ATC130521: Report of the Portfolio Committee on Human Settlements on Budget Vote 31: Human Settlements and on the Strategic Plans, 2013/14 – 2015/16 and Annual Performance Plans 2013 – 2014, dated 15 May 2013

Report of the Portfolio Committee on Human Settlements on Budget Vote 31: Human Settlements and on the Strategic Plans, 2013/14 – 2015/16 and Annual Performance Plans 2013 – 2014, dated 15 May 2013

The Portfolio Committee on Human Settlements, having considered Budget Vote 31: Human Settlements, and the strategic plans and the annual performance plans of the Department of Human Settlements and its entities, as well as business plans of provincial departments responsible for human settlements development, reports as follows:

1. Introduction

The Constitution places an obligation on the State to provide access to adequate housing to its citizens. As the custodian of the housing sector, the Department of Human Settlements has developed strategies, policies and programmes to ensure the progressive realisation of this right. The comprehensive plan for the development of sustainable human settlement, approved in 2004 and the revised housing code, published in 2009, mark a conceptual shift away from the mandate of providing shelter to supporting the residential property market. Furthermore, in the 2009, State-of-the-nation Address, the name change of the Department of Housing to Human Settlements was pronounced that required collaboration from other departments to make it a success. The Housing Code allows for access to housing, services for low-income families, and ensures greater choice in quality, location and ownership. [1]

The Committee held numerous strategic sessions with the national and provincial Departments of Human Settlements and Human Settlements entities on the budget plans and on annual performance plans. The Committee also met with the Financial and Fiscal Commission, office of the Auditor-General and the Internal Audit Committee of the national Department of Human Settlements in preparation for the Committee’s engagement with the Department on its Budget Vote.

2. Department of Human Settlements

2.1 Aim and mandate of the Department

The mandate of the Department of Human Settlements is to determine, finance, promote, co-ordinate, communicate and monitor the implementation of housing policy and human settlements. [2] Since the formulation of the Comprehensive Housing Plan in 2004, the department has conducted various initiatives to enhance the creation of comprehensive, integrated, coordinated and sustainable human settlements and quality housing. These initiatives include the review of the National Housing Code, which determines national norms and standards in respect of housing development, as well as the provision of the Farm Worker/Occupier Housing Assistance Programme and the establishment of the Housing Development Agency.

Subsequent to that and during the course of January 2010, the Cabinet approved an outcomes-based performance approach to the mandate of the department with the adoption of Outcome 8 – Sustainable Human Settlements and Improved Quality of Household Life.

2.2 Summary of the strategic plan

The Department reported that it had implemented the approved turnaround strategy with effect from 01 ^st April 2012. An organo-gram was approved by Department of Public Service and Administration with effect from 01 ^st April and a process on migration of staff and personnel has been completed. The National Treasury approved a revised budget structure, which is consistent with the strategic plan, but not the organisational structure. A key issue intended to receive priority is the matter of alignment of the strategies with plans, budget and performance. A process will also unfold to further refine strategies and alignment to national development goals and priorities and this includes matters related to policy and strategic infrastructure development.

The Department reported on key issue that will receive attention as the alignment of roles, responsibilities, obligations and accountability for the household sanitation function. The year will also require term reports to be completed and this includes Outcome 8 as well as the 20 year review of government. The material and key performance indicators, outputs and outcomes as contained in Outcome 8 and the objectives in the Estimates of National Estimates (ENE) receive priority focus in the strategic and annual performance plans of the Department. The Department will use the 2013/14 financial year as one that imbeds the National Development Plan in respect of strategy, policy and operations for sector and institutional transformation and implementation. The targets as contained in the Delivery Agreement signed between the Minister and the President also form a key basis of the strategic focus areas of planning, funding and implementation.

The following are key programme and project activities for the period head:

· The implementation of the revised Financial Link Individual Subsidy Programme (FLISP) programme.

· Implementation and management of the Rectification Programme by the Department.

· Focus on the accreditation programme of the municipalities

· Improving on the social of and rental housing units delivered.

· Improved intergovernmental collaboration and coordination.

Special and designated group and sector-focused programmes including “Youth Builds”, “Womens’ Builds” and the “Each One, Settle One” programmes are to be up scaled and planning and funding improved. Better and improved output and target monitoring including quality and value for money through the Programme Management Unit is envisaged.

2.3 State-of-the-nation address (Sona) and the budget speech

The 2013 State-of-the-nation address highlighted the following key strategic objectives pertaining to the Department of Human Settlements: [3]

· An amount of R47 billion committed for the renewable energy programmes.

· An amount of R800 million (green economy fund) that was established in 2012.

· The Financed Linked Individual Subsidy Programme (FLISP), which was promulgated in 2011.

· Housing programme that is geared towards assisting mineworkers living in mining areas.

· Redressing the past apartheid spatial settlements planning and the need to develop National Integrated Urban Development Framework.

· Providing renewable energy (solar electricity) and solar geysers to all low cost houses (a target of 1 million geysers to be provided by 2014-2015).

· The need to improve infrastructure (water, roads, and electricity infrastructure).

The Department reported that its approach to Sona would be to develop action plans for issues raised and interact with affected provinces such as North West , Mpumalanga and Free State .

3. Budget analysis and programmes

Programme	Medium term estimates
	2013/14	2014/15	2015/16
Administration	422,399	426,948	445,106
Human Settlements Policy, Strategy and Planning	84,055	89,301	92,967
Programme Delivery Support	226,922	239,335	251,305
Housing Development Finance	27,377,087	29,450,583	31,957,214
Total	28,110,463	30,206,167	32,746,592

The Department of Human Settlements budget allocation for 2013/14 is R28.1billion. This reflects a nominal increase of 11.8 % or an increase of 5.9 % t in real terms when compared to the allocation of R25.1 billion for the 2012/13 financial year.

Real changes (calculating the effect of inflation) in expenditure of the four main programmes for 2012/13 is: [4]

· Administration: -1.8 %

· Human Settlements Policy, Strategy and Planning: 23.9 % Programme Delivery Support: 15.8 %

· Housing Development Finance: 12 %

· The Housing Development Finance pr ogramme is the main proponent of growth in the Department and constitutes 97 % of the Department’s budget. This programme is comprised of the following sub-programmes:

· Human Settlement Development Grant (HSDG), which receives R16.9 billion. The service delivery output for this grant is ensuring that houses are completed and sites serviced.

· Urban Settlements Development Grant (USDG), which recievesR9.1 billion. The service delivery output for this grant is ensuring bulk infrastructure is installed.

· Rural Household Infrastructure Grant (RHIG), which received R106.7 million.

In terms of capital expenditure, a total of R106.7 million is allocated to the RHIG. RHIG was established in 2010/11 with the aim of eradicating water and sanitation backlogs over a three-year period. [5] The grant facilitates community involvement in the creation and maintenance of facilities, thereby creating employment and ensuring sustainability and cost effectiveness. RHIG plays an important role in aligning the Department with the massive investment in the infrastructure programme announced by the President in the state-of-the-nation address. [6]

3.1 Programme 1 – Administration

The purpose of the programme is to provide strategic leadership, administrative and management support services to the Department. In the 2013/14 financial year, this programme received an allocation of R422.4 million.

Both the Departmental Management and Corporate Services sub-programmes dominate expenditure, which constitutes more than 75% of the overall programme allocation. However, expenditure for the Corporate Services experienced a decline from the previous year. The decline was mainly due to 12 % vacancy rate in 2012/13 following the organisational re-structuring. Those vacancies were to be filled over the medium term.

3.2 Programme 2 – Human Settlements Policy, Strategy and Planning

The purpose of the programme is to manage the development and compliance with human settlements governance frameworks, norms and standards, the drafting of the human settlements macro strategy and related sector plan, Implement the rollout of human settlements programmes, facilitation of the accreditation of 27 municipalities by 2014 to administer the national and human settlements programmes and thereby improving the cooperation and collaboration in the sector relations. Although Programme 2 constitutes the smallest portion of the departmental allocation, compared to the previous financial year wherein decrease of 21.5 % in real terms and a nominal decrease of 17.8 per cent was experienced. This financial year, this programme has received an allocation of R84.1 million, which reflects an increase of 23.9 % in nominal terms and 17.3 % increase in real terms.

The sub-programme on Human Settlements Strategy and Planning, dominates this departmental allocation, receiving a budget of R42.1 million, representing an increase of 19.9 % in nominal terms or 13.6 % in real terms. This is mainly due to the strengthening of the planning process in the provinces and municipalities to develop a programmatic approach to human settlements development planning.

3.3 Programme 3 – Programme delivery support

The purpose of the programme is to support the execution of human settlements programmes and projects and oversee the implementation of the household sanitation programme. The programme consists of the following five sub-programmes: Management of Programme Delivery Support, Programme Implementation Facilitation, Technical Capacity Development, Programme and Project Planning Support and the National Support Programme [7]

Compared to the previous financial year, budget allocation for the Program Delivery Support has been increased from R196 million in 2012/13 to R 226.9 million in 2013/14.

The increase is due to an increased focus on the National Upgrading Support Programme (NUSP) and spending on consultants and professional services. This also includes providing technical support to 49 municipalities through the national upgrading support programme. The Sanitation services, which promotes universal access to sustainable sanitation services by coordinating and monitoring the implementation of the sanitation programme. Compared to the previous financial years this programme has experienced a significant decline from R97.8 million in 2011/12 to R71.7 million. This may be because at the local government level, where basic services deliveries are devolved, there remain major challenges such as the following:

· Under spending as a result of delays in the implementation of Accelerated Community Infrastructure Programme (ACIP);

· The delay in the implementation of certain programmes in the municipalities as result of compliance issues and procurement processes;

· The high vacancy rate;

· The cost saving measures introduced. [8]

Furthermore, the Department’s third strategic objective seeks to “support implementation and delivery, build capacity, and liaise and communicate with stakeholders for effective housing and human settlement programmes. Coordinate and monitor the implementation of priority projects and the sanitation programme”. In this way, under programme 3 the Department aimed at giving effect to this strategic objective. However, compared to the previous financial year for example the sub programmes, programme Implementation Facilitation sub programme has increased in real terms with 25.6 % , while Technical Capacity Development declined with 24.5 % in real terms. This financial year, Programme and Planning Support sub programme shows a nominal increase of 53.9 % in nominal terms, while also the National Sanitation Programme showed an increase of 6.7 % in nominal terms and 1.04 % increase in real terms.

3.4 Programme 4: Housing Development Finance

The purpose of the programme is to fund and monitor delivery of all housing and human settlements programmes, including oversight of public entities reporting to the Minister of Human Settlements. Further, it manages all mater related to improving access to housing finance and developing partnerships with the financial sector.

In addition, it seeks to promote investment in housing finance, mobilise and promote financial integrity within housing institutions, as well as managing all matters provided for by the Home Loan and Mortgage Disclosure Act (2000). Programme 4 consists of eight sub-programmes, namely, Management, Housing development finance, Chief Investment Officer, Regulatory Compliance Services, Human Settlements Development Grant, Contributions, Rural Households Infrastructure Grant, Backlogs in Water and Sanitations at Schools and Clinics Grant, Urban Development Settlement Grant and Programme Monitoring and Evaluation. [9]

For 2013/14, programme 4 has received an allocation of about R27.4 billion compared to 24.4 billion in the 2012/13 financial year.

The expenditure under programme 4 is dominated by the Human Settlements Development Grant sub-programme, which increases from R15.7 billion in 2012/13 to R16.9 billion in 2013/14.

The Urban Settlements Development Grant (USDG) increases in real terms with 16.3 % from R7.4 billion in 2012/13 to R9.1 billion in the 2013/14 financial. RHIG increases from R340.6 million in 2012/13 to R106.7 million in 2013/14.

The three types of grants located in Programme 4 are critical for giving effect to the commitments articulated both in the 2013 state-of-the-nation address, as well as in Outcome 8. In this regard, South Africa should by 2014, have increased access to sanitation services to 100%, as well as upgrade 400 000 informal settlement households. Together, these commitments also give effect to the achievement of the Millennium Development Goals (MDGs), which committed government to:

· By 2015, halving the proportion of the population without sustainable access to safe drinking water and basic sanitation.

· By 2020, achieving a significant improvement in the lives of at least 100 million slum dwellers.

4. Human Settlements national priorities and Outcome 8

The January 2010 Cabinet Lekgotla adopted an outcome-based approach to service delivery. For each outcome, a limited number of measurable outputs with targets were set. Each output is linked to a set of activities as prepared by the Presidency. While 12 Outcomes were identified, Outcome 8 speaks directly to Human Settlement targets. Outcome 8 seeks to “create sustainable human settlements and improve the quality of household life”. The delivery agreement for Outcome 8 sets 2014 targets for: [10]

· Accelerated delivery of housing opportunities - upgrading of 400 000 informal settlement households at an estimated cost of R19.2 billion, including the provision of bulk infrastructure.

· Access to basic services - increasing the provision of basic services, including increasing access to sanitation from 69 per cent to 100 per cent.

· More efficient land utilisation - Releasing 6 250 hectares of well located state-owned land for delivery of sustainable human settlements.

· Improved property market - Financing 600 000 housing opportunities for people in the R3 500 – R12 800 income bracket and affordable rental housing stock

4.1 Delivery agreements for Outcome 8 for 2013/14

Programme	Sites	Units	Outcome 8 Deficit	Budget	% Allocation
Informal Settlement Upgrading	29,201	37,357	146,946	3,255,143	21,16%
Affordable Rental	793	10,356	44,498	1,601,104	9.5%
Affordable Housing (FLISP)		2,528		214,380	1.26%
Sub Total	29,998	50,241		5,070,627	29.85%
	Ha	Parcels
Land	117,091	12		314,428	1.85%
Total				5,385,055	31.70%

4.2. National priorities and priority projects

The Department reported that national priorities were determined by Cabinet Lekgotla; state-of-the-nation address; Medium Term Strategic Framework and Outcome 8. The national priorities were reported as follows:

4.2.1 Rural Development

The department reported that there will be 8 183 sites to be made available; and 36,311 units on this programme. An amount of R2, 8 million will be set aside for this programme.

4.2.2 Emergency or Disaster Relief

The department reported that 802 sites will be acquired and 3 442 units will be built for emergency housing. An amount of R407 million is budgeted and according to the DORA allocation for disaster R298 million was made available.

4.2.3 Rectification of both subsidised stock 1994-2002 and pre 1994

The Department reported that in the Eastern Cape Province – 2 328 sites were to be rectified at an amount of R14, 733. Further, reported that 1168 units were to be rectified nationally at an amount of R678, 008.

4.2.4 Strategic integrated Projects – Presidential designated projects

Mining towns for 2012/14 – Greater Tubatse and Lephalale in Limpopo; Matlosana, Madibeng, Rustenberg, in North West; Matjebeng, in Free State; eMalahleni in Mpumalanga; West Rand District municipality and Carltonville in Gauteng – were presidential designated projects, and had been allocated money for upgrading. The President monitored the projects through the Ministers of Rural Development and Land Reform and of Economic Development. Money was allocated through the USDG to the projects. It was reported that 15 159 sites were targeted, an amount of R554, 338 was allocated and 9 755 units were to be developed. An amount of R900, 174 was set aside and total allocation budget was R1, 631,917.

4.2.5 National priority projects

Province	Town	2013/14	2014/15	2015/16
EASTERN CAPE	Duncan Village	109,767	117,881	129,386
GAUTENG	Lufhereng	182,944	196,468	215,644
	Diepsloot	91,472	98,234	107,822
	Sweetwaters	45,736	49,117	53,911
	Khutsong	96,046	103,146	113,213
Sub Total		416,198	446,965	490,590
KWAZULU-NATAL	Cornubia	120,743	129,669	142,325
LIMPOPO	Lephalale	291,651	313,211	343,781
WESTERN CAPE	Drommedaris	62,736	67,374	73,950
Total		1,001,095	1,075,099	1,180,032

The department reported that an amount of R1, 417 million has been ring-fenced for priority projects in Eastern Cape, Gauteng, KwaZulu-Natal, Limpopo and Western Cape. Provincial departments have also planned for an amount of R844, 4 million to realize their mandates.

5. Key Performance indicators

Indicators	Programme	Outcome to which it contributes	Past			Current	Projected
			2009/ 10	2010/11	2011/ 12	2012/ 13	2013/ 14	2014/ 15	2015/ 16
Number of additional municipalities assessed for accreditation level 2 per year	Human Settlements Policy, Strategy and Planning		-	6	10	10	5	5	5
Total number of municipalities provided with technical assistance for informal settlement upgrading per year	Housing Development Finance	Outcome 8: Sustainable human settlements and improved quality of household life	-	20	20	20	49	49	49
Number of additional residential units completed per year	Housing Development Finance		161,854	121,879	120,610	72,223	132,705	138,540	137,898
Number of additional sites serviced per year (green fields)	Housing Development Finance		64,362	64,362	58,587	26,308	77,248	81,883	85,568
Number of additional households upgraded in well-located informal settlements with access to secure tenure and basic services per year (Brownfields)	Housing Development Finance		-	52,383	66,639	22,460	62,752	66,517	69,510
Number of additional hectares of land prepared for human settlements development per year	Housing Development Finance	Outcome 8: Sustainable human settlements and improved quality of household life	-	4,945	2,000	2,000	2,000	2,000	2,000
Number of additional loans granted in the affordable housing segment per year	Housing Development Finance		-	47,616	69,57	69,970	63,798	62,344	67,527
Number of additional households provided with on-site sanitation in rural areas per year	Rural Household Infrastructure Programme		-	11,652	19,225	5,818	11,858	12,296	12,588

6. Transfers payments

Programme	Medium term estimates
	2013/14	2014/15	2015/16
Human Settlements Development Grant	16,983,872	17,918,321	19,667,204
Urban Settlements Development Grant	9,076,906	10,334,684	10,699,773
Rural Households Infrastructure Grant	106,721	113,124	118,328
Housing Development Agency	97,497	97,497	97,497
National Urban Reconstruction and Housing Agency	100,000
Social Housing Regulatory Authority: Operational	32,151	33,480	35,020
Social Housing Regulatory Authority: Capital Restructuring Grant	904,103	867,543	1,248,400
TOTAL	27,301,250	29,364,649	31,866,222

7. Grant allocation to provinces

7.1 Human Settlements Development Grant (HSDG) Provincial Allocations

The national Department of Human Settlements reported that the purpose of the HSDG is to provide funding for the creation of sustainable human settlements. The goal was the creation of sustainable human settlements that enable and improved quality of household life. The Outcome 8 programme was reported as to facilitate and provide access to basic infrastructure, top structure and basic socio-economic amenities that contributes to the creation of sustainable human settlements. This will improve the rates of employment and skill development in the delivery of the infrastructure.

7.2 Presentation on the business plans of the provincial departments for human settlements

The Department presented a consolidated business plan, which contained consultative information on budget allocations to provinces. The plan focused on key deliveries, alignment with Outcome 8 and other national imperatives. The plan also reflected the allocation of the Urban Settlement Development Grant to metropolitan municipalities. The allocation of funds to provinces was based on a formula, taking into account migration patterns. It was further indicated that a technical meeting was scheduled to take place on 19 April 2013 for further consideration of various submissions from provinces. The meeting would provide an opportunity for the Department to further scrutinize the business plans; however, the Department had conditionally approved the business plans in terms of protocols of government. It was indicated that the presentation would cover allocations for the current financial year, Outcome 8, rectification, rural development, critical projects, and Strategic Infrastructure Projects (SIP).

7.3 Summary of provincial strategic plans

7.3.1 Eastern Cape

The national Department of Human Settlements reported that the province has greater emphasis on house construction than the provision of basic services. Consequently, substantial variances exist between Outcome 8 deficits and planned delivery. Nelson Mandela Metropolitan Municipality (NMMM) has not eradicated the bucket sanitation backlog. The province had committed approximately 10.8% on rectification programme of which 2 328 sites were to be rectified.

Mr Sharpley clarified that the Eastern Cape had to have rectification on services but not sites. He reported that prior 1994, some of the services like the water and sewerage pipes were laid in one trench, and in instances of bursting, that resulted in a mess. The quality of those pipes also was another challenge. The province stated that the way it went about its business was constructive.

He said the bucket system in NMMM would change, as the municipality had finally appointed a municipal manager. The province would assist the municipality in eradicating the bucket system as it was still perpetuated, instead of reducing it. He further stated that discussions were ongoing with Buffalo City metro to get a project manager for Duncan Village project. The province was also pleased with the 10.8% rectification figure, and it considered it quite conservative compared to the old projects that were still in existence.

7.3.2 Free State

The national Department reported that the province has ambitious targets, given the recent level of performance. Thus rationally, the business plan presented would be reconfirmed as inadequate use of non-financial monitoring systems and reporting systems, including the Housing Subsidy System and BAS. It was also reported that there was a lack of a detailed audit of both the financial and deliverables. The province has a backlog in the eradication of bucket system.

A delegate from Free State commented about targets not being achievable. He stated that challenges in the Free State were due to a lack of capacity. The capacity in the districts was another issue that needed consideration because it is where delivery happened. There was a lack of technical capacity at district level. The focus for the department in the current financial year would be to acquire technical skills for the districts. The provincial department had largely outsourced the function, and even its staff complement comprised mainly administrators and that was being addressed.

7.3.3 Gauteng

The national Department of Human Settlements reported that a critical performance risk requiring attention was implementation of potential transfer of some R3 billion to the three metropolitan municipalities. It was reported that necessary step would be taken to ensure capacity-building programme and project management is in place where assignment of housing function is awarded.

7.3.4 KwaZulu-Natal

The national Department of Human Settlements reported that the province’s emphasis is on rural housing as opposed to Outcome 8 and at the expense of the slum upgrading in the urban centres of the province. The national Department of Human Settlements was concerned with the 1% commitment for Cornubia.

Mr Zungu, Acting Head of Department reported that it was difficult to provide clarity in Cornubia because different components were being compared. The allocation policy for the project had been taken through to the metro committees. This was finalised and it was awaiting ratification by the executive committee of the metro. The main issue with the project was the low-income component that would be completed by June 2013.

The Committee requested the province to show progress in Cornubia project and pleaded the province to fast-track delivery in all priority projects. It was informed that it should also eradicate transit camps.

7.3.5 Limpopo

The national Department of Human Settlements reported that the province will not achieve affordable rental target. The emphasis was on rural housing programme with 65% and only reserved 15% for Lephalale project. The national department further reported that clarity was sought on the administration and management of finances and actual delivery. The national department informed the Committee that an amount of R300 million was surrendered in 2012/13, yet contractual commitments have been made against the said amount.

Mr Paul Mohlala, General Manager Human Settlements: Limpopo, commented that the province received reduction allocation, therefore People’s Housing Process was not allocated. The Lephalale project was being implemented but there had been challenges with the site. The owner of the site had initially agreed with the department, but it appeared he wanted to renege; however, good care was being taken of this.

7.3.6 Mpumalanga

The national Department of Human Settlements reported that the implementability of business plan was questionable given recent delivery trends and lack of programme and monitoring systems in place. The national department requested an assurance byby province that that funding for eradication of bucket sanitation would be made available. The national department reported that it was waiting for relevant performance audit and accountability statements for all monies allocated in respect of financial and non-financial information for 2012/13 and the report on shortfall in non-financial delivery and related financial performance in respect of 2012/2013 financial year.

Mr A Gamede, MEC Human Settlements: Mpumalanga stated that the province would contribute its portion in achieving the 400 000 target. The challenge was with the small contractors that were not used to carry out big projects. He further stated that it was important to rope in contractors who had a good delivery record, but used in such a way that would empower those small contractors.

MEC Gamede reported that the challenge with vacancies was that the system had got saturated and there was too much uncertainty. The qualified people often moved around departments and to such extents that work were carried out by inexperienced people. Government needed to strengthen the mentoring system with the experienced officials. He informed the Committee that the provincial department had challenge of people occupying posts but lacking capacity.

7.3.7 Northern Cape

The national Department of Human Settlements reported that the province was requested to ensure that relevant revision to funding and programmes in compliance with targets set in terms of Outcome 8 agreement signed with the Minister of Human Settlements and provincial MEC for Human Settlements.

7.3.8 North West

The national Department of Human Settlements reported that the province has inadequate funding for rental programme particularly in mining towns rather the emphasis was given to rural housing. It was reported that province continued to place emphasis on shelter provision rather than a better balance with basic services.

Mr Maloyi, MEC for Human Settlements, in his comments indicated that the North West did not under-spend. The province exceeded its targets and used its entire budget. He reported that the province applied the smart principle to its fullest, despite that there were challenges. He disputed the notion that migration was only to the Western Cape, KwaZulu-Natal and Gauteng. He indicated that a considerable number of people also migrated to the North West, and yet the budget allocation did not consider those. The province did not have adequate funding to build sufficient houses for the people.

He stated that there was a serious problem with rental stock as it was very expensive. Out of the 450 units the province was expected to have built, it only built 100 units in Tlokwe. It was important to balance rental stock with low cost and rural housing. Another challenge that the province had was land availability since the municipalities had sold land many years ago. The province had been allocated R75 million this current financial year for acquiring land. Over and above this, the provincial government had agreed to take funding from the provincial equitable share and use it to acquire more land.

7.3.9 Western Cape

The national Department of Human Settlements reported that the province is unlikely to achieve the Outcome 8 targets on informal settlements and affordable rental. However, the reality of limited resources coupled with established and credible pipeline, considered view that with minimal adjustments the business plan was supported.

MEC Madikizela commented that the business plans indicated a number of issues to be considered. In the past, provinces accepted business plans from municipalities that were a wish list of projects that municipalities wanted to implement without having done any planning. This resulted in provinces missing targets and having to shift funds to other programmes. Provinces now had to retrospectively deal with the targets that had been set on their behalf, before answering whether provinces could deliver on the targets.

MEC Madikizela indicated the bucket system was a challenge. Some provinces battled with the challenge of bulk infrastructure. This was the biggest challenge; and the PICC was formed to deal with this problem. The country was still confronted with a trillion rand backlog to deal with the challenge of bulk infrastructure. In some areas it was still not feasible to build dignified sanitation facilities. Migration to big cities further compounded the challenge as well, because migrants settled in un-serviced areas.

The national Department of Human Settlements made a commitment to assist and support the provinces in ensuring that:

· Appropriate funding and program reviewal is made in compliance with targets set in outcome 8Adequate programme and project pipeline planning is undertaken to prevent recurring of under-expenditure

· Sufficient funding is available to eradicate bucket sanitation backlog

· Adequate resource provision for priority project

· Capacity building, programme and project management is in place where assignment of housing function is awarded

7.4 Deliberations and Concerns of the Committee

The Committee welcomed the consolidated departmental strategic plan and commented that the department does not apply smart principles in its planning and that challenge has also cascaded down to provinces. The Committee further welcomed the presentation on the assurance provided by the Department that Provincial Business Plans were conditionally approved, considering that continuous engagement with provinces to refine their plans in order to be aligned with the National Priorities and targets, as set out in Sona, Budget and other policy directives. The committee acknowledged and appreciated the commitment demonstrated by some provincial MEC's and Executive Mayors of Metros by responding to the call by the Committee , to engage on the budget related issues and have one common understanding of the expected budget outcomes . These include Eastern Cape, North West, Mpumalanga, Northern Cape and Western Cape as well as Tshwane, Mangaung, Nelson Mandela Metropolitan Municipality and Buffalo City Metropolitan Municipality.

The issue of budget versus target was of concerned and the Committee had since requested the national department to assure it that the budget would be enough for the target set. The Committee dismissed the notion of vacancy rate; under-expenditure and shortage of skills as hindering delivery. It urged that the national department should translate the land that has been acquired and been released into units. The Committee sought to know whether the budget for disaster was readily available for spending by provinces and the process on how to access the grant. The Committee sought clarity on the percentage of allocation of sites to emergency housing. It further sought clarity and reasons why the provinces were not eradicating bucket system as these were health hazard to communities.

7.5 Response made by the national Department of Human Settlements

· The department reported that its budget was not in line with organisational structure but all programmes were catered for within the R28 billion that R3 billion has been added in the budget and it was only related to USDG and HSDG.

· An amount of R6.9 billion (60%) is for the Human Settlements Grant and 0,30% is for Administration and Operational budget less than 5% of R28 billion and other R9 billion to Human Settlements Grants and transfers. SHRA would take another R9 million and R100 million is for transfers in this coming financial year. During the year the department would be have some changes in terms of negotiating as in the census report.

· The department reported that the current formula would be that the highest would go to Gauteng followed by KwaZulu-Natal and next allocations would be in consideration of Census report going forward.

· The department also reported that Outcome 8 was introduced without funding and in the past two financial years, the department had to manoeuvre because it had no funding for Outcome 8. In the R16.9 billion, the department would still be using the model used last year that is 20% for Outcome 8 which was not funded and Gauteng would be taking high toll of four projects and the department would prioritise monitoring.

· The department further reported that R1.1billion would be for National Monitoring programme and the purpose would be to upscale delivery to improve outcome 8, which includes informal settlements upgrade and sanitation.

8. Urban Settlements Development Grant (USDG) provincial allocation of the grant for 2013/16

Provinces	Metros	2013/14	2014/15	2015/16
EASTERN CAPE	Buffalo City	613,305	698,290	722,958
	Nelson Mandela	727,986	828,863	858,144
Sub Total		1,341,291	1,527,152	1,581,102
FREE STATE	Mangaung	596,719	679,406	703,407
GAUTENG	Ekurhuleni	1,584,912	1,804,532	1,868,280
	Jo'burg	1,488,877	1,695,189	1,755,074
	Tshwane	1,290,611	1,469,450	1,521,361
Sub Total		4,364,400	4,969,171	5,144,715
KWAZULU-NATAL	eThekwini	1,580,999	1,800,076	1,863,667
WESTERN CAPE	Cape Town	1,193,497	1,358,879	1,406,883
Grant Total		9,076,906	10,334,684	10,699,773

8.1 Rural Household Infrastructure Grant (RHIG)

The Department reported that the purpose of the grant is to provide capital funding for the reduction of rural water and sanitation backlogs and to target existing households where bulk dependent services are not available. The grant was initiated as a schedule 7 grant in 2010/11 financial year and amounted to R1.2 billion. The grant has allowed for 50 065 household to have been served with basic sanitation since its inception in 2010. It was further reported that the schedule of the grant has changed from schedule 7 to 5(b) with effect from 2013/14; the grant will be implemented by municipalities with the support of the Department. The grant allocation for the next three years will be as follows:

· 2013/14: R106 million;

· 2014/15: R113 million; and

· 2015/16: R118 million.

The Department informed the Committee that it has an obligation to provide, support and capacity to municipalities to be accountable whenever necessary. Some of the tasks to this obligation will include the following:

· Approve the business plans submitted by municipalities;

· Continuously monitor implementation and provide support to municipalities;

· Submit monthly financial and quarterly non-financial reports to National Treasury;

· Submit an annual evaluation report after the end of the financial year; and

· Prepare a payment schedule for the transfer of the grant to municipalities.

Subsequent to the above, the Department planned to fill the vacant post at regional offices to provide support. Furthermore, the Department was developing monitoring and reporting processes and schedules to report on financial and non-financial progress.

8.2 Accreditation of municipalities

The Department reported that there are eight (8) municipalities and one (1) district municipality accredited in level 1. It was also reported that there are seven (7) metros, three district and seven (7) local municipalities accredited in level 2. There were also 20 municipalities that were assessed for level two (2). The Department further reported that implementation protocols were being drafted with a view to put in place measures and assign responsibility for the housing function to level 3 accreditation of metropolitan municipalities by end of the 2013/14 financial year.

9. Human Settlements entities - Grant allocation to housing institutions

9.1 Housing Development Agency (HDA)

Mr T Adler, the Chief Executive Officer, reported that HDA was established to address the land acquisition and assembly process NHBRC to accelerate housing delivery and human settlement development. He stated that the main objectives are to identify, acquire, hold, develop and release well-located land and buildings; and to provide project management support and housing development services.

He stated that in order to achieve these objectives, the agency had to ensure that residential and community developments are sustainable, viable and appropriately located; that job creation is optimised in the process of residential and community development. He also stated that the agency had introduced and managed a land inventory and information system and that community participation took place.

He highlighted that the agency has identified 69163 4076 hectares in 2010-12 and 23198 5919 hectares in 2012-13. The agency has also preliminarily assessed 423 properties for human settlements development in 2010-12 and preliminarily assessed 87 properties in 2012-13. The entity has also requested 47604 0862 hectares of properties in 2010-2012 and released about 7477 4954 hectares of properties.

The HDA had actually delivered land for effective utilization for human settlements development, such as 69 163 hectares of state land identified for assessment; 47 604 hectares assessed for suitability for release and 7 44775 hectares has been released in Free State, Gauteng, KwaZulu-Natal, Limpopo and North West.

He reported that two properties in Elias Motsoaledi Municipality measuring 523 hectares have been submitted for approval to be released for upgrading of informal settlements. The agency was currently assisting Mangaung with the National Upgrading Support Programme (NUSP) and would proceed to assist five remaining municipalities in the Free State, and an agreement was being negotiated with North West province.

The Committee commended the work done by the entity. However, the Committee would like to see the number of units developed in those parcels of land. The Committee sought clarity on how the agency was assisting provinces with land acquisition as well as the land that is under traditional leadership and the Ingonyama Trust. The Committee alleged that Metros were not fully participating in this acquisition programme and wondered what they were doing with the allocated budget for land acquisition.

The agency reported that it had discussions with KwaZulu-Natal and implementation protocol has been completed but not finalised. The agency also reported that in Mpumalanga and Northern Cape land has been identified. However, the land that was identified was not suitable for human settlements. It was further reported that additional capacity was provided to provinces to alleviate red tape. The agency also reported that it had discussions with Buffalo City Municipality, City of Johannesburg and City of Cape Town.

The Committee recommended that the agency should translate the promotional video that markets the agency into all eleven official languages.

The Committee further proposed that there should be a joint meeting between the Departments of Public Works, of Rural Development and Land Reform, and of Public Enterprises to discuss issue related to acquisition and release of land especially the state land.

The Department requested the agency to share the information in a forum where provinces would be present. It also reported that there is an existing forum where the above-mentioned departments meet to discuss issues pertaining to land and there was a place to enhance the work of the forum. Nevertheless, there was a need for a change of mindset and not to make the challenges of the agency its own challenges but those of the sector.

9.2 Social Housing Regulatory Authority (SHRA)

The Chairperson of the Social Housing Regulatory Authority (SHRA) gave an overview of the entity. She indicated that social housing has been gaining interests and that the entity had managed to deliver on creating a viable institution within a short space of time.

Mr Moholo, Chief Executive Officer, indicated that regulations and policies were drafted and have been finalised. The entity had already entered into partnerships with Gauteng, Limpopo, Mpumalanga and Northern Cape and still had to enter partnerships with the other five provinces to finalise the land release process for human settlement delivery. SHRA had an agreement with the City of Cape Town, the City of Johannesburg, and the Nelson Mandela Metropolitan, Ethekwini and Ekurhuleni municipalities. The Fund Manager position would be filled and would be leading on how to leverage the money SHRA got from government. Taxes from cities had to make municipalities understand that this programme is for low-income earners and therefore they had to be rebated.

The Committee needed to ascertain the policy imperative as to how rates, levies and taxes affect the social housing delivery and what intervention can be made. The Committee was also concerned about how affordability and sustainability was assured through the programme. Whether the issue of standardised design has been considered. The Committee requested a report on which zones the Minister has declared and that SHRA would concentrate as per legislative prescript.

The CEO stated that SHRA was not affected by the Rental Amendment Bill and would work with the national department to encourage provinces to develop Provincial Rental Strategy.

In the workshop organised after the meeting, the CEO of SHRA indicated that Social Housing provided the necessary investment in communities and if used optimally, the investment could transform communities into economically active and viable neighbourhoods. He also indicated that Social Housing opportunities create sustainable revenue sources for municipalities.

Dr. Spencer Lazarus from Nelson Mandela Metropolitan University (NMMU) stated that the overall objective of Social Housing was not merely the provision of a house, but was largely the strife to promote the social wellness of families by creating security, improved living standards and a better life in general. The CEO of SHRA highlighted the Madulammoho Social Housing Project as an example that provides for low-cost overnight rental facility, especially for people who are attending interviews in Johannesburg, and also provides accommodation for low-income earning groups who work in cities and live far from their places of work.

The CEO reported that the challenge was that municipalities were charging Social Housing institutions high rates and taxes, which is a burden for the leaseholders. The issue of excessive municipal rates charged at some of the Social Housing Projects would be raised by the Committee with the Department of Cooperative Governance and Traditional Affairs (DCOGTA). Despite existing challenges, the Committee viewed Social Housing as the viable intervention for low-income earning groups and advocated for the expansion and rapid development thereof.

The Committee indicated that SHRA has not demonstrated commitment in marketing itself and services provided thereof. SHRA services are also crucial where accommodation for public service employees is very limited and negatively affect their performance for example, Alfred Nzo District Municipality in Eastern Cape.

9.3 Rural Housing Loan Fund (RHLF)

Mr Fakazi, the Chief Executive Officer presented on behalf of the entity. He stated that RHLF’s mandate was to facilitate access to incremental housing finance for low-income households in rural areas. It focused on rural areas and small towns (outside of metros); market segment: below R9, 800 (bias towards those earning R3, 500 and less) and to support the implementation of the rural development programme.

He also reported that despite the challenges posed by market conditions, government policy interventions present an opportunity to do more. When projects are implemented and commissioned under Strategic Infrastructure Projects, the entity serves as a basis for growth and job creation. The entity also foresees demand for housing loans as a result of the implementation of the Infrastructure Plan. In terms of Outcome 8 targets, the entity had provided a total of 156 219 loans against the target of 181 811. The RHLF was also well positioned to support the implementation of the National Development Plan in the rural economy and the transformation of human settlements. The shortage of intermediaries was their main challenge and the entity’s response to the challenge was to provide additional facilities to existing intermediaries with the capacity. The entity had approved three intermediaries and would continue to sign other new intermediaries and to collaborate with provincial development finance institutions.

The RHLF reported that it had a shortfall of R98 million in meeting the demand for additional facilities from existing intermediaries, which was a credibility issue for the RHLF and government.

The entity was taking some action in order to address the challenges and those actions were as follows:

— Application for additional capital injection from the RHLF shareholder — this is critical for meeting long-term development objectives.

— Applied for relaxation of liquidity covenant on KfW/DBSA/RHLF loan — from 30% to 10% of total assets.

— Exploring raising loan funding from private and international institutions (however, cost may be high given the RHLF’s mandate to facilitate unsecured incremental housing loans and will defeat efforts to continue with the strategy to lower the cost of credit for borrowers.

The Department informed the Committee that the RHLF had funding constraints and was unable to reach out to rural public. The Department reported that it was going to negotiate recapitalisation with National Treasury. However, the National Treasury was cutting down on expenditure.

The Committee requested the Department to state clearly how it was responding to the National Development Plan, the state-of-the-nation address and Strategic Integration Projects 18 (SIP 18) in terms of infrastructure and to develop smart principles responding to policy perspective. The Committee expressed its concern regarding the funding constraints and advised the Department of Human Settlements to take the matter to National Treasury. The Committee requested the RHLF to submit a report of the work done since its seventeen (17) years of existence detailing the impact it had in changing lives of the South African citizens, especially those in rural areas. The De partment was further requested to present the progress made in the amalgamation of Development Financial Institutions (DFIs).

Mr Fakazi informed the Committee that the RHLF did not market itself to the rural people with the fear that they will be less willing to pay back government’s money and that marketing was given to intermediaries. It was reported that the promotion of incremental housing finance borrowers was done through intermediaries and potential clients were channeled. It was also reported that the entity had a bad debt of R9 million.

9.4 National Housing Finance Corporation (NHFC)

Mr Moraba, the Chief Executive Officer of NHFC, reported that its strategic objectives are aligned with national priorities of the Department of Human Settlements as determined by Pillars of Human Settlements Development Strategy, such Medium Term Budget Policy Statement (MTBPS), Cabinet Lekgotlas, state-of-the-nation addresses 2010-2013, and Outcome 8.

The entity had 8 Implementation Protocols; 1 Memorandum of Understanding (MOU) with (First National Bank); 13 accredited projects across the country, 6 737 estimated total units in all these projects.

The entity is wholly owned by the South African government although it was self-sustaining and is paying income tax out of its revenue. However, the Board has appealed not to pay this tax and it is believed that it would save more money for housing finance. The main business was broadened and deepened to access affordable finance for low-income earners.

During the 2012/13 financial year, the entity had a budget of R172 million and the current budget commitment is estimated at R42 million. The entity reported that it has processed about 835 subsidy applications in development projects representing 3173 households, and 57 have been approved. The budget for 2013/2014 financial year is R189 million.

The entity reported that it took a calculated risk by funding AFHCO as a start-up company. The entity has attracted major South African companies to be shareholders. Old Mutual, as one of the biggest companies, owns 50% of AFHCO. The challenges of the NHFC are that it had to fund a concessional cost to balance developmental and sustainability impact; growth in GDP to stimulate the economy; growth in employment levels. The entity had stimulated an affordable housing market through Mortgage Default Insurance: Expand access to finance and FLISP: Improve household’s affordability.

The Committee agreed that the entity needed to do more work on increasing access to housing finance, especially for lower-income households. The Committee had since requested the entity to provide it with clear targets for each municipality, region and province for Finance Linked Individual Programme (FLISP) and clear application process for this programme. The Committee advised that the NHFC and the Department should move away from a project-based funding model for FLISP, as it was not justifiable in any way and was ineffective. The Committee requested the NHFC to come with a proper definition of affordable, as R6000.00 was not affordable to every person.

9.5 Estate Agency Affairs Board (EAAB)

Mr B Chaplog, Chief Executive Officer, presented and informed the Committee that the EAAB has strategic outcomes namely; to improve compliance with the Estate Agency Affairs Act; to increase stakeholder awareness of the EAAB and its role and services; to effectively and efficiently manage EAAB; and to build capacity of the key stakeholders.

He reported that the outputs of the entity on their strategic outcomes would be to increase impact on prosecutions and inspections; improve registration process; increase consumer awareness of the EAAB and estate agents industry; improve the processing of Fidelity Fund certificates and improve the standards of education and training of service providers.

In the workshop requested by the Committee, Mr Chaplog indicated that legislation regulating the EAAB did not advocate for the effective transformation of the sector. The current office-bearers deemed it important to effect measures aimed at bringing meaningful participation and ownership of historically disadvantaged groups in this sector of the economy. He reported that the EAAB will be vigorously transforming the business. The EAAB would not be competing with the NHFC, but would market FLISP at no cost when conducting road shows. He further stated that the agency would meet with the departments’ Policy Unit for the alignment of activities.

The department reported that it had signed a Memorandum of Understanding (MOU) with the Banking Association of South Africa (BASA) and in view hereof, the EAAB advised the Committee to call all members of BASA viz. Nedbank, First National Bank, Standard Bank and ABSA, to Parliament so that they present an account on their plans for the roll out of FLISP.

Mr Chaplog assured the Committee that the EAAB has the power to carry out the task given. He thought that those who were given the task earlier did not have the passion to carry it forward, which was the reason it had collapsed. He informed the Committee that the EAAB would be meeting with the Sheriffs in order to organise them as an organized business and regulate them according to the Act. The awareness will be communicated through the media; local radio stations would be utilized. He undertook to provide a progress report in six mouths’ time and the list of the various bodies with which the entity is associated.

The Committee advised that the Department should ensure that effective and efficient monitoring systems are in place to prevent unintended consequences, whereby, some of those qualifying for mortgage would be found benefitting from FLISP. The Committee was disturbed by the figure presented by the NHFC stating that there were only 57 applications that were approved for FLISP and requested EAAB to assist by popularising and marketing the programme. It was further stated that the FLISP programme was introduced in 10 years ago but there were no tangible results. The Committee alleged that the market for the programme was huge; there was a need for mind-shift of agencies and business people to flounce the market. The Committee had requested the EAAB make the information available for members to inform their constituencies as well. The Committee was eager to know when the process could start and whether the current legislation would be able to carry the task.

9.6 National Home Builders Registration Council (NHBRC)

Mr Mnyani, the newly appointed Chief Executive Officer (CEO), led the delegation and informed the Committee that he would present the strategic plan and budget of the entity. He indicated that the vision, mission and strategic objectives were the same and had not changed. The organisational structure has been approved by the Minister and the critical positions would be filled by the end of June 2013. He also reported that the entity would be focusing on enrolment and beneficiaries would be given an occupational certificate to occupy the house, which was not issued before. The entity would enhance capacity in all provinces. On the issue of recoveries, the NHBRC indicated that there would be consequential mechanisms that the entity would be put in order to recover costs. He highlighted the key products of the entity as being enrolments and inspections.

The NHBRC highlighted that there would be a certain fund set aside for the training of contractors and there was no tracking system to track contractors, but had to come back to the entity to register. He said that they would sign a Memorandum of Understanding (MOU) with the Contractor Independent Development Programme (CIDP) which must result in an action plan and that all sectors must be able to assist the entity. The CEO reported that the entity has to litigate government departments and that would need to improve the principles of Intergovernmental Relations (IGR) before litigating government departments.

The NHBRC was putting a lot of effort into geo-technical investigations and on some of the materials used by contractors which were not SABS approved. He also highlighted that there was a new area called green building and would be working with geo-tech companies in setting standards and the need to implement some of the new technologies. One official would be deployed to all provinces to assist them with the planning.

The entity would be looking at outsourcing inspectors to ensure that there is value for money because they need to be ready for any eventualities.

Mr Mnyani informed the Committee that in order for the NHBRC to be effective in conducting inspections, the NHBRC had to build internal capacity that would be able to work with service providers. He stated that an inspector could not inspect a building or house from the foundation up to the roof. Each inspector must inspect one level/layer of the house. The NHBRC had developed a model that would speak to that effect. He also reported that the NHBRC had assigned an official to assist the planning unit in all provincial offices of human settlements. Contractors would be held accountable for substandard work and would be penalised accordingly. The NHBRC was in the process of opening offices in three provinces, namely Eastern Cape, KwaZulu-Natal and Northern Cape because these are the most rural and vast.

The communication and marketing strategy has not been responding well to the objectives of the entity and that was the reason for increasing the budget. The NHBRC had to build good stakeholder management and is in partnership with the National Youth Development Agency (NYDA) and national department in training the youth. He also indicated that the Information Technology (IT) System would be more on organisation and all projects would be in the system but it would not be linked to provinces. He highlighted that the NHBRC had signed a Memorandum of Understanding (MOU) with Engineer’s Profession to accredit and certify inspectors because there is no college that offers courses for inspectors. He also highlighted that the NHBRC was in partnership with the SABS to check the quality of materials being used by homebuilders. He reported that the NHBRC was assisting City of Cape Town in 200 units for greening environment. He also reported that provinces have started to increase the enrolment because of good and positive engagement the entity was having with the provinces.

The Committee welcomed the presentation from the NHBRC. However, the Committee stated that rectification was an unwanted process (fruitless and wasteful expenditure), which was as a result of substandard work by contractors and a lack of inspection by the NHBRC. It was advised that contractors should be held liable for inferior work. The Committee further advised the NHBRC to employ more inspectors instead of employing Executive Directors to strength inspections, and to have value for money. The Committee commented on the qualified report received by the Council as well as the irregular expenditure during 2011/12 and requested the NHBRC to furnish it with a progress report. The lack of compliance by provinces in enrolling projects was raised sharply and the Department was advised not to approve any project without a registration certificate.

9.7 National Urban Reconstruction and Housing Agency (Nurcha)

Mr Gqwetha, Chief Executive Officer presented on behalf of the agency. He informed the Committee that the mandate of the agency was to ensure that bridging finance to small, medium and established contractors is available for building low and moderate housing and related community facilities and infrastructure. He gave an overview of the strategic plan in the operating environment, including the international economy in terms of subdued economic recovery prospects.

He reported that the Development Funding Institutions (DFIs) are instruments of government policy and the entity has struck partnerships with DFIs in order to address the pricing because is drying up of consequential funds. He further reported that local and provincial government had administrative and capacity constraints in contract and programme management thus; procurement of service providers and budgetary expenditure remained a challenge.

The entity has provided guarantees to First National Bank (FNB) to lend to contractors at a good and reasonable price and is working with the Department and National Treasury to extend this programme. He also reported that a group of contractors have been lent money as a group and have been provided training by the NHBRC.

With regard to the defaulting of contractors, the entity referred to Buffalo City Municipality, which had appointed a contractor who was bankrupt, and the entity had to lend the contractor money for security. In return, the entity had to use the Sheriffs to recover its money and the contractor continued to work so that the entity can be paid by the municipality. He informed the Committee that the entity had a history of clean audits and was working closely with DFIs and the NHBRC in the Free State.

The Committee requested the department to prepare a report on recapitalisation of the institutions.

10. Human Settlements stakeholders

10.1 Financial and Fiscal Commission

The Chairperson of the Financial and Fiscal Commission ( FFC), Mr B Khumalo, gave a brief summary of the presentation on the budget analysis of the department and stated that the department has five key strategic programmes for the 2013/14 financial year such as the implementation of the revised Finance-Linked Individual Subsidy Programme; implementation of the management of the rectification programme; focus on the municipal accreditation programme; improving the delivery of the social and rental housing; and better and improved intergovernmental collaboration and coordination.

Mr Mtantalo, Senior Researcher: FFC, made the presentation and indicated that the department had four key programmes, namely Administration; Human Settlements Policy, Strategy and Housing; Programme Delivery Support and Housing Development Finance. Out of the R36.9 billion budget of the department, a lot of money went to Programme 4 since the 2009/10 financial year up to the following years which means that it is the main programme of the department and is responsible for management of public entities, provinces and municipalities; acceleration of delivery of housing and human settlements through HSDG, USDG, RHIG and transfers to public entities; improvement of access to human finance through collaboration with the private sector and ensuring equal access to housing finance monitoring the lending practices of the financial sector.

During the 2009/10 financial year, the programme consumed more than 90% of the budget and out of the R16 billion allocated for this programme R10.8 billion was allocated for Human Settlement Development Grant. This trend continued up to the 2011/12 financial year. He also stated that the HSDG has accounted for 68%, 67% and 68% of the total funding in 2009/10, 2010/11 and 2011/12 respectively in programme 4. He indicated that overall spending across all programmes was improving and that some programmes were showing inconsistent performance especially programme 1.

He also indicated that the department has not reached its targets of residential housing units delivery despite 100% spending on the HSDG during 2009/10-2012/13 financial years and the Commission has attributed this to either targets set that were too high or inadequate funding. He stated that the Commission has been unable to make assessments on other performance indicators due to unavailability of data on targets in the Annual Reports. The Commission reported that targets and indicators of the department were then in line with strategic key programs developed. The Chairperson of FFC indicated that, in past years, the Commission had raised concerns about targets that were not clearly defined and not disaggregated per year making it difficult to assess and evaluate as whether they have been achieved or not. He highlighted that these concerns have been addressed in 2013/14-2015/16 Strategic Plans and APPs. The Commission was also of the view that indicators and targets set for 2013/14 were credible and the priorities identified were in line with past recommendations of the Commission.

The Commission recommended to the Committee that the department should:

· Review its yearly targets taking into account unit costs, available funding, capacity and past performance;

· Develop effective monitoring systems for verification of housing projects delivered in all provinces by instrument which will improve the credibility of reporting;

· Strengthen its monitoring and evaluation role not only in respect of human settlements grants and the development finance institutions but for the entire sector as a whole;

· Make both financial and non-financial performance data on all performance indicators easily accessible on its website;

· Put in place measures to improve expenditure performance on programmes 1, 2 and 3.

Mr Mtantalo stated that there were challenges that require urgent attention by the department and municipalities regarding the USDG and RHIG and that the Commission had reiterated the recommendations contained in its submission on the Division of Revenue Bill that there should be a review of the RHIG design with a view to make it flexible.

He also stated that the Commission has in the past made recommendations on the accreditation of municipalities and it has now observed the intention to assign the housing function to six metros as a positive development and the Commission in principle supported the proposed assignment of the housing function to the six metros.

10.2 Presentation by Fiscal Financial Commission (FFC) on RHIG

Mr Mtantalo indicated that, according to the analysis of the Commission , the RHIG has not performed well during 2010/11-2011/12, and during 2012/13 the RHIG allocation was reduced by R138 million to R340 million and spending by January 2013 amounted to R61 million (17.9%).

The Chairperson made a presentation on the performance of the RHIG and indicated that the FFC has made concrete submissions to the Standing Committee on Appropriations on what was happening in the implementation of the RHIG on two principles namely;

· That the RHIG is a National Priority Programme that needed special attention and there has to be timeframe to take the grant to another sphere to ensure that there is sufficient capacity and to build an exit strategy;

· That certain types of services has jurisdiction across the provinces.

The Chairperson stressed that it was proper that a conditional grant be established to deal with that and how to implement it. He indicated that the issue of where the function resides did not matter to the FFC, but proper measures needed to be put in place and there had to be equitable resources to implement the function. The FFC has submitted its positions in a meeting of joint sitting of Committees where afterwards the Commission did not get the feedback about the meeting. The Chairperson stated that the FFC was not in support of the transfer of the RHIG from one Schedule to another Schedule. On the issue of title deeds, the FFC had done a bit of work and found that there were some challenges on data collection. He also stated that in 2007, the government made rural development one of the major priorities and sanitation was identified as key. He indicated that the President made a proclamation on the shift of sanitation from the Department of Water Affairs to the Department of Human Settlements in order to improve sanitation by 2014, and therefore it was the reason that RHIG was introduced.

The performance of the grant has been poor until up to the 2012/13 financial year. The allocation for the grant was high and was reduced by R138 million because the department felt that it would not perform because of its capacity challenges. There has been no data since January 2013 about the progress of the grant and there was additional spending of R2 million within the period of only one month. Under performance on the allocation for the grant was across the provinces for two financial years and despite that the provinces have increased their targets during 2012/13. There has been a slight increase in 2011/12 in terms of performance and targets. The grant was changed from an indirect to a direct grant and such a change will have implications. For example, funds may be transferred to local municipalities. The Minister of Finance announced that there would be a review of grants to municipalities and this grant should have waited for that reviewal.

10.3 Presentation by Fiscal Financial Commission (FFC) on Backlog of Title Deeds

Mr Mtantalo indicated that more than 3.2% of housing units have been delivered and expected that the same number of beneficiaries should have title deeds and by 2010/11 the department estimated that 35% of subsidised houses were without formal title deeds. He stated that the number of houses completed was far more than the number of beneficiaries having title deeds.

The challenges identified by the FFC were delays in the establishment of township and proclamation caused by capacity and pieces of legislation such as Provincial Ordinances, which require different activities. Another challenge is that some owners were not collecting title deeds because of a lack of knowledge on the importance of title deeds.

The FFC recommended that the department should review and amend the different pieces of legislation.

The Committee requested the national department to submit list of municipalities so that the Committee would be able follow-up in terms of oversight and how many municipalities have been gazetted.

The Chief Finance Officer (CFO) of the national department appreciated the presentation by FFC and accepted that at the time the Appropriation Bill was submitted to Parliament proposing that the grant be transferred so that the national department have direct powers of monitoring the RHIG. The Department would be part of tendering processes of the municipalities and the lessons learnt would be passed over to the municipalities. The municipalities adopted strategy tighten up planning, procurement processes and controls are in place in ensuring that the current grant implementation is enhanced. The national department reported that it has been gazetted the number of municipalities that would benefit from RHIG and the list would be provided to the Committee.

11. Briefing by the Minister of Human Settlements on the broader strategy and policy perspective of the Budget Vote 31

Minister Sexwale indicated that he assumed office in 2009 and since then his Department had made great advances pursuing the vision of a nation housed in sustainable human settlements, but stressed that “Rome was not built in one day”. The theme of the Minister’s speech will be, “Better few, but better”. Budget Vote 31 will focus on the following aspects:

· The current funding model.

· The effects of Apartheid Separate Development on present-day South Africa.

· Deracialisation of society by means of acquiring well located land.

· Policy Intervention Instruments for the Gap Market, viz. FLISP.

· Economic growth and unemployment.

· A departure from welfare grants.

12. Deliberations and Concerns of the Committee

The Committee commented and raised concerns as indicated below:

· Recurring matters of emphasis have constantly been reported by the Auditor-General on the national department audit.

· Unacceptable trends have been observed on the high commercialisation of sanitation, and this has had a negative impact on the acceleration of adequate sanitation roll-out.

· Quality assurance has not been considered seriously by provinces. There were projects that have not yet been enrolled with the NHBRC since 2011/12. Nonetheless, the Committee is in support of the Minister setting aside 10% to rectify houses with serious defects for the poor to maintain and restore their dignity. However, the Minister was advised to take drastic steps against those contractors who put such constraints on public funds.

· Some metros still have a consolidated system where if the beneficiary fails to pay the electricity bill, the municipality attaches the house and sells it, such as eThekwini.

· The approval of the budget by National Treasury is inconsistent with the organisational structure.

· The lack of collaborative planning with other sector departments posed a challenge on how the department would respond to other areas raised in Sona.

· There was a lack of emphasis on sanitation and the eradication of the bucket system.

· Very limited information was provided on the allocation of the disaster relief fund to provinces. It was only reported that the fund has been earmarked for the reconstruction of damaged infrastructure. The department could not come up with clear and direct responses. This required extensive further engagement.

· Systems in provinces were not standardised. For example, some provinces used the Housing Subsidy System (HSS) and others used the Basic Accounting System (BAS). This non-standardisatoin remained a serious concern as it may result in inconsistencies in monitoring actual delivery and beneficiary management (which is where most corrupt practices and manipulation occur).

· The filling of vacancies took too long and was therefore affecting delivery.

· A small percentage allocated to Cornubia is a cause of concern and requires reviewal if the department is serious about informal settlements clearance in KwaZulu-Natal.

· No provision was made for Community Residential Units (CRUs) and Peoples Housing Process (PHP) in the provincial and national programme.

· The non-alignment of government legislation to streamline processes related to registration of title deeds has a negative impact on citizens in acquiring property ownership, such as Provincial Ordinances, the Less Formal Township Establishment Act and the Development Facilitation Act.

· Current FLISP policy is discriminatory and would not achieve the objective, and therefore the Committee calls for its urgent reviewal to accommodate individual applicants and not to only consider project alignment.

· Under-spending trends by provinces during 2012/13 were unacceptable.

13. Committees recommendations

The Committee recommends that the Minister should ensure that the national department:

· Monitors funds transferred to provinces and municipalities constantly and further strengthens its monitoring systems to detect any potential risks and undertakes proactive, remedial action before the damage occurs, such as under-spending features, inappropriate budget utilisation, and to ensure value for money;

· Enrols and registers projects with the NHBRC together with all provinces and conducts systematic monitoring and evaluation and reports the status of all projects for implementation on this current financial year to the Committee by July 2013 to prevent further rectification;

· Submits a list to the Committee of companies that have been convicted. Furthermore, the national departmental Corruption Hotline should be reviewed and monitored constantly to see whether it is still working effectively and efficiently because the Committee discovered that it was not working;

· Responds adequately and promptly to reported crime, fraud and corruption matters;

· Provides adequate capacity to the risk committee for it to be effective and efficient;

· Advocates and champions the study for a new and appropriate funding model for human settlements development in the country and reports progress to the Committee by September 2013;

· Prioritises the drafting of an interim regulatory mechanism to regulate sanitation in order to accelerate bucket system eradication and report progress to the Committee by September 2013. Meanwhile, it should provide a clear concise plan and targets to address the bucket system in specific municipalities through the Urban Settlement Development Grant (USDG), the Rural Household Infrastructure Grant (RHIG) and the Municipal Infrastructure Grant (MIG) funding allocation for the current financial year, and report to the Committee by September 2013. A complete monitoring and evaluation report on the capacity of various municipalities and support provided would be very crucial;

· Assists NURCHA in addressing challenges of contractors not being paid by provinces. In fact, a regulatory mechanism should be put in place as a matter of urgency and progress should be reported to the Committee by August 2013;

· Facilitates the discussion between SHRA and COGTA on rates and taxes paid by SHRA to municipalities and its implications for the government’s objectives and works out an amicable solution that will not compromise municipal revenue collection;

· Intervenes urgently in the unacceptable practice by the eThekwini Municipality on the sale of state subsidy houses due to failure to pay rates. The Committee strongly condemns this and requires an urgent report on the matter by June 2013;

· Considers conferring with other relevant Ministers on issues raised in this report, such as issues of land release, pieces of legislation impacting on the registration of title deeds and the budget allocation versus the organisational structure and report to the Committee on the outcome of such interactions by August 2013;

· Considers and reviews a follow-up on low budget percentages on priority projects and submit a report by the end of July 2013.

The Committee further recommends that the Minister should:

· Take seriously the recommendations made by the Institutions Supporting Democracy, and more engagements on issues relating to human settlements should be undertaken as this will assist in resolving complex issues within the sector;

· Devise a clear plan between the department and other sector departments in ensuring that issues raised in Sona and the Budget Speech that aim to advance and enhance the delivery of human settlements are presented to the Committee by July 2013.

Report to be considered.