Intergovernmental Fiscal Review 2007 Hearings: Housing, Roads& Transport and Agriculture & Land

NCOP Finance

16 October 2007
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Meeting Summary

A summary of this committee meeting is not yet available.

Meeting report


16 October 2007

Mr T Ralane (ANC, Free State)

Documents handed out:
Provincial Budgets & Expenditure Review 2003/04 – 2009/10 Chapter 5: Housing
Department of Housing Presentation
Provincial Budgets & Expenditure Review: 2003/04 – 2009/10 Roads & Transport
Department of Transport, Intergovernmental Fiscal Review 2007
Agriculture and Land Chapter 6: Provincial Budgets and Expenditure
Land and Agrarian Reform Programme

Audio recording of meeting [Part 1]&[Part 2]

National Treasury and the National Departments each addressed the Committee on the budgets and expenditure, detailing how much was allocated and had been spent, and the percentage ratios. Details of the strategies and achievements were also given, and some of the challenges were identified.

In respect of housing, the Committee raised issues regarding under expenditure within municipalities and on the quality of houses being built. The input and role of the National Home Builders Registration Council was raised. The Department cautioned that not every fault could be ascribed to poor building. Further questions were raised on accreditation of municipalities, work with the communities, slow delivery, the size of housing, blocked projects, interaction with the Department of Public Works, the capacity of municipalities.

In respect of transport, the Department acknowledged that there was still a great deal of work in terms of road maintenance. The challenges were highlighted, and included issuing of illegal licenses and scaling up Expanded Public Works Programmes. Questions were asked about resurfacing project reports, the improvement of the public transport systems, the capacity to monitor, whether there was not skewed focus on 2010, or whether the plans aimed at overall improvement, the current traffic problems and inability of the roads to handle the number of vehicles, the issue of fraudulently obtained licences, the taxi scrapping programme and the uncertainties as to who was responsible for certain roads. The Department was asked to submit detailed explanations of some of the terms used.

The Department of Agriculture noted the budgets and the greater amounts allocated to Land Redistribution. Questions by Members addressed the problems of obtaining land, the Land Bank loans where interest compounded to the loan had more than doubled the loans, the compensation to be paid for animals slaughtered to prevent further outbreaks of swine fever, and the under spending.

Intergovernmental Fiscal Reviews
Housing Provincial Budgets & Expenditure on Housing, National Treasury (NT) briefing
Mr Kenneth Brown, Chief Director: Intergovernmental Policy, National Treasury, mentioned that housing subsidy allocations grew from R4.6 billion in 2003/02 to R11.5 billion in 2009/10 to speed up delivery. Over 3 million subsidies were approved and 2.3 million houses were completed. Additional allocations included R1.5 billion for unblocking projects and enhancing the credit linked subsidy. One of the key challenges faced for municipalities was a lack of direct role for them in housing delivery. If this could be taken care of then there would be alignment and greater accountability of the municipalities. Another challenge was that of affordability for households falling outside of the subsidy programme.

Institutional Arrangements in the Housing Sector: National Department of Housing (NDOH) briefing
Mr Mziwonke Dlabantu, Deputy Director General – Strategic Support, NDOH,  said that housing was concurrently a provincial and national function. Accountability vested in the Minister of Housing and then MECs. Monitoring and oversight remained in place at provincial and national levels.

The housing sector has seen a high price escalation. Mr Dlabantu said that the growth in housing grant should be looked at in that context.  R6.8 billion of funding was utilised to finalise current multi-year projects under existing contracts in the 2006/07 allocation. Despite the currently changing market and regulatory conditions, progress in lending and provision of stock for the gap market was being made. As part of the future plans, Mr Dlabantu said that the NDOH was the process of trying to establish a housing agency.
Roads and Transport Provincial Budgets and Expenditure Review 2003/04 – 2009/10: National Treasury Briefing
Mr Tebogo Makube, Director: Provincial Government Infrastructure, NT,  opened the presentation by saying that investment in transport infrastructure was critical for sustainable growth. He said that an efficient transport system reduced transaction cost and ensured that the economy remained globally competitive, thus promoting international trade. The number of kilometers of surfaced roads upgraded in provincial roads construction totaled 718 kilometres. In 2006/07, the roads and transport sector had 238 Expanded Public Works Projects (EPWP) projects across provinces. Most projects were in Kwa-Zulu Natal with 74 (31%) of the total projects; followed by the Eastern Cape at 67 (28%); Limpopo with 41 (17%) and Gauteng Province with 35 (15%) of the total projects.

A number of initiatives had been geared towards traffic management and safety, including the Road Traffic Management Corporation (RTMC), which began operating in September 2005. The aim of these projects was to reduce the incidence of traffic offences, ensure effective adjudication and implementation, and achieve improved management. Mr Makube said that it was estimated that the cost of road traffic accidents was about R13 billion every other year. In terms of the taxi recapitalisation programme, the Siyenza Consortium Scrapping Agency had finalised and set up facilities and infrastructure countrywide for scrapping taxis.

The challenges faced in this sector included aligning plans and monitoring preparations for 2010 FIFA World Cup, which would serve as a catalyst to overhaul the public transport system. Another area of concern was that of reporting properly on non-financial performance, in terms of roads constructed and maintained, as well as the total inventory of roads.

National Department of Transport (NDOT) Briefing
Mr Dan Pretorius, Chief Financial Officer, NDOT, mentioned that the National Road Network now was a total of 13 600 kilometres for non toll roads.  The average age of roads in 1998 was older than 28 years and this highlighted the importance of infrastructure and decisions on maintenance by the Department. The mandate of EPWP was to focus on applying labour intensive projects to capital road works and road maintenance.

Mr Pretorius said that the funding allocation over 2007 Medium Term Expenditure Framework (MTEF) was R3 billion, with roll-out starting in April 2007. Past performance reflected that collectively, provincial road departments spent R726.6 million on EPWP projects and programmes. The NDOT, Department of Public Works (DPW) and National Treasury would be reviewing first quarter reports to ascertain whether provinces were delivering as agreed. The Department developed a number of strategic interventions which included developing and  implementing computerised leaner license testing systems, vigorous law enforcement on public transport and motor vehicles, decreasing the speed limit where there was high pedestrian activity, increasing the number of traffic officers and decreasing the issuing of fraudulent licenses.

The challenge of overloading continued to be a major problem on roads and the desired levels of law enforcement were not yet attained. The vision of the public transport strategy was to move from basic commuter operations to accelerating modal upgrading and ultimately towards Integrated Rapid Public Transport Networks (IRPTNs). These would, amongst other things, achieve maximum accessibility and coverage, electronic fare integration, and expanded access to public transport in rural areas.

With respect to the taxi recapitalisation programme, the target was to scrap 80% of the old taxi fleet by 2010. Currently more than 10% of the taxi fleet had been scrapped.

Agriculture Provincial Budgets and expenditure review: NT Briefing
Mr Kenneth Brown said that the land and agrarian reforms programmes were by far the most important programmes driving transformation. He said that they were important in addressing the skewed land ownership patterns.  Agriculture was a sector that enjoyed support from numerous state agencies such as Land Bank, Agriculture Research Council (ARC) and others. The budget for the Department had grown from R1.2 billion in 2003/04 to R2.4 billion by 2009/10, an average annual rate of 13.1%. Expenditure for sub-programmes grew sharply at an annual growth average rate of 20%.

The budget for Land Affairs was much higher than that of the Department of Agriculture due to rising allocations for land restitution, tenure reform and land redistribution. Between 2004/04 and 2006/07, overall expenditure grew significantly from R1.3 billion to R2.8 billion, at an average annual rate of 30.3 %. A large portion of land claims had been settled. The budget for land reform and restitution grew sharply, more than doubling from R1.3 billion in 2003/04 to R2.8 billion in 2006/07.

Department of Agriculture (DoA) briefing
Mr Sugar Ramakarane, Head of Department, Free State Department of Agriculture opened the presentation by saying that the objectives of the DLA and the DoA included to redistribute 5 million hectares of white-owned agricultural land to 10 000 new agricultural producers, increase black entrepreneurs, increase the agribusiness industry by 10% and increase agricultural trade by 10% – 15%. The Department had identified clusters that had development needs, and these included Public/Private Sector Investment, Land use Management and Post redistribution Support. A Product Portfolio was established for industries that delivered growth now and/or were positioned for further growth, resulting in a total value chain.  The cross-cutting issues in the Product Portfolio were focus on innovation, fostering of greater and fair market access and promoting competition and efficiency.

For monitoring and evaluation, the Department implemented a single management information system for tracking beneficiaries and projects. The Department would start first with beneficiary contact, and follow both beneficiaries and projects.  The Department had put in place monitoring and evaluation immediately to be able to evaluate the impact so that they could in the future redirect in terms of beneficiaries and particular projects.

(Note: many of these questions were responded to generally by a number of presenters)
Department of Housing
Ms P Majodina (ANC,) asked why the Department had not made it compulsory for any contractor to enroll with National Home Builders Registration Council (NHBRC) because houses that were built by non-quality contractors were likely to have numerous faults.

Mr L van Rooyen (ANC, Free State) noticed that the spending trends were occurring in the last weeks or month of the financial year. He asked firstly for the reason, as this appeared to be “fiscal dumping”, and also what could be done to correct such trends.

Mr van Rooyen asked what was causing slow accreditation of municipalities and whether that was the responsibility of local or provincial government.

Mr van Rooyen asked what the Department was doing about the slow delivery of housing by low income contractors.

Ms P Majodina (ANC) commented that if housing was not included in public works and if the same principles were not applied to selection of contractors, then there would be inconsistent quality. She asked what methods the department was coming up to away with capacity constraints like cement. Ms Majodina further said that even though houses that were built were said to be 40 square meters, that was not always the case. She said that there was lack of monitoring in that area. She then asked when the Department would start involving communities in the housing developments because some houses in certain rural areas that were built many years ago were still standing strong, indicating that the community, although not having formal education, at least had knowledge and skills to share with the Department on workable possibilities.

Mr M Robertson (ANC, Eastern Cape) asked for the names of the municipalities that had been accredited and asked how the problem of sub-standard building would be rectified.

Mr D Botha (ANC, Limpopo) said there was a discrepancy in the fact that the Department of Housing said that they did not know how many houses had been built already, although this should be on record with the provincial departments. He requested that the department looked further into this matter. Mr Botha then went on to say that there were certain projects that were not appearing in the integrated development plans, for example in Limpopo, and asked whether the department had figures of how many houses were actually occupied by people. Lastly, he asked whether the NHBRC was doing its job in terms of inspecting the houses being built, if there were still poor quality houses being built.

Mr B Mkhaliphi (ANC, Mpumalanga) requested that the Department elaborate more on the under spending that was reflected in the report.

Rev P Moatshe (ANC, North West) firstly asked what mechanism was being used to identify the blocked projects and whether the department was succeeding in unblocking the projects. Secondly, he said that there were some provinces that provided more houses, and asked what the problem was those not meeting expectations and what was being done. Thirdly, he asked when the housing development agency would be established. Fourthly, he asked whether there was a turn around strategy, and if so, that it be described.

Ms D Robinson (DA, Western Cape) said that she was in the Eastern Cape over the weekend and problems were raised concerning the NHBRC and money being collected. She requested that the Department elaborate on this.

Mr L Suka (ANC, ) commented that the report was short of time frames for implementation. He added that he was also concerned about the size of houses. Often the land did not allow for expansion and he wondered if it would be possible to increase the size of the plots.

The Chairperson asked whether the Department would not be wasting money in developing an agency. He asked whether money spent reflected houses on the ground.

Mr Kenneth Brown (National Treasury) gave a general response to some of the questions raised by saying that provinces last year were spending on average R14 million a month, but that amount increased to R23 million expenditure for the month of March. He said that NT alerted the budget council of this spending trend so that it could be checked, and further investigations wee being undertaken in this regard.

Mr Itumeleng Kotsoane, Director General, National Department of Housing responded on the issue of contractors and the NHBRC. Every contractor was required to be registered with NHBRC so that the NHBRC could do its job in protecting consumers. He said that some contractors would register with the NHBRC but would then sub-contract with non-registered contractors. This was a big challenge that the Department was facing at the moment.  He also said that the Committee must be careful in terms of blaming everything on the quality of the building. For instance, window breakages could not be blamed on the National Department of Housing. He added that it was important to take note of the responsibility of beneficiaries and potential beneficiaries in terms of looking after the properties

Mr Kotsoane also responded to interaction with Department of Public Works by confirming that the two did have a relationship. He also responded to the question of constraints,  saying that the Department had established an information hub in one province, where different houses were being established using different technology. Provinces were taking the products and putting them into different projects.

The Chairperson asked whether the Department would consider incorporating in their plans the building of houses using rural mechanisms and materials.

Mr Kotsoane responded that the Department had certain standards that needed to be met in order to ensure that quality houses were built. However, he would take this suggestion forward, and the Department could incorporate certain methods if found to be of a suitable standard. He added that engaging communities was an integral part of housing development and that the Department would be looking further into that matter.

Mr Mkhalipi asked to what extent municipalities would call in assistance in order to facilitate service delivery in housing. Mr Mkhaliphi requested further information about the municipalities that were accredited. With regard to the blocked projects, he said that he had reservations about the figures although he did not have enough information to dispute them. For example, in Mpumalanga there were only three blocked projects. He said that he would be satisfied if this reflected a project type, and not total number of projects.

The Chairperson commented that municipalities were less capacitated and that there must be a huge project from the National Department of Housing to capacitate these municipalities. This was a project that would take time, and the Committee should follow it up from time to time.

Mr Dlabantu explained that level 1 accreditation meant that a municipality could manage the beneficiary area of housing and could manage housing stock. He told the Committee he could provide a list of the 16 municipalities that were accredited.

Mr Johan Minnie, Director. Information Management, NDOH, responded on the questions about blocked funding. He said that there were a number of projects in different provinces;  for instance Mpumalanga had 4. The definition of a blocked project had to look into what was causing the problems. Mr Minnie explained that the Department considered a project that was slow moving and where payment had not been made in 36 months to be a blocked project. He said that the blocked projects were being monitored and strategies were being devised to assist in unblocking them.

Mr Dlabantu said that the Department had a turn around strategy in place in the Eastern Cape in particular, where it was working closely with provincial government. He said that it was looking at issues like under expenditure and monitoring how this could be spent properly.

Mr Kotsoane added that the NHBRC as a consumer protection entity did function in the private entity situation. The Department would submit a list to the Committee of all the members of the NHBRC so that the Committee could engage them.

In relation to the size of houses, Mr Kotsoane noted that the Department felt that 40 square metres was reasonable. He said that there were provinces reporting bigger spaces,  up to about 50 square meters. The Department took into account densification - for example Cape Town had limited space - and if the Department wanted to provide more housing, they would have to take this into consideration.

With regard to the number of houses, Mr Kotsoane said the Department was conducting surveys to verify them. When that process was completed, the Department would share the results of the survey with the Committee. The Department had also appointed a team that would go out to the provinces and audit the money spent on housing developments.

The Chairperson suggested that the Department confirm in writing that all contractors or structures were properly registered. He said that there were still big gaps in the information presented and requested that the Department give the Committee a detailed report on all the issues raised at the meeting.

Department of Transport
Mr D Botha stated that in the report for provincial roads construction outputs, Limpopo reported 0 kms and Gauteng reported 1 km surfaced roads upgraded. He said that he was seriously concerned about this and requested that National Treasury assist him in understanding.

Ms P Majodina asked who was in charge of taking care of unproclaimed roads. She then asked how involved the Department was in the classification of roads.

Ms Majodina asked if the Department had any plans to ensure safe public transport in order to encourage people with cars to use public transport.

The Chairperson asked how the Department dealt with provinces that had not performed.

Mr L van Rooyen requested information on a certain named road and when it was anticipated that this would be completed, because the Department had been busy on that road for a period of about 3 years now.

Mr L Suka suggested that next time; the Department bring a detailed report of what they had done so that the Committee could make a proper review of their performance.

Mr E Sogoni (ANC, Gauteng) commented that the capacity of departments to do monitoring was of utmost importance to him. He also said that the focus on expenditure on public transport by this department had shifted to 2010, but for the rest of transport, not much was said.

Rev P Moatshe noted that the roads were not able to carry the current load of traffic and asked what plans the department had made for 2010. Secondly, he requested that the department elaborate on the issue of a “non-compliant society” because his understanding was that the country had non-compliant individuals as opposed to society. Thirdly, Mr Moatshe asked what was happening around the taxi recapitalisation programme. He requested that the Department give them a detailed report as to how many taxis had been taken off the road to date, and procedures that would follow when taxis were taken off.

Mr M Robertson commented on the frustrations of trying to obtain a driving licence. The new Ottery Traffic Department took in only 100 people and told the rest to come back another day. A person would have to undergo an eye test both for a learners and a full licence. These frustrations and difficulties no doubt led to people rather buying illegal licences than pursuing the whole procedure.

Ms Khibi Manana Chief Director: Public Transport Strategy & Monitoring, NDOT,  responded in general to some of the questions raised. A public transport Strategy was developed and approved by Cabinet early in the year. The strategy aimed to move to a system that was controlled at Transport Authority level. The refurbishment strategy was aimed at transforming the whole public transport system. The proposal was to start implementation of phase 1 in 12 cities and 6 rural districts. Once the performance of these cities and districts had been reviewed, then the Department would look at expending the systems.

The Chairperson asked the Department if this response meant that the amount allocated for this strategy only related to host cities for 2010.

Ms Manana responded that this amount did not only relate to host cities, as the Public Transport Infrastructure grant formed part of the phase 1 funding for all cities .

Ms Inge Mulder, Finance Director, South African National Roads Agency (SANRA) responded to the question on traffic handling by saying that N1 and N2 route project, in Cape Town for instance, had been reviewed again and was being dealt with already, and the N3 project from Pietermaritzburg to Durban was also underway.

Ms Majodina said that the route between Eastern Cape and Durban was bad. When the province complained about this national road, they were told that that road was part of the old Transkei and that the legislation would need to be changed to transfer it over to fall within the national roads mandate.

Ms Mulder responded that there was a difference between a national route and a national road. Secondly, the Act specifically stated that with the areas such the old Transkei, either the province could choose to take on that road itself or, if it was required that it fall under national roads, then the approval of the Minister must be obtained.

Ms Majodina asked if the Department was saying that there was no national road in the Eastern Cape,  or whether this was a matter of tagging. She said if tagging was the problem the labels needed to be changed to reflect such routes between Durban and Eastern Cape as provincial roads.

Mr Suka suggested that the Department give a written explanation of a national road and a national route, and that a list be given of all provincial roads and national roads.

Ms Mulder referred the Committee to the SANRA website, as all this information was clearly set out there.

Department of Agriculture
Mr Sogoni asked how the Department was going to get the 5million hectares of land that was white-owned and what they were planning to do in order to speed up this process. Secondly he noted that during a recent visit of the NCOP to the Free State, farmers had said that they had got loans from the Land Bank for about R30 thousand, but that these had more than doubled over the years due to interest. He asked how the Department could assist the farmers in rectifying this. Making loans to people who could not afford to pay back seemed to him like reckless lending.

Mr Ramakarane responded that when government gave grants to beneficiaries of land reform, the difficulty was that almost 90% of farmers who benefited since 1994 received grants with a loan element, and those had not been written off by the Land Bank. The Free State Department said that they would assist farmers with production input, and make agreements with certain financial institutions.

Mr M Robertson said that many pigs had to be slaughtered due to swine flu. People were told they would be reimbursed for the slaughtered animals, yet this had not happened.

Mr Ramakarane responded that R230 million had been allocated but some provinces did not submit all their claims.  The number of pigs was 40 000 to date, and R88 million of the previous budget had not been claimed.

Mr Robertson asked whether the Eastern Cape had applied for any claims.

Mr Ramakarane responded that the province did apply for claims but certain claims were not sent out to the Department in time.

Mr L van Rooyen asked for clarity on the fact that the EPWP in Free State was allocated R75 million yet this amount was doing nothing for the Free Sate.

Ms A Mchunu (IFP, Kwazulu Natal) asked whether it would not be possible to reshuffle the various integrated departments - for example to combine environmental affairs with forestry -because where there was agriculture with no water, the people were totally helpless.

Rev Moatshe asked whether the Department had over or under spent in the current year.

Mr Ramakarane responded that the Department was roughly behind its spending projection.

The Chairperson requested that all those issues that were not able to be responded to during the meeting should be addressed in writing by the Departments.

The meeting was then adjourned.


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