Department of Human Settlements on its 2015/16 Annual Report with Auditor General, DPME & FFC inputs

Human Settlements, Water and Sanitation

11 October 2016
Chairperson: Ms N Mafu (ANC)
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Meeting Summary

The Portfolio Committee met with the Auditor General of South Africa (AGSA), the Financial Fiscal Commission (FFC), the Department of Performance Monitoring and Evaluation (DPME) and the Department of Human Settlement (DHS), which presented its annual performance report.

AGSA said that over the past three years, there had been a slight regression in the Department’s audit outcomes. This was a concern, because there had been stagnation in terms of urgency in implementing action plans. Financial statements had had to be corrected. There were issues with the National Home Builders Registration Council’s (NHBRC’s) procurement, and the 30-day limit for payment of suppliers had not been complied with. Problems which had been identified in the past had not been rectified by implementing action plans. There was no monitoring or reviewing on a monthly basis, and AGSA recommended that this should be done.

The FFC found that the Department’s overall performance had been good over the last six years, with an average spending of 98% of allocated funds. However, concern was raised about Gauteng, where the target for top structures had been missed by 41%, as funding had been reallocated to other provinces, despite higher volumes of households migrating to the province. The FFC was also of the view that the termination of the Municipal Human Settlements Capacity Grant (MHSCG) had created uncertainty with respect to the housing function shift, given that this grant had been established specifically to assist metros with the capacity to fully undertake the function. Overall, Programme Three (Delivery Support) was flagged as an under-spending concern. 

Members asked why the FFC had focused mainly on Gauteng, as other provinces had clearly under-spent, and questioned why some metros were struggling to perform optimally on municipal grants. The FFC explained that because the province was experiencing greater pressure as a result of increased migration, it was problematic that it under-spent, and that was why the FFC had focused on it extensively. It had undertaken a study of indirect and direct grants, and found that indirect grants were underperforming in comparison to direct grants. This had been why municipal grants were performing poorly. The grant had been established to capacitate metros but had been stopped by the Minister in anticipation of a change of plans, and this had affected municipal performance.

The DPME said it had been found that there were two key breakdowns. Firstly, there had been a breakdown in the linkage between the funds -- the money that had gone to the metros, and the money from the national department to the provinces. That breakdown had interfered with getting good settlement functionality. There had also been a breakdown in the Inter-governmental Relations (IGR) planning interface, which informed why certain issues had arisen. This had been the same with the Integrated Residential Development Programme (IRDP). This had not been right at the input level, which had affected outcomes. The banks could not come into the game at the end of the process. The structure of financing had been a key breakdown. With regard to strategic management, governance and accountability, the Department had performed at below the required compliance level, but had done well in the area of financial management. Members wanted to know the effects of accreditation problems and issues around strategic research in informal settlements. 

The DHS said it had 74 annual targets, of which 56 had been achieved, 14 partially achieved and four not achieved. The Department had had one big target, which had been the consolidation of the Human Settlements’ development finance institutions, which had been commenced. This had been a target which the Department should have achieved already, but perhaps it had under-estimated some of the tasks it had to do. The Department had closed the year with an under-spending of R508 million. The main reason had been that money transfers could not be made for several projects. There had been poor performance in respect of informal settlement upgrading. Assessment and analysis of 101 catalytic projects had been completed.  Pertaining to mining houses, the Department said that government could not be held responsible for building houses for miners.

Members said that the Department was a slow learner, as year in and year out the AG repeated the same matters of emphasis. They asked what was needed to ensure the Community Residential Unit (CRU) programme ran more smoothly. They called for consequence management to be applied where department heads did not comply with the 30-day payment requirement. 

Meeting report

Auditor General of South Africa (AGSA): briefing

Ms Corne Myburgh,  Business Executive: AGSA, said that with regard to the Department of Human Settlements’ actual audit outcomes, there had been a slight regression over the three years. There had been minimal activities in first year, but when they had started to be fully functional there had been regression. The Department and National Home Builders Registration Council (NHBRC) had been financially unqualified for the past three years. This had been a concern, because there had been stagnation in terms of urgency and implementation of action plans. This had been raised in the past. Financial statements had had to be corrected for the Department. The NHBRC procurement policy had not been followed and there had been 30-day compliance issues. These were problems which had been raised in the past, but there had been a lack of implementing action plans which could have solved these issues.

The Department, NHBRC and Community Schemes Ombud Service (CSOS) all had findings on compliance issues. The key one had been financial statements, where there had been no processes which made sure that by the time financial statements needed to be produced, one could just draw that information and draft proper statements. Internal audit issues had also been present.

There had been no irregular expenditure at the Department, but there were at NHBRC and CSOS. With regards to 30-day payments, the Department had compliance issues. Some suppliers had been paid after the 30 days had lapsed.

With regard to performance information, in 2015/2016 indicators had been included in the CSOS action plan, which were not in line with the mandate. CSOS needed to make sure that whatever it included in the plan needed to be aligned to the mandate.

The NHBRC had some issues with regards to the reliability of performance information. This involved the status of the key controls, whether leadership had been providing oversight, and making sure that the finance system would support the capacity and action plans being implemented. The finance staff needed to ensure that daily and monthly controls were in place. The governance structure was also important. If these aspects had been in place, then the entities would have had a clean audit outcome.

There had been some regression at the Department and CSOS in respect of leadership. This had been because of oversight issues regarding financial and performance information. There had been regression in the daily and monthly controls. Financial statements had needed to be corrected after they were presented.

Most of the governance structures were in place and functioning. Pertaining to assurance provided per level, none had provided full assurance at the first level, which was the senior level,. Year after year, there were repeat findings. The Auditor’s Office needed to play a more significant role. The executive needed to ensure that consequence management was in place.

At the NHBRC there had been adequate assurance with regard to internal audit and its committees, but for the Department and the CSOS there had been only some assurance. This had been as a result of repeat findings. There were capacity constraints at CSOS. All three had provided adequate assurance with regard to audit committees. The Portfolio Committee (PC) had had robust engagement with Department, and from this it had provided adequate assurance.

The Department’s three programmes had been tested and there had been no findings on the usefulness and reliability of performance information. There had been findings on reliability for the NHBRC. CSOS’s three objectives had been tested, and two had not been aligned with the mandate. There had been a regression with regard to financial statements.

There needed to be assurance that all procurement processes were followed. Tax certificates needed to be in place. The management of contracts needed to be monitored and maintained. If the ASGA had not corrected the financial statements at CSOS and the Department, they would have been qualified.

The Department had issues with regard to fruitless and wasteful expenditure, because it had used rented vehicles instead of its own vehicles. Irregular expenditure was linked to processes. In this regard, 67% of the R22 million in irregular expenditure had been due to improper processes at CSOS. The remaining 37% had been incurred at the NHBRC, were employees had been given contracts. This had not been prohibited, but the entity had failed to disclose this and it had thus been recorded as irregular expenditure. Investigation and corrective action was needed. There should be more urgency in terms of implementing action plans and consequence management. 

The Chief Financial Officers (CFOs) needed to engage with regards to commitments. This had been happening, but there had been issues with monthly processes and check ups. If this improved, financial statements were going to be better. Regular reviews were needed. AGSA recommended that the PC get insight from the Department on key controls, performance management and the implementation of action plans.

Discussion

Mr S Gana (DA) asked, on the issue of oversight, whether it had been about the senior leadership of the Department performing this function itself, and what kind oversight AGSA was referring to. Had been there any reason why the Department could not meet the 30-days payment requirement?

Ms M Mokause (EFF) said that the presenter mentioned a number of issues, and asked if AGSA was advising the Department on how to handle them.

The Chairperson mentioned the entities which had not complied for the past three years, and asked what were these entities were saying with regard to problems in implementing action plans? What where the challenges?

Ms Myburgh responded that with regard to oversight, AGSA was talking about its own oversight. AGSA had regular engagements with the CFO and the Department. The actual implementation, however, was the responsibility of the Accounting Officer.

It was said that with regard to 30-day compliance issues, the main problem had been the following up of disputes. Following up disputes should not be over 30 days. With regard to action plans, the problem had been that during the year there had been nobody going back to ensure action plans had been implemented. There was no monitoring or reviewing on a monthly basis. There should be monitoring monthly.

Mr P Chauke (ANC) asked if the PC had a hard copy with regard to the action plan findings as a basis for engagement with the Committee.

Ms Myburgh said that AGSA had the action plan, but did not have it with them at present. She suggested that the PC ask the Department for it.

Financial and Fiscal Commission (FFC): report

Mr Eddie Rakabe, Researcher: Public Finance, Fiscal Policy Unit, FFC, said that the medium term strategic framework (MTSF) sought to achieve sustainable human settlements and improve the  quality of life. It had several key priorities:

  • Prioritized adequate housing and improved quality of life for approximately 1.4 million more households in new or improved housing conditions.
  • Residential property market, with a target of 110 000 new housing units delivered in the affordable gap market.
  • Enhanced institutional capacity, with a target of 49 municipalities assigned or accredited with the housing function.
  • Provide title deeds for all 563 000 new subsidised housing units and address the backlog of 900 000 title deeds.
  • Expanding informal settlements to cover 750 000 households.

The FFC had had a number of problems with issues concerning title deeds, and it had been good to notice that the Department had put this issue in its medium term strategic programme. The FCC had also looked at the housing policy regime post-2009 just to assess where the country had been coming from. Several realities had happened since 2009:

  • The adoption of Outcome 8 of the National Development Plan (NDP);
  • The state-guaranteed fund for the housing gap market in the form of the Finance-Linked Individual Subsidy Programme (FLISP);
  • The establishment of the Municipal Human Settlements Capacity Grant (MHSCG) to assist metros on the housing function shift;
  • Discontinuation of the MHSCG due to a number of policy issues;
  • Uncertainty on the housing function shift, and the revision of the accreditation approach yet to be finalized for implementation;
  • Slow down on accreditation to all levels for 2015/16;
  • Transfer of the sanitation function to the Department of Water and Sanitation;
  • Increasing the contracting for the number of houses delivered per annum.  

Mr Sabelo Mtantato, Senior Researcher: Fiscal Policy Unit, FFC , said that the Commission had been concerned with regard to the Department’s spending performance. Performance remained poor for the Urban Settlements Development Grant (USDG). The Commission had been concerned with the performance of Programme 3, as there had been persistent under-spending in the programme.

The FFC had found that the Department’s overall performance had been good over the last six years, with an average spending of 98% of allocated funds. Targets set for 2015/2016 with respect to top structures had been over-achieved in some provinces, and narrowly missed in others. There were concerns with Gauteng, where the target for top structures had been missed by 41% as funding had been reallocated to other provinces, despite higher volumes of households migrating to the province.

The targets set for 2015/2016 with respect to sites had been overachieved in some provinces. The three worst achievers had been Limpopo (24%), Northern Cape (50%) and Gauteng (59%). The MHSCG had continued with poor spending, having spent 8.5% in 2014/2015 and 2015/2016. Here, transitory grant management processes were required to deal with discontinued grants and uncertainty.

The FFC was of the view that the termination of the MHSCG had created uncertainty with respect to the housing function shift, given that this grant had been established specifically to assist metros with the capacity to fully undertake the function. Furthermore, there had not been a single municipality accredited over the period, and the revised accreditation framework had not been finalised.

Programme 3 remained a concern in respect of spending performance. Under-spending had dropped from 55% in 2013/2014 to 29% in 2014/2015, and had remained low in 2015/2016. Generally, there had been an improvement with respect to the AG’s findings in 2015/2016 compared to previous years. There were concerns, however, with regard to under-spending in Programme 3, the financial statements and leadership.

Discussion
Ms T Gqada (DA) asked if the Department had cited the reason for discontinuing capacity grants, and had the FFC raised this issue with the Department. What were the implications and the FFC’s concerns? The capacity grant had been helping metros, and the discontinuance would affect them. With regards to outcome performance, the presentation had been not clear where specific problems were located. Pertaining to the medium term strategic framework, she suggested that the FFC should not work on approximations, and asked how the estimate for 1.4 million more households in new or improved housing conditions had been arrived at.

Ms L Mganga-Gcabashe (ANC) thanked the FFC’s for its report, and said most of the findings were issues with which the PC was familiar.

Mr K Sithole (IFP) asked about the FFC’s engagements with the Department, and what the challenges with regard to the transferring of sanitation had been in respect of unemployment.

Mr H Mmemezi (ANC) said that the FCC seemed to justify the lack of performance in Limpopo, but had focused extensively on Gauteng. Why was the Commission not seeing what the PC had been seeing with regard to Gauteng? The FFC’s neglect in this regard worried him.

Mr Gana said that there had been no recommendations from the FFC. It had diagnosed problems but not provided any identifiable recommendations. With regard to the 98% spending, he said this had been misleading. This had been merely transfers from Department to the municipalities, and the 98% had been merely calculations based in transfers. There had been a need to focus on the remaining 2% which the Department used daily.

Mr Chauke agreed with Mr Gana on the need to focus on the remaining 2%. He asked what had been the FCC’s research finding on household spending consumption. What had its response been to the management plan, which had been a contract between the Auditor General and the Department? Had the FCC been involved in the plan, or did it only analyse the final report?

The Chairperson asked what the Department and FFC considered was the cause for the under-performance in Programme 3.

Mr Rakabe referred to the termination of the capacity grants, and said the FFC had made a number of recommendations to Department and the Minister in 2012, but unfortunately there were new developments which taken place. The grant had been terminated because of under-spending. The Treasury had said that because there had been under-spending it should be terminated. The Human Settlements Development Grant (HSDG) could, however, be used by municipalities for building capacity.

The presentation had emphasised issues with regard to under-spending. With regard to the transfer of the sanitation function, the grant had been moving from one department to another. Since the grant had been moved to the Department of Water and Sanitation, there had been slight improvement in expenditure. It took some years before a grant performed at its optimum, however. Before a grant was terminated, the FFC suggested that proper reasons needed to be articulated by the Department.

Responding to the Gauteng issue, he said that because the province had been experiencing pressure as a result of increased migration, it had been problematic that it had under-spent its budget, and this had been why the FFC had focused on it extensively.

The FFC had made some recommendations, particularly with regard to Programme three. This had been as far as the FFC could go, however. He agreed that the 98% had been misleading. A lot of the expenditure had been made in the transferred amounts. Even though the Department had been spending 98%, there had been decline in the output. The FFC agreed that the 2% focus was important.

With regard to household spending, the FFC looked at national averages and not village specific experiences. National averages were not consistent with all individual experiences. Almost 70% of households in the country were over-indebted, which meant that they could not have bonded houses. This showed that households spent a lot on consumer goods.

The FFC did not have access to the management plan.

Mr Mtantato said the national credit report showed clearly that credit for mortgage bonds was decreasing, but for consumer goods like cars it was increasing. Regarding the transfer of sanitation grants, the FFC had undertaken a study of indirect and direct grants. It had revisited ten grants. Indirect grants were under-performing in comparison to direct grants. This was why municipal grants were performing poorly. The grant had been established to capacitate metros, but had been stopped by the Minister in anticipation of a change of plans. This had been one of the reasons why metros were not performing well on this grant.

The Chairperson appreciated the responses and the fact that last year’s recommended meetings had taken place. Some things the PC had suggested had made an impact.

Department of Performance Monitoring and Evaluation (DPME): presentation

Mr Ahmed Vawda, Outcomes Facilitator: DPME, said that in the Department’s development indicators publication of 2015, it had reflected the government’s own assessment of the country’s performance in quantitative measures, against national priorities. Data had been sourced from government administrative data sets, official and national statistics, and research undertaken by local and international institutions. The report had found that between 2003-2014, South Africa had accommodated 4.1 million households. 30% of all formal housing had been produced by the government’s housing subsidy programme. This had been a phenomenal achievement. Informal dwellings had decreased. There was a great migratory shift and demand for housing.

Household formation had been outpaced by population growth. The demand for housing was 25% more than the population growth. Research suggested that young people were looking for jobs first before housing. Therefore responses needed to be tailored to the problem, and not a numerical figure. This was important. 67% of South Africans rented their homes. South Africa’s policy instrument had been rental, however. This would have to align better to rental demands. This was what the indicators were saying.

Tthe National Department of Human Settlements (NDHS) had seven evaluations in the National Evaluation Plan. There were different types of evaluation for different stages of the programme -- design, implementation and impact. Social housing had been a useful programme to respond to rental. Getting matters right had been based on the theory of change. The findings were not yet ready. The DPME had two reports which were to be presented, and some had been taken to Cabinet.

In the evaluations, there had been a systematic review of the design stage of the housing programme interventions. DPME had looked at the interventions and had considered how R18 billion had been spent annually over an accumulated period of time. The main spending had been through the Integrated Residential Development Programme (IRDP) over the last ten years. The DPME had also looked at the Urban Settlement Development Grant (USDG), and how the money had helped the metros with their programmes to produce better housing interventions.

It had been found that there were two key breakdowns. Firstly, there had been a breakdown in the linkage between the funds -- the money that had gone to the metros, and the money from the national department to the provinces. That breakdown had interfered with getting good settlement functionality. There had also been a breakdown in the Inter-governmental Relations (IGR) planning interface, which informed why certain issues had arisen. This had been the same with the Integrated Residential Development Programme (IRDP). This had not been right at the input level, which had affected outcomes. The banks could not come into the game at the end of the process. The structure of financing had been a key breakdown.

The preliminary finding stated that the housing/human settlement programme instruments respond to a complex operating environment of complicated legislative frameworks of multiple institutional, political, administrative and financial rules, which provided for an expansive delivery system.

The evaluations had provided early pointers that overall, the housing programmes worked, but performances and outcomes were mixed. A core finding had been that subsidised housing had contributed significantly to addressing poverty and stabilising society.  Furthermore, the structure for financing housing and human settlements had a critical causal relationship for sustainable human settlement outcomes. Subsidy administrators were not skilled in dealing with banks.

The IRDP programme supported integrated settlement making when based on specialised implementing agents who were capable of managing the complex interface between planning, financing and implementation of projects, with clear agreements on responsibility and accountability. Good implementing agents led to good projects.

Core evaluation financing showed both the planning and implementation agency interface limitations. The housing/human settlements meta-theory of change had been contested. There were different views in metros and departments on what targets of project achievement were. This needed to be changed to get matters right. There was poor correlation between programme, housing project, house, household, settlement making, city plans, and uneven plans and monitoring.

The PC needed to see if its numbers were consistent with the DPME’s numbers. Generally, the annual performance plan (APP) was aligned to the MTSF. These were complicated calculations which needed to be fixed. The key issue in the MTSF report had been that the performance of metros was bringing everything down, and this indicated where the Department should intervene. There had been a problem with social housing, but it was on track. Gap housing was coming together. There were problems with title deeds, which were all covered in the annual report. The Department was on to this, but the question was what these interventions were and whether they were effective.

There had been good progress in addressing the integration of settlements: the Master Spatial Plan (MSP), catalytic projects, land and development finance institution (DFI) consolidation. This had been the shift. There were some policy and programme issues involving finance, rentals, mineworker housing, and the Human Settlements White Paper, and the accreditation of municipalities was behind target.

With regarding to planning and budget, there were some critical issues which reflected on the Department’s responsibilities, as derived from Section 3 of the Housing Act (1997). It had several functions, which included planning and support, but not a delivery function. There was a distinction which needed to be clear. Provincial deliverables could be reflected in the Department’s APP as “consolidated indicators,” separate from the programme performance indicator. This would allow the Department to distinguish between its core functions and those of the provinces to ensure accountability, as the national Department should reflect progress made by the sector in delivering services.

The national Department’s APP should reflect its role in providing support and ensuring that provinces, municipalities, and entities delivered services on behalf of the sector. The NDHS should monitor the performance of entities, provinces and municipalities. It had to refine the institutional capabilities of entities, provinces and municipalities in terms of policy, planning, strategy, programmes and project delivery support. It had to set out the terms for consultation and partnerships with all stakeholders in the housing delivery chain.

Controls should ensure that sufficient collection, verification and validation systems were in place so that the consolidated information was reliable. There should be a clear audit trail of where data was coming from and how it was consolidated, which should include reasons and supporting documentation for any adjustments made. Data used in the consolidation should be the same as data that was reported by each individual entity.

Pertaining to impact, the medium score which any department needed to get nationally was 3, which represented compliance; 4 was over-compliance, and meant that departments were working well. With regard to strategic management, the Department had performed at below the compliance level, at a 2.1 average.  With governance and accountability, it had also performed below the compliance level, at a 2.2 average. With human resources, the Department had performed below the compliance level, at a 2.5 average, but with financial management, it had performed at a compliance level, at a 3.2 average.

The one thing the PC did not have to worry about was the money. It was about strategically directing the critical issues that made human settlements function, which needed everyone to apply themselves, such as getting top management right and providing the information to support top management. The PC needed to worry about whether it and the Department were ready for the demands of the NDP, and how to manage the changed agenda.

Discussion

Mr Sithole said that the presentation had been an eye-opener. He he differed with statistics that had been provided. What were the Department’s intentions about Community Residential Units (CRUs), because people could not live under such conditions? What had been the working relationship between the provinces and metros, what role did the DPME play in this regard?

Ms Mnganga asked what the recommendations and plans were to assist the Department in the area of strategic management and its ability to deliver. The PC had identified a grey area, in that most of those working in middle level management might not have information on metros or the skills which the Department needed. The Department had to build these skills. What had the DPME been doing to assist the Department to ensure that the NDP was being achieved?

Mr Gana said he had been battling to understand what the ideal performance scores for human settlements should be, especially when everyone was chasing the 2030 objective. With regard to oversight, he believed that South Africa had been building rows and rows of governance structures. How was the DPME monitoring this?

The Chairperson provided some clarity on the presentation. She said that the DMPE was looking at four key performance areas (KPAs). For the Department to perform well, it needed to perform well in three. The first three were strategic management, governance and accountability, and human resource management. The last had been financial management. There had been a disjuncture. There had been three KPA’s where the Department had not performed well, but in financial management it had. She wanted to understand if this had been what the DMPE was saying. What did the DMPE recommend the Department should do to fix issues related to the three KPAs?

Mr Vawda the issue with regard to Community Residential Units (CRUs) had been that National Treasury had been presenting its expenditure review. The descriptions of the CRU programme had been loose, and thus the controls had been affected. The result had been that the average household for a CRU had been R400 000 per unit, and the average subsidy had been a little above R140 000 per unit. This was important. Social housing funded the unit, and not the household. The theory had been that after 20 years, the subsidy on the unit would produce a unit for the state, because the state collected the rent, which allowed the state to repay the money and allowed one to buy a new unit. That theory of change had been essential in social housing. The idea had been not to fund the ownership of the unit, but to fund the unit and collect the rent to repay itself. The problem with the CRU was that it did not have this concept in mind. The rentals were not set against the unit price and this was where the breakdown occurred. Municipalities were disadvantaged. The problem was rather big.

With regard to accreditation, there was a bigger set of issues above and beyond accreditation. The metros drove the economy of the country -- 70% of the economy was driven by the nine metros and 80% of the economy was driven by the top 20 cities. Unless governance used the subsidy systems better for the metros, the game was over. Treasury had said that cities and metros needed to be fixed or else the economy would die. Accreditation had been one of the sub-functions. The country had to take a bigger decision. There needed to be improvement in strategic management, not just tracking money, but what was happening in metros and departments. It was a changing world and the Department needed to keep up with that.

Ms Gaynore MacMaster, Deputy Director: Management Performance and Monitoring, DPME, said with regard to impact, it was a compliance tool based on the premise that good management practice leads to good performance and produces service delivery. This was the theory of change. The 1,2 to 1,3 performance scores reflected assessment periods. The DPME had just concluded a self-assessment for 2016 and the next step was the moderation phase. What the DPME tried to do was to get the departments to a level 4, which meant that they were working smartly.

Ms Mannana Sethobane, Outcomes Manager: DPME, said that within the Department there was a unit called Government Performance Information (GPI), which looked at the strategic and annual performance plans, and another unit called Outcomes Monitoring and Evaluations. These units conducted training sessions with the Department. The first training was based on outcomes on how to prepare strategic plans (SPs) and APP’s. The second meeting provided recommendations and lessons on what, and what not, to do. There were some improvements with regard to the quality of information input as a result of these interventions.

The Chairperson said a day with the DPME was needed, where it could come and train the PC so that it could do oversight correctly.

Department of Human Settlements: Presentation

 

Mr Mbulelo Tshangana, Director General: Department of Human Settlements (DHS), said that the Department had 74 annual targets, of which 56 of them had been achieved, 14 partially achieved and four not achieved. The Department had had one big target, which had been the consolidation of the Human Settlements’ development finance institutions, which had had commenced. This had been a target which the Department should have achieved already, but perhaps it had under-estimated some of the tasks it had to do. The relevant directives had been given and issued by the Minister to the three entities, and the only issue outstanding was the tax amendment. The DHS had completed the policy framework and had started with the business case. It would be completing the operational integration. It had been given a mandate that this had to be completed before the end of the financial year.

 

There was a White Paper process in place. It would make the Department deal with all important aspects, and would inform the Human Settlements Act and code.

With regard to the qualitative outputs achieved as at March 2016, several programme frameworks had been revised. These were the beneficiary allocations policy, a revision of the pre-emptive clause on the sale of subsidised houses, and the CRU policy. The review of the programmes’ code had commenced, evaluation of the social housing programme had been completed, and an investment framework to guide human settlements development had been completed for consultation and adoption.

The Department had developed a prototype of the business intelligence dashboard to improve monitoring and reporting on programmes. This would help the Department to track provinces. Almost 95% of implementation was done through provinces and municipalities.  The Department needed to be on top of all 12 000 projects country wide. A central intervention to fast track the issuing of title deeds had commenced. The Department had ring-fenced the budget, but the performance had been very slow. This had been a priority target. There was a programme which ensured that the NHBRC enrolled all subsidised projects, and monitored construction. There were areas where concerns had been raised, and the Department would take speedy and appropriate action.

Some progress had been made with an interspherical package of support that had been developed, concluded and implemented in Nelson Mandela Bay Metro. When all three spheres of government worked together, greater things could be achieved. There is no one sphere of government that had all capacity in the world to deal with challenges.

The implementation guideline for the Peoples’ Housing Process (PHP) had been tabled for approval. This was an important programme because it allowed people to be involved in the construction of houses. The Department needed to change its tack in the mining towns. It could not be the responsibility of government to build houses for miners. Mining companies signed mining rights and plans, and thus they needed to build the houses for mine workers. The Government had a working model it had developed for miners to not only rent, but to own houses. If miners went to the capital markets for loans, they would not be able to pay them back because of indebtedness. The Royal Bafokeng model made it possible for mine workers to get houses, so the Department had been looking into this model.

Accreditation had been up to level 2. Level 3 had been changed to indicate that one would be assigned, instead of accredited, the function. Capacity building of metros had been a Department focus. Some metros had struggled to spend their grant for the last five years. The Department would do away with capacity building grants, but 2% to 3% of the grant was to build its own operational capacity. Provinces were allowed to do the same.

With regards to MTSF targets, he said that 232 583 additional houses were targeted to be built. 170 288 additional houses had been upgraded. Assessment and analysis of 101 catalytic projects had been completed. The target had been to assess and implement 50 catalytic projects. At 26 of those projects, developers had been on site. All 101 catalytic projects qualified, but not all of them could be implemented. 126 278 loans had been issued by the DHS’s DFIs. 463 feasibility studies in informal settlements had been completed in various municipalities.

Pertaining to the progress with implementation, 12 097 additional affordable rental opportunities had been delivered, compromising 3 480 social housing units, 2 152 CRUs, 6 565 through National Housing Finance Corporation (NHFC) loans, and various PHP initiatives had yielded 8 498 PHP units. The Department was reviewing income bands and had made recommendations to the Minister. The CRU had been one of the most expensive projects. The market had been problematic, because the majority of customers were in hostels.

Mr Neville Chainee, Deputy Director General, NDHS, referred to progress on the implementation of the MTSF targets, and said the Department had not been doing so well with the upgrading in informal settlements. The target had been 150 000 households, but there had been a shortfall of 129 712. Rectifications would be made.

The Department’s target for title deeds had been 127 223, and it had reached 87 199. The Department had been expecting national government intervention. This was the same for home owners’ new title deeds and affordable housing.

816 informal settlements had been assessed in 62 municipalities. For these, 503 detailed plans had been developed. The poor performance in this area had translated to the poor performance in Programme 3. This had been what the Department was not doing property. The target on hectares of well-located land being rezoned had been met. The overall target in the big areas of focus had been missed by 9%.

With regard to audit improvements, sometimes the provinces dragged their feet because of the time lag between the close of the financial year and the submission of documents. This was what had happened in the case of the Eastern Cape and would be reflected in the next financial year. The important thing had been that the accuracy and integrity of data had been improving.

With partially achieved targets, there had been issues around compliance and poor performance. There were no instances where key stakeholders had not signed. There had been substantive targets. The bi-annual report on property trends had not been disseminated. The capacity building programme had been reprioritised.

Ms Funani Matlatsi, Chief Financial Officer: DHS, said that the Department had been audited on a budget of R30.5. It had closed the year with an under-spending of R508 million. There had been a significant amount which could not be spent on projects. There had been transfers which could not be transferred. R41 million spoke to failed transfers on investment grants.  Only R109 million had been requested by the Social Housing Regulatory Authority because it did not have projects in its pipeline at that time. Spending of R71 million had not been achieved by the Housing Development Agency.

With regard to operational budget, administration had under-spent by 6%. Programme 3 had underspent for the past three years, because youth brigade money could not be transferred. Money to the Department of International Relations and Cooperation (DIRCO) could also not be transferred. Action plans had been put in to handle such issues. 90% of the operational budget had been spent.

With regard to a major part of the grant, there had been much progress in expenditure. In total, R1.3 billion had been spent. Only two provinces had been problematic -- Gauteng and Limpopo. With regards to mining towns, Free State and Mpumalanga had provided fair units.

Rectification issues had been addressed to a great extent, and there had been fair improvement in North West Province. There had been progress in handling disasters, which had been attended to by the provinces. 47.3% of the USDG budget had been under-spent. eThekwini had improved immensely, but Cape Town and Ekurhuleni had under-spent.

The capacity grant had not performed at the desired level. At the end of the financial year, the Department’s spending had stood at 16%. This was depressing.

While the Department had received an unqualified audit, the main emphasis had been on the material under-spending, particularly on Programme 3. The amount of R38.1 million was informed by a number of items. It formed a part of the under-performance from the previous year. The Department had since appointed programme managers, and a performance management system had been introduced, which had made a difference.

There had also been material misstatements in the annual performance report which had subsequently been corrected. These had mainly been small mistakes. The Department was talking to internal audit to look closely at its audits on a quarterly basis. There had been no consequence management in the Department, as some issues had just been petty mistakes.

Discussion

Ms Mganga-Gcabashe said she had a problem with regard to Programme Three. For three years, the Department had under-spent. The PC could not discuss this matter every financial year. The Department’s staff would be tarnishing the name of the DHS if it did not cleanup this programme. The PC wanted action taken on management which was not performing. Programme Three spoke to the delivery and eradication of informal settlements. If this issue was not being resolved, the Department and PC were not supporting the metros or the big cities. What was the Department saying about the President’s State of the Nation Address (SONA) and the government’s promises? At earlier meetings, it had been established that if the Department did not go and assist municipalities, negative outcomes would arise. The 30-day payment response was not acceptable. What were the sanctions for personnel who flouted this regulation? The Department was not listening to the SONA or taking the government’s promises seriously. Heads needed to roll and consequence management was needed. With regard to the core concern of strategic management, she urged the DG to make sure that the Department’s strategic team was up to scratch. Most of the issues which had been raised by the FFC, the AG and the DMPE were not new. Monitoring on a monthly basis was needed, because quarterly did not work. There should be an internal audit department which audited the DHS on a monthly basis.

 

Mr Sithole asked if there had been a new informal settlement programme strategy. What had been the intake at settlements where the Department had failed? He noted that the Department had stopped doing any rectification, and nothing had been said about backyard dwellings. With regard to the CRU, he was also very concerned.

Ms Makause referred to the CRU and issues of accessibility, and asked what requirements and criteria were needed to be met. The issue of title deeds remained a problem throughout. What had the Department been doing in this regard? What was the Department doing to handle the mining houses situation? What had led to overspending in the Northern Cape?

Ms Gqada said she had heard the DG speaking of 50 catalytic projects, and Mr Chainee saying something contradictory. It had been almost two years now since the Minister had announced that 50 catalytic projects had been identified. The PC needed to know what had been happening with these projects. She agreed with Ms Gcabashe on the issue of informal settlements. The Department needed to improve the conditions of people living in the informal sector, but it was not doing so well here. Where was the main problem? With regard to the under-spending of the Housing Development Agency (HAD), she would have expected the government to present the target. Did the HDA need assistance? With regard to the under-spending in Cape Town, the DG had said that the money had been redirected to government, but the CFO had said that the money had been transferred. Where was this money? Pertaining to the capacity grant, where was the money meant to capacitate metros?

Mr Memezi said the PC appreciated the teamwork within the DHS, but the Department was a slow learner. Year in and year out, the AG repeated the same matters of emphasis. There should be consequences for poor performance, not just warnings or letters. The worst was where the Department ignored internal audit reports. This needed to stop. There were issues that were embarrassing. Some of the irregular expenses should not happen. Why was the middle class not being helped? The Department needed to assist the middle class.

Mr Gana said people could not see what had been achieved by the DHS in its annual report. What people could see and feel -- the key areas in the aspects of human settlements – had not been achieved. Informal settlements had been really worrying. More focus needed to be placed on informal settlement upgrades. There had still been no progress in defining what a poor person was.

Mr Chauke referred to the Amnesty International report on mining company Lonmin. What was the new approach which the DG had spoken about? The PC should put forward suggestions that could help, but he appreciated that the Department had done a lot. There was a need for the Chamber of Mines and the DHS to make a presentation to the PC. There had been a policy shift, so that presentation would be very valuable. There had been no delivery in the metros. Was the DG insisting that the same thing be done which had led to the under-spending and under-performance? He said that it was treason that so much money allocated to deal with squatters had been sent back. In some areas, this had been deliberate. He asked for clarification on capacity building based on demography,.

The Chairperson said that the Department had been not meeting its targets for employing people who had disabilities, and asked what challenges were causing this.

Mr Tshangana responded that if one looked at Programme Three this year, it had turned the corner. There were two things which needed to be separated -- the professional aspect of the Department to get projects packaged and, once packaged, the programmes needed to find their way to municipalities for them to be registered in the Integrated Development Plan (IDP). The USDG came in on the capital side. There were few areas which had received no service, but the key issue had been level of service. The intention had been to upgrade informal settlements.

There had been a correlation between the poor performances of the USDG and informal settlement upgrading. The metros were not doing well in this regard. Programme Three had not performed for three years, and the problem was that the supply chain management processes was not geared to handle such work. Supply chain management was finding it hard to complete everything on time. He assured the PC that the budget would be spent.

The Department would make sure that heads would roll over the 30-day payment issue. The Eastern Cape and Free State were the only two provinces which were not paying contractors on time. The Department had been watching and monitoring the provinces. There was a need to open and close books on a monthly basis.

He said the capacity building grant had been with metros for the past three years, and had failed dismally in respect of spending. The issue with capacity building grants was that the DHS was not really behind it, but it had been forwarded by Treasury for the Department adopt it. A different approach was needed for capacity building, and the Department was working on this.

The Department had to go on with the CRU programme. It was an expensive programme because it had not been standardised. It needed to be standardised. The social facilitation of such projects was important, and the Department would welcome any help in this regard.

With regard to mining towns, he agreed that the Department could come and present on this matter. Most mining companies which were operating in South Africa were building five-star houses in other countries. The Royal Bafokeng model had been practical and useful. It made the building of houses possible. The Department felt that Lonmin could adopt the same model.

The Department had to agree that it had been slow learners with regard to title deeds. If the budget had been ring-fenced in 2014, the situation would be much better now. There was a proper structure for title deeds in the Western Cape. In managing the title deeds programme, there were too many links in the chain.

He said that the DHS needed to sign 21 catalytic projects before 30 October. Within the last financial year, there had been more than ten projects running. Such projects, however, needed to meet proper definitions. There were 101 which had been set, and budget considerations needed to be kept in mind. The Department could come back and provide a list of those 101. The 21, which were called platinum projects, were ready and being implemented.

The Social Housing Regulatory Authority (SHRA) had stabilised. The Department needed to change the quantum. The Finance-Linked Individual Subsidy Programme (FLISP) had to be managed as a national project, and the National Housing Finance Corporation (NHFC) had been asked to manage it. This had been agreed with Treasury and presented to various provinces. Some provinces were happy with it, and others were not. Most were not equipped to deal with such a programme. Consequence management was needed. When performance management went out the window, performance was poor.

Ms Matlatsi said the National Housing Fund had been waiting for certain finalisations. The Department could not dis-establish it as an entity. The Fund had been delisted in the PFMA as a Section Three A entity. Funds were being disclosed. The two metros where it had been projected that money would not be spent by March, had under-spent, and roll-overs would be received after proper investigation. Limpopo’s under-spending had been rolled over, but Gauteng had not requested a roll over.

The meeting was adjourned.

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