya (ANC)
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Meeting Summary

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Annual Performance Plans

The Portfolio Committee on Human Settlements, Water and Sanitation met on a virtual platform to receive presentations from the National Home Builders Registration Council and the Housing Development Agency on the Strategic Corporate Plan 2020-2025 and Annual Performance Plan 2020/21 for each entity.

The Deputy Minister for Human Settlements, Water and Sanitation very briefly introduced the two entities and reminded Members that, as with the Department of Human Settlements, Water and Sanitation, there were budgetary constraints in 2021/22.

The National Home Builders Registration Council informed the Committee that the Council had lost its very dedicated and capable CEO, Mr Mziwonke Dlabantu, on 24 March 2021 and the Council was currently operating with an Acting CEO, and replacing him was an Acting CFO. The Council’s strategic plan took into account the challenging economic and construction performance that it faced in that its overall revenue generation business was declining and might affect its financial sustainability. Nevertheless, the focus was on the environment and sustainable building methods which meant that  the Council was researching the Green First - Zero Energy model house concept. Cost containment guidelines for the Council were critical going forward. The subsidy and non-subsidy numbers were lower than in previous years as many developers had units that they had not yet off-loaded and were not engaging in new builds. Revenue had decreased by 15% in 2021/22 to R759 million and cash operating expenses declined by 11% in 2021/22. Net profit was budgeted to grow from R 318 million to R405,9 million in 2021/22.

The Housing Development Agency was seeking its own capital budget from the Department of Human Settlements, Water and Sanitation as it was unable to fulfil its mandate of acquiring and developing land for human settlement projects without a capital budget. The consolidated budget of the Agency for 2021/22 was based on confirmed grant funding from the Department of Human Settlements and funds received from provinces for operational expenditure based on agreed Medium-Term Operational Plans. The total projected consolidated budget for the financial year was R436m, a reduction of R39 million compared to the prior year’s budget of R475m. Three new projects included work in Masiphumelele in Cape Town and two social and student housing projects, one in Braamfontein and one in Kimberley.

Members requested details of projects and the names of specific settlements to be upgraded as those were not included in the presentation. Members requested details of the bucket eradication programme. Was it running? What was the mandate and functions of the Agency in that regard? How many buckets were to be eradicated? Where were they located and what was the nature of the project? Which four informal settlements were to be upgraded to phase three and which two informal settlements would be assisted with relocation and emergency intervention? How many households or people would benefit from that programme? Members asked about progress in the Catalytic Projects and requested a report on the outcome of investigations into the Talana project.

Why had the Council reduced some of its targets from the current year? Why had the budget for Goods and Services been increased from R306.8 million in 2020/21 to R324 million in 2021/22? Could the Builders Registration Council explain what investigations had been conducted into the Covid-19 de-densification projects that were managed by the Housing Development Agency? Had feasibility studies been undertaken in respect of what the two entities intended to deliver in 2021/22?

As the Housing Development Agency was being managed by an Administrator, Members asked about the current status of the board. What impact had there been on stability and continuity by the recent change of board members? What was the current composition of the board? The R10 million allocated to the office of the current CEO of the Housing Development Agency, one in a long line of CEO’s, raised concerns. What was it for? Did it include salaries for the staff in the CEO’s office as well as the CEO? What salaries did the CEO and CFO earn? Overall, the salary budget had increased from R215 million in 2020/21 to R225 million in 2021/22 despite the intention to freeze posts and reduce personnel costs. Why was that the case? Why had the budget for Goods and Services increased from R306 million in the current financial year to R324 million in 2021/22, an increase of 5.6%?

One Member raised a concern that information that she had urgently requested from the Housing Development Agency some weeks ago, and which had been approved by the Minister, had not yet been received.

Meeting report

Opening remarks
The Chairperson opened the meeting and welcomed everyone on the virtual platform. She reminded Members that the meeting was a continuation of the meeting that had commenced that morning. The National Home Builders Registration Council (NHBRC), led by the Chairperson of the Council, and the Housing Development Agency (HDA), led by its Administrator, would each present their Five-Year Strategic Plans and Annual Performance Plans for 2021/22.

The Chairperson welcomed the Deputy Minister of Human Settlements, Water and Sanitation, Pamela Tshwete.

Deputy Minister Pam Tshwete reminded Members, firstly, that she had network challenges. She stated that in her opening remarks during the morning session, she had explained that there were budget constraints in the Department and its entities. The Administrator at the HDA would speak on behalf of the entity and the Acting CEO, Mr Booi, was responsible for the NHBRC.

Briefing by National Home Builders Registration Council (NHBRC)
Dr Julieka Bayat, Chairperson of Council, NHBRC, stated that she was sad to inform the Committee that the NHBRC had lost its very dedicated and capable CEO, Mr Mziwonke Dlabantu, on 24 March 2021 and so the Acting Executives would present. However, business had to continue and the Council had appointed Mr Songezo Booi, the CFO, as Acting Chief Executive Officer. He was a Certified Chartered Accountant and had many years’ experience and had been acting since the CEO had fallen ill. She had every confidence in his leadership of the organisation. The Deputy CFO, Ms Tamlyn Bower, also a Chartered Accountant, was acting as CFO in Mr Booi’s stead.

She added that the term of the Council came to an end on 31 July 2021. The Council had commenced certain initiatives, including the Operational model and the Inspection model, that the new Council would implement.

Dr Bayat handed over to Mr Booi to make the presentation.

Mr Booi stated that the NHBRC strategic planning had taken into account the challenging economic and construction performance that it faced  as its overall revenue generation business (enrolments, registrations and renewals) was declining and might affect its financial sustainability. In that planning cycle, further focus was on the environment and sustainable building methods. Hence the Council was researching the Green First - Zero Energy model house concept to explore various Modular housing innovative technology, cost cutting methods in home building and environmentally friendly and sustainable systems, methods and standards.

As a result, the NHRC was revising its operating model and was anticipating the legislative review which was currently in the parliamentary review stage. A number of elements underpinning the operating model had been identified, including issues relating to the organisational structure, processes, technology, skills and talent as well as effective communication. In the current planning cycle, increased focus would be on the environment and sustainable building methods.

Mr Booi handed over to Ms Bower to present the budget. She began by referring to concerns resulting from the Covid-19 lockdown. The cost containment guidelines were critical going forward. The subsidy and non-subsidy numbers were lower than in previous years as many developers had units that they had not yet off-loaded.

Actuarial valuations had indicated warranty profits of R28m per annum over the past financial year and the
investment strategy, which included the Housing Development Fund, had been referred back to Fund and Finance for review. Revenue had decreased by 15% in 2021/22 to R759 million, largely due to a decline in the non-subsidy market and the change in policy direction by the National Department which affected the subsidy market. Cash operating expenses declined by 11% in 2021/22 largely due to a decrease in travelling cost and training costs, a decrease in enforcement and marketing and communication costs, as well as some costs relating to staff. The operating profit had decreased by 75% in 2021/22 largely due declining revenues. Net profit was budgeted to grow from R 318 million to R405,9 million in 2021/22.

Dr Bayat concluded, confirming that the Council had attempted to maintain a stringency to keep costs low.

(See Presentation for full breakdown of planned outputs, indicators and targets per programme)

Briefing by Housing Development Agency (HDA)

Mr Neville Chainee, Administrator, HDA, informed the Committee that the presentation would be made by the Acting CEO.

Mr Stephen Poya, Acting CEO, HDA, stated that MsTebogo Sejane, Head of the Strategic Planning team, would present the Strategic Plan and Ms Mmemeng Tsehla, Acting CFO at HDA, would present the proposed quarterly budgets for 2021/22 and indicate the division of the budget per programme. He stated that the Strategic Plan was intended to support the core mandate of NHA which was to be a developer, and the developer of choice.

The mandate of the Agency was to acquire and develop land for its own Human Settlement projects that would be implemented in partnership with strategic private sector partners that would share project and financial risks. HDA would be responsible for the full value chain of property developer services and be fully accountable for the achievement of tangible outputs.

The consolidated budget was based on confirmed grant funding from the Department of Human Settlements and funds received from provinces for operational expenditure in the respective offices based on agreed Medium-Term Operational Plans (MTOPs). The total projected consolidated budget for the financial year was R436m, a reduction compared to the prior year’s budget of R475m. The reduced budget was driven by a reduction in MTOP funding from R211m to R197m based on signed funding agreements.

The Administrator projected slides showing the work of the NHA in Masiphumelele working together with the Western Cape Provincial Administration and the Cape Town City Council. Agreements were in place for temporary and medium- to long-term plans. NHA had also purchased the Eskom Braamfontein regional head office for R60 million – the building would provide for student and social affordable housing. Social rental and student housing would also be developed in a building purchased from Eskom for R16 million in Kimberley. NHA would work in conjunction with the Northern Cape Provincial government and the Sol Plaatje Municipality.

(See Presentation for full breakdown of planned outputs, indicators and targets per programme)

The Chairperson invited the Deputy Minister to conclude.

Deputy Minister Tshwete stated that it had been a long presentation with many presenters, but it was an attempt to provide the Committee with all the information it required. She stated that she would come in at the end of the meeting after the engagement with Members.

Discussion
Ms M Mohlala (EFF) addressed her first questions to the NHBRC. It had held 673 disciplinary hearings, resulting in 64 home builders being suspended in the 2019/20 financial year. According to the NHBRC, the suspensions were as a result of the failure to rectify major structural defects. She requested more information on the Talana project.

She also noted that a number of targets for the year had been reduced due to a poorer performance in 2020/21. In 2020/21, the target was for 91% of the approved risk management plan to be implemented but it had been reduced to 90% for 2021/2022. Under Programme 3, four programmes for social transformation programmes were to be introduced in 2020/21, but the plan was for only three social transformation programmes to be introduced in 2021/22. What was the reason for the reduction in targets? The budget for Goods and Services had been increased from R306.8 million in 2020/21 to R324 million in 2021/22 - an increase of 5.6%. What was the reason for the increase?

With regards to the HDA, Ms Mohlala asked about the current status of the board. What impact had there been on stability and continuity by the recent change of board members, what was the current status of the board and what was the current composition of the board?

She asked for more details of the bucket eradication programme. Was it running? What was the mandate and functions of the HDA in that regard? How many buckets were to be eradicated? Where were they located and what was the nature of the project? Which four informal settlements were to be upgraded to phase three and which two informal settlements would be assisted with relocation and emergency intervention? How many households or people would benefit from that programme?

Ms Mohlala asked about the Six Categories Project to raise funds. Which categories were involved?

Ms G Tseke (ANC) noted that Ms Mohlala had addressed several of her questions. She emphasised that the bucket eradication programme had been in progress for quite some time and it needed to be completed as soon as possible. It was necessary to fast-track the programme as the Minister had promised to eradicate buckets in one of her budget speeches.

Ms Tseke stated that in a previous interaction with HDA, the agency had indicated a high vacancy rate in a number of provincial or regional offices – Mpumalanga, Gauteng and the Northern Cape. How was that issue being addressed? The Committee acknowledged the efforts of HDA in buying buildings for student accommodation. It was appreciated as the Portfolio Committee was aware that students had been struggling to find accommodation for quite some time. Could the project be fast-tracked in order to be ready for the next academic year?

Ms E Powell (DA) recalled that salaries at the HDA had been a huge issue in a previous meeting. In the latest budget, on slide 35, she saw that over R10 million had been allocated to the HDA CEO’s office, the latest of many CEO’s. What was it for? Did it include salaries for the staff in the CEO’s office as well as the CEO? What salaries did the CEO and CFO earn? The unit cost for other salary levels, i.e., 11 to 12 and 17 to 22 had been reduced between 2020/21 and 2021/22 while the unit cost increased for salary levels 7 to 10 and 13 to 16. Usually increases or decreases in a salary band formed a trend. What were the reasons for the increases and decreases? Overall, the salary budget had increased from R215 million in 2020/21 to R225 million in 2021/22 despite the intention to freeze posts and reduce personnel costs. What had HDA done to implement that intention and how should the budget for salaries be interpreted as the intended reductions were not visible in the data before the Committee?

Ms Powell noted that the quarterly target for Programme 2 indicated a total of zero for three of the four quarters and a total of 1 000 hectares for the fourth quarter. Why had a staggered approach not been adopted? She knew that often there was an upswing or hockey stick effect on targets but it was a big target for one quarter. She noted that Programme 3 had no targets for Quarters 2 and 3 related to the upgrading of informal settlements. Why was that so?

Ms Powell informed Mr Poya and Mr Chainee that she was awaiting some legal information. The Minister had authorised, in March 2021, that the information be sent to her in response to a PAIA application that had gone on appeal. She had still not received the information and asked whether she could get an indication either in the meeting or via email as to when she could expect it.

Ms Powell asked the NHBRC Chairperson about the rumours that she had heard that the NHBRC was going to start charging fixed levies in upcoming years. She requested clarity. She added that the high operational costs at NHBRC remained a concern. Could the NHBRC provide clarity as to what investigations had been conduct into the Covid-19 de-densification projects that were managed by the HDA? It was not only Talana that was a concern. The Minister had asked the NHBRC to look at a number of the projects. Could the Committee be informed of the findings? She had submitted a parliamentary question requesting the full report but had been told that, for various reasons, she could not have a copy of that report.

She noted that the budget for Goods and Services had increased from R306 million in the current financial year to R324 million in 2021/22 which was a 5.6% increase, which was similar to the percentage increase in the national Department budget. What were the reasons for the increase at NHBRC? Under the NHBRC Programme 3 on Consumer Protection, the timelines by which the enrolment application should be approved had been omitted. In 2021, a timeframe of 15 days had been given. Was there a reason for the omission?

Mr M Mashego (ANC) stated that his questions had been largely covered, but he had a different perspective on the matters. His view was that there was a difference in the presentations by the two entities in that the APPs were telling the Committee what the entities would be doing in the coming year. Had feasibility studies been undertaken in respect of what the entities intended to deliver? They were committing to building houses on land that had not yet been acquired, but they might not get the land and therefore the plans to build might not be achieved. He asked if the plans and targets were feasible and doable. He wanted the entity to avoid under-budgeting. 1 983 title deeds were to be distributed. It was quick and easy to distribute the deeds but the difficulty was getting to that point in the process. Had all the feasibilities studies been undertaken?

Mr Mashego asked about salaries, acknowledging that the entities were independent institutions and did not fall under the government ambit regarding wages. Could the Committee rely on the entities’ commitment to reduce salaries?

The Chairperson recalled that it had been agreed that all state projects had to be registered with the NHBRC. How far was that process? Regarding the HDA, she knew Administrator was standing in for the disbanded board, but the law said that three or four Departments had to nominate people to serve on the board. That might have been a reason for the weakness of the board. She wondered whether there was any intention to re-look at the legislation to get a full board based on competency and a commitment to the proper running of the HDA. It was possible that representatives nominated by Departments did not have the capacity to serve on a board.

The Chairperson emphasised the concerns about the bucket eradication programme. Did the entity have the capacity to finalise the programme if there was no board and no one was sure of the quality of the new board? The Departments did not even go through a process of scrutiny in respect of the representatives sent to serve on the board.

Deputy Minister Tshwete stated that the questions related to salary should be addressed to the DG of the Department. Regarding the student accommodation, she thanked Ms Tseke for her comments. The Department had been trying its best to assist students who were always asking about accommodation. She apologised to Ms Powell that she had not yet received the information on Duncan Village but the DG should speak to that. Regarding the issue of the board, she stated that the DG would also speak to the matter but she did know that the Department was in the process … the connection was lost.

Mr MbuleloTshangana, Director-General, Department of Human Settlements, Water and Sanitation, stated that specific questions would be responded to by the chairperson of the NHBRC and the Administrator of the HDA and the CEOs.

He informed the Committee that the process of appointing a new HDA Board had begun and that it would end up in Cabinet. The Department had advertised, done shortlisting and the final decision had to be made in concurrency with Cabinet. The process was at an advanced stage. The current challenge related to an attempt to take into account representatives from provinces other than Gauteng and also gender and equity. The term of the NHBRC board was coming to an end so the process of appointing a new board for the NHBRC had commenced.

Mr Tshangana explained that, in the past, the Minister had consulted with the Minister of COGTA on a representative for the HDA board and it was usually someone from the Municipal Infrastructure Support Agent who was familiar with the entity. The Departments of National Treasury, as well as Public Works and Infrastructure and Rural Development and Land Reform were represented on the board. If a Department declined to take up its seat, the Minister could appoint someone in that place.

Dr Bhayat responded to the question by Ms Powell about rumours regarding a change to fixed levies. It was news to her and there was no credibility in that comment. The NHBRC requested any information that she might have about the fixed levy rumours. She requested Mr Booi, to answer the other questions.

Mr Booi responded to Ms Mohlala regarding the reduction in two KPIs. The Council had done an assessment of how it had performed pre-Covid-19 and had then considered the impact of Covid on the operations and, consequently, the targets had been revised downwards for 2021/22. The KPIs had been raised to pre-Covid  levels in the following year .

Mr Booi stated that non-compliant builders were taken through a disciplinary process where, ultimately, they were fined or suspended. Regarding the Talana Project, the NHBRC had been requested to undertake an assessment of the houses “on the ground” in the Talana Housing Project. It had been done and a report compiled and presented to the Special Investigative Unit. The turnaround times had not changed and enrolments would be approved within 15 working days. The NHBRC had assessed all the projects as required and the findings were contained in a report that he was sure could be made available.

The Registration of projects by provinces had been raised by the Chairperson. It had also been addressed previously and there had been an improvement in registrations.

Mr Booi handed over to the Acting CFO.

Ms Bowers spoke to the increase in Goods & Services, as raised by Ms Mohlala and Ms Powell. The NHBRC tried to decrease those costs but an increase in data costs as a result of more staff working at home had pushed up costs. Lease cost escalations were an issue and those leases would be re-negotiated and current workspaces would be reduced.

Mr Chainee requested the Acting CEO and CFO to respond to operational issues.

Mr Poya, stated that the Agency had the capacity to complete the eradication of the 11 400 buckets in the Free State and the 590 buckets in the Northern Cape. The programme was being conducted in Setsoto, i.e., in Ficksburg, Clocolan and Senekal, and in Deneysville as well as in Nketoana, i.e., in Petrusville, Reitz and Arlington and in Metsimaholo. The Agency was collaborating with the Department of Public Works and Infrastructure when it came to implementation. The programme was a collaboration between the HDA and the Department of Water and Sanitation.

Mr Poya was confident that the Agency had paid attention to the leading and lagging activities in the plan for 2021/22. He committed and confirmed that the plans in the Annual Performance Plans had gone through due diligence processes and the numbers indicated could be attained.

He added that the information for Ms Powell had been submitted to the Department and to the ministry on 9 April 2021, but he would follow up and ensure that the information was sent on to her.

Ms Tsehla stated that the Agency had a total consolidated budget of R436 million which included operating costs and salaries. R10 million was the operational costs of the CEO and the staff in his office as well as their salaries. She explained that the HDA entered into contracts when it needed capacity for specific programmes, such as the bucket eradication programme and the student housing blocks. When those projects were completed, the contracts specific to the projects would be ended and the salaries would go down as could be seen in the outer years.

Ms Daphney Ngoasheng, Head of Planning & Programme Design, HDA, spoke about the work being done in the informal settlements and the catalytic projects. The catalytic projects for which capital was being raised and had been gazetted by InfrastructureSA in 2020, were Greater Cornubia in KwaZulu-Natal, Matlosana 12 in North West, Vista Park 2 and 3 in the Free State, Lufhereng and Malibongwe Ridge in Gauteng as well as the N2 Nodal Development in the Eastern Cape. All of the projects were in the implementation stage but some of the phases were stuck because of infrastructure that was required. The informal settlements to be upgraded to phase 3 were Nkaneng (10 000 households) and Mafikeng extension 12 in North West, Smashblock, Limpopo (5 000 households) and Makhuduthamaga in Mogale City in Gauteng. Khutsong and Makhuduthamaga required alternative land for housing as a result of the dolomite in the area.

Ms Ngoasheng confirmed that she was referring to the settlement named Makhuduthamaga in Gauteng and not the one based in Limpopo.

Mr Lucien Rakgoale, Landholding National Manager, HDA, responded to the questions of the land targets. He explained that it was always a long-term project and all the preparatory activities were included in the first three quarters with the target finally becoming attainable in the fourth quarter. In particular, municipal tribunals did not always sit when they were required to sit so that factor had also been accommodated. Environmental authorisations, etc. would be completed in the first three quarters.

Mr Chainee explained that the HDA had instituted a Project Readiness Committee which completed an investigation into the projects before a project could begin as the municipalities had often not completed all the preparatory phases, such as a feasibility study, before presenting a project.

He stated that title deeds were only handed out when all processes had been completed.

He stated that the vacancy rate was high because contracts and capital grant funds were received an annual basis and that determined the expertise that was required. When the HDA had its own projects and funding stream, it would not need to rely only on the annual contracts but would appoint on fixed term as well.

He confirmed that the PAIA request had been attended to, but he would follow up with the Ministry.

Mr Tshangana stated that all questions had been covered and he had addressed the matter of the appointment of the board. Only the Minister would be able to give specific timelines regarding the board. At the HDA, the Administrator was responsible for oversight and the CEO was responsible for the executive. The HDA was stable and the Department was providing support to the Administrator. He stated that it was important to capitalise the HDA as it had no capital budget and currently relied on municipalities and provinces for capital budgets. A week ago, the HDA had heard that the Arlington Race Course in Port Elizabeth (Gqeberha) had been sold for about R60 million. It had been offered to HDA for housing but HDA had not had the money to buy the land, even though the race course had occupied prime land in Nelson Mandela Bay. The Department was preparing for the next budget cycle and the CFO would be making a plan to make the process of capitalising HDA happened. The core mandate of HDA was to assemble land but it could not do that without a budget.

He stated that the NHBRC was stable as the Chairperson of the board understood housing very well. The Department was preparing for the next board.
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Ms Powell asked for clarity regarding the fact that the information had been submitted on 9 April 2021 but she had not received it so she required information offline as there were legal implications.

The Chairperson requested the Acting CEO to repeat his response.

Mr Poya stated that the information had been submitted to the ministry and the Department and he would follow up with the ministry and Department to find out what had happened. He would be in touch with Ms Powell within a day or two.

The Chairperson asked for input from the Deputy Minister but she had lost connectivity.

Closing remarks
The Chairperson thanked Deputy Minister Tshwete in her absence. Further, she thanked the Chairperson of the NHBRC board for her dedication during her term of office. She offered her condolences on the passing of the previous CEO.

The meeting was adjourned.

 

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