Intergovernmental Fiscal Review: input by Departments of Transport: North West, KwaZulu Natal, Free State, Limpopo & Eastern Cap

NCOP Finance

20 October 2005
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Meeting report

FINANCE SELECT COMMITTEE

FINANCE SELECT COMMITTEE
21 October 2005
INTERGOVERNMENTAL FISCAL REVIEW: INPUT BY DEPARTMENTS OF TRANSPORT: NORTH WEST, KWAZULU NATAL, FREE STATE, LIMPOPO & EASTERN CAPE

Chairperson:
Mr T Ralane (ANC) [Free State]

Documents Handed out
KZN Presentation on the Provincial budget and Expenditure Review
Free State Presentation on the Provincial Budget and Expenditure Review: Transport;
Part1 & Part2
Eastern Cape Presentation on the Provincial Budget and Expenditure Review: Transport;
Part1 & Part2
Department of Roads and Transport: Expenditure Review 2001/02-2007/08
Limpopo Presentation on the Provincial Budget and Expenditure Review: Transport
Free State Presentation on the Provincial Budget and Expenditure Review: Housing
Western Cape Presentation on the Provincial Budget and Expenditure Review: Housing
Gauteng Presentation on the Provincial budget and Expenditure Review: Housing
North West Presentation on the Provincial budget and Expenditure Review: Housing
[please
info@pmg.org.za for the documents]

MINUTES
Presentation by KZN Department of Transport

The Department was represented by Mr B Cele (MEC) and Dr K B Mbanjwa (Head of Department). The MEC made the presentation. (See document attached). He said that the Department had a budget of R 2 197 532. This excluded the R500 million bus subsidy budget dealt with on an agency basis for the national Department of Transport. The Department had spent R692 064 and R576 804 on construction and maintenance respectively. The province had an emerging contractor development programme called "Vukuzakhe". Capacity development on the programme included business development and technical training.

The Department had another programme called "Zibambele" which dealt with road maintenance. In terms of the programme, a household living alongside the road would be contracted to maintain a section of road of between 500 and 800 meters. It would be given a twelve month contract. The Zibambele contractor worked 60 hours a month. Technical and organisational skills training was provided by the Department. Equipment comprising a wheelbarrow, pick, shovel, machete and slasher was also provided and could be used for agricultural and building activities. Features of the programme included the creation of sustainable job opportunities for poor rural families through the maintenance of the rural road network in order to break their poverty cycle. The selection of workers was by done neighbourhoods themselves. The programme targeted women-headed households and was therefore a gender empowerment program.

The MEC said that overloading continued to be a major problem in SA and caused premature road deterioration. During 2004/05, the Department had weighed 109 224 vehicles, of which 24% were overloaded. 6% of them were charged as they had exceeded the 5% tolerance.

Discussion
The Chairperson said that the Department had spent more money that any other province.

Ms D Robinson said that she was concerned about the monitoring of people working under the Zibambele project to ensure that work was done properly. She asked if hey were sufficiently trained.

The MEC replied that he was very proud of the programme. Out of the 25 000 people working on the project, 24 000 of them were women. They had gone on to create savings clubs and had managed to save R3 million. The Department was working with Economic Development to advance them to form co-operatives. They were trained and the Department had put some training mechanism to ensure that they advanced to other levels. They worked on low volume roads. Though there was an accident last month in which two of them were involved, this was the only accident that they had ever had. Three days ago there was a meeting with them and they had requested further monitoring mechanism. There were monitoring mechanisms already in place but the Department was working towards increasing them.

The HOD replied that the Department had established a directorate that dealt with ensuring that all targets that had been set were being met. People normally adhered to standards and specifications but sometimes there were some problems at some stages.

Mr BJ Mkhaliphi (ANC) [Mpumalanga] said that involvement of communities in building their own future was progressive. It had been said that all district municipalities had finalised their transport plans. He was of the view that the plans would be able to feed into all the planning including taxi recapitalisation. He wondered if district municipalities had used information from the Integrated Development Plans of the local municipalities in finalising their transport plans.

The MEC replied that after the Premier had called his Provincial Co-ordination Forum, the Department went on to call its forums and had an Imbizo on transport issues. The Department worked very closely with municipalities in developing understanding on recapitalisation. One thing that was problematic with municipalities was the provision of taxi ranks. There was a tendency to give problematic taxi ranks to opposing taxi associations. It was important for the municipalities to inform the Department about issues around the allocation of taxi ranks.

The HOD replied that the Department was working with municipalities on the IDPs. In fact the Department was forced to do work with them and normally sat down with them and draw up the transport plans. There was a cluster system that had been introduced by the provincial Cabinet. Local government was part of the cluster. Taxi ranks belonged to municipalities and the Department only controlled the roads. There was no way the two spheres of government could not work together.

The Chairperson said that the 2002/03 provincial roads maintenance expenditure had declined. It was R539 million in 2001/02 and declined to R534 million. He asked what was the reason for the decline. There was a projected drop in the revenue collected from motor licenses. What were the reasons for this? KwaZulu-Natal had the highest maintenance budget. He asked if there was value for money in terms of maintenance and construction of new roads. He was aware that the province had good quality roads and had toll roads. He asked if the toll roads assisted in keeping the roads in good condition.

The HOD replied that the Department had started with the upgrading of the major roads. The Department was sitting with the problem of communities that had no access to roads. It was trying to balance the actual maintenance and the provision of access to roads to all people. It was very difficult to explain to the people why they still had no roads after 11 years of democracy. The Department had identified economic roads and had started constructing them. Some roads had been neglected for years. The Department had not been able to attend to such roads due to budget constraints. There was a decline on the maintenance side but also a sharp increase on the construction side. The revenue had also declined a little bit. One of the reasons was that there was a 'boom' following the introduction of personalised number plates but things started to slow down thereafter. The figures were going up again.

The Director General replied that there was value for money from the roads. He conceded that there were potholes in some roads but the Department had tried to cover and maintain as much as it could. The Department had limited funds and could do more if it had more funds. Toll roads belonged to the national Department and the provincial Department only did the policing on them. The provincial Department did not get a cent from the toll fees.

The Chairperson said that the Committee had seen one of the roads constructed by the community through the Vukuzenzele programme. It might be better to give more money to those provinces that had the capacity to spend. It would be useful to have confirmation of the things in the report because one of the problems was the reliability of data. For instance the Department of Education had 2002 data. The question was how could one plan for school nutrition in the context of old data.

Ms Ngqaleni (Treasury) said that Treasury was taking the issue of aligning budget with capacity very seriously. Treasury should begin to say that if was a possibility of underspending, funds should be shifted to another Department that could spend. The Division of Revenue Act allowed this.

The Chairperson said that MECs within and across provinces should start talking to each other. The Department of Transport was critical to economic growth.

The MEC said that it did not help to have rollovers if one could not spend. There was no savings book for government. The Department required about R207 million to construct pedestrian bridges to make it safer for people to cross roads and rivers. The Department required about R990 million to build roads to clinics, schools and police stations.

Presentation by Free State Department of Public Works, Roads and Transport
Mr S Mohai (MEC) and Adv. M. Msibi (Head of Department). The MEC said that transport underpinned development and was a catalyst for unlocking economical growth and social development potential. Transport should be geared toward eradicating structural and social imbalances that yielded two economies and under development in our country. It should provide access and improvement of mobility thus ensuring that people had access to social services, job creation and skill development. It should also contribute towards the reduction of the cost of doing business and transformation of the economy. The Free State province was central to the country because one had to pass through it to go to other provinces. It was mainly dominated by agriculture.

The HOD said that the kilometres of poor and very poor roads were going to increase dramatically. The cost of repairing roads would also increase due to a lack of proactive maintenance. The gravel road system was on the verge of total collapse. The number of road accident related claims were expected to increase given the state of the roads.

The Department's ability to collect revenue was above par. The amount collected had increased on annual basis. It had collected It had collected R168 million from vehicles licenses. Free State tariffs were on average right in the middle of the nine provinces. It had on average the third highest fees for light vehicles and the sixth highest fees for trucks and busses. The province had the lowest fatalities in Arrive Alive. Overload control was undertaken in Kroonstad, Bothaville and Senekal.

He said that road signs played a significant part in ensuring overall road safety and providing direction. Currently 23% of the signs on paved roads and 60% of the signs on gravel roads were in a very poor to poor condition. 18,185 signs must be replaced annually to address the backlog. Some of the bridges were on the verge of collapsing.

Discussion
The Chairperson asked what was there was there value for money from the expenditure from 2001/20 to 2004/05.

Mr Mkhaliphi asked what was the reason for the decrease in relation to collections from motor vehicle licenses. Could the reasons be associated with personnel related constraints? He asked how the Department envisaged improving the situation. Many provinces including Mpumalanga faced litigation. The problems in Mpumalanga were probably more severe than those that were in the Free State. The difference was that the problems in Mpumalanga were not yet in the public domain. The provincial leadership in provinces should take certain decisions when faced with budget constraints. The presenter had indicated that road signs were a problem and some markings on the road surface were no longer visible. It was interesting that one would come across a brand new road sign indicating the distance to Bloemfontein but the regulatory signs would not renewed. There was a need to take a value decision given budgetary constraints. The problem of staff shortage led to law enforcement constraints. He asked what was the situation in the province.

The HOD agreed that some roads were in bad conditions. The N1 was responsibility of the South African National Roads Agency Limited (SANRAL). SANRAL would replace sings from time to time. The N5 was currently under construction and the provinces had to take a decision to hand over the road to SANRAL. All provincial roads would be given to SANRAL given the prevailing situation in the province.

He said that figures on revenue collected included traffic fines. There was a decrease on the figures because the province had initially had collected a huge amount of registration fees at Sasolburg. Most of the vehicles were registered from the Vaal area. Most of the vehicles did not find back into the system after the Department had stepped up its measures against fraud and corruption in relation to the registration of vehicles. Another factor was the backlog in areas that were on the verge of other provinces. Some of the vehicles that were near the borders with Mpumalanga and Gauteng were registered in those provinces.

The Chairperson said that cars in Free State were registered in other provinces because the fees in those provinces were cheaper. It made economic sense for the people to register their vehicles where it was cheaper to do so.

The HOD said that the province was third most expensive in relation to light motor vehicles and number six in terms of heavy vehicles. The fact of the matter was that the province should generate revenue to maintain the roads despite that money that belonged to the province was going to other provinces. This was problematic because the people who had registered their vehicles elsewhere were using the road surface in the province. Most of the vehicles in Xhariep were registered in Eastern Cape.

The Chairperson said that registering vehicles in Eastern Cape was cheaper compared to in Free State.

Ms Robinson was concerned about labour intensive alternative to traditional bridge wall. Programme. The alternative was good for the purposes of saving money. She asked if the wall were properly engineered and sustainable. Could they withstand floods and high traffic volumes? This was important given the projected increase in litigation as a result of the poor conditions of the roads.

The HOD replied that the bridge was designed by engineers. It could take the worst load and the Department was not expecting any litigation from that bridge.

Mr Sogoni (ANC) [Gauteng] said that the Department had underspent during the 2004/05 financial year. They had spent only 75% of their budget in terms of the records from the national Department. They had indicated that they needed R5 billion despite the fact that they were underspending. There was a 17% vacancy rate in the Department. He wondered if the vacant posts did not include key positions in the Department.

The HOD replied that most of the posts were critical. The Department had put a case to Public Service and Administration in terms of salaries paid to engineers and senior management.

The MEC replied that the Department was concerned about the expenditure on infrastructure. The province had committee itself to increasing expenditure on road infrastructure.

The Chairperson said that part of the provinces' responsibilities was to contribute to economic growth and roads were critical in this regard. It had been indicated that the Department's budget had been reduced from R900 million to about R300 million over the years. Roads were needed in the construction of schools and houses. He asked why road construction and maintenance was biggest victim in the context of creating provincial priorities. There was no road upgrading in the province.

The HOD replied that there were two choices to be made. It was a choice between upgrading or rehabilitating the existing infrastructure. Due to budgetary constraints the province could not upgrade roads save to rehabilitate them.

Mr Mchunu noted that agriculture was a dominant economic sector in the province. She asked how the province would get the produce to ports and other provinces if the conditions on the roads were bad.

The HOD replied that most of the farmers were converting from crop farming to game farming due to the state of the roads. The Department was prioritising gravel roads to help those who were still crop farming.

Presentation by Eastern Cape Department of Roads and Transport
The MEC, Mr T Mhlahlo and Mr HOD represented the Department. During the 2005 financial year, the provincial legislature had appropriated an amount of R312 507 000 to the department. The R312 507 000 was revised to R302 586 000 in order to assist in funding a provincial deficit. The actual total expenditure for the financial year amounted to R 289 367 853. The amount that was not spent from the vote was R13 218 147 or 4 % of the Voted funds. The unspent amount of R13 218 147, was before the inclusion of non-voted funds and expenditure of local and foreign aid assistance. The expenditure of R289m reflected a 96 % spending after the final adjustment and write-offs of irrecoverable debts of R2m. The spending, before write-offs, amounted to R286m or 95% of the Voted funds.

The major source of own collected revenue arose from motor vehicle licence fees. The fee was applicable to all annual registrations and renewals of motor vehicle licenses and trailers. While not directly earmarked for road works, the revenue generated from this process provided an important contribution to the provincial fund as own revenue. Ordinary licence number plates were sold by registered private businesses and the department charges royalties at R5.30 per plate. A private company Ltd was appointed by the Department of Transport to collect these royalties on its behalf. Since February 2003 the company stopped collecting the royalties as a result of unsigned agreement. Efforts to collect monies since February 2003 were still being pursued via the signing of a written agreement.

Discussion
Mr Robertson said that there were discrepancies in figures presented by the Department and those in the National Treasury book. For instance, the presentation referred to a total provincial road network of 43 600 kilometres whilst Treasury referred to 48 582 kilometres. He asked the MEC to clarify the discrepancies.

Dr M de Villiers (Superintendent General) replied that the Department had looked at the figures. The Department had not included certain figures.

Mr Z Kolweni (ANC) [North West] said that own revenue collection registered was very low. He asked what was the reason for this.

The Chairperson said that the figures were less than those recorded by the Free State

Mr Mkhaliphi said that the presentation reflected on the work ethics. He asked the presenter to elaborate on this in the context of whether there was value for money from the operations of the Department. The province was the second lowest in license fees for smaller cars. However, there was an observation that there were vehicles registered in Eastern Cape but were not being used in the province. He asked if there was some benefit from registering a car in a province but not use the infrastructure available there. There were many heavy trucks registered in the Eastern Cape but where being used in Mpumalanga and Western Cape.

Dr de Villiers replied that the Department had investigated the issue of the registration of vehicles in the province. The process was still ongoing. With regard to the issue of work ethics, she said that the problem was that the Department of Public Works had a different culture from that of the Department of Transport. The challenge was to have one integrated team. One could say that there was value for money from the operations of the Department.

The Chairperson said that the Western Cape was proposing a fuel levy yet their licensing fees were very high. The Committee would have to consider this issue at some stage. Part of the motivation was that they wanted to maintain roads infrastructure.

Mr Sogoni asked if the province was recording any success in relation to the Arrive Alive Campaign. Roads in the province were not fenced. Cattle and other animals had free access to the roads and this had caused lot of accidents. He asked what informed the budget of the Department. The province was doing well in terms of rehabilitating and upgrading roads but there was no report about new roads being constructed.

The Chairperson said that the only good road in the province was the N6.

The MEC replied that the Arrive Alive campaign had been initiated by the national Department and was initially funded by it. The question of safety was the second threat facing the country should one look at death rate. The numbers of death on the roads were sky rocketing. One of the contributing factors was the quality of public transport. Rural communities were very much ignorant in terms of road safety measures. He agreed that most of the road network in the province was not fenced. Even the national roads constructed by SANRAL were not fenced. The issue was not necessarily the fencing of roads but the education of communities. In some cases the very communities that were to be protected would steal the fence. The province had decided the yellow wire and people were very much afraid of touching it. There was a need to consider talking to talking to Minister of Education with the view that the school syllabus should deal with the question of road safety.

Dr de Villiers replied that the Department had concentrated its funds on maintenance of roads. There was a backlog on maintenance because the Department had focussed on building new roads in the past.

Presentation by Limpopo Department of Transport
The MEC, Mr S Motimele and HOD represented the Department. The MEC said that the Limpopo Province was responsible for the maintenance and construction of approximately of 23 087KM network of roads. The province was also responsible for the maintenance of provincial and local municipality roads which had not yet been proclaimed.


The overall quality of roads in the Province was poor but also differed from district to district. The terrain, type of soil and weather conditions in Vhembe and Bohlabela districts shortened the lifespan of roads in the area and made it expensive to construct and maintain them. The area was mountainous and the raw materials (soil) were to be imported from other districts. The year 2000 floods left lot of pot holes on paved roads, damaged gravel roads and there was a need of a lot of funds put them to their initial state of affair. The extent of the damage was such that some of the areas could not be accessed to date.

Transfers on table 3 are the annual transfers that are made to Road Agency Limpopo for maintenance and construction of roads in the province.

During 2001/02 and 2002/03 there was no increase in the percentage of the departmental maintenance. The province increased the budget on roads maintenance from 37.7% by 11% in total to 48.8% in 2002/03 to 2003/04 financial year. The percentage budget was increased from 48% to 50% from 2003/05 and 2006/07. Further increase of 9.1% during 2006/07 to 2007/08 shows that the province is trying to put its resources to the improvement of roads in the province. This does not necessarily mean that the budget will be able to resolve all the backlog of damage caused by the 2000 floods however it only shows the provincial commitments to address the road condition.

The current average cost of constructing a paved road was R2, 0 million per kilometer and the maintenance cost of a paved road was R0, 5m per kilometer. The cost varied from district to district depending on the availability of raw materials. Labour intensive construction cost R0, 5 million per kilometer. The department would hand over routine road maintenance (surface repairs) to SANRAL with effect from the begging of 2006/07 financial year. The department would make use of EPWP programmes to perform other maintenance work to provide more jobs.

Discussion
The Chairperson said that a member had pleaded with him that the Department should not be asked any questions because both the MEC and the HOD were new to the Department.

Mr Sogoni proposes that the delegate should respond to the questions.

The Chairperson said that the delegation should respond to the best of their ability. They could even furnish written responses to some questions at a later stage.

The HOD said that the roads component of the Department was also knew to the Department.

A member asked how many registered vehicles did the province have. He imagined that the number of vehicles in the province had increased that there would be some improvement on revenue collection. It might be helpful consider having flat rate of fees across the country. This would stop people from registering their vehicles in one province but use them in another. A lot of work had been done in relation to re-paving roads in the province. The problem was the sustainability thereof. The Department would re-gravel a road only for it to be damaged by rains. One was concerned about value for money. He was of the opinion that some other provinces also shared the same problem it might be helpful to have the best practices when it came to re-grovelling roads. The "Gondo Lashu" programme had been helpful when it to came to reducing unemployment in the province. The Roads Agency Limpopo had spent all its money and this was good for the province.

The HOD replied that the Department had realised that there was a problem in relation to gravel roads in the province. Roads were normally washed away after rains. There was a top seal that was being added to ensure that the roads lasted a little bit longer. The Gondo Lashu programme was aimed at those people who had no other form of income. There were 24 Gondo Lashu projects and eight of them had been completed successfully.

With regard to revenue collection, she said that the Department was in the process of devolving the road traffic function to municipalities. Five functions had already been transferred and four more were in the process of being transferred. Municipalities took part of the revenue from the functions transferred to them and that part of revenue was not reflected under the Department's revenue. The Department had also not sent out the notices for the renewal of licenses and there was a marked drop in the number of people renewing their licenses. The Department was negotiating with Treasury with a view of putting a new system in place. The new system would lead to better collection and recovery of arrears.

The Chairperson said that Gondo Lashu was an equivalent the "Vukuzenzele" programme in KwaZulu Natal.

Mr Mkhaliphi said that the presentation had indicated that there had been no increase in the percentage of the departmental maintenance during 2001/02 and 2002/03. The National Treasury had reflected some kind of increase, however marginal. He asked if SANRAL and Roads Agency Limpopo (RAL) one and the same institution.

The HOD replied that the Department had stopped employing officials and was now using the Gondo Lashu programme to maintain the roads. A lot of training was provided before the implementation of the programme. SANRAL was a national Agency and RAL was under the provincial government.

Mr Sogoni said that the capital expenditure was 72% in 2004/05. He asked if there was a strategy to ensure that money allocated would be spent. Limpopo had re-gravelled 135 kilometres of road and routine maintenance was done on 115 kilometres of the road. The figures were the lowest across provinces. He asked what percentage of the Department's budget was allocated to road maintenance.

A member asked which roads would be handed over to SANRAL.

The HOD replied that all national roads in the province would be transferred to SANRAL. There was a problem in terms of land transfer and this was the reason why the process was taking a bit longer.

The MEC said that the quality of roads in the Gondo Lashu programme was a cause for concern. The Department had realised that some of the problems were caused by the kind of materials used in construction of roads. RAL only dealt with provincial roads whereas SANRAL dealt with national roads.

The Chairperson said that provinces had a tendency of owing municipalities for services. The Municipal Finance Management Act encouraged co-operative governance and it was important for provincial and national governments to co-operate. Lack of payment for services had the effect of strangling municipalities. There was a need to look at the issue of registration of cars in the Eastern Cape. There was a huge number of cars registered in the Eastern Cape but revenue collection was very low. One could even ask if those cars existed. There were serious problems across provinces. The number of pensioners was growing in all provinces every year. The question was whether this was correct and whether the available was reliable.

He said that the Eastern Cape had only two weighbridges. Was there a fair distribution of weighbridges? The weighbridges were also not strategically placed. The big trucks normally bypassed the N1. The question was how to ensure that the small roads were further damaged. The problem was that law enforcement was only carried out during the day and horrible things were taking place at night. The big trucks also forced small cars off the roads. There was a need for a proper analysis of what was happening in the provinces in order to be on top of the problems.

Presentation by Free State Department of Local Government and Housing
Mr MJ Mafereka (MEC) and Mr F Ralikontsane (HOD) represented the province. The HOD made the presentation. The MEC said that there were problems in the province. All Ministers of housing that South Africa has had since 1994 had their own housing policies. The policies had been changed but provincial Department never made any amendments to its polices in order to have one standard policy. They were all in force and this had caused problems. Problems had been unsure about which policy and specifications to apply. It was risky to continue with the accreditation of municipalities for housing delivery purposes because municipalities did not have capacity to deliver houses. It had been agreed with the South African Local Government Association (SALGA) that there would three years process of capacitating municipalities before they are accredited.

He said that the Department had launched a project in Xhariep aimed at completing uncompleted houses. The Department was cancelling all long term blocked projects and there might be litigation around them. It was difficult to understand how a contract could remain incomplete for eight years. The Department would only recognise projects from 2003 financial year. There should also be reasons why such projects had not been complete before they would be recognised. The Department was engaged in a process of accrediting contractors. It was important to know if the contractors had the capacity to do quality work.

The HOD said that the Department had been experiencing serious housing delivery challenges resulting in under expenditure of the Housing Fund. The quality of houses in the province was at times also not up to standard due to the lack of technical skills and ineffective project and financial management processes. Lack of bridging finance due to stiff requirements from financial institutions was another problem. There was also monopoly and conniving by manufacturers and material suppliers. For of them did not comply with the South African Bureau of Standards requirements.

A ‘Turn-Around’ strategy had been developed to address the challenges facing housing delivery in the Free State. Only the MEC of Local Government and Housing would allocate subsidies by virtue of powers vested in him. There would be no further allocation of subsidies under the Peoples Housing Process (PHP) until existing irregularities had been rooted out. Law enforcement agencies would be called in to deal with some of the problems. The department would work together with municipalities on deciding which contractors within their areas of jurisdiction should be awarded housing tenders. The department would entertain no further unsolicited proposals.

Contractors would be subjected to the department’s criteria of ranking, probity checks and vetting. An effective contract management system would be put in place and would contain penalty clauses to be strictly enforced. Under-performing contractors would be blacklisted while performing contractors would be allowed to complete housing projects left incomplete by under performing contractors. Unfinished houses stood out like a sore thumb. The Department was finalising the programme intended to complete incomplete houses.

Discussion
The Chairperson asked the Department could indicate how many houses had been completed. He also asked it had information on incomplete houses. It would be useful to have clear number of houses that had been completed, were still under construction and those that only had foundations or walls. It seemed like the Department did not have allocations for human settlement and re-development in 2001/02. On 2002,03 there was R1, 5 million allocated and there was a big jump to R16 million in 2004/05. The amount for 2005/06 was R9 million and this was a drastic reduction. He asked what was the reason for the reduction. He wondered if there had been value for money in the investment for housing delivery since 2001.

The MEC replied said that the completed and incomplete houses differed from those under construction. The Department had a special programme to deal with houses under construction. There were 5000 incomplete houses and the Department was in the process of completing 153 housed in Xhariep. The most affected district was Thabo Mofutsanyana and it would be the last to be attended to.

The HOD replied that the Department would be able to give a break down on how many houses had been completed or were still under construction.

Mr Robertson said that the presentation document indicated no expenditure on maintenance during the period under review. There was a disturbing trend around the country. Some of the houses that had been built so far were beginning to fall down. The provinces were building new houses. The question was how would they fix the houses that were falling apart.

On the issue of houses that were falling down the question raised by the Chairperson on value for money, the HOD replied that the results were mixed. There was a challenge in respect of incomplete houses wherein some of the contractors had gone down. There were also instances where good quality houses had been built. Consumers should also be encouraged to look after their houses. Lack of proper maintenance made it difficult to determine if the houses were falling due to poor workmanship or neglect.

A member said that the Department had a rollover of R490 million. It was projected that the Department would underspend by R100 million. He asked if the Department would put systems in place to ensure that it spent its allocation. How many years would it take to have the right systems in place?

The HOD replied that the rollover had gone down from R136 to R72 million. It was not that there were no systems in place.

Mr Sogoni said that section 33 of the Division of Revenue Act (DORA) provided for the withholding of allocations. He asked there were any discussions between the Department and Treasury about this. The process of accreditation was intended to improve service delivery and it had been stalled in the province. He asked if the were processes to ensure that municipalities would soon be accredited.

The HOD replied that the Department was worried that it might lose part of its allocation due to underspending.

The Chairperson said that it critical that there should be a discussion between Departments of Housing and Roads and Treasury to transfer the R100 million projected underspending to the Department of Roads. The Department would essentially not be losing money. The issue of accreditation was critical. The Committee was reluctant to pass section and Treasury pleaded with the Committee to pass it. People had said that they had capacity and needed the money. It was surprising that they had the money but were now saying that they could not spend due to lack of capacity. The Committee would have to look at the issue of withholding allocation and capacity issues when dealing with the Division of Revenue Bill.

The MEC replied that SALGA and MINMEC had agreed that it was too early to accredit municipalities. There was a pilot projects that had been done in places like Ekurhuleni Metropolitan Municipality. Those projects were in danger because if capacity. There would be a National Housing Indaba on 12 November in Sun City to deal with capacity in municipalities. Municipalities had money but lacked human resource capacity.

The HOD replied that the money was part of a conditional grant. He wondered if it was possible to transfer it to another Department.

Mr Sogoni said that the Department had alluded to the bad quality of the work done by constructors. He wondered if the National House Builders Registration Council (NHBRC) was functional. People going away with murder in some places.

The Chairperson said that the Committee would call the Department of Housing and the NHBRC to come and explain what it was that they were doing. .

The MEC replied that the Department had interacted with the NHBRC. The Department had realised that the Council was letting contractors off the hook. One of their functions was to monitor and they were not doing this. The Department had taken a decision to enter into a Memorandum of Understanding. It was important to know how often the Council would be on the construction site once construction had started. There was a penalty clause that put the blame on the Council and not the contractor should something go wrong on the site. Contractors were registered with the Council and they Council was responsible for monitoring them. The problem was that in the past the Council was not always on site. They would monitor the first foundation and then disappear. They would then come back when the houses were on advanced stages only to tell the contractors that something was wrong and the houses had to be destroyed. One was dealing with small and medium enterprises and the question was where were they going to get the money to destroy and build the houses again. The Department had resolved the issue with the Council but it would be a good idea if they could be invited to appear before the Committee.

Presentation by Western Cape Department of Housing
Mr R Dyantyi (MEC), Ms S Majiet (HOD), Mr Phillip Bredenkamp (Director: Financial Management), Mr R Smith and Mr A Fourie represented the Department. The MEC said that having taken over a going concern he had no excuses for over service delivery. He said that the province had a particular history had deficits in everything that it did. There were challenges in relation to housing backlogs. The Department was optimistic and confident that the challenges were not insurmountable. The challenges were historical and not surprising. The backlog was not surprising because the bulk of people who needed houses were largely the African and coloured communities with Africans forming the largest percentage. There was 300 000 backlogs as a result of number of things. Some of the backlogs could be attributed to policies introduced since 1994. He said that he came from a family of nine people. His mother needed just one subsidy to accommodate all of her children. With the advent of democracy and new opportunities created and new subsidy policies, there was a situation where everybody in the family would seek his or her own subsidy. Instead of the government for providing one subsidy it would have to provide nine. There was a disbundling of families. This was unintended by was still a result of the policies. There had also been a history of underspending over the years.

He said that the Department hoping that it would overcome the backlogs. The Department had a budget of R533 million and would only be able to build 16 000 houses a year. The demand was increasing and it was estimated that 27 000 houses had to be built per year. There would still be problems even if the Department spend the whole of its budget. The leadership had to be creative in order to overcome some of the challenges. There was a need to build partnerships with parastatals, the private sector and beneficiaries. There was a need to unblock some projects and to understand community dynamics. There were also issues of corruption. He said that he had to unblock PHP projects wherein some of people had not received any of their subsidies and yet those subsidies had been used.

The MEC said that the Department was bound to come across challenges in the N2 project. People wanted houses and did not care which sphere of government would provide them. He said that he had once been asked as to when the Department would completely eradicate shacks. One could be populist and say that there would be no shacks in ten years' time. He said that he did not give such an answer because he shared the view that part of going forward included embracing informality. The challenge of housing could not be dealt with by the Department of Housing alone. What was required was a government response. Shacks emerged because people were looking for other opportunities that they could not get where they were staying. The provincial government was committed to make its contribution to housing delivery.

Ms Majiet made the presentation. (See PowerPoint Presentation). The HOD said that the Department had R180m during April and September. 7,008 houses were built and 10,477 sites serviced by end September. Expenditure was in line with projections to the end of the second quarter. It was anticipated that 16,000 houses would be built and 18,000 sites serviced by March 2006. The Department was not anticipating any under expenditure. More than of 200,000 houses had been provided in the Western Cape since 1994. In 2001 there was a shift towards a higher quality product at an increased unit cost. In 1994 the unit cost allowed for in the subsidy was R12, 500. The current unit cost was almost R40, 000. The unit cost has trebled since 1994. Over the same period the Housing grant to the Western Cape had less than doubled, from R283m in 1994 to R456m in 2005/06. It was therefore clear that a lower number of units could be produced currently due to the conditional grant not keeping pace with inflation and the improved specifications required.

She said that the Department had engineers, project managers and inspectors who assessed performance of projects on a monthly basis. 3 project managers had been appointed to boost the capacity of the team of 7 Engineers/Monitors. Cuban professionals were complementing capacity. Project managers and implementing agents had been appointed at municipal level. There had been some delays due to lengthy community consultation processes. There was also lack of capacity especially project management at municipal level. There had been insufficient planning in past and the province was assisting in planning process.

Discussion
The Chairperson said that there was a need for discussion between MECs from different provinces. The government was not winning the war against migration. There were people from the Eastern Cape, for instance, who had houses in their provinces but would come and erect shacks in the Western Cape. They would then claim to qualify for subsidies. He wondered how the provinces were dealing with such issues. Such people would go back to Eastern Cape during the festive seasons and come back with relative or friends who in turn would erect shacks. The Department of Social Development had shown that the number of pensioners in Eastern Cape was growing annually. The MECs would say that people moved to other provinces when they were still young and were repatriated to the province when they were old. The problem was that the numbers of pensioners in Gauteng and Western Cape were not declining. The issue of data was critical. There was a need for inter-Departmental discussions. He asked how far was the Department with the accreditation process and what were the challenges.

The MEC replied that the Department had to do its homework on the issue of migration. Migration was a political challenge that had to be dealt with on political level. One could not simply assume that better service delivery would solve the problem. He agreed with the issues raised by the Chairperson. Many people who were coming to the Western Cape say that they had homes in the Eastern Cape and that they were here to work. They would say that the issue was not about owning a home here. They would prefer renting but the problem was that there was no renting stock. The availability of rental stock could alleviate the pressures. There was a need for inter-provincial co-operation in trying to solve the problems. Migration was linked to the Provincial Equitable Share. In the Western Cape the equity share had decreased despite the increase in the population figures. The province was grappling with the challenges and was looking at how it could be proactive and creative in dealing with the challenges. It was important to deal with the issue of with trade offs. There was no need for competition amongst provinces.

Ms Majiet replied that the Department was working on discussion document to become the basis of dialogue that the province would have with surrounding provinces on the impact of migration. The City was part of the accreditation process. There was a draft national accreditation framework. The province had worked closely with the national Department in the production of the framework and had raised a number of critical issues. The province was aware of the kind of institutional arrangements that it would have to make to support and nurture accreditation process of municipalities. There was a need to investigate the impact of the accreditation process. There was a working group that had been set up between the Department and the City of Cape Town to look at the implementation of elements of the framework. There would be a phased accreditation process. Certain fundamentals had to be in place before a municipality could be accredited. The minimum period for accreditation was two years. There would be levels one, two and three. Level three was full assignment and there was a need to understand what full assignment meant in relation to the role and future of a provincial Department of Housing. There might be a range of unintended consequences of accreditation.

Mr Sogoni said that there was a need of clarity on the trend on housing delivery. There had been a decline since 1994 except in 2002. Could the decline be attributed to lack of capacity? The HOD had alluded to the need to increase the subsidies. He wondered if this turn things around. The situation in places like Gugulethu was not good. He asked if the Department was projecting any underspending.

The MEC replied that there were problems in the provinces. On could see two worlds in the province. One would find traffic lights not working for a week in Gugulethu. However, in Durbanville a faulty traffic light would be attended to ten minutes after it had been reported. The question was why the Batho Pele was not being applied in Gugulethu.

The HOD said that subsidies would solve the problem should the Department get R1 million a year for then next ten years. This was just for the catching up with the backlogs at the current growth rate. It did not take into account the example of the Dyantyi family needing nine houses. It was unlikely that national Treasury would make such resources available given other national priorities that had to be dealt with. Private-public partnerships would be vital in the medium term. It would be incorrect to say that 90% of the problems would be solved through PPPs. One would have to confront the entire construction industry around the profit margins given the property boom that the province had been experiencing. The province was considering some kind of development tax that would say that for every new hotel built, so much contribution should be made towards social housing. On a bad day one might to take refuge in the meaning of progressive realisation of rights. The demand was outstripping the supply.

Mr Smith replied that the Department had approved a lot of projects at the beginning of the year. It was over committed and there was a very little chance of underspending. The N2 project and its impact on spending had not been factored in. there would a need for additional funding for the project. Things had changed from the past two or three years. Municipalities now had housing delivery plans.

She said that the Department was expecting to spend the whole of its allocation. It had signed off a number of projects that were in the pipelines. It was even gearing for over commitments. The Department was fully committed against the budget and it was unlikely that it would underspend

Ms Robinson was encouraged by the enthusiasm displayed by the MEC. She hoped that the situation would change. She wondered why the Department had enlisted the services of Cuban professionals whilst the country had a very unemployment rate. There were many skilled in the provinces who had been saying that it was difficult to get jobs. She wondered if anything was begin done to use the skills that were in existence in the communities. People were finding it difficult to get tenders.

Mr Dyantyi replied that the challenge huge and difficult. He believed that the challenges could be overcome. The main purpose of the arrangement with Cubans was for them to come and share their knowledge, transfer skills and provide mentorship. There were examples of how such people had transferred skills. For instance, there was a Project in Mbekweni involving the youth and the Cubans. The province had a deep commitment to work with people who had helped it before. It would never shy away from deepening its skills even if it meant sending people to Cuba. The arrangement had been useful. He was concerned about unemployment in the country. It was important to ensure that people in our communities were not neglected in the process of bringing in professionals from other countries.

The HOD replied that the Department would have liked to give many bursaries for technicians, engineers and architects. There was not enough engineers and architects in the country. It took five to eight years to produce qualified engineers and architects. In the interim it was crucial to fill the gaps in the best possible ways.

Presentation by Gauteng Department of Housing
Ms N Mokonyane (MEC) and Advocate B Monama represented the Department. The MEC made the presentation. The MEC said that the annual in-migration to Gauteng was estimated to be around 25 500 households. The provincial population growth was estimated at 4.02% per annum and this was nearly twice the national figure. The impact of HIV/AIDS had resulted in an increasing number of child-headed households with no contractual rights. The Department had begun to interrogate the relevance of the waiting list. Following the waiting list meant that the Department would be expected to move from the first person until the last on the list. It meant that the Department would not be able to attend to people based on their needs. It had been agreed that the waiting list would be consolidated at the provincial level and no other sphere of government would wave a waiting list. Some of the people who were on the waiting list had shelter. As a result there was a distortion of the backlog.

The Department was committed to the accreditation of municipalities. The problem was that there was no municipality with a fully-fledged Department of Housing. The Department had started with a pilot in Ekurhuleni to see if municipalities could be reorganised towards housing delivery. Not all municipalities budget for housing.

One of the problems was that in terms SABS anything that was not brick and mortar was not adequate. However, there were houses that our grand fathers had been occupying for some time. There would be a lot of noise should one bring thatched houses on the agenda. Such houses were cheaper and quicker to build.

Discussion
The Chairperson said that SALGA was very militant when the Committee dealt with provisions relating to accreditation of municipalities. The MEC of Free State had indicated that SALGA had said that there was no capacity in municipalities. There was a need to have a workshop to deal with the issue. The DORA already addressed some of the concerns around underspending and allowed for the withholding of allocations.

Mr Sogoni noted that there would be a housing Indaba towards the end of the year. He hoped that the issue of accreditation would be discussed. It might be helpful for the Committee to attend the Indaba. Each province must have a way of assessing emerging contractors.

The MEC replied that would be a workshop to engage municipalities on issues of accreditation. It would be good if the Committee could be invited to the workshop.

Ms Mchunu asked if the Department provided overnight shelters for people like job seekers. Such people would not mind paying some money for accommodation.

Briefing by North West Department of Housing
The Chairperson requested the presenter to be brief and straight to the point in the interest of time. Mr Iqbal Motala (HOD) said that housing expenditure had declined over the years. The average delivery per year was 12 000 completed houses. There were huge backlogs in terms of housing delivery in the province. The Department had an allocation of R468 million and this excluded rollovers. It had spent R256 million as at the end of September. There was a lack of implementation capacity at municipality level. There was also non-compliance with contractual conditions. The Department had deployed Cuban professional to help the districts. There were two pilot projects in terms of Breaking New Ground. Both projects had reached services installation stage and for this reason the Department was convinced that it would reach targets. An audit process was being conduct with the view that the Department could begin to rectify houses built pre and post 1994.

Discussion
Mr Sogoni said that it was pity that the Committee would not be able to justice to presentation due to time constraints. He noted that the Department had set some targets that it wanted to reach. He wondered how it would reach them given that it had under performed in the past.
The MEC of the Free State was frank about local government capacity to build houses. It was clear that the Department had arrangements with municipalities to deliver houses but capacity lacking.

The HOD replied that the Department's targets were not too ambitious. The Department was confident that it would achieve them because some projects were on the construction phase. All projects had services installed. A lot time spent on planning and identification of land and it was expected that delivery would pick up in the next coming months.

The Chairperson said that this was one Department that was in the Intensive Care Unit. The figures for completed houses and houses that were still under construction started well but went down. This trend was replicated in other provinces. He wondered what was the reason for this. He hoped that the Committee had seen how it was to deal with the issue of accreditation and the withholding of allocations.

Ms Mchunu said that it might be helpful to at the clustering of small municipalities with bigger ones.

The meeting was adjourned.


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