Committee deliberations on the Housing Consumer Protection Bill covered clauses 1 to 38.
In clause 2 Members expressed their concern about the lack of mention of mud huts in rural areas not being listed as exempt from the requirements of this legislation. Members asked which entity is responsible for temporary structures such as the temporary residential unit (TRU) that the Department constructs and whether the TRU should be registered. Members sought clarity on the legal instruments used to exercise the powers of the Minister in clause 2 other than via directives and gazetting regulations and for granting exemptions.
Members recommended that the Minister must fill vacancies on the board within a specific period as well as the CEO and CFO positions in clause 7 to avoid long periods of acting executives and interim board members. In clause 13, there was discussion on what are the appropriate delegation of powers to the Council by the Board. In clause 15 Members requested clarifying the qualifications that would be required for the NHBRC CEO and CFO.
In clause 23 Members questioned the registration process. It was established that when contracting a homebuilder to build a home, the housing consumer has the responsibility to establish if the homebuilder is registered. They also questioned how registration facilitates risk management.
Moving to chapter V, clause 39, Members said this is the most important chapter for the Committee to realise the benefits of this Act. They said they always get concerned when a statement says the Minister or whoever may decide on an increase or fees because they worry about the protection the people get affected by those increases. There is a stipulated increase from the beginning and there is another increase that is decided in the process of a standard price that is already there. There must be a way of informing the persons that will be affected by this increase that comes in the process.
Clause 39 enables to the establishment of a non-profit company to provide a public insurance scheme. It was suggested that many private sector insurers do this efficiently and could be contracted to do this. Why is the state setting itself up as competition?
There were complaints about clause 40 that now required homebuilders to pay an additional three sets of fees: a once-off registration fee, an annual fee and an enrolment fee for each house. It was suggested that there not be a once-off registration fee and an annual fee but that homebuilders merely pay enrolment fees on a project-by-project basis.
In clause 41, the Committee questioned the warranty cover of five years and it was established although there is a warranty from the start of house construction the warranty kicks in afresh for five years from the date that the housing consumer is authorised to occupy the home.
There were questions about how to protect consumers from the use of substandard housing materials and if there is legislation to cover this.
Housing Consumer Protection Bill: deliberations
The Chairperson acknowledged the Parliament Legal Team and the State Law Advisor who would guide the proceedings as Members engage with the Housing Consumer Protection Bill [B20-2021]. She requested that the Motion of desirability on the Bill be read out and adopted.
The Committee adopted the motion of desirability.
Chapter I: Interpretation
Clause 1 Definitions
Adv M Masutha (ANC) asked for clarity on the powers of the Minister. She can issue regulations and the Council can issue rules so 'prescribe' will refer to each of them exercising those powers. Secondly, the Minister exercises her powers by way of directives. Can you clarify the process that the Minister follows for directives [00:41:20 to 00:41:49 network challenge]. The Minister may act generally such as giving exemptions to structures from the operations of this Act. In that instance, would she be doing it by way of directives? Which are the legal instruments through which the Minister can exercise her powers?
Mr Sabelo Mnguni, Deputy Director: Policy Development Assistance, National Department of Human Settlements, referred the Committee to Clause 2(3) to (5):
"(3) Notwithstanding the provisions of subsection (1), the Minister must, by notice in the Gazette, determine—
(a) in relation to a category of a home, a date; and
(b) in relation to different categories of homes, different dates, when the provisions of Chapter IV will apply to any addition to, alteration, renovation or repair of, a home.
(4) Notwithstanding the provisions of subsections (2) and (3), this Act applies to any addition, alteration, renovation or repair of which the purpose is to convert a commercial building or part of a commercial building to a home.
(5) The Minister may, after consultation with the Council, in exceptional circumstances and in the public interest, on such conditions as he or she may determine, exempt certain persons or homes from the provisions of this Act, but that exemption may not be contrary to the objectives of this Act."
Ms Thilosini Gangen, Parliamentary Legal Advisor, asked Adv Masutha to clarify his question because it is not entirely clear if he is asking if the Minister is going to do these changes via directives or regulations.
Adv Masutha replied that the definition clause refers to where the Minister exercises her executive power by way of subordinate legislation, which is regulations. There are places where she exercises her power by way of directives, and in those instances, those tools are specified. However, there are instances where the Minister can exercise powers, but the tools or the legal instruments through which she exercises that power are not specified. Are we supposed to assume that there is a general rule of interpretation that would clarify what tools to use where there is no specification on how the Minister exercises her powers? In some instances, it says the Minister must do so in the gazette and in some instances it did not state gazetting. Hence, it seems as if there are varied circumstances. Do you rely on the Interpretation Act for how subordinate legislation under this Act is to be done? The Interpretation Act also expects such subordinate legislation to be tabled in Parliament. Is there a requirement that Parliament approves or notes the draft subordinate legislation before it is promulgated? This is a separate question that the Committee may not want to deal with now. Ultimately, to legitimise subordinate legislation, there will either be an assumption that the Interpretation Act takes care of it or specifies it here. It has to be specified that such draft regulations or subordinate legislation must be tabled for approval or just for noting by Parliament.
The Chairperson said the Committee can decide on the latter part of the question on parliamentary approval because there were instances where Members would have a problem with regulations that dilute the essence of the Bill. Hence, it is up to the Committee to decide that as the Minister drafts those regulations, she must table them to the Committee not just for noting but for the Committee to ensure that they do not dilute the essence of the Bill. As such, the answer is with the Committee.
Ms Gangen agreed with the Chairperson on the regulations and the role that Parliament needs to play. Thus it is for the Committee to decide how it wants to structure the promulgation of regulations, and all that is needed is to add that Parliament needs to be part of that process for the reasons the Chairperson mentioned. On the main question on regulations, directives, gazetting and the Interpretation Act, she has always believed that legislation, especially legislation that is so important, needs to be understood by lay people without having regard to the Interpretation Act and so forth. She suggested that where it speaks about the Minister exercising powers, it needs to say how the Minister is going to be exercising these powers, specifically in clause 2(3) which says “Notwithstanding the provisions of subsection (1), the Minister must, by notice in the Gazette,”. This is perfect because it states what should be done. Going down to clause 2(5), it does not specify. It is now up to the Committee to make the specifics to make it more understandable and more accessible to members of the public because this Bill impacts them the most. The Committee can add the specifics on how the Minister will be exercising these powers in clause 2(5).
Adv Masutha said he agreed with Ms Gangen because it is legally correct. However, where the Bill does not specify how the Minister must exercise her powers should not come from the Committee. It should allow the Department, which is the architect of this Bill, to clarify what they had in mind. Maybe there is a another or third method or legal instrument that it envisages through which the Minister can exercise power. The Department must also specify why in this instance there is no promulgation reference in subsection 5.
The Chairperson called the State Law Advisor to respond.
Adv Masutha said his question is directed at the Department which is the drafter of the Bill – before the State Law Advisor steps in.
The Chairperson said the Committee had engaged the Department. The State Law Advisor had certified the Bill himself which is why she called him to respond.
Mr Paul Masemola, DHS Acting Head: Legal Services, replied that the specifics may not be included there but clause 87 talks at length stating: “The Minister may make regulations not inconsistent with this Act with regard to any matter that is required or permitted to be prescribed in terms of this Act, and any other incidental or administrative matter necessary for the proper administration and implementation of this Act. Before the Minister makes any regulation under this clause, he or she must publish a draft of the proposed regulation in the Gazette together with a notice calling on interested persons to comment, in writing, within a period stated in the notice, which period may not be less than 30 days from the date of publication of the notice.” Clause 88 deals with the Board, on the recommendation of the Council, so it is covered under those two clauses, which could be why it was left out there because it is covered in the later clauses.
Adv Masutha said that is not the question he asked. The Parliament Legal Advisor understood the question and proffered the answer. He just wanted to confirm with the Department that the answer given is consistent with their thinking, that was the question. The answer given does not seem to understand what the question was.
The Chairperson interjected asking the advocate to let her chair the meeting for the sake of progress. The State Law Advisor was given the platform to speak because he certified the Bill and if the response is not satisfactory then Members can come in with follow-up questions.
Mr Sisa Makabeni, State Law Advisor, replied that two instances are foreseeable where the Minister may make exemptions as contemplated in that clause. One instance is where there will be an application made, and in that case, the Minister will deal directly with the application. But where the Minister has to deal with an exemption that applies generally, then in terms of Clause 15 of the Interpretation Act, the Minister will have to publish a notice in the gazette on that. Those will be the two instances, one by way of application and the other will be where there is a general exemption.
The Chairperson told Adv Masutha to make suggestions on the matter if he is not content with the responses and then the Committee will deliberate on his suggestions.
Adv Masutha said the parliamentary legal advisor was spot on about simplicity in drafting legislation [01:08:57 - 01:09:22 network difficulty]. Where there is talk about the Minister dealing with an individual application, if that is the purpose, then it should be stated. People should not be made to assume the context in which the Minister can exercise her power. Of course, it will then make sense why the Minister would not need to gazette such an exemption because it is an individual request not meant for general application. But then it should be specified that where an individual is unable to comply, the Minister may grant exemption at the request of the affected individual, which is what the State Law Advisor is saying. He agrees with him but agrees more with the parliamentary legal advisor – why not be specific about it in that instance?
Mr C Malematja (ANC) said sometimes if matters are not put in the form of figures, mistakes end up being made, for instance, an individual. If this matter has to deal with an individual location, which is outside the broader location, what becomes a problem is that the very same location must be applied the same way to avoid court action due to inconsistency in the application of the Minister's powers. Why can it not be done consistently to avoid court action to obtain clarification?
Mr Makabeni replied that to be on the safe side the provision will still need to provide for both scenarios because there may be a scenario where it is required that you give a general exemption and another one where you deal with a specific case, which requires an application to deal with a specific application. They will need to make that distinction and the Department will have to advise if this understanding is correct.
Ms Gangen agreed with the State Law Advisor that there is a need to make a distinction. The legal team will be guided by the Department in possibly redrafting that clause.
The Chairperson said Members must agree that it will have to reflect what the legal team is suggesting to make it easier for everyone to understand.
Mr Malematja said if the people are not ready with answers they must request time to consult and then return to respond to questions. He is saying this out of the experience of being taken in and out of court for clarification. He might be a bit backward on the matter, but it cannot be because individual and location are two different things, the Bill cannot apply the same approach to them.
Adv Masutha said Mr Malematja has a valid point, but to some extent the point has been answered. What remains may be that the procedure for dealing with an individual might need to be slightly different from the one that deals with a locality. He is correct about consulting the Department and the drafters, especially because these things are department policy issues; it is a matter of choices and the Department holds the final responsibility. They may have to reflect and ask if they have regulated sufficiently. How does this apply to the other powers of the Minister on regulating localities by way of regulations and directives? Could this be an area which should not be lumped together with a situation that was explained by State Law Advisor where an exceptional situation that applies to an individual has to be entertained? He agrees that individuals should never be locked out from being able to approach the Minister in meritorious circumstances. That is good law.
Clause 2 Application of the Act
Ms Powell (DA) referred to the submissions where one of the comments from the public hearing was on the exclusion of rural communities in clause 2. The Act does not apply to informal settlements, but there is no exemption to mud huts in rural areas, but there is an exemption for a hotel and a motel. Is it responsible for the Committee not to make comments on whether or not we think that the application should include or exclude a mud house in a rural area? Her submission is that if the Members are to exclude a structure that forms part of an informal settlement they may as well make a similar provision for the exclusion of a mud house in rural areas given the challenges faced by rural dwellers in accessing enrolment and registration and the fees that apply. What is the Committee’s views on mud houses in rural areas? Do we believe that it is prudent for the Act to exclude a hotel or a motel? If it covers commercial buildings, why are we giving exemption to hotels and motels?
Mr A Tseki (ANC) asked about the temporary structures in clause 2(2)(b) and where they fall. Should they be registered or what? Are they excluded or included in a different form?
Mr Masemola replied that the temporary structures are being excluded because they are temporary in nature and are not structures that are intended to be built in terms of this Bill. The commercial buildings in this Bill are ones that have been turned into residential housing units.
Mr Makabeni agreed with Mr Masemola.
Ms Gangen also agreed.
Ms N Tafeni (EFF) expressed her concern on the issues on the ground that emerged as Members travelled across the country to engage communities on the Consumer Protection Bill. When will the Minister sit with the Committee and debate some of these issues that people on the ground raised? She asked the Department if people get registered for the temporary structures when they are given to them. In rural areas, many temporary structures are 01:27:07 to 01:07:27:10 (vernacular). Since 2010 there are temporary structures in the Eastern Cape 01:27:15 to 01:27:25 (vernacular).
Mr Neville Chainee, Deputy Director General, Human Settlements, Planning and Strategy: Department of Human Settlements, replied that the Committee must be clear about the temporary structures such as the temporary residential unit (TRU) that DHS constructs. The responsibility and function of the NHBRC is primarily to ensure the warranty and integrity of a permanent structure which is intended to house people permanently. In the case of a TRU, with specific reference to construction, there are other regulations and Acts dealing with occupational health and safety, building regulations and civil engineering which cover that aspect. Where a household puts up a temporary structure that is not intended to permanently house a household, that is not covered by the NHBRC because it only covers permanent structures. As such, the responsibility and accountability must be looked at based on the other Acts with specific reference to the erection of a structure, civil engineering and other matters that attended to that.
Adv Masutha said the question about temporary structures remains valid. What Ms Tafeni is trying to understand is that the Department of Trade and Industry and probably the Department of Labour may be responsible through regulations for safety when it comes to any kind of construction. But it is clear in this Bill that where the mandate for the erection of structures falls under DHS, namely the residential forms, then DHS cannot defer that responsibility to the others, especially if the temporary structure was erected by DHS. What then is the meaning of temporary structure if a temporary structure has been there for ten years? What is the implication? Is it directing in this Act that a structure because its temporary may not be allowed to exist for longer than a particular period, and if so, must it be demolished? By who? If they are not ready to replace it with a formal house, what happens to the accommodation of the people that have been staying there in the interim because they automatically become homeless? Those are the questions that are at the doorstep of the Department. It is not about engineering here but when you exempt temporary structures, what are you saying about the longevity of their continued existence? If they have to be demolished, what is the alternative that you are offering if you may not be ready to move those people for whatever reason? It brings back the debate about financing and the financial implications of this legislation.
Ms N Sihlwayi (ANC) said this is a very tricky debate. There should be a clear definition and the basis of that definition must be explained to Members. Mr Masutha made an example of the TRU. As such, there needs to be clarity. The Bill also talks about informal settlements, and the Department is being called to deal with the informal settlements. For how long are they going to be upgraded and registered in those people’s names? This is tricky because of our history and where this Bill finds us. Can we get clarity on the temporary structures, informal settlement and the TRUs? How do you differentiate these based on housing consumer protection?
Ms S Mokgotho (EFF) also sought clarity on the TRUs. Does this Bill also cover the TRUs because these are homes where people are staying and have been built by DHS. For example if there are any defects in the TRUs, does this Bill cover those defects? Who is responsible for repairing those defects? Are they covered? In the Bill there is a warranty given to the subsidy houses, are the TRUs also covered by this warranty?
The Chairperson asked the Department to explain why it excluded hotel.
Ms Fouche Fouche, NHBRC Legal Advisor, replied that the NHBRC only deals with permanent structures which have been approved according to town planning and that have approved plans. NHBRC does not deal with temporary buildings at all. On the exclusion of hotels, generally a hotel provides accommodation temporarily, that is not considered a dwelling unit and operates as a business. It provides a temporary residence for guests and is not intended to provide a home for a housing consumer as defined in the Bill. It also provides short-term accommodation with meals and other services such as cleaning and laundry facilities.
Mr Chainee said the Act states: “Notwithstanding the provisions of subsection (1), the Minister must, by notice in the Gazette, determine— (a) in relation to a category of a home, a date; and (b) in relation to different categories of homes, different dates, when the provisions of Chapter IV will apply to any addition to, alteration, renovation or repair of a home.” The point raised on the TRU is Members are saying it is inconsistent with the contradiction that will arise that a TRU in terms of the housing programme for all intended purposes is a home; for all intents and purposes must consist of a building plan, and must comply with that. If not then it will not comply with the National Housing Building Regulations. In Subclause (3), the Minister may determine (a) in relation to a category of a home, a date; and (b) in relation to different categories of homes, different dates, so it does not preclude the ability of the Minister to do so in instances where that arises. The aim is to allow the Minister to determine that or ask the government to have a blanket approach. The point raised which is why this clause is in there is that in the case of a TRU, it meets and ticks all the boxes on the building plans. The point is will the Minister gazette it – because it will mean that every TRU is gazetted to form part of NHBRC responsibility and accountability. It is something DHS has considered and will take guidance from the Committee on on that.
The Chairperson said even if NHBRC said it is not dealing with temporary structures, when there was a problem with the Talana Temporary Residential Units, it was NHBRC which went there and raised the issue of quality. So to say NHBRC does not deal with that is not truly correct. NHBRC was instructed by the Department to go and look at the TRUs there and give quality assurance. NHBRC provided a report which guided the process forward. It is incorrect to say NHBRC does not deal with temporary structures because if there are flats with problems, it ends up dealing with those issues.
Adv Masutha added that temporary structures mainly relate to the work of DHS itself where it provides accommodation for temporary or permanent purposes. This legislation is self-regulating in the sense that the Department is regulating itself on its work. Therefore, there is no reason for it to share or shift its responsibility to someone else in circumstances where it did the work. It also applies to cases where in the course of constructing a permanent residential home which is covered by them, a temporary structure may be erected for those who are involved in the construction of the home. Does that temporary structure suddenly become the responsibility of somebody else and not the Department when its sole purpose is to house those that are producing a home that will be regulated by the Department? There are many questions. The third category is where a person builds a temporary structure with the hope that when they have the money, they will develop it into a permanent structure but end up in the temporary structure for the rest of their lives. He does not mind DHS using the exemption provisions there, but it cannot simply say it is not its business but it is somebody else’s. Whose business is it? Anything to do with human settlements, in other words, accommodating humans for dwelling purposes, falls within the mandate of DHS, not the Department of Trade and Industry or any other department.
Mr Tseki said this has a lot of interpretations, but 'temporary structure' dictates that it is not permanent. Regardless of the period that temporary structure exists, it is still the responsibility of DHS. If the person stays in that temporary structure, that person will automatically go to DHS if there are problems. It will be dealt with by the Department not the NHBRC.
Mr Makabeni replied that the scope of the legislation, how far it goes and what it covers are policy matters that the Office of the Chief State Law Advisor does not get involved in. Members should just be mindful that various pieces of legislation regulate various aspects of building a house. There are national building regulations that are administered by municipalities as well regulations for certain aspects of housing. Thus different regulators deal with different housing issues. Members should be mindful of that in the discussions. The fact that it is not regulated by this Bill does not mean that it is not regulated elsewhere, so compliance will still be required under that piece of legislation. The local government inspectors will still need to oversee those processes.
Ms Gangen agreed with the State Law Advisor that the discussion is about policy not legal issues. Having regard to the scope of the Bill and the definition of permanent structure, there may be capacity issue and 'opening the floodgates' argument for the NHBRC if they were to include temporary structures. The scope of the Bill is limited to permanent structures; hence going forward Members will have to be mindful of that.
Adv Masutha said the word "floodgates" and saying that there are other laws and institutions involved in regulating and enforcing built environment regulations by implication is generally evading the issue. The reality is DHS could have chosen to say it provides houses and does not deal with engineering, structural integrity and soundness of built structures but its responsibility is just to fund and allocate houses. It could have said all other matters regulated elsewhere such as the building regulations and Building Standards Act, will be referred to the relevant department or municipality and the laws they administer. But DHS took it upon itself to in part deal with structural defects which are engineering issues. This means that it decided it will have the capacity as long as it has to do with residential, whatever the definition of residential, and takes full responsibility for all aspects concerning allocation, licensing approval and possibly directing demolition where structural sounding is of such a nature that poses a risk to people’s lives. The Department has taken on those responsibilities and cannot midstream, and say yes when it comes to temporary, whatever the definition, it defers to other departments, yet those other departments are not here to defend themselves. That is why he once raised a question on the extent of the coordination and consultation between this Department and other departments that deal with regulating. It is not sufficient to say there is a provision and Act that is administered by some other department, have you consulted with them? Are they understanding and accepting that where you do not come in, they automatically come in? Otherwise, there will be a ping-pong situation where the Department of Trade and Industry says it is none of its business because it has to do with residencies that fall under the Department of Human Settlements, and the Department of Human Settlements will also say its law exempts this because it only deals with permanent structures. Yet, in the meantime, people's lives and safety are at stake, and that is where the cracks emerge in the way the government operates. The Department must come clean and tell the Committee who takes the responsibility here and cannot just talk of the Building Regulations and Building Standards Act or any other law that is administered elsewhere. That is not good enough.
Mr Tseki asked if today’s meeting is to conclude everything. Earlier it was agreed that some clauses can be flagged for later discussion. This item has been exhausted. The Committee should flag and allow all parties to go back to the drawing board and come back with a better formulation.
Chapter II: National Home Building Regulatory Council
Clause 7 Term of office
Ms Powell referred to clause 7(4) which states: “When a vacancy occurs in the ranks of the members of the Board appointed in terms of clause 6(4), the Minister must fill the vacancy for the unexpired part of the period for which the member’s predecessor was appointed, by the appointment of another person who has special knowledge, skills or expertise similar to that possessed by his or her predecessor.” When the Bill talks about vacancies that occur for the Chief Executive Officer and the Chief Financial Officer, there should be a minimum period in which vacancies must be filled. She suggested in 7(4) that this requirement must be made within a specific period. She gave the example of the Housing Development Agency that has seen a continuous rotation of acting executives and interim board members. She recommends that the Minister must fill vacancies on the board within a specific period.
Dr N Khumalo (DA) commented on clause 7(1) which state that a member of the Board holds his or her office for a period of three years, and that member may be reappointed at the expiry of his or her term of office. (2) A person may not hold office as a member of the Board for more than two consecutive terms. (3) One-third of the members of the Board must be reappointed, but if it is not possible to do so, a number as close to a third of the members as possible may be so appointed. There must be criteria for board members to be reappointed even if it is based on their performance. People cannot just be reappointed without any guidelines. She suggested oversight for the appointment of board members to safeguard against what everyone has come to know about appointment of board members and their effectiveness.
Mr Tseki said he understands board appointments are not having a separate rule from the general rule of administrative justice. So based on what Ms Powell is saying, one way or the other, there must be a reference to the Public Finance Management Act (PFMA) and the general standards of the board appointments. King II and III Reports give reference to the fiduciary responsibilities of the board and the Committee needs to understand that. It is not only for the NHBRC board; there are stipulated rules which the Committee probably needs to take note of.
Mr Masemola replied that Ms Powell’s suggestion for a time frame for filling of vacancies is something that can be included in the Bill.
Mr Masemola replied about Dr Khumalo saying that board member reappointment must include performance as part of what is indicated. Sometimes they will also need to apply. It will not harm if it can state reappointment is based on criteria to be determined by the Minister and the board.
Mr Makabeni replied about the suggestion on fiduciary duties saying Clause 9 already adds over and above what is provided for in Section 50 of the PFMA. In Clause 9(5), for instance, it states that this clause must be interpreted as adding to, and not deviating from, the duties imposed on members of the Board in terms of the Public Finance Management Act. Thus those board duties in the PFMA are added to in clause 9.
Ms Powell pointed out the outstanding matter highlighted in the chat box. In 7(4) the question was about specifying a minimum period within which the Minister must fill board vacancies on the. There has not been a response if the Committee can include a minimum period there.
Ms Gangen replied that she is happy to close that gap and to insert a minimum time frame in consultation with the Department and the entire legal team. This will serve to bolster the Bill.
Clause 10 Remuneration of Board members and Compliance and Enforcement Committee
Mr Tseki said that board fees cannot be different from the standard payment of boards in the public sector because one board cannot receive R10 000 while another receives R20 000 for the same work. It should be stipulated within the functions generally of state boards such as the boards for each of the Department entities. It should be in line with those entities.
Mr Chainee replied about board fees that it is regulated by the Department of Public Service and Administration and the National Treasury regulations. It can be dealt with through gazetting.
Clause 11 Meetings of the Board
Clause 11(1) states that the Board holds meetings at such times and places as may from time to time be determined by the Board. Ms Powell suggested there should rather be a minimum number of meetings required given the extensive list of functions the board is responsible for in clause 13.
Dr Khumalo raised concern about clause 11(1) which states that the Board holds meetings at "such times and places as may from time to time be determined by the Board”. The Committee has control over the number of board meetings like in many other entities and levels of government. Leaving everything to the board’s discretion leads to abuse of power and board meetings carry on just for the sake of payment rather than real business. There should be controls there.
Mr Makabeni replied about the control on the number of meetings saying that the Committee can put a minimum number saying the board must at least hold a meeting once every quarter. He is not sure about a maximum number or how it would be able to formulate that and still ensure the board does all the work it is required to do in terms of the Act. As such, guidance will be required on that – perhaps from the board – on how many meetings are reasonable for its functions.
Clause 13 Delegation and assignment of functions by the Board
Ms Powell referred to clause 13(1): "The Board may— (a) excluding the powers and duties in relation to the Compliance and Enforcement Committee and subject to subsection (5), delegate any of its powers and assign any of its duties to any member of the Board or any committee established in terms of clause 12, to the Chief Executive Officer, the Chief Financial Officer or any employee of the Council". This means that the board may assign or delegate any of its powers to any employee, and it ultimately needs to hold the CEO accountable. Clause 13(1)(a) is a contradiction of 13(5) which states that the Board may not delegate the power— (a) to make rules as contemplated in clause 88; (b) to appoint the Chief Executive Officer or the Chief Financial Officer; and (c) to decide on the strategic corporate plan of the Council. The word 'any' in 13(1) (a) should be looked at because in 13(5) it says that there are certain powers that the board may not delegate. There is a contradiction here. It is not wise from a fiduciary and fiscal perspective to allow a board to delegate any of its powers, especially given the fact that the board does have statutory accountability here and that the board is responsible for holding the CEO accountable. It is not clear if that will be possible with the board delegating its functions to a CEO. There is no wisdom in that. Again there is inherent contradiction in the way that the Bill is worded, particularly the contradiction with 13(5).
Mr Makabeni replied to Ms Powell about delegation. Clause 13 states, " (1) The Board may— (a) excluding the powers and duties in relation to the Compliance and Enforcement Committee and subject to subsection (5)". So whatever the Board delegates is subject to subsection (5) and there is no contradiction in reading that because whatever is delegated under (1) would be subject to what is said in subsection (5).
Mr Makabeni noted that the Chairperson's comment that 'delegations do not transfer responsibility' is covered by 13(2). It says, "Notwithstanding a delegation or assignment contemplated in subsection (1), the Board is not divested of the power or relieved of the duty so delegated or assigned. This clause covers what the Chairperson stated.
Clause 14 Functions of Council
Ms Powell noted the Master Builders Association (MBA) submission had sounded the alarm on the definition of a 'homebuilder' versus a 'developer'. In 14(c) it says subject to clause 5, the Council must register and deregister homebuilders in accordance with requirements and procedures prescribed in this Act. At this juncture, the Committee needs to have quite a serious discussion on these concerns that have been raised by industry role players such as the MBA as to what defines a homebuilder. For instance, if she owns a home and hires, say, “Smith Construction Company” to do renovations on her home, is she the homebuilder or is Smith Construction the homebuilder? This needs to be addressed as it has been flagged by MBA, and the Committee should get this definition clear for Clause 14(a) on registering and deregistering homebuilders.
Ms Powell said Clause 14(e) states(e) for the purpose of ensuring the structural integrity of a home, enter into agreements generally or specifically with MECs regarding services to be rendered in respect of projects for the construction of homes, the acquisition of which, except in respect of any deposit that may be payable, is financed solely from the proceeds of a State housing subsidy". This means the Council may enter into agreements on developments that are financed from grants from national government such as Urban Settlements Development Grant (USDG), Human Settlements Development Grant (HSDG). What about existing housing codes? The Chairperson have been an MEC for a long time and she understands that MECs are bound by existing housing codes. Is this an addition to existing housing codes that MEC contracts are bound by? Are we creating an additional layer of bureaucracy here that MECs and their provincial administrations will have to adhere to for state-subsidised projects to get off the ground? Will this not cause unnecessary delays? We need to be reduce red tape not apply additional layers.
Mr Tseki commented on the definition of homebuilders raised by Ms Powell saying that it is not clear. Members need to empower that definition so that it can accommodate what she is saying. He agreed with Ms Powell that delegated functions are not general, but in every board, there are committees or subcommittees that the board normally delegates those functions to. At some point, the board will decide to appoint an external person for a second opinion or for a certain study that is very specific. As such, Ms Powell is correct to say it cannot be general but must be stipulated according to the laws and definition of delegation. He will always want to refer to the PFMA in particular and the Public Services Commission which can also assist the Committee in that.
The Chairperson said the delegation of responsibility and accountability do not transfer. She is not sure where to get that recorded because sometimes people delegate and they want to delegate even responsibility.
On the quorum, she asked to simplify it and put it at 50%+1 because if it just says “majority”, arguments may go on for a long time. This will also help the layman understand what it means.
Mr Chainee asked the Chairperson to clarify if she wanted the Department to comment on board remuneration.
The Chairperson said it should respond to everything relevant including the functions, quorum, number of meetings and the qualifications of the CEO and CFO as already pointed out by Members.
Mr Masemola replied that a limitation on delegations is correct because when you delegate your power it does not exonerate you from the responsibility. This is tried law; if you ask somebody to do something on your behalf it does not necessarily mean you are not responsible for anything that comes out of the work. Sometimes when legislation is drafted not everything is out there; but it is something that can be decided with the State Law Advisor to see what should be included to cover what Ms Powell is indicating.
Ms Fouche referred to the definition of 'homebuilder' in reply to Ms Powell. The Bill says a homebuilder means a person who "builds or undertakes to build a home or cause a home to be built for any person, including himself or herself". The new Bill has taken away the provision for owner-builder, which exempted a person building a home for him or herself. Any ordinary citizen would not necessarily have the capacity or the know-how to undertake construction and build a home. A homebuilder builds a home for a housing consumer or one who builds or undertakes or causes a home to be built for any person. As such, any person that builds a home must be registered because that person should have the necessary skills and capacity. For instance, if as a housing consumer she wants to undertake renovations at her house, being in the legal profession, she would not have the skills or know-how to undertake construction or renovations. Therefore, she will have to appoint a homebuilder who has the necessary skills and expertise. The Bill maximises the protection of housing consumers. When looking at the owner-builder, the NHBRC would not be able to ensure that home complies with necessary technical requirements. Therefore, any person that constructs a home must have the necessary capacity, skills and know-how.
Mr Makabeni replied that he does not foresee any danger in changing the phrasing about quorum to 50%+1 as that will convey the same meaning.
Ms Powell said her question remained unanswered about 14(1)(e). She asked about the Council entering into agreements with the MECs, if this will nullify the existing housing codes that the MECs are obliged to comply with on developments financed from the proceeds of state housing subsidies.
Mr Makabeni replied that as the Bill reads, 14(1)(e) does not take away any codes that the MECs will have to adhere to. Whatever codes are there in terms of other legislation, they will still need to meet those codes because it does not amend, repeal or do anything to those codes. All it says here is that the Council may enter into agreements generally or specifically with MECs on services to be rendered for the construction of homes projects. Thus it does not take away from what is there in terms of other legislation.
Ms Gangen clarified Ms Powell’s concern on 14(e) had to do with the additional burden over and above the existing codes. The concern was if there has to be compliance with existing housing codes over and above the new codes. Is that the concern that needed to be addressed?
Ms Powell replied that the Committee must take her concern about 14(1)(e) and deliberate on it more intensively. It needs to scrutinise existing delegations and competences in service standard agreements. This provision is creating a new authority. It is now saying that the Council can enter into agreements on these services. This is quite a substantive clause because the Committee is creating a new authority. It is now giving additional powers to the Council that are addressed in other legislation where the Minister and various entities have this authority. As it is, as a nation we are burdened by such bureaucracy and red tape. We need to consider the ordinary man in the street who is doing building or a small start-up home building company and try and roll back the red tape. The Committee needs to deliberate if it agrees that the Council may enter into agreements with the MECs when the Minister already has that power, and the service standards are already governed and regulated by the housing code. She will not now argue this further but this clause is creating additional bureaucracy layers and giving authority to the NHBRC that it should not have at this stage.
Mr Chainee replied that he hears what Ms Powell is saying and will not enter into a debate, but he asked to note that 14(1)(e) is about ensuring the "structural integrity' of a home. the Committee needs to understand that the MEC has a concurrent responsibility with the Minister on the implementation of home construction projects. The MEC has responsibility and accountability as the executive authority for a province. It speaks about the NHBRC entering into an agreement with the MEC to ensure that every home construction project financed with a subsidy in a province is enrolled with the NHBRC. Some MECs have delegated that responsibility to their head of department as the accounting officer. Clause 14(1)(e) is there because that is where the problem is at the moment. Some projects are not enrolled by provinces, which currently leaves the householder exposed to all these structural integrity issues. This can be deliberated on but he wanted the Committee to understand it at an operational level. It is not about including any changes or additional levels of authority because the MEC already has that concurrent responsibility as stipulated by the Constitution and the Housing Act.
Mr B Herron (GOOD) said the Committee must remember what the purpose of this Bill is, which is to protect the consumer. Everyone has been in state-subsidised housing which from a structural perspective is often substandard. The consumer is the beneficiary who lives in that substandard home where often the house is cracking very early and there are problems with the construction. Clause 14 (1)(e) does not encroach on the housing code which prescribes what the size of the housing must be and who qualifies. It must stay to ensure the 'structural integrity' of the home. The purpose of this Bill is to protect the consumer who is ultimately the beneficiary of his state-subsidised housing product. Clause 14 (1)(e) is needed to bring an end to handing over substandard housing. This is an important clause to remain.
Clause 15 Appointment of Chief Executive Officer and Chief Financial Officer
Ms Powell said that Clause 15(3) states that a person appointed as CEO or CFO must have qualifications and experience relevant to NHBRC functions. This person could have an NQF level 3 or 4 bricklayer certificate which is relevant to the Council functions. She suggested that the Committee imposes minimum criteria in line with the public service remuneration guidelines. If the CEO and CFO are going to be earning salaries of, say, R2.1 million, the qualifications should be concomitant to Public Service Commission guidelines. The Committee is not acting with wisdom to state that the CEO or CFO can have any "qualifications and experience relevant", it must be specific and apply minimum criteria or insert a proviso that refers to the Public Service Commission remuneration guidelines.
Dr Khumalo said she is uncomfortable that the requirements are not specific, especially as the Committee knows what the functions are. Why can the Committee not be explicit about what the requirements are?
Mr Chainee replied that the CEO and CFO qualification is something that is determined by the board in consultation with the Minister. This is how it has been traditionally done and it is consistent with the DPSA framework that guides and determines categorisation of CEO / CFO qualifications.
Mr Makabeni replied on qualifications that it will be guided by the Department if it can clarify the qualifications that would be required for the CEO and CFO. If these can be clarified, there would be no problem with his office formulating a provision that puts it in the legislation. It can be done in terms of subordinate legislation and that would also be appropriate.
Ms Gangen replied that she is in agreement about the minimum criteria in 15(3) and that suggestion is noted. They can look at how to add them and change this to include specific qualifications if the Department and the SLA agree to do so.
Ms Powell said the question on 15(3) remained unanswered although the Department did touch on it saying that it is implied that the person appointed would have qualifications in line with DPSA framework. The Committee needs to ensure in this Act that the CEO and CFO are persons have formal academic qualifications relevant to the functions of the Council. She is not satisfied with the Department response that it is implicit that this complies with the DPSA framework. It could be on any one of the notches provided for in the DPSA framework so the point is that the Committee needs to ensure that the Act specifies the minimum criteria as do many Acts that explicitly stipulate the minimum criteria.
The Chairperson suggested that the Committee should also add experience because formal education without an understanding of public service is also problematic. It should include managerial experience and government operation because some of the failures experienced in the public sector are due to appointing people who do not understand the system of government and end up messing up the processes.
Clause 16 Conditions of appointment of Chief Executive Officer and Chief Financial Officer
Mr Tseki said Clause 16(2) says the CEO and CFO are appointed for a term of five years and may be reappointed for one additional term of five years. However, it does not say if that ten years can be extended. It should state that a CEO can be appointed for five years, which can be extended for another five years only and cannot go beyond ten years. He proposed the insertion that these positions cannot be held by a person for more than 10 years. If he could have it his way, he would have said a five-year term and a three-year extension totalling a maximum of eight years. He did not want to spoil what is written here, but ten years should be the maximum and the Committee must see how to factor in that phrase.
Mr Chainee replied that he does not know what the customary practice is on the CEO appointment and asked the State Law Advisor to assist with that. He is not sure if it is common practice to include that in the legislation given that it is an operational issue that deals with specifics. However, that could be required and it is a good point.
Mr Masemola welcomed Mr Tseki’s suggestion to insert “only” in 16(2) saying it was clearer. It can be included to make it certain that it is only for ten years. It is five years and if extended it will be ten years so there will be no ambiguity.
Mr Makabeni said the Department agreed to adding “only” to the Bill. His office was under the impression that it is clear but there is no danger in adding “only” to the clause.
Ms Gangen said all concerns raised by Members have been adequately answered and addressed by the Department and the SLA. However, if her office needs to add and bolster the frequency of the board meetings and the like, it will do so in consultation with the Department and SLA.
Chapter III Registration of Homebuilders
Clause 23 Register of homebuilders and developers
Mr Tseki said if he is a consumer employing this contractor to build this asset for him, whose responsibility is to know if this homebuilder is registered. If he would have to claim and he realises that the person is not registered, would that be placed on him that he did not ensure the person is registered?
Ms Powell asked what clause 23(2)(a) means: "to facilitate risk management in the tendering process in relation to the building of a home". How does the Council via the registration of a homebuilder/developer facilitate risk management? What does that look like in practice, does it mean that they can interfere with the tendering process? This is open to quite wide interpretation.
In 23(2)(b), it says to facilitate the assessment of the performance of a homebuilder or a developer in the execution of home building contracts. Is this for every home that is built and execution of every home building contract? The talk about Councils having registers that can facilitate the assessment of performance makes her think about things like capacity; details need to be specified more explicitly here because this is open to quite substantive abuse.
Clause 25 Homebuilder or developer to be registered
In 25(1) Ms Powell said the legal advisor gave a very good example about the definition of a homebuilder. She gave the example that as a lawyer she would not constitute a homebuilder, but, rather the person that she contracted or commissioned to build or renovate their home would meet the definition of a homebuilder. But Clause 25(1) states that the homebuilder or developer who intends to undertake or to commission the building of a home, as the case may be, must in the manner prescribed by the Council apply for registration in terms of this Chapter. This provision is entirely contrary to the explanation given to the Committee a few minutes ago, where it was told that it is only the actual homebuilder who lays the bricks or hires labourers to lay the bricks that meets the definition of a homebuilder. Laws need to be understood by all South Africans who do not have advanced qualifications or education. If this Bill becomes an Act, and people wanting to renovate their homes read this, it will be unclear that this definition is the person laying the bricks. The owner will commission the building of a home, so can we get clarity on this?
Ms Sihlwayi said that based on the vulnerability of our people when they want housing, the Council is the one that engages homebuilders to build for our people and are procured by government, specifically, for the Reconstruction and Development Programme (RDP) houses. The people do not participate in that process to be able to know that a homebuilder is registered, and if so, which is the registered one to opt for. A project consists of 100 people, and a homebuilder or developer that comes as procured by the municipality is given this group. How will the people know which one is registered to protect themselves? The Act says the beneficiary should engage people that are registered. How is that process going to be clarified?
Mr Malematja said the Bill leaves out the residential inspectors who are the main players here. They are the people who have been given the right to go and check who is building in an area, and if registered or not. It is the responsibility of the inspectors to know its demarcation of work and should be able to identify the illegal builders. These should be utilised properly, and awareness should be conducted for the consumers to consult the inspectors before starting to build anything to be given a green light if the homebuilder is registered. There is a tendency of mixing up issues in the Committee. For instance, homebuilders and developers are different. The developers are those that develop a locality massively. Even if it is not that massive, the developer cannot be regarded as a homebuilder who is just building a home or house extension. The Committee should be able to differentiate the two to avoid repetition or contradictions in the Bill. This is straightforward but the Committee keeps going back and forth on the matter.
Mr Makabeni replied to Mr Tseki who asked if the consumer is responsible for knowing if a person is registered. In the case of consumers, Clause 25 (1) and (2) gives a category of a homebuilder or developer. If you are a homebuilder or a developer and intend to undertake the building of a home yourself or to commission one, you must in the manner prescribed by the Council apply for registration as a homebuilder. In the case of 25(2), a person, developer or organ of the state may not procure the services of a homebuilder who is not registered. This means that the responsibility would be on the person who is procuring the services of a homebuilder to satisfy themselves that the homebuilder or developer is registered.
He assumed that Ms Sihlwayi was referring to social housing when she spoke about RDP houses. In that case it would be the organ of the state, either the Department or the municipality that is responsible for social housing. It can also be the delivery agent that will be responsible for ensuring that the developer or homebuilder is registered. As such, it will not be the beneficiaries that will be required to check because the agreement for the building is between the state and the developer. The responsibility will not be passed to the beneficiaries. The beneficiaries are the end recipients of the product.
Mr Makabeni replied that Clause 23(2)(a) "to facilitate risk management in the tendering process" means that in the system being developed by the Bill part of its objective is to facilitate risk management through the categories of homebuilders. Firstly, you need the developers to be registered, which means you ensure you are dealing with a level of skill that is known. It also informs you about the number of claims associated with their work because it will be in those registers kept by the Council. In that way it will facilitate risk management in the tendering process. This will also facilitate the assessment of the homebuilder performance because the legislation says homebuilders would be categorised according to their skill. This will help to determine where the builder fits in the scheme of things.
Ms Gangen said she agreed with the SLA’s responses.
Ms Fouche agreed with the SLA but added to Mr Malematja’s point on the definition of a developer saying it is appropriate as a developer is a person who is in the business of housing development. Homebuilders carry out the construction to sell to housing consumers or to lease out. In the current legislation, developers must also register with the NHBRC.
Mr Tseki requested that the residential inspector raised by Mr Malematja must be revisited because, in all the public consultations, this matter was not raised. It could be discussed when the Committee talks about the fees that need to be paid for registering because it links to municipality planning in case someone just develops property on its land without being registered.
Chapter IV Enrolment
Clause 29 Register of enrolments
Ms Powell noted 29(2)(b) says the Council must establish and maintain a register of enrolment of homes, which must be able to interface with any other register established in terms of this Act. The purpose of the register as contemplated in subsection (1) is to facilitate— (b) a cost-effective procurement process in relation to the building of a home. Will this be prescriptive or suggestive? Will this be a training manual? How is the register going to facilitate a cost-effective procurement process as there are so many different private-sector procurement processes for individual homebuilders?
Clause 32 Duties in respect of subsidy housing project
Mr Herron said he had raised before that clause 32 imposes obligations on the Member of the Mayoral Committee (MMC) which places this Bill in contravention or in conflict with the Municipal Finance Management Act (MFMA) and the code of conduct for councillors, which is an annexure to the Municipal Systems Act. An MMC cannot appoint a homebuilder because the Council is not to be involved in the appointment of service providers. The municipal manager is the accounting officer in a municipality. This makes the Bill ultra-vires. The MMCs have very limited powers and they do not have an executive office. The local government council has legislative and administrative functions. From a supply chain management perspective, where a homebuilder is appointed that is part of the administration and the MMC cannot be involved in the administration. It is against the Municipal Systems and Municipal Structures Acts and the MFMA. He is surprised to see that the MMC is still there.
Ms Sihlwayi agreed with Mr Heron's concerns that other legislation does not allow it. Perhaps they use a process plan or a collective system of taking decisions? She suggested that the Committee do something about consequence management. What about person who has not been informed that the house is not in a good condition. How do we deal with that?
The Chairperson agreed with Mr Heron that it should state the municipal manager as they are the responsible for awarding tenders according to the MFMA. It gives the authority to the accounting officer to administer the resources of government, not the MMCs or MECs. This Bill is more about administration than political management issues. The municipal manager and the Head of Department are the ones that award tenders and enrol the houses. MMCs have oversight on the budget, not its implementation. The enrolment and commissioning of resources will be done by the municipal manager and the HOD.
Clause 31 Failure to enrol home
Ms Powell expressed her concern about 31(1)(b) which says that a homebuilder or developer who failed to enrol a home in terms of clause 30, where construction has already commenced, must immediately stop the construction until approved by the Council. The Committee must be realistic about the capacity and the competency of our state departments and entities. Her deep concern is the additional layers of bureaucracy of this Bill. What is the minimum period in which the Council has to provide approval? What happens when you get an incompetent Council? Will individual homebuilders have to stop construction immediately and send their workers away, say, if they have enrolled but have not obtained approval from the Council to proceed? The time frame is a great concern here. It is going to cause delays in the housing supply chain because of the punitive regulations that force homebuilders to get so many planning approvals. This additional enrolment due to this Act, will force them to down tools if they do not get it. It does not seem to work the other way around when it comes to prescribing the minimum period in which the Council should satisfy this approval.
In 31(2)(b) it says that the Council may, before giving the approval contemplated in subsection (1) require the homebuilder or developer to provide a financial guarantee to the amount prescribed by the Council in relation to that home’s compliance with the applicable technical standards. What type of guarantee are we talking about, is it a bank guarantee? How would a small-scale developer that has been caught up in red tape and has been unable to enrol a home that and has a team waiting to commence with work be able to do that? They are small-scale businesses and now they must provide a financial guarantee for compliance. If we have a system that does not work; it will not only be placing additional layers of requirements on small-scale building firms but will also potentially bankrupt them or render them unable to provide the service because they are unable to provide financial guarantee. May you please clarify what that guarantee means and looks like?
Mr Tseki asked Members to understand that when they raise an issue as a concern, they should also provide proposals unless it is a clear question. He supported Ms Powell on the time frame issue that if one has enrolled, the Council must issue permission within five days of enrolment. He did not want to comment on the matter without proposing – so his view would be five days as a minimum. Enrolment was raised in the Committee as an expense to both the homebuilder and the homeowner or the consumer. Can this be looked at because it is not the intention of this Bill to encroach on the finances of those that we want to protect? If it does, it should be very minimal. The other enrolment issue is that of a whistleblower in cases of illegal building on the municipality's land. Would there be somewhere to include whistleblowers in the non-enrolment of homes?
Clause 25 Homebuilder or developer to be registered
Ms Sihlwayi agreed that there is a difference between a developer and a homebuilder. The homebuilder is the person on the ground who is contracted maybe by the developer. When the homebuilder has not managed to finish a house for a consumer, there should be something that states 1) the consumer be notified by a certain method and 2) there should be an administrative implementation process to pin down department officials to make things happen. These are principles that are going to sit in a boardroom cupboard and may not be known by consumers. Developers and homebuilders are waiting a long time to get their money and they are not responsible for certain delays. If only there could be a process plan that could enforce these things to happen. This is a policy issue. She suggested that the Committee do something about consequence management.
Mr Masemola replied that the idea in 32(1) was that the MMC and the MEC of Human Settlements are the ones who carry out oversight on what is happening in the department. As a result, they must take responsibility for the kind of issues raised here. He takes note of Members' comments and the Department will resolve them in consultation with SLA and the Parliament legal team.
The suggestion to put a time frame in clause 31(1)(b) can be done with the understanding that some of the reasons might also be dependent on the homebuilder or developer to clear up before they are resolved. Perhaps on the side of the Council it could be possible to put a timeframe which is dependent on the builder on complying with those issues.
Mr Chainee said that the matter of the MMC and MEC will be dealt with in consultation with the legal team, but the issue was accountability responsibility. Even in the PFMA and the MFMA, there is the whole issue of executive accountability and executive authority. The only uncertainty around it is to agree whether the MMC or the municipality is there in terms of executive oversight. Who is it because MMCs exercise very little executive authority on delegations? It is the executive mayor in certain instances that does it, and so. The problem around this is that the accountability in all our legislation rests with the executive authority, whereas the responsibility is something that also straddled the accounting officer / accounting authority.
Mr Makabeni agreed with the Department that they will review clause 32(1) given the discussion on the powers of the MMC and the municipal manager as stipulated by the MFMA. The review will be done and tailored accordingly.
In response to Ms Powell’s question on 29(2)(b), he does not see that clause as being prescriptive the way it is formulated. All it does is record that it is meant to facilitate a cost-effective procurement process for building a home. It does not specifically prescribe what should happen but would be those systems set up by the Act that will result in that.
The other issues raised are policy matters that must be dealt with by the Department. He agreed that a time frame can be added to the legislation. He agreed with the Department that it will also have to record that whatever time frame is provided will also be dependent on the compliance that the homebuilder or developer would need to meet.
He never mentioned superior law but only spoke about the other applicable law. There may have been a miscommunication as he was just talking about other applicable legislation that would apply to the regulation of home building.
Ms Gangen agreed with the SLA and the Department about reviewing clause 32(1). They will get together and relook at that. On the timeframes for the Council to revert, she agreed that it can be looked at and changed. She is in agreement that clause 29 is not prescriptive, but it is only to facilitate. On clause 31(2)(b) on financial guarantees she asked for a moment to revert to that question at a later stage.
Mr Tseki said there was a question about the cost of registration or enrolment. For example, if you must enrol a wall that can be costly to both the consumer and the homebuilder. This could be a policy matter. DHS must look at that. He referenced the MBA submission about exemptions for renovations that cannot be enrolled because of the costs that will be incurred by the consumer. Can DHS look at that without necessarily saying we should change those clauses? On superior law, it was said in passing and did not require a response.
Chapter V Financial Matters
Clause 36 Additional fund
Mr Tseki said this is the most important chapter for the Committee to realise the benefits of this Act. He always gets concerned when legislation states that the Minister or whoever may decide on an increase or fees. This is very general. How do you protect the person that is going to be affected by those increases? There must be a consultation or information, even if it is not going to be disputed, but there must be a way of informing the person affected by this increase that comes in this process?
Clause 41 Commencement date and duration of the warranty
Mr Tseki questioned the period of the warranty cover for an RDP house or a registered homebuilder who may take three years to complete a house, yet the warranty starts from the first day that house starts to be built. It is now left with only two years when the house is going to be allocated to someone.
Clause 42 Claims and limitations
Mr Tseki said during consultations with the public, the public spoke about the quality of the materials. If one can prove that the material used to build the property was not of a good standard, can that also be added to the rejections? Or will there be an automatic acceptance that the material was substandard even if the warranty has gone beyond the five years?
Clause 34 Funds of Council
Ms Powell suggested in clause 34(1) that this be subject to the necessary approval by the National Treasury.
Clause 39 Establishment of the non-profit company
Ms Powell needed to understand how this intersects with the warranty fund which is already essentially an insurer. It almost looks as if the Committee is playing in the private sector space here and duplicating the purpose of the warranty fund. The Bill is intent on establishing a non-profit company as a mechanism for risk-based insurance offerings for the structural integrity of a home. Many private sector insurers do this or could be contracted to do this. How does this intersect with the warranty fund?
Clause 40 Fees
Ms Powell said the Committee is now creating another regulatory layer that requires additional resources by small business owners. This is like the Property Practitioners Regulatory Act (PPRA) where it is expecting these homebuilders to pay a once-off registration fee and an annual fee for training and development programmes aimed at supporting them – despite earlier provisions in the Bill stating that development programmes are going to be funded from the surplus of the warranty fund. Why do people need to pay an annual fee and enrolment fee? She suggested that there not be a once-off registration fee and an annual fee and that homebuilders merely pay enrolment fees on a project-by-project basis.
Ms Sihlwayi said she is sometimes worried about the Committee having debates and making decisions and thinking that it can regulate them 100%. How can we have this debate with the Council because it has the practical experience? How do we take this debate back to others so they can understand that there has been some review?
She commented on the repayment period when homebuilders have been penalised. There is a payment period that must be agreed on if the house is not of a good standard. These issues may be regarded as administrative issues but they are important because they can serve as control measures to make them be accountable.
Mr Masemola replied about enrolment fees that may be a burden to people who have to enrol their houses. Clause 38(7) indicates: "The Minister may, if an actuarial assessment indicates excess free reserves in the funds of the Council, instruct the Council to lower any enrolment fee prescribed by the Council under section 40". The Minister may intervene to ensure it is indeed reduced which will make Mr Tseki comfortable.
Where it is requested in clause 34(1) that it should be subject to approval by Treasury, it is something that will be considered with the State Law Advisor and Parliament legal team.
On the fee increases in clause 40(5), it is clear that the Council would not increase the fees in an arbitrary way. If it increases more than the consumer price index, it will then have to get approval from the Minister before being publicised. It will not be an arbitrary situation where members of the public will not be informed about those increments.
Mr Koena Selolo from Legal Services replied that the Bill stipulates the cover will kick in immediately upon commencement of construction until it is concluded. Once construction is concluded, the cover will again commence when the housing consumer has been granted the
right of occupation and run for a period of five years. It does not mean that the five years will be counted from construction commencement date.
On inadequate materials becoming an issue at a later stage, this will be determined at the early stage of construction. It should not only come up at a later stage when the cover has already lapsed. If the material used is substandard, it should be determined at the earlier construction stage and must be compliant with the technical requirements as per the NHBRC technical manual.
The Chairperson said that substandard materials is a very serious issue because it is not clear if legislation on material standards is needed to help assist in providing quality homes. The hardware stores are selling substandard materials such as zinc, cement and bricks. The legal team and the Department must look into this to see if there must regulations to strengthen that. Is there a need to lobby other departments to look at the quality of the building materials produced in the country. Talking about providing quality houses and not dealing with the quality of the materials is a huge setback to the progress already made.
Mr Makabeni replied that clause 40 details the process of how fees are determined to ensure protection against large fee increases. He understands Mr Tseki's concern about clause 41(5) which says "the enrolment fee must be proportionally adjusted in accordance with the extended period of the warranty cover as contemplated in subsection (3)". It will be agreeable to then link that adjustment to cross refer that it must be done in line with the clause 40 process.
On the clause 34(1), he did not quite get the motivation for Ms Powell's proposal because it just records from where the Council funding comes. It is unclear why the Committee should then make it subject to the approval of National Treasury because it is a more or less a standard provision that you would find in legislation that tables the funding sources for an entity. It never talks about Treasury. For instance, 34(1)(b) talks about money that comes from Parliament. The other money comes from fees, the surplus of the warranty fund and interest on investments. It just records what the funds of the Council are.
Ms Gangen replied that warranty cover has been covered by the Department. The cover starts on commencement of the construction and then starts running once construction has been completed.
She agreed with that clause 40 can be linked to 41(5) so that one clause speaks to the other and it is not done arbitrarily.
Ms Powell's concern about clause 39 is why is the Bill looking to provide insurance when there is an insurance industry in the private sector. This was raised in the MBA submission as well as the competition by a non-profit company. As such, this is something that the Committee would have to come back to discuss and map the way forward.
Ms Sihlwayi said she wanted to get the process correct. The Bill has been subject to comment by the housing partners the Committee is working with. Now the Committee is trying to refine some of these issues. She requested a process that will involve them again before the finalisation of the Bill. Will it be possible to get the opportunity to discuss this with the building partners? She is concerned about the period of repayment to the Council by homebuilders when they are penalised. They should be able to debate and engage on these issues as well.
Ms Powell said the Department did not address her questions on clause 40 on the need for three separate fee sources. Clause 34 outlines five sources of revenue one of which is a fee, but the Bill is then imposing three separate additional fees on the industry on top of their taxes, rates and building application fees. They will now have to pay an additional three sets of fees: a once-off fee, an annual fee and an enrolment fee, why are three fees necessary if the Department envisages this Council getting an appropriation from Parliament? Can the Department respond to that as it is a substantive question that speaks to intention.
Her second question was on the intersection between clauses 40 and 41 and 34(3). Clause 40(1)(b) talks about an annual fee that "which may provide for programmes and projects aimed at supporting homebuilders and developers in relation to the acquisition of information, and their development". These are development programmes and now it says that they must pay an annual fee so that the Council can then give them development programmes. Clause 34(3) states: "The funds referred to in subsection (1)(c) may be applied in relation to developmental programmes for the home building industry". Subsection (1)(c) is the surplus to the warranty fund. So now the Council is creating two separate sources of funding to be used for the same aim of development programmes and projects. She suggested the Bill alleviates the financial burden these cash-strapped companies are already facing that the Committee reduces the number of fees that the industry must pay the Council to just an enrolment fee. Clause 34(3) uses the surplus from the warranty fund for training and development programmes and she noted that NHBRC already has a training and capacitation mandate.
Adv Masutha asked to get a sense about the public insurance scheme established by this Bill and the existing private sector insurance schemes that ensures for structural failure, damage and destruction. Can one choose between this public sector insurance scheme and private sector insurance? Is there a right to opt out and be covered privately? It may well be that the private schemes turn out to be a lot cheaper. Is it something that is going to be imposed without discretion on both contractors and homeowners?
On the quality of materials, the understanding and assurance has been given that all other departments that have an interest in any aspect of this legislation have been consulted. There is not much explicit cross-referencing between this Bill and what is currently regulated by other laws. On the quality of materials, it may well be that those materials are manufactured in South Africa, in which case the law governing the powers of the South African Bureau Standard arises. It could also be that it is material brought into the country illegally and escapes the South African Revenue Service monitoring powers. We have seen this with illegal cigarettes flooding the country's economy, and clothes that come from the East that escape SARS levies. He does not want to sound xenophobic but there is also a particular community which is notorious in our communities for selling substandard food, building materials and everything else which exposes people to risk. The Department of Trade and Industry has a key role to play. Have all those things been envisaged in this Bill that seeks to create synergies with what other role players are trying to do to protect our consumers? There are those selling substandard materials alongside hardware outlets that uphold the standards set out by the country’s legislation. To what extent has this Bill explicitly created those synergies and does not simply assume that the others will play their role?
The Chairperson said the deliberations will continue on 18 November and adjourned the meeting.
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