Medium Term Budget Policy Statement: Housing & Transport Departments’ briefing

JOINT BUDGET COMMITTEE
01 November 2007
MEDIUM TERM BUDGET POLICY STATEMENT: HOUSING & TRANSPORT DEPARTMENTS’ BRIEFING

Co-Chairpersons: Ms L Mabe (ANC) and Mr B Mkhaliphi (ANC)

Documents handed out:
Medium Term Budget Policy Statement 2007 [available at www.treasury.gov.za]
Department of Transport Presentation on MTBPS 2007
Department of Housing Presentation on MTBPS 2007 [Part 1][Part 2]

Audio recording of meeting

SUMMARY
The Committee was briefed by the Departments of Transport and Housing on their mandates and medium term policy priorities and what they had so far been able to achieve. Each Department briefed the Committee on its financial and audit performance and plans with regard to the Medium Term Budget Policy Statement.

The Committee questioned the Department of Transport on the spending, staff issues and vacancies, the constitution of the audit committee, the slow taxi recapitalisation progress, training to employees, the comprehensive strategic plan, and areas of emphasis over the next three years. Further questions related to the relevance of research and use of consultants. The Committee agreed that the Department of Transport needed to do more in improving its capacity in order to justify the huge amounts allocated and to successfully achieve the monumental goals ahead.

The Committee raised with the Department of Housing issues around spending, movement of funds from one programme to another, whether the Department could meet the commitment of eradicating informal settlements by 2014, areas of emphasis, and rationalisation of cost-cutting. Further questions were raised on vacancy issues, the lack of a proper HR plan, the plans to fast-track delivery, the new organogram, the quality of units, adequate monitoring and the lack of distinction between houses completed and those not completed. A generalised response was given, due to lack of time. Committee members were generally dissatisfied with the answers given so far, and further responses were to be forwarded in writing.

MINUTES
Medium Term Budget Policy Statement (MTBPS) Department of Transport (DOT) Briefing
Ms Mpumi Mpofu, Director-General, Department of Transport, outlined the 2006/07 expenditure trends of the Department, stating that the total budget for the period was about R13.7 billion. Of this amount, R386,4 million was under spent. She noted that certain challenges were identified by the audit report, including non-compliance with relevant legislation, issues around governance, corrections made to the financial statement, and lack of internal controls. Steps were however taken to address these challenges during the period.

The main interventions by the Department to improve its performance had included a new audit committee being appointed. Relevant legislation like the National Road Traffic Act was in the process of review to enable the Department to suspend Testing Centers. Also, corrections were made to the financial statements emanating from the audit and processes were put in place to ensure correct disclosure. Furthermore, post-implementation audit had started, and this report would be tabled before parliament.

On its medium term policy priorities, the Department planned to obtain cabinet approval for the Integrated Transport Black Economic Empowerment (BEE) Charter and implement the Charter. It also planned to set up an independent ports regulator in each commercial port, and improve security at vehicle stations and drivers’ license testing stations by March 2009. There were also plans to develop a regional integrated search and rescue strategy in 2008/09. Furthermore, the 2010 transport operational planning framework had been finalised, while an Integrated Rural Transport Development Programme with geographical information systems was to be established by March 2008.

In respect of public transport, the Department was to facilitate the implementation of a public transport strategy and development of phase 1 operational plans for the Integrated Rapid Public Transport Network in 12 cities, aligning with 2010 plans. The Department was to support the taxi recapitalisation programme (TRP), and also the transformation of bus subsidies into public transport subsidies to include taxis. In this regard, the availability of new compliant taxi vehicles was currently being facilitated.

Discussion
Ms N Dumbuza (ANC) asked if there was any assurance that by the end of the year, the whole budget would have been spent by the Department. She also asked to know what the Department was doing about staff that were resigning in large numbers.

Mr G Schneeman (ANC) asked to know if the Department actually had the capacity to handle the 2010 programme considering the number of vacancies that it had.

Ms Mpofu stated that the Department had been allocated extra funds to assist with improving capacity. She however said that the extent of such improvement could only be to the tune of the amount allocated.

Mr Schneeman asked if the host cities had the required capacity to host the 2010 World Cup events.

Mr Schneeman asked how the audit committee was constituted.

Ms Mpofu stated that the new audit committee consisted of five members, and was structured in such a manner that if one or two members were to resign, the other three would still be able to form a proper quorum.
 
Ms R Mashigo (ANC) asked what was contributing to the failure of the taxi recapitalisation process. She said the process started in 1999, but that actual scrapping of taxis began only in October 2006.

Ms Mashigo asked whether the training being offered to employees of the Department was relevant enough to retain them in their positions.

Ms Mpofu stated that the training being offered to employees was relevant and quite diversified. Training was being offered in areas such as aviation law, maritime transport, and contract management. She added that the vacancy rate in the Department had steadily declined and that the grades in the Department would need to be improved in order to attract more qualified personnel.

Mr B Mkhaliphi (ANC) asked whether the Department had a comprehensive strategic plan to help implement government policy. He also asked if the Department’s allocated funds were enough to implement the MTBPS.

Ms Mpofu stated that the Department had a public transport action plan already approved by Cabinet, and that the Department intended to implement public transport on an 18 to 24 hour basis. She added that the Department was being redesigned and restructured to have a comprehensive policy framework, and its policy framework was different from its strategy implementation framework.

Mr Schneeman asked the Department to suggest areas where greater emphasis should be placed with regard to the transport budget for the next three years.

The Chairperson asked whether the current researchers and consultants engaged by the Department had adequate knowledge and understanding of what the developmental environment and circumstances of the country were like. She also asked to know what was being done in the various entities within the Department to provide more training for staff.

Ms Mpofu conceded that challenge the Department faced was that it had had the same group of researchers for a long time. She said that in this regard the Department was trying to strengthen the research component by raising it to a Chief Directorate level. The Department was satisfied with the consultants it had currently, who were technically competent. She added that the Department usually engaged consultants from a consortium of companies, and not just from one company. She concluded that the Department had already rationalized its activities even before the directive from the Minister of Finance.
 
MTPBS: National Department of Housing Briefing
Mr Itumeleng Kotsoane, Director-General, Department of Housing, briefed the Committee on the aspects of the MTBPS that concerned the Department. The areas highlighted included the Department’s mandate and medium-term policy priorities, significant allocations, personnel training and skills development, financial performance, and audit outcomes. He stated that the government White Paper on Housing remained the pillar of the housing policy. He outlined the priorities of the comprehensive plan that included the acceleration of housing delivery within the context of sustainable human settlements.

Mr Kotsoane stated that a number of risks and challenges still remained in the housing sector. These included the existence of a significant housing backlog, multiple capacity constraints on government and the construction industry, and the lack of best-practice models for expeditious delivery of integrated housing and sustainable human settlements. Further challenges arose from the changing demographics of South Africa, rapid urbanization and migration, the influx of immigrants and the erosion of affordability of housing

The allocation for the current financial year was R8.2 billion for the completion of current committed multi-year projects. Mr Kotsoane noted that the housing backlog must be eradicated within the shortest possible time as cost projections indicated a doubling of costs for every two years delayed. He hinted in this regard that some reforms had taken place, which included repositioning the national, provincial and municipal housing departments for improved housing delivery and capacity development, especially at provincial and municipal levels.

With regard to personnel development, the Department had a restructured and enhanced organogram and a new Human Resources (HR) plan was being developed. Also, under the Department’s HR development programme, staff training and skills development was ongoing while scholarships and bursaries were being offered to employees and students for various studies.

Mr Kotsoane then summarised the financial performance of the Department. As at 31 March 2007, about R7.3 billion had been allocated for various programmes, of which about R7.1 billion was spent and about R167.7 million remained unspent. One contributing factor to the under-spending was the administrative expenses unspent due to the existence of vacancies. He also outlined the expenditure trends over the following three financial years (see attached presentation)

In conclusion, Mr Kotsoane stated that the number of subsidies approved from 1994/95 to March 2007 was 3,043,900, while the number of housing units completed and in process of completion in the same period was 2,355,913. The Department had received an unqualified audit report with some matters of emphasis.

Discussion
Ms Dumbuza asked if there were any guarantees that by the end of the financial year, all the funds budgeted would have been spent by the Department.

Ms Dambuza also noted that funds had been moved from one programme to fund another programme, and asked to know why this was the case, and why certain programmes were not budgeted for.

Mr Schneeman asked if the Department would be able to meet government’s commitment of eradiating informal settlements by the year 2014.

Mr Schneeman also asked if there were any particular areas where emphasis should be placed, in terms of the housing programme in the Medium Term Expenditure Framework (MTEF) period.

Mr Schneeman asked the Department to indicate how it intended to implement the rationalization or cost-cutting directed by the Minister of Finance.

Mr A Steyn (DA) asked how the Department was dealing with vacancy issues without a HR plan.

Mr Mkhaliphi asked what plans the Department had to fast-track good quality delivery.

Mr Mkhaliphi asked the Department whether there was any guarantee that it could handle the resources allocated to it effectively. In addition he asked that the Committee be furnished with the Department’s new organogram.

The Chairperson asked whether the units being delivered were of good quality.

The Chairperson asked why performance bonuses were paid to staff when there was still a lot of complaint about delivery.

Mr Steyn asked to know whether there was adequate monitoring to ensure that the subsidies paid out reached the proper beneficiaries.

Mr E Sogoni (ANC) noted that the report did not distinguish between houses already completed and those not yet completed.

Ms L Chikunga (ANC) asked to know how long the process of building one unit would take.

Mr Kotsoane responded to these questions in general, due to lack of time. The full responses to the questions would be forwarded before the end of the following day.

Mr Kotsoane said that despite the many challenges being faced, delivery in the sector was being geared up. Officials from the Department were being sent to resolve the challenges around delivery. He admitted that they had been spending less than half of their budget. He added that the HR plan of the Department was at its final stages and that the Portfolio Committee on Housing would be briefed on the restructuring within the Department. He hinted that the Health, Safety and Environment scheme of the Department had also been improved.

The Chairperson noted that constant restructuring was inimical to the success of the Department. She also frowned at the practice of shifting funds from one programme to another. She noted the dissatisfaction of Committee members with the answers so far given by the Department, and asked that the responses be forwarded on the following day. 

The meeting was adjourned.