Department of Human Settlements Q2&3 2022/23 Performance

Meeting report

The Chairperson opened the virtual meeting by congratulating the Committee on the passing of the Housing Consumer Protection Bill by the National Assembly on 14 March and thanked the drafters.

Department of Human Settlements (DHS) Quarter 2 & 3 Performance
The briefing was presented by Ms Pamela Tshwete, Deputy Minister of Human Settlements; Ms Sindisiwe Ngxongo, DHS Acting Director-General and Ms Lucy Bele, DHS Acting Chief Financial Officer.

Quarter Two performance
DHS recorded a 62% in performance within Quarter 2, which is a 4% increase from the first quarter. In Quarter 2 the following was noted:

Human Settlements Development Grant (HSDG) Expenditure at 30 September 2022
- Gauteng and Northern Cape spent above 70% of their transferred funds and had spent just above 50% of their total grant fund.
- Eastern and Western Cape and Mpumalanga spent above 90% of transferred funds, and spent just above 40% of their total grant fund.
- Free State, KwaZulu-Natal and North West spent less than 40% of their grant fund with the lowest being Free State with 13% expenditure.
Provinces submitted various reasons for the under-spending.

Informal Settlements Upgrading Partnership Grant (ISUPG) Expenditure at 30 September 2022
- Northern Cape and North West reported expenditure above 70%.
- Eastern Cape and Mpumalanga spent above 50% of allocated funds.
- Free State, Gauteng, KwaZulu-Natal and Limpopo spent less than 31% of allocated funds.

Provincial Emergency Housing Grant (PEHG) Expenditure at 30 September 2022
- Only two provinces (KZN and MP) reported expenditure under the emergency funding;
- KZN spent R76.4 million as at 30 September 2022, representing 55% of transferred funds.
- MP spent R18 million (89%) of the approved rollover as at 30 September 2022.

Urban Settlements Development Grant (USDG) Expenditure at 30 September 2022
- All eight metros spent less than 20% of available funds. The total expenditure of all metros is 10.8%. The reason is that this is the first quarter for metros as their financial year starts on 1 July.

Quarter Three performance
DHS recorded 71% performance in Quarter 3, which is a 9% increase from Quarter 2.

Highlights:
-There is 68% of departmental expenditure at 31 December 2022.
- Operational expenditure programme at 31 December 2022 is 54%.
-There was 67% expenditure of transferred grants at 31 December 2022.
- Provincial emergency housing grant received a top-up from National Treasury. Mpumalanga and City of Joburg have submitted their application for the emergency grant.
- Funds taken from Free State and Limpopo were reallocated to Mpumalanga and Northern Cape.
- Northern Cape and KZN exceeded their targets for serviced sites.
- Free State achieved only 9% of housing unit target: 201 out of 2351 housing units were delivered.

Informal Settlements Upgrading Partnership Grant (ISUPG) Expenditure at 31 December 2022
- Gauteng had largest ISUPG allocation R1.3 billion with 41% not spent by quarter end.
- Treasury approved stopping the ISUPG as follows: R200m (Gauteng), R50m (Free State) and R44m (Limpopo). The funds were reallocated to Mpumalanga (R200M) and Northern Cape (R94m). All provinces were informed in writing.

Provincial Emergency Housing Grant Expenditure at 31 December 2022
- Unallocated available funds amount to R369m
- KZN: Balance of R202m was transferred in January 2023
- Mpumalanga spent R20.1 million of approved rollover which represent 99% of transferred funds.
- Eastern Cape spent R12.6 million at quarter end, representing 30% of transferred funds.

Urban Settlements Development Grant (USDG) Expenditure at 31 December 2022
- Mangaung, City of Ekurhuleni and eThekweni spent less than 30% of the total funds.
- DHS had written to these metros to submit their recovery plans for interrogation.

Challenges faced by DHS:
• Restructuring of the Department.
• Late payment of invoices.
• Procurement challenges
• Funds are reallocated so that they do not revert to the National Revenue Fund.

Discussion
Dr N Khumalo (DA) congratulated the provinces that have shown good performance throughout both quarters. Highlighting unemployment, she asked for more details on the jobs created especially for youth such as the overall nature of the jobs and if permanent or temporary.

She asked about the grants that had been reallocated from three provinces to other provinces because citizens are deprived when these funds are reallocated. What are the plans for these citizens who will not be assisted with human shelter? What happens to the people who then miss out on the services that they have a right to?

Dr Khumalo asked about the implementation plan and criteria used to eradicate mud houses. What are the timelines? What are the plans? This is needed so the information can be communicated instead of providing a blank timeline for the year. She asked how the Ministry is supporting service delivery for provinces to eradicate mud houses. She noted that the issue with service delivery on prioritising mud housing is due to the lack of funds. She asked the Deputy Minister how the Ministry will support these provinces to achieve these priorities?

The DHS reports that meetings are being held with provinces to check on performance targets. What are the plans beyond the meetings? What assurance is there that there will be a performance improvement within these provinces?

ISUPG underperformance is noted every quarter. She asked what the plans are to assist these provinces as the residents are suffering due to the underperformance.

Ms N Sihlwayi (ANC) asked for the recovery plan where there is identified non-performance in provinces and municipalities. Non-performance is not due to National DHS but it is the provincial sphere which has been delegated to do this. Development is challenged by land rezoning. DHS should have a land planning unit that should focus on rezoning to assist municipalities in this area.

Ms Sihlwayi raised municipalities not achieving their targets. The interventions in poorly-performing municipalities helps provinces to perform as municipal performance has a direct impact on provincial performance. She asked about progress with the blocked projects.

Ms Sihlwayi noted the challenge of issuing title deeds is due to poor land planning and rezoning. What is the progress in issuing title deeds; rectification due to houses falling apart and poor land planning and rezoning?

She said the recovery plan needs to address not paying invoices within 30 days.

She asked about the -100% for payment of financial assets in the economic classification section in the report.

Ms Sihlwayi noted that the ISUPG programme addresses human settlements not the housing issue. The integration of all services (water, electricity) to make a house. On the taking of money from municipalities and reallocating the funds, she asked about cases where funds have been reallocated in previous years from the same municipalities. What is DHS plan to assist them permanently so that same challenge does not reoccur?

Ms Sihlwayi asked for clarity on the 21% for the provincial emergency grant.

Ms Sihlwayi asked if Eastern Cape is considered for the Provincial Emergency Housing Grant.

She stated that NDHS should announce the provinces that have been awarded the reallocated funds due to their good performance, so that provinces that are not performing can be spurred on to perform due to jealousy.

She asked for clarity where the presentation stated that 41% of Eastern Cape serviced sites should go to towards mud houses and asbestos.

The Chairperson asked about the targets of the Medium-Term Strategic Framework (MTSF) 2019-2024. Will the targets be increased for the provinces receiving reallocated grants and will the non-performing provinces have their targets reduced? How will the Committee know if the funds reallocated to performing provinces actually benefit the citizens? How will the performance of these performing provinces be analysed? How will DHS know if the conditional grant objectives are being achieved? She asked for a detailed report on the exact amount reallocated to performing provinces.

The Chairperson said the Committee was informed that the Limpopo MEC and Head of Department were clashing. But the same HOD was appointed to Mangaung, which is now also a non-performing municipality. She asked for clarity on this matter. Why was the same non-performing HOD sent to Mangaung which is now facing the same challenge as Limpopo.

On job creation, the Chairperson asked how many woman contractors have been appointed in tender awards in the provinces, particularly in the performing provinces with increased funds. Will their target for woman contractors also be increased?

When meeting with the metros, the CFO mentioned that the money being reallocated will assist particular informal settlements. The Chairperson asked if the provinces which have received the reallocated funds have the informal settlements that the Human Rights Commission called on to intervene.

The Chairperson asked about the appointment of Senior Management and if the President is being pressured to finalise the matter so DHS can get an HOD.

The Chairperson asked if there are contractual agreements, besides the business plan, between the Minister and MECs and Director-General with the HODs for the non-performing provinces to achieve their targets. NDHS is directly affected by this as it has direct impact on not reaching the national targets for the MTSF.

On title deeds, the Chairperson asked about the operation implemented by National Treasury to help DHS address title deeds, the names of the provinces where this is being implemented, and the results of this programme.

The Chairperson asked about the District Development Model (DDM) and if DHS has engaged with the districts where there are difficulties with the other spheres of government which affect DHS performance such as land rezoning.

Ministry response
Deputy Minister of Human Settlements, Ms Pam Tshwete, agreed with the concern about permanently filling the Acting DDG posts. Interviews were conducted on 14 March for the Policy and Research Planning post, Informal Settlements Upgrading post, as well as the CFO post. The posts will be filled as soon as possible. DHS is in the process of taking the candidates to Cabinet for approval.

The Deputy Minister agreed about the unemployment challenge. The DHS hires youth from within the communities where projects are taking place but when the projects have been completed, the temporary posts fall away and there are a few permanent posts that remain.

The Deputy Minister that the provinces with a large number of mud houses are Eastern Cape, KZN and Limpopo which have a large rural areas. DHS has created a platform called ‘Destitute Housing’ which is led by Ms Tshwete herself. There has been improvement in the provinces especially Eastern Cape as the platforms allows DHS to discuss mud housing within each municipality. The platform is attended by ward councillors, MEC, mayors, Deputy Minister herself and the MMC for Human Settlements. It is best to include the ward councillors as they are present in these municipalities and are able to show DHS actual footage and images of the mud houses.

The DHS will be allocating 15% of the total HSDG to the unblocking of blocked projects, eradication of mud houses and title deeds. This will be monitored to ensure that these funds will be strictly use for these priorities, as in previous cases some municipalities have used the funds on other projects.

Deputy Minister Tshwete stated the Free State was not performing well on title deeds which was due to the instability of the province. There is a newly appointed MEC in the province. There is a recurrence of the same challenges being raised by the provinces such as the rezoning, town establishment and land planning issues. DHS ensures that all three spheres of government are working together to fast-track title deeds. There is a backlog of title deeds and there has been asbestos used in some townships since pre-1994. In the next quarter there will be improvement in the area of title deeds especially with the appointment of permanent senior management in DHS.

DHS is doing everything possible to ensure that provinces are utilising their funds as citizens suffer when they are reallocated. A meeting will be held with the non-performing provinces to ensure that money will be utilised. The DHS is monitoring the state of instability in the Free State. A meeting will be held with the Western Cape DDM to address the challenges there. She is working with the Western Cape municipalities and MEC Simmers to address the title deeds and issues raised by Committee members.

Deputy Minister Tshwete stated that municipalities which have not completed the building of houses units are being monitored. DHS has requested that the province provides them with the exact number of blocked projects. DHS will be having a meeting with metros on 15 March, and the results of the meeting will be presented at the next committee meeting.

The Deputy Minister mentioned that the Minister and herself will be going to Nelson Mandela Bay Metro as it had houses which were built in 1994 that need rectification. She will also obtain the number of already rectified houses from the MEC’s of the Eastern Cape.

DHS response
Acting CFO Bele replied about the 30-day payment of invoices. The factors that contribute to the delay in payment are beyond the control of DHS. For instance once invoices are logged on the system they are automatically processed the following day. When the invoices are not paid an investigation is conducted. If it is found that the payment delay is due to the negligence of an official, consequence management will take place.

Ms Bele indicated that the -100% for financial asset payments was an error which was corrected in the 31 December 2022 report. The -100% is meant to be 80%. The payments on financial assets are the losses incurred. If it is found that the losses are due to the negligence of an official the cost will be recovered from that official by informing the official and deducting the amount from their salary. If the loss is due to negligence of DHS, the Department will cover that loss.

Ms Bele replied about DHS assisting non-performing municipalities to avoid in future the taking away of funds for reallocation. The common challenge within metros is instability in governance. For example, there is no mayor one day, the following day the council does not meet, and so on. These challenges have an impact on budget performance. The budget can only be approved by the council and only once the council has approved the budget, can procurement begin. As an intervention plan they have received assistance from the South African Local Government Association (SALGA) especially when communicating with metros and when talking to National Treasury.

Ms Bele stated that DHS has realised the main issue with the metros is that of procurement due to the council not approving the budget. Metros should explore the option of procuring through panels as they would only need to advertise once and panels remain on the system for a period of three years. Another option proposed by DHS to address procurement is to look at a multi-year tender with a specific conditions provided to ensure that approved projects continue even when disputes and disruptions occur within the internal governance of municipalities.

Ms Bele replied about NDHS assisting other spheres of government with procurement. The three spheres of government ­– national, provincial and local – operate independently. By law national government cannot intervene in the procurement process conducted by municipalities. DHS can only support and provide guidance through forums.

Ms Bele explained that the 21% is not an expenditure but the transfer. There is a difference between what grant amount has been approved and the amount that has been paid out (transferred). DHS agreed with National Treasury that the whole grant amount will not be transferred but only paid in tranches. The 21% speaks to the tranche that has been transferred. Once communities have spent 80% of the first tranche, the second tranche amount will be transferred. R342 million was approved for KZN and to date the whole amount has been transferred. In Eastern Cape 42% of the grant amount has been transferred due to procurement challenges. Since Eastern Cape has dealt with these challenges, DHS has requested National Treasury for the balance to be transferred to Eastern Cape. For municipalities that have had disasters, the MMC and MEC need to submit an emergency grant request form. DHS also requires an adjustment plan from the province to accompany the form so that it knows where the money will be spent and how.

Ms Bele agreed that a DHS report will be produced for both grants for the 2019-2024 MTSF for submission to the Committee.

On the underperformance of Mangaung metro, DHS had requested a meeting between the Free State MEC and NDHS to come up with a solution. She had requested that the Chief of Staff resends the letter to the newly appointed Free State MEC so that taking away of funds from the municipality can be addressed. The support provided by DHS is that of looking at the business plan with the MEC and understanding what is happening on the ground. Project managers have been deployed in the areas that require support to check on the performance and management and deliverables of projects

DHS is finalising the report on the tenders awarded to women.

In reply to the question on the contractual agreement between DHS and non-performing provinces, Ms Bele stated that the business plan is the contractual agreement between the parties. The grant framework is a legal document which has clear responsibilities of the grant receiving officers of the municipalities, metros and the provinces. If transgressions occur by either parties the parties are held accountable based on the specifications of the law. Chapter 12, 14 and 15 of the Division of Revenue Act clearly state the responsibilities of the receiving officers.

Ms Rashnee Atkinson, DHS Acting DDG: Research, Policy, Strategy and Planning, replied that the District Development Model (DDM) and Priority Development Areas (PDAs) were declared due the struggles faced with coordination and alignment across the different sectors involved in project execution. For example houses were built but these houses had no access to services such as water and electricity. PDAs were declared to ensure integration between sectors which will improve the lives of citizens as these areas will have the greatest spatial impact. DHS will focus on areas where houses have been built but there is no internal and bulk infrastructure being supplied. DHS is mapping the bulk infrastructure and the internal infrastructure projects along with existing and planned housing projects. The “One Plan” is prepared for the DDM. The PDAs are declared in the “One Plan” as it gives direction on how to work with sectors to achieve the targets.

A forum has been set up to meet quarterly with sector departments, provinces and municipalities to share progress on the PDAs. The MTSF target was to develop 94 plans, which most have been completed. The only problem being faced is that the plan has to be approved by the municipal council and if the plan is not adopted by council it has a direct impact on the performance of the local municipality. The plans assist DHS in identifying the sectors that are important in achieving the targets. The PDAs also include blocked projects. The unblocking of the projects will allow for a large number of housing opportunities to the PDA’s with priority projects. DHS is also working with Infrastructure South Africa to match private sector and public sector investments.

Ms Atkinson replied that a new director will be appointed in the following month to oversee the unit for land planning and rezoning and the person will be responsible for delivering the PDAs. The Department of Agriculture, Land Reform and Rural Development has been assisting in mapping the PDAs and the projects across sector using GIS software. It has also assisted in fast-tracking the land rezoning required in areas. With the PDAs, a total of 4 615 hectares of land had to be rezoned and 3 985 hectares have been rezoned.

DHS has received business plans but performance is based on what gets approved. Business plans were approved late as the provinces had to indicate how the MTSF targets will be achieved. Plans that were not approved were those where MFTS targets were not substantially accounted for. DHS has identified the provinces that did not contribute significantly to the MTSF targets.

Ms Atkinson stated that approximately R175 million is allocated to the asbestos programme, primarily the Free State, Northern Cape and Mpumalanga. The Western Cape mentioned that they do not have an asbestos problem but they have not provided a report on how they have resolved the problem.

Ms Tshepiso Moloi, Chief Director: Corporate Support, addressed blocked projects. DHS has established a baseline for projects at different stages that are stuck. DHS had concluded that 3 445 projects were blocked. After assessments were completed, the provinces indicated that 2 880 were closed. DHS is in the process of appointing a Professional Resource Team (PRT) which will assess the 2 880 closed projects. At present there are 619 blocked projects identified as blocked. These projects have been planned for across the 2022/23 to 2024/25 financial years. DHS is at 45% of housing unit delivery of the blocked projects. Of the target of approximately 15 000 completed projects, around 6 000 have been completed. The majority of work has been completed on serviced sites accounting for 69% of completed works. Of the 20 000 projects at the completion stage, 14 000 of the projects have been completed by end of Quarter 3 accounting for 71% of delivery. There are resources available in DHS for the monitoring of the blocked projects.

There are seven provinces (mainly the rural provinces) that are implementing the mud house and destitute housing programme. Gauteng and Western Cape have no targets set for the mud housing programme. Free State and Limpopo have no targets set for the current financial year but have indicated that targets will be set for the next financial year. Of the 9 760 identified mud houses in 2022/23, 84% have been delivered. There is no distinction between mud houses, destitute housing and rural housing. DHS is in communication with provinces on identifying the mud houses that need to be eradicated in the backlog.

Ms Moloi stated that the Vulindlela programme was established to assist DHS with eradicating the title deed backlog. Vulindlela will assist only in the areas of research, data analysis and the coordination of provinces. The responsibility of fast-tracking the title deed programme lies solely with DHS.

She addressed the question on job creation stating that job creation is at project level thus the jobs are temporary jobs as the jobs are provided throughout the duration of the project.

Ms Sindisiwe Ngxongo, DHS Acting Director-General, stated that DHS is looking at insourcing of jobs instead of outsourcing.

DHS has agreed on prioritising the responses to destitute housing cases and that of mud house in the rural provinces.

Ms Ngxongo stated that DHS needs to improve on the quality of the business plans to avoid delays in the implementation of the projects as the business plans will not be approved conditionally.

Ms Ngxongo replied that the multi-disciplinary teams will be required to complete the task of rezoning the already acquired land parcels.

Ms Ngxongo stated that the intervention plan on the poor performance in Mangaung is a collaboration between different departments. The failure of Mangaung is due to the team of different departments and not just DHS. An official was sent to Mangaung to lead the intervention team. Progress has been made and the second milestone of the intervention plan has been achieved. However, the impact of the intervention team is not at the anticipated level. The intervention turnaround plan of the previous financial year is being prioritised by DHS to ensure that the targets are achieved.

Deputy Minister Tshwete mentioned that since she is deployed to the Western Cape province she has seen evidence of houses with asbestos, for example in townships such as Delft, Langa, Gugulethu, Nyanga East and Beaufort West. She wants to conduct further research and compile a report on this. She asked that the Committee assist in this matter to ensure that the asbestos is accounted for in Western Cape housing.

The Chairperson referred to the Division of Revenue Act (DORA) and DHS stating that it is enough of a tool to hold provinces and municipalities accountable. However, why is there still non-performance? She referred to the Acting DDG’s response about the DORA business plans. If the business plans are sufficient to hold them accountable why are they not fulfilling their mandates through the Division of Revenue Act?

The Deputy Minister replied that DHS is responsible for monitoring the funds allocated to provinces and municipalities and that the funds are being utilised. Perhaps Ms Bele will correct her statement. Often the excuses given by non-performing provinces are petty; for example, in the case of disasters at times the municipalities affected submit their application late for the emergency grant. This may be attributed to the lack of capacity in these municipalities. DHS does attempt to address capacity which is why there is the DDM programme.

Ms Bele explained that she was responding to the question on the procurement process in the different spheres of government. On the Division of the Revenue Act (DORA) the responsibility of DHS is stated in section 10 of the Act: certify to National Treasury that the monitoring system is working, clear and understood. The grant framework states that the provision of the grant is provisional based on the approval of the business plan. DHS has to certify to National Treasury that the business plans have been submitted and approved by DHS.

The Chairperson thanked everyone and adjourned the meeting.