Government Employee Housing Scheme: progress report; with Deputy Minister

NCOP Transport, Public Service and Administration, Public Works and Infrastructure

08 December 2021
Chairperson: Mr M Rayi (ANC, Eastern Cape)
Share this page:

Meeting Summary

Video

In a virtual meeting, the Select Committee received a briefing from the Department of Public Service and Administration (DPSA) on the Government Employee Housing Scheme (GEHS) for public servants.

The introduction of the GEHS had arisen from concerns that public servants were not able to secure home loans without additional financial assistance. The scheme aimed to provide a housing allowance to civil servants for them to access various financing deals in order secure housing options such as owning a home, or being able to rent accommodation. The current allowance was R1 500, and was subject to annual increases as per Resolution 7 of 2015 of the Public Service Co-ordinating Bargaining Council (PSCBC).

The Committee was concerned that many public servants were not accessing their housing allowances, despite being eligible. The Department responded that there were advocacy programmes that were encouraging employees to register for the scheme.

The DPSA explained that employees who did not make use of their housing allowance would have a portion of it diverted to the Individual Linked Services Facility (ILSF), which they would be able to access once they wished to explore their housing options. The Committee was concerned that the Department had sought informal expert advice on how the ISLF may be able to address the housing financing concerns of state employees, instead of obtaining formal expert advice to guide both the Department and the Committee. The Department responded they would be conducting a formal study which would be completed by the end of next year.  

There were discussions under way to have pension funds being used to provide home loans to civil servants, which would require the Government Employee Pension Fund Act to be amended.

There was currently a partnership between government and SA Home Loans to provide reasonable home loan packages, but the government had undertaken a termination process, as bargaining councils, particularly labour, had complained about not being consulted on SA Home Loans' involvement, nor were their packages favourable to employees. There were currently discussions about the termination period, where the government would like a one-year period, while SA Home Loans was requesting a five-year period. The Department's view was that this was not justified, based on the lack of service that had been provided.

The Department was mindful that the scheme was one of government’s most expensive programmes, and it would continously assess how it was being managed, and would provide regular feedback to the Committee on its progress.

 

Meeting report

Select Committee on Transport, Public Service & Administration, Public Works & Infrastructure

8 December 2021

Government Employee Housing Scheme: progress report; with Deputy Minister

Acting Chairperson: Mr M Rayi (ANC, Eastern Cape)

Documents handed out:

Department of Public Service and Administration: Government Employee Housing Scheme Presentation

Meeting Summary

In a virtual meeting, the Select Committee received a briefing from the Department of Public Service and Administration (DPSA) on the Government Employee Housing Scheme (GEHS) for public servants.

The introduction of the GEHS had arisen from concerns that public servants were not able to secure home loans without additional financial assistance. The scheme aimed to provide a housing allowance to civil servants for them to access various financing deals in order secure housing options such as owning a home, or being able to rent accommodation. The current allowance was R1 500, and was subject to annual increases as per Resolution 7 of 2015 of the Public Service Co-ordinating Bargaining Council (PSCBC).

The Committee was concerned that many public servants were not accessing their housing allowances, despite being eligible. The Department responded that there were advocacy programmes that were encouraging employees to register for the scheme.

The DPSA explained that employees who did not make use of their housing allowance would have a portion of it diverted to the Individual Linked Services Facility (ILSF), which they would be able to access once they wished to explore their housing options. The Committee was concerned that the Department had sought informal expert advice on how the ISLF may be able to address the housing financing concerns of state employees, instead of obtaining formal expert advice to guide both the Department and the Committee. The Department responded they would be conducting a formal study which would be completed by the end of next year.  

There were discussions under way to have pension funds being used to provide home loans to civil servants, which would require the Government Employee Pension Fund Act to be amended.

There was currently a partnership between government and SA Home Loans to provide reasonable home loan packages, but the government had undertaken a termination process, as bargaining councils, particularly labour, had complained about not being consulted on SA Home Loans' involvement, nor were their packages favourable to employees. There were currently discussions about the termination period, where the government would like a one-year period, while SA Home Loans was requesting a five-year period. The Department's view was that this was not justified, based on the lack of service that had been provided.

The Department was mindful that the scheme was one of government’s most expensive programmes, and it would continously assess how it was being managed, and would provide regular feedback to the Committee on its progress.

Meeting Report

The Acting Chairperson welcomed Committee Members, officials from Parliament, and Dr Chana Pilane-Majake, Deputy Minister, Department of Public Service and Administration (DPSA), and her team.

The purpose of the meeting was to receive a progress report on the Department’s Government Employment Housing Scheme (GEHS) and how it would be of assistance in addressing concerns that arise when trying to secure housing for a state employee.  

Deputy Minister’s introductory comments

Dr Pilane-Majake thanked the Committee for the opportunity to present before them regarding the GEHS, with particular reference to government’s housing allowance dispensation in accordance with a directive by the Minister of DPSA and the Public Service Bargaining Council Resolution 7 of 2015, dealing with housing benefits queries.

In 2016, the DPSA and the Public Investment Corporation (PIC), on behalf of the Government Employees Pension Fund (GEPF), had signed a partnership to roll out the housing scheme through SA Home Loans. A service level agreement (SLA) had been signed between DPSA and SA Home Loans and between the PIC and SA Home Loans, to offer packages that would enable employees to have ease of access to housing while working for the government.

DPSA briefing

Ms Yoliswa Makhasi, Director-General (DG), DPSA, said that the GEHS arose out of concerns that state employees were receiving housing allowances but did not own homes, nor could they access home loans without additional financial assistance. There was also an under-supply of affordable housing units in the gap market, and the credit financing criteria were not friendly to government employees.

The Public Service Coordinating Bargaining Council (PSCBC) Consultative Committee was formed, and was represented by labour and employer representatives from National Treasury, the DPSA, the PIC, the Department of Human Settlement (DHS), the GEPF and Government Pension Administrative Agency (GPAA). The GEHS was located within the Chief Directorate of Macro Benefits in the DPSA, focused on negotiations, labour relations and remuneration management (NLRRM). The GEHS strategy was presented and approved by the Ministry for Public Service and Administration (MPSA) in October 2020.   

Mr Modise Letsatsi, Acting Deputy Director General (DDG), DPSA, said that the housing allowance was currently at R1 500, but for those who did not make use of it, part was directed to the Individual Linked Services Facility (ILSF). This could be accessed only for acquiring or building a house or another source of accommodation.

The challenges faced by government employees was that they may have an impaired credit record due to being over-indebted and having garnishee orders, which affected their credit score to access financing to purchase a home. In addition to this, they tended not to have adequate funds to access a home loan and while some may earn enough, they were unable to pay bond payments due to pressing incidental expenses.

When the scheme started in 2015, the housing allowance was R900. As of 2021, the allowance was R1500. The allowance would be subject to annual increases as per Resolution 7 of 2015 with the PSCBC.

In 2015, 305 193 employees were eligible to receive the housing allowance, but were not receiving it. This number had been reduced to 212 760 in 2021 due to an advocacy drive conducted by the Department for employees to sign up to the scheme. Employees who were homeowners and receiving the housing allowance had increased from 352 103 in 2015, to 732 516 in 2021. Employees who were tenants decreased from 569 000 to 221 587, showing that more state employees were becoming homeowners than tenants. To date, there were 402 883 employees enrolled on the scheme.

Most home loans given were in Gauteng and KwaZulu-Natal (KZN), as they had the larger metros in the country, along with more urban areas. Government employees between the ages of 30-50 accounted for the bulk of loans allocated, and most were female employees.

As of 31 October 2021, R13 billion had been saved in the ILSF, with approximately R180 million being saved monthly, and the withdrawal rate fluctuated per month. Informal expert advice had concluded that the ILSF was able to resolve the financial challenges of getting cheaper home loans for public servants and to receive additional related benefits. A study was being conducted to assess whether the informal advice was implementable.  

The scheme currently had a partnership with SA Home Loans, but there had been dissatisfaction about the partnership, especially from bargaining councils. As such, a process was under way to terminate the partnership, although government was mindful that the termination should not affect employees who had impaired credit scores.

There were discussions under way to have the Government Employee Pension Fund Act to be amended to allow for pension-funded home loans as a benefit to public servants. If approved, the PSCBC would be able to amend the pension fund law to make such provisions.

There were discussions under way to involve various financial institutions in providing loans to government employees. However, key principles of the charter of housing finance solution requirements had to be met, such as home loans must have prime minus interest rates -- which the current proposition was to have it at 8% -- and employees who were under levels 1-5 should be prioritised for additional benefits as per Resolution 1 of 2018. Home loans should be provided at loan-to-value (LTV) of 100%, giving employees the option to put down a housing deposit should they wish to do so. There should be the option of a mortgaged or non-mortgaged home, where shorter periods of repaying the loan should be encouraged for public servants. There should also be consideration for public servants who live in rural areas as per the 2018 determination and directive on housing allowances for employees in the public service, to facilitate access to housing, as their form of residency tended to be excluded from the housing market.

Discussion

Mr T Brauteseth (DA, KZN) asked why the Department had received informal advice about the R13 billion that had been saved in the ILSF. Why had the Department not sought an official opinion from financing experts which could also be considered by the Committee? An official presentation from experts would be ideal so that a consensus could be reached on the best way to use the ILSF to adequately administer the GEHS, which should be market-driven and not used as a petty cash fund.  

The Acting Chairperson asked who qualified for the housing scheme. Did all employees of government who were homeowners qualify for the scheme, regardless of owning a house, which may or may not be paid for?

Were all government employees enrolled into the scheme, or it was limited to employees who were or may wish to be homeowners? Did this mean that those who were not enrolled in the scheme were not entitled to a housing subsidy?

Would an employee continue to receive a housing subsidy once they had accessed funds from the ILSF? Would they also receive monthly statements as to how much they had remaining in the ILSF?

What would happen to employee who had resigned, retired, or died and had not yet accessed their funds from the ILSF? In the event of a couple working in government, did each partner individually access the housing scheme and the funds in the ILSF, or would it be one partner as the principal spouse who received the benefits?   

Which government entity or financial institution was administering the ILSF?

Was the group of employees who were eligible for the housing allowance, but not receiving it, also part of the ILSF? Why were they not receiving their allowance? Was it because it was diverted to the ISLF, or they not enrolled in the scheme? Were they able to access their funds from the ISLF once they purchased a home or rented accommodation, or did they have to forfeit what had already been placed in the fund?

What were the challenges that had been experienced with SA Home Loans, as there were reports of dissatisfaction about their service and ability to help government employees?

How often did the subsidy increase, seeing that there had been increases in 2015, 2020 and 2021?

DPSA's response

Mr Letsatsi said labour felt they had not been consulted about bringing SA Home Loans on board to administer home loans to civil servants, so they did not wish to associate themselves with an entity they did not recognise. Additionally, the loan packages were not favourable to state employees, as only 12% of state employees had made use of SA home loan packages. Therefore there was now a process that government had undertaken to terminate its relationship with SA Home Loans. If there was no termination, it would not serve a mutually beneficial relationship for the State, its employees or SA Home Loans.

Regarding eligibility for the scheme, all public servants including senior employees were eligible to enroll for the scheme, but enrolments come mainly from employees in levels 1-12. Accessing the allowance required employees complete the necessary application process, but some employees were not interested in following the process as they thought they may be excluded for not owning a home and/or living with their parents, living in rural areas or leasing accommodation. The scheme did not discriminate against those living under these conditions if they have could provide any proof of occupancy of where they live.

The Department was embarking on road shows to encourage employees to apply for the scheme, and there had been an overwhelming response.

Each spouse of a married couple qualified for a housing allowance. If the couple did not own a home, part of, or the whole amount of, their allowance would be directed to the ILSF in terms of Resolution 7 of 2015.

National Treasury was administering the ISLF, so it was handled internally by the government.

The informal advice had come from interaction with financing experts from the banking sector, such as the South African Banking Association. This had led to the Department commissioning a research report on how best to administer the funds, which would provide official advice as sought by the Department and by the Committee. The research was anticipated to be concluded before the end of 2022.

Civil servants who resigned or were dismissed from the government would forfeit their savings, whereas retired civil servants would have access to their savings. There were funds that would accumulate from resignations within the ISLF.

The housing subsidy increased annually according to the consumer price index (CPI), regardless of whether there were salary adjustments in government. The subsidy formed part of a different resolution which ensured it adjusted the increases.

Ms Makhasi said that a public servant in national and provincial government, in terms of the Public Service Act (PSA), were the ones who qualified for the scheme. It did not extend to local government or those not hired as per the PSA. The Department was currently of looking at implementing the housing scheme so that the gap market was attended to. The SAHL rates were expensive and did not speak to their gap market.

Another DPSA official said that employees had access to the ILSF and could see how much was in their funds when they wanted to.

Deputy Minister's closing remarks

Deputy Minister Pilane-Majake thanked the Committee for allowing the Department to provide an update on the GEHS. The Department was conscious that this was one of its most expensive undertakings and through a status report, it would continue to evaluate how best the scheme could be managed.

The Department was assessing whether to continue its agreement with SA Home Loans, as the initial agreement with them had been to provide attractive packages at better interest rates that would be beneficial to civil servants, compared to other financial institutions. However, this seemed not to have been the case. The government wanted a one-year separation notice, but SA Home Loans wanted a five-year separation notice. Government was hoping to get the one-year notice period, as the lack of performance did not justify a five-year notice period. Every public servant must be able to access financing services, regardless of their position within government.

The Department was pleased that the Committee had taken an interest in the GEHS, and would work closely with it to consistently improve the scheme in order to improve the lives of public servants through easier access to housing.

Committee matters

Adoption of minutes

The Committee considered the minutes of its meeting held on 1 December 2021, which considered the presentation of the Infrastructure Investment Plan and infrastructure developments by the Department of Public Works and Infrastructure.  

The minutes were adopted.

2022 first term calendar

The Committee considered the first term calendar for 2022.

Mr Brauteseth asked if the meetings would resume in-person or remain in a virtual setting.

The Acting Chairperson said that at present, all meetings would proceed virtually, but he advised Members to speak to their Chief Whips about considering making the meetings physical or hybrid.  There was support by Members for the meetings to adopt a hybrid model like the plenary sessions, while observing health protocols.

The calendar was adopted, with a note that all Committee Members must check that the calendar did not clash with any other meeting that they were required to attend. If so, they must inform the necessary meeting structures, to see if the meeting dates could be adjusted.

The Acting Chairperson thanked the Deputy Minister and her team for their presentation. The Committee was pleased that such a housing scheme existed, as public servants had long complained that their salary thresholds placed them in a precarious position, limiting their ability to access housing and bond financing. The scheme was a step in the right direction towards addressing housing challenges for the public sector.

The Members were thanked for their attendance and participation. They also wished Chairperson Mmoiemang a speedy recovery on behalf of the Committee.

The Committee staff were thanked for their assistance throughout the year. The staff and the Committee were wished a joyous festive season and a safe return to work in the new year.

Mr Brauteseth thanked the Chairperson and the Acting Chairperson for their leadership, and the Committee for holding the Executive to account.

The meeting was adjourned.

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: