Convention on International Interests in Mobile Equipment Bill, 2007: adoption & Breaking New Ground Project briefing by Departm

PUBLIC SERVICES SELECT COMMITTEE
28 March 2007
CONVENTION ON INTERNATIONAL INTERESTS IN MOBILE EQUIPMENT BILL, 2007: ADOPTION & BREAKING NEW GROUND PROJECT BRIEFING BY DEPARTMENT OF HOUSING

Chairperson:  Mr RJ Tau (ANC)

Documents handed out:
Convention on International Interests in Mobile Equipment Bill, 2007
N2 Gateway Housing Project
Eastern Cape Informal Settlement Upgrading and Human Settlements Projects: Part1 & Part2
North West Housing Project

SUMMARY
The Department of Transport had previously briefed the Committee on the Convention, signed in November 2001, which then required to be enacted into law. The purpose and benefits of the Convention were to establish an international legal regime for the creation and control of security interests held by creditors, conditional sellers and lessors, thus overcoming problems in obtaining secure and readily enforceable rights in aircraft objects. This would then lead to the reduction in cost of commercial finance for mobile equipment. The Bill then aimed to give effect to the obligations in the Convention. Questions of clarity were raised on how the convention was unique, whether e-mail transmissions were included, security concerns, why NEDLAC had not been included, the costs aspects, and the economic benefits. The Bill was unanimously approved. Benefit to private airlines was more substantial.

The Department of Housing delivered reports on the Breaking New Ground projects of the N2 Gateway (Western Cape) and in Eastern Cape and North West. The Limpopo report would be forwarded to the Committee. The reports listed the numbers of units completed and the challenges, which included lack of leadership, slow delivery, disputes on workmanship, lack of cooperation by Councils, and some beneficiaries refusing to participate. Members commented that the national department were perceived as being reluctant to take ownership of the projects and questioned its responsibility, control over contractors, bottlenecks around payment, lack of spending in Eastern Cape, and bad planning as evidenced by all three presentations. Further questions were raised on the lack of consultation in the three spheres of government, poor workmanship, the standards of building materials, the need for greater involvement, non-inclusion of schools, the community participation, services provided, refusal of people to register, and discrepancies in numbers. It was decided that written questions and answers should be exchanged.

MINUTES
Convention on International Interests in Mobile Equipment Bill [B1 – 2007]: Briefing by Department of Transport
The Chairperson reminded the Committee that on 7 March it was briefed on the Convention, which aimed to establish an international legal regime for the creation and control of security interests held by creditors, conditional sellers and lessors, thus overcoming problems in obtaining secure and readily enforceable rights in aircraft objects. This would then lead to the reduction in cost of commercial finance for mobile equipment.

Mr Johan Biermann, Director, Aviation Infrastructure, Department of Transport briefed the Committee on the clauses of the Bill. The South African Civil Aviation Authority was the entry point through which information was transmitted to the International Registry. He compared the Bill to the Convention of the International Recognition of Rights in Aircraft Act, 1993. There had been extensive consultation and the Department of Transport was satisfied that the Bill proposed non-contentious, although unique, matters, and that all stakeholders had been given adequate opportunity to comment. There were no financial implications for the State as this was a private law instrument relating to the financing of high value mobile assets. It promoted asset-based financing by establishing the legal framework to protect interests in aircraft equipment.

Discussion
Mr M Likotsi (PAC, Free State) asked what the uniqueness of the convention was.

Mr Biermann replied that it was not unique in that many countries had such terms already in place internally. It was unique in terms of its operation within the international law environment.

Mr L van Rooyen (ANC, Free State) questioned the definition of “information may be transmitted” (under the heading ‘Contents of the Bill’) and asked whether it included email. He enquired as to what protection there was around electronic information and who was allowed to access this information, as security issues were of a concern.

Mr Biermann replied that email was included. The system was run by an Ireland-based company who were up-to-date with the latest security measures. In order to access the information, a user would have to register. The Civil Aviation Authority would be registered as an entry point.

Mr van Rooyen asked why the consultation did not include National Economic Development and Labour Council (NEDLAC).

Mr Biermann replied that it had not been intentional to exclude NEDLAC. The aviation industry was seen as the core member of the consultation as it comprised the users and beneficiaries of the Convention.

Mr Likotsi asked how there could be no financial implications for the State.

Mr Biermann explained that either the losing party would be liable to pay the fees or the two parties would be liable. This was a matter to be adjudicated on by the Judge. States would not be responsible as the matter fell under the private law arena.

Mr van Rooyen asked what the “significant economic benefits to countries”, mentioned under the heading of ‘Purpose and Benefits of the Convention' were.

Mr Biermann replied that the Bill would have huge benefits for the aviation industry and thus the country.

Mr van Rooyen questioned the benefit to South African Airways (SAA) following the passing of the Airways Bill on 27 March 2007.

Mr Biermann was not sure if it was relevant to SAA, stating that the benefit to private airlines was more substantial.

The Committee unanimously adopted the Bill.

Progress report on the Breaking-New-Ground-projects of N2 Gateway, Eastern Cape, and North West: Department of Housing (DOH) briefings
The Chairperson noted that this briefing was not a reaction to the negative media coverage of the housing projects and particularly the N2 Gateway Project. The Committee had wanted to address challenges in safety. She stated that the Department of Housing (DOH) had made a deliberate effort to take a leadership role.

Mr Joseph Leshabane, Deputy Director General, National DoH, reiterated that the projects under Breaking New Ground were pilot projects and were adopted specifically in order to test new ground. They were also not the only developments occurring. He noted that due to some miscommunication the presentation on the housing projects in Limpopo was not included, but this would be forwarded by 29 March. A previous report would also be sent.

Eastern Cape Upgrading
Ms Julie Bayat, Acting Chief Director, Policy and Program Monitoring, DOH, presented the report on the Eastern Cape (EC) Informal Settlement Upgrading and Human Settlement Projects. She described the composition of the various projects, and gave numbers of the housing required. The total budget requirements were R557.54 million, excluding costs for socio economic services. The available funds for the Medium Term Expenditure Framework (MTEF) to 2010 were noted. The Zanemvula Project was described. In the 2006/07 year an amount of R73.9 million was available but only R39 utilised. A total of R320 million over the MTEF was available. She noted that achievements to date Council had resolved not to use temporary relocation areas (TRAs) but to relocate directly to serviced sites. She noted the process for identifying beneficiaries. The interim business plan had been completed. Thubelisha Homes was not currently involved. The Challenges included the construction of the first 600 units, and the lack of a dedicated project manager. There had been a meeting with the MED and Mayor and interventions with Thubelisha were under consideration.

The Duncan Village Project had about R227,8 million over the MTEF, but there had been little progress in a number of areas. IT was a complex project with several small sub-projects. The idea to start small and then expand had not worked, the cost estimates were high and there was slow pace of delivery. The project had changed, and there was no project manager.  The Department was meeting with three spheres of government to realign work responsibilities.  in the Eastern Cape.

North West Province Pilot Projects
Ms Luanne Werner, Director, Department of Housing, presented the report on the North West Province project. She indicated that these projects were taking place in the Matlosana Local Municipality and Rustenburg Local Municipality. She gave a full summary of progress and indicated that the challenges in the Matlosana area included the fact that the construction had halted in October 2006 due to non payment by the Council. A lawsuit was pending. The Council claimed that there had been poor workmanship, and the National Home Builders Registration Council had facilitated discussions and an agreement that some defects would be rectified.

The Rustenburg project had 2 186 subsidies approved and installation of services had reached 99% completion. The progress was listed. Challenges included delays in procurement processes that had compromised project funding and concerns about the suitability of land for township establishment. Approval was awaited from the Department of Minerals and Energy. The anticipated construction date was June 2007.

Mr Phillip Chauke (Chief Director: International Relations Department: Housing) presented the report on the N2 Gateway Project. The objectives of the Project were set out, and the beneficiaries were detailed. The achievements of Joe Slovo Phases 1 and 2 were noted. Challenges remained in the relocation of existing residents, particularly Zone 32, to TRAs to allow construction to start. The Delf 7-9 projects were set out and here the challenges included electrification of TRA4 by Eskom. The City had agreed to continue with the management of the TRAs beyond June 2007. The achievements in Delft Symphony were fully set out, and it was noted that the electricity negotiations were under way, that there had been identification of the most needy beneficiaries, and verification of the subsidy applicants was under way.

New Rest and Boys Town were indicated, and it was noted that the township establishment process was completed. Challenges in Boys Town included the fact that the beneficiaries had refused to register, and negotiations with the community on the layout plan were still in progress.

The progress charts, summary of units, and available funding were tabulated. The funding available for 2007/08 was R285 million, well below the requirements for completion of the projects.

Discussion
Mr Van Rooyen commented that there was a perceived lack of responsibility on the part of the National Department of Housing for these projects.

Mr Chauke explained that this perception of reluctance was due to the different roles of the national, provincial and municipal sectors. The national department was increasingly becoming more involved and embraced the principles of the Extended Housing Project.

The Chairperson asked what the Department saw as its role in the construction of houses. She reiterated the concerns over national responsibility by questioning to what extent the national department had control over the contractors.

Mr Leshabane responded that the national department had no control over the contractors, as the municipal authorities decided upon the contractors. This was a function of the method of financing of the project as the grant was divided up into 9 parts and allocated to each province. The national department provided the framework of these projects but not the specifics.

The Chairperson stated that this issue needed to be flagged for further discussion and suggested that the Members of the Committee should forward questions to the presenters at a later stage.
 
Mr F Adams (ANC) stated that issues had arisen in the Western Cape regarding the non-payment of contractors and the subsequent cessation of building.

Mr Leshabane explained that the Department had carried out a major review of the programme, particularly the bottlenecks around the contracting arrangements. Over the years, established contractors had left the low-income housing (LIH) sector due to the low profit margins. As a result, the LIH was left to inexperienced contractors. These contractors were more likely to encounter cash-flow problems than their experienced colleagues. In addition to this, the Department did not pay up-front but only as certain stages were completed, which could, in turn, lead to cash-flow problems.

A member questioned why R40 million of the available funds of the MTEF for 2006/07 in the Eastern Cape had not been utilised.

Ms Bayat replied that the lack of housing construction had led to the funds not being spent.

Mr Van Rooyen stated that the elements of poor planning were evident from all three presentations, and the roll over of funds was also indicative of this.

Mr Chauke acknowledged that different planning could have eliminated some of the difficulties but that strategies were being devised to address these difficulties.

Mr Van Rooyen raised the issue of a possible capacity problem.

Mr Adams noted that two years down the line, following Joe Slovo Phase 1, everyone was still fighting and shifting the blame for non-delivery.

Ms Bayat responded that the reasons for non-delivery on time were a lack of capable structures and efficiency within the different units. She strongly emphasised that Thubelisha Homes needed to come in and provide a private sector head to a public sector group.

Mr Leshabane explained that competing groups within the areas, particularly Boys Town, had undermined the project. Two distinct groups were unwilling to compromise and this had made it problematic both to coordinate and to reach resolutions on planning problems.

Mr Van Rooyen commented that there was a lack of consultation between local, provincial and national government.

Ms Bayat replied that the national, provincial and local committees had come together in the planning sphere of these projects.

Mr Leshabane emphasised that the Breaking New Ground project required intense collaboration between the three spheres of government and that these pilot projects had produced many lessons in that regard.

Ms Matlanyane raised the issue of shoddy workmanship and the disappearance of contractors.

Mr Adams asked whether Thubelisha Homes checked the standards of building materials.

Mr Leshabane’s comments on the inherent problems of contractors were used as an explanation for the shoddiness of the workmanship. The projects in the EC were supply driven. There has been a review of the involvement of provincial players, allowing them to be able to better inspect properties. There has also been major restructuring and a new branch has been developed to deal with implementation support.

Ms Bayat emphasised that Thubelisha needed to be more involved.

A Member asked why the engineers in the Eastern Cape had completed building in an area that could be flooded at any time. The Chairperson agreed that it was unacceptable that people should be living on flood plains.

Ms H Matlanyane (ANC, Limpopo) stated that in Limpopo, beneficiaries were being moved before the buildings had been completed and were subsequently building shacks on the sites allocated for their buildings.

Mr Chauke replied that people had been moved because of a lack of power. He went on to explain that the realities of development were such that people needed to be removed from the building sites for safety reasons.

Mr Likotsi referred to the N2 and Eastern Cape projects and stated his concern that people were being moved away from their schools and their work.

Ms Bayat explained that in the Eastern Cape in particular, those needing to be moved fell into two categories of below the flood-line and those above the flood-line. The former needed to be moved more urgently than the latter. The long-term views of the project needed to be considered. The project was being planned in terms of the integrated human settlement approach, which looked at developing Sustainable Community Units (SCUs). To this end, the Department was working closely with the different inter-sectoral departments. The removal of the people of Joe Slovo West was included in the previous report that would be forwarded to the Committee.

Mr Likotsi asked why schools had not been included in the presentation on Joe Slovo.

Mr Chauke replied that Joe Slovo was not separate from Langa and as such was serviced by the schools within Langa.

Ms Matlanyane queried the community participation suggested in the Eastern Cape report and asked how the locals benefited from bigger companies being involved in the projects.

Ms Bayat replied that community members were present at the planning meetings. The engineering designs were outsourced but were first approved by local authorities.

The Chairperson emphasised that this was an important question and asked to what extent the N2 project took place within the context of the Expanded Public Works Program.

Mr Likotsi asked about the relationship between First National Bank (FNB) and the projects, given that FNB had been known to pull out in the past.

Mr Likotsi stated that issues of water were often a problem and asked how this had been addressed.

Mr Chauke replied that in a meeting on 23 March 2007 between the N2 Project and the City of Cape Town, the issues of water, waste, and other services had been dealt with and a renewed working relationship between the projects and the City had been established.

Mr Likotsi asked what type of arrangements had been made regarding electricity in Delft Symphony.

Mr Chauke replied that no construction was taking place there as yet as there was a clause in the contract that did not specify the start date.

Mr Likotsi asked why people had refused to register.

Mr Chauke noted that some people refused to register due to the uncompromising group attitudes mentioned earlier, in the different projects.

The Chairperson queried the omission of gender equality in the project objectives of the N2 Gateway.

Mr Chauke explained that the omission was purely in terms of the presentation and not in the practice of the project. He noted that over 50 % of the beneficiaries were female, in accordance with male/female demographics.

Ms Chaso asked why there was a discrepancy of 15 flats between those established and those occupied and why there were discrepancies in the number of units cited and the approved beneficiaries in the North West, as contained in the progress Report on the Klerksdorp Project.

Ms Werner explained that the status of beneficiaries needed to be assessed and approved and thus there were some flats that had not yet been occupied.

Mr Van Rooyen stated that he had numerous questions to ask but he would put them in writing and forward them to the presenters.

The Committee decided that all Members who still had questions should forward these in writing to the presenters, who in turn would give written responses.

The meeting was adjourned.