ATC181018: Report of the Budgetary Review and Recommendation Report (Brrr) of the Portfolio Committee On Human Settlements, dated 18 October 2018

Human Settlements, Water and Sanitation

REPORT OF THE BUDGETARY REVIEW AND RECOMMENDATION REPORT (BRRR) OF THE PORTFOLIO COMMITTEE ON HUMAN SETTLEMENTS, DATED 18 OCTOBER 2018

The Portfolio Committee on Human Settlements (the Committee), having considered and assessed the performance of the Department of Human Settlements and its Entities, and having met with the office of the Auditor-General and the Department of Planning, Monitoring and Evaluation on 9 and 10 October 2018, 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 realising 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 upscaling 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 BUDGETARY 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 2017/18 BRRR using the following documents:

The National Development Plan: Vision for 2030;
Medium Term Strategic Framework;
2017/18 State of the Nation Address;
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) 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 2017/18: ANALYSIS OF KEY PRIORITIES PERTAINING TO THE DEPARTMENT

The central theme in the 2017 State of the Nation Address (SONA) was radical economic transformation with an emphasis on land ownership, and the structure, nature and functioning of the economy with particular emphasis on the mining sector, the financial services sector and land ownership.

The overriding message of the 2018 SONA was the need for unity and social cohesion. The only reference to the human settlements sector was made in this regard and as part of a vision of a South Africa that is focused on prospering and creating jobs, housing opportunities and safe communities.

Strategic Priorities of the Department of Human Settlements

This section provides a broad view of the strategic achievements of the Department in 2017/18. Specific attention will be paid to performance according to the various programmes.

Within the context of sluggish economic growth, the Department has progressively continued to provide access to adequate housing for people, delivering 370 999 housing units during the MTSF period. People that were on waiting lists were prioritised, translating to 70 percent of the total housing opportunities that were earmarked for 2017/2018, or 135 981 housing opportunities.

The Department has accomplished these milestones by following the National Development Plan (NDP) as a guideline to transform the space economy and systematically undo the legacy of dysfunctional apartheid spatial planning and its resulting socio-economic inequalities.

Significant progress has been made by the Department, the Housing Development Agency (HDA), provincial departments and municipalities in the goal to deliver 50 catalytic projects at a mega scale. These projects would be characterised by the use of different tenure options and would promote efficient land use and socio-economic integration. Some projects were already at implementation phase.

An estimated 3 329 446 hectares of land had been acquired, of which the majority of which would be in well-located areas in close proximity to social and economic hubs.

Furthermore, the Department upgraded 67 548 households during the review process in partnerships with provinces and municipalities through the Upgrading of Informal Settlements Programme (UISP). Within this programme, efforts were also made to provide opportunities to women and youth. Through the Youth Brigade Programme, 2270 young people were trained with a variety of skills, including brick-laying, plumbing, plastering, roofing and carpentry, construction management, electrical wiring and tubing. A further 391 youth brigade trainees were placed in learnership programmes to curb unemployment and supply the economy with much-needed technical skills.

Around 30 percent of the total budgets for the Human Settlements Development Grant (HSDG) and the Urban Settlements Development Grant (USDG) were set aside for women-owned entities, while a further 10 percent was meant to serve youth-owned businesses in order to address the high rate of youth unemployment.

In partnership with the National Home Builders Registration Council (NHBRC), around 1800 youths were trained in various housing construction trades. The challenge was a lack of appropriate placement in order for the programme to be sustainable. About 100 women involved in the Women Entrepreneur Enterprise Development programme, graduated from the Gordon’s Institute of Business Science (GIBS). The Department, in partnership with South African Waste Information Centre (SAWIC) and NHBRC, established 27 Women in Construction Co-operatives (140 women), through the Emerging Contractor Programme.

The 2013 Inter-Ministerial Committee (IMC) for the Revitalisation of Distressed Mining Communities was established to implement partnerships between government, mining companies, organised labour, the private sector and local communities. A key objective was to increase affordable home ownership, intensify the delivery of gap, rental, Breaking New Ground (BNG), social housing opportunities and serviced sites for employer-assisted housing. To date, efforts have yielded 4731 serviced sites and 4303 units from a combined budget of R1.6 billion.

Furthermore, as a result of South Africa’s participation during the third United Nations Conference on Housing and Sustainable Urbanisation (Habitat III), South African sector stakeholders are currently developing a South African Implementation Framework. This would ensure that urbanisation would be tackled as part of a continuum of urban-rural development and that acknowledged that human settlement development and urban management are intricately linked to the economic and social development of the country.

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 in the implementation of the 2014/19 Medium Term Strategic Framework (MTSF) in line with the. 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 Human Settlements Development Grant (HSDG) and a further 19 058 housing opportunities delivered through the Urban Settlements Development Grant (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 (HSB) 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 2017/18 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 Performance environment

The service delivery environment for the period was marked by an increase in construction costs, natural disasters, adverse Constitutional Court judgements, service delivery protests and invasion of land and houses. In addition, the service delivery environment was particularly affected by the following:

Economic Performance

The South African economy grew by 1.3% in 2017, exceeding the National Treasury’s expectation of 1.0% growth. The strengthening in economic activity over 2017 was partly driven by agricultural industry, which bounced back from one of the worst droughts in recent history. The economic performance was also boosted by the financial and mining industries which also contributed positively to GDP growth in 2017.

Rate of Unemployment

South Africa’s unemployment rate decreased to 26.7% in the fourth quarter of 2017 from 27.7% in the third quarter. The number of unemployed fell by 330 000 to 5.88 million and the number of employed declined by 21 000 to 16.17 million. This created pressure on the sector to find innovative mechanisms to contribute to job creation through the housing and human settlements value chain.

Cost of living

For the year 2017, inflation maintained a downward trajectory. The year started off with CPIs at 6.6% and continued with a downward trend until it reached 4.7% by the end of the year. PPI followed the same downward trend until it reached its lowest in July, with a recording of 3.6%. This translated into the most favourable cost of production rate during the period, after which it started on an upward slope until it reached 5% by the end of the year.

Inflation rates

Even though inflation rates were on the downward trend, consumer capacity was still constrained, making it difficult to afford housing and for government to provide housing opportunities with the relevant supporting human settlements services. The overall result was that it costed a little more to build a house. These developments together with high prices of essentials like food and clothing for instance does indicate that households will continue to find it more challenging to provide shelter for themselves and therefore will continue to request for some form of assistance from government.

6.3 Service Delivery Improvement Plan

The Service Delivery Improvement Plan (SDIP) is the Department’s commitment to its citizens, on the level and quality of service provided by the Department and proposes improvement from the current level of service. With regards to the PILLAR 3 of (SDIP), the Department during the year under review:

Conducted quarterly sessions under the Batho Pele Change Management Engagement Programme; and
Customised the Batho Pele Change Management Engagement Programme (BPCMEP) to align its principle to the departmental objectives and values.

6.4 Organisational environment

Critical SMS posts and posts on levels 2 to 12 were prioritised as critical and filled on a 3-year contract basis. An Employee Health and Wellness Programme was implemented, as per approved plans, to enhance the wellbeing of employees. Labour relations awareness sessions were conducted to enhance staff understanding their roles and contributing towards a collaborative, productive working environment.

Key Policy Developments and Legislative changes

A revision of the minimum and maximum threshold of the social housing income bands was approved. This now accommodates all beneficiaries who earn between R1500 and R15 000 whilst the subsidy quantum for standalone houses was also adjusted in line with the Building Cost Index of the Bureau for Economic Research;
New norms and standards for higher-density design houses were also approved, which means that government has to strengthen consumer education, given that the only mechanism for registering ownership of title deeds for such properties is through a sectional title scheme;
The Department was affected by recent Court judgements on evictions and interpretations of Section 26 of the Constitution, and now fully acknowledges the need to meaningfully consult beneficiaries regarding possible options for resolving the existing housing challenges whilst noting the principle of enjoinder, which continues to be applied in a number of court cases;
The New Urban Agenda, Strategic Development Goal (SDG) no11 and the World Urban Forum 9 played a critical role in reinforcing the shift from housing to human settlements. This would still require bolder measures that include and analysis of the transactions in the residential property market;
The Department continued to review its policy programmes to include Cabinet-adopted principles such as universal design, green design and inclusion of Early Childhood Development Centres (ECD) in order to transform human settlements;
The Red Book was also concluded as a comprehensive guide for planning human settlements in line with the value chain for delivering sustainable human settlements;
The Department would continue engaging stakeholders as part of its on-going endeavours to reform the majority of the housing and human settlements policy frameworks in order to craft the housing in human settlements policy framework and the human settlement code. This would indeed include arrangements for phasing out some of the Housing Code programmes that are no longer working well.

Legislative changes

Legal Services embarked on a number of legislative changes which, inter alia, consist of repealing the following legislation: Housing Consumers Protection Measures Act 95 of 1998 by developing the Property Practitioners Bill. There were further legislative changes on the following pieces of legislation which were being amended, namely the Prevention of Illegal Eviction from Unlawful Occupation of Land Act 1998(PIE) was going to be amended by PIE Amendment Bill, 2016 and Home Loan and Mortgage Disclosure Act 63 of 2000 was going to be amended by Home Loan and Disclosure Amendment Bill. Further the Department was amalgamating three DFI’s that fall under the Department, which are NURCHA, RHLF and NHFC, to establish the Human Settlements Development Bank through the Human Settlements Development Bank Bill. Lastly, once the Human Settlements Policy was approved, the Housing Act 107 of 1997 was going to be amended towards the Housing in Human Settlement Bill.

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.

As far as the progress with regards to the implementation of the objectives of Outcome 8 of the Programme of Action is concerned, good progress was made, especially with regards to the delivery of individual units within the housing subsidy market. At the end of the 2017/2018 financial year, more than 80% of the target had been reached with 370 999 housing units that were delivered. In addition, more than 550 000 households had been provided with upgraded access (individual or shared access) to basic services such as water, sanitation and/ or electricity. In terms of the provision of affordable rental accommodation, 64% of the target of 10 000 units targeted for Community Residential Units (CRU) and 77% of the target of 25 000 units of private rental have been achieved by 31 March 2018.

Although the performance of the Social Housing Programme had proceeded slowly in the past, it was increasing and it was expected that although all 27 000 units targeted for 2019 would not be completed, it would be under construction. In order to fast track, the eradication of the backlog in the registration of title deeds for beneficiaries of subsidised housing, a special Title Deed Conditional Grant had been introduced on 1 April 2018 to finance this programme. This relevant grant would be allocated to the nine Provincial Human Settlements Departments for this purpose.

It is worth mentioning that the current organisational performance had been affected by unsatisfactory inter-sectoral collaborations, underperformance by certain provinces, and lack of affordable stock for people earning less than R15 000 per month, mainly relating to the FLISP.

8. PROGRESS ON THE IMPLEMENTATION OF MTSF AS AT 31 MARCH 2018

MTSF OBJECTIVE	DELIVERY AS ON 31 MARCH 2018	REMAINING BALANCE
635 000 additional households living in adequate housing through the subsidy and affordable housing segments	431 986 (68.0%)	203 014
750 000 households in informal settlements provided with improved living conditions (individual and shared access to services and security of tenure) by 2019	580 610(77.4%)	169 390
NUSP to assist Municipalities with the upgrading of informal settlements by assessment of current status and development of settlement upgrading plans: Target: 2 200 informal settlements	1 658 informal settlements assessed 912 settlement upgrading plans developed	542 settlements 1 288 upgrading plans
452 650 individual units for the subsidy housing submarket provided by 2019	387 957 (85.7%)	64 693
27 000 Social Housing units completed or under construction	12 120(44.9%)	14 880
10 000 CRU units delivered	6 666 (66.7%)	3 344
25 000 affordable private rental units delivered	19 282 (77.1%)	5 718
70 000 housing opportunities delivered through FLISP	8 361 (11.9%)	61 639

9. HUMAN SETTLEMENTS ALLOCATIONS - MTEF ALLOCATIONS

Appropriation Statement 2017/2018

Programme R’ 000		2017/18			2016/17
Programme R’ 000		Final Appropriation	Actual Expenditure	Over/under expenditure	Final appropriation	Actual expenditure	Over/under expenditure
1	Administration	464 069	419 775	44 294	455 459	420 897	34 562
2	Human Settlements Policy, Strategy and Planning	111 253	99 854	11 399	92 275	86 600	5 675
3	Human Settlement Delivery Support	205 119	156 547	48 572	217 685	151 742	65 943
4	Housing Development Finance	32 697 260	32 694 309	2 951	29 930 937	29 927 992	2 945
	TOTAL	33 477 701	33 370 485	107 216	30 696 356	30 587 231	109 125

Expenditure

The Department had spent R33.37 billion by the end of the 2017/18 financial year, which constitutes 99.7% of its allocation. This signals an improvement from the previous financial year when the Department spent 99.6% of its final appropriation. The underspending of about R107.21 million translates to 0.3 percent of the total allocation.

Virements to value of R13.4 million were approved during the adjustment budget for the purchasing of computer network equipment.

After the adjustment budget, an additional R 41.4 million was sourced as virements from programmes 1 and 3 to pay for, amongst others, the review of the Guidelines for Human Settlements Planning and Design (Red Book), funding the shortfall on the membership fees of the UN HABITAT, funding the Human Settlements Housing Summit, funding the Research Chair for Human Settlements at Nelson Mandela Metropolitan University and over-runs experienced in the hosting of the Govan Mbeki awards and costs related to the task team dealing with military veterans’ housing needs.

9.1 Performance targets per main programme 2017/18

Programme	No. of Indicators	Achieved	Partially achieved	Not achieved	Percentage Achieved
Administration	15	8	0	7	53.3 %
Human Settlements Policy, Strategy and Planning	16	11	1	5	68.7%
Programme Delivery Support	19	6	0	13	31.5 %
Housing Development Finance	11	7	0	4	63.6 %
Total	61	32	1	29	52.45 %

(Performance targets per main programme 2017/2018)

The table above provides an overview of numbers and targets achieved and not completely achieved and is not meant to serve as a measuring or rating tool to determine the effectiveness of the programmes of the Department. Overall, the Department fared better in achieving its targets in Programmes 4 and 2, compared to Programmes 3 and 1. Each of the Programmes are discussed in detail below.

Programme Performance

Programme 1: Administration

Categories	2017/18	2016/17
Total Targets set	15	16
Targets achieved	8	11
Targets not fully achieved	7	5
Indicator success rate	53.3 %	68.8%
Budget spent	R 419.775 million or 90.45 %	R420.8 million or 92.0 %

Expenditure for Programme 1 totalled 90.45% of the final appropriation for the programme, compared to 92 % during the previous financial year. Actual performance in terms of indicators for the 2017/18 financial year was at 53.3 per cent, compared to 68.8 per cent during the previous financial year. The performance under this programme had therefore regressed both in terms of expenditure and performance.

During the 2017/18 financial year, the Department underspent in Programme 1 by approximately R 44.29 million (9.55 per cent). Reasons offered for underspending include delays in filling vacant positions, due to funding shortages over the medium term, which in turn resulted in less equipment being bought than what was anticipated. There were also further delays in the appointment of panels of service providers specialising in Internal Audit and Governance, risk and compliance management to supplement capacity in the Department. Furthermore, Microsoft licensing fees payments were processed at year-end, were rejected and reprocessed in April. The issue around unfilled positions and the impact on underspending in this programme was a recurring challenge and was also a key point raised in the previous financial year.

Programme 2: Human Settlements Policy, Strategy and Planning

Categories	2017/18	2016/17
Total Targets set	16	11
Targets achieved	11	7
Targets not fully achieved	5	4
Indicator success rate	68.7 %	63.6 %
Budget spent	R99.85 million or 89.75 %	R 86.6 million or 93.8%

Expenditure under Programme 2 reached 89.75 per cent by the end of the 2017/18 financial year, compared to 63.6 per cent during the previous financial year. However, only 68.7 per cent of the performance targets were achieved during 2017/18, compared to 63.6% of targets met during the previous financial year. There has therefore been a slight improvement in expenditure and performance under this programme.

Some of the key reasons provided for the underspending of around 10.2% in this programme include underspending on compensation of employees due to delays in filling vacant positions, due to funding shortages over the medium term, which resulted in a limited number of positions being filled. Another factor was the planned printing of the revised Guidelines for Human Settlements Planning Design (Red Book), which did not materialise and would only be completed in the new financial year.

Programme 3: Programme Delivery Support

Categories	2017/18	2016/17
Total Targets set	19	17
Targets achieved	6	7
Targets not fully achieved	13	10
Indicator success rate	31.5 %	41.2%
Total budget spent	R156.54 million or 76.32%	R 151.7 million or 69.7%

Over the past three years, Programme 3 has consistently been the worst performing programme of the Department. For the 2017/18 financial year, only 31.5 per cent of targets were met, while 76.32 per cent of the final appropriated budget for the programme was spent. This is compared to the previous financial year, where 41.2 per cent of targets were met and 69.7 per cent of the final appropriated budget was spent. There has therefore been an improvement in expenditure, but a regression in terms of performance.

Underspending in Programme 3 has been attributed to vacant positions that could not be filled due to funding shortages over the medium term, which limited the number of positions that could be filled. Furthermore, the National Upgrading Support Programme (NUSP) underspent due to the late commencement of the procurement process to secure services of a panel of Professional Resource Teams (PRTs). The Department has, as an interim measure, approved the use of the Housing Development Agency panel of PRTs, subject to the Department procuring its own PRTs.

Underspending in NUSP was also a reason provided for underspending in this programme during the previous financial year. Delays in finalising a service level agreement for maintenance of the Housing Subsidy System resulted in limited support provided by SITA, which further contributed to underspending. During the previous financial year, SITA also failed to provide the needed services, which also resulted in underspending for the previous financial year.

Programme 4: Housing Development Finance

Categories	2017/18	2016/17
Total Targets set	11	4
Targets achieved	7	3
Targets not fully achieved	4	1
Indicator success rate	63.6%	75%
Total budget spent	R 32.69 billion or 99.99%	R29.9 billion or 99.99%

Programme 4 received an allocation of R33.47 billion, of which R32.69 billion was spent (99.9 per cent) during the 2017/18 financial year. Performance has consistently declined over the past 3 years, while expenditure has remained unchanged over the past two years at 99.9 per cent. Performance has declined from 75 per cent of targets being achieved in 2016/17, to 63.6 per cent in 2017/18.

The underspending in this programme during 2017/18 has been ascribed to delays in the commencement of a review of tender processes in all provincial departments of Human Settlements. This was due to concerns raised by the Service Provider regarding the contents of the service level agreement.

9.2 Human resources

It was reported that the Department had embarked on an aggressive recruitment drive to fill all its prioritised vacant and funded posts, resulting in a reduction of the vacancy rate to 5 per cent, which was an all-time low in recent years. Other vacant unfunded posts were frozen, ring-fenced and removed from the organisational establishment. The cut in the Compensation of Employees (CoE) budget limited the desired ability to secure staff capacity to deliver on the Departmental mandate, with all new appointments made on a 3-year contract basis.

The Department continued with a review of its current organisational structure, intended to ensure alignment with various policies as well as the NDP and MTSF. It further intends to enhance holistic departmental capacity to deliver on its expanded mandate and to enhance the Department’s programme and project implementation capability to support Provincial Departments and Municipalities.

The number of funded posts on the approved establishment declined from 821 in 2015/16 to 680 in 2016/17 financial year. It then further declined to 644 in the 2017/18 financial year. A total of 597 posts were filled, which translates to a 7.2 per cent vacancy rate.

10. HUMAN SETTLEMETNS CONDITIONAL GRANT EXPENDITURE

10.1 Human Settlements Development Grant (HSDG) Expenditure Performance as at 31 March 2018

Year to Date (01 April 2017 – 31 March 2018)
Provinces					Spent by Provinces	Unspent against Total available	% Spent against Total Available	Unspent as % of Total Available
	Voted Funds	Stopped/Reallocated Funds	Roll Over from 2016/17	Total Available	Spent by Provinces	Unspent against Total available
	R'000	R'000	R'000	R'000	R'000	R'000
					R'000	R'000
Eastern Cape	2 239 316	100 000	-	2 339 316	2 339 315	1	100	-
Free State	1 193 038	-	-	1 193 038	1 192 715	323	100	-
Gauteng	5 528 050	-150 000	43 705	5 421 755	5 302 694	119 061	98	2
KwaZulu-Natal	3 477 567	200 000	1 372	3 678 939	3 678 939	-	100	-
Limpopo	1 319 493	-150 000	84 968	1 254 461	1 253 839	622	100	-
Mpumalanga	1 395 774	100 000	11 888	1 507 662	1 507 662	-	100	-
Northern Cape	402 668	100 000	8 973	511 641	479 239	32 402	94	6
North West	2 186 679	-300 000	192 109	2 078 788	2 051 947	26 841	99	1
Western Cape	2 226 758	100 000	-	2 326 758	2 326 758	-	100	-
Total	19 969 343	-	343 015	20 312 358	20 133 108	179 250	99	1

(Source: Department of Human Settlements Annual Performance Report, 2018)

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

Metros	Voted Funds	Roll Over from 2016/17	Stopped/Reallocated Funds	Total Available	Year to date (1 July- 31 March 2018)
	Voted Funds	Roll Over from 2016/17	Stopped/Reallocated Funds	Total Available	Spent by municipality	Variance Spent vs. Total Available	% Spent vs. Total Available	% Unspent vs. Total Available
	R'000	R'000	R'000	R'000	R'000	R'000	R'000	% Unspent vs. Total Available
Buffalo City	768 128	-	160 000	928 128	459 656	468 472	49,5	50,5
Nelson Mandela Bay	911 761	-	178 800	1 090 561	497 642	592 919	45,6	54,4
Mangaung	761 307	82 229	100 000	943 536	430 262	513 274	45,6	54,4
Ekurhuleni	1 985 010	12 098	100 000	2 097 108	983 407	1 113 701	46,9	53,1
City of Johannesburg	1 864 731	-	- 363 000	1 501 731	728 731	773 000	48,5	51,5
City of Tshwane	1 616 415	-	-	1 616 415	736 832	879 583	45,6	54,4
eThekwini	1 980 109	-	-	1 980 109	897 687	1 082 422	45,3	54,7
City of Cape Town	1 494 786	58 501	- 175 800	1 377 487	587 184	790 303	42,6	57,4
Total	11 382 247	152 828	-	11 535 075	5 321 401	6 486 379	46,1	53,9

(Source: Department of Human Settlements Annual Performance Report, 2018)

11. SUMMARY OF AUDIT FINDINGS BY THE DEAPRTMENT:

1.1. The Department reported that it received an unqualified audit report. The Auditor-General of South Africa (AGSA) made the following material findings:

Under Programme 2:

The Department did not have an adequate record keeping system to enable reliable reporting on the achievement of a number of indicators. As a result, the AGSA was unable to obtain sufficient appropriate audit evidence in some instances, where in other cases, supporting evidence provided did not agree with reported achievement;
The AGSA was therefore unable to determine whether any further adjustments were required to the reported achievements of 4 indicators, including the number of pre- and post-1994 title deeds issued, and the number of hectares of well-located land acquired, released or rezoned for new developments.

Under Programme 3:

Regarding the number of non-statutory military veterans housed, the reported achievement of 480 ha from a target of 1700, is not reliable as the Department did not have an adequate performance management system to maintain records to enable reliable reporting on the achievement of targets;
The AGSA was therefore not able to determine whether any further adjustments were required;
The AGSA was unable to obtain sufficient appropriate audit evidence for the reported achievements of 5 out of the 19 indicators relating to Programme 3.

Under Programme 4:

The annual performance report contained misstatements that were subsequently partially corrected. Material findings were therefore made regarding the usefulness and reliability of the reported performance information, where misstatements were not corrected;
Leadership did not exercise effective oversight with regards to performance reporting;
Regular, accurate and complete performance reports that were evidenced and supported by reliable information, was not prepared throughout the financial year;
Proper record keeping was not always implemented in a timely manner to ensure that complete, relevant and accurate information was accessible and available to support performance reporting.

11.2. Departmental responses to the Audit Outcomes

The Department was in the process of consulting the National Treasury and the Department of Planning, Monitoring and Evaluation to ensure improvement in managing within the current concurrency in budgeting, planning and performance reporting process.
The Department had instituted an improved IGR contracting process with sector partners in order to address recurring audit findings about insufficient supporting evidence for the achievement of the targets and systems and processes to verify the reliability, accuracy and reliability of specific reported achievements.
To achieve improved delivery targets, the Department had instituted the comprehensive review process of performance information in response to the AGSA auditing process.
The Department had consulted provinces and municipalities on the 2017/18 audit findings in order to ensure the submission of credible, reliable and useful performance information.

12. HUMAN SETTLEMENTS ENTITIES

This section reports on the Human Settlements entities:

12.1 National Home Builders Registration Council (NHBRC)

Ms M Kotsi, Deputy Chairperson, led the delegation and introduced the team. Mr M Dlabantu, Chief Executive Officer, presented on behalf of the entity. He reported on various training programmes the entity provided where 9 343 people benefited and out of that number 5 290 were females. Registration (3 435) and renewals (13 832) of homebuilder was at 17 267. The enrolment of homes stood at 56 506 and late enrolment was at 1 020. He further reported that subsidy home enrolments were at 66 691. The inspection of homes (non-subsidy) stood at 75 176 and subsidies at 83 369. The complaints lodged stood at512 and 484 complaints were closed. An amount of 218 conciliations were received and 145 were closed. The remedial work done were in substructure 181 409, superstructure 213 539, settlements 8 966 763 and accommodation was 75 000. Total claims for the term under review were 9 436 711. It was reported that there were 211 homebuilders were suspended in various provinces.

Mr Dlabantu informed the Committee that the entity’s performance was at 65% for the term under review. The entity received qualified audit report with findings, this was due to completeness of late enrolments and financial guarantees; performance information; compliance with laws and regulations; irregular expenditure of R4 million and wasteful expenditure of R14.6 million. In short, the audit was classified as a high-risk audit due to unreliable data, negative reporting by the media and late enrolments.

During the interaction with the Committee, it was pointed that during the previous two financial years, the issue of irregular expenditure was raised and the entity was advised by the Committee to come up with remedial measures. In regard to audit outcomes, the Committee argued that for two consecutive years, the entity had obtained qualified reports and the Committee wanted to know, what was to be done to move the entity out of the qualified audit with findings.

The Committee also made reference to the issue of suspended executives, an issue that had since become an audit outcome. For the Committee the NHBRC had regressed in terms of its performance a reflection that things were not working well at the entity. The Committee raised a number of issues including the following:

Timeline for a remedial plan.
Cost related to the pool of inspectors produced.
Austerity measures effected at executive level in line with advice by the National Treasury as part of cost-saving and frugality measures.
Reasons for the decline in the number of inspectors – to which the CEO had responded that the decline was due to decline in the number of houses requiring inspections.
Issue of disciplinary measures that involved a high number of cases which were cited to be in the region of 506 due to various transgressions.
Availability of inspectors to ensure monitoring of projects in order to avert recurrence of defects and shoddy workmanship and reference was made to a project in Queenstown, Eastern Cape on which an amount of R9 million had been spent yet the outcome was that of further poor workmanship. The rectification programme was at Ilinge Location, Queenstown, which represented wasteful and fruitless expenditure of R9 million on “rectification of the rectification”. To the Committee, this represented something wrong with the systems of the entity.
Since the overall performance of the entity was around 65%, the Committee inquired as to what the cause for this was.
Reasons behind late enrolments of homes.

For the Committee, it was critical to see improvement in performance as well as stability as there was a new Board in place. It further, inquired on the progress in regard to the Youth Brigade programme as well as whether the matter between the entity and the City of Johannesburg had been resolved.

12.2 Housing Development Agency (HDA)

Mr P Moloi, Chief Executive Officer, presented on behalf of the entity. He informed the Committee that the entity met the targets set in support of the Medium Term Strategic Framework targets. The entity had a target to acquire 10 000 well-located land rezoned and released for new development targeting poor and lower middle income households. The entity achieved 16 618.301 hectares of land. The entity managed to develop Intergovernmental Relations Programme Coordinating relationships with all provinces through a technical capacity programme for human settlements development. The Master Spatial Plan had been developed with supporting Priority Housing Development (PHDA).

Mr Moloi informed the Committee that the Minister of Human Settlements had given the HDA a mandate to manage and implement three national priority programmes, namely the Catalytic Programme, the Informal Settlements Upgrading Programme and the Revitalisation of Distressed Mining Towns Programme. With regard to catalytic projects, it was reported that 48 government-led catalytic projects were approved and 12 were at the implementation stage. There were 22 mining towns identified and 356 informal settlements assessed and six were at the implementation stage.

Mr Moloi reported that the entity received an unqualified audit opinion.

During interaction with the Committee, a number issues were raised by the Committee and these are listed below:

Issue of fiscal dumping, with reference to an amount of R58 million from the Free State and Gauteng Province (R888 million transferred to the entity) which was said to be one of the worst performing provinces despite conclusion of an Implementation Protocol with the HDA. For the Committee, it was important that there be proper planning in order to avert the phenomenon of fiscal dumping and ‘fire-fighting’;
Role of the HDA in assisting municipalities with spatial planning in order to realize integrated development;
Development of land acquired seemed to be a problem as reflected in the failure to meet set target;
Poor performance on the issue of catalytic projects;
Reasons for charging for project management fees while there was the operational grant for project implementation;
Explanation for the increase in surplus to an amount of R2.6 billion yet the Department was not meeting its targets, for the Committee this represented a contradiction;
Support for informal settlements upgrading.

In responding to some of the issues raised, the CEO confirmed that an amount of R888 million was transferred from Gauteng Province to the HDA. Mr Moloi also explained that running a capital project incurs operational costs and made reference to page 45 of the entity’s Annual Report which provided a breakdown of projects that were in projects. Further, he reported that there were 365 assessed informal settlements requiring to move to actual upgrading by municipalities.

With regard to the issue of rezoning of land acquired for development, Mr Moloi informed the Committee that this was a municipal function and that there was not much that the entity could do except to play a supportive role to municipalities.

Committee Resolutions:

The HDA to be in attendance when Gauteng Province appears before the Committee to present its Second Quarter Report;
The HDA to furnish a report on catalytic projects;
The HDA to provide a report on informal settlements to be upgraded;
The HDA had to be utilized optimally by the national Department;
The Department continue to engage the three poorly performing provinces, including Gauteng, Limpopo and North West, in order to curb fiscal dumping to the HDA.

12.3 Rural Housing Loan Fund (RHLF)

Mr J Fakazi, Chief Executive Officer, informed the Committee that RHLF as a wholesale lender funds retail intermediaries. In return, the intermediaries lend to commercial and community based organisations (CBO). It also lends to borrowers and carries credit risk, but RHLF conducts risk reviews annually. He reported that CBO were charged at prime minus 2.5%. He reported that growth of the economy had remained subdued during the term under review. Economy was at technical recession, following contraction in the first 2 quarters of the year.

Unemployment remained stubbornly high during the term of government whilst slow economic growth and structural factors contributed to the challenges of addressing high unemployment. He reported on the performance of the entity stating that the number of loans delivered was below the set target due to tough market conditions, high unemployment as a result of slow economic growth. Expenses were below budget, partly due to delays in the implementation of Voucher Programme and managing cost in general.

Mr Fakazi reported on performance against Medium Term Strategic Framework (MSTF) target. He reported that the Minister committed on 1 495 000 housing opportunities and RHLF’s commitment was 233 636 housing opportunities. The performance at the end of quarter 1 was at 176 208, which is 74,4%. This was due to poor market conditions that had prevailed during the term under review (MSTF). He further reported that 192 157 loans valued over R888 million had been granted in rural nodes since 2005/06 financial year. The funding was supporting building material suppliers and by doing so retaining jobs in rural nodes and contributing to local economic development. He informed the Committee that there were housing loans and value delivered in both mining towns and labour sending areas prioritized in the Special Presidential Package.

Mr Fakazi reported that on the winding up process, RHLF was a division of NHFC as per Donation Agreement as from 1 October 2018. In terms of Schedule 1 of the Companies Act an NPC could only donate assets when being wound up. RHLF was going to prepare financial statements for audit, have financial statements audited, Audit and Risk Committee to approves audited financial statements; RHLF board to approves financial statements and passes resolution to wind up the company and lodge winding up resolution with NPC.

Mr B Gordon reported that the entity received unqualified report (clean audit) no material findings on usefulness and reliability of the reported performance information.

The Committee commended the RHLF for obtaining a clean audit and the entity was commended for the 63% that constituted of women in its loan book as well as for the interest levied at 15% under tough economic conditions.

The Committee resolved that the Rural Housing Loan Fund should present the housing voucher scheme together with the National Housing Finance Corporation.

12.4 National Urban Reconstruction Housing Agency (Nurcha)

Mr V Gqwetha, Managing Director, presented on behalf of the entity. He informed the Committee that the core business is lending; that is project finance and working capital and programme management.

During the term under review, performance against annual performance plan 2018/19, the entity managed to deliver 5 269 houses and sites services in the affordable housing and 16 037 in the subsidy housing. The entity reported loss of R18 million fraudulently.

Mr S Nxusani, the Chief Finance Officer reported on the financial year audit outcomes. He reported that the entity received unqualified audit outcomes with emphasis of matter of the following:

Transfer of functions between entities under common control;
Material increase in asset provision – loan for construction project – R57.9 million;
Irregular expenditure of R1.4 million;
Fruitless and wasteful expenditure of R48 425;
Financial commitment amounting to R596 million reported.

Mr Gqwetha indicated that the dissolution audit was to take place during October 2018 and was to be completed at the end of October 2018.

Following the presentation, the Committee raised a number of issues as raised in the Auditor-General’s Report pertaining to vacancies with respect to senior managers as well as Matters of Emphasis amounting to R500 million as well as reasons for this. The Committee also inquired as to whether there were any consequences on those responsible for the fraudulent loss of R18 million and irregular expenditure including whether there were recovery plans for the defrauded amount. Furthermore, whether there was any authentication of an individual or entity purporting to render a service. For the Committee, this was a reflection of failure to meet National Treasury processes and the question was how the entity got to this point. The Committee also enquired as to whether there had been gazette of the 30% to be set aside, was there a plan for the 30% to be set aside and related activities. A further inquiry of the Committee, was the geographical spread of active projects together with provincial the provincial spread of the loans granted as well as the influence behind the decision to allocate loans. For the Committee, there was no indication of assistance to the youth, the disabled and women in terms of empowerment as the mandate of the NHFC was the provision of bridging finance. The entity was also asked to comment on the issue of meeting Employment Equity targets.

In responding, the Managing Director, Mr Gqwetha, reported that 50% of the entity’s loan book was of women-controlled companies whereas 90% of the loan-book consisted of previously disadvantaged individuals (PDIs). On the issue of the fraud, he indicated the prevalence of diversion and admitted to the prevalence of diversion and that payments were diverted into a private account which was a fraudulent act.

In regard to the 30% set aside, he stated that their products that were available to finance the 30% and that by and large the loan book was made up of those contractors who may not be able to access funding by banks.

Procurement challenges and irregular processes arose during this current transitional period which have attracted negative audit outcomes. He also agreed that the entity had to be at all times alert to the credibility of processes in terms of operational business.

The Chief Financial Officer, Mr Nxusani, commented on commitments and stated that the entity did commit to finance when funds were required. On the issue of diversion, it was stated that this occurred in one province whereby one person dealt with a number of projects.

12.5 Community Schemes Ombud Services (CSOS)

Adv N Memani, Deputy Chairperson of the Board, led the delegation and introduced the team. Ms N Rabuli, Acting Ombud and Mr N Dube, Acting Chief Financial Officer presented on behalf of the entity. Ms Rabuli informed the Committee that the entity failed to meet the 30 000 target set in regulating all Community Schemes within South Africa. The actual target during 2017/18 was 17 477. She reported that there was a decline in the number of schemes submitting documentation and there was a provision for penalties which was to be implemented. She further reported that targets were not met in the following:

Control and provide quality assurance of Community Schemes Government Document;
Provision of Dispute Resolution services for Community Schemes;
Ensure that the Community Schemes Ombud Services was an effective and sustainable organization. Mr N Dube reported on financial performance and audit plan of the entity.

The Committee made reference to the R26 million irregular expenditure which had also been confirmed by the Auditor-General’s Report and clarity was sought on whether this was the same amount that had been requested from the Department of Human Settlements by the entity. The Department’s Chief Financial Officer, Ms F Matlatsi, responded that this was not the same amount since the entity was not allowed to ask for funds to cover for irregular expenditure. In short, these amounts of R26 million were two different cases and that the entity had not paid back the amount of R26 million it had previously requested from the Department.

During deliberations the Committee expressed serious uncertainties and challenges that needed urgent intervention and include failure by the Board to perform its fiduciary responsibilities; failure by the Board to comply with the applicable laws governing the investments of surplus funds by public entities (the PFMA and Treasury Regulations in respect of the investment of surplus funds of the CSOS), and failure by the Board to take any remedial action towards the implementation of the Auditor-General’s findings for the 2017/18 financial year.

For the Committee, poor performance by entities was pulling down the performance of the entire Department. The Department indicated that any Recovery Strategy for the CSOS had to include finalization of the investigation process. For the Committee, as long as there was a dark cloud hanging over CSOS, there had to be a clear timeframe for the completion of the investigation. The Committee further inquired of the extent of the investigation, role of the Board in terms of its oversight over the executives of the entity. Further, the Committee inquired on the scope of investigation in light of funds (an amount of R80 million) that was said to be with a certain bank (namely VBS Bank) in Limpopo. The Committee also sought clarity on the nature of investigations conducted as there had been reference to a ‘triple investigation’ on the same matter.

Furthermore, the Committee expressed a view that nothing concrete that restores confidence than those who were supposedly in charge of the entity had a grasp of challenges facing the CSOS. It also made reference to the Minister’s statement previously on the appointment of an investigator however, the entity went ahead to appoint an investigator despite the Minister’s decision not to do so. To compound matters, the entity had failed to comply with the Public Finance Management Act (section 55 of the PFMA require of the entity to keep proper financial records) and there was a failure of internal systems as well as lack of compliance to a monitoring framework. For the Committee this did not inspire confidence, as the entity had submitted its financial statements late, which represented a breakdown in management.

Two further issues were of concern to the Committee and these were related to the interaction with and oversight visit to the CSOS earlier in the year, during which the process and manner of collecting levies were said to be awaiting approval by the National Treasury as well being subject to concurrence between the two Ministers (Minister of Human Settlements and Minister of Finance). The Committee could not understand why the presenters were silent on this matter during their presentation. Secondly, the presentation was also silent on the issue of training.

The Department’s Chief Operations Officer, Ms S Ngxongo, proposed that the first investigation should run its full course before putting the entity under administration. The Department’s Deputy Director-General, Mr N Chainee, indicated that a number of issues had been raised concerning the entity over the last three years. He also alluded to certain actions taken at Ministerial level (by the Minister of Human Settlements as soon as she became aware of the situation at the CSOS). He stated that based on the Regulatory Audit whose findings were part of the Auditor-General’s Report, the Minister had to act while being mindful not to undermine the board. An undertaking was made for the Department of Human Settlements to report on a Turnaround Plan.

The Committee resolved that the Department of Human Settlements should take full responsibility of the CSOS and was given three months to turn the entity around. The Committee would draft a letter to the Minister of Human Settlements to put the entity under administration and to appraise the Committee with the investigation being conducted including, including the investigation on the R80 million at VBS Bank.

12.6 Estate Agency Affairs Board (EAAB)

The Committee was informed by the Department that the entity did not submit its Annual Report and presented a letter stating the reasons for not submitting the Annual Report in accordance with the Public Finance Management Act. The Chairperson of the Committee read the letter stating the reasons for the Board not submitting the report.

Subsequent to that, the Committee bemoaned that the entity had been on a downward slope. When the Committee was conducting stakeholder engagement sessions in five provinces on the Property Practitioners Bill, complaints were received from estate agents regarding a number of issues such as the issuing of Fidelity Fund Certificates, non-responsiveness to queries, unlicensed estate agents, etc. It was therefore a grave concern and disappointment that during this financial year the entity had failed to table its annual report and financial statements as required in terms of section 55 of the PFMA. Furthermore, section 83 stipulates clearly the financial misconduct thereto. The national Department and the Minister were urged to assist the entity in its administration. It was agreed that a letter should be written to the Minister stating that the Committee therefore recommends that under these circumstances, it would be in the interest of the public, stakeholders and good governance that the Minister consider placing the entity under administration in the light of failure of governance and leadership at the institution.

12.7 Social Housing Regulatory Authority (SHRA)

Mr S Ganda, a Board Member introduced Ms N Ntshongwana, also Board Member, and the team from SHRA. Mr Ganda in his opening remarks informed the Committee that the entity had collectively formulated the new values in the period under review. The last three financial years had seen immense change within the entity, a series of interventions were instituted. Those interventions had resulted in significant improvement in the entity’s financial and non-financial performance resulting in the Minister lifting the administration in July 2017. He further informed the Committee that the key policy changes were on the increase of the Restructuring Capital Grant quantum and the increase in the income bands for qualifying households. He emphasized that the work of the entity required collaboration between all three spheres of government and the private sector.

Mr R Gallocher, Chief Executive Officer, reported that the entity achieved an unqualified audit opinion for 2017/18. He presented the entity’s state of the sector report, in which indicated that 27 000 units had not been achieved as per set target. The entity was reported to have improved in the expenditure of capital grants. Improvements in non-financial performance was at 78%. With regards to recruitment, a rigorous drive was done and successful during the period under review. There were 3 519 social housing units delivered and 32 046 social housing units under regulation. He reported that 11 684 units have been delivered within the Medium Term Strategic Framework 2014/2019.

For the Committee the failure to realize set targets was concerning. However, it commented the entity for noticeable improvement in all the programmes including a decline in vacancy rates. It was also commended for having achieved an unqualified audit report but pointed out that the issue of vacancies had to be addressed to fill all vacant positions soon. It also asked that the issue of transformation be addressed including furnishing a breakdown in figures of recent appointments and an update on transformation on those the entity was conducting business with. As the entity had achieved a target of 20% for women in terms of employment equity to date, the Committee indicated that the entity has to strive to meet the set target of 30% which applied across the board.

Further, the Committee made reference to the presentation by the Department of Monitoring and Evaluation (DPME) during which concern had been expressed that the target for social housing may not be realized as it was, at present, sitting at 59%. According to the DPME, the entity might instead achieve 69%. Consequently, the Committee requested an explanation for the failure to meet targets and asked the entity to comment on the issue of boycotts in regards to rental payment. The Committee also indicated that in its previous engagement with the entity, it had raised the issue of a pipeline planning which was concerning. The Committee reminded the entity that it could not report a surplus when it had not spent its allocation.

On vacancies, Mr Gallocher reported that 9 vacant positions were to be filled during third quarter and the rest were waiting for job grading and that by the end of the year an assurance was given to operate at full capacity. In regard to the issue of rent boycotts, this was said to be a stakeholder management issue and the proposed strategy to deal with the issue to intervene before a boycott is initiated through pre-emptive preventative action. The issue of rent boycott was said to be widespread in the Western Cape.

On the issue of meeting Employment Equity target of 30% for women, the CEO indicated that this was to be achieved in due course. He also undertook to present on the issue of Student Accommodation and Community Residential Units once presentation has been done to the Council. The Committee was also informed that most of the applications received for projects were from Gauteng however, the situation had changed somewhat as there also applications from other provinces, namely Limpopo and Mpumalanga. He also reported of three stakeholder engagements that were held in the Northern Cape however approval for projects was still to be done.

The Committee resolved that the entity should provide transformation report on figures on those entities the entity was doing conducting business with.

National Housing Finance Corporation (NHFC)

Ms Mafu reported to the Committee that the Auditor-General had confirmed the Auditor-General had taken over the auditing of the entity.

Mr S Moraba, Chief Executive Officer, introduced his team and presented on behalf of the entity. He informed the Committee that the entity is a state-owned with total assets of R3,4 billion as at March 2018 and total liabilities were at R323 million as a group. The entity is self-sustaining. Its main business is to broaden and deepen access to affordable housing finance for the low-to-middle income South African households.

Mr Lupondwana presented the financial report of the entity, and reported that the entity received unqualified audit opinion. With regard to supply chain management, irregular expenditure was identified of R2.95 million in 2017/18. This was due to non-compliance with the regulation for three-way quotation or competitive bid process. Investigation revealed no financial loss or damages to NHFC and action plan was in place to strengthen internal controls.

He presented the progress made in the consolidation of the Development Finance Institutions (DFIs) that is NHFC, National Urban Reconstruction and Reconstruction Agency (Nurcha) and Rural Housing Loan Fund (RHLF). He reported that NHFC phase 1 has been approved, tax exemption has been approved effective from April 2016; companies’ tribunal application has been approved as at April 2017; section 54 (2) and section 66 (1) of the Public Finance Management Act has been approved and section 38 (1)(m), 51 (1)(g) part JEP process. He further reported that the funders capital providers approved and operational integration has been finalised. He reported that in phase 2, the establishment of Human Settlements Development Bank – policy has been done; Business Case has been developed; drafting of enabling legislation or Act was in process. Phase 3 optimisation, was reported that the process was full integration of systems and processes. The implementation of new products or service lines and staff migration to NHFC was finalised.

In closing, Ms Mafu welcomed the detailed consolidation report presented as well as the increase in the stamp duty from R300 000 to R900 000 as this was a relief to the poor people as it was promoting affordability on property costs. The issue of rent boycott was a matter that the NHFC and SHRA should work on it as it was an indicator of lack of management of the units. As stated earlier. The Committee welcoming the merger of the three entities as it was taking place with healthy entities. However, the Committee wanted to know what actions were envisaged to turn around the issue of revenue and rental collection. Concerns were expressed in regard to failure to submit 3 quotes in regard to service providers. The Committee also asked for an explanation on the issue of the stamp duty payment and to elaborate on the Inner City Programme, particularly its footprint/presence of the entity beyond metropolitan municipalities. Furthermore, the Committee asked the NHFC to explain its relationship with the Social Housing Regulatory Authority (SHRA) particularly in relation to the issue of rental collection.

On the issue of the stamp duty, the entity stated that when purchasing a house, a person or prospective homeowner has to pay a stamp duty in the form of transfer costs. In order to facilitate and improve affordability across the board, it has been proposed to have the stamp duty at zero, in order to improve affordability and broaden access to households.

On the issue of non-payment of rentals, NHFC was working together with the SHRA and the Department of Human Settlements to resolve the issue. Further, the NHFC alluded to the involvement to the involvement of the MECs to resolve the issue of rental boycott.

On the issue of the Inner City Programme and its presence beyond metropolitan municipalities, the Committee was informed that the thrust of the Programme was through associate companies involved in inner city financing and that the Programme had a regional presence and coverage through direct funding (urban finance) in various cities.

The Department of Human Settlements offered a cautionary note that any reporting on the issue of land expropriation has to be factually based as well as be weary of perception. Further, it was the concurrent responsibility on the part of government and developers in dealing with the issue of land invasions.

The role of Tuft was also explained which was said to raise more loans to address the issue of rent boycott. It was also reported that gangs were attempting to appropriate social housing projects. A call was made for the NHFC needed to be cautious and sympathetic in dealing with associated risks. The entity was also asked to adhere to issues of good governance. Rent boycotts and failure to pay rent were also said to be associated with failure to maintain social housing units, which has resulted in dilapidated rental units.

The Committee resolved that the new merged entity should present the Operational Integration once the first phase of Consolidation is completed.

13. REFLECTION BY AUDIROR- GENERAL SOUTH AFRICA FOR 2017/18

Ms Myburgh, Business Executive, AGSA led the delegation. Mr L Songwevu presented on behalf of the AGSA, and he reported that the Department of Human Settlements received unqualified report with material findings. He reported that the audit outcomes of NHBRC and CSOS regressed from previous year. He further reported that out of nine provinces, one province received clean audit, six unqualified and two qualified audit reports.

Mr Songwevu stated that out of 11 key projects that were selected from the Human Settlements Development Grant, most projects funds were spent. The following provinces Free State, Gauteng and Mpumalanga the audit outcomes had challenges of compliance. It was reported there were projects delays in most provinces resulting in negative outcomes. Late enrolments of projects with the National Home Builders Registration Council resulted in poor workmanship.

14. REFLECTION BY THE DEPARTMENT OF PLANNING, MONITORINGAND EVALUATION

Mr H Mohamed, Deputy Director-General, DPME presented on behalf of department. The presentation was outlined as follows:

Contextualising Human Settlements within the National Development Plan;
Overview of the performance targets against Medium Term Strategic Framework 2014/2019;
Management Performance Assessment Tool results.

He stated that the National Development Plan goals for Human Settlements were to eradicate absolute poverty from 39% of people living below the poverty line of R419 (2009 price) to zero; reduce unemployment rate to 6% by creating 11 million more jobs by 2030; significantly reduce inequality from 0.69 to 0.60 gini coefficient through a range of policy interventions. Mr Mohamed reported on the Outcome 8 performance MTSF targets 2017/18 and indicated that Department of Human Settlements was not going to meet the target set.

Mr Mohamed reported on the Outcome 8 performance MTSF targets 2017/18, as indicated below:

Housing Intervention/ MTSF Indicators	5 Year Targets	4 Year Performance 31 Mar 2018	Annual Targets	Actual Performance
Upgrading of 2 200 informal settlements	750 000 households	555 235 – 74%	150 000	89 670
Free hold ownership units	563 000 (452 650) units	370 257 units – 82%	112 000	86 131
Title Deeds (backlog) Title Deeds (new units)	818 057 (563 000 - 452 650 units & Titles Deeds)	89 013 titles – 20%) 244 954 title deeds transferred (54%)	327 300 93 200	81 929 - incorrect 81 929
Development Finance for affordable/gap housing (DFI + Banks) re functional market	110 000 (70 000 FLISP, 40 000 DFI loans)	FLISP 8 111 – 11.6% DFI 44 264 Total: 52 375 – new units	14 000 (FLISP) Target reduce to 5000	2 295
Integrated Settlement Development (land and integrated projects	MSP (50 catalytic projects)	48	50	48
Social Housing CRU - rental Affordable Private Rental	27 000 10 000 25 000	11 847 – 44% (6 394 – 64% + 19 282 - 77% )	6000 1 915 7 920	3 535 546 3 506

Source: DPME presentation

He informed the Committee that Department of Human Settlements was not going to meet the target set.

15. OBSERVATIONS

The Committee made the following observations:

That the target of 100% implementation of the approved internal audit plan was not achieved, with an implementation rate of 81%. Capacity constraints (staff and delayed appointment of service providers), reprioritisation of management requests and rollover of non-completed audits to 2018/19 were provided as further comments;
That for the second year in a row, the HR plan has not been fully implemented (only 82 per cent implementation rate), due to a number of reasons, including activities that were not completed such as the secondment policy, uploading of the approved organisational structure on the PERSAL system, the development of the implementation plan and the outcomes of the competency assessments and skills audit and the EE Plan that was only approved in April;

That the target for title deeds issued for new subsidised houses was not met as a result of poor performance by the provinces. The Department has since initiated a directive to link the transfer of title deeds with the completion certificates;
That only 4 out of the planned 9 municipalities were assessed for accreditation due to an unavailability of funds from the original budget. The panel was therefore not appointed and the remaining assessments will be rolled over to the 2018/19 financial year;
That the target for pre- and post - 1994 title deeds was not achieved based on the provincial submission. Poor performance by the provinces was offered as a reason and a stand-alone grant has been introduced to improve the Department’s control over performance outputs;
That out of a planned target for 40 partnerships that had to be mobilised for Human Settlements Development, none have been mobilised. Reasons were not provided for this lack of achievement, other than the fact that partnerships were mobilised through the Govan Mbeki awards, Rapid Responses, Outreach projects and Social Contract and that a once-off signed partnership agreement concluded with Social Contract partners in 2014;
That one target was partially achieved, with the indicator for hectares of land acquired and released for development being achieved, while the other related to hectares of land being rezoned for new developments, not being achieved;

That out of a target of 50 catalytic projects, only 48 were approved;
That out of 400 informal settlements that were planned to be assessed (feasibility studies conducted), only 61 were assessed. Reasons for the deviation were not clear;
That out of a planned 300 informal settlement upgrading plans that had to be developed, only 109 were completed. Reasons for the deviation were not clear;
That out of a planned 1700 non-statutory military veterans that had to be adequately housed, only 480 received adequate housing. A lack of prioritisation on the delivery of housing for military veterans by provinces was offered as an explanation for the poor performance;
That out of a target of 6000 social housing units, only 3 535 units were delivered. Poor performance by the provinces was offered as an explanation for the poor performance for this target;
That the planned target of 30% of the HSDG and USDG construction budgets being allocated to women and youth contractors was not met, since only 10.42 % was allocated to youth and women under the HSDG and only 9.09 per cent under the USDG. Poor performance by the provinces was provided as an explanation;
That for the second year in a row, the target related to the number of Finance Linked Individual Subsidy programme (FLISP) subsidies allocated to beneficiaries was not met. Out of a target of 5000, only 2782 subsidies were allocated to beneficiaries. Reasons for underperformance vary across provinces, but some general reasons include the unavailability of affordable stock and financial constraints. The Department is continuing outreach campaigns for FLISP, consumer education toward home owners and revised FLISP policy;
That there was non-performance in some entities;
That there was slow progress in the revitalisation of mining town.

17. RECOMMENDATIONS

Having been briefed by 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 should:

Address the collapse of good governance and relegation of fiduciary duties by Estate Agency Affairs Board (EAAB) and Community Schemes Ombud Services (CSOS) respectively; take appropriate action by placing the EAAB under administration for failure to comply with the Public Finance Management Act (PFMA) and further facilitate and fast-track the turn-around plan for the EAAB to address the instability within and transform the industry.
Expedite the current forensic investigation into the financial misconduct and non-compliance by the CSOS Board and administer consequence management to transgressors.
Present a recovery plan in six weeks stating plans to turn the CSOS around and in three months’ time to present the progress on the implementation of the turnaround strategy.

Ensure that the NHBRC is visible in projects to safeguard the quality of housing units. The Entity must come to the Committee to present the Turn Around Strategy.
Ensure that National Home Builders Registration Council present remedial measures to deal with irregular expenditure and fruitless and wasteful expenditure.

Implement a coherent multi-segmented social rental-housing programme that includes backyard rentals.
Develop a strategy for the Social Housing Regulatory Authority to deal with issues of rent boycott in social housing.
Ensure that Social Housing Regulatory Authority (SHRA) to present transformation target in the filling of vacant positions indicating demographics. And speedily resolve of HR issues relating to executive management.

Ensure that Department and the HDA should develop a strategy to fast-track the upgrading of informal settlements.
Respond systematically, to entrenched spatial patterns across all geographic scales that exacerbate social inequality and economic inefficiency. Improve institutional capacity and coordination for better spatial targeting.
Drive a robust campaign with the sole intention on unlocking land to house South Africans.
Revise the regulations and incentives for housing and land use management.
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. A report must be submitted to the Committee.
Ensure that the HDA assist municipalities with project packaging, rezoning and development of land.
Ensure that the HDA furnishes a progress report on the implementation of catalytic project.
Ensure that the HDA provide a list of informal settlements that were assessed for upgrading per province and municipalities.

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. Furthermore, radically revise the housing finance regime.
Ensure that, through the Human Settlements Development Bank, the Rural Housing Loan Fund to present the implementation strategy for the housing voucher scheme.

Ensure the acceleration of youth, 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.

Review housing policies to better realise constitutional housing rights, ensure that the delivery of housing is used to restructure towns and cities and strengthen the livelihood prospects of households.
Build capabilities and develop bolder measures for developing and transforming sustainable human settlements.
Deal with the affordable market with particular emphasis on constructive engagements and strengthening partnerships with the private sector to improve delivery.
Support the development of a functional and equitable residential property market.
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, people with disabilities and elderly people.
Ensure that skilled and qualified personnel are 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 are 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.
Improve focus on processing payable and valid invoices within 30 days of issue.
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.
Ensure that all the entities and the Department present the strategy to meet the 30% of women and youth empowerment target.
Ensure that Housing Development Agency (HDA) to accompany the Gauteng and Limpopo Department of Human Settlements when presenting their turnaround strategy.
Instruct the Department to closely monitor and ensure improvements in poor performing provinces and metros.

Fast-track the transfer of all title deeds for subsidy units to beneficiaries.
Ensure that the HDA fast-track the revitalisation of mining town and provide the Committee with the progress report.

18. 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

No related documents

ATC181018: Report of the Budgetary Review and Recommendation Report (Brrr) of the Portfolio Committee On Human Settlements, dated 18 October 2018

Human Settlements, Water and Sanitation

Documents

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