ATC171017: Budgetary Review and Recommendation Report (Brrr) of the Portfolio Committee on Human Settlements, dated 17 October 2017

Human Settlements, Water and Sanitation

BUDGETARY REVIEW AND RECOMMENDATION REPORT (BRRR) OF THE PORTFOLIO COMMITTEE ON HUMAN SETTLEMENTS, DATED 17 OCTOBER 2017

 

The Portfolio Committee on Human Settlements (the Committee), having considered and assessed the performance of the Department of Human Settlements and its Entities on 3, 4 and 5 October 2017, reports as follows:

 

1.         INTRODUCTION

 

In 2009, the President assented to the Money Bills Amendment Procedure and Related Matters Bill. The Money Bills Amendment Procedure and Related Matters Act (No. 9 of 2009) came into effect on 16 April 2009. The Act aims to provide for a procedure to amend Money Bills before Parliament. The Act also enables Parliament to amend the Budget and other Money Bills. This includes the annual Division of Revenue Bill, the annual Appropriation Bill and the Adjustments Appropriation Bill.

 

In 2010, Cabinet adopted an outcomes based delivery approach to achieve the predetermined objective to accelerate services to the people. To ensure compliance with this approach, all spheres of government should work in a coordination to effect twelve measurable outcomes which assists to focus all policy and programme implementation. These predetermined objectives, with associated and defined targets, should be reached at a date set out by the President. Outcome 8 is focused directly on the mandate of the Department of Human Settlements and states that the department is responsible for the creation of sustainable human settlements and improved quality of household life.

 

Many people still live in poor conditions, without access to basic services in a proliferation of marginalised informal settlements as a result of poor planning and socio and geo-spatial dislocations of the apartheid legacy. These informal settlements are located far from economic opportunities and are in many instances without access to water, sanitation facilities, and electricity and refuse removal. This, together with the shortage of land, the lack of affordable housing opportunities and security of tenure was the motivation behind Outcome 8 of the MTSF. The Delivery Agreements for Outcome 8 focus on the following outputs:

 

  • Output 1        The Accelerated delivery of housing opportunities;
  • Output 2        Universal access to basic services;
  • Output 3        The efficient utilization of land for human settlements;
  • Output 4        An improved property market.

 

The intention for Outcome 8 is to create sustainable human settlements and improved quality of household life. In order for the Department to achieve its Outcome 8 mandate coupled with challenges of approximately 2.2 million housing backlog, the Department has reconfigured its functioning through a Turn-Around Strategy approved by the Department of Public Service and Administration and the National Treasury.

 

1.1        MANDATE OF THE COMMITTEE

 

The Committee’s mandate is to maintain an oversight responsibility that ensures a quality process of scrutinising and overseeing government’s action.  It is driven by the ideal of releasing a better quality of life for all people in South Africa.  It is also required to facilitate public participation as well as oversee compliance with regulatory legislative frameworks related to human settlements.

 

In brief, the Committee

  • Considers legislation referred to it;
  • Conducts oversight of any organ (s) of state and constitutional institution (s); falling within its portfolio;
  • Facilitates appointment of candidates to Entities;
  • Considers international agreements; and
  • Considers budget of department and Entities falling within its portfolio.

 

 

 

 

1.2        MANDATE OF THE DEPARTMENT OF HUMAN SETTLEMENTS

 

The mandate of the Department of Human Settlements is to determine, finance, promote, co-ordinate, communicate and monitor the implementation of housing policy and the provision of human settlements.

 

Since the formulation of the Comprehensive Housing Plan in 2004, the department has conducted various initiatives to enhance the creation of comprehensive, integrated, co-ordinated, 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. In keeping with this responsibility, the Department has set short, medium, and long term human settlements development goals towards breaking of apartheid spatial patterns while promoting access to adequate housing, affordable services in better living environments and a more functional equitable residential property market.

 

As mentioned in the introduction to this report, Outcome 8 of the government’s outcome-based service delivery approach is focused on the mandate of the Department of Human Settlements. This mandate is to create sustainable human settlements and work towards improving the quality of household life. Section 26 of the Constitution of the Republic of South Africa (1996) and the Housing Act (No. 107 of 1997) are still considered the foundation for the operational models and the spending focus of the Department.

 

 

1.3        AIMS OF THE DEPARTMENT OF HUMAN SETTLEMETS

 

In line with the National Development Plan (NDP), the Human Settlements aims at achieving visible results from effectively coordinated spatial planning systems by 2030 and this is done through:

  • The development of the Spatial Master Plan for Human Settlements that would direct investments to the priority precincts;
  • Implementation of Catalytic Projects;
  • Prioritising, targeting and focusing resources (financial and other) towards scale delivery;
  • Supporting and encouraging government and private sector collaboration and integration;
  • Promoting the participation of Youth and Women in human settlements development programmes;
  • Scaling up delivery on the informal Settlements Upgrading Programme.

 

 

2.            PURPOSE OF THE BUDGETORY REVIEW AND RECOMMENDATION REPORT (BRRR)

 

In terms of Section 5 of the Money Bills Amendment Procedures and Related Matters Act (No. 9 of 2009), the National Assembly, through its Committees, must annually compile Budgetary Review and Recommendation Reports (BRRRs) that assess service delivery and financial performance of departments and may provide recommendations on forward use of resources. The BRRR is also a source document for the Committees on Appropriations when considering and making recommendations on the Medium Term Budget Policy Statement (MTBPS).

 

2.1          METHODOLOGY

 

The Portfolio Committee on Human Settlements compiled the 2016/17 BRRR using the following documents:

  • The National Development Plan: Vision for 2030;
  • Medium Term Strategic Framework;
  • 2016 State of the Nation Address;
  • The National Housing Code;
  • Strategic Plans of the Department of Human Settlements and its Entities;
  • Annual Performance Plans of the Department of Human Settlements, assessment made by the Department of Planning, Monitoring and Evaluation DPME, Financial and Fiscal Commission (FFC), and the Auditor-General South Africa outcomes of audit findings.

 

3.         NATIONAL DEVELOPMENT PLAN VISION 2030

 

In relation to the National Development Plan (NDP) 2030, the Department has the following strategic priorities:

  • Respond systematically, to entrenched spatial patterns across all geographic scales that perpetuates social inequality and economic inefficiency;
  • Implement strategically the chosen catalytic interventions to achieve spatial governance;
  • Achieve a creative balance between spatial equity, economic competitiveness and environmental sustainability;
  • Expand personal freedoms by providing the residents of South Africa with greater choice of where to live;
  • Support individuals, communities and the private sector in engaging with the state on the future of the spaces and settlements in which they live and work while streamlining processes to enable local governments to implement strategic spatial intervention.

 

4.         MEDIUM TERM STRATEGIC FRAMEWORK (MTSF) KEY TARGETS INCLUDE:

 

The Department of Human Settlements had set targets for the MTSF as indicated below:

  • Radical economic transformation, rapid economic growth and job creation;
  • Rural development, land and agrarian reform and food security;
  • Access to adequate human settlements and quality basic services;
  • Improving the quality of, and expanding, access to education and training;
  • Ensuring quality healthcare and social security for all citizens;
  • Contributing to a better Africa and a better world;
  • Social cohesion and nation building.

 

 

 

 

5.         SONA 2016/17: ANALYSIS OF KEY PRIORITIES PERTAINING TO THE DEPARTMENT

 

The 2015/17 SONA highlighted the efficient use of energy at a household level and upgrading of informal settlements. Infrastructure support to households in specific municipalities has been outlined as one of the priorities. With regards to the Human Settlements sector, the following strategic objectives have a bearing:

 

  • Encouraging households to switch from electricity to gas for cooking, heating and other uses and also to offer infrastructure support to specific municipalities in the country;
  • Ring-fencing a total of R2.1 billion for the revitalisation of distressed mining towns;
  • Approving expenditure to the value of R290 million for the upgrading of informal settlements through the National Upgrade Support Programme (NUSP).

 

 

  1.       Strategic Priorities of the Department of Human Settlements

 

In order to systemically work towards achieving the vision of the NDP and transforming the functioning of human settlements and the workings of the space economy, specific reforms were focused on the MTSF and were aimed at the following:

 

  • Ensuring that poor households have adequate housing in better living environments;
  • Supporting the development of a functionally and equitable residential property market;
  • Improving institutional capacity and coordination for better spatial targeting.

 

Furthermore, the Strategic Plan for the Department (2015 – 2020) identified a number of key priority areas that support the incremental achievement of the vision of the NDP:

 

  • Scaling up and upgrading informal settlements;
  • Transferring of all title deeds for subsidy units;
  • Developing a more coherent and inclusive approach to land;
  • Implementing a coherent and multi-segmented social rental housing programme that includes backyard rentals;
  • Dealing with affordable market with a particular emphasis on a constructive engagement and strengthening of partnerships with the private sector to improve delivery;
  • Consolidating the Development Finance Institutions (DFIs).

 

 

6.   DEPARTMENT AND THE ENTITIES PROGRAMME PERFORMANCE

 

Before discussing the performance of the Department and its Entities, it was imperative to provide context or issues that affect the performance:

 

6.1        Situational analysis

 

The Department remained committed to the implementation of the 2014-2019 Medium Term Strategic Framework (MTSF) in line with the NDP for the 2016/17 financial year. The Department had prioritised the following programmes:

  • The scaling up of the informal settlements-upgrading programme;
  • The acceleration of the transfer/issuing of title deeds;
  • Planning and implementation of Catalytic Projects;
  • The provision of access to housing finance for the gap market;  
  • The provision of housing for Military Veterans.

 

As part of implementing the MTSF objectives, the Department evaluated the existing subsidy instruments to improve spatial investment targeting and planning for the implementation of programmes that act as catalysts for spatial, social and economic transformation and integration. As a result, a total number of approximately 45 catalytic projects were approved for implementation and these were expected to yield significant number of housing opportunities over the medium-to long term. These projects would drive spatial restructuring and would facilitate the connectivity of human settlements to infrastructure plans and contribute to the achievement of the 2050 vision of having transformed human settlements with citizens living in close proximity to work, with access to social facilities and essential infrastructure. To ensure that the vision would be realised, the Department in the past year focused on enhancing coordinated planning across all spheres of government by ensuring that municipal and provincial plans were aligned to the bulk infrastructure spending and plans for the provision of amenities which were critical for the delivery of human settlements.

 

During the year review, the Department was able to account for a total of approximately 148 000 housing opportunities, delivered through the HSDG and a further 19 058 housing opportunities delivered through the USDG. These include the provision of basic services to households’ informal settlements which means, for this MTSF period, 260 970 households have benefited from the informal settlements upgrading process.  In addition, municipalities were provided with technical support and 283 feasibilities were conducted to determine the sustainability of the areas for development and 413 informal settlements upgrading plans were developed.

 

One of the priorities of the Department was the provision of shelter to the poor and vulnerable groups. The Department has in the past year provided approximately 90 000 houses from the HSDG to the poor in the subsidy market, prioritising the elderly, women-headed households and the vulnerable groups. Thus the MTSF period, this amounts to a total number of 286 627 BNG units provided.

 

The Department however did not perform as expected in the delivery of houses in Military Veterans; a strategy to ensure that all non-statutory Military Veterans were housed had been developed and was being implemented. The provision of subsidy housing was also used to allow for job creation opportunities for women and youth. The Department in collaboration with the National Home Builders Registration Council (NHBRC) and Estate Agency Affairs Board (EAAB) trained a significant number of women and youth in home builders training, the contractor development programme, the one learner one estate agent programme and artisan development. As a result, most of the prioritised groups trained participated in various human settlements development programmes.

 

As part of the commitment to provide housing to the affordable housing market segment, access to housing finance for the affordable market was facilitated by the DFIs in partnership with other financial institutions and also through the Government Employee Housing Scheme. This culminated in low and middle-income households accessing housing finance despite the unfavourable economic conditions. For the MTSF period, 50 046 new housing units were yielded as a result of loans granted by DFIs and the private financial institutions.

 

To accelerate delivery of affordable housing to low- and medium-income households, the Department was in a processes of finalising the legislative and operational establishment of the Human Settlements Bank which would improve and address the prevailing human settlements challenges in relation to accessing credit and borrower education. It envisaged that the bank would extend and facilitate wholesale finance to empowered consumers for investments that promote development in underserved markets. However, it would not compete with the retail and commercial loan finance business activities of the private banking sector. Instead, it would mobilise private sector participation to unblock financial resources to cater for the needs of low-income households.

 

During the past year, focused interventions to accelerate delivery of affordable rental were implemented in the Social and Affordable Rental Housing Programme, including through the Community Residential Programme, including through the Department did not deliver as planned on the target of issuing title deeds, which remained a complex process in the housing delivery chain. During the 2016/17 financial year, a total 67 447 pre- and post–1994 title deeds were issued. This totals 187 000 pre- and post-1994 title deeds issued during this MTSF period. The greatest challenge, which impacted on the slow pace of issuing of title deeds, included delays in proclamation and resolution and land rights. The process was further hampered by missing information of beneficiaries who cannot be traced and, in some instances, by family disputes that cannot be resolved because the owner had been deceased. As a result, the Department has put measures in place by ensuring that each province has a dedicated office with the required capacity and a task team has been put in place through the development and publication of the Property Practitioners Bill. This would repeal the Estate Agency Affairs Act of 1976 and would ensure that all segments of the market were transformed in order to participate in the property market.

 

As part of control, the Department has in the past year intensified its monitoring systems to track the impact of resultant spending by provinces, municipalities and Entities. The organisational performance management has been re-designed to reflect the new approach and manner in which the Department was providing sustainable human settlements.

 

 

6.2        Challenges in the Human Settlements Sector

 

Despite the remarkable progress made in the provision of adequate housing opportunities housing quality living environments, access to housing and the interplay between demand and supply remained a challenge. South Africa faces a low-income housing supply constraint across the income spectrum. In 2016, Statistics South Africa (Stats SA) reported that the household size had decreased to 3.3 persons and predicted that the number of household size drops. It is also estimated that by 2020 there would be a formation of about 3.6 million new households. More than 2 million households would fall within the income category of less than R3 500 per month, which would contribute to an increasing demand for housing and government support.

 

High levels of unemployment (which by the end of 2016 has fallen to 26.5%) and inflationary pressures further eroded household incomes. This perpetuated an increase in the demand for housing and government support, as consumers faced financial pressures which impacted on the risk and on their risk profiles, thus influencing the private retail banking appetite for lending. Notwithstanding the economic challenges and the availability of end-user finance, the demand for affordable housing had expanded as the majority of the population fall within this category, and cannot access mortgages due to affordability. The country’s GDP growth had fallen behind the rate of population increase, resulting in declining per capita incomes and reduced Government revenue, contributing to the State’s inability to sustain spending on core social and economic programmes. Furthermore, in 2016, the increase of material prices in the building industry exacerbated the problem and made the market vulnerable. This therefore had a negative influence on the delivery of human settlements and the achievements of the set outcomes.

 

At the centre of the challenges presented remained the effective and timely release of well-located land suitable for development. Accordingly, the Housing Development Agency which is the entity established with the mandate, ensured that well located land was identified, acquired, rezoned and released for human settlements. Through the process, the HDA worked together with a number of Government departments and the private sector, facilitating collaboration and integrated alignment for human settlements land development.

 

Because of the dynamic in the land markets, delivery tends to be plagued by bureaucracy and compliance delays, resulting in communities showing growing dissent over the inability of government to account for turn-around times to delivery. The sector lack of capacity to package projects at municipal and provincial levels remained a challenge and places a strain on the Government responsibility to provide access to adequate housing. To address this challenge, the Department had a panel of resources teams that preceded the delivery of the structure. The Department’s focus was on supporting the entire property and ensuring that housing was delivered in sustainable and habitable settlements. This had required the establishment of enhanced intergovernmental planning that supports optimal land use and stimulates private investment. The Department and Government broadly to ensured there as a holistic human settlements development planning and financing approach that would address issues of scale, affordability and sustainability.

 

 

6.2.1     Strategies to improve the identified challenges:

 

As part of laying the foundation for transforming the functioning of human settlements and the workings of the space economy, the 2014-2019 Medium Term Strategic Framework focused on reforms aimed at achieve the following:

  • Ensuring that poor households have adequate housing in better living environments;
  • Supporting the development of a functionally and equitable residential property market;
  • Improving institutional capacity and coordination for better spatial targeting.

 

6.2.2     Over the next year’s priority would be given to:

 

  • Scaling up the Upgrading of informal settlements;
  • Transferring all title deeds for subsidy units;
  • Developing a more coherent and inclusive approach to land;
  • Implementing a coherent multi-segmented social rental-housing programme that includes backyard rentals;
  • Dealing with affordable market with a particular emphasis on a constructive engagement and strengthening partnerships with the private sector to improve delivery, and;
  • Consolidating the DFIs.

 

For the success of the planned housing and human settlement programme reforms/strategies, significant institutional reforms to improve the coordination of housing and human settlement development would be put in place. This included strengthening capabilities for municipalities and integrating the housing and human settlement grants. This would also be supported by and improved interface of the housing and human settlement planning elements with the spatial planning frameworks driven within other government departments.

 

 

6.2.3 Performance environment

 

The dawn of democracy in 1994 created a new dispensation in which access to basic services such as housing, water and sanitation was recognised as a fundamental human right. South Africa inherited high levels of poverty and it continued to be confronted with unequal and often inadequate access to resources, infrastructure and social services. The Bill of Rights enshrined the right to basic services and commanded that the state must take reasonable measures to achieve the progressive realisation of these rights.

 

The characteristics of the dwellings in which households live and their access to various services and facilities provide an important indication of the wellbeing of household members. It was widely recognised that shelter satisfies a basic human need for physical security and comfort. According to the 2014: General Household Survey, the percentage of households that fully owned the dwellings they inhabited increased slightly from 52,9% in 2002 to 61,4% in 2008, before declining to 55,3% in 2014. This increase was accompanied by a decrease of about five percentage points for households that rented accommodation. Households that maintained ‘other’ tenure arrangements increased from 11,7% in 2002 to 12,4% in 2014.

 

In 2014, more than three-quarters (79,4%) of the South African households lived in formal dwellings, followed by 12,9% who lived in informal dwellings, and 6,8% in traditional dwellings. The highest concentration of households in Limpopo (93,6%) lived in formal dwellings, followed by the households in Mpumalanga (88,1%). Although the highest concentrations of informal dwellings were found in North West (21%) and Gauteng (19,2%), it was worth noting though that the majority of households in these two provinces lived formal dwellings: with 78,9% of Gauteng households living in formal households. More than one-fourth of households (27,7%) in Eastern Cape resided in traditional dwellings compared to 17% of households in KwaZulu-Natal.

 

The Department’s delivery environment was in the main influenced by the increase in urbanisation resulting in the increase demand for housing. Even though South Africa had progressively accommodated an additional 4.1 million households in formal dwellings, an upward growth from 74.4% in 2003 to 79.4 % in 2014, demand for housing continue to exist.

 

Households were also experiencing challenges in spending patterns and recurring low savings. The low savings combined with consumers’ credit-risk profile contributed to the inability of access credit particularly for mortgages. This offers evidence of vulnerability for low income earners to access credit particularly mortgage loans which was the main form of funding for housing development. With the increase of the repo rate by 0.25 basis points in November 2015, the prime interest rate by commercial banks increased to 9. 75%. The increase in interest rate had a severe impact on disposable income for individuals with mortgages and other forms of credit exposure. The report by International Monetary Fund (IMF) indicates that in 2014, the South African economy was estimated to have grown by just 1.4% after expanding by 1.9% in 2013, 2% in 2012, 3.6% in 2011, and 3.1% in 2010.

 

Even though South Africa has had the second biggest economy in the continent over the past ten years, the country’s GDP growth has been lagging behind. This has resulted to increasing dependency from government as 68.8% of households in rural areas and 30.9% of residents in urban areas were living in poverty. Only 30% of South Africans were able to afford a house of more than R500 000 as house prices, inflation, and income have affected the affordability levels. Low-income earners have found it increasingly difficult to enter the property market because of stringent lending regulations and declining levels of disposable income arising from increasing interest rates.

 

Statistics South Africa indicated that there were about 14.4 million households with a household size of about 3.4 persons per household. It was predicted that the total number of households would grow as the household size drops and that by 2020 there would be about 3.6 million new household formations, with 55% falling within the income category of less that R3500 per month. This would contribute to an increasing demand for housing.

 

 

6.2.4     Organisational environment

 

The Department embarked on an approach to review its organisational structure. The purpose of the review was to ensure the alignment of the Departmental organisation structure with the National Development Plan (NDP), the Breaking New Ground (BNG) policy, the Medium Term Strategic Framework (MTSF), and the Departmental Strategic Plan and Annual Performance Plans. Central to that, the Department experienced severe budget cuts that impacted on the filling of vacancies over the MTEF. However, the Department prioritised critical positions and the process to fill all the advertised critical positions were being concluded.

 

 

7.         STRATEGIC OUTCOMES-ORIENTED GOALS

 

The Department Annual Performance and Strategic Plan included strategic outcome-oriented goals that were the drivers of change towards the achievement of sustainable human settlements. The Department was directly responsible for delivering on and coordinating the work and priorities outlined in Outcomes 8 focusing on human settlements, and also makes contribution to other outcomes. The four strategic outcome-oriented goals of the Department were aligned to the long-term goal of transforming human settlements into equitable and efficient spaces, with citizens living in close proximity to work with access to social facilities and essential infrastructure. The strategic goals set in 2015-2020 strategic plan include:

·         Enhanced efficiency and effectiveness of the Department;

·         Integrated and responsive human settlements sector planning and policy environment;

·         Increased delivery of adequate housing in quality living environments.

 

The Department took a series of steps to achieve strategic objectives and targets that would, in the long term, result in the achievement of the strategic goals by reviewing and evaluating existing policies and programmes. The design and implementation evaluation of the Urban Settlements Development Grant (USDG) was conducted. It resulted in the development of the USDG policy that governs and guides the application of investment in areas of deprivation, particularly informal settlements and previously disadvantaged areas. The Social Housing programme was also evaluated and this resulted in the Department’s decision to review the Restructuring Capital Grant quantum and household income bands. The infrastructure for development of human settlements policy was developed and this would guide the review of human settlements legislation.

 

As part of the commitment to provide adequate housing in quality living environments, the Department ensured that households living in informal settlements were upgraded through the provision of basic services and provision of land tenure rights, where applicable. The DFIs and provinces completed a significant number of affordable rental units.

 

In collaboration with the HDA, well located land was identified and acquired. It was expected that the sector would see an increase in rental housing units by utilising the hectares of land acquired for affordable housing. To improve institutional coordination and enhance sector capacity, institutional reforms have been introduced, and this includes interventions by professional resource teams that assist in packaging projects for municipalities and provinces. To improve operations, the Department developed an improvement plan for MPAT and monitors adherence to the implementation of each key result area.

 

8.         PROGRESS ON THE IMPLEMENTATION OF MTSF AS AT 31 MARCH 2017

 

Annual target

Actual Performance

Total delivered during the MTSF period until 31 March 2017 (Outcome 8 report)

175 000 households upgraded  to Phase 2

75 941 households

HSDG (56 343)

USDG (19 598 )

265 660 households upgraded  to Phase 2

115 000 subsidy housing opportunities provided

90 692  subsidy opportunities

284 735: Subsidy units delivered

69 675 Title Deeds transferred

3 700 affordable rental opportunities delivered

5 040 affordable rental opportunities delivered

15 776

6 301 of Social Housing units delivered

3595 of Social Housing units delivered

 

8 165

2 000 Community Residential Units (CRU) delivered

981 Community Residential Units (CRU) delivered

5 258

100 000 title deeds backlog eradicated

67 449 title deeds backlog eradicated

187 175 (Backlog Pre- and Post- 1994)

2 455 hectares of well-located land acquired, rezoned, and released for new developments

6 250.385 ha of well-located land acquired,

There is slow progress on rezoning of the land

13 507.0 ha

2 Evaluation studies conducted (Affordable Housing and Access)

1 Evaluation study conducted  (Affordable Housing)

5 Studies conducted (Asset, USDG, Social Housing, IRDP, Affordable Housing)

100% of projects under implementation monitored and verified   (HSDG and USDG)

96.6% of projects under implementation monitored and verified (HSDG and USDG)

N/A

l (Source: Department of Human Settlements Annual Performance Report, 2017)

target

 

9.         HUMAN SETTLEMENTS ALLOCATIONS - MTEF ALLOCATIONS

 

The Department spent R30.5 billion by the end of the 2016/17 financial year, which constitutes 99.6% of its allocation. This signals an improvement from the previous financial year when the Department spent 98.3% of its final appropriation.

 

Virements to value of R10.284 million were approved during the adjustment budget, of which R10 million was sourced from Programme 4. After the adjustment budget, an additional R6.5 million was sourced as virements from programmes 1 and 3 to pay for amongst others membership fees for UN Habitat, and the appointment of a service provider to draft the Rental Housing Amendment Bill. In addition, the virements related to the hosting of the following: the Govan Mbeki Awards, the Habitat III Thematic Meeting, preparation towards Habitat III Conference in Quito, and the National Human Settlements Conference. Vacancies in programmes 1 – 3, also contributed to underspending.

 

 

 

 

 

 

 

9.1        Performance targets per main programme 2016/17

 

Programme

No. of Indicators

Achieved

Partially achieved

Not achieved

Percentage  Achieved

  1. Administration

16

11

5

0

68.8%

  1. Human Settlements Policy, Strategy and Planning

11

7

4

0

63.6%

  1. Programme Delivery Support

17

7

8

2

41.2%%

  1. Housing Development Finance

4

3

1

0

75%

Total

48

28

18

2

58.3%

(Table 2: Performance targets per main programme 2016/2017)

 

The table above provided an overview of numbers and targets achieved and not completely achieved and was not meant to serve as a measuring or rating tool to determine the effectiveness of the programmes of the Department. In general, the Department has fared better in achieving its targets in Programmes 4 and 2, compared to Programme 3 and Programme 1. Each of the Programmes will be discussed in more detail below:

 

Programme Performance

 

Programme 1: Administration

 

Total Targets set

16

Targets achieved

11

Targets not fully achieved

5

Not achieved

None

Indicator success rate

68.8%

Budget spent

R420.8 million or 92%

(Source: Department of Human Settlements Annual Performance Report, 2017)

 

Expenditure for Programme 1 totalled 92% of the final appropriation, while actual performance is 68.8% of indicators. Partially achieved targets speak to the mandate of the following sub-programmes:

·         Internal Audit, Risk Management and SIU – all 3 targets were partially achieved. Failed to fully implement Risk Management Plan, Anti-fraud and Corruption Plan and Annual Audit Plan.

·         Human Resources – 2 targets set for the sub-programme could not be fully achieved. The HR Plan was not fully implemented and it only achieved 73% instead of 100% of the HR Statutory Requirements.

 

Programme 2: Human Settlements Policy, Strategy and Planning

 

Total Targets set

11

Targets achieved

7

Targets not fully achieved

4

Not achieved

None

Indicator success rate

63.6%

Budget spent

R86.6 million or 93.8%

(Source: Department of Human Settlements Annual Performance Report, 2017)

 

Programme 2’s expenditure reached 93.8% by the end of the financial year. However, only 63.6% of the performance targets were achieved.  Some of the targets not met include:

  • An approved Human Settlements Master Spatial Plan;
  • About a third of title deeds backlogs was not eradicated;
  • While the target for hectares of land acquired was exceeded, most of it has not been rezoned and thus not released for new development;
  • A draft White Paper for Human Settlements was not completed.

 

Programme 3: Programme Delivery Support

 

Total Targets set

17

Targets achieved

7

Targets not fully achieved

8

Not achieved

2

Indicator success rate

41.2%

Total budget spent

R151.7 million or 69.7%

 

 

(Source: Department of Human Settlements Annual Performance Report, 2017)

 

Programme 3 managed to achieved less than half of its performance targets for the 2016/17, while overall expenditure is 69.7% of its final appropriation. Performance-related challenges were reported due to:

  • The upgrading of households was delayed because of the process involved that includes the adoption of upgrading plans by the council and budgeting process thereof;
  • Delays in delivering has been as a result of a number of processes that include the third quarter seasons where for almost two months’ work is stalled;
  • Underperformance because of the process to reconstruct the organisation;
  • Confirming the state of readiness of projects by various stakeholders contributed to the delays and slow pace of delivery.

 

Programme 4:  Housing Development Finance

 

Total Targets set

4

Targets achieved

3

Targets not fully achieved

1

Not achieved

0

Indicator success rate

75%

Total budget spent

R 29.9 billion or 99.99%

(Source: Department of Human Settlements Annual Performance Report, 2017)

 

 

This programme was allocated R29.930 billion, of which R29.927 billion was spent (99.9%). Performance has declined from the 2015/16 financial year, while expenditure is higher than 98.5% achieved in the previous year. 

 

The Department experienced a challenge with processing FLISP subsidies due to:

  • Sluggish economic performance of South Africa;
  • High inflation eroding disposable income;
  • Over indebtedness of consumers.

 

9.2        Human resources

 

The number of funded posts on the approved establishment declined from 821 in 2015/16 to 680 in 2016/17 financial year. A total of 591 posts were filled, resulting in a 13.09% average vacancy rate. As the previous financial year, the highest vacancy rate was experienced by Programme 3 (29.7%), which was also the worst performing in terms of targets set, as well as expenditure. However, the vacancy rate amongst critical occupations such as engineers and related professionals, finance and economics-related, etc. was significantly higher than the average vacancy rate, i.e. 39%.

 

About 93% of the members of the Senior Management Service (SMS) signed performance contracts. One employee was placed on precautionary suspension for 365 days, at a costs of R1 million. It was unclear when this issue would be resolved by the Department.

 

 

10.        HUMAN SETTLEMETNS CONDITIONAL GRANT EXPENDITURE

10.1            Human Settlements Development Grant (HSDG) Expenditure Performance as at 31 March 2016

Provinces

Voted     Funds

Roll Over from 2015/16

Total Available

Year to date (1 April 2016 - 31 March 2017)

Transferred from Voted Funds

Spent by Provinces

Unspent against Total available

%  Spent against Total Available

%  Spent against Roll Over & Transferred Funds

% Unspent against Roll-over & Transferred Funds

R'000

 

Eastern Cape

   1 991 457

        4 186

   1 995 643

   1 991 457

    1 995 643

                        -

             100

                     100

                           -

Free State

   1 098 411

        2 784

   1 101 195

   1 098 411

    1 098 317

       2 878

             100

                     100

                           0

Gauteng

   5 022 669

               -  

   5 022 669

   5 022 669

    4 978 964

          43 705

               99

                       99

                           1

KwaZulu-Natal

   3 124 702

               -  

   3 124 702

   3 124 702

    3 123 330

            1 372

             100

                     100

                           0

Limpopo

   1 208 370

   394 842

   1 603 212

   1 208 370

    1 517 376

          85 836

               95

                       95

                           5

Mpumalanga

   1 314 645

               -  

   1 314 645

   1 314 645

    1 302 757

          11 888

               99

                       99

                           1

Northern Cape

      371 109

       3 821

      374 930

      371 109

       368 127

            6 803

               98

                       98

                           2

North West

   2 151 817

               -  

   2 151 817

   2 151 817

    1 951 247

       200 570

               91

                       91

                           9

Western Cape

   2 000 811

               -  

   2 000 811

   2 000 811

    2 000 811

                        -

             100

                     100

                           -

Total

18 283 991

405 633

18 689 624

 18 283 991

18 336 572

        353 052

  98

          98

                    2

(Source: Department of Human Settlements Annual Performance Report, 2017)

 

10.1.1. Financial interventions

The Department reported that the HSDG:

  • On the reported R18.3 billion expenditures by Provinces for the 2016/17 financial year, a total of R2.2 billion which was 12% of the total available funds, was spent on Financial Intervention Housing programme;
  • A total of 43 283 housing opportunities was reported under the financial intervention programme and the outputs cannot be counted as new housing opportunities;
  • The lead contributors to these outputs were mainly NHBRC enrolments with 26 000, followed by State Asset Maintenance with 8 011, EEDBS with 5 278 and Rectification with 2 519 units;
  • It was only under FLISP in this programme that yielded a total of 5 057 (2 000 sites and 3 057 units) new housing opportunities with a reported expenditure of R78.7 million.

 

10.2      Urban Settlements Development Grant (USDG) (01 JULY 2016 – 31 MARCH 2017):

Municipality

Voted Funds

1

Roll-over   from    2015/16

2

Total Available Funds

3=(1+2)

Transfer from Voted funds

4

Spent by Municipality        

5

Unspent against Total Available Funds

6=(3-5)

% Spent against Total Available Funds

7= (5÷3)

 

% Unspent against Total Available Funds

8= (6÷3)

 

R'000

 

Buffalo City

 731 499

-

 731 499

 731 499

 510 132

 221 367

69.7

30.3

Nelson Mandela Bay

 868 282

-

 868 282

 868 282

 439 164

 429 118

50.6

49.4

Mangaung

 725 003

 58 644

 783 647

 725 003

 544 689

 238 958

69.5

30.5

Ekurhuleni

1 890 352

-

1 890 352

1 890 352

 815 522

1 074 830

43.1

56.9

City of Johannesburg

1 775 809

 94 984

1 870 793

1 775 809

1 017 418

 853 375

54.4

45.6

City of Tshwane

1 539 334

-

1 539 334

1 539 334

 993 847

 545 487

64.6

35.4

eThekwini

1 885 685

-

1 885 685

1 885 685

 856 694

1 028 991

45.4

54.6

City of Cape Town

1 423 504

 145 319

1 568 823

1 423 504

 787 731

 781 092

50.2

49.8

Total

10 839 468

 298 947

11 138 415

10 839 468

5 965 197

5 173 218

53.6

46.4

(Source: Department of Human Settlements Annual Performance Report, 2017)

 

 

11.        SUMMARY OF AUDIT FINDINGS BY THE DEAPRTMENT:

 11.1.    The Department reported that:

  • The Department achieved an unqualified audit opinion with findings on compliance and/or performance information;
  • The Office of the Auditor General placed an emphasis of matter on the fact that prior year financial statements had to be restated due to an error on the value of the investments;
  • An amount of R230 million was appropriated during 2014/15 for recapitalisation of the NHFC;
  • The amount was transferred to the NHFC as appropriated but was reported as a grant transfer to the NHFC instead of a recapitalisation amount. This is also mainly due to changes in the reporting requirements by National Treasury;
  • Audit finding regarding the insufficient information on the number of title deeds backlog eradicated as a result of concurrent functional responsibility and accountability in the mandate which the department takes overall accountability for –while the function is performed by other spheres of government;
  • Audit finding in respect of fruitless and wasteful expenditure due to an overlap in the time period between departmental procurement of a vehicle (transaction, delivery and transition for use) and the use of a rental vehicle;
  • Audit finding regarding the insufficient information on the number of title deeds backlog eradicated as a result of concurrent functional responsibility and accountability in the mandate which the department takes overall accountability for while the function is performed by other spheres of government;
  • Audit finding in respect of fruitless and wasteful expenditure due to an overlap in the time period between departmental procurement of a vehicle (transaction, delivery and transition for use) and the use of a rental vehicle.

 

11.2.     Departmental responses to the Audit Outcomes

  • To address the material findings on performance information the department developed standard operating procedures that detail how indicators were developed, applied and verified across the sector;
  • Customised Sector Indicators were used to assess the alignment of plans to the MTSF priorities- and also to verify and test the accuracy of the reported information;
  • An audit action plan to address all audit findings was developed -and progress would be monitored and reported against quarterly through the Internal Audit unit of the department.

 

 

12.        HUMAN SETTLEMENTS ENTITIES

 

12.1      National Home Builders Registration Council (NHBRC)

 

The entity announced the newly appointed Chief Executive Officer, Mr M Dlabantu. It has reported that it received an unqualified report with matters of emphasis and material findings. The entity reported that the issues of irregular expenditure were disturbing. This was because Council rules were transgressed. The Human Resource Committee was appointed to deal with issues of personnel, and a Task Team was also appointed to deal with issues of irregular expenditure within the entity. It was further reported that, by the end of January 2018, condonations would be brought before the Council and the National Treasury. It was confirmed that there was a need to have an accredited body for inspectors. The Department stated that there was a need for normalization plan of the entity. In addition, the entity needed to strengthen its inspectorate units as inspection of homes is/was at the centre of its mandate.

 

12.2      Housing Development Agency (HDA)

 

The entity reported that it has received an unqualified audit outcome for the 2016/17 financial year.  The entity reported that it had achieved all the targets set for the year under review. 

 

The Committee agreed that the entity would be required to present a detailed report on the following:

  • List of catalytic projects;
  • The National Upgrade Support Programme (NUSP) per province and the list per municipality;
  • The revitalisation of mining town programme.

 

 

12.3      Rural Housing Loan Fund (RHLF)

 

The entity presented the status of the annual report for 2016/17 financial year. It reported that it has received an unqualified audit report. It further reported that, despite the challenges environment, targets were achieved as a result of growth strategies adopted by some intermediaries extending their footprint in the market and pricing policy enabling significantly majority of borrowers to access housing loans much cheaper that prescribed in the National Credit Regulations (NCR).  The entity reported that during the 2016/17 financial year, the tough markets persisted and there was slow growth, high unemployment; recession for the last two quarters of the financial year; high level of indebtedness remained and high rejection rate at retail level. 

 

12.4      National Urban Reconstruction Housing Agency (Nurcha)

 

The entity reported that it has received an unqualified audit report. It also reported that there were challenges encountered in the financial year as indicated below:

  • DFI Consolidation delayed by number administrative and compliance hurdles;
  • Unfolding of consolidation resulting in high levels of uncertainty;
  • Divided attention to strategy execution;
  • Fund mobilization in limbo pending finalization of the DFI consolidation process;
  • Achieving optimal utilization of PIC/NLF facility of R117 million remained a challenge for the year ahead with slowdown in economy and weaker end-user mortgage approvals by banks;    
  • Retention of core skills, keeping staff morale at a healthy level and maintaining performance standards;
  • Slow traction in the new areas of focus for Programme and Fund Management;
  • Output yield of CFDP and Emerging Developer business was low and demands higher attention from a risk management perspective, yet mandate and shareholder demands more of these transformational programmes;
  • Rise in affordable housing overdue loans and impairments. 

 

It was further reported the future focus of the entity would be as indicated below:

  • Maintain coherence of management and leadership;
  • Re-focus and energize staff and management to deliver on targets;
  • Attend to change readiness interventions and DFI Consolidation and attend to business migration challenges;
  • Provincial engagements, lending protocols and campaigns;
  • Optimize utilization of PIC/NLF Lending Facility;
  • Improve lending spread across provinces, particularly subsidy housing;
  • Improve management of operations and monitoring of projects;
  • Improve loan management mechanisms to mitigate emerging risks;
  • System enhancement for project monitoring;
  • Streamlines business processes and functions;
  • Strike good balance between new ‘transformative programmes’ and NURCHA’s conventional business;
  • Ensure output performance, transformation targets and sustainable revenue generation.

 

 

 

 

12.5       Community Schemes Ombud Services (CSOS)

 

The entity reported that it has received a qualified report for 2016/17 financial year. It highlighted that the promulgation of the CSOS Act and the Sectional Titles Schemes Management Act in 7 October 2016 meant that the CSOS could fully regulate the Community Schemes industry; and execute its full mandate of Dispute Resolution services.  CSOS officially launched on 10 November 2016.  The CEO stated the operational highlights as commenced with the registration of Community Schemes (9 January 2017); commenced with the Adjudication of disputes; Commenced with Schemes Governance Documentation Services; and collected the first CSOS Levy in the last quarter of the year to the amount of R30.3 million.

 

The Committee agreed that the Department and the entity should present a detailed plan on how it was going to assist the entity in management systems in order to be able to manage and account for the collect levies – need to procure interim system to collect levies.

 

 

12.6      Estate Agency Affairs Board (EAAB)

 

The entity reported that the it has received a qualified report with governance and performance audit findings.

 

The Department indicated that in the report it was evident that entity was under stress.  It had reported that the Minister took various steps to address governance issues. The management of the entity was under review especially the position of the Chief Executive Officer. The process of the Property Practitioners Bill was at advance stages – Cabinet (the most senior level executive branch of Government). The Bill was envisaged to assist with the transformation of the sector. The Department reported that the Restoration of the Title Deeds Programme was relocated from the entity back to the Department. It was confirmed that the Restoration of Title Deeds Programme was a magnitude programme that required radical shift. It was further confirmed that the outcomes and the performance illustrated the instability within the entity.

 

The Committee agreed that there was instability in the entity, because the Board was dissolved, three audit and risk personnel and senior officials resigned, no systems in place, technical indicators were not measurable. It was further agreed that national department led by the Minister of Human Settlements and the entity were to, in less than a month, present the turnaround strategy. The presentation should include the transformation strategy of the sector.

 

 

12.7      Social Housing Regulatory Authority (SHRA)

 

The entity reported that it received an unqualified audit report for 2016/17 financial year. It was reported that the turnaround of the entity was underway, SHRA was no longer under administration. The Capital grant adjustments was recommended. There were 138 new Restructuring Zones gazetted. The new structure was approved by the Minister in December 2016, which was aligned to the new strategy. The focus of 2017/18 was to capitalize on key policy amendments and on recruitment in order to capacitate SHRA.

 

A range of interventions were implemented as part of the Organization Development Project. There were 3 058 social housing units delivered, 6 529 social housing units approved for capital grant award and 65 accredited Social Housing Institutions.

 

 

12.8      National Housing Finance Corporation (NHFC)

 

The entity received an unqualified audit report for 2016/17 financial year.   The significant milestones achieved were reported with regards to consolidation of DFI as follows:

  • The required resolutions to enable the transfer of Assets and Liabilities from NURCHA and RHLF to the NHFC have been passed by the respective Board Committees and the shareholder of the NHFC. 
  • The Taxation Laws Amendment Act (No. 15 of 2016), published in the Government Gazette on 19 January 2017 under notice 40562 had exempted NHFC from normal tax. 
  • The restructuring of the NHFC Board by the Minister to oversee the operational integration and legislative establishment of the Human Settlements Development Bank. 
  • The setting up of a Management Committee (Manco) comprising of the executive management of the three Entities. 
  • The Administrative Order obtained from Company Tribunal exempting the Consolidation from the NPC Restrictions as contained in the Companies Act and the NURCHA and RHLF Memorandum of Incorporations (MOIs).

 

The entity reported that the required approvals from the National Treasury and some funders were impacting on the effective date of the consolidation.          It was further reported that operational integration was underway as well as with change management programme; all Entities were residing at NHFC offices. Managed at respective functional areas, e.g. Business, Finance, Credit. The key focus was on the completion and approval of key HSDB establishment documents such as Policy, Enabling Legislation, Business Case (including OD) and capitalizations towards a fully integrated HSDB.

 

 

13.        REFLECTING ON THE FINANCIAL AND FISCAL COMMISSION (FFC) REPORT

 

The Financial and Fiscal Commission (FFC) is an independent, permanent, statutory institution established in terms of Section 220 of the Constitution. According to Financial Fiscal Commission Act, No. 99 of 1997, the Commission makes recommendations, envisaged in Chapter 13 of the Constitution or in national legislation of Parliament, Provincial Legislatures, and any other organ of state determined by national legislation. 

 

In 2015/16 it was recommended that:

  • Municipalities especially Metros were to invest in forward looking processes and systems that would enable such municipalities to accurately understand and disaggregate housing demand;
  • Metros were to focus on planning for rental flats and creating new (or transform existing) neighbourhoods in intermediate suburbs, which have lower densities than in the inner city;
  • Government’s housing subsidy was to prioritise the most vulnerable groups, which included poor female-headed households with children below the age of 20 years and households containing adults who are permanently out of the labour market;
  • Targets and indicators were to be put in place and closely monitored annually;
  • The Department were to report on households benefitting from government housing programmes based on gender and by age group on a yearly basis;
  • Government response: accepted recommendations but no progress on implementation.

 

The 2016/17 recommendations by FFC

 

  • The Department should undertake a review of the Finance Linked Individual Subsidy Programme (FLISP) to find ways of ensuring that qualifying beneficiaries was implemented in a standardised manner across provinces;
  • Provincial Departments (of Human Settlements) and other key Departments including the provincial Departments of Basic Education and Transport, but not limited to, were to align their delivery plans particularly for new human settlements development. This could have been done by establishing functional inter-sectoral coordination committees where relevant Departments would meet to discuss new infrastructure development projects relating to habitable human settlements;
  • Ensuring that the portion of the Education Infrastructure Grant and funding from the Provincial Equitable Share were aligned to the portion of the HSDG for new housing developments.

 

14.        REFLECTING ON THE AUDITOR-GENERAL’S FINDINGS

 

The Auditor-General South Africa has a Constitutional Mandate and, as the Supreme Audit Institution (SAI) of South Africa, it exists to strengthen the South African democracy by enabling oversight, accountability and governance in the public sector through auditing, thereby building public confidence. The office of the AGSA informed the Committee that the presentation on annual audit examined three areas which were:

  • Fairness and reliability of financial statement;
  • Reliable and credible information for predetermined objectives, and;
  • Compliance with key legislative on financial and performance management.

 

The Department spent 99% of the allocated budget whilst the targets achieved were 51%. The AGSA reported that the Free State, Limpopo and North West Province reported irregular expenditure.  It was reported that there was non-compliance with DORA in Gauteng. This was because funds were not spent in accordance with the grant framework. Two provinces (Limpopo and Western Cape) had an over-achievement on total delivery, while seven other Provinces under delivered on their delivery programmes.

 

The AG opinion was as follows:

The Department received an unqualified audit report. The AGSA emphasised the following:

 

  • The financial statements contained misstatements that were subsequently corrected – which was mainly due to inadequate controls over investments and accruals;
  • A lack of sufficient appropriate audit evidence for the reported actual performance for the number of title deeds backlog eradicated. Systems and processes to enable reliable reporting was halted during the year under review;
  • Fruitless ad wasteful expenditure to the value of R2 587 173 was incurred due to inadequate preventative controls.

 

The Office of the AGSA advised the Committee:

  • To request the Department to provide feedback on the implementation and progress made in the action plans to address the poor audit outcomes quarterly;
  • To provide quarterly feedback on status of key controls;
  •  To provide feedback on the progress made in the filling of vacancies at Community Schemes Ombud Services, and;
  • To provide a list of action taken against transgressors of all irregular and fruitless and wasteful expenditure incurred.

 

15.        REFLECTING BY THE DEPARTMENT OF PLANNING, MONITORINGAND EVALUATION

 

The Department of Planning, Monitoring and Evaluation recommended that the Department were to:

  • Embed the asset based approach to housing development towards enhancing overall property value i.e. create virtuous cycles between household asset growth, neighbourhood development and management, improved investment by household and private sector - enabling improved rates revenue and closing the fiscal gap; 
  • Develop new forms of adjudicating settlement level development and performance by building the requisite skills and mechanics across spheres, and with the private sector and civil society;
  • Spell out Improved Performance, better define targets and plans based on an iterative understanding the of the intervention logic that operates for housing, human settlement development and the built environment;
  • Build concerted programme support for core housing instruments (the subsidy programme IRDP; Informal Settlement Programme; Rental/Social housing programme; Affordable Housing programme); through intergovernmental agreements based on emergent practice and public private partnerships;
  • Create a coherent policy/legislative, programme investment and implementation framework between Housing, Human Settlements and the Built Environment (like in the Mining Towns) to better incentivize private sector and social partners.

 

16.        PREVIOUS RECOMMENDATIONS FOR 2015/16

 

Recommendations

Achieved or Not achieved

Ensure that the Department fast-track the revision of the USDG Policy Framework to achieve its human settlements and housing targets, while ensuring management of rapid urbanisation.  In addition, that the metropolitan municipalities should utilise the grant optimally as stipulated on the framework.

 

Partially achieved because some municipalities were still underspending.

Ensure that the Department fast-tracks the drafting of Policy on Backyard Dwellers.

 

Not achieved, Work in progress.

Ensure that the Department fast-tracks the revision of the policy on Community Residential Units and the issue of cost should be addressed and the provision of the people with disabilities should be considered.

 

Not achieved, but intention to review the policy was reported.

Accelerate the consulting process to finalize the release of a White Paper on Human Settlements and thereafter a Human Settlements Bill as this was critical for the development and review of housing and human settlements policy. This will also assist in closing down of Thubelisha, Servcon and National Housing Fund.

 

Still in a drafting stage

Accelerate the drafting or revision of the Finance Linked Individual Subsidy Programme.  This programme is not performing well in all provinces whilst is meant to benefit or earmarked for the middle class.  The Committee support the centralisation of the programme.

 

Slow progress on the centralisation state of the programme.

Ensure that the Department has a framework in place on the utilisation of the 3 - 5% of the Urban Settlement Development Grant that is going to be ring-fenced for capacity building in the municipalities since the Municipal Human Settlements Capacity Grant has been discontinued.

 

Not achieved. The consolidation framework was in the process of being developed.

Fast-track the consolidation process of the Development Finance Institutions (DFIs) to promote improved financing of human settlements and housing programmes and present the progress made in that regard.

 

Achieved. The business case for the HSDB was in process

 

 

17.        OBSERVATIONS

 

The Committee made the following observations:

  • The most critical, the Committee raised several recurring issues from the previous BRRR report (2013/14, 2014/15). These include material misstatement of disclosure items which were identified, were subsequently corrected. That top management did not exercise adequate oversight and monitoring to their financial reporting and compliance with law and regulation. It was concerning that, similar to the previous financial years, the AGSA made adverse findings in respect of the usefulness and reliability of performance information reflected in the Annual Report. There is therefore a need for the Department to improve accountability and compliance;
  • That AGSA’s finding regarding the insufficient information on the number of title deeds backlog eradicated as a result of concurrent functional responsibility and accountability in the mandate which the department takes overall accountability for while the function was performed by other spheres of government;
  • There was a possibility the Department and Entities do not give enough or accurate information to the Committee with regards to challenges they experience in expenditure. This made it difficult for the Committee to make informed observations and recommendations;
  • That there were recurring and non-compliance issues, identified through Committee processes, that have not been addressed by both the Department and Entities. That there seems to be a lack of political will and administrative capacity to implement remedial actions presented by AGSA;
  • That while funding for delivery of housing has been increasing, the number of housing units delivered per annum continue to decline. Generally, this has been attributed to a number of factors including increasing costs over time and changes in policy (norms and standards);
  • That there was no proper management system to manage and account for levies collected by the CSOS;
  • That an amount of R230 million was appropriated during 2014/15 for the recapitalisation of the NHFC. The amount was transferred to the NHFC instead of a recapitalization amount. This was mainly due to changes in the reporting requirements by the National Treasury;
  • That the payment of valid invoices was often paid outside of the prescribed 30 days period;
  • That NHBRC was often not visible and accessible in some provinces, especially in rural settings. This was further compounded by project inspectors often accused of colluding with contractors, to approve poor workmanship. However, the new CEO was appointed which could contribute to the stability of the organisation;
  • That there were several blocked projects in all provinces;
  • That it was encouraging to learn that all Entities under DFIs received unqualified audits. In relation to NURCHA, the consolidation of DFIs was delated (informed against DFIs) which resulted in a number of administrative and compliance challenges;
  • That some goods and service below R500 thousand were procured by the NHBRC without obtaining the required price quotations;
  • That while target for capacitating municipalities has been over-achieved, there has been slow progress with respect to finalization of new/revised accreditation framework;
  • In relation to the RHLF, there were high levels of indebtedness of prospective borrowers. This was partly as a result of high levels of unemployment and poverty in South Africa;
  • That HDA function or approach of packaging human settlements was contributing positively in the planning of human settlements. However, during several oversight initiatives, the Committee observed that some provinces were not assisted in project packaging by the Entity;
  • That there were not concerted efforts to empower the previously disadvantaged groups by the EAAB. The untransformed, estate agent sector, had serious implications towards the transformation agenda outlined in the National Development Plan;
  • NURCHA reported irregular expenditure amounting to R13.4 million in the year under review. 

 

 

18.        RECOMMENDATIONS

 

Having been briefed by the institutions that support democracy (Financial and Fiscal Commission and the Office of the Auditor-General South Africa); the Department of Planning, Monitoring and Evaluation and the Department of Human Settlements and its Entities on its annual report, the Committee recommends that the Minister of Human Settlements should:

 

  • Ensure the finalisation of the drafting and enactment of the Human Settlements Bill, the Human Settlements Development Bank Bill, the Property Practitioners’ Bill, the Home Loan and Disclosures Amendment Act. This would add an impetus to the efforts of changing the ownership patterns and of directing and transforming, the economy by improving financial access into the property market and strengthen and improve the policy environment;
  • Ensure the prompt operationalisation of the Human Settlements Development Bank since the consolidation of the DFIs was almost complete to ensure delivery of houses to poor South Africans;
  • Create a coherent policy or legislative, programme investment and implementation framework between housing, human settlements and the built environment (like in the mining towns) to better incentivize private sector and social partners;
  • Assist municipalities, especially Metropolitans, to invest in forward looking processes and systems that would enable such municipalities to accurately understand and disaggregate housing demand. Due to an increasing housing demand, planning for rental flats and creating new (or transform existing) neighbourhoods in intermediate suburbs, which have lower densities that in the inner city;
  • Ensure that government’s housing subsidy prioritises the most vulnerable groups, which include poor female-headed households with children and households containing adults who were permanently out of the labour market;
  • Ensure the acceleration of youth, child headed households, and women empowerment programmes. This would empower these groups to participate in the human settlements programmes that deliver technical capacity and economic benefit, as proposed by the National Development Plan. Preferential procurement programme, the 30% set-aside principle, should be enforced by the Department;
  • Ensure that skilled and qualified personnel were placed in strategic position to implement the human settlements trajectory. Build concerted programme support (both financial and administrative support) for core housing instruments or programmes; develop new forms of adjudicating settlement level development and performance by building the requisite skills and mechanics across spheres, and the private sector and civil society;
  • Spell out improved performance, better define targets and plans based on understating of the intervention logic that operates for housing, human settlements development and the built environment;
  • Ensure that Customised Sector Indicators were used to assess the alignment of plans of the MTSF priorities, and also to verify and test the accuracy of the report information;
  • Streamline the planning processes with Provinces and Metros to ensure aligned and responsive plans to the Medium Term Strategic Priories;
  • Provide support to Provinces and Metros in the implementation of MTSF priorities and in managing risks associated with improved spending of the budget and achieving the targets;
  • Collaborate with Provinces and the Department of Rural Development and Land Reform Deeds Registry to ensure that the factors inhibiting the issuing of title deeds were resolved and expedited. Put in place the mechanisms to address the titling backlog by institutionalising the management process and assigning capacity to each province to oversee the process;
  • Improve the implementation of the project readiness matrix which was a risk management tool used to assess the readiness of housing projects;
  • Improve focus on processing payable and valid invoices within 30 days of issue;
  • That NHBRC improve visibility and accessibility in the market while enhancing interaction with human settlements stakeholders. That NHBRC assist both the National Department and Provinces to unblock the blocked projects. Ensure that the NHBRC apply the National Treasury guide on irregular expenditure. That NHBRC implement the Committees recommendation on ensuring that Audit outcomes of the 2015/16 financial year were addressed;
  • Ensure that NHBRC monitor the impact or effectiveness of training of both emerging contractors and internal staff (Project inspectors). The NHBRC with the assistance of the National Department, develop and implement an organisation stabilization plan. A report on the organisation stabilization plan should be presented to the Committee;
  • Facilitate and fast-track the turn-around plan for the EAAB to address the instability within and transformation of the industry;
  • Ensure that the Department responds to the issues raised by the AGSA. The issues raised during previous financial years should be resolved. There was a need for monthly monitoring of Action Plans and, subsequently, quarterly reporting to the Committee;
  • Advance the implementation of catalytic projects (these projects should demonstrate integration and access) to ensure that the recommendations of the National Development Plan are realised;
  • Improve the monitoring and oversight of the sector delivery supply chain, ensuring improved efficiencies and value for money. Put in place corrective measures to address the stipulated 30-day turnaround of processing and payment of invoices; it was suggested that the Project Managers should monitor the payments of contractors upon submission of the invoices;
  • Ensure that the NHBRC was visible in projects to safeguard the quality of housing units;
  • Ensure that the HDA assist municipalities with project packaging.

 

 

19.        CONCLUSION

 

It is the submission of the Committee that the implementation of these recommendations would positively respond to the objectives of the Department and Entities, the National Development Plan and the lives of the people. Recurring challenges observed would be resolved as swiftly as possible if accountability regarding these recommendations could be forthcoming from all the Entities within the sector. To ensure the realisation of these objectives at specified timeframes, the Committee will conduct its oversight on specified intervals.

 

Report to be considered.

 

Documents

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