Fourth Quarter Conditional Grant Report on Housing: hearings

NCOP Finance

04 May 2006
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Meeting report

FINANCE SELECT COMMITTEE

FINANCE SELECT COMMITTEE
5 May 2006
FOURTH QUARTER CONDITIONAL GRANT REPORT ON HOUSING: HEARINGS


Chairperson: Mr T Ralane (ANC)

Documents handed out:
National Treasury report
North-West Department of Housing report
Limpopo Department of Housing report
Northern Cape Department of Housing report
Western Cape Department of Housing report
KwaZulu-Natal Department of Transport report
KwaZulu-Natal Department: Road Network report
Western Cape Department of Transport and Public Works report
Limpopo Department of Roads and Transport report
Northern Cape Department of Transport, Roads & Public Works report
Gauteng Department of Public Transport, Roads and Works
Eastern Cape Department of Roads and Transport: Part
1, 2 & 3
Free State Department of Public Roads and Transport
Speech by MEC FA Wyngaard: Roads and Transport, Northern Cape
Region/Municipality Activity and Sub activities

SUMMARY
The Treasury said that that the provinces had spent R4.72 billion or 108% of the R4.35 billion adjusted budgets for the roads and transport sector. Building and other fixed structure (B&OFS) averages were at 92.7% of the total adjusted capital budget for the sector. The road infrastructure budgets had increased by an average of 5.7%. It was notable that increases in spending by all the provinces were at a constant rate.

Kwa-Zulu Natal said that the problematic issue here was the lack of access for ordinary citizens to access roads and pedestrian bridges. They were in the process of developing a transport corridor to boost the economy by increasing the construction of roads to link various areas to each other. These activities would also improve the unemployment figures in the province.

The Western Cape said that the province had contextualised their road and infrastructural projects into the Accelerated and Shared Growth Initiative South Africa (ASGISA). Their capacity problems included poor infrastructural capacity in municipalities, backlogs in road maintenance and access to road networks by poorer communities.

The Northern Cape said that the Department had been allocated R338 million with R253 199 million spent on infrastructure. The bulk of the funding was spent on the upgrading and maintenance of roads, with these two activities accounting for 69% of the total expenditure budget. However, the challenge of technical skills had become more critical. To help retain some of the incumbents, the Department had reviewed the salary levels of engineers through a job evaluation process.

Limpopo said that the province road network was approximately 23 087 km long. About 7348 km were paved, which represented 32% of the total road network, while 68% of their roads were gravel. Their grant for infrastructure was R830 737 million they managed to spend the whole amount.

The Eastern Cape said that they had spent their whole conditional grant budget of R675 330 million for the fourth quarter. They had spent R1.3 billion on roads infrastructure which was 49% of their conditional grant allocation. Some of the problems they faced were huge backlogs to convert gravel roads into tarred ones.

Gauteng said that they had received R147 911 million in conditional grants but had only spent R 122 117 million which represented an 83% expenditure. This under-expenditure was caused by the heavy rains that the province experienced in the last quarter of the year that expected their activities. The province had spent 96% of its total capital budget, an under-expenditure of R3 675 million.

The Committee met with the provincial housing departments of North-West, Limpopo, Northern Cape and Western Cape provinces to receive information on conditional grants and other financial transfers. Detail on actual expenditure was relayed relative to budgets. Monitoring capacity of each department was outlined. Constraints and challenges were also explained.

Members asked various questions including on whether a beneficiary list was available, standards of construction, the use of Public Works Inspectors, reasons for underspending, progress in awarding the housing function to municipalities, availability of skilled municipal staff and accreditation of municipalities.

MINUTES
National Treasury Presentation
Mr I Lesang from Intergovernmental Relations said that the provinces had spent R4.72 billion or 108% of the R4.35 billion adjusted budgets for the roads and transport sector. The lowest rates of spending were in the Free State with 77% and the North West with 95.6%. Gauteng and Kwa-Zulu Natal had the highest rates at 185.7% and 106% respectively. The largest adjusted capital budgets were for Limpopo at 111.7% and the Free State at 60.1%. Lowest were for the Western Cape at 0.7% and Gauteng at 4.5%.

Building and other fixed structure (B&OFS) averages were at 92.7% of the total adjusted capital budget for the sector. Highest allocation for B&OFS was in the Free State at 99.2% and the Northern Cape at 99.6%. Limpopo and the North West had the lowest ration at 56.7% and 81% respectively. The provinces overspent their budgets by an average of 7.5% of the total adjusted capital budget for the sector. Gauteng at 172% and Kwa-Zulu Natal at 106% had the highest rate of spending in B&OFS, while Limpopo at 64% and the Free State at 77.3% had the lowest.

The road infrastructure budgets had increased by an average of 5.7%. The highest increases were in the Free State at 16.6% and Limpopo at 19%. However, Gauteng and the Eastern Cape had adjusted their budgets downwards by 2.1% and 1.9% respectively. The provinces had also spent an average of 98.2% of the adjusted roads infrastructure budget. The Western Cape at 111.2% and the Eastern Cape at 100.1% had the highest spending level with Gauteng at 91.3% and 91.4% having the lowest. It was notable that increases in spending by all the provinces were at a constant rate.

Kwa-Zulu Natal Presentation
MEC Cele said that the Department had to work towards a minimum road equity of 42 025 km. The problematic issue here was the lack of access for ordinary citizens to access roads and pedestrian bridges. They were in the process of developing a transport corridor to boost the economy by increasing the construction of roads to link various areas to each other. These activities would also improve the unemployment figures in the province. From the Zibambele Project alone the province had 27 831 permanently employed people. At the end of this year there would be 32 041 and they maintained 14 000 km of road.

Dr K Mbanjwa, the Head of Department, said that their total budget was R1 747 712 with actual expenditure at R1 747 724. This showed 0.001% over-expenditure. A figure of R341 412 was spent on new construction and R614 215 was spent on rehabilitation and upgrading.

Western Cape Presentation
MEC Fransman said that the province had contextualised their road and infrastructural projects into the Accelerated and Shared Growth Initiative South Africa (ASGISA). Their capacity problems included poor infrastructural capacity in municipalities, backlogs in road maintenance and access to road networks by poorer communities. They were able to ensure a high rate of expenditure with added emphasis on monitoring to indicate where the ‘bottle-necks’ were.

The province had received about R88 million as its Provincial Infrastructure Grant (PIG) last year and they were able to spend all of it. One of the key challenges they faced was a shortage in technically skilled staff. To help solve this problem in the long-term, the Department was awarding 120 bursaries to deserving students. This figure would be increased to 250.

Northern Cape Presentation
MEC Wyngaard said that the Department had been allocated R338 million with R253 199 million spent on infrastructure. The bulk of the funding was spent on the upgrading and maintenance of roads, with these two activities accounting for 69% of the total expenditure budget. Of the R253 spent on infrastructure, R113 265 million came as conditional grants with the province expending R139 930 million as part of its equitable share. The 2004/05 financial year saw the lowest expenditure level at 91%. However, through the re-engineering of the Department during the 2005/06 year, a marked improvement of 98% conditional grant spending was registered.

As part of equitable share the province spent R5 million on the maintenance of buildings through the 'painting project' where 1092 jobs were created between October 2005 and February 2006. A further total of 15 million from the equitable share was allocated to the paving of access roads in identified municipalities. A total of 2240 job opportunities were created by this venture. However, the challenge of technical skills had become more critical. To help retain some of the incumbents, the Department had reviewed the salary levels of engineers through a job evaluation process.

In the Department's dealings with sectors within and outside of Government, it insisted on established standards and procedures. It is for this reason that all contracts with external service providers were monitored continuously. The Department had entered into service level agreements with four of the five district municipalities that served as agencies for the Department in the re-gravelling and maintenance of gravel roads in the province. The bulk of the roads in the province were gravel roads that were used primarily for farming and mining. The challenges on these roads remained as daunting as ever.

Limpopo Presentation
MEC Motimele said that the province road network was approximately 23 087 km long. About 7348 km were paved, which represented 32% of the total road network, while 68% of their roads were gravel. Their grant for infrastructure was R830 737 million they managed to spend the whole amount. The Department also spent R1 373 780 to repair flood-damaged roads.

Eastern Cape Presentation
Ms N Bisiwe, the Head of Department, said that they had spent their whole conditional grant budget of R675 330 million for the fourth quarter. They had spent R1.3 billion on roads infrastructure which was 49% of their conditional grant allocation. Some of the problems they faced were huge backlogs to convert gravel roads into tarred ones. The capital expenditure in the Department outweighed the maintenance allocation. As a result, only 35% of the normal maintenance needs were being met. The Department also had to improve their internal technical capacity.

Gauteng Presentation
Mr S Buthelezi the Head of Department, said that they had received R147 911 million in conditional grants but had only spent R 122 117 million which represented an 83% expenditure. This under-expenditure was caused by the heavy rains that the province experienced in the last quarter of the year that expected their activities. This rainfall exceeded the amount normally catered for in project planning. The Department received R339 597 million for infrastructure and had spent R288 841 million which represented an 85% expenditure. The reasons for the under-expenditure were the delays caused by the excessive rainfall and the fact that funds were re-prioritised to start other approved capital projects.

The province had spent 96% of its total capital budget, an under-expenditure of R3 675 million. The reasons for this under-expenditure were that their spending in the Departments of Public Transport, Roads and Works and Social Development was affected by price variances. The under-spending in the Department of Agriculture, Conservation and Environment was due to a capital works project that had to be completed before the maintenance work could be done.

Discussion
Mr E Sogoni (ANC) (Gauteng) asked how Kwa-Zulu Natal was dealing with the issue of high numbers of traffic accidents. The over-expenditure had implications for the rest of their budget and how services were delivered. How were they dealing with this? Who were the bursaries the Western Cape was awarding targeted at?

Dr Mbanjwa replied that the issue of traffic accidents was a matter of enforcement and not about infrastructure. MEC Cele said that the 0.001 over-expenditure was miniscule to the point of irrelevance. MEC Fransman replied that there had been a flight of skills from the province. They had identified that they required high-level skills such as engineering and quantity surveying. These bursaries were targeted at first and second year students from various tertiary institutions.

Mr B Mkhaliphi (ANC) (Mpumalanga) asked the Western Cape how much it cost them per km to tar a road.

MEC Fransman replied that it usually cost between R7 million and R8 million to tar a dual carriage road and between R4 million and R5 million to tar a single lane road.

Mr Z Kolweni (ANC) (North-West) said that even though Limpopo spent a lot of money on repairing roads, the budget for maintenance of the roads was not exhausted. This could indicate that there was a backlog somewhere. What was the real situation?

MEC Motimele replied that the maintenance budget that was under-spent was the one allocated for bush clearing, pothole patching, grass cutting and re-gravelling. However, the budget allocated by the Road Agency Limpopo to construct roads and bridges and to perform rehabilitative maintenance was fully spent.

Afternoon Session
The provincial housing departments of North-West, Limpopo, Northern Cape and Western Cape provided information on allocations and actual expenditure of conditional grants and other financial disbursements. Constraints and challenges in delivery were outlined. Project Management capacity had been enhanced. Skilled staff were needed to promote sustainable development.

Discussion
Mr D Botha (ANC-Limpopo) asked whether a list of beneficiaries was available and whether quality was a priority. He mentioned the common problem of poor finished quality and lack of occupancy. Lack of budget would curtail attempts to address the problems.

Ms Makayane asked whether Public Works inspectors were used by provincial departments to monitor projects. The inferior quality of top structures continued to hinder progress.

Mr M Robertson (ANC-Eastern Cape) noted the extent of substandard and unfinished houses in Limpopo and asked why underspending had occurred. He asked whether the rollover figure for North-West was correct.

Mr B Mkhaliphi (ANC-Mpmumalanga) referred to under-performing municipalities in the Northern Cape and North-West provinces as regards housing delivery. He asked for comment on the plan to award the housing function to Metros given the inadequacies at the local government level.

Mr E Sogoni (ANC-Gauteng) noted that the North-West claimed that municipalities were delivering houses and asked whether this was correct. The capacity of municipalities had to be audited before the housing function was assigned. Provincial government officials should be seconded to municipalities to assist with capacity. He asked how many municipalities had been accredited. Capital expenditure was high but he wondered where the additional funds required would be acquired from.

The Chairperson noted that previous requests to obtain information on levels of accreditation had been unsuccessful. He asked how many municipalities had been accredited. Metros were delivering houses without the establishment of pilot projects. The vacancy rate in the Northern Cape had to be addressed. The underspend in Limpopo should be discussed with the provincial Treasury.

Ms N Mashabane (Limpopo MEC) responded that beneficiary lists were available for scrutiny. Beneficiaries tended to avoid occupancy for various reasons such as poor education levels and migration to other provinces. A Central Registration Office had been established. Poor planning had contributed to high levels of empty houses in the past. The location of housing developments and nature of land used would have to be improved through sound integrated planning. Rural developments were abandoned due to lack of interest by communities. Successful housing projects had to be better communicated to improve current perceptions. Blocked projects were now being addressed and quality was being enhanced. In-house project management capacity was being developed. Funds from one grant would not be transferred to another to assist blocked projects. No municipality was delivering houses for the provincial government at this stage. Housing beneficiaries were listed at municipalities. Housing units would be established in municipalities. Provincial Treasuries should also contribute towards housing delivery in addition to national provisions.

Mr L Rampedi (Limpopo HOD) added that a land availability problem had contributed towards the underspending in housing provision. Municipalities played an important role in creating conditions conducive to housing delivery. Adequate zoning and bulk service provision were important. Various other challenges were outlined such as contractor capacity and poor material. Houses would be built within a specific time period.

The Chairperson asked how electricity and water provision was funded in completed houses

Mr J Van Wyk (NC MEC) replied that a beneficiary list was available. Additional building inspectors could address quality shortfalls. Engineers were urgently needed to improve capacity. Municipalities had been identified and accreditation would be progressively applied. Capacity problems would be determined by means of an audit. Five district municipalities had been identified for accreditation. A four-year time period would be used to reduce the number of blocked projects. Cases were underway to seek conviction for defaulting contractors. Blocked projects were difficult to start and required additional funding. Plans were underway to reduce the vacancy rate.

Mr I Motala (NW-HOD) explained that a list of beneficiaries was available before structures were built. Inspectors within the department checked the quality of structures prior to payment. Public Works did not have the capacity to address the housing shortage. The rollover figure that appeared in the presentation was incorrect and referred to expenditure. A contractual arrangement was set up between the department and municipalities to deliver houses. Municipalities outsourced certain tasks such as construction to private contractors. No municipalities had been accredited at this juncture. Rustenburg had been identified as a pilot project and a business plan was in place. Contractors would be managed from within the department. Block projects had been reduced from 100 to 30. The floor space of houses built had increased to 36 square metres.

The Chairperson declared that the Committee would closely monitor the progress in addressing block projects. The capacity of municipalities would have to be determined before contracts could be awarded.

Ms H Fast (Western Cape-Acting HOD) declared that beneficiary lists were available. The problem around occupation of houses had to be carefully defined to avoid assumptions. The relation of erf number and title deed to the subsidy had been addressed. The location of housing developments in remote areas contributed to lack of occupancy. Inspectors were positioned in the department to maintain quality control. Developments would be conducted in accordance with the provincial spatial development framework that would determine where houses should be built. Housing project applications would be carefully considered. The department budgeted to spend the entire budgeted amount. A human settlement strategy would be coupled with ensuring strong build quality. Blocked projects had been reduced from 18 to 4. Municipalities had to carry out two distinct functions namely to build houses and to maintain existing structures. Sound contractors should be used to ensure quality. Each municipality should have a competent housing manager but necessary skills were difficult to acquire. Rural housing needs required creative solutions. Improved service delivery would have a positive impact on housing delivery.

Mr Rampedi indicated that the total subsidy amount would be restructured to accommodate various priority issues. Bigger top structures could be built if adequate services were in place. Municipalities could contribute to the resource pool to ensure electricity provision to completed structures. Provincial Treasury had made a grant available to provide water.

The Chairperson stated that key sectors should not be compromised by the movement of funds. Conditional grants should be used to ensure proper services. Housing delivery could unlock economic potential and contribute to increased standards of living.

The meeting was adjourned.






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