Third Quarter Conditional Grants Report: Housing and Local Government MEC’s

Meeting report

FINANCE SELECT COMMITTEE
23 January 2005
THIRD QUARTER CONDITIONAL GRANTS REPORT: HOUSING AND LOCAL GOVERNMENT MEC’S

Chairperson: Mr T Ralane (ANC, Free State)

Documents handed out:
Presentation to NCOP by MEC – Limpopo Local Government and Housing (please email [email protected])
Mpumalanga Province – Public Hearings on Grants and Capital Expenditure
Vote Nine: Department of Housing and Local Government, Northern Cape – Presentation to Public Hearings on Conditional Grants
Western Cape Department of Housing and Local Government – Capital Expenditure Outlook for 2005/06

SUMMARY
The Committee heard submissions from the MECs for housing and local government from the provinces of Limpopo, Mpumalanga, Northern Cape and the Western Cape. While a shortage of materials proved a severe constraint to housing provision in Mpumalanga and Limpopo, problems related to all the Provinces present related mostly to departmental capacity and the process of accrediting municipalities in accordance with the Division of Revenue Act. Members were largely impressed by the content of the submissions but cautioned the MECs that interventions to address problems identified would bear close scrutiny in the fourth quarter reviews in May and the first quarter reviews in July.

MINUTES
Submission by the Province of Limpopo
The Local Government and Housing Department of the Province of Limpopo was represented by its MEC, Ms M Mkoana-Mashabane. The Department of Local Government and Housing in Limpopo Province administered four grants: the Integrated Housing and Human Settlement Development Grant (IHAHSD), the Human Settlement Redevelopment Programme (HSRP), the Municipal Support Programme (MSP) and the Municipal Infrastructure Grant (MIG). While the Department managed to spend most of the budget of its other grants, MSP expenditure peaked at 53% of the total allocation for 2004/05, having been as low as 22% in 2002/03. While the Department had 41% left to spend of each of its IHAHSD and MSP allocations, and 74% of its HSRP allocation left for 2005/06, it envisaged 100% spending by March 2006.

Challenges identified by the Department included delays caused by project scope modifications at local government level, provincial clay brick shortages, contractor’s financial incapacity, land surveying delays, contract implementation delays by developers and payment claims fraud. Departmental interventions included the deployment of project managers at 26 municipalities and the amendment of low cost housing specifications to include the use of cement bricks

Submission by the Province of Mpumalanga
The Local Government and Housing Department of the Province of Mpumalanga was represented by its MEC, Mr J Mahlangu, and its Chief Director (CD), Mr B Mojapelo. In terms of its Housing Grant, Mpumalanga Province’s Department of Local Government and Housing spent 66% of its entire allocation as opposed to the envisaged 75%. Of the contracts awarded, 52.3% were cancelled and 42% were granted escalations. Eight inspectors from its technical unit were charged with corruption and were either dismissed, transferred or suspended. Capacity constraints included understaffing to the tune of 68%, 31% and 71% in the housing performance, urban renewal and human settlement and technical services directorates respectively.

Corrective measures instituted by the Department included organisational and baseline allocation reviews, the appointment of external professionals, contracting material suppliers and severing ties with poor performing contractors. Results achieved included the current appointment process of inspectors, granting escalations to unlock slow-moving projects and improved quality control.

Submission by the Province of the Northern Cape
The Housing and Local Government Department of the Province of the Northern Cape was represented by its MEC, Mr J van Wyk, and its Head of Department (HOD), Mr S Thina. Though its month-to-month expenditure levels were erratic, the Provincial Department of Local Government and Housing spent 84% of its total allocation by December 2005.

Challenges included capacity constraints at municipal level, an inadequate operational budget, the vast distances over which projects needed to be monitored and inadequate data line capacity to monitor on-line subsidy administration. Of the 382 housing units currently under construction, 94 resorted under blocked projects

Submission by the Province of the Western Cape
The Local Government and Housing Department of the Provence of the Western Cape was represented by its MEC, Mr R Dyanti, its HOD, Ms S Majiet, and its CD, Mr R Rughubar. The Provincial Department of Housing and Local Government had R532 million available for the 2005/06 financial year. This consisted of R456 million in grants and R76 million in ring-fenced funds for the N2 Gateway project. Excluding the ring-fenced funds, departmental expenditure stood at 78% by the end of 2005. The Department aimed to have
16 000 houses built and 18 000 service sights prepared by the end of the financial year. By 31 December, 60% of the houses were completed and 73% of the service sights were established.

The 2005/06 month-to-month actual expenditure of the Department showed a slow start, and did not only catch up to projections by September, but exceeded them by November. The Department already exceeded its projections by January 31, 2006, and therefore expected some over-expenditure. The improvements resulted because of a variety of interventions at municipal level.

Discussion
Mr E Sogoni (ANC, Gauteng) remarked favourably on the state of capital expenditure in the provinces, not only as it emanated from the presentations of the day, but also from the Treasury’s report. He stated that where over-expenditure was likely, it would have to be justified against the context of the Public Finance Management Act (PFMA) at a meeting for that purpose. Mr Sogoni thanked the MECs for being upfront with regard to the capacity problems they faced, but wanted greater clarity on how the Provinces planned to overcome these obstacles and what role Project Consolidate was playing in doing so. In this regard he made specific mention of the vacancies at Mpumalanga’s Department of Housing and Local Government and gestured that there night be a job creation opportunity in finding a solution to clay brick shortages in Limpopo.

Mr Sogoni further probed the apparent disparity between expenditure figures provided for the Departments present, as opposed to the information provided by their respective Provincial Treasuries. Here Mpumalanga was again mentioned for the large gap between the end of November 2005, by which time the Mpumalanga Treasury measured the Department of Local Government and Housing’s expenditure at 53%, as opposed to the 66% figure for the end of December 2005 provided by the Department. Making mention of the fact that none of the Municipalities in Mpumalanga were accredited, he asked how the Provincial Department ensured that funds were distributed equitably. He also asked whether the Northern Cape foresaw over expenditure by the end of the 2005/06 financial year. Finally, Mr Sogoni sought clarity on how the Western Cape planned to deal with the destroying effects of the perpetual township fires and migration from neighbouring provinces, especially the Eastern Cape.

Ms Robenson (DA, Eastern Cape) encouraged action against defaulters and non-performers as noted from the submissions by the delegations from Limpopo and Mpumalanga. She concurred with Mr Sogoni that there could be economic opportunity in solving supply-side constraints and, in addition, noted unspecified reports of brick shortages and tendering problems surrounding the N2 Gateway project. Denouncing the perpetual reoccurrence of delays, such as the delays in the municipal surveying of land as mentioned by MEC Nkoana-Mashabane (Limpopo), Ms Robenson suggested that greater effort was needed in this regard. Referring MEC Dyanti’s submission, Ms Robenson expressed her concern over the reported exclusivity of the Housing Summit held recently in the Western Cape. She appealed to those assembled that all who has a stake, an interest or ability should be allowed to get involved for the greater good.

Mr T Ralane (ANC, Free State) indicated that attendance at public events such as summits and parliamentary hearings was a difficult matter to address, since regardless of the intentions of the organisers, the onus was on the stakeholders to attend. He stated that those who did not attend such events could not complain over the reported exclusivity of such events. He dismissed an attempt by Ms Robenson to respond.

Noting Mpumamlanga’s submission, Mr Ralane expressed his concern over the accreditation of Municipalities in accordance with the Division of Revenue Act (DoRA), and asked how far the respective Provinces were and what they were doing in this regard. He indicated that the Provinces should be prepared to provide much greater detail on this matter, come the hearings on the fourth quarter conditional grants report by the National Treasury.

Mr B Mkhaliphi (ANC, Mpumalanga) asked after the apparently low expenditure levels by the Limpopo Department of Local Government and Housing of all for of its four grants in general and the IHAHSD in particular. He also made specific mention of the underspending of the MSP grant against the repeated mention of Municipal capacity problems. Referring to the vacancies in Mpumalanga, Mr Mkhaliphi asked how many of them were unfunded. Referring to the submission by the Western Cape, Mr Mkhaliphi wished to know how many of the beneficiaries of completed housing units were receiving the benefits of those completed units.

MEC J Mahlangu (Mpumalanga) stated that he had no other figures available except those from his Department, but that he knew that spending went up during December 2005. He indicated that his Department had to rid itself of twenty five staff members in total who implicated themselves in corruption. Filling these positions were not that easy and external contractors and municipalities were now also relied upon to do certain of the inspections. Charges were also laid against contractors suspected of fraud. Admittedly, spending could have been at a more advanced level, had it not been for these interruptions. All the vacancies indicated in his Department’s submission were part of the staff establishment, but not all were funded. The Department has been requesting a review of its baseline allocation from the Mpumalanga Treasury, so that its capacity could be brought in line with the task it needed to perform.

Material shortages because of increased demand were a real problem. Bricks ordered could now take as long as eight weeks to deliver. Job creation initiatives in brick manufacturing were often militated against by the inconsistent standard of the products from such projects. Moves were afoot to improve monitoring in this regard. Shortages do affect price increases as well, as illustrated by the recent seven percent rise in cement prices. Persistent rains also affected delivery and spending as no building could happen when it rained.

Legal constraints hampered the accreditation of municipalities, since the delivery of housing was a national and a provincial competence. Pilot projects were currently being conducted in three municipalities in the country to test the viability of amending the Municipal Finance Management Act (MFMA) so that municipalities could share in the responsibility for the provision of housing.

MEC M Mkoana-Mashabane (Limpopo) stated that given the direction of the discussion, it was fortunate that MECs of Housing were also responsible for Local Government. Since there was no way in which housing provision could be successfully done without the assistance of municipalities, the Province of Limpopo engaged all 26 of its local municipalities on the basic stages of accreditation. Firstly, this involved identifying indigent sections of municipal populations who qualified to get housing subsidies. Then, development sights had to be identified. The idea was to involve ward councillors to ensure process integrity.

Mr Ralane asked how long it would take for the accreditation process to be complete.

MEC Mkoana-Mashabane stated that time frames were not prioritised.

Mr Sogoni and Mr Ralane emphasised that the South African Local Government Association (SALGA) would be engaged on the topic later in the year and the MECs should bear that in mind. The issue was that SALGA wanted a greater role for municipalities in the provision of housing, yet many of the local governments had no capacity to deal with such a competency.

MEC Mkoana-Mashabane stated that her Department did request SALGA to do a review of the issue to ensure that steps were in place to ensure the competence of local governments in this regard. In the mean time the Limpopo Department of Local Government and Housing would only engage municipalities on the basic stages of accreditation as explained. Even so, there were still problems. Contractors are, for instance, often delayed in starting their work after they were awarded their contracts because of councillors’ bickering over the identification of development sights. In the future, the emphasis would be on ensuring the necessary levels of preparedness to ensure a smooth process.

The MEC recognised the opportunity for poverty alleviation initiatives, but also emphasised the need for changing the perceptions of beneficiaries in overcoming the stumbling block of the current material shortages. This was so as beneficiaries perceived cement bricks as inferior to clay bricks and those beneficiaries resident in mountainous regions often insisted on having their new homes built high up, regardless of the extra cost it entailed.

The idea was to work towards Limpopo being a shack-free Province by 2014. This would be done by establishing 33 000 service sights per annum, and where there were still shacks, to ensure that they were on these established service sights. Following the example of Gauteng, these shacks would then be bar-coded to ensure that when houses were eventually erected on these sights, that there would be no "backyard stayers".

Two pilot mining housing partnership projects were also being conducted in Limpopo. As a result of an agreement between the National Union of Mineworkers, miners were paid a living out allowance in stead of being accommodated in the traditional hostel-style accommodation. A trend then emerged where mineworkers would erect shacks and thus pocket the allowance, rather than using it to secure formal accommodation. Since then, the Provincial Government and the Mining houses agreed rather to apply the state subsidies and the funds used for the living out allowance to erect formal housing for miners that were even bigger than standard RDP-type housing units. Municipalities would also be encouraged to bring by-laws into effect that would outlaw the indiscriminate erection of shack dwellings.

Mr Ralane emphasised the importance of consultation in delivering services and infrastructure that were relevant to the needs and wants of the people for whom it was intended.

MEC Van Wyk (Northern Cape) stated that besides their initial allocation, and an additional R20 million provided by the Northern Cape Treasury to unblock blocked projects, the Northern Cape Department of Local Government and Housing did not foresee any over expenditure. MEC van Wyk concurred with MEC Mkoana-Mashabane on the phasing in of municipal accreditation. Currently, the Sol Plaatjie Municipality (Kimberley) constituted the pilot for full accreditation in the Northern Cape. There the Municipality already played a very important role in the administration of the housing provision projects within its borders. The development of training manuals for targeted municipalities was yet another step in the direction of accreditation. As a result of the great distances over which housing provision projects needed to be monitored, the issue of accreditation was very important in the Northern Cape. All vacancies in the Northern Cape were funded and would be filled in due course.

MEC Dyanti (Western Cape) stated that the scarcity of bricks was not an issue in relation to the N2 Gateway project. In relation to the housing summit, MEC Dyanti pointed out that there was a comprehensive pre-summit process that catered separately for labour, the academia, financial institutions, civil society and local government. He expressed his interest in the identity of the sources of the rumours that lead to both these questions. Capacity within the Western Cape Department of Housing and Local Government was addressed on an ongoing basis, ensuring not only that structure was continuously aligned with function and that the necessary skills and numbers were there, but also to ensure the correct work ethic and productivity. MEC Dyanti committed his Department to ensure that its figures were reconciled with that of the Western Cape Treasury.

The Western Cape attracted many migrants from the Northern and Eastern Cape Provinces. This and the issue of urbanisation — which was exacerbated by farm evictions as a result of a pressurised agricultural sector — added to the housing problem. Informal housing was also not always erected with due regard to safety concerns. In those areas where disaster has struck, the opportunity was there to ensure that informal housing could be re-erected as directed by the authorities. The Western Cape did apply to National Government for the Emergency Housing Programme to deal with these problems. The challenges were immense, though, as communities of thousands of people would have to be relocated through a process that was not open to abuse.

The meeting was adjourned.