Housing Budget: Briefing by Director General

Meeting report

PUBLIC SERVICE SELECT COMMITTEE
23 May 2001
HOUSING PROGRAMMES 2001/2: BRIEFING BY DIRECTOR GENERAL OF HOUSING

Chairperson: Ms PCP Majodina (ANC)

Documents handed out:
Information on the 2001/2002 Budget

SUMMARY
The Director General, Ms Nxumalo, informed the Committee that the Department has made slight changes to the low cost housing scheme. Further, capacity building within the Department has been strengthened allowing for increased housing delivery. She noted that a number of projects have been abandoned whilst appropriate strategies for housing delivery in rural communities have been adopted.

MINUTES
The Chair informed the Committee that the Minister was supposed to have attended the meeting to equip them for the House debate on the 31 May but unfortunately could not make it. The meeting with the Minister has been postponed indefinitely.

The Chair welcomed PMG and thanked them for the quality of their minutes. She added that a member of the Committee, Chief Mokoena, had recently made a motion in the House and had stated that the quality of PMG minutes were excellent "even if a person did not attend the meeting," he told her, "he could follow the minutes as if he were there."

Presentation
Ms Nxumalo (Director General Department of Housing) introduced officials from the Department namely Ms Madida (Deputy Director General for Strategic Support), Mr Dlabantu (Chief Director Financial Services), and Mr M Singh (Director Financial Administration).

Ms Nxumalo explained that the Department has made minor changes to the Housing Development Programme. She stressed that the National Policy Framework and Strategy stipulated key objectives which the Department aimed to fulfill within the Housing programme. Several changes have occurred since the adoption of the White Paper in 1994.

Ms Nxumalo said that the Department has participated extensively in international housing related forums and particularly in the United Nations Habitat. The Department has also established capacity building programmes intended to intervene and enhance the ability to deliver houses and monitor the housing sector performance - mainly the construction industry and the financial sector.

The Department provides information on housing to the public and other stakeholders and manages funds for the National Development Programme. The Housing Development Programmes are realised through the following programmes: administration, policy planning, programme management, housing performance, communication and the South African Housing Development Fund.

The Director General affirmed that since 1994 the Department has delivered 1.129 million houses providing accommodation for more than 5 million people. Further the Department has managed to eliminate capacity development problems and have adopted an approach which recognises constraints and is focusing its efforts on quality rather than quantity. Ms Nxumalo contended that the Rental Housing Act of 1999 and the establishment of the Social Housing Foundation, which manages institutions dealing with rental stock, illustrates this point.

The Department has developed the Human Settlement Re-development Programme, which replaces the Special Integrated Presidential Projects as a strategic intervention in urban renewal. A multi-year plan has been established to facilitate better planning in the housing environment by all spheres of governments. The result is a buDirector-Generalet process reflecting current needs and backlogs. Ms Nxumalo said that these multi-year plans would be finalised shortly and consolidated into a single national multi-year plan.

A national prioritization programme has been engineered which identifies a number of national priorities. This guides the allocation of buDirector-Generalet to provinces. Priority areas that have been identified include the integrated land development programme, people’s housing process, rural housing, rental housing, informal settlement upgrading, the promotion of marginalised women in the construction industry and credit-linked subsidies.

She informed the Committee that the Grootboom case has been exempted from certain procedures as ruled by the Constitutional Court to assist those in crisis situations. 0,5 – 0,7% of the Housing buDirector-Generalet has been allocated for utilising a contingency fund in emergency situations.

The Department has introduced a new programme called Programme Management to cover the housing subsidy scheme, special projects and capacity building. Over the last 7 years, she added, the housing buDirector-Generalet on average has been 80.3% of funds transferred to provinces for subsidy.

She said the Housing Fund would continue to be the major delivery instrument for the Department. The Housing Fund has witnessed a slight increase from R49.0 million in 2001/02 to R120.0 million in 2002/03 and finally R157.9 million in 2003/04.

Programme 1
Programme 1 concerns management responsibilities of the Department. This includes the Minister’s policy formulation role and overall control in terms of s 1(a) of the Public Finance Management Act. It also covers the responsibilities of the DIRECTOR-GENERAL and the management team responsible for setting policy in the Department.

The PMFA has placed greater emphasis on the financial management of government to create improved financial reporting and monitoring. This has particular impact upon the SA Housing Fund. She added that housing institutions have improved reporting mechanisms on monies allocated to them.

Transformation remains a key objective for the Department. Service delivery, employment equity, affirmative action, representivity, institutional building, and the implementation of the HIV/AIDS policy are areas identified by the transformation strategy.
Ms Nxumalo informed the Committee that the Department’s total expenditure for 2000/01 in the Table entitled Estimate of Expenditure per Programme for Comparative Purposes: 2000/01 vs 2001/02 was R3,4 million. Further, the financial year 2001/02 has been allocated R3,7 million or an increase of 8.1%.

Programme 2
Ms Nxumalo said policy planning comprises the National Housing Policy and Strategy, Housing Framework Legislation and Human Settlement Policy and Integration.

The policy developments that have taken place since 1994 are as follows:
The Housing Act of 1997;
the Housing Consumers Protection Measures Act of 1998;
the Rental Housing Act of 1999;
the Rental Housing Regulations approved 31 October 2000 and
the Home Loan and Mortgage Disclosure Act of 2000.
She added that the national capacity-building programme, the winding down of the SA Housing Trust, the Housing Amendment Bill of 2000 currently with the NCOP and the Inter-Departmental Task Team on Environmental Efficient Housing have also been significant policy developments.

The Department participated in the UN General Assembly Special Service (UNGASS) on the implementation of the Habitat Agenda. The Department also participated in the African Solution Conference, hosted jointly by the Department of Housing and the Department of Environmental Affairs and Tourism in March 2000 and the World Conference on Urban Future in Berlin in July 2000.

The Housing Department has contributed to the Emerging Contractor Development Programme which is managed by the Department of Public Works, the Integrated Sustainable Rural Development Strategy coordinated by the President’s Office, and has also made policy inputs to the Social and Economic Ministerial Clusters. She said buDirector-Generalet changes in this programme reflect an increase of 51%.

Programme 3
Ms Nxumalo said Programme Management comprises the housing subsidy scheme, special investigative unit, capacity building, special programmes support, and the phasing out of subsidy programmes. Ms Nxumalo said the buDirector-Generalet allocation for 2000/01 is R152 million and that next financial year (2001/02) this amount would increase by 36% to R207 million.

Programme 4
The Director General informed the Committee that the housing performance programme comprises implementation monitoring, information management (smart cards), Office of Disclosure (she hoped the Community Re-investment Bill will go through this system), secretariat support, and contributions. There has been a 10% decline in this programmes buDirector-Generalet from R195 million in 2000/01 to R177 million in 2001/02.

Programme 5
The communication programme comprises housing communication, public relations, provincial, media and local liaison, and communication production. The buDirector-Generalet expenditure for 2000/01 was R9 million and for 2001/02 has increased by 7% to R16 million.

Programme 6
This programme covers the Housing Development Fund and comprises addition to the capital of the SA Housing Fund, and interest and redemption of private loans. In the 2000/01 financial year the buDirector-Generalet expenditure was R3 billion and in 2001/02 has increased by 8% to R3.2 billion.

Deviations in Programmes

Programme 1
In this programme there has been a decrease of expenditure by 43% due to restructuring and relocation of personnel. She said the Department was completing the financial statements of the Department dating back to 1994 for SCOPA.

Programme 2
The expenditure under this programme increased by 51% due to the drafting of the legislation but the Department has continued to cut down on the use of consultancy.

Programme 3
The most affected expenditure in this programme was the transfer of payment increasing by 25% from R146 million in 2000/01 to R197 million in 2001/02. Declines were experienced in inventories, the Doomkop resettlement community and the winding down of the subsidy programme.

Programme 4
The Director-General said the transfer of payments decreased by 25%, and the winding down of the SA Housing Trust by 53%.

Programme 5
The communication programme was affected most significantly by computer upgrades.

Programme 6
The DIRECTOR-GENERAL showed the Committee how the SA Housing Fund was distributed to provinces including the Human settlement Grant.

Discussion
The Chair asked for Ms Nxumalo to explain the meaning of the upgrading of informal settlements, people’s housing process, rural housing, and contingency fund.

The Director General responded that housing delivery has not had the expected impact because of the continued growth of shack numbers. Consequently a decision was taken to implement the new housing building programme parallel to the upgrading programme. Ms Nxumalo added that the successof the exercise depended upon the realisation that shacks are built in swampy areas where housing delivery is not possible. To eliminate these areas would require relocating people to new houses.

The challenge, continued Ms Nxumalo, lay in the fact that shack dwellers either rent out their shacks or allow relatives to live in it when they leave and hence the lifespan of the shack continues. She said that from a moral perspective and for other reasons it is difficult to demolish these shacks.

Ms Nxumalo contended that the best solution is to encourage local government to upgrade areas that are upgradeable and to provide services. This is termed the upgrading of informal settlements.

The people’s housing process entails people building or improving their houses via subsidies. She conceded that this process was slow and said that the Department would like to encourage people to build houses and not to sell them once built.

The Director General said that rural housing also presented difficulties since the rural housing subsidy is given to people who have formal land right on traditional land without title deeds. A further difficulty is that water and sanitation in rural areas is a greater priority than housing.
In addition, the Department has learnt that people need short term improvements to their houses in addition to needing new houses in the long term. The Department is reinforcing rural mud houses with both cement and sand and to dig deeper foundations.

Ms Nxumalo explained that people in rural areas have not responded positively to township-like structures because they want more land for livestock and crops. She said that the Department is considering these issues within its planning and is trying to find solutions that are appropriate to rural conditions.

The Director-General said the contingency fund has been reinforced and the provinces have been received their allocation. She stressed that the Provinces must use the funds allocated to them and added that although the Department had motivated for that the funds be allocated at the National level, the Treasury had not supported this motion. She added that the money is used for disasters such as Grootboom, floods, fires, and tornadoes – in essence for crises.

Ms J Kgoadi (ANC) asked about the relationship between the Department of Local Government and the Department of Housing. Further she asked why the SA Housing Trust had been phased out and what role smart cards had in housing.

Ms Nxumalo replied that the Department has implemented a number of joint programmes – specifically the SIMI Programme that used to be called Bulk and Collector Infrastructure Grant (BCIG). The SIMI Programme is administered by the Department of Housing whilst implementation is the responsibility of the Department of Local Government. Since the SIMI programme consists of housing funds, the Department has secured an agreement with the Department of Local Government that housing will be a priority for all SIMI Funds.

Ms Nxumalo explained that the Department interacts with Local Government in respects of the Urban Renewal Programme. This programme is being implemented in Alexander, KwaMashu and Mdantsane through the Integrated Development Programme (IDP) and the Local Development Objectives (LDO).

Ms Nxumalo said the SA Housing Fund is allocated to provinces for local government use. Local governments in the Eastern Cape implement approximately 70% of the housing projects. She said their assessment is that on average local governments deliver about 60% of housing projects in the country and that this was the trend the Department would be following.

Ms Nxumalo continued by saying that the phasing out of the SA Trust was because its liabilities were outweighing its assets and that the government was likely to pay more money in the future if it had not closed it down. She said projections were done to evaluate whether it was a viable project and the results indicated that it should be closed down. The Department made this recommendation to Cabinet and Cabinet had decided to close it down.

Ms Nxumalo informed the Committee that the Trust had three elements – the SA Trust Holding Company, New Way Development and Khayelethu Home Loans. All three elements have been disposed of and according to the Director General this was the biggest empowerment initiative ever undertaken by the Department. Black Economic Empowerment companies bought each of these initiatives and she added, each company is doing well.

The Director General said that the Department was aiming for the utilisation of smart cards as soon as possible. A smart cards would store a persons personal information such as pension numbers, housing subsidy, criminal records and identity number amongst other things. She explained that currently the Department has its own database where checks are made to see whether a person has received any subsidy before being given one. However, she added that there were loopholes in this system.
Ms ND Ntwanambi asked whether it was possible to reverse a portion of the subsidy money from services to housing construction to avoid building small houses dubbed ‘o vez’inyawo’.

The Director General responded that the Department recognises the problems of subsidies especially in their allocation to top structures and services. In 1999 minimum norms and standards were introduced and resulted in changes stipulating that services could utilise R7 500 only and the balance of R8 500 had to be used for top structures. She said that if Metropolitan Councils wanted to provide higher standards they were free to use additional funds from their own resources.

The Director General said that minimum norms and standards for housing had improved the quality of housing delivery. After 1999 houses of 12 square metres would be pulled down and reconstructed. She remarked that the Department hoped never to see ‘o vez’inyawo’ again.

Ms B Thompson (ANC) inquired as to the size of land given to people through subsidies.

The Director General said the concept of a subsidy scheme is provide a start to people. The Department defines 30 square metres as a reasonable size of land to be given but in provinces such as the Northern Province and Free State the allocated size is usually about 40 square metres.

The meeting was adjourned.