Department Strategic Plan and Budget: briefing

Meeting report

 

HOUSING AD HOC COMMITTEE
2 June 2004
DEPARTMENT STRATEGIC PLAN AND BUDGET: BRIEFING

Chairperson: Ms Z A Kota (ANC)

Documents handed out:
Department budget briefing

SUMMARY
A team of research analysts, representing the Department of Housing, presented an overview of the strategic plan and budget for 2004-2006. After the initial overview, the researchers went over six programmes individually. The Committee questioned the motives of each programme as well as various inconsistencies in the presentation. The programmes mentioned were:
1) Administration;
2) Policy, planning and research;
3) Programme management;
4) Housing sector performance;
5) Housing equity, and
6) Housing development funding.

MINUTES
Mr A Steyn (DA) asked about plans for approved subsidies. He then referred to the setbacks and false promises regarding housing development since 1994, and asked if these promises would ever be met.

Mr G Schneemann (ANC) asked if the investigative task team mentioned in the budget overview were currently employed or if staff had changed.

Mr Ahmed Vawda, Acting Director General, stated that a new task team had been appointed and was thus not the same as mentioned in the budget overview. A research and development unit had been established to improve quantitative and qualitative housing issues. Lack of institutional arrangements had hindered processes in the past and a new institutional layer would have to deal with these discrepancies. More cost-effective housing was being researched, broadly along with new construction techniques, for both rural and urban areas. There was a drive to meet post-1994 backlogs but improvement would be gradual. Their knowledge in this area was growing as time progressed.

Programme 1 (Administration)
The Chairperson asked if it was possible that the budget plan could be more effectively utilised in the future.

The researcher mentioned that there had been effective budget implementation and utilisation in the past few years, and that this was not likely to change as long as budget strategy was followed.

A Department official commented that there was a lack of clear communication about housing subsidies and this had led to confusion and corruption, but the issue was being dealt with.

Mr G Schneemann (ANC) suggested that all internal and external communications should be documented and distributed throughout the Department to avoid any future confusion or misunderstandings. The Committee supported this suggestion.

Programme 2 (Policy, Planning and Research)
Mr T Dodovu (ANC) asked for an example to clarify what was meant by a mismatch between policy implementation and legislation. He subsequently asked what role South Africa and the Department were playing to take control of future housing challenges.

Mr Schneemann (ANC) commented that national banks had still not adhered to all elements of the Home Loan Act. He then asked what action had been taken to deal with informal settlements.

The researcher responded that the mismatch issue was a product of a poor relationship between monitoring and feedback. It was not clear whether this was a procedural or an institutional issue. All these factors contributed to a mismatch between policy implementation and legislation.

Regarding informal settlements, the researcher stated that squatting remained an illegal activity. The problem was who should enforce this legislation. Unequivocal enforcement of such legislation was needed.

An ANC Member asked if there were any racial breakdown statistics on who had benefited from land grants.

Mr Schneemann (ANC) questioned whether there had been any programme with universities or technikons to recruit trained researchers for incorporation into departments.

An ANC Member asked if statistics indicated whether the Department was managing to reduce informal land settlement. He also queried whether there had been a concerted effort to create an "African housing agenda".

The researchers responded that there were no statistics of land grants, drawn along racial lines. Statistics of this nature could be obtained through close co-operation with municipalities and related groups.

A "National Housing Research Seminar" had been established to address universities and technikons about student induction programmes and potential employment within the Department. There had been no reduction in informal settlements, but instead further growth had been prevented.

Programme 3 (Programme Management)
The Chairperson asked whether the Department had introduced standards to judge whether houses were suitable for occupation.

Mr Dodovu (ANC) asked, with reference to the Presidential Project on Rental Housing, the reasons for non-delivery of the previously stipulated number of houses.

The researcher explained that certain NHPRC standards for housing had been introduced. In order to meet realistic budget demands, he suggested that the sub-standard level be discussed and re-interpreted. Non-delivery of housing was once again due to poor Department communication, as well as a lack of credibility between programmes and policies.

The Chairperson suggested that the Department form alliances or partnerships with outside organisations in order to tackle the informal settlement issue. Partnerships should provide more funds as well as better co-operation.

After the lunch break, the researcher reported that informal settlement policy had not been finalised. However, the Department did envisage that informal settlement would provide some type of security leading to ownership and rental occupation. The second element would be access to services within such settlements. The third would be a top structure for people to reside in as part of a single phase and would include tenure, services and top structures. The fourth element would be amenity and other social services that would have to be supplied within such settlements.

As far as the R2479 contribution was concerned, the government would not move away from the principle of people contributing to their own housing needs. People could either contribute financially through the R2479 or offer their own ‘sweat equity’. The Challenge was in the mechanisms that the Department created for people to save the R2479 before they access housing and at what time the Department would require individuals to deposit their R2479 contribution. The investigation the Department was conducting looked at all those aspects, including whether beneficiaries should deposit the R2479 before their application was approved or whether they would be allowed additional saving time. The third was to establish a dedicated savings scheme, which was currently being investigated by NURCHA at the request of the Department who negotiated with bank councils and a number of banks. Some people faced technical difficulties in opening bank accounts, but the Department was trying to convince banks to create a product that would be suitable to low income people and was standardised across the country, thus enabling people to save for their financial contribution.

The Department had launched an intensive communication exercise in relation to the R2479 contribution. Huge adverts were posted in newspapers and brochures prepared for provinces and municipalities to distribute within communities.

As far as backyard informal shacks were concerned people could have been assisted through the normal subsidy mechanisms to access housing. However, the Department’s policy section was also part of the Rental Housing Policy Unit investigating a number of options for creating rental stock, where people who owned property could derive an income. Government assistance in creating backyard rooms instead of shacks would enable people to rent them out providing an income and a service. Until more information was gathered the Department felt they should not comment further on the issue.

As far as the Department was concerned, social amenities in housing developments were not being paid for by the subsidies. Departmental norms and standards require developers to deliver a product of at least 30 square meters valued at R28 000 and not less. Funds, therefore, could not be siphoned off the subsidy to provide social amenities, but rather were targeted at providing infrastructure, services, roads, water provision and sanitation.

As far as disabled persons were concerned, Minmec last year approved the latest variation in the Department’s subsidy mechanisms. The Department had a number of variations through which disabled persons could obtain additional funding. For instance, wheelchair-bound individuals had received increased bathroom space from the Department. Discussions with three foundations for the disabled agreed that the variations catered for all forms of disability, and also assisted in communicating the availability of the variations to their members.

Mr Vawda, Deputy Director General, commented on the informal settlement framework. He said there were three main issues that determined a systemic approach, viz. the trends and conditions that produced the problems, how the Department responded to the problems and the movement patterns of people.

He pointed out that emergency housing funding was dependent on an instrument that did not allow for fast-tracking. The way to respond was to inform people of their upgrading options. In addition, it was important to revisit institutional arrangements between the three tiers of government as they were just as important as funding sources. Mechanisms for rapid land release could also assist in informal settlement planning and location decisions.

The Department welcomed construction partnerships, as they provided various valuable options. If, for instance, municipalities were to deal with upgrading, they could do so through negotiation and release large capital amounts as was done in Cape Town. Finally, he commented on social amenities and said that the Human Social Redevelopment Account was always intended as an instrument to facilitate interim capital expenditure.

Programme 4 (Housing Sector Performance)
Mr Chauke, Acting Chief Director, Housing Sector Performance, explained that the programme was intended to monitor the Department’s performance and assess the impact of housing delivery. The programme was divided into four broad areas.

The first entailed monitoring the implementation of housing policy and programmes. Each financial year, the Department identified projects where there was a critical need to gather data for reporting purposes and conducted surveys on those projects. The Department was currently focusing on three aspects of the housing subsidy scheme, namely planning, delivery and effects. The Department was investigating township planning designs and were evaluating whether building and construction techniques and procedures were followed. In mid-June, the Department will begin looking at the impact of policy in the last eight years. A research study will be conducted to investigate immediate outcomes, the long-term impact and whether people’s lives were improving in a holistic manner. The study will also be used to identify the unintended consequences of such policies.

The second monitoring activity focused on the Department’s support to the eight housing institutions. The primary focus would be on the impact of the Department’s overall construction policy and housing functions. The third area dealt with identifying economic and financial variables as well as construction industry trends and the impact of reciprocal agreements.

The final area consisted of the maintenance of housing information systems and databases, the National Housing Subsidy Data Bank that monitors the allocation of subsidies in order to avoid double subsidisation and the Distance Support System which maps out housing activities in relation to investment trends within a particular community.

The budget for the programme stood at R92, 2 million of which about 60% was transferred to various housing institutions. The second biggest allocation, approximately R24 million, went to maintenance of the Department’s databases, while the balance went to sub-programmes. The programme allocation would increase by 32% to R121 million in 2005 / 2006 due to increased allocations to SERVCON which would finalise its work by March 2006. By fiscal year 2006 / 2007, the programme allocation would be an estimated R128 million mainly due to inflation adjustments.

Mr Schneeman (ANC) asked how monitoring would take place and if the Department went out to housing developments to see policy implementation for itself. Second, he asked whether the Department had oversight authority over Housing Support Institutions.

Mr Sonto (ANC) wanted to know what action was being taken against institutions that did not provide adequate housing structures.

Ms Dambuza (ANC) asked if the Department was committed to service delivery and placing the correct systems in place.

Mr Chauke replied that a monitoring team conducted quarterly visits to housing developments. After the first visit, the Department had discussions with its counterparts and compiled a list of concerns. Later, a follow up visit checked that the problems had been corrected.

The Department had established a reporting mechanism for Housing Support Institutions whereby they submitted a quarterly business plan. A process of consultation followed until the Department was responses and results. The business plan was then submitted to the Minister for approval. The institutions were expected to report to the Department on a quarterly basis to show progress with the particular project.

One problem was that houses of low quality were being built, but the Department had raised these concerns with the appropriate institutions.

Mr Steyn (DA) commented on the apparent overlap of programmes 3 and 4, saying that monitoring cannot function without management and visa versa. He said the two programmes were separate and therefore lacked sufficient communication. As a result, monitoring seemed to be reactive instead of proactive. He voiced concern over the 54% increase in staff remuneration when there had only been an increase of 8% in personnel and wondered what contributed to this massive increase.

Ms Ramakaba-Lesiea (ANC) asked how the Department monitored people who applied for houses twice using both their maiden and married surnames.

Mr Dhlamini (IFP) commented on Ramaklodi Park that had been empty for the past two years even though it had been determined as an area for the construction of low cost housing.

Mr Masango (DA) asked about individuals who were deregistered and wanted to know what would happen to their homes.

Mr Dlabantu, Chief Financial Director, gave a lengthy explanation of the linkages between the programme manager and the housing sector. He eventually went on to say that monitoring capabilities were to be increased as the new budget allowed for this. The Department would look at issues going back to 1994 and determine whether policy guidelines had been followed to the letter.

He also mentioned that the Department was unaware of the situation at Ramakhlodi Park but they would discuss the matter with the chair of the institute and would be happy to report back to Members at a later stage.

Programme 5 (Housing Equity)
Mr Aaref, Chief Director: Disclosure Office presented Programme 5 and explained that the Disclosure Office formed part of the Housing Equity programme. The Home Loan and Mortgage Disclosure Act, promulgated in 2000, created the Disclosure Office but it had started operating in January 2004 only. Final regulations were still needed for the Act to be implemented fully, but were in final draft form and would shortly be submitted to the Director-General for approval. Staffing and infrastructure issues were also still to be finalised.

The Office was established to identify discriminatory lending patterns and therefore required financial institutes to disclose information on gender, race and income. The Office utilises the legislative framework to ensure fair lending practices if they were found to be discriminatory. The Department would not reprimand these institutes as that was left to the CRS which would penalise them.

The key activities of the Office was to support the achievement of an effective housing market; to manage the relationship between the financial institutes and the Department; to monitor the achievements of financial institutions relative to the Financial Sector Charter and to increase the capacity of all stakeholders. Also, the Office would like to establish communication links with provincial and local government authorities and the public to share their experiences with financial institutions.

Mr Pule (UCDP) asked how banking would take place in the rural areas where people did not have the title deeds to the property. He also wanted to know what the equity situation would be regarding both husband and spouse wanting to apply for loans from financial institutions.

Steyn (DA) said that according to the budget documentation, the Disclosure Office should have had its staff by March 2004, and questioned why that had not happened yet.

Mr Mabena (ANC) asked what the purpose of the Act was if no action was taken against banks that refused to provide financial support to people in certain areas.

Mr Osman replied that the Office would be calling for information from banks on their refusal to lend money to people in "high risk areas". He said that SA had many non-bank loan institutions that were successful and that banks needed to know that others were doing. He also said that mortgage payments were often taken from joint income accounts. Decisions about personal loans would be made individually, but nothing could stop both husband and spouse from applying. He pointed out that the staffing date in the budget vote was incorrect and that the Office would be fully staffed by the end of July.

Finally, the Mortgage Insurance Fund (MIF) was wound-up in 1998 and the involved properties were transferred to SERVCON. The MIF was a failure because people did not pay for their houses because of poor construction. As a result, the CRA allowed for punitive measures and charged substantial penalties on institutions that discriminated.

Programme 6 (Housing Development Funding)
Mr Dhlabantu, Chief Financial Officer, presented Programme 6 that contains the Housing Subsidy Conditional Grants that are transferred to provincial housing departments in terms of the Division of Revenue Act.

He said the purpose of the Programme is to manage the funds of the National Housing Programme. The Department is looking to fund provinces in a matter that is equitable, objective and that looks at the needs of each province. Its strategy is to allocate funds to provinces based on the allocation formula that was approved in 2001. The formula takes into account the needs of each province in terms of the housing backlog. In addition, it takes into account factors such as homelessness, shack dwellings, caravan dwellings, tents, back rooms and rooms in flats. The formula contained a poverty indicator that measured household earnings of less than R3 500 in each province and also established their population share factor as calculated by each province’s share of total country population.

The programme allocation would grow by about 6% over the next three years. The Department had agreed with the Treasury that major changes would be financed over a period of years to allow the Department to continue meeting its obligations. In terms of migration statistics and growth in informal settlements the beneficiaries have generally been provinces with a larger degree of urbanisation such as Gauteng.

Mr Dhlabantu commented on preliminary spending for the last financial year. R4.2 billion had been voted to which was added roll-over adjustments of R999 million making available about R5.2 billion for housing delivery. Nearly R4.7 billion was actually spent, representing 89% of the overall allocation. However, serious over-spending trends occurred at the end of the 2003 financial period which was a major concern for the National Department. The provinces that contributed to this situation were the Eastern Cape – 18%, Free State – 23%, North West – 11% and Western Cape – 8%. When these trends were identified towards the middle of the year, the national Department of Housing re-allocated funds within the national budget and targeted it at provinces that were seriously affected by under-spending.

The last part of the presentation dealt with the recipients of transfer payments from the programme. Some of the recipients included the Habitat Foundation, the First Time Home Buyers Interest Scheme, the Human Settlement Redevelopment Programme, the National Housing Funding Corporation, SERVCON, the Social Housing Foundation, NURCHA and PHPT.

Mr Schneeman asked how the formula was used to allocate funds and if it was based on the Department formula only or on actual housing projects.

Mr Dhlabantu said the Department calculated output from the rapid release of land and then appropriated the necessary funding, but to a large extent identifying measurable "deliverables" from the provinces was a challenge for the national Department.

Mr Steyn (DA) asked whether the Department had information on the actual number of units that had been built as he felt a direct relationship between expenditure and actual unit output should have been established. Mr Dhlabantu could only comment that he had seen large and irregular movement between expenditure and output.

Mr Masango expressed concern and said that he would like to see where the money had been spent. Mr Schneeman commented that Members should realise that delays are generally out of the hands of the provinces thus holding them back from delivering. Mr Dhlabantu said this was mostly due to the length of time it took to implement projects and that it was a challenge the Department would have to face.

The Chair adjourned the meeting.