Department of Human Settlements Quarter 1 2020/21 performance

Meeting report

Department of Human Settlements: First quarter report

Mr Mbulelo Tshangana, Director General (DG), Department of Human Settlements (DHS) said the first three months of this financial year had been marked by a hard lockdown, and it had been very difficult to move around. Contractors could not take site occupation in April/May, and had started moving back in June, but there was a lot of recovery to be done. All the departments that were managing big capital budgets had been affected by the hard lockdown. The DHS had tried all it could to ensure that it achieved some of the non-financial targets in the first quarter that had ended in June.

Quarter One Performance Report - 2020/21

Ms Lucy Bele, Acting Chief Financial Officer (CFO), DHS, said that following the publication of the Housing Consumer Protection Bill for public comments, including the information sessions, the Department had redrafted and updated the Bill in accordance with the comments received from the National Treasury and the Office of the Chief State Law Adviser respectively. It had gazetted the 136 declared priority development areas -- referred to as priority human settlements and housing development areas (PHSHDAs) in the National Government Notice No. 43316 of 15 May 2020. It had responded as a department to the COVID-19 pandemic.

The DHS had spent a total of R4.296 billion (14%) of its R31.325 billion allocation during the first quarter. Expenditure according to classification was:

• Compensation of employees: R86.328 million (20%);
• Goods and services: R26.192 million (5%);
• Transfers and subsidies: R4.183 billion (14%); and
• Payments for capital assets: R706 million (10%).

Ms Sindisiwe Ngxongo, Deputy Director General (DDG): Chief Operational Officer (COO), DHS, said the Department had achieved 20 of its 37 targets (54%), partially achieved nine, and failed to achieve eight.  

The targets not achieved were:

• Qualitative assessments through the submission of quarterly reports on the status of services provided;
• Valid invoices paid within 30 days

The target to implement the anti-fraud and corruption plan during the performance period had been 89% achieved, with eight of the nine activities concluded. The fraud and ethics monitoring tool had not been completed.

Integrated Human Settlements Planning and Development Programme

Mr Joseph Leshabane, Deputy Director General (DDG): Project and Programmes Management Unit, DHSWS, said the Department had gazetted the 136 declared PHSHDAs in the National Government Notice No. 43316 of 15 May 2020. The draft implementation plan for putting together the integrated programmes for priority development areas (PDAs) had been developed and presented at the national Human Settlements spatial planning forum sessions.  The Department had supported provinces in unblocking the challenges experienced.

The projects under implementation through the Human Settlements Development Grant (HSDG), the Urban Settlements Development Grant (USDG) and the Title Deeds Restoration Grant (TRG) had achieved a monitoring performance of 67%. The 1 505 HSDG and 460 USDG projects were all monitored through a desktop exercise, since onsite monitoring could not be undertaken due to Covid-19 challenges. There was no monitoring of TRG projects.

Informal Settlements Programme

The target for the management of the informal settlements programme in nine provinces was partially achieved, a shortcoming being the quarterly forum and oversight site visits not being done as planned. The monitoring of programme performance, based on approved business plans, was instead carried out by convening the quarterly informal settlements upgrading forum and projects oversight. This was mainly due to Covid-19 and the associated restricted movement.

The Department had engaged the provinces and metros on informal settlements upgrading projects in their 2020/21 financial year business plans. The business plans for the metros were also analysed

Areas requiring attention

A revision of the departmental strategic and annual performance plan was being undertaken to ensure that it was aligned to the concrete and material outcomes of the medium-term strategic framework (MTSF). The aim was to eliminate the impression that the Department was just about meetings and the compilation of reports. There was renewed focus on the delivery targets on informal settlements upgrading, social and affordable rental, title deeds registration, rapid land release and integrated residential development. There needed to be a more robust monitoring and evaluation compliance process, which would hold provinces, municipalities and entities accountable for what needed to be done.

The DHS was exploring ways and means to ensure that notwithstanding the governance, financial and administrative constraints, it was taking concrete steps to ensure that funds were used and delivered on the Department’s targets.

There was a need to accelerate integrated planning, budgeting, monitoring and reporting processes, taking into consideration the implementation of the district development model (DDM).

The Department would develop strategies to operate under the “new normal” as a result of COVID-19.

Discussion

Ms M Mohlala (EFF) said the Department had spent R86m against a projected spending of R102m on personnel costs. This was R15.8m lower than projected due to vacant posts not being filled. The Department had a funded establishment 635 posts and a staff complement of 572 employees, and the 63 vacant positions represented a vacancy rate of 9.9%. What was contributing to the inability of the Department to fill these vacant positions?

She said that municipalities and provinces had not submitted requests for emergency housing funds. How had temporary housing solutions offered during the lockdown period, such as the emergency shelters provided at Cape Town at Strandfontein, been financed?

Ms N Tafeni (EFF) asked what the reasons for provincial Departments not submitting their business plans for approval were. Similarly, what reasons had been advanced by the National Housing Finance Corporation for not submitting claims for payment?

Ms E Powell (DA) wanted to know what the reasons were for the failure of the provincial housing regulatory authority to submit their business plans. What consequence management and remedial actions had been taken in this regard? What were the reasons for the failure to submit claims for payment by the social housing regulatory authority? The same applied to the National Finance Corporation.

She referred to the Department’s gazetting of the 136 declared PDAs, and asked if the national DHS was providing the provincial administration with additional PHSHDA funding, or other sources of funding, through which to establish and build on what had been gazetted? Were there plans for the national government to capacitate municipalities across the country with additional security budgets in order to start safeguarding land all across the country from land invaders? They could not continue to have provincial departments spending 100% of their budgets and achieving only 21% of their building targets because they were using the budgets for security.

Mr M Mashego (ANC) said the quarter covered the period of April to June, which was the heart of the lockdown, and had to be taken into consideration -- it was obvious the Department would be hard pressed to meet their targets. In the Western Cape, it was reported that they had spent 100% of their budget but had achieved 21% of their targets, but that question had been answered by the last speaker. It had to be noted, though, that the Western Cape provincial government had wrongly used the money given to it, and the Department had not allocated additional funding for land invasion security. The justification orchestrated by the Western Cape provincial government must be discerned properly, because other provinces had also experienced illegal land occupation. It was important that in the second and third quarter performance reports, the DG should be specific on highlighting the failures experienced by the various provincial administrations during the three months of the hard lockdown.

Ms N Sihlwayi (ANC) said it had been a sad performance report -- the Department had performed poorly because of the pandemic and the lockdown, and she hoped the next quarter’s report would meet expectations. The Committee expected a comprehensive report next quarter that clarified and focused on the priority areas. Land and legal assets should be identified by the Department for planning purposes. This should be done with a strategy, because redress should accompany this land planning. Consideration must be given to providing people with fertile land, not barren soil far from social amenities and economic hubs.

The Chairperson said the Department had already lost time in the provinces, with the lack of construction during the May to August period. Now that it was the rainy season, should recovery plans be activated? Could they still catch up? Should provinces be encouraged to make other plans, particularly in areas where 500 houses had been earmarked for construction by one contractor? Should the construction be split between two or more contractors in such cases? 

Response

Mr Leshabane responded on the title deeds question, and said the DHS had taken a hard line by insisting that provinces specifically adhere to the outputs as specified in the grants framework.  Interactions had been held with the provinces long before the financial year started. The business plans worked out with the provinces had specified which townships were going to be formalised, which properties were going to be registered, in whose name, and the areas that there were conflict so that a dispute resolution plan was put in place. It was good for the Department to have got down to the micro elements of this work, given that until now the programme had not been performing well. As a result, the Department had changed course by insisting on specific deliverables. All the provinces had eventually submitted approvable business plans. These had all been assessed, and they had been given feedbacks. Some provinces had seen some parts of their business plans that were compliant, approved. Some provinces’ business plans were practically empty, while provinces such as the Eastern Cape were struggling to come to grips with what needed to be done to deliver on the title deeds. Ultimately the business plans had been approved, and that was why the transfers could take place. 

The Department also wanted to confirm that with regard to the priority human settlements and housing development areas that had been declared, an extensive process running for over two years had identified priority areas that could be utilised for spatial consolidation. This process had addressed urban efficiency, semi-urban consolidation and redress around past practices that had alienated households from better opportunities. These priority human development areas represented the spaces where the Department wanted to focus so as to achieve better settlement outcomes.

He said the Head of Department (HOD) had addressed the Department on the difficulties some provinces were encountering with regard to land invasions, but this not a new phenomenon.  Gauteng province had faced a similar trend over the years, where project sites had been invaded and resulted in huge security costs being spent. The advice given to the HODs was that they had a project, and a contractor and developer who had taken over the site. Part of site establishment includes the provision of security, and this had to be reconciled.  However, in cases where extraordinary circumstances arose, these extra measures such as security had to be accounted for in the project itself. It had to be noted, though, that the national Department does not provide funding for other eventualities, and therefore it had to be allocated within the funded amount.

Within the provinces and municipalities, there was the process of land development that required consultation with the traditional councils that were in place, and it had worked well in many cases.

Ms Bele said that R2.4 billion from the USDG had been set aside for Covid-19 response. The Department had revised the USDG budget to take into account the use of the USDG to construct temporary shelters. Even though the City of Cape Town had not applied for the emergency grants, they had used portion of the R2.4 billion put aside to construct temporary shelters, as the conditions had been revised as well. It had to be noted that this was also gazetted by National Treasury. As this money had been re-prioritised, municipalities were allowed to construct temporary shelters using a portion of the amount. 

It had to be noted that the financial year of the national and provincial governments ran from April to the following March, while the municipalities’ financial year ran from July to June. When the DHS said they were in the first quarter, it was the national government being referred to -- but it was the last quarter for the local governments. 

She explained that the first tranche of the USDG goes out on 1 July, so in order not to miss the USDG timelines, it is transferred in three tranches. The first tranche goes off in July, the second tranche November, and the last goes to the municipalities in February. This was done so that when the year ends for the national government, all that was due for the metros had already been transferred to them. The metros then have three months to spend it before they close their books. All the money being spoken about was still being audited, and the Department was awaiting the final figures.

It was true that no transfers had been made to the National Housing Finance Corporation (NHFC), because the process was for them to first request a draw down. As of 30 October, the transfers had been made, and when the Department returned to brief Parliament again, a different picture would emerge as most of the transfers had happened during the second quarter.

Mr Neville Chainee, Deputy Director General (DDG): Planning and Strategy, DHSWS, referred to the mitigation measures relating to illegal land occupations, and said a more sustainable way of dealing with the situation was the introduction and up scaling of a massive land release.

The Western Cape’s non-financial performance had always lagged behind its financial performance in the first two quarters, because that was the way they ran their budget. There was a substantial amount of funding that went into planning, materials and servicing. They would see a big spike in their non-financial spending in the third and fourth quarters, and this had been a trend that had to be respected. 

A point to remember was that given the financial constraints in this period, Departments had to be careful in the way that funds were managed. The later the draw down, the more interest was paid on the funds still to be drawn. Even though the money was allocated, if there was a cash flow process that allowed the Department not to draw down the money earlier, then that was a strategic financial decision.

Regarding the vacancies, it should be noted that the lock down came into effect on 1 April, and it was not deemed prudent and transparent for the Department to advertise during this period. There was limited publicity in the newspapers, as well other forms of media, and that could explain the delay. In the second quarter, the number of posts available to be filled in the Department had dropped because the compensation of employee (CoE) budget had also dropped.

Mr Tshangana added that even though they were going into the rainy season, there were signs of improvement in KZN. After going through their recovery plan at a meeting held with the accounting officer of KZN last week, it had been found that they had enough projects to keep them busy to the end of the financial year. They had already spent more than R1.2 billion to date against a budget of more than R3 billion.

There were signs of improvement in KZN, and the only problem discovered in the North West (NW) province was compliance issues. The administrator and the two HODs had not managed properly, and the CFO should not have moved to the local government and stayed instead with Human Settlements. They had reached the 40% expenditure mark, and no money would be taken from them, even though the Department had written to them to sort out the compliance issues earlier mentioned. NW province was still under administration, so the Department was still “all hands on deck” there.

The Western Cape was relatively fine and was still using the municipalities as implementing agents. The Northern Cape was stable too, and was sitting at 60% expenditure now and had managed to get out of the blocks. Gauteng, which takes 30% of the budget, was sitting pretty, and the reason it did not get off the mark quickly was because their account had been frozen after a service provider took the Department to court and was granted a court order, and it therefore could not disburse their claims. The Department wanted to make sure all the provinces had spent 40% of the allocation before the end of October, as that would be a significant milestone when they reached that level.

On Treasury granting roll-overs, they might not be amenable to continue granting these to metros that had consistently failed to spend their grants. The City of Johannesburg had turned things around and had received a greater allocation for having done so. Tshwane had struggled, and money had been taken away from them last year. Buffalo City had been consistent, and had received an additional allocation last year.

Follow-up questions

Ms Powell asked if the national Department of Human Settlements intended to give provincial governments additional funds which they could use for building in the gazetted priority human settlements development areas.

The Chairperson said that the Mangosuthu University of Technology (MUT) had not performed very well, and there had been a glaring gap in the last financial year. Was there a problem the Department had discovered that it could share with the Committee? Who had identified the 39 priority areas -- the provinces or the municipalities?

Department’s response

Ms Ngxongo said the transfer of R3.5m to MUT had been delayed due to the closure of the institutions of higher learning because of the pandemic. In their final submission last week, it had been agreed that matter would be settled by the end of this quarter. What was outstanding was the portfolio of evidence from the research undertaken by the Chair of MUT in support of human settlements development.

Mr Tshangana said that the priority human settlements and housing development areas (PHSHDAs) was an ideal exercise, because it was not a top down, but bottom up exercise. It had been discussed thoroughly and recommended by all provinces, with no exception. Officials in the Western Cape had recommended all the PHSHDAs in the province, including the municipal officials. These were the areas the Department wanted to prioritise.

Last week, discussions had taken place between the DHS and officials from Colombia, and they had said South Africa was the only country where human settlements and transport were interlinked, because in other countries, they were not that interwoven. The SA government would always provide human settlements to communities. Provinces leading the charge in linking human settlements and the servicing of stands were KZN and the Western Cape. As informal settlements were upgraded, service stands were also provided so that people could build houses for themselves. This was also in line with the Western Cape government’s policy.

The Chairperson, in summary, said what was important was that Parliament could not fight the battle of the executive, because they were mandated to do oversight over them. In the Western Cape, there was the Premier, the Members of the Executive Council (MECs) and an Executive Mayor. If they had issues with instructions from the Department, they could have interacted with the national government. An impression should not be created that there was no framework governing national and provincial governments’ interactions, as there was a united, but inter-dependent, South Africa. What this Committee should do was to look at the framework of inter-governmental relations.

The meeting was adjourned.