Local Government & Housing Provincial Spending: 3rd Quarter 2007 Spending

NCOP Finance

12 February 2008
Chairperson: Mr T Ralane (ANC, Free State)
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Meeting Summary

Five provincial Departments of Local Government and Housing, excluding Gauteng, Western Cape and KZN, briefed the committee on their housing projects, setting out the spending, progress on projects, challenges being faced and plans for the 2008/2009 financial year. Gauteng and Western Cape tabled written presentations to the committee outlining expenditures, underspending and overspending from the third financial quarter and plans for the 4th financial quarter.

Under spending was reported in three provinces, with two provinces having made plans to resolve the problems, and having requested reallocation of funds called back by National Treasury. Northern Cape and Free State indicated their crucial need to access the funds recalled in order to proceed with projects already under way. The Eastern Cape, North West and Northern Cape particularly experienced challenges relating to the National Home Builders Registration Council. Several provinces indicated that they were facing challenges relating to the contractors, in terms of their capacity and service delivery, which subsequently led to shoddy work and the suspension of housing projects in certain municipalities. Eastern Cape indicated that it was embarking on initiatives that included awarding more lucrative contracts, as a means of attracting reputable contractors. Limpopo province indicated that it was conducting training programmes for contractors as a response to the poor service delivery by contractors.

The Committee provided suggestions to deal with the problems indicated, in addition to the interventions of the provincial departments. Several committee Members commented that poor planning and monitoring might have led to the problems being faced. With regard to the provinces that requested more funding and reallocation of recalled funds, the Committee indicated that it would assess the provinces’ capacity to absorb new funds. The Cmmittee indicated that it would make plans to have meeting with Eastern Cape HOD and MEC for Local Government and the Home Builders Registration Council, to resolve the problems being faced in the province. The committee indicated that tit would be visiting the Eastern Cape on 22 February to try and resolve the challenges being faced in the provinces.

Meeting report

 

Provincial Department of Local Government and Housing: Spending on Housing Performance for 3rd Quarter
Eastern Cape Provincial Department Briefing
Mrs Tokozile Xasa, Eastern Cape MEC for Local Government and Housing, tabled a presentation to the Committee on housing projects expenditure for the first 9 months of the 2007/2008 financial year. She outlined the key challenges being faced in the province. These included poor or no planning and alignment of budgets in the housing development projects. There had thus been prioritisation of all municipalities that were facing these challenges and a turnaround plan that involved stringent approval and monitoring of projects was to be implemented in 2008/2009.She indicated that a further challenge faced by several municipalities land issues and was being resolved in cooperation with the Department of Land Affairs. There had been agreement on a moratorium on land that was being developed by the challenged municipalities and departments. However, several projects had been unblocked after intensive investigation and re-planning. These municipalities had also been facing challenges involving a lack of capacity by contractors. A memorandum of understanding had therefore been signed with the Eastern Cape Development Corporation (ECDC) on the use of established and reputable contractors. It had further been decided to award attractive contracts as a means of luring reputable contractors. The turnaround plan had so far involved R1 billion and 30% expenditure.

Discussion
The Chairperson commented that it was imperative to focus on readiness to spend money, considering that more funds were to be made available in the upcoming financial year. He added that Member Mr E Sogoni would share experiences from Gauteng that would be beneficial in the resolution of the problems, including the huge under spending, and to also improve on the programmes that are already underway.

Mr M Goeieman (ANC, Northern Cape) asked for the implications of the problems being faced by Eastern Cape and the province’s ability to commit the funds that were not spent in the financial year.

Mr ESogoni (ANC, Gauteng) commented that there was a need for further meetings that would focus on solutions to address the problems being faced in the Eastern Cape. He indicated that a major problem was poor planning, which had culminated in numerous other problems. The lack of capacity appeared to have led to the inability to spend the funds that had been allocated. He proposed that the Eastern Cape MEC and HOD be invited to assist in resolving the problems. With regard to the land issue, the government had sent out a clear moratorium on the use of government land and there should not be a problem since all provincial departments were part of the same government. A comprehensive approach might thus be necessary to resolve these problems. He further indicated that there could be other problems not highlighted, such as skills, that could have caused the shoddy work indicated by the MEC and the incapacity to use the funds. There also needed to be an indication of the short-term plans to resolve  the problems, and the long term plans for housing in the Eastern Cape.

The Chairperson requested to know the role that the Environmental Impact Assessment (EIA) could play in resolving the problems in the Eastern Cape.

Mr Sogoni replied that the EIA was a necessary step to be taken. He indicated that it was also necessary not to delay the implementation of programmes.  

The Chairperson commented that the department responsible for the EIA needed to be brought on board, as there appeared to be a need to go to the Eastern Cape to assess the situation

Mr B Mkhalipi (ANC, Mpumalanga) commented that the housing projects should be seen in the broader context of the government’s Reconstruction and Development Programme (RDP) that was launched in 1994 and its successor Growth Employment and Redistribution (GEAR) Macro-economic strategy. The housing projects were thus a paramount feature of the government’s promise to redress previous imbalances and the democratisation of the South African society.  He also indicated that the National Home Builders Registration Council (NHBRC), the Construction Development Board (CDB) and other numerous other institutions, including those mentioned in the presentation, were structures created specifically to facilitate and capacitate programmes such as housing development, and ensure quality. They however appeared to have become barriers and hindrances rather than facilitators. The problems could therefore be solved by engaging these structures and insisting that they go on outreach and awareness programmes to attract investors and contractors. Furthermore there was a need to ensure that they met the necessary standards and prevent problems similar to those being currently faced. He further stressed the gravity of the issues highlighted in the presentation, as they were essentially barriers on achieving the millennium development goals.

Ms D Robinson (DA, Western Cape) indicated that she concurred with Mr Mkhalipi’s assertion and commented that she was circumspect about the CDB. It was a very important institution that safeguarded and ensured that quality was attained in the programmes embarked upon. It was however crucial that it ensured that programmes progressed whilst guaranteeing quality. She referred to the NHRBC as an example of safe-guarding institutions, although there had been reports on it being austere and becoming a complete barrier. There was an urgent need to investigate these institutions and resolve the problems identified.

Ms Xasa commented that there were further problems involving the Integrated Development Plans (IDP). She added that the NHRBC had not yet responded to several housing project proposals

Ms N Ntwanambi (ANC, Western Cape) referred to page 11 of the report and asked if there was the capacity to intensify rural housing as part of the programmes benefitting from the R500 million allocation.

Ms Xasa replied that the R500 million had to be spent or surrendered, and thus plans had been made to utilise it. She also indicated that progress had been made with regard to the projects. The programme included the use of alternative sanitation, water supply and electricity and was part of the Integrated Development Planning (IDP). It therefore sought to integrate the department’s economic development aspects. She further indicated that ABSA Bank and several municipalities were cooperating and providing assistance to the programme. There were also areas marked as economic development nodes, which were prioritised in the programme. She added that there was a lot of commitment to meet the goal of intensifying rural housing and that the money allocated would be of great assistance.

The Chairperson commented that there was a need to convene a meeting with the National Department of Housing, the NHBRC and the Eastern Cape MEC so as to find out how they were supporting each other in the housing projects. He also requested that a list be provided of all the municipalities that did not have water and sanitation, in order to ensure that something was done.

Mrs Xasa thanked the Chairperson for suggesting the meeting. She commented that the current problems in the Eastern Cape were of a broad nature requiring the cooperation of all the parties involved.

Mr Sogoni proposed that the Department of Land Affairs be invited to the meeting proposed

North West Provincial Department Briefing
Mr Howard Yawa, North West MEC for Local Government and Housing, and Mr Mohamad Motala, Head of Department (HOD): North West Local Government and Housing, tabled a written presentation outlining expenditures. Mr Yawa proceeded to elaborate on the challenges being faced in the Province. He indicated that several challenges were being faced in the province, with Khutsong Resettlement Plan and Matlosana Pilot Project being the major ones. Central to these challenges was the red-tape experienced in getting approval from the NHBRC. Funding for Internal Services was a further challenge in terms of policy and impacted on the housing projects in Naledi. Nonetheless, several projects that had been delayed were now in progression.

Discussion
The Chairperson indicated that there was need to have a joint meeting with the relevant Portfolio Committee and the NHBRC in order to resolve the challenges indicated. He also expressed his concern over the spending of the Municipal Infrastructure Grant (MIG). There was an urgent need to address problem of depressed municipalities not spending the MIG funds. He also stated that the Eastern Cape and North West Province needed to indicate whether there were problems relating to demarcation.

Mr Yawa commented that the challenges being faced were related to substandard work.

Mr Z Kolweni (ANC, North West) stated that the National Council of Provinces (NCOP) had visited the North West Province and had made recommendations on the damages identified to the HOD. He asked whether there had been housing projects thereafter that had taken those recommendations into cognisance.

Mr Mkhalipi highlighted that there were housing projects in Tswaing that had resulted in substandard houses that were not fit for habitation. The toilets built were falling in. He asked to know if there was anything done to rectify the situation.

Mr Sogoni indicated that there appeared to be poor delivery by service providers, yet the government had not rectified the problem. He noted that in terms of legislation the provinces had oversight over the municipalities and were meant to resolve these problems. Parliament would therefore hold the provincial departments accountable for the activities and problems occurring in the municipalities. The problem with monitoring the activities in the municipalities had led to other problems such as the under-spending of the MIG. He added that the Municipal Finance Management Act (MFMA), sections 34(1) and 34(3) outlined issues relating to assistance and monitoring. The Act clearly addressed and stipulated the municipalities’ roles and mandate. The Committee and the provincial departments thus had the legislative mandate to monitor the municipalities and hold them accountable for their activities.

Mr Yawa replied that the problems with municipalities went beyond accounting for financial expenditures and correct usage of funds. He indicated that he had personally visited the municipalities and monitored their activities. He added that corrective actions to address problems identified were already under way and responsibility for several projects had been taken away from some of the municipalities. Nonetheless, the municipalities’ problems in generating finance led to the incorrect usage of funds.

Mr Mkhalipi asked to know the timelines for completing the housing projects after receiving funding.

Mr Yawa replied that 2007/2008 housing projects were significantly under.way, with submissions having been made to the relevant departments with regards to the Khutsong projects. He indicated that detailed information on the Tswaing project would be provided in the near future.

Mr Motala commented that responsibility had been taken away due to municipalities’ failure to get accreditation. Most Municipalities could not even attain level one in terms of accreditation. He indicated that the Shishaka Municipality had specifically been targeted in this regard.

Limpopo Provincial Department Briefing
Ms Maite Nkoana-Mashabane, Limpopo Province MEC, and Mr Sam Rampedi, Limpopo provincial department HOD, presented their 2007/2008 progress report on the Integrated Sustainable Human Settlement Programme and plans for the 2008/2009 financial year. The MEC referred to page 6 of the presentation outlining the strategic interventions. She indicated the strategic interventions reflected the province’s foundation building and implementation of housing programmes. Page 7 and 8 outlined the province’s expenditures in the 2007/2008 financial year.  The preparations for the 2008/2009 housing plans were also outlined and it was noted that contractors would commence work in March.

Discussion
The Chairperson aired his concern over the ability of the province to spend the R160 million on rural housing. He asked for clarification on the 60% fund expenditure indicated, saying that Treasury had reported less spending in the province.

Mr Rampedi replied that the province’s expenditure was below 60%, as indicated by Treasury as at December 2007. However, the spending had increased and was approximately 66% as at 11 February 2008.

The Chairperson referred to page 7 of the presentation and requested clarification on the Sites and Services programme, as well as on the blocked projects mentioned in the presentation.

Mr Rampedi replied that part of the land that was being used for the housing projects was not serviced. The land had now been serviced and the contractors hadcommenced work and have been on site since December/January. He also indicated that there was close monitoring of the projects and efforts to fast track several projects. The blocked projects were basically incomplete projects that were suspended due to poor planning. There had been intensive assessment of the blocked projects and the necessary actions to rectify the problems had been identified. He added that 200 houses were expected to be completed by the end of the next financial year

Mr Mkhalipi referred to page 10 of the presentation and asked for the exact location of the training programme of ten emerging contractors. He asked why, in such a large project, there were only ten being trained. He further requested more information on the funding of the programme, as well as the involvement of the NHBRC and other institutions in the project.

Ms Nkoana-Mashabane responded that the training projects were initiated in conjunction with the National Department of Public Works (NDPW) Sector Education and Training Authority (SETA). She also noted that the training project was a pilot project, hence only ten contractors were trained initially, with an increase of the number of contractors expected in the near future.

Mr Rampedi commented that the training programme involved various stakeholders, including the Departments of Public Works, Health, Education, and Environmental Affairs. The programme essentially involved enhancing the capacity to deliver in terms of skills and finance, and other areas that had experienced poor performance. He also noted that the social cluster, which consists of the Department of Health, Education and Social Development, had assisted in building capacity.

The Chairperson indicated that the Committee would visit the Limpopo Province on 22 February to address the problems being faced and the goals for the 2008/2009 financial year. It would be necessary also to assess the capacity of the province to absorb the funds allocated, specifically the R100 million.

Free State Provincial Department Briefing
Mr Joel Mafereka, Free State MEC for Local Government and Housing, gave a presentation on the 2006/07 Third Quarter Performance, planned measures to improve spending, service delivery challenges and capital expenditure. He indicated that the planned housing units for 2006/2007 had been exceeded, as indicated on page 5 of the report.. As highlighted in the presentation, there was 50% spending at the end of December, which translated to approximately R400 million spent out of the R657 million budget. National Treasury took away R100 million due to insufficient spending. This would produce problems as it was budgeted for several projects involving 200 people. The spending had nonetheless increased to R410 million as at February 2008. As indicated in the presentation, measures had been put in place to address the under spending, with an expected expenditure of R60 million, out of the R87 million budgeted, by the end of March. Service delivery challenges and the necessary responses to address them were outlined in the presentation. The main service delivery challenge involved land identified for development although township registers were not in place in the municipalities. A further challenge was the disparity in the capacity of contractors, which was being resolved through a contractor development programme. Unprecedented weather conditions in April/May created a further challenge and might result in lack of water for contractors to proceed with their work. There were also financial problems being faced with regards to Municipal Housing Sector plans and thus funds had been requested from the National Department of Housing (NDOH). Specifically, land had to be serviced so the projects could continue. Given the problems that the Department was facing, the projects committed to, and the huge spending expected in March 2008, the province requested the assistance of the Committee with regards to the R100 million called back by National Treasury.

Discussion
Mr Mkhalipi commented that it was disturbing to notice the disparities in the provinces regarding empowerment of municipalities, especially taking into consideration the collaborations taking place between some provinces. He indicated that there was need for agreement with regards to the cooperation to empower municipalities.

Mr Mafereka replied that there was no ambiguity in the Free State with regard to empowerment of Municipalities. He indicated that Municipalities were not appointed as contractors.

Mr M Goeieman asked whether the land being developed was linked to the Iintegrated Development Planning of Local Government. 

Mr Mafereka replied that the Free State provincial department participated in the IDP process.

The Chairperson asked whether the plans to acquire land included private land.

Mr Mafereka affirmed that the land acquisition included private land.

The Chairperson asked whether the province was ready to absorb more funding.

Mr Mafereka replied that the province was ready to absorb more funding as well as to spend the money called back by Treasury.

The Chairperson indicated that the Committee also needed to see the quality of spending.

Northern Cape Provincial Department Briefing
A delegation from the Northern Cape Department of Local Government and Housing gave a brief presentation to Select Committee on Finance. It was indicated that the National Minister of Housing visited the Northern Cape to check on the readiness of the department in terms of capacity. The Department was found not ready to implement the NBHRC. Nonetheless, the provincial department was now ready to implement housing projects in the 2008/2009 financial year and was waiting to receive the additional R100 million requested from National Treasury.

Discussion
An official from the Department of National Treasury commented that Treasury only received information on the processes that were meant to take place in the Northern Cape. National Treasury still needed to be convinced that money would be spent, having only received the request for the additional R100 million at the end of the financial year.

A member of the Northern Cape delegation replied that the province was ready to spend the R100 million and already had contractors waiting to be paid.

The Chairperson indicated that the Committee would also be assessing and monitoring the provinces’ ability to spend the allocated and requested funds.

A member of the Northern Cape delegation commented that the province had projects overlapping into the 2008/2009 financial and was in critical need of additional funds to continue.

The meeting was adjourned.


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