Housing Delivery Financing: Recommendations of Financial & Fiscal Commission

Share this page:

Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report

HOUSING PORTFOLIO COMMITTEE
10 October 2007
HOUSING DELIVERY FINANCING: RECOMMENDATIONS OF FINANCIAL & FISCAL COMMISSION


Chairperson: Ms Z Kota (ANC)

Documents handed out:
Financial and Fiscal Commission Submission for Division of Revenue 2008/9
Financial and Fiscal Commission Submission for Division of Revenue 2008/9 Supplementary Presentation

Audio recording of meeting

SUMMARY
The Financial and Fiscal Commission (FFC) made its submissions and recommendations to the Housing Portfolio Committee in terms of Chapter 13 of the Constitution and Chapter 9 of the Intergovernmental Fiscal Relations Act (IGFR Act). The Commission emphasised that its intention was not to dictate to parliament, but merely to make recommendations. The first recommendation was to ensure stability and predictability in allocations of revenue shares between the different programmes or categories. It further highlighted the importance of policy prioritised programmes, and emphasised the need to align policy objectives and budget spending. FFC also recommended the entrenchment of best practice project planning, to solve under spending. A further recommendation was the need for adequate reporting on service delivery outputs. Non-financial data was required to enable an assessment of progressive realisation and efficiency. The socio-economic impact of government capital, and the current expenditure, must be assessed. The Commission then analysed the policy performance and spending performance, showing that the delivery rate had halved over the past ten years. The Commission had highlighted the need to have a conditional grant for housing which used homelessness as an indicator for financial need. It also recommended the link of the Equitable Share and Municipal Infrastructure grant. The Municipal Infrastructure Grant should go beyond funding the basic residential infrastructure.

Members raised questions on the effectiveness of interaction between the Department and the Commission, whether the Department implemented the recommendations, the adaptation of the subsidy to the rate of inflation, and the need also to take blocked and inadequately completed projects into consideration.
Further questions related to service delivery, capacity problems of the municipalities, promotion of indigenous housing, and the need for integrated planning and proper implementation of the Breaking New Ground Policy. Members further questioned whether homelessness was an adequate indicator of housing need on its own, the split between the department’s figures for completed and ongoing projects, and the need for further information on the People’s Housing Process. It was recommended that there be further studies on how the delivery of housing impacted on poverty alleviation in more general terms, improvement of interaction and addressing the problem of those people who, when allocated houses, simply sold them. It was suggested that further interaction be held in a few months.

 


MINUTES
Financing of Housing Delivery: Financial and Fiscal Commission (FFC) briefing
Mr Conrad van Gass, Programme Manager: Budget Analysis, FFC, stated that the criteria used for evaluation by the Financial and Fiscal Commission was provided for in section 214(2) (a-j) of the Constitution. He emphasised the developmental needs and the institutional capacity of the government to deliver.

Mr van Gass outlined that the first recommendation of the Commission in relation to housing was to ensure that there was stability and predictability in allocations of revenue shares between the different programmes or categories. He explained that there was a need to aim for a steady growth rate to ensure stable budget growth. Housing was mentioned in the Bill of Rights and was clearly an imperative. Often when there were newly established programmes there was a tendency towards over-budgeting, policy prioritisation, and under-spending, leading to cut backs in the following year’s budget.

Mr van Gass further recommended the importance of policy prioritised programmes as there was an indication of an above-average growth of budgets. He emphasized that it was necessary to ensure that there was alignment of policy objectives and budget spending. He stated that the priority areas should grow by higher than the average growth rate.

Mr van Gass said that the FFC also recommended the entrenchment of best practice project planning. He encouraged institutionalisation of best practice project planning and budget methods that would separate planning from implementation and align them to the fiscal year. He stated that this would solve under-spending caused by excessive adjustments, late disbursements and end of year fiscal dumping, which was more pronounced when different spheres were responsible for budgeting and delivery.

Mr van Gass highlighted the fourth recommendation by the FFC by focusing on the need for adequate reporting on service delivery outputs. He stated that the departmental service delivery programme should be defined and reported according to the actual targeted beneficiaries, personnel numbers and budgets, by the occupational skills delivery and the current items, including capital assets, that were used in delivery. He mentioned that the Provincial Departments should report on these non-financial indicators on behalf of their service delivery agents. The rationale was that the non-financial data was required to enable an assessment of progressive realisation and efficiency, by knowing what the cost of housing was against the measure of the inflation rate. It was also necessary to know which sectors of the population remained homeless.

Mr van Gass further recommended that there should be a measurement of the socio-economic impact of government capital, and the current expenditure would be standardized across governmental departments and programmes.

He went on to analyse the policy performance and spending performance. He mentioned that the personnel growth rate was more than the money that was going into housing.

The analyses of the delivery performance of the provincial housing departments showed that the delivery rate had halved over the past ten years. There was concern that the municipalities resisted accreditation because of top-ups required to ensure that there was adequate servicing and quality top structures. The FFC also noted that there was limited reporting of non-financial data by housing departments.

Mr van Gass indicated that the FFC, in its submission for the 2007/8 Division of Revenue Bill, had highlighted the need to have a conditional grant for housing which used homelessness as an indicator for financial need. He stated that there was a need to improve the methodology of the census for providing data.

Mr van Gass proceeded to address the disjuncture between the Local Equitable Share (LES) and the Municipal Infrastructure Grants (MIG). He mentioned that the FFC recommended the link of the LES and MIG so as to provide the appropriate incentives to municipalities to extend infrastructure efficiently. This entailed achieving equity and considering the differing capacities. He emphasised that there was a need to ensure that the LES allocations for operational purposes kept pace with installation of the new infrastructure.

He further mentioned the recommendations that the FFC had made in its submissions on the DoR. These recommendations were that the MIG needed to go beyond funding the basic residential infrastructure, public municipal service and social institutions, and the micro enterprise. There was also a need for long term sustainability of new infrastructure through the adoption of a formula that took the operational and maintenance costs into account.

Discussion
Mr G Schneemann (ANC) asked how effective and successful the interaction between the Financial and Fiscal Commission (FFC) and the Department of Housing has been so far. He wanted to know how many of those recommendations made had then been implemented by the department.

Mr C van Gass, Programme Manager: Budget Analysis of the FFC answered that the FFC had only been making recommendations to the Department of Housing for the past two years, and o the interaction with the Department of Housing had been limited, but it was hoped that this would change. An important part of this engagement was also to organize the FFC workings around the Department and the portfolio committee.

 

Mr Henry Eksteen, Parliamentary Liasion Officer, FFC, added that the interaction had been good so far but of course the FFC was only making recommendations, and could not force the Department to implement them.

Mr Mziwonke Dlabantu, Deputy Director General Strategic Support, Department of Housing added that the relationship could improve, since the FFC had until now mainly sent technical people of the lower level. The relationship on the substantive issues between the Department and the FFC had been good. The recommendations had been taken seriously and in fact some of those recommendations presented today had already been taken into consideration previously by the Department itself. In relation to previous recommendations, the issue of the rural housing had been dealt with in line with the FFC engagement, but other issues might not be resolved yet. Some recommendations raised by the FFC had also been used to enhance the Department’s arguments to raise more funding. It was important to ensure that the support of the provinces grew parallel to the capital available for housing.

Mr Schneemann wanted to know if the housing subsidy was now adequately adapted to the rate of inflation.

Mr van Gass replied that the data to answer this question would be available but had not been calculated at this stage. This matter could be taken forward by the FFC if required by the Committee.

Mr A Steyn (DA) emphasised that he fully agreed with the first recommendation of the FFC but wanted to know how such a stable, predictable budget growth path could actually be achieved. It would be necessary to go back and take blocked projects and completed houses in a poor condition, as well as future housing projects, into consideration.

Mr van Gass replied that there needs to be some debates within the department on minimum standards and minimum size, which then could be used as a benchmark for the minimum cost. He also suggested identification of programmes for blocked projects and poor quality housing, so that these could be isolated. It would then be possible to analyse the difference in costs between the minimum standard and what had been provided. This should be done by the national and provincial departments.

Mr Steyn expressed his doubts on the second recommendation, which suggested that most provinces had prioritised infrastructure and skills training, as he had seen no evidence of this in most cases.

Mr Eksteen noted that the prioritisation was clearly meant in financial criteria rather then in terms of delivery. This emphasised the need for non-financial data, so one could calculate and compare the growth rates in both financial and delivery terms.

Mr Steyn enquired if the FFC could give a more extensive proposal on how reporting on service delivery outputs could be actually implemented, and how the interaction with the Department had been on this matter.

Mr van Gass replied that this recommendation called for a distinction to be made between houses under construction, houses completed, and houses being occupied.

Ms B Dambuza (ANC) asked what exactly the FFC was advising concerning the capacity problems of the municipalities.

Mr Eksteen responded that there had been categorisation of municipalities according to their capacity and financial capacity. There should be a similar way to analyse their capacity to manage housing projects. Whilst metropolitan municipalities tended to have already more capacity to deliver, some areas had less capacity relative to the demand. In the former homeland areas the capacity was even lower. It should be possible to structure a grant to give more to the municipalities that had lesser capacity to boost their delivery.

Ms B Dambuza enquired what the FFC´s observations were concerning the promotion of indigenous housing and what recommendations it could make.

Mr van Gass responded that there was some question whether to concentrate on urban areas or rural areas in the migration process.

The Chairperson emphasised the disjunction of planning and implementation which led to problems like under spending. One of the issues that need to be focused on was integrated planning. Until now the Breaking New Grounds Policy was not being implemented, and planning was not sufficient. She noted that the Committee would have to evaluate items raised on the budget performance of the provincial housing departments.

Mr van Gass suggested that integrated planning should be realised on a municipal level, so that a settlement would be the unit of planning, and then the municipal and provincial departments should have to work together in each section. For example, each municipality should have a housing section, which interacted with the housing department on the provincial level. These would together make a plan for every settlement. Then it was a matter of scheduling that things like water were provided first, then housing, then education. It was important that the municipalities would be the drivers of development, even up to the national level.

The Chairperson commented that the main problem was the lack of capacity in the municipalities. Even though all municipalities should have an Integrated Development Plan, and therefore a section for housing, this was unfortunately not the reality in most cases. The FFC should look at that issue and find out which municipalities had delivery problems. This information would help the Department in its budgeting and then the responsibilities should be given to the provincial department in those areas.

Mr Steyn expressed his doubts about the recommendation to take homelessness as an indicator of housing need and use it for the conditional grant for housing. He did not feel that it was possible to use homelessness in a province as the determining factor for funding to the province. He said that any formula must take the capacity to spend this money into consideration.

Mr Eksteen answered that the suggestion to include the spending capacity into the formula would be passed on and followed up.

Mr Steyn asked the Department of Housing why it was not possible yet to state how many houses had been completed and how many were under construction, rather then putting them all together.

Mr Dlabantu responded that the new budget reports were differentiated and therefore showed several details that had been requested previously. Budget statement 2 showed the splits into the different housing projects. The split between houses completed and houses under construction was possible and had been done before. The challenge would be to decide how far back the data should go. However, he confirmed that the budgeting was improving, and the Department would revert on this matter.

Mr Steyn wanted to know what assumptions had led to the capital under spending of 25% as depicted in the presentation.

Mr van Gass responded that the basis for the under spending was the comparison between the budgets and spending. The budget was taken from the January budget statement and the spending was taken from the annual financial statement.

Mr Steyn asked what the FFC´s information was on the Peoples Housing Process (PHP), because there generally seemed to be a lack of information.

Mr van Gass noted that the FFC had been asking where the information was on the PHP. In the longer version of the report handed out by the FFC there was some detail, but only in relation to the Eastern Cape. The FFC was also requesting more data on the PHP in general.

Mr Schneemann noted that it was not only important to evaluate how many jobs had been created through housing, but to get an understanding on how the delivery of housing had impacted on poverty alleviation in general. To do so, it would be necessary to also take infrastructure development into the calculation. This seemed not to have been mentioned in the strategy.

Mr Eksteen agreed that there needed to be assessment of the impact of housing on the poverty level. Ideally it would need to be done at the municipal level, but it was generally harder to measure.

Mr Schneemann wanted to know if the FFC had looked at the problem that the Breaking New Ground Strategy, which suggested that housing projects should be accompanied by simultaneous infrastructure planning, existed on paper but was not implemented in reality. The question was how it would be possible to improve the interaction between the involved departments of health, education and housing to realise such combined planning.

Mr Eksteen agreed that integrated planning was important to take all the communities into consideration.

Ms Dambuza asked what could be done to ensure that those given houses would not simply move back into shacks and sell the houses.

Mr Schneemann wondered if the FFC had looked at whether the housing budgets matched the infrastructure planning.

Mr van Gass briefly responded that the FFC would take these questions and recommendations for further research.

Mr Steyn proposed that the Department should give a report on their perspective of the recommendations of the FFC, to generally improve the interaction.

Mr Schneemann proposed that there should be further engagement in a few months, which would ensure that the necessary steps of planning, implementation and interaction between the departments in terms of integrated development were actually taking place.

Mr van Gass noted that the FFC would welcome another engagement. He invited the Committee to take part in a stakeholder seminar by the FFC and several departments.

The Chairperson confirmed that this was a good idea, but would need to take place in November, to fit in with the parliamentary working schedule.


The meeting was adjourned.


Audio

No related

Documents

No related documents

Present

  • We don't have attendance info for this committee meeting

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: