Housing Provincial Conditional Grants & CapEx: 2nd Quarter 2006/07 spending
NCOP Finance
24 November 2006
Meeting Summary
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Meeting report
FINANCE
SELECT COMMITTEE
24 November 2006
PROVINCIAL BUDGET: PROVINCIAL HOUSING DEPARTMENT BRIEFINGS
Chairperson: Mr T S Ralane
(Free State, ANC)
Documents handed out:
Northern Cape
Department of Housing and Local Government
Western Cape: Housing
Delivery Status
KwaZulu-Natal Department of Housing: Part1 & Part2
Eastern Cape Housing Delivery: Part1, Part2 & Part3
Limpopo
Province: Public hearing on Housing Conditional Grant 2006/2007
Free State
Department of Local Government and Housing
Gauteng
Department of Housing
SUMMARY
The Provincial Housing departments from seven provinces (excluding North
West and Mpumalanga) briefed the Committee on their
performance from April to September, in particular focusing upon delivery
against the budget. All provinces reported underspending,
particularly on the conditional grants. All cited lack of capacity, both
internal and at municipalities, as a problem, but said that they had plans in
place to address it. The committee was concerned by the projections of under
expenditure by a number of provinces that were likely to occur towards the end
of the financial year. They expressed particular concern about the situation in
Free State, Eastern Cape and Mpumalanga. Concerns
were expressed that municipalities were delivering houses whilst they were not
accredited, on the slow process of municipal accreditation, on the shortage of
building materials, the PHP processes and what steps had been taken to ensure
that there would be spending. The Committee asked what steps had been taken to
protect beneficiaries when contractors had been fired, and what steps were put
in place on procurement rosters. The Provinces were asked if some of the
funding should not rather be transferred to other provinces if it could not be
spent. .
MINUTES
Department of Local Government and
Housing Northern Cape Briefing
Mr F Jacobus van Wyk, MEC
Housing, Northern Cape and Ms Renita Soodeyal, Executive Manager Housing, Northern Cape
Department of Local Government and Housing stated that the budget allocation
for 2006/7 was R104.7 million. 40% of this had been spent by September 2006,
although the spending for the quarter had exceeded the budget for the quarter,
as there had been a sharp rise in actual expenditure in the last two months. Thubelisha Homes were expediting the implementation of
projects, projects were being monitored and vacancies were being filled.
Challenges included the fact that the operational budget in proportion to the
Conditional Grant was limited, so that the few officials were over stretched.
There was lack of capacity of Municipalities to deliver and a lack of skilled
professional and technical staff in the Province. Some cross border projects
with North West may not be completed. Additional funding had been sought,
housing units were being established in municipalities and three project
managers and five works inspectors had been appointed on a contract basis. Ms Soodeyal summarised the houses
and services completed in the second quarter and said that monthly reports were
now being called for from Municipalities in order to get the next tranche of payments.
Discussion
Mr E Sogoni (Gauteng, ANC) remarked that the biggest problem was that
the provinces themselves did not have capacity but they were devolving
functions to municipalities who also did not have capacity, thereby making the
situation worse. His main worry was which department held the responsibility.
The Chairperson agreed with Mr Sogoni
on the issue of accreditation. He concluded that by not accrediting
municipalities properly provinces were leading them to failure.
Mr Sogoni added that all
municipalities should be asked how they were delivering houses without being
accredited.
The MEC for Local Government, Northern Cape replied that indeed municipalities
were used as developers even though there were not accredited. The
municipalities were involved in the building of houses and they did this by
contracting local companies to build the houses. The Northern Cape was hoping
to strengthen their own departmental capacity to accredit the municipalities.
Mr B Mkaliphi (Mpumlanga, ANC) wondered if municipalities were permitted
to undertake housing before accreditation.
Mr Sogoni remarked that he
was worried about the fact that the Northern Cape had pledged to raise their
expenditure from their current 40% by the end of the financial year. He said
that similar promises had been made before by other provinces and often it was
found that there were no beneficiaries.
Mr B Mkaliphi (Mpumalanga, ANC) requested the Committee to look into the
issue of cross boundary municipalities raised by the Northern Cape.
The chairperson asked the Northern Cape how they were going to deal with the
possible under expenditure they had predicted.
Mr O Dikgetsi, MEC,
Northern Cape replied that the predicted under expenditure was carried from the
first quarter, where the Province had only spent about 14%, and said he had
enumerated why this had happened during the first quarter hearings. They were
confident that expenditure was going to increase, and he indicated that already
they had moved from 14% to 44%. Moreover their expenditure track record had
been good over the past few years, with the exception of 2002.
The Chairperson asked the provinces the number of municipalities they had
accredited so far and at what stage they were in the accreditation.
Mr Digketsi replied that
Northern Cape had identified five district municipalities and all of them had
relative capacity. For example Kimberley already had housing units that only
needed strengthening and there was also a housing support centre that was
involved in capturing data. He added that the biggest problem was 62 blocked
projects but the Department had already taken action against five contractors
who had contributed to the creation of the block.
The Chairperson asked that the list of municipalities that were developers be
forwarded to the Committee as it was interested in finding out the difficulties
faced.
Department of Local Government and
Housing Western Cape briefing
Mr Andreas Fourie,
Director: Professional and Project Management services, Western Cape Department
of Local Government and Housing reported that the challenges to funding
included a backlog of about 300 000 units, whereas only about 15 000 units
could be built on the annual grant of R598 million. The Province was trying to
accelerate delivery in the hope that more funding would be allocated. There
needed to be a survey of the Provincial Housing Plan (PHP). Expenditure was
projected to rise. In 2005/6 the Province had spent 96% of its budget
allocation, and between April and September 2006 had achieved 60% spending.
Statistics were tabled for the various municipalities and a comparison done
between districts. It was projected that the full amount would be spent by
December. The target was to build 16 000 houses and service 18 000 sites in
2006/7. Western Cape was the top performer of all the provinces.
Discussion
Mr Mkaliphi asked whether the national pilot
project was ready to serve the nation, especially after most monies from the
provinces was re-routed into the national pilot.
The Chairperson asked Western Cape whether they have considered withdrawing
money from underperforming municipalities and allocating it to municipalities
that have the capacity to spend.
In view of the shortage of time the questions did not appear to have been
answered.
Department of Local Government and
Housing KwaZulu- Natal Briefing
Mr Mike Mabuyakhulu, MEC Housing, Local
Government and Traditional Affairs, KwaZulu-Natal,
and Mr W Evans, Chief Financial Officer (CFO), Department of Local Government
and Housing KwaZulu-Natal, briefed the Committee on
the vision and mission of the Department, reporting that key focus areas were
restructuring of the Department, eradicating slums, strengthening governance
and service delivery, ensuing job creation, accelerating delivery and
completing all blocked projects by 2007. Expenditure for the first and second
quarters had fallen below budget, as a result of delays in drafting of
municipal housing plans and the late start of the consumer education programme.
There had also been delays in project management, and the Department had
approved a plan to address the under expenditure trends. Property management
was now being handled internally. A tripartite agreement had been introduced
between the Department, the local municipalities and the contractors. The
Department wanted to ensure quality spending, and also to ensure that fiscal
dumping did not continue. The conditional grant expenditure was set out.
Challenges included delays in getting expenditure claims from developers,
internal capacity constraints, which had been addressed through fast tracking
appointment of project monitors, who would start in December. Not all municipal
integrated development plans (IDPs) included Housing
Sector Plans. There was lack of dedicated housing capacity. The Department had
intervened and developed a demand database as well. Monthly reports were now
received from developers. The Department would enter contracts for each housing
development, setting out timeframes and expectations.
Discussion
The Chairperson asked the provinces on the number of municipalities
they had accredited so far and at what stage they were in the accreditation.
Mr Mabuyakhulu replied that on the issue of
accreditation KwaZulu Natal firstly looked closely at
the constitution that placed the responsibility for housing in national and
provincial hands. However in the delivery of houses municipalities were
involved and he argued that the relationship with the municipalities was vital.
He further said that the Department had identified 51 municipalities, and
stringently assessed their capacity, bearing in mind that there were three
levels of accreditation. They had realised that housing was not being
prioritised. The Department then made a decision to assist the municipalities
to perform basic services. To ensure that the IDP created alignment on the
issue of housing, the Department helped set up housing sector plans and would
assist in building some capacity. Pursuant to this the Department had a
partnership with the Flemish government, where 25 identified municipalities
were being assisted with the basics before being accredited. He announced that
one would be accredited with level one status.
He added that the issue of unoccupied houses came about because there had been
a concentration on quantity, hence in their report the
needs of housing were being taken into account to avoid houses without
occupiers, susceptible to vandalism. The question of beneficiaries came early
as opposed to their previous policy.
Mr Sogoni complained that the presentation was hard
to comprehend.
Mr Mabuyakhulu apologised, stating that the
presentations would be made more user-friendly in future.
Mr Mabuyakhulu added that the Department had a
tripartite relationship with the municipalities so that they were able to have
greater participation, especially if they wanted to dismiss a contractor who
did not deliver. No Department should not be hampered by the fact that the
contractor had entered a relationship only with the municipality, which in the
past tended to be in favour of the contactor.
Department of Local Government and
Housing Eastern Cape Briefing
Mr Sindisile Maclean,
Head of Department (HOD), and Mr Ngwadi Mzamo, General Manager,
Eastern Cape Department of Local Government and Housing, informed the
committee that there was a projection of an under expenditure of about R103
million.
The Chairperson at this point asked the presenters not to continue with their
report as it was clear that the Department was in trouble. He was also
sceptical of their projected expenditure of 86% by the end of the final year
because their expenditure had only reached 21.5% in the first six months. He
further said that he was worried about the fact that some provinces were
performing well whilst others were underperforming.
Discussion
The Chairperson informed the Eastern Cape that it had to convince the committee
why its money should not be re-allocated to other provinces who were
performing. He remarked that maybe the large amount was stifling them and they
might be able to work efficiently with a lower figure that was more manageable.
Mr Mzamo replied that, without attempting to justify
the possible under expenditure, the Eastern Cape was determined to spend the
allocation. He told the Committee that the Department was assisting the
municipalities by taking over their projects and implementing them, and it was
now involved with established contractors so that they would respond to the
challenge of speed. Although in the past three years the spending patterns were
low in the early part of the year, the Department had nonetheless mostly
managed to spend their allocation, and was determined to do so this year.
The Chairperson asked the number of municipalities accredited so far.
Mr Mzamo replied that there were two municipalities
in the province at level one, being Nelson Mandela Bay and Buffalo City
Municipality. Both had housing units though Buffalo City indicated that it was
still working on capacity.
Limpopo Department of Local Government and Housing
Briefing
Mr Rampedi, Head of Department (HOD), Limpopo Department of Local Government and Housing,
informed the committee that he would compare the current expenditure with the
previous year’s expenditure. He tabled graphs showing the total spent on
infrastructure housing, the housing grant and project management, indicating
that expenditure was in line with initial projections, and was more or less on
track for each month. He tabled statistics relating to houses completed,
training projects, a public private partnership with Angloplat,
and partnerships with suppliers and municipalities. 36 project managers were to
be deployed to municipalities. Payment of contractors was taking place in short
times, which assisted the emerging contractors. He compared targets with
performance across all projects. He indicated that Polokwane
Municipality was being accredited at level one. Challenges remained the
shortage of bricks, the municipal elections delays, the loading of subsidy
quantum, institutional capacity and the contractors’ capacity.
Discussion
Mr Z Kolweni (North West, ANC) noted that
when contractors were fired beneficiaries suffered for a long period before the
houses were delivered. He asked the Department how it would deal with such a
situation.
Mr Rampedi replied that the Department was aware of
this but in order not to slow the process down it had already acquired
contractors to start on uncompleted housing projects as early as February. By
starting in February the Department would deal with the issues of contactors
and expenditure at the same time. The contractors were in place and would be
paid from this year’s budget but if the project spilled to the following year
then they would be paid from next year’s budget without breaking any rhythm.
Mr Sogoni asked Limpopo
whether its housing target was not too ambitious especially considering that
the highest achievement to date was 20 000 houses in 2000-2001.
Mr Rampedi agreed that indeed the units were very
ambitious but they should realize that the 29 000 mentioned also included about
17 000 units from the previous year. For the current year the Department was
aiming for 24 000 units, and out of these 6 000 units had already been
committed to contactors. About five contractors should finish their projects by
November or December.
Mr Rampedi reported that the Department was standing
at 37% as opposed to the 33% given by the national treasury. He said that as
part of the adjustment budget it was given R30 million in addition to the
conditional grants and that the money was used for planning and other various
projects. The Department had also revised its payment level from the previous
30 days to the current 7 days.
The Chairperson acknowledged that the current figure was indeed 37%, but he was
still concerned that this was still not good enough. He further added that one
of the issues they had not discussed was the scarcity of materials.
The Chairperson also asked for the number of municipalities accredited so
far.
Mr Rampedi replied that municipalities still
performed roles despite the accreditation process. They identified land for
housing and beneficiaries for housing and the Department’s main mission was to
accredit Polokwane. Moreover it intended to spend the
whole budget by March.
Free State Department of Local
Government and Housing Briefing
The Chairperson asked the presenters to concentrate on the housing grant
expenditure, the capacity constraints and the issue of slum dwellings.
Mr K Ralikontsane, HOD, Department of Local
Government and Housing, Free State, informed the committee that spending in the
first two quarters had only reached 41.5% of budget, which was a source of
worry. Their expenditure for the last three months had been fluctuating but the
Department had mechanisms to investigate and support it. The main worry was the
People Housing Process, where the Department had allocated money to 14 support
organisations. He reported that there were capacity constraints, but six new
Cubans had been appointed on a contract basis. In some cases contractors were
not able to deliver within timeframes and this had now been taken into account
with 16 000 new subsidies allocated. The national Minister’s Programme had
pledged 1000 subsidies to slum dwellers and the criteria for determining
beneficiaries was in the process of being drawn up.
Discussion
Mr Z Kolweni (North West, ANC) noted that
when contractors were fired beneficiaries suffered for a long period before the
houses were delivered. He asked the Department how it would deal with such a
situation.
Mr Ralikontsane replied that they were also dealing
with the unfinished houses programme which was a different programme that was
financed by the provincial fund. In this programme surveyors were to check each
house at the cost of R600.
The Chairperson asked the provinces their projections on expenditure, and what
measures were in place to deal with the projections.
Mr Ralikontsane replied that the Department had felt
the pinch the previous year when R150million from its budget was re-allocated
to other provinces. He was happy to inform the committee that they had a fully
fledged tender system which was finalised in September and people were busy at
work. The major problem was that the Department would have to scale up
expenditure in February and March, and this was unavoidable. However they had
every intention of utilizing 100% of their funds and they did not foresee any
over or under expenditure.
The chairperson informed the committee that they had to monitor Limpopo, but also watch Free State which could fall into
difficulty at the end of the financial year.
Mr Mkaliphi asked the Free State to clarify the
figures on the additional allocations.
Mr Sogoni noted that in the Free State there were
projects such as rural subsidies and emergency houses that were not budgeted
for, but had been allocated funding, although this had not been utilised.
Mr Ralikontsane replied that the emergency housing
fund was a business idea to set aside money so the Department could be able to
intervene when disaster strikes. If not utilised the money unfortunately became
part of the whole budget. He gave examples of where the funding had been used.
It was also the intention to pilot an emergency housing project where people
who lived in areas with unhealthy conditions could be prioritised, but this was
still under discussion with the local municipality.
He added that the hostel redevelopment expenditure had been gradual but the
process was running and the Department was confident that it could use all the
money. The rural subsidies were given to pilot the off-farm projects
Mr Sogoni reminded the Free State Department that it
had previously informed the committee that it was withdrawing the delivery of
houses by the municipality. He wanted to know how far this had gone.
Mr Ralikontsane replied that the Department was in
the process of accrediting Mangahu municipality with
level one. The province had also identified six priority municipalities. Mangahu would be the pilot project.
The Chairperson asked about the status of the PHP housing.
Mr Ralikontsane replied that in terms of the PHP
programme the beneficiaries were actually involved in the building of 55-60
square metre houses and these groups had gradually developed into contractors.
As a result the Department felt that there should be skills transfer, which was
the reason for allocating 14 credible support organisations which were
assisting.
Gauteng Department of Local Government and Housing
Briefing
The Chairperson asked the presenters to focus on certain areas only so that the
full presentation was not given.
Ms M B Monama, HOD, Gauteng
Department of Local government and Housing, informed the Committee that it
should take into account that Gauteng had three
metros, which had their own financial muscle and had a tendency not to submit
claims and reports on delivery, which skewed the performance reports of the
Department. The Department was also concerned about the inspectorates, which
the Department was trying to streamline to ensure that the delivery of housing
was not held up by the duplication of inspection, which constantly led to
delays. The Department was looking at accreditation of the three metros and the
question of whether municipalities were accredited should be understood in the
light of the fact that municipalities would always have functions to perform.
On the spending she reported that there was currently on track, with the total
spending to the end of the second quarter being R535,7
million. The conditional grant spending was slightly under target.
She mentioned that the Department had piloted one alternative technology and
they hoped to showcase the outcome at the end of the next year.
Mr A Green, CFO, Department of Housing tabled the expenditure profile in more
detail, and gave the service delivery statistics. He said that the reasons for
variance in comparison to the allocation were that certified claims for work
completed prior to 30 September had not been paid in this month but only in
October. Similarly an amount of R30 million paid in the second quarter had
actually related to first quarter spending. He reported that the Department had
revised its organizational structure, but there were still constraints
hampering delivery. This included submission of insufficient information to
allow payments to be made, the need to improve contract management processes
and housing inspections. Quality and service delivery to target needed to be
addressed. There was slow delivery by emerging developers. Illegal land and
building invasions compounded the problems and municipalities could not
implement by laws to deal with illegal structures in newly built subsidised
houses. The interventions made by the Department were tabled and explained. A
draft monitoring and evaluation framework had been established to evaluate
progress. The processes were starting to given results. There was better
coordination and improved leadership from the Department.
Discussion
The Chairperson asked why there was no movement in Alexandra and
indicated that it the Department was not using the funds it would be more
profitable to donate them to another province.
Ms Monama replied that the Department had not planned
to utilise the Alexandra fund in the first and second quarter. This was
generally because this time was allocated for land negotiations. She assured
the Committee that the Department would spend the funds and hoped that next
year it could request an even larger amount so as to secure more land.
Mr Kolweni commended the fact that Gauteng had six units completed by women.
Mr Kolweni asked how the Department could convince
the Committee that it would spend the money considering that there were
rollovers from last year. He also asked how the urban renewal programme was
progressing.
Ms Monama assured the Committee again that all the
money would be spent, including the Alexandra fund. She added that in the urban
renewal programme the spending was slow in the beginning but steps had been
taken to intervene, particularly in Everton. The Department had dismissed the
non-performing contractors and had appointed new contactors who were monitored
on a monthly basis.
Mr Kolweni asked for clarification of the procurement
roster.
Ms Monama replied that the procurement roster was a
list developed of contractors and developers accredited, so that the Department
did not have to go through the three-month cycle of procurement every time
there was a project that needed implementation. This roster was reviewed on an
annual basis and currently offers had already been made available for next
year.
General questions
The Chairperson asked the provinces for their projections on expenditure,
whether there would be over or under expenditure and what measures were in
place to deal with the projections.
Mr Green replied that Gauteng was mostly likely to
overspend by R170million.
Ms Monama said that in the first quarter the
Department had notified the Committee that it was having problems with payment,
but she then made a promise to the Chairperson to turn this around. She was
glad to advise that the Department was now paying in less time than the
prescribed period. It was looking into the claims as a priority.
The Chairperson asked about the scarcity of materials.
Ms Monama said that building materials did not affect
Limpopo, as the country was only able to meet about
half the demand for materials.
The Chairperson asked about the status of the PHP housing.
Ms Monama replied that in PHP there currently was
slow delivery and the Department had scaled it down considerably in some areas,
even phasing it out. In Johannesburg the Department was investigating the PHP
organizations that were successful, with a view to empowering them and turning
them into operatives so that they would not lose the skills they had already
acquired.
The meeting was adjourned.
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