In a virtual meeting, the Portfolio Committee received briefings from three Department of Human Settlements entities -- the National Housing Finance Corporation, the Property Practitioners Regulatory Authority and the Community Schemes Ombud Service -- on their budgets, strategic plans, and revised annual performance plans for 2022/23.
The Deputy Minister said following the entities' last presentations to the Committee on their plans for stability and long-term interventions towards achieving unqualified audits and much of what was discussed was refined and found expression in the strategic and annual performance plans presented today. The entities were entering the current financial year with a clear plan for what they had begun, and she was confident that the right men and women were in control.
The Committee noted a common commitment among the entities to the transformation and development of young people and designated groups. They all had development programmes intended to open doors and equip those who were previously disadvantaged with the necessary skills to progress in the sector. All these initiatives were quantifiable, and the entities would be required to provide progress reports on the achievement of their targets.
The National Housing Finance Corporation (NHFC) said that with a new board in place, it positioned itself as the preferred service provider in the sector to help people buy houses. That ambition came with certain expectations, and it was well on the way to achieving them. These changes played a critical role in redressing historical issues. Most importantly, the entity was in a great place when it came to business processes, particularly around quick and easy payment of service providers. It al o advised the Committee that it was moving from being the NHFC to becoming the Human Settlements Development Bank.
The Property Practitioners Regulatory Authority (PPRA) said its transformation plan had already been integrated into its strategic and annual performance plans. Its focus was informed by the new mandate contained in the Property Practitioners Act (PPA). It updated Members on the suspension of the CEO and the plans that it had in place to maintain stability in the organisation. An acting CEO was appointed, but the other vacant positions that the Committee wanted to be filled were not filled yet because the entity transitioned the Estate Agency Affairs Board (EAAB) to the PPRA and the re-engineering of the organisational structure to align with the new mandate espoused in the PPA.
The Community Schemes Ombud Service (CSOS) reported that it had a new board as of 1 January 2022. It was doing well in achieving the 30-day payment of service providers and was currently achieving a 14-day turnaround time. It described the challenges it was experiencing in recovering its money from VBS, where it was listed as a creditor with the liquidators. Because so much money was withdrawn, VBS was referred to as an empty shell, and there may not be any assets to share with the creditors. Forensic accountants identified some accounts to which the funds had been transferred, but this information could not be shared with CSOS until coordination with the principals involved. The entity had made follow-ups with the Hawks and the Special Investigating Unit regularly, asking how far they had got with the process, but t hey kept saying they were also still waiting for authorisation from the principals. CSOS was therefore in limbo and unable to move anywhere regarding the possible recovery of its funds.
Deputy Minister’s opening remarks
Ms Pam Tshwete, Deputy Minister of Human Settlements (DHS), said it was not so long ago that the entities had come before the Portfolio Committee to present their plans for stabilising the organisations and long term interventions toward unqualified audits. Much of what was discussed had been refined and found expression in the strategic plans and annual performance plans (APPs) presented to the Committee today. The entities were entering the current financial year with a clear plan on what they had begun and she was confident that the right men and women were steering that ship.
The Committee noted that what was common among the entities was a commitment to the transformation and development of young people and designated groups. The entities had better skills development and graduate development programmes intended to open doors and equip the previously disadvantaged with the necessary skills to remain in the sector. All these things were quantifiable, and the entities would be required to provide progress reports on their targets. She was aware that the Chairperson was very strict about targets and had raised this before to entities that presented in the Committee, and she hoped they would give a clear mandate and vision of their targets for 2022/2023.
The National Housing Finance Corporation (NHFC) positioned itself as the preferred service provider in the sector in the quest to help people buy houses. That ambition came with certain expectations, and the entity was well on the way to achieving them -- she was sure that they were going to achieve them because she had done her research to confirm that. These changes played a critical role in changing historical issues. Most importantly, the entity was in a great place when it came to business processes, particularly around quick and easy payments of service providers.
Deputy Minister Tshwete said she was aware of the issue raised by Ms Sihlwayi in the previous meeting on the need to check transformation, and the entity would touch on that. The Property Practitioners' Act had effected the addition of new targets for the Property Practitioners Regulatory Authority (PPRA) in line with its standard mandate. She was pleased with the work done and was confident that the financial aspect of the human settlements portfolio was strengthened. She reiterated there would be a change in stability of the entities and believed that Members saw that already because the Department used to struggle with stability. Now there were new boards and stability.
National Housing Finance Corporation 2022/23 Annual Performance Plan
Mr Luthando Vutula, Chairperson, NHFC, said his board was new and they were having their first inaugural board meeting next Tuesday. He agreed with what DM Tshwete had said about the NHFC: its future was looking brighter. The entity was moving from being the NHFC to being the Human Settlements Development Bank, and this would be explained in the presentation. He was aware that sometime in June, his team would have to come back to the Committee and present the progress on the bank. He said the new board had several skills sets and was made up of men and women with the capabilities to make a serious contribution to human settlements in South Africa.
Mr Bruce Gordon, Acting Chief Executive Officer (CEO), NHFC, gave the presentation and confirmed that the entity had a newly appointed board comprised of six women and five men.
Socioeconomic challenges included persistent challenges of inequality, unemployment and poverty. There was a sustained low level of investment and growth, and unemployment was stubbornly high. Covid 19 had harmed the economy, and there had been a series of downgrades for the economy and state-owned entities (SOEs).
There were also prevailing market challenges. Devel pers had slowed down their activities in some markets due to the impact of Covid-19 and the challenging economic environment. The affected products included incremental housing finance, private rental finance, subsidy contractor finance, and social housing finance.
The Finance-Linked Individual Subsidy Programme (FLISP), which the Minister recently announced, was a housing subsidy for first-time homebuyers to assist with purchasing a home. High levels of unemployment due to the persistent pandemic and slow economic growth posed a challenge for the FLSIP market. However, national marketing of the programme, the inclusion of non-mortgage products in its implementation, its availability for the Government Employees Housing Scheme (GEHS) market and other initiatives were expected to ameliorate the impact of tough market conditions on its performance.
In its contribution to the economic recovery, the NHFC had introduced a skills development and graduate programme, with more women in the top programme. It was also responsible for job creation and empowerment of small, medium and micro enterprises (SMMEs), particularly focusing on women and youth, enabling conditions for ease of doing business, and promoting the economic inclusion of SMMEs in the area of supplier development.
Property Practitioners Regulatory Authority 2022/23 Annual Performance Plan
Suspension of CEO
Mr Steven Piet Ngubeni, Chairperson, Property Practitioners Regulatory Authority (PPRA), said his entity was no longer new. They were appointed in November last year and appeared before the Committee for the second time now. The last time the PPRA appeared before the Committee, it presented the transformation plan, already integrated into the strategic plan and APP. The focus in the strategic plan and APP was informed by the new mandate contained in the Property Practitioners Act (PPA), and there were things the entity used to do that had been carried forward. However, because the mandate had expanded, there were now more targets. The assumption to be made was that the PPRA was a new entity and it would be seen that the targets would reflect this, as there were new targets that had not been dealt with before. Emphasis was placed on the transformation mandate, as it was drawn directly from the PPA. Because of the problems engulfing the PPRA, the entity was making progress in inculcating the culture of embracing transformation in the sector.
He said there had been a request last night for the PPRA to update the Committee on the suspension of the chief executive officer (CEO) and its plans to maintain stability. The last time it appeared before the PC, it was asked what it was doing about the allegations levelled against the CEO. It had responded by saying it was not in a position to speak about the matter but acknowledged that allegations had been received. The entity promised to attend to allegations soberly without any bias or succumbing to any external excitement, regardless of where they came from, be it from the media, individuals or politicians. The entity had decided to do its job properly as an independent body based on the facts it had. Today it was at liberty to brief the Committee about what had happened and take the Committee through the developments to date.
After the board's appointment last November, the entity received a communiqué from the Minister, bringing attention to a report compiled by the Public Service Commission (PSC) based on a submission that an anonymous whistleblower made. The letter of the Minister requested the PPRA to indicate the action intended to take in response to these allegations. It had looked at the allegations and decided to accord the CEO an opportunity to give it an explanation even before it commenced with the investigations. This would assist in deciding if the allegations were baseless or not and whether to use the state's resources on an investigation, given the financial constraints experienced. The CEO had responded to the board's request to explain the allegations. After considering the explanation given, the board felt that it was not adequate to allow it to disregard or discard the allegations. The board had felt the need to initiate a forensic investigation into the allegations and decided to protect the whistleblowers and hear what they had to say by giving the CEO a letter of intention to suspend her on 23 March, after the last PC meeting. This was to enable transparent investigations where whistleblowers could participate freely. This decision emanated from previous experiences where whistleblowers were victimised by the CEO, which had affected investigation processes.
The CEO was asked to give reasons why she should not be suspended, but she preferred not to respond to that request by the end of 48 hours, which was the disciplinary code requirement at the PPRA. The board was forced to confirm the suspension. However, she decided later on to challenge the suspension but did not put much emphasis on challenging the suspension per se in court. Rather, she challenged the legality of the appointment of the board by the Minister. The board and the Minister had opposed that challenge, and the high court dismissed it with costs. The board had since received notification that she had petitioned the high court requesting reasons for the judgment, and the board suspects that she may file an appeal against the judgment.
To maintain stability in the organisation and avoid a leadership vacuum, the board had decided to look amongst the managers in the organisation and choose the one it thought was the best and most suitable to fill in the gap with the necessary experience, qualifications and acumen. It had decided to select Ms Deli Nkambule as Acting CEO until such a time that the investigations were completed, either clearing the CEO or leading to the disciplinary process.
There was, therefore, a CEO in the meantime, but the other vacant positions that the PC wanted to be filled had not been filled yet, mainly because of the transition from the Estate Agents Affairs Board (EAAB) to the PPRA and the re-engineering of the organisational structure to be able to respond to the new mandate as espoused in the PPA. The board was at the stage where it could start filling those positions and accordingly come back and report to the PC that the positions were filled. There was quite a great deal of work that needed to be done, including responding to the findings from the previous year. The board kept itself busy to ensure it rectified matters that had been done wrongly before setting the entity on the right path.
Annual Performance Plan
Ms Nkambule, Acting CEO, PPRA, presented the entity’s budget for 2022-2025, its strategic plan and APP.
Describing the key issues, she said the PPRA, as a new entity, had a new board that consisted of fewer members compared to the previous board. Transitioning from EAAB to PPRA from 1 February had brought about the new PPRA Act. The PPRA was a schedule 3A public entity of the National Department of Human Settlements, and its mandate was outlined in s6 of the Act.
Transition Implications were that it marked the start of the reporting period covering February and March, which was at the back end of the already approved 2021/22 annual plan. It would be gearing itself to execute the wider mandate ushered in by section 6 of the PPA in the transition period. In particular, the transition period would be used to initiate processes to structure and resource the PPRA to be capacitated to deliver on the expanded mandate and initiate and establish new processes to execute new deliveries. The 2021/22 supplementary APP had captured the new performance outcomes aligned to the transition – for example, development of a new PPRA stakeholder management plan; and engagements towards memorandums of understanding (MoUs) to establish the Knowledge Resource Centre.
Alignment to the medium term strategic framework (MTSF) and the PPA meant the entity would focus on the following priorities:
Property sector transformation through empowerment programmes like the principalisation, regularisation and consumer awareness programmes; the property transformation fund; the property research centre; development of the qualification standards for property practitioners; and provision for continuing professional development for the property practitioners.
Ms Nkambule outlined the PPRA's strategy for 2022/25 and the APP for 2022/23
Programme 1: Administration
The PPRA road map for the strategic planning period 2022-25, in support of the MTSF Priority 1 of building an effective and capacitated government, would include the following:
- Establishment of the Property Practitioners Fidelity Fund within six months of commencement of the Act.
- Building on the expanded mandate and structures as reflected in the PPA.
- Strengthening the capacity of the PPRA to implement the PPA would be able to achieve the desired outcomes only if a stable and well-functioning regulatory authority drove it.
- Stakeholder engagement and sector consensus.
- Ensuring an unqualified audit opinion with no material findings.
Programme 2: Licensing and compliance
The compliance objectives were to ensure property practitioners -- including their directors, members or trustees, and their employees who act as property practitioners -- obtain and hold a valid Fidelity Fund certificate.
The PPRA would amplify the provisions of the PPA, aimed at strengthening the regulatory aspect of the human settlements sector.
The PPRA supported the objectives of the DHS working towards the National Development Plan (NDP) 2030, implemented through the MTSF through the achievement of Priority 5: spatial integration, human settlements and local government.
Programme 3: Inspection and enforcement
The PPA was anchored as a consumer-focused piece of legislation designed to protect consumers in the property industry. This meant that the PPRA, in contrast to EAAB, would have more reaching power, which included inspections without notice and more serious consequences for non-compliance.
Programme 4: Research, professionalisation and training
The PPRA road map for the strategic plan 2022-25 in support of the MTSF Priority 1 -- building an effective and capacitated government, and professionalising the property sector -- would include the following:
- Development of the qualification standards for property practitioners.
- Development of course materials, including assessment and approval of existing materials of representative bodies.
- Establishment of professional designation examinations.
- Development of standards for the practical training of non-principal property practitioners.
- Regulation of candidate property practitioners (CPPs) undergoing 12 months of training under the active supervision and control of an agency principal or a qualified agent with at least three years experience.
- Prescription of continuing professional development requirements for property practitioners.
- Establishment of the Knowledge and Research Centre to make available knowledge resources and to disseminate knowledge in the real estate sector.
Programme 5: Transformation
The PPRA road map for the strategic planning period of 2022-25 in support of the MTSF Priority 5 was to ensure the transformation of the property sector so that the historically disadvantaged, especially women and persons living with disabilities, could participate meaningfully and would therefore include the following:
- Capacitation and enterprise support for historically disadvantaged property practitioners;
- Support of small, medium and micro enterprises (SMMEs) owned by historically disadvantaged property practitioners.
- Promotion of the standard of training and development of historically disadvantaged property practitioners.
- Supporting existing historically disadvantaged property practitioners to become principal property practitioners and owners of business property practitioners;
- Facilitation of ownership of and participation in property investment enterprises.
- Enabling the transformation of property ownership in South Africa by providing grant support through the Transformation Fund to historically disadvantaged property practitioners who were in the business of developing residential properties in the affordable and secondary housing markets.
The PPRA requested that the Portfolio Committee approve its 2021/22 APP, the 2022/25 strategic plan, and the 2022/23 APP.
Community Schemes Ombud Service 2022/23 Annual Performance Plan
Adv Boyce Mkhize, Chief Ombud, Community Schemes Ombud Service (CSOS), gave the APP presentation and indicated that the entity had a new board, effective 1 January 2022.
He said the major thrust of the entity's APP rested on five strategic outcomes. These were functional, efficient and integrated government, effectively regulated community scheme sector; effective dispute resolution; empowered stakeholders; and transformation of community schemes.
The CSOS took its guidance from the National DHS and, at an institutional level, also contributed to the following MTSF 2019-2024 priorities:
Priority 1: Capable, ethical, and developmental state
This was the bedrock of the CSOS operation, as the organisation implemented a range of governance improvement measures to progress towards achieving an unqualified audit outcome with no material findings.
Priority 2: Economic transformation and job creation
This would be achieved through targeted procurement and by implementing the preferential procurement regulations supporting the MTSF targets for designated groups -- 40% procurement spend on women, 20% for youth and 5% for persons with disabilities.
Priority 5: Spatial integration, human settlements and local government
The desired outcome was spatial transformation and justice by implementing housing and human settlements in priority development areas (PDAs).
Adv Mkhize outlined the entity's strategy for contributing to job creation. This included the appointment, training and possible placement of historically disadvantaged executive managing agents (EMAs) in real economic opportunities, such as the governance and/or management of schemes. Creating a database of such EMAs and a network for opportunities was underway. There was a partnership with the Youth in Property Association (YIPA), comprised of black-owned property entities passionate about transforming the industry. Interns would be placed in all CSOS business units for practical exposure and possible absorption thereafter
Ms Thembelihle Mbatha, CFO, outlined the entity's MTEF 2022/25 budget and said it received a grant from the government through Treasury and a Community Scheme levy income. The base of the interest received was adjusted slightly because of the economic conditions.
The existing headcount complement was 115 permanent and 14 temporary staff and 23 interns. Critical positions were identified that were to be prioritised and accounted for in the staff costs, including employees to be recruited to expand additional points of presence for the CSOS. There were no cost-of-living increases budgeted, in line with 2021 MTEF cost of employment (COE) guidelines, so the increase was attributable to filling vacant positions. However, there was a provision for performance-related remuneration only for resources below the executive management level.
Operational expenses comprised the core functions of dispute resolution, community schemes database management and related activities, and storage, management and retrieval of community schemes’ governance documents. These activities should naturally consume the second largest expenditure after staff costs.
In the cash flow statement, the cash and cash equivalents decreased by R212 million from 2021/22 to 2022/23 due to the envisaged accelerated spending and expenditure to be undertaken in the new financial year and non-retention of National Treasury (NT) surpluses and capital expenditure projects underway.
Marketing and communications functions continued to be earmarked as an important function of the CSOS due to lack of awareness of what CSOS does. The P exercise would entail public consultation campaigns for the organisation, and brand promotion and management costs for the entity were also included. Further, production of the mandatory annual report and annual performance reports were part of this cost category.
The education of stakeholders and consumers, including reaching the affordable and subsidy housing market community schemes, was a core function of the CSOS and a key contribution to the current MTEF for the Department. The C OS intended to roll out extensive programmes in this area during the coming planning period. The scope, speed of rollout, and reach of these programmes would be limited only by budget availability.
Dr N Khumalo (DA) directed her first question to the NHFC about those who did not qualify for a bond. How many people would benefit from the provisions that the entity had put in place to serve that particular constituency? Was it correct that there were no funds for the servicing of stands? What could be the reason for that? This could be one of the solutions to some of the challenges faced as far as human settlements were concerned? What were the criteria for the graduate learnership programme, as thousands of applications would be coming in? How would the selection be carried out? Was the supply chain management (SCM) process improvement, which was spoken about as a way forward for financial sustainability, mean looking at what prices they accepted, or was it the result of findings on the part of the entity? Were there any plans to improve its liquidity as it moves forward, especially considering how it was funded and how its operations were carried out?
Turning to the PPRA, she said she was not sure at this stage the kind of questions that would be appropriate or what they would be able to answer. They had mentioned that the whistleblower was not really protected in the past -- was that a result of an inefficient or inadequate policy that was in place at the time? Had the policy been reviewed and was it possible to share the document so that Members could see the changes made to ensure that whistleblowers feel protected if they report anything? She was also curious about the process the entity outlined around the intention to suspend if that would not come about already with the explanation of what the allegations against a particular individual were. What were the turnaround times for the recruitment process plans and targets? Ordinarily, some entities say their recruitment process from the beginning to the end would take 90 days, so what was their targeted timeframe considering their comments about the critical vacancies within the PPRA? What was the reason for taking pensions out of human resources (HR) in the committees? What was the timeframe for establishing the transformation knowledge resource centre licensing regime, and what did the stakeholder engagement involve? That slide referred to February and March 2022, meaning that the activities should have happened already, and she requested clarity on this. Could the entity supply the Committee with a detailed report furnishing it with the full details of the programme -- the time frame and criteria of those programmes, the availability of resources, capacity, and so forth -- and how they allocated the funding of over R1 million? Was the increase in the learnership programme a result of inflation, or they were looking at increasing the number of students?
She asked the CSOS how the indicator on the electronic document programme would be measured. Would it be from inception to when it was in operation? How would it be measured, as it seemed as if they would need to implement cash procurement? Were they procuring for the whole year, or was that indicator including procuring and having it in operation when they were storing their documents electronically and so forth? How far was the entity on the operational design? When would completion be envisaged? Did the entity have a marketing and communication department?
Ms S Mokgotho (EFF) directed her question to the CSOS. How many previously disadvantaged individuals had the CSOS trained as executive managers in the 2021/22 financial year? If the number was fewer than 25, what was the reason for that? What would they do differently to reach their 2022/23 target? What percentage of the procurement budget had it spent on women, youth, and disabled people in the 2021/22 financial year? Concerning the 2022/23 MTSF budget, under administration in 2021/22, the MTSF budget estimate had been R140 156 852 million, and in 2022/23, the allocated budget was more than double that amount. What had informed this huge increase? There was also a budget allocated for training in 2021/22 of about R14 586 511 million, and in 2022/23, the budget was R14 125 511. This meant there was a reduction in the amount of money allocated to train the previously disadvantaged groups for 2022/23. Why had the budget been reduced when there was a backlog of empowering previously disadvantaged groups so that they could also play a crucial role in the economy? What percentage of the procurement budget had CSOS spent on women, youth, and disabled groups in 2021/22?
Ms N Tafeni (EFF) asked why the NHFC specifically partnered with the City of Cape Town for the contractor incubator programme. Would it be rolling out similar projects in some of the metros? How would it compensate for the potential of fewer beneficiaries receiving benefits from the FLISP due to its increased subsidy quantum and the implementation of non-mortgage products? What were the reasons for the deferring configurations of programmes between the budget and the APP?
Ms N Sihlwayi (ANC) appreciated the presentations of the three boards and the progress they had made in implementing their programmes. She appreciated the fact that the equity fund was established, which would improve the performance based on skills development and the inclusion of previously disadvantaged people in the country's economy. That was a very progressive transformation agenda by the board. She asked the PPRA how it had managed to change the people's attitude when it said it had arrived in an environment where highly indebted people were unable to access loans. Where was the entity now, and how did it develop a turnaround in addressing the culture and attitude of the people? Do they believe that their programme could be sustainable in the future with the people who had the old culture? She proposed that the board continue to do more research, as this would help address various impediments to changing the old behaviours to the new ones. Their search should look at how other countries and other people had done it so that it continued to empower itself.
She said the CSOS had a community scheme that had to grow and multiply. What was the board's strategy concerning recruitment, or perhaps lobbying for more people to come into the scheme? There may be many people who would like to be assisted -- how were they coming in? Was there a programme or campaign for other people to come into the scheme? She heard that there was one in Port Elizabeth (Gqeberha), and she appreciated it. She saluted the board for its compliance with the Committee's recommendations because one could not have people in a loose arrangement, and where there was the borrowing of money there should be standards. The enforcement strategy was key to avoiding headaches. There was a notion of dispute resolution, and she wanted to know what type of dispute resolution it was and where it originated. What had become the strategy for the board in addressing those disputes? The training of disadvantaged individuals to be executive managers should be appreciated because it gave dignity to the ordinary people who had been neglected in the past. For one to become an executive manager from zero needed to be appreciated.
The Chairperson said some targets of the PPRA, even though it had a new mandate, were implemented in the previous years as part of the EAAB. They had said there was no baseline in their targets and had then come up with the targets -- was the way they had set their targets not misleading? It was confusing, and she sought clarity. She said the Committee welcomed the briefing, but its concern was that the PPRA did not have a CFO and internal auditors. The spirit shown to strengthen the entity did not help when the CEO was suspended, and there was no CFO or internal auditor. She asked for a timeframe for filling those posts so that the entity did not go back to unqualified reports after it had worked so hard to receive a qualified report.
She told all the entities that it would be very helpful for the PC to be informed of the commitments for this financial year for their contribution to job creation. This was so that as Members of Parliament (MPs), the Committee would be able to follow up on the entities' commitments to the set targets. Each entity should have a tangible number of targets to indicate how much it would contribute within a given timeframe. How w re they going to monitor the 40% and 20% and 5% set aside expenditure for previously excluded individuals to ensure that it gets implemented? There had been a 30% target that had never been achieved in government, so what were they putting in place to ensure that these targets would be made this time? With talk about transformation and building the inclusion of the previously disadvantaged within the economy, were they paying the small and medium enterprises (SMEs) within 30 days, as stipulated by the regulations? That information would be helpful.
She asked CSOS how far it was in getting back the money invested in VBS.
Deputy Minister Tshwete requested she and the Department respond at the end because many questions had been asked and they needed more time to consolidate a comprehensive response.
Mr Vutula said the body was looking at ensuring that the NHFC moved from being the NHFC to the new Human Settlements Development Bank. This would be one of the priorities on which the entity would be working with the DHS. The bank could play an important role in eradicating the problem of housing in the country. Regarding plans to improve liquidity and raise funding, the Committee would have seen from the balance sheet presented that the entity had a very lazy balance sheet, so there was an opportunity to grow it, but it would have to make sense in terms of the numbers. Much would depend on the kind of rates made available as a development finance institution. What was raised here was the importance of ensuring adequate funding to support the entity's challenge in the sector.
In response to Ms Tafeni’s question on the FLISP, he said the advantage of the policy was that now it was not just about a mortgage. For example, it would also deal with people with a Permission to Occupy (PTO), so the entity was starting to get into rural spaces where more housing opportunities would become available. Management would speak to some MOUs the entity was beginning to sign now that the policy was approved and signed with all major banks in SA. The MOUs would be signed with specific targets, where the entity would have to manage and monitor what the banks would be doing.
The entity would come with the numbers regarding job creation, and because it was under human settlements and there was construction, job creation was critical. With some of the entity's programmes, such as the incubator programme in Cape Town, the intention was to roll them out to all the provinces.
Regarding the equity fund and ensuring that people had access to cheap grant funding, some form of a quasi grant could be made available. The entity had initiated debates with some of the provinces. This involved some of the MECs, who had invited the NHFC to sit down and talk about how it could assist them in ensuring that it started bringing entrepreneurs to the various provinces, especially to take advantage of opportunities in the inner cities. That could lead to regeneration, with black people starting to own businesses in the inner cities. The NHFC would be reporting on some of these initiatives at the next meeting.
Mr Gordon said the entity did not have data yet on the split between people who got mortgages and those who got funding through other means. It was working with some stakeholders, savings associations and incremental lenders to find out what their views were or what they suggested should be done in those areas, but the entity expected a good return.
He was unaware of where the idea of servicing stands came from because it was not part of their presentation, so it must have been a misunderstanding.
The graduate learnership programme was still being designed, so he could not tell what the qualifications required were. For the top training of the chartered accountants, one would normally have to start with a degree in accounting. The entity was trying to extend this qualification to individuals in the rural areas who may not be able to get a degree at a normal university and not from Model C schools. This was where the idea was, but the entity would see as time went by whether this was feasible.
The entity was looking at improving the SCM process because of audit findings, and they were hoping to clear those audit findings as they moved forward.
The chairperson of the board had responded to the question on liquidity. The entity was looking at ways to deal with that, but it was sitting at around R1 billion, and it was not an urgent issue.
The choice to partner with the City of Cape Town on the incubator programme was because the City had asked it, and nobody else had. However, the entity would like to roll out this programme to all other metros in the country. They were busy with another programme in Nelson Mandela Bay and were finalising the agreement to get that going. It was the same sort of programme with which the entity wanted to ensure that it was developing black-owned construction companies.
He said the entity would like to get figures on job creation. The City of Cape Town projects estimated that around 10 000 jobs would be created. If they could achieve the same in other provinces and metros, that would be a lot of jobs they would be able to create. If Members could talk to anyone they knew from other provinces that the entity could work with, they would be happy to hear from them. It would be wonderful to create jobs and bring money into the communities because NHFC insisted on working with construction companies within the communities in which they operate. This meant that money stayed in those communities if the people employed were from those communities. This was what this programme was about.
He would leave the question on FLISP to the DM and the Department because the NHFC did not deal with funding.
In response to the Chairperson's question about procurement and monitoring, he said NHFC had been monitoring its procurement for a long time already. If one looked at the statistics for the current financial year, the entity had spent 66% of its procurement on Level 1 broad-based black economic empowerment (BBBEE).
On the payment to SMEs within 30 days, he said those in Cape Town were guaranteed payment within 14 days, but they actually got paid within seven days. However, occasionally with larger suppliers, not SMEs in general, there were delays with invoices, which was an area it needed to improve on and change its processes to ensure that it did not have those slips happening anymore.
Mr Ngubeni responded to the question on what was done to improve the protection of the whistleblowers and said this question was part of the investigation. The reasonable apprehension mentioned earlier that the CEO may interfere with the investigation was based on one of the allegations contained in the whistleblower's reports that informed the entity of the lack of protection of whistleblowers in the past. As a result, the board would look at how it happened, what was done, and if nothing adequate was done, then what needed to be done. That was why he said this was part of the investigation. The suspension was for the investigation, but the allegations had been provided to the CEO. The whistleblower's report was not some kind of a secret or confidential document -- it had been furnished to the CEO so that she was fully aware of the allegation. The subsequent suspension was due to the decision to investigate. That investigation could not happen in the presence of the CEO against whom the allegations were levelled, at the same workplace as the whistleblower. The suspension was based purely on the need to carry out the investigation.
Critical vacancies were acknowledged in the presentation, and it was explained it was mainly due to the transition from the EAAB to the PPRA. The new board had to consider a new organisational structure -- re-engineering -- in line with the new mandate. That had been done and the entity was at the final stages of approving the organisational structure. Immediately thereafter, the empty vacancies would be filled. It was hoped that in its next visit to the PC, it would give a satisfactory progress report on the critical positions that had been filled. This had been prioritised to ensure that the right people could fill these positions.
Ms Nkambule acknowledged and appreciated the research proposal made by one of the Members and said the entity would do its research analysis to inform it of the impediments in the industry. On the payment of the SMEs, she said the entity tried to make payments within 30 days, but there were one or two that had not been paid. To resolve this issue, the entity had updated its policies, especially the SCM and the fiscal policies, to specifically provide for the payment of these SMEs within 30 days.
On the timeframe for establishing the licensing regime and the research council, she admitted it was supposed to be 1 February and confirmed that the licensing was continuing, although there were hiccups. However, because of legislation in place, particularly section 4, the PPRA could grant exemptions to those the entity had difficulties licensing. The difficulties were because the entity had been busy with its system. However, those who were unlicensed had not been affected because they could continue trading since they had been granted permission. Once the system was up and running, they would be issued the Fidelity Fund Certificate. The provision of section 4 protected them and allowed them to trade and earn a commission. The only ones affected were those who came after 1 February because, in terms of the entity licenses, most property practitioners or property agents renewed their Fidelity Funds Certificates in 2021 in preparation for 2022. What the entity would have done was that those that came back after 1 February and were not licensed, were granted an exemption.
The research centre was in the pipeline, together with the transformation fund. Ms Nkambule was hoping that they would be able to finalise this within the next six months as per the legislation. The entity had about six months to set the transformation fund up.
In response to the question on why the entity had said these were new targets, she said that previously the registration was supposed to be done within 21 working days. However, the registration was now supposed to be done within 30 working days regarding the new legislation.
Regarding the criteria that followed in allocating funding from the transformation fund, she said some of the programmes that would be funded included the learnership programmes that had previously been run, but they did not have funding for the capacity that they were now going to have. They were previously funded by the Sector Education and Training Authority (SETA). Because it had been running the programme for more than three years, the PPRA had gone back and looked at the database of the persons they had had within this programme and then allocated the funds based on the database.
For the principalisation programme, which was in the transformation fund and the regularisation, the entity had looked at its database of the black estate agents who were moving to principal estate agent status and had used it to come up with the funding.
Adv Mkhize said 23 historically disadvantaged marketing estate agents were trained and listed on the CSOS panel in 2021/22. The target for the year was 20, so it had exceeded the target by three. The 20 itemised in the APP for 2022/23 was a new target for the new year, so that would mark an increase of a further 25 to the 23 that had already been dealt with.
The question of the budget spent on women and disabled persons would be dealt with, but CSOS had not yet done the classification or a breakdown according to that particular categorisation. The previous financial year was based on a global BBBEE basis, and there was a target for that. According to the 2021/22 APP, the entity had to spend at least 70% of its procurement on historically disadvantaged or majority black-owned service providers.
He corrected information on training that the entity spoke about in the presentation - it was not just for previously disadvantaged individuals but was training globally in terms of its mandate, legislated in the Act, training body corporates, boards of trustees and governance structures on the schemes to comply with both the CSOS Act and Sectional Titles Schemes Management Act. This was globalised training targeting everyone in the governance structures and not necessarily historically disadvantaged persons.
Responding to Ms Sihlwayi’s question on the strategy for lobbying to enlist the scheme programmes for registration, he said there were several interventions that the entity was pursuing. As indicated in the presentation, the first one was data cleansing, where the entity integrated its data on the schemes with validated data from the deeds office, which was more reliable regarding the number of the schemes in the country, as well as the data from the Companies and Intellectual Property Commission (CIPC). There was already a project underway that was looking to integrate the data universally so that there was one set of composite data for the schemes in SA. In addition, the entity had engaged a service provider, Livestorm, which had access to a programme for the geo-mapping of schemes. This entailed physical identification of schemes on their GPS coordinates and locations in all the districts in the country. The entity intended to engage in an aggressive verification programme that would attract some unemployed youths and women to conduct the physical verification of the schemes, using the data set that had been cleansed and integrated accordingly.
The other intervention that the entity was continuously advertising on its social media platform, website, and other media calls were that the schemes should register with the CSOS. The public campaigns were beginning to bear fruit. It was becoming visible in other forums, such as industry associations, where it posted its profile and banners to drive the recruitment campaign. These initiatives were aimed at aggressively advocating for the enlistment of the schemes.
He agreed with Ms Sihlwayi on the enforcement strategy, because it was rooted in the authority that the entity had, or did not have, regarding legislation. That authority was derived either from the CSOS Act or the Sectional Titles Schemes Management Act. The entity already identified a major weakness in the pieces of legislation and frameworks, which was why it had a draft set of regulations that were already with the Department. The legal division was going through it to analyse it to process these regulations through the PC because, according to the CSOS Act, although they were regulations which were subordinate frameworks, they still had to be passed through the National Assembly. This was a peculiar and unusual arrangement because the regulations were usually passed and published by the Minister concerned after following a consultative process. The entity would go through that process and engage the PC as soon as the Department was ready to place those draft regulations before the Members so that they could find support in strengthening the CSOS enforcement regime. Part of what CSOS was looking at in regulations included the inspectorate and powers of inspectors, reportability of schemes, and other necessary mechanisms to ensure compliance with CSOS frameworks. This would enable the entity to do certain things to enforce compliance.
Regarding the types of disputes, he said these emerged from the members of the schemes. People lived within schemes where there were body corporates and rules of conduct, and sometimes it was the absence of the rules led to disputes arising. People also had concerns such as properties not being maintained, disputes around parking, issues of maintenance, and a whole lot of disputes that were lodged with the CSOS because it provided an alternative dispute resolution mechanism. This was a quasi-judicial process, almost akin to a court of law, but with fewer formalities than a court of law process. It was, however, quicker and less expensive than a formal court of law. A cohort of conciliators and adjudicators look at these disputes and evaluate the outcome based on the nature of the tabled dispute. The major portion of the disputes concerns the non-payment of levies, interest accumulation, and actions that arose from that. Other disputes emanated from a lack of accountability in the agency, such as a failure to share information on the financial statements and expenditure. CSOS had been vocal about creating an obligation for accountability and ensuring that the board of trustees and the body corporate and the management agency alike account for every cent collected in levies from their members.
He thanked Ms Sihlwayi for confirmation that the entity was on the right track regarding the training of historically disadvantaged persons, as this was the right thing.
Responding to the Chairperson, he acknowledged that the CSOS might not have put specific numbers to the entity's contribution towards job creation. However, working together with the Department on this aspect, CSOS may be able to come back to the PC with some specific data on job creation.
He was proud to say that under the leadership of the CFO, the entity had done exceptionally well with the payment of SMEs within 30 days. There was 98% payment within 30 days, which was reduced even further to 14 days after receipt of a complete invoice. The remaining 2% was due to service providers not providing the necessary details, or instances where the invoicing may not be up to scratch on meeting all the requirements.
He said there were two major things regarding progress on the VBS issue. One was that when CSOS listed its interests as one of the creditors with the liquidators, it seemed as if it was a process where one stood with the hope that if any assets remained, one may also be able to receive some kind of equitable share from the proceeds of the liquidation of those assets. He said the VBS story had come to be known as an empty shell concerning assets because there had been huge extraction of those funds, with the result that there may not be any assets remaining to share with the creditors. The process was grinding on very slowly, given the magnitude of the issues, but CSOS was monitoring the situation.
The second area was related to the entity's engagements with the Hawks and the Special Investigation Unit (SIU). In the last engagement, they had indicated that there was involvement of forensic accountancy. The forensic accountancy had identified some of the accounts to which the funds had been transferred. CSOS requested to have sight of the movement of funds to identify prospects of possible recovery by looking into the existence or otherwise the asset base of those who may have been responsible for the management or owners of those accounts. There was agreement that information would be shared with the entity, but there was a request to say this needed to be coordinated first with the principals before that information could be shared. The entity had regularly made follow-ups with the Hawks and SIU, asking how far they had gotten with the process. However, they kept saying they were also still waiting for authorisation from the principals to be able to share whatever information there was about this. As such, CSOS was in limbo and unable to move anywhere regarding the possible recovery of these funds.
On the one hand, it was stuck because to make any motivation for a write-off, it must demonstrate that it had followed all avenues of possible recovery and those avenues had failed. CSOS was not at a stage where it could make that conclusion until it had sight of the report referred to by the Hawks and SIU and could satisfy itself that there were no assets for the entity to pursue possible recovery. Therefore, the sooner the entity could access that particular report, the better. It was currently stuck at this stage because there was no corresponding cooperation on the part of the Hawks. That was where the entity was with the VBS issue, hoping for sooner intervention. Perhaps the PC and the DM may wish to take it up with their counterparts at the SIU and law enforcement, as this may help to expedite issues.
Ms Mbatha agreed that the CSOS was doing well on the 30-day payment of service providers, and in the last quarter of the financial year, the entity was reaching the 100% mark. In this year's APP, the entity was targeting to have 100%, and currently, it was achieving a 14-day turnaround of payment of invoices. This had probably created confusion around keeping tabs on the level of women and youth that the entity procured from regarding procurement spending. This was a new target, but CSOS kept tabs on spending to date by checking the expenditure on black companies at BEE levels 1 and 2. On that basis, CSOS was at 77.05% for spending at black-owned companies, but in the new APP, the entity would be tracking the expenditure for women and the youth and people with disabilities.
The Chief Ombudsman highlighted the kind of training needed on the education and training budget. However, there was a slight reduction over the MTEF because the CSOS was preparing to introduce training through digital platforms. Therefore, the main cost drivers under education and training would be incurred for conference venues, conducting physical training sessions, and using the digital platform as well.
Adv Mkhize said the organisational redesign project and the proposed structure were now before the board for consideration. Early next month, the entity should be able to conclude the organisational redesign and then begin a process where the Ministry would be engaged in the approval process of the new structure. Upon receipt of approval, the entity would then proceed with the migration processes and the population of that structure. The entity was looking into getting up and running with certain models for the business automation solution by August. The others were scheduled for implementation early in the new year. They would then begin transferring all the data and ensuring that all processes were automated accordingly.
Mr Neville Chainee, DDG: Human Settlements, Planning and Strategy, DHS, said the Department, together with the entities, would provide the matrix of job creation through the entities and the Minister as requested. It was important to note that on the matter of job creation, which had come up in many of the reports today, or in the targets that had been determined, it involved the entire delivery chain, so it was about the managers and professionals. It was also about ensuring that there was a change in how the Department measured and determined job creation.
The second point was a briefing from the Department on the FLISP that would give a comprehensive picture of what was done, with specific reference to amendment and review of the FLISP. In summary, what was intended was to respond in-depth to some specifics that had prevented households from accessing finance. For example, the policy now allowed households to occupy and access the FLISP, which would have a huge impact, particularly in the rural areas and people living on communal land. Regarding reducing the FLISP grants, he said they had indicated that the FLISP grant or subsidy did not only provide for house construction or the purchase of a house. So the NHFC, together with the provinces, would have to fund the households to acquire a service stand, and in doing that, it would limit the full amount that got paid, which would allow for greater impact. Of course, the subsidy review or the upward adjustment would impact the budget. The Minister had taken up with the Minister of Finance the importance of increasing the budget because there had been a substantial depletion of the budget when there had been spending in times of trouble.
As seen in all the presentations, the framework of priorities was determined by the Minister and the MTSF. All the entities, particularly those that had provided the strategic plans and APPs for this financial year, have embraced those priorities, but it was a work in progress. With all this, the Department could do better, but what was important was job creation, transformation and empowerment.
Deputy Minister Tshwete said she agreed with all the Members talking about the very critical aspect of job creation, but the Department needed to emphasise nurturing the set aside percentages for black-owned businesses, the youth, and the persons with disabilities because they went together. If the Department could put more effort into this matter and ensure that it was implemented, it would make a change because it was known that the majority of people who were not working in SA were women and the youth. She was confident that entities would achieve the targets planned, and the DHS would continue to monitor progress. She was saying so because they were new, and the progress could be seen. The CSOS, in particular, had spoken about achieving more with their targets, so when the Department came back to the PC there would be changes. The transformation aspect was being monitored. The Department was monitoring all the entities so that they could meet their targets.
The Chairperson thanked the Department and the entities for the briefings and responding to the questions asked. Members had raised these questions because they believed that when the Department did well, the Committee’s work became easier. The PC would continue to ask questions, some of which may not be comfortable, but the intention was to improve the sector and respond to the needs of the people and make a better life for all, as envisaged in the legislation.
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.