National Housing Development Agency Bill: public hearings

Human Settlements

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

Three organisations made submissions to the Committee. Servcon felt that a key missing element was that of property management. In cases where too much responsibility was delegated to residents of state housing, insufficient rent was collected to pay for maintenance and other expenses. Sufficient funding was a concern. The functions of the agency seemed to be dependant solely on agreements with municipalities and excluded any working relationships with the provinces and/or national government. The Bill was silent regarding the nature of the juristic person that the HDA was going to be as it did not state whether the HDA would operate as Section 21 company or other legal entity.


The Ekurhuleni Municipality had concerns with some aspects of the Bill. These included uncertainty over the position with land acquired by an agency and then transferred to a municipality. There were some uncertain areas regarding funding, where municipalities had to pay fees to an agency as well as costs for the provision of bulk services. The position regarding funding of housing for persons earning more than R3 500 per month was also a concern.

The Middle Village Community Representative Council supported the Bill. They felt that Section 21 companies could be used to assist with the acquisition of land and housing projects.

 

Meeting report

Servcon submission
Mr Lindikhaya Mpambani (Chief Executive Officer (CEO), Servcon) said that Servcon embraced the Bill. However the scope of the role of the HDA ought to incorporate a wider range of stakeholders.

Decisions about land should not only be subject to the decisions of the local municipality, but rather fall under broader government structures. The functions of the agency seemed to be dependant solely on agreements with municipalities and excluded any working relationships with the provinces and/or national Government.

As a way of expanding the function of the HDA, Clause 6 ought to be broadened to include property management activities which are currently within the mandate of Servcon.

 

A service provider was needed for this as the state’s own properties needed to be managed. If the agency were to be self-sufficient, it would have to do property management. There was a wide scope in this field. The agency could not rely solely on a grant but needed income from rentals.


The Chairperson asked him to go back to his comments on Section 6 of the Bill.

Mr Mpambani explained that there was one province where property was being renovated. However the Department had a limited capacity. In some cases the residents of government owned flats were allowed to manage the block. Rentals which were due were not being collected, and there was no oversight. In some cases residents sublet their flats. Rentals were needed to pay municipal rates and taxes. Instead, this money had to be found in the provincial grant. The Bill provided an opportunity to provide for oversight and sustainable development.

The Chairperson asked how things could be done properly. She asked how his comments could be applied to the first phase of the N2 Gateway project.

Mr Mpambani replied that there was a focus on housing development rather than on property management. This was the problem with the N2 Gateway project, as no rent was being collected. People had to be made to understand the need to pay rent, as this made provision for maintenance, water, electricity and other costs. The Department focussed on development whereas management structures had to be put in place.

Discussion
Mr A Steyn (DA) thanked Servcon for its submission. He said that there must be wider funding for the development agency. However, the focus should be on the delivery of houses, but these suggestions were moving away from the core focus area. In the Special Housing Bill of 2007 there was a call for municipalities and provincial government to focus on rental stock. The functions of the proposed Housing Development Agency (HDA) should not go that far. Its focus should be on clearing up bottlenecks.

Mr G Schneemann (ANC) said most of his concerns had been raised by Mr Steyn. Skills would be lost, and the establishment of the HDA could mean the closure of Servcon. He asked why the issue of property management was being raised. The Bill was about the delivery of housing and about the acquisition and development of land.

Mr Mpambani replied that he welcomed the Members’ comments. There would be a loss of skills after the formation of the HDA, and it would result in the cessation of the activities of Servcon. If the opportunity was available, thse skills should be used. Another avenue of revenue generation was needed. Servcon wished to make its input, but accepted if the input was not welcome.

Ms B Dambuza (ANC) said that Servcon must be honest, and say where they saw their role in the HDA.

The Chairperson agreed that the non-payment of rent was a problem. There was no way that government could solve all the problems. She asked why property management was being brought in now.

Mr Mpambani said that Servcon would know how far it could go if and when guidelines were issued by Cabinet. Property management was included in its activities. They did not have a mandate at present, and had therefore put this issue forward. It was just an input. One company could be closed and another formed. Migration of people from one to another would not be automatic.

The Chairperson said that Servcon was right to raise the issue. She would like to ensure that the inputs on the Bill be as narrow as possible. Government had to serve the people, and delivery of housing was one aspect of this commitment. Only those skills needed for the HDA would be incorporated.

Mr Mpambani said the point was well understood.  However, an issue to be resolved was the funding for land purchases. A problem was the fluctuation in property prices.

Mr Steyn said that the right-sizing mandate had ended some seven years previously. A special purpose vehicle was needed to source land.

Mr Mpambani said that this was what Servcon was doing. There were agreements with the Department of Housing (DOH) and Public Works Department (PWD).

Mr Steyn said that Servcon fitted in well with other agencies.

Mr Mpambani said that the estimated cost of land for current purchases was R228 million. Of this, only R57 million could be readily provided. If Servcon had its own revenue sources it could finance the balance.

The Chairperson said that a mandate would be given to the agency. They must have the knowledge to acquire land.

Mr Schneemann agreed that funding was a problem. The Bill stated the sources of income. These would include inter alia Parliament, donations and interest. He asked if Servcon was saying that this would not be enough.

Mr Mpambani replied that provisions for funding should be included. Financial sources were only available to municipalities. They could be rendered if a mandate was given.

The Chairperson asked why there was so much concern about Servcon now.

The CEO replied that his organisation was not in a position to render its services to provinces.

Mr Steyn asked that Servcon make a submission by the following week giving its experiences. It should include what specific measures it felt should be taken.

Mr Schneemann said there should be an extended mandate. The submission requested by Mr Steyn should be a summary of Servcon’s successes and challenges, and should outline the collaborations in which it was involved.

The Chairperson said that this was a bilateral process. The details requested by the Members could be done later. She asked if Servcon had any reply on the new mandate.

Mr Mpambani said Servcon had no comment.

The Chairperson said that a synopsis could be provided at a later meeting. She asked if the Department had any comment.

Mr Joseph Leshabane (Deputy Director General, DOH) said that Servcon’s submission did not in itself reflect the Department’s experience. Servcon had been a stop-gap measure. There was currently no provision to acquire new holdings of land. Only interim measures were in place. They were still at a very early stage. They were looking at 1 000 hectares.

Mr Michael Myonezulu (DOH) said that the DOH needed to ensure there was a different level of understanding. There was a broad enough mandate for other programmes. They were not all managed in the same way.

The Chairperson said that what had been asked of Servcon still stood. They asked what their experiences were in general and what was being done in the provinces. She asked what form of guidelines was needed.

Ekurhuleni Metropolitan Municipality submission
Mr Miemie von Maltitz (Acting Director Policy and Planning, Department of Housing, Ekurhuleni Municipality) said that something was unclear in Section 3 of the Bill. The question was in whose name the land would be registered if it were acquired by the HDA on behalf of a municipality or provincial department. There were additional costs associated with registration. That in itself was one of the major challenges that one experienced at the moment. He asked why municipal land should be included in the Bill, as he understood this was exempted in terms of the Integrated Development Plan (IDP). He went on to explain that the municipal approach was that if land was found that was suitable and available, in terms of IDP, the municipalities were doing good in identifying that land.

He said that Section 24 left confusion about additional amounts of funding for the services of the HDA. Would it be funded through subsidy? Municipal experience had been that in essence it had been indicated so, but insufficient allocation had been made, and what happened was that these amounts had to be taken out of the subsidies, e.g. project management fees. This then affected the actual probability to be able to provide in terms of the costs.

The other issue Mr von Malitz commented on was the question of the costs associated with bulk services and provision in the acquisition. There have been cases where the state or the municipality did have land, but there were a whole lot of issues that prohibited the development of that land, because the bulk services costs were not funded from national. The municipality had to provide the bulk infrastructure, even if the agency did procure the land.  There needed to be an amendment to the Bill to indicate that there would be funding available for bulk infrastructure.

Mr von Maltitz said that it was unclear as to how funding would be provided for persons with an income of between R3 500 and R7 000. It was unclear if this case was provided for. In terms of the equitable share formula, Ekurhuleni wished to know what the financial arrangements were. Capacity was needed at metro levels.

Mr von Malitz went on to say that the municipalities should be allowed to contract with the agency on a program to program basis. One issue that needed to be fleshed out was capacity development of municipalities in housing development.

Lastly, Mr von Malitz mentioned that the Bill was silent in relation to the provinces. In the past, there had been areas of conflict with regard to responsibilities between the national and provinces. He requested that the Bill include a proviso that there should be provincial interaction and support of the municipalities, which is consistent with the IDP.

Discussion
The Chairperson said that the input was very clear and suggested that they had to deliberate on the issues that Mr von Malitz had raised.

Mr A Steyn (ANC) said that after he had listened to the submission, it becomes obvious that   Ekurhuleni municipality was in favour of the Bill, but they lacked information, they lacked detail. Looking at the submission, it is clear that it was also submitted to the Department of Housing, before the Bill was tabled in Parliament. His question, like yesterday with the Banking Council was what was their interaction with the Department after their submission? They seemed to have the same questions they had then, which led him to believe that very little interaction had taken place and once again very little that was submitted was transferred to give clarity to the Bill.

Mr G Schneeman (ANC) said he actually wanted to ask the same questions as Mr Steyn. He wanted to acknowledge that the municipality had gone through the Bill thoroughly. In terms of their experience, how did they see the HDA Bill having an impact on housing delivery?

Mr Von Malitz replied that they had had numerous interactions with the department. By the time we had made this submission, the Bill had already been drafted. However, one needed to tighten and strengthen the Bill to overcome these shortcomings to ensure future success.
Based on their experience they believed that the agency was a good thing, as is it focused on a specific mandate for delivery. What they had found was that everyone had fallen over their feet in relation to the housing delivery process. The major problem was that national want to be developers, provinces want to be developers and municipalities want to be developers. They believed it was best done if left to national and provinces. If it was done through the agency that was fine, but as a municipality they wanted to focus on planning and development aspects related to housing delivery. Ekurhuleni was probably the first municipality where they are servicing stands in the informal settlements, providing water and sanitation. They asked the province to focus on housing construction, which allowed a clear demarcation of roles and there was no conflict of responsibilities.

Mr Steyn asked where the funding for bulk services would be sourced.

Mr von Malitz replied that a proposal had been made some four or five years previously. There was a consistent migration plan. Risks had to be taken and Environmental Impact Assessments had to be done. There were huge problems with profiteering, compliance with the Public Finances Management Act (PFMA) and feasibility studies. The same rules did not apply as in the public service. There was a subsidy for bulk services for subsidised houses. Some alternate funding was needed. This affected the speed of delivery.

The Chairperson asked if there was funding from the private sector. She asked if banks were involved. She asked how the private sector could help. There was a form of pseudo project management. Private sector involvement was correct for persons with an income of above R3 500.

Mr Schneemann referred to page 2 of the Ekurhuleni submission. He asked under what circumstances the municipality thought that use of the HDA might be made compulsory. It was not the case at the moment.

Mr von Maltitz said that when permission was granted, he assumed that there would be some warning. All parties needed to agree.

Mr Leshabane said there was a point at which responsibility would change hands. This had been raised in several quarters. The HDA could acquire land and then transfer it. There were pros and cons to either method of acquisition. The land would go to the end user in any event. He asked why the land would then have to be transferred to the municipality. The HDA would have an operational policy. A model of operation was reflected in the Bill. The private sector would be involved in some aspects but not in others. There was a development chain. People had to steer away from using fear tactics.

The Chairperson returned to the issue of the R3 500 income margin. Agreements would have to be entered into with service providers. The R3 500 income applied to the total income package of the applicant. Where developers paid the costs of bulk infrastructure they would have to claim back their costs. This would be subject to the operational model.

Ms Dambuza stressed that the requirement of accountability must not be compromised. This was an important tool in monitoring the correct use of funds.

Mr Steyn asked the Department if they had sought comment from the South African Local Government Association (SALGA). He asked if there was an intention to phase out the accreditation of municipalities, even when the HDA was eventually up and running.

The DOH replied that the Bill addressed itself to the powers and functions associated with the accreditation process. The DOH could not provide for the assignment of delegates. Accreditation did not affect the work of the agency. The Department had held a national meeting with SALGA on 13 February. There had also been a full day workshop, and all the implications had been discussed. Matters had been agreed at municipal level. There were some issues relating to certain workings in the Bill. They had fully engaged with SALGA, and so it was not necessary for them to attend the public hearings.

Mr Steyn asked if the accreditation process would continue even when the agency was established.

Mr von Maltitz said that everybody assumed that accreditation was seen as being the same as development. There were different levels of capacity. The municipality would do what it could.

Mr Leshabane said that the issue of accreditation had no bearing on the submission. The agency would have to interface with different levels of government.

The Chairperson said there was a need for the Agency to cut across the different levels. It seemed that Members were satisfied. SALGA represented all municipalities. As Ekurhuleni was the only municipality to present a submission, it would have been better if SALGA had been present. The Committee needed to have all inputs.

Mr Schneemann said that the Bill had been published for public comment by the Department and the Committee had to find out where those comments were.

Mr von Malitz said that Ekurhuleni did not want to undermine SALGA.

Middle Village Community Representative Council submission
Mr Michael Kotsokoane (President, Middle Village Community Representative Council) said that a company registered under Section 21 may be appointed as an HDA. It must comprise historically disadvantaged individuals and support the Constitution and the Bill of Rights. There was a strong working relationship with community based organisations working at the grassroots level, including communal property associations. These managed land on behalf of their members, and acquired land for residential and community development purposes.

He said that the HDA could assist municipalities in dealing with incomplete developments. Full information must be provided by a ward councillor. It might assist municipalities with upgrading informal settlements. Some of the jobs might be given to Section 21 companies to accelerate the pace of service delivery. The HDA could be funded directly by the Section 21 companies, but municipalities should be informed about what was being implemented for the residents in their area.

Discussion
Ms Dambuza said that it was clear that Middle Village represented a community. This submission would create some homework for the Department. She asked why the submission was so specific about interaction with the ward councillor.

Mr Steyn thanked the delegation for taking the time to present to the Committee. He took it that they were in favour of the Bill, and were just making some comments on what was not necessarily reflected in the Bill.

Mr Z Mkhize (ANC) said that Middle Village was a communal property organisation. This was an important issue. Traditional leaders should be included in the debate. They were responsible for houses in their own areas.

Mr Schneemann referred to the last paragraph of the submission. Municipalities should be included in the interaction. Traditional methods of housing would not fall away. There was no procurement opportunity for the HDA. He asked where Middle Village was, if it was an area or a specific community. Their input was welcome, as Parliament must seem remote to small communities.

Mr Kotsokoane said that Middle Village was an organisation. If possible it would be a national organisation. There were offices in Hebron and Soshanguve. Their policy differed somewhat from the South African National Civics Organisation.

The Chairperson said that when people were before Parliament they would meet the Members. It was rare that a community organisation was able to brief the Committee. People should be encouraged to make use of such opportunities. This would help the Committee in processing legislation. The Nyanga organisation had chickened out, and only made a written submission. What Middle Village had said reflected what had been said the previous day. This was the last submission.

The meeting was adjourned.


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