Public hearings on the Housing Development Agency Bill

Human Settlements, Water and Sanitation

04 March 2008
Chairperson: Ms Z Kota-Federicks (ANC)
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Meeting Summary

The Banking Association of South Africa briefed the Committee on their views on the proposed Housing Development Agency Bill looking at the Agency’s functional operational framework, legislative issues, and provided recommendations. Its view was that the Agency should be lean and focused on its coordination / facilitationrole within the housing sector, and not be involved with development as well.

Questions from the Committee focused on the weaknesses of the proposed Bill and how these areas could be strengthened, the future of Thubelisha, the role and efficient structure of the Agency, capacity utilisation and availability and the kind of support the Banking Association would render to the Agency to capacitate it.

The Institute for Housing South Africa made a verbal submission which was cut short after members felt that it was misplaced. The Middle Village Community Representative Council failed to turn up.

Meeting report

Institute for Housing South Africa submission
Their delegation included Mr T Mthethwa and Mr Abraham Luruli (both former presidents of the Institute). Mr Mthethwa chronicled the humble beginnings of the Instititute, its objectives, its present day operations, its post-apartheid transformation, funding and problems bedevilling the Institute at the moment.

Discussion
Mr A Steyn (DA) interjected that he was not sure whether the Institute would make any meaningful proposals on the Bill. It seemed that the presenter was only chronicling problems at the Institute without any reference to proposals about the Bill. He suggested that the presenter should stop his submission, as it was unnecessary and irrelevant. He proposed that the Committee should set aside a date to address problems bedevilling the Institute, instead of wasting time.

The Chair agreed saying that the Institute should put its house in order, although they were welcome to remain in the meeting making comments about the other submissions where necessary.
 
The Banking Association South Africa submission
Mr Cas Coovadia, Managing Director, accompanied by Mr Prince Maluleke, Senior Manager, briefed the Committee on their views on the proposed Housing Development Agency Bill.

They submitted that the proposed piece of legislation was most welcome in addressing housing backlogs within the country in an environment characterised by blockages and lack of coordination of the sector’s role players. In principle it was fully supportive of government’s intent to establish an Agency which it believed was a bold initiative required by government to overcome the housing supply shortage for the low- and lower-middle income market segments. It pointed out that the Agency had the potential of reducing the housing supply shortage especially as government was the biggest landowner of well-located vacant land. However, the Banking Association had several concerns about the functional operational framework for that Agency. It was of the view that its establishment would further exacerbate an infrastructure ‘vacuum’, hampering its ability to increase housing delivery, resulting in a financial drain on government and it might be seen as an opportunity for local Authorities and Provincial Housing Departments to relinquish their responsibilities.

He pointed out that the Housing Development Agency, as envisaged in the Bill, would be a hybrid entity, as it would be required to act as both a contractor and a developer - engaging on both the supply and demand side of housing. There were numerous problems with this especially its diverse functions, competition with the private sector which contradicted government policy. It would duplicate Thubelisha structures. Its focus areas were simply too vast and important to be managed by one entity.

Other issues covered in the submission looked at the unsupported release of public sector land. This would:
- increase market distortions and ‘gaps in the housing ladder’ if developers would continue to be required to fund infrastructure,
- increase cross subsidisation between markets,
- increase land to stand delays,
- exacerbate the problem of inadequate economic and social infrastructure, and
- further weaken the already weak local authorities.

The Bill’s stance that the HDA cannot acquire land owned by provinces, municipalities, provincial public entity or provincial commercial enterprise or municipal entity was untenable. Over 80 per cent of national housing demand was within the top 20 municipalities. These municipalities were all to have accredited Housing Departments and so would act independently of the HDA. The Development Finance Institutions (DFIs) and parastatals such as Eskom and Transnet also needed to be included given their abundant strategic land ownings.

Their recommendations for the HAD were:
- that it be measured from a sustainability viewpoint, both the financial and social impact,
- assemble land on behalf of the second/ third tier government and DFIs for sale to the private sector,
- formulate physical infrastructure proposals on behalf of second/ third tier government to facilitate motivations for funding, assist second/ third tier government to navigate their way around procurement in respect of the complex MMFA and PFMA legislation,
- assist in up-skilling of municipal, provincial government resources,
- assist second/ third tier government housing project planning and outsourcing,
- establish an HDA with a lean group of professionals only,
- be placed in the Office of the Presidency since it cuts across departmental functions,
- should not be able to expropriate land, given this is already the jurisdiction of the Department of Land Affairs,
- should parcel land expropriated by the Departments of Land Affairs,
- should include Departments of Trade and Industry Land Affairs representatives on its board.

The Association believed that HDA could play a vital and strategic role in the provision of sustainable human settlements, provided its role was amended and narrowed as recommended. He noted that the need to double housing delivery within 10 years needed a singular concentrated focus. He further recommended for additional commentary to the Bill from National Treasury given the HDA’s envisaged role as a guarantor and borrower

Discussion
Mr A Steyn (DA) asked why the proposed amendments suggested by the Committee to Department of Housing in the previous sitting had not been effected. He asked Banking Association South Africa to substantiate on the unintended consequences of ‘crowding out’ the private sector. He asked for elaboration on the implications of the coexistence of Thubelisha alongside the Housing Development Agency.

Mr G Schneeman (ANC) asked if the Banking Association had received any feedback from the Department of Housing on the proposals they had made on the Bill. He also sought clarity on the Association’s views on the implications of competition between the HDA and the private sector. He queried the suggestion by the Association to house the HDA under the Office of the Presidency and questioned the rationale. He asked the Association to point out areas within the Bill that they considered defective and weak, requiring refining and strengthening.

Mr Coovadia commented that there was need to find a mechanism to optimise government and private sector resources without necessarily ‘crowding out’ the latter. He was of the view that HDA should ‘unblock the blockages’ by ensuring checks and balances and coordination within the sector. On the issue of Thubelisha, he said it should be allowed to continue with its mandate as a developer. He defended the placing of HDA in the Office of Presidency, by saying that this would give it teeth and the necessary integrative role critical to the housing delivery quest of the government.

A representative from the Association added that the ‘crowding out’ effect would push most private sector developers out of business given that the HDA would rely on cheap government funds. He also supported the Office of the Presidency proposal arguing that it was a cross cutting issue requiring coordination from the highest office in the land. He pointed out that there has been some verbal feedback from the Department of Housing.

Mr Steyn (DA) wanted to know whether the creation of the HDA as proposed by the Association would not lead to the duplication of roles with the Department of Housing. He also questioned the skills availability and capacity to address key challenges within the sector.

Mr Coovadia responded that there would not be any duplication given that the Department of Housing had a broader mandate as compared to the HDA, whose mandate was very specialised. He emphasized that the HDA must play the role of integration and coordination of role players within the housing sector. He added that the skills issue would remain a challenge but was optimistic that capacity was there to roll out the project.

A representative from the Association cited Clauses 4 and 5 as a big elephant requiring a major facelift if the Bill was to pass in its current form. At present there was an integration vacuum within the sector, which they hoped would be addressed by the establishment of the HDA.

Mr Schneeman (ANC) assured the Association that those provisions in Clause 4 and 5 had already been struck out and the Committee had advised the Department of Housing to ensure that these did not appear in the amended version.

Mr Steyn (DA) asked about the feasibility of creating a directorate on housing within the Department of Housing.

Mr Coovadia replied that it was possible but there was a need to ensure that the Department of Housing was ring-fenced. He added that the HDA would not take long to establish, provided it has a lean structure and focused on a singular area.

A Department of Housing representative agreed that the integration and coordination role of HDA would be critical in the long run. In principle, the Bill clearly shows infrastructural concerns would be addressed. He added the department welcomed the recommendations made by different stakeholders in principle and assured the banking fraternity that they would come looking for its promised skills. On the Thubelisha issue, he said it was important for stakeholders to understand that its mandate had matured. He noted that capacity in Thubelisha and SERVCON would be harvested and utilised in the created HDA.

Mr Coovadia commented that the Association had offered the department capacity in the past and would continue, when approached in future.

Mr Schneeman referred to the problems currently faced in inter-departmental planning and coordination within the government and expressed concern that something had to be done before establishing the HDA. He proposed that the Bill must explicitly make it clear that infrastructural development would be carried out by the HDA.

The Chair commented that it seemed that the Banking Association was of the view that the HDA should be lean and focused on the coordination role within the housing sector. She reminded members that the fruits of this initial drafting of the legislation would take long before they were felt. She thanked the Association for its eye-opening submission that was thought provoking and allowed for an informed engagement process.

The members of the Middle Village Community Representative Council failed to turn up at the scheduled time and the meeting was adjourned.

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