AGSA Induction Session; DHS MTSF Performance; with Minister

Human Settlements

28 August 2024
Chairperson: Mr M Seabi (ANC)
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Meeting Summary

The Committee met to be briefed by the Auditor-General of South Africa (AGSA) as part of the process of inducting the Committee on the organisation’s mandate. The AGSA's presentation provided a historical context of the sixth administration's audits, emphasising the importance of oversight, accountability, and governance. The AG highlighted a significant gap between audit outcomes and the actual experiences of citizens, noting that clean audits do not necessarily correlate with positive service delivery. This prompted a strategic shift towards ensuring that audit outcomes lead to tangible improvements in citizens' lives, particularly in sectors like housing. The AG's office stressed the need for public entities to not only comply with financial reporting but also to demonstrate effective service delivery.

The presentation also outlined the accountability ecosystem within the South African public sector, emphasising that improving accountability and service delivery is a collective responsibility involving various stakeholders. Effective leadership was identified as crucial for fostering a culture of integrity and compliance. The AG noted that many public entities were currently categorised as "yellow," indicating unqualified audits with findings, which reflects a need for improvement in internal controls and performance reporting.

The Department of Human Settlements (DHS) subsequently briefed the Committee on its performance under the Medium-Term Strategic Framework (MTSF) for 2019-2024, highlighting achievements and lessons learned.

The discussion highlighted the need for the Committee to actively investigate unmet targets, enhance internal systems, and strengthen oversight mechanisms. Additionally, issues related to the national housing needs register and its correlation with the housing subsidy system were raised, indicating significant gaps in addressing the needs of vulnerable citizens.

Meeting report

Chairperson's opening remarks

The Chairperson opened the meeting, and indicated that the legacy report had been tabled in Parliament. Because it was in booklet form, the Department of Human Settlements (DHS) and invitees had a summary, as it had been sent beforehand to all those at the meeting.

He said the meeting had been convened to receive a presentation from the Auditor-General of South Africa's (AGSA's) office, which provided an independent oversight opinion over the Committee's work. The AG's office was expected to provide an update on the human settlements portfolio's performance, and touch on issues from the Sixth Parliament, particularly regarding investigations involving the Special Investigating Unit (SIU).

Apologies were extended due to some Members being discharged from the Committee as recently as the previous day. This had caused some confusion and delays, with Members being reassigned to other committees. He expected these changes to stabilise by the third parliamentary term.

The Chairperson introduced all present Members, support staff, and representatives from the AG's office. The agenda was reviewed, with no amendments.

The Chairperson mentioned that the meeting would proceed as scheduled, with the hope that additional Members might join later. Further engagement with the AG's office was necessary, especially regarding the progress of the SIU investigation. The presentation from the AG's office was expected to provide valuable insights into the Committee's performance and oversight responsibilities.

AGSA briefing

The presentation by the AGSA provided a historical overview of the sixth administration from the perspective of audits it had conducted. This context served as a foundation for understanding where the portfolio currently stood as it transitioned into the seventh administration. The AG’s office was mandated to strengthen democracy by enabling oversight, accountability, and governance through audit work. This mission was pivotal for empowering oversight bodies like the Portfolio Committee to question and hold departments accountable. The AG’s vision emphasised its need to remain relevant by enhancing public sector accountability, and ensuring that audit insights lead to meaningful action.

The AG highlighted the gap between audit outcomes and the lived experiences of citizens. Although public entities may achieve clean audits, this did not always translate into positive impacts on citizens' lives. This disconnect prompted the AG's office to adopt a new strategy, which was focused on ensuring that audit outcomes were not just about compliance, but also about creating a positive impact on the lives of citizens. The goal was to move public entities toward achieving results that align with their mandates, and serve the public interest.

The AG's office was encouraging public entities to be compliant not only in their financial reporting, but also impactful in their service delivery, particularly in sectors like housing. The AG's office would assess public entities based on their ability to spend allocated funds effectively and achieve set targets. Accountability was key, and the AG emphasised the importance of consequence management when projects or policies fail. Leadership within public entities was expected to exhibit integrity and ethics, setting a positive tone for all officials.

The AG stressed the importance of transparency in financial reporting and compliance with deadlines. Public entities must provide timely and accurate financial statements and annual performance reports to facilitate effective audits. The AG’s office aimed to shift the public sector culture towards better governance, accountability and transparency through consistent audit insights and enforcement. The ultimate goal was to ensure that public sector audits contribute to improved service delivery and a better quality of life for citizens. The Committee would need to track how well public entities adapted to this new strategy and whether it led to the desired impact. It should focus on holding leaders within public entities accountable for both financial management and service delivery outcomes, and should emphasise the importance of transparency and adherence to reporting deadlines in its engagements with public entities.

The presentation from the AG's office provided a comprehensive overview of the new strategic direction aimed at enhancing public sector accountability and service delivery. The Committee was urged to use these insights to better oversee and guide the departments under its purview.

Accountability ecosystem

The presentation continued by looking at the accountability ecosystem within the South African public sector. The AG's office emphasised that shifting the culture of the public sector toward better accountability and service delivery was a collective responsibility. Key points included that while their office plays a crucial role, AGSA could not shift the public sector culture alone. The responsibility was shared across various stakeholders, each playing a distinct role in ensuring accountability and effective service delivery.

The AG introduced a graphic depicting the "Accountability Ecosystem," which illustrated the interconnected roles of different stakeholders in the public sector. These included department officials, senior managers, internal auditors, accounting officers, executive authorities (e.g., ministers), and coordinating ministries like National Treasury and Cooperative Governance and Traditional Affairs (CoGTA). Internal auditors were identified as key players in proactively identifying risks and advising departments on corrective actions before issues escalated to the level of external audits.

Effective leadership at all levels was emphasised as crucial for driving the desired cultural shift. Leadership must prioritise integrity, compliance and ethical behaviour, setting a positive example for all public officials. The AG stressed the importance of collaboration between different government spheres and entities, particularly in areas like housing, where coordinated efforts were essential for addressing complex challenges.

The presentation then moved on to an analysis of audit outcomes and the performance of public entities within the portfolio, providing a baseline for the new administration. It represented the desired audit outcome, where financial statements were accurate, there was compliance with regulations, and performance information was reliable. The majority of entities within the portfolio were currently in the yellow category (unqualified with findings). While this was better than having adverse outcomes, it was not the ideal state. The AG noted that entities had become too comfortable in the yellow category, indicating a need for improvement in internal controls, compliance, and reliable reporting of performance information.

See attached for full presentation

DHS MTSF 2019-2024 Performance for the Past Five Years

The Department briefed the Committee on the Department’s MTSF 2019-2024 performance for the past 5 years and lessons learned. Members were briefly taken through the MTSF and where it applied to the human settlements portfolio.

Members were taken through the performance including BNG houses delivered, serviced sites delivered, households receiving financial assistance and informal settlements upgraded or formalised. Members were taken through social housing, spatial transformation, rezoning land parcels, security of tenure and title deeds.

The presentation concluded with lessons learned.

See attached for full presentation

Discussion

Ms Z Abader (MK) said a concerning observation was that despite some entities achieving unqualified audit outcomes, their performance in terms of meeting set targets was lacking. For instance, the national department had achieved only 50% of its targets, which raised concerns about the impact on service delivery and the lived experiences of citizens. She encouraged the Portfolio Committee to probe deeper into the reasons behind entities remaining in the yellow category and to ensure that actions were taken to improve internal controls, compliance, and performance reporting.

She said that the Committee should also focus on understanding how financial resources were being used to achieve the intended outcomes, and whether these efforts were making a tangible difference in the lives of citizens. They needed to work with entities to strengthen internal controls to move from yellow to green audit outcomes; to ensure that entities not only manage finances well, but also achieve their performance targets; and encourage leadership within entities to prioritise ethical behaviour and compliance to set a positive tone for the entire organisation.

The Chairperson urged the Committee to take an active role in driving improvements, particularly in areas of compliance, performance and leadership integrity, to enhance service delivery and positively impact citizens' lives.

The AG's office responded that the national Department of Human Settlements had not achieved 69% of their targets. This non-attainment of targets reflected a significant challenge in meeting the expected outcomes and positively impacting citizens' lived experiences. Previous audits had revealed qualified opinions on financial statements, indicating issues with how certain line items were reported. Despite this, the performance targets had remained unmet, illustrating a disconnect between financial management and actual service delivery.

The AG stressed the need for robust internal systems within departments to ensure accurate and verifiable performance reporting before submission for audit. This included proper review and correction mechanisms. The AG noted discrepancies between the medium term strategic framework (MTSF) targets and the targets included in the annual performance plans (APPs) of the national and provincial departments. For example, the MTSF targets for "breaking new ground" (BNG) houses, service sites, and title deeds were not fully reflected in the APPs. Even if departments achieved 100% of their APP targets, they would still fall short of the MTSF targets. This highlighted a gap in planning and target setting.

Ms B Kegakilwe (ANC) said there had been progress in standardising indicators across national and provincial departments, which helped in tracking performance more consistently. Despite improvements, some standardised indicators were still not consistently applied across all provinces.

The AG noted that there was room for further enhancement in this area. The Committee should:

  • investigate why targets were not being met and develop action plans to address these gaps;
  • ensure that departments enhance their internal systems to produce accurate and verifiable performance reports;
  • review and align APP targets with MTSF targets to ensure that departmental goals reflect the strategic priorities and are achievable;
  • continue to work on improving the standardisation of indicators across provinces to ensure consistent tracking and reporting;
  • examine the APPs in detail to ensure that they align with strategic goals and targets;
  • strengthen oversight mechanisms to ensure that departments were held accountable for meeting their targets and improving service delivery; and
  • collaborate with stakeholders, including internal auditors and executive authorities, to address identified issues and drive improvements.

The AG’s office provided a thorough analysis of the audit outcomes, performance reporting, and target achievements for the human settlements’ portfolio. The Committee was encouraged to use these insights to drive improvements in service delivery, financial management, and performance reporting, ultimately enhancing the impact on citizens' lived experiences.

The AG's office audited various infrastructure projects, including those managed by the Human Settlements Department and its entities, as well as other sectors like public works and transport. These audits were consolidated into the general report to provide a comprehensive view of infrastructure management and performance across the country. The national housing needs register, which should guide housing projects, was not being fully utilised.

Ms M Dlamini (EFF) said that there was a lack of correlation between the national housing needs register and the housing subsidy system, making it difficult to confirm if housing projects address the needs of vulnerable citizens. Of 29 000 approved housing subsidy applications, only 1 700 were matched with the national housing needs register, indicating a significant gap. Issues had been found with the implementation and planning of housing projects, including inadequate project needs analysis and planning. Delays were common, with projects taking longer to complete than initially planned.

She said that monitoring and accountability for project managers was lacking, affecting project quality and adherence to budgets. Quality concerns have been noted across various infrastructure projects, reflecting a need for improved oversight and management. The national housing needs register should be more effectively used to ensure that housing projects address the needs of vulnerable populations. The Department needed to improve the correlation between the housing subsidy system and the national housing needs register to better match housing delivery with actual needs. A practice note aimed at enforcing the use of the national housing needs register had been developed, but was not yet enforceable.

The AG’s office trecommended that this practice note be implemented to ensure adherence to best practices. The issues identified in human settlements were part of broader challenges faced across various infrastructure sectors. Addressing these challenges required improved planning, monitoring, and accountability across all infrastructure projects.

There should be a review to assess why targets were not being met and strategies developed to address these issues. Housing projects must be aligned with the national housing needs register and other relevant data sources. Oversight mechanisms should be strengthened to improve project planning, execution, and monitoring. The implementation of practice notes and other policy documents must be supported to enforce best practices in project management and data utilisation.

The AG’s office highlighted several critical areas for improvement in the management and execution of housing projects. The insights provided pointed to a need for better utilisation of data, improved project management, and stronger policy enforcement. The Committee was encouraged to focus on these areas to enhance the effectiveness of housing projects and ensure they meet the needs of vulnerable populations.

Ms Mmamoloko Kubayi, Minister of Human Settlements, admitted that municipalities were sometimes not appointing approved contractors, leading to issues with claiming from the warranty fund. She emphasised compliance with appointment processes and accountability in project execution. There was a need to ensure that approved contractors were used for projects to avoid complications with warranties and to improve project outcomes.

The Chairperson argued that delays in project execution affected timely delivery and intervention. There was a need to elevate methods for managing delays and prioritise projects, especially those impacting vulnerable populations; consider adjusting strategies to better manage and expedite project timelines; overcome inadequate integration and communication between social housing initiatives and government subsidies; enhance communication and collaboration with social housing entities and finance departments; and ensure that subsidies were effectively utilised and benefit targeted populations.

Ms Dlamini argued that the incomplete projects and lack of proper inspections led to substandard outcomes. She wanted to know from the Department of Human Settlements about the housing backlogs and why people were still living in bad environments. She highlighted the impact of floods, especially for those who were still staying in the informal communities.

Minister Kubayi responded that the Department would strengthen project management practices and ensure thorough inspections. It would also implement lifestyle audits and ensure accountability for project completions.

She responded to the title deeds issue by stating that there were difficulties in issuing title deeds due to legal and procedural issues. The Department was in the process of reviewing and amending policies related to title deed issuance. It was collaborating with the Justice Departments to address estate disputes and ensure proper title distribution. There was inefficient use of funds and a lack of bulk procurement strategies. Strategies for bulk procurement should be developed to maximise the impact of available funds, and bulk buying practices implemented to reduce costs and improve project delivery.

She also referred to improved coordination between various stakeholders, including municipalities, housing departments, and finance entities, and the enhancement of oversight to ensure that projects were completed to standard and within budget. The Department needed to engage with non-governmental organisations (NGOs) and community organisations to effectively support social participation and address local needs. These solutions aimed to address the core issues identified and improve overall project management, compliance, and service delivery in the housing sector.

Minister Kubayi also responded to the issue of corruption, saying that corruption and the mismanagement of funds were affecting project outcomes. Departments had paid for houses that were not being built satisfactorily. Increased transparency and accountability measures were required. Stricter oversight and auditing procedures had to be implemented to ensure funds were used appropriately. The financing for first-home buyers could be perceived as expensive, impacting affordability. They had to continue refining the first-home financing programme to ensure it meets the needs of buyers while remaining cost-effective. Consideration should be given to revising the programme name and structure to enhance clarity and accessibility for potential buyers.

Some property developers were failing to manage projects effectively, leading to distressed projects. The Department needed to monitor and support developers to ensure project sustainability and effectiveness, and address issues related to repayment and project management to prevent failures. Contractors may lack the knowledge or experience needed to manage projects successfully, leading to issues with fund management and project completion, so training and support programmes for contractors, particularly those new to the industry, needed to be implemented, with a focus on financial management and project execution.

On the issue of student accommodation, the Minister responded that social housing projects were facing distress, while student accommodation projects were performing well, so they should learn from successful student accommodation projects and apply similar principles to social housing. Management practices and support for social housing projects had to be improved to enhance their success. There was misuse of funds by contractors who prioritised personal gain over project success, so strict financial management and accountability measures had to be enforced. The Department had to provide clear guidelines and support for contractors to ensure they used funds appropriately. Existing policies and programmes may need adjustment to better serve their intended purposes, so they should review and refine policies related to financing, project management, and contractor support. and ensure that policies align with current needs and challenges in the housing sector. These actions aimed to address the core issues related to corruption, financial management, and project execution, improving overall outcomes in the housing sector.

There was evidence of corruption where senior citizens on waiting lists were bypassed for housing. Individuals not on the list were receiving houses more quickly, creating inequity. The Department had to Investigate the distribution process for senior citizen housing to uncover any corruption or unfair practices, and implement stricter controls and transparency in the allocation of houses to ensure that those on the waiting list receive priority. A feedback mechanism for affected individuals to report issues and track the resolution process had to be established. Senior citizens were living with large families in housing intended for them, leading to overcrowding and associated problems such as crime and safety issues, so the criteria for senior citizen housing should be reviewed and revised to ensure that it was reserved for individuals or couples without large extended families. Improved security measures in housing areas for senior citizens were needed to protect them from crime and ensure their safety, supported by collaboration with local law enforcement and community organisations.

Minister Kubayi concluded by saying policies related to housing for senior citizens needed review and adjustment to better meet their needs and prevent misuse. Housing policies had to be clearly communicated and enforced consistently. By addressing these issues, one could improve fairness and effectiveness in housing allocation, enhance safety for senior citizens, and resolve specific problems in targeted areas.

The meeting was adjourned.

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