Department Budget: public hearings

Meeting report

HOUSING PORTFOLIO COMMITTEE
12 April 2005
DEPARTMENT BUDGET: PUBLIC HEARINGS

Chairperson: Ms Z Kota (ANC)

Documents handed out:
Servcon presentation
Thubelisha Homes presentation
National Homebuilders Registration Council:
Department’s presentation on Budget 2005/06 to 2007/08
Western Cape Department briefing
Eastern Cape Housing programme
Eastern Cape Department briefing
Housing Budget Vote No 28

SUMMARY
The Housing Institutions, the National Department and two provincial departments presented their annual assessment reports outlining their achievements, the challenges that they are facing and their strategic plans for the future. The Director General explained that the 2005/06 budget was to drive the translation of the Breaking New Ground policy framework into new programmes while bring old business to a conclusion. He said that there was greater alignment between the Department and the Housing Institutions, particularly in terms of agreement on mandates. The provinces and Housing Institutions were looking at the Comprehensive Settlement Plan and engaging with it more robustly to attune their responses to each province's priorities.

Servcon Housing Solutions described its "in situ rightsizing" activities which would dispose of the remaining 12 274 houses from its original portfolio of 33 000 properties that had been in default. The banks had agreed to cut their losses and accept the housing subsidy amount of R25 800 for each of these properties regardless of the original bond amount. This would cancel the debt of the owners who as beneficiaries of the housing subsidy would not be allowed to sell their houses for five years. Government had not made a decision about the further 20 00 properties that had gone into default since the Servcon cut-off date in 1997. Servcon also presented its recommendations for re-aligning its mandate .

Thubelisha Homes outlined their corporate plan and repositioning strategy for a new mandate. This transformation would involve Thubelisha Homes in the resuscitation of ‘blocked hosing projects’ and the establishment of provincial offices. Members asked for more detail on the rightsizing process, the future of both Servcon and Thubelisha Homes, issues of budgeting and Thubelish's current work and proposed new mandate.

The National Homebuilders Registration Council explained that it had developed uniform models for houses and was able to calculate the exact materials needed for building houses of specific sizes in order to assist builders. It had set standards for homebuilding and would work for full compliance by builders to those standards. Members asked for specific information about the number of complaints filed with the NHBRC about poorly built houses. They also asked about NHBRC’s efforts to work in rural areas and about projects that had been recalled due to non-compliance by builders.

National Department briefing outlined its strategic plan for its six programmes which included Policy Planning and Research, Programme Management, Housing Sector Performance, Housing Equity and Housing Development Funding. Discussion topics included the slow progress in rural housing, the Department's monitoring capacity to detect provincial under-spending and identify blockages, verification of information received from provinces given the potential for inaccurate reporting, the Department's fraud and corruption hotline, alternative building technologies and energy efficient innovations.

Western Cape's Department of Housing noted its amalgamation since 1 April 2005 to promote integrated delivery. A key challenge was the housing backlog which was difficult to clear given the approximately 48 000 annual immigrants to the province. Its current delivery capacity was 18 000 units per year which needed to expand to 30 000. The Committee asked about delivery capacity and timeframes for dealing with backlogs, the effects of the recent amalgamation of department, the status of the People’s Housing Process (PHP), the N2 Gateway project budget, strategy for managing floods and fires, stalled projects, energy efficiency needs and the preference given to people who had taken initiative to save. The Committee plan to invite the provinces back in six months' time to monitor expenditure patterns.

The Eastern Cape Department outlined its targets for this year such as construction of 25 813 houses and the unblocking of 35 stalled projects and the finalisation of the rural pilot. The impact of this would include the creation of 6 250 jobs. However it claimed that that its budget increase was minimal except for the third year of the MTEF. Questions were raised about its housing backlog, its female contractor target, its human settlement projects at Soweto-on-Sea and Duncan Village, declining targets in the light of budget increases and its rental stock.

MINUTES
Servcon submission
Mr M Moroka, the Managing Director, explained that the mandate of Servcon Housing Solutions had been to provide an alternative to housing evictions. Servcon was involved in ‘in situ rightsizing’ whereby banks and government had reached a compromise in November 2004 to finalise the remaining 12 274 properties of the original portfolio of 33 000 properties that had been in default. He was optimistic that it would able to deal with the remaining 12 274 properties by 31 March 2006 at a total cost of R316 million. Banks would accept R25 800 across the board for each property. They had already visited 8 800 clients who had signed the "in situ rightsizing" agreement and Servcon had received R277 million in housing subsidies from the provinces which would be paid to the banks. They would receive the balance from the remaining provinces by the end of April 2005. Once the properties were satisfactorily disposed of, incidental costs would be taken care of, the government would be freed of its responsibility, the property would be transferred to the client and there would be a five-year moratorium on the sale of that property.

Mr Moroka also spoke about Servcon's future role once it had completed its old business. It was clear that its current expertise was relevant to implementing parts of the Comprehensive Housing Plan and the Financial Sector Charter. Cabinet still needed to decide if the additional 20 000 properties that had gone into default after the Servcon cut-off date of 1997 should qualify for this or should an alternative be sought. It was looking to Cabinet to approve a change in its mandate so that it could continue to work in the areas of consumer education, improving public stock management and secondary market initiatives.

Discussion
Mr G Schneemann (ANC) pointed out that previous deadlines had not been met and that Servcon now had the goal of disposing of all remaining properties by March 2006. There had been an increase in the budget allocation to Servcon, but if Servcon had not been able to meet previous deadlines, they may not be able to meet the one of March 2006. He suggested that it may be a problem of capacity.

Mr Moroka replied that there was not a capacity problem. Transfers from the provinces were linked to the implementation of rightsizing agreements. Thus far, 70% of the subsidy funds had been paid if one looked at the provincial funding table. Servcon would be able to finalise the portfolio by the end of the first quarter or in the second quarter of this financial year. The SDO (satisfactorily disposed of) properties would be finalised on time, so things would look different by the end of the first quarter. As they finalised filling in client forms, 70% of the staff were now ready to be re-aligned to the new business proposal.

Mr Steyn referred to provincial subsidy payout table in the presentation and asked if the Gauteng pay-out of R175 million been budgeted for.

Mr Moroka explained that some properties had been carried over from previous year and this amount
had been budgeted for.

Ms B Dambuza (ANC) also referred to the table that reported on the provincial response. She asked Servcon how it viewed this response. She also asked what Servcon's plan was to meet deadlines if they did not receive the remaining provincial funds.

In terms of the provincial response, the Minister of Housing, Dr Lindiwe Sisulu, said that it was for the provinces to deal with and that Servcon would consult with the remaining provinces. Both banks and government who were the shareholders would like to see the end of this portfolio and would ensure that the provinces paid what was owed.

Mr A Steyn (DA) asked what conditions were attached to the rightsizing process, what the maximum value of the qualifying home was, when were the implementation and closing dates and did people who were in arrears qualify for rightsizing? He noted that Mr Moroka had mentioned cost sharing over and above the subsidy of R25 800 and he asked how many houses were over this amount.

The Minister explained that "in situ right-sizing" applied to the people who were listed in the Servcon database. If the original bond amount was R60 000, the property would be discounted to R25 800. The banks had agreed to accept the amount of R25 800 across the board. The occupant would become a government subsidy beneficiary and thus would not be able to transfer the property for five years to avoid a profit being made. The decision that the banks agreed to cut their losses on the remaining 12 275 properties had taken place on 31 Nov 2004 and the first transfer of funds to Servcon took place in Feb 2005. From end of January 2005 up until 31 March 2005, they had visited 8 800 individuals. Servcon was still discussing options with the Department for future involvement with public stock management. They hoped to be involved in terms of being able to change the mindset of those who worked and earned income but who were not paying what they should on their properties. If they were unable to pay, they would be given twelve months to sort out their residual salary to afford the rent. After a year, if they still could not pay, they would be put into a category that would be submitted to the province to decide if they be exempted from payments or removed from the property.

The Chairperson agreed that some people who were working did not care about paying.

Mr Moroka explained further that the provinces would give Servcon their data on successful and unsuccessful payments on property stock and that Servcon would go out to personally interview the non-paying clients. In some cases, they found that the person occupying the home was not the person listed in the provincial database or they found a pensioner or a disabled person. When Servcon approached people, they interviewed them on an individual basis and were able to get more complete responses. Once people accepted that if they worked they should pay, they were willing to. The reason that they were not paying was because no one was following up on them.

Mr Steyn asked if the maximum value of homes qualifying for rightsizing was R60 000. Since the provinces were transferring the funds, what would Servcon's allocated budget be used for and what was Servcon proposing for an extension.

Mr Moroka said that they had a table of the values of the homes and that R60 000 was just an example. Of the 12 000 properties being dealt with, only 3 956 were worth under R25 000. The rest were worth over R25 000 and most fell between R60 and 70 000. When "in situ rightsizing" was approved, banks had been asked to further discount these properties (as the default amounts had grown due to increasing interest) and so the banks had lost a further R100 million.

Mr Moroka then explained how in situ rightsizing was a cheaper option than cost-sharing. In cost-sharing, if a property was worth R96 000 and the resident agreed to be rightsized, Servcon would hire Thubelisha to build a new home. The government would then pay R25 800 and would also pay half the amount lost. In this example, government must pay a further R35 000, multiplied by the number of properties of this value being rightsized, plus the Servcon costs and the transfer costs. In ‘in situ rightsizing,’ the government must only pay R25 800 and any incidental costs, so this option was ultimately R133 million cheaper. The funds to be transferred were R25 800, so the 3 956 homes that were worth under R25 000 were up-valued and the remaining 9 000 were down-valued. When the Minister and Provincial MECs were considering "in situ rightsizing" for properties that had defaulted since the Servcon cut-off date of 1997, it was against the background of the many retrenchments that were taking place such as in the Eastern Cape motor industry. Servcon had then looked across the country to come up with a total number in order to be able to let the Minister know if there would be problems in implementing in situ rightsizing and the figure submitted to government was 20 000.

Mr Schneemann asked if Servcon's proposed role dealing with the new Comprehensive Housing Plan had yet to be approved.

Mr Moroka said that it had yet to be approved.

Mr Schneemann asked if the mention of ‘improved management of and disposal of public stock’ was referring to the stock that government had been transferring to individuals in its programme to give title deeds and ownership to people for the houses they were occupying. He asked if the budget transfers to Servcon from the Department were to complete the current mandate of Servcon or were to be used for any future role.

The Chairperson asked what was meant by their participation in "secondary market initiatives".

Mr Moroka said that there was a programme called the discount benefit scheme providing people with transfers, but this was not what Servcon was interested in, even though they had the expertise and skills to assist with that. They were interested in properties where people could pay rent and did not. They aimed to take these properties from redundancy to liquidity.

In the Western Cape, there were 20 000 housing stock properties identified, but they were not managed by the Department of Housing but by the Cape Town Unicity. Servcon had gone to Unicity, which had agreed that Servcon could add value, but there was no funding to do so. A tender had gone out for the management of the entire portfolio, but Servcon was trapped in that they were a housing institution that was owned by the Department. They could either form a consortium that would win the tender because they had the experience, or the Department could change their mandate and task them to administer the process, but that was for the Department to decide.

The 2005/06 budget that was being presented was the budget for finalizing the current activities of Servcon's old mandate. The other section of the presentation was the proposal for their new mandate. There was discussion about integrated housing development for areas where there were to be new developments. In this programme, 12 000 homes would be built bordering both an informal settlement and high end housing. One third would be transferred to beneficiaries through the conventional RDP (reconstruction and development programme), another third would be both RDP and a bank loan and the other third would be solely transferred through a bank loan. Servcon did not participate in the first third, because these would be occupied by beneficiaries of the province. In the second third, people qualified for both RDP and bank loans, and would be registered as a mixture of the two. Servcon's role would be in the identification and profiling of qualified clients. The other third were people who did not qualify for government subsidy but did qualify for a bank loan, so Servcon would identify and profile in this case as well. This concept had nothing to do with cost sharing, but value adding and one entity would be used and charged accordingly. This was what Servcon proposed as their role, because in the public sector, there were people highly trained "to do RDP" or to deal with the banks, but there was nobody that could link the two.

The Chairperson suggested that Servcon could also be involved in identifying land suitable for housing.

Mr Moroka said that he did not want to comment on that because it was still under discussion with the Minister. A task team had produced a report on that, but it was still internal.

Mr Steyn said that in its previous presentation, Servcon had indicated that they had a surplus of houses. They had identified beneficiaries for rightsizing who refused to be rightsized into smaller, more affordable houses, so some of those surplus houses were going to be used for conventional RDP beneficiaries. This lack of co-operation from people that needed to be rightsized meant that the rightsizing process had had to come to a stop. He was unclear about the funds allocated for medium term expenditure in light of this surplus.

Mr Schneemann said that for the next three years, the role of Servcon was to complete its current mandate, so he asked if there was any indication of when Servcon would know if it had a new mandate or if it would cease to exist. Some of the answers around questions on the Comprehensive Housing Plan had not been clear, which may be because Servcon did not have a mandate yet.

Mr Moroka replied that since the "in situ rightsizing" activities, the relationship between Servcon and Thubelisha had changed. Thubelisha no longer had to procure affordable homes as the people who could not be removed were allowed to stay in their original home. Last September, all of the housing institutions were called to a meeting and asked to indicate to the Housing Department the role they wished to play in the Breaking New Ground concept. Servcon and Thubelisha were told not to submit proposals at that stage, but they asked the Department to find avenues to make use of the expertise that existed in their organisations. Servcon had been directed not to do anything at that time, but was given an open door to go to the provinces and inform them of what Servcon could do for them. The Acting Director General was aware that Servcon had done this, but there was a need to change Servcon’s mandate. Servcon was waiting for the Department to consider its proposal to assist with improving public stock management. The Medium Term Expenditure Framework budget was for the finalisation of the Servcon portfolio and had been increased by the Department to ensure that the portfolio be completed by 2007.

The Chairperson said that they looked forward to the Department's decision on the future of Servcon.

Thubelisha Homes submission
Ms Laura Msimang, Communications Manager, and Mr Herman Rawjee, Regional General Manager represented Thubelisha Homes. Ms Msimang said that Thubelisha had developed a short-term plan and a medium term plan. To carry out the short-term plan, they would look in-house to the types of skills and capacity they had internally. They hoped to be fully repositioned and transformed by 1 April 2006, because their original mandate of rightsizing by relocating people to smaller, affordable homes was no longer an option. The business plan was a suggestion, and Thubelisha was happy to hear that government still felt that Thubelisha had a role to play. Cabinet would make the final decision, but Thubelisha did not want to wait until receiving that decision before developing a plan. They saw a role for themselves in the upgrading of informal settlements and the ‘unblocking’ of slow-moving projects. They also planned to set up provincial offices and work closely with communities, provinces and local authorities to provide housing. They had developed a budget for their anticipated outcomes until 2008.

Discussion
Mr Schneemann said that the presentation did not cover the current work of Thubelisha homes. He asked if Thubelisha homes had completed all of its obligations in terms of work that it was doing for Servcon. He asked if the plan had been approved by the Department. Budget figures had been included, but there was no indication of funds being allocated to Thubelisha in years to come.

Ms Dambuza asked how they planned to upgrade informal settlements and how they planned to resuscitate blocked projects. They assumed that one of the reasons these projects were blocked was because of administrative problems and contractors not completing projects, so she asked how they would make changes in those areas and where they would access the funding for those projects. The People’s Housing Process was one of the major projects identified by government, and she asked why Thubelisha was only working with Mpumalanga and not trying to encourage the other provinces to get involved.

Mr Steyn said that most of the presentation covered a possible new mandate for Thubelisha Homes that they had put to the Minister. In the financial, they had a deficit of R33 million for this financial year. In light of this and the fact that their mandate had expired, he asked if they saw themselves as growing in this financial year. He assumed that the opening of the provincial offices was also subject to approval of the new mandate. In terms of the new mandate, he was concerned that there was no clear line of responsibility and that there would be a lack of communication between Thubelisha and the provinces. There was a lack of capacity in some provinces, so Thubelisha's expertise may be better served by being integrated into provinces and metros to increase capacity to help get projects off the ground rather than forming a separate entity and creating a confusion of responsibilities.

Mr Rawjee replied that since Servcon had been involved in "in situ rightsizing", Thubelisha had been assisting local authorities with their waiting list clients. The new mandate had not been approved yet, but the business plan had been sent to the Department. The role of Thubelisha in upgrading informal settlements would be in terms of expertise. Thubelisha could be awarded pieces of land where they could take people and then create corridors by which services in informal settlements can be provided. This was the only way they felt that informal settlements could be upgraded, except in rural areas, where they could afford land next to the informal settlements in order to relocate people there.

He said that Thubelisha was in touch with Mpumalanga, the Eastern Cape and the North West Province regarding blocked projects. There were various issues involved in blocking them, including contractors being paid for work that they had not completed. Thubelisha's strategic operations unblocked these projects and it had been successful thus far in the North West. They had assisted Mpumalanga and the Eastern Cape with various People’s Housing Process (PHP) projects. In Mpumalanga, they had gone into areas where it was very difficult to gain access and had built 700 units in the last financial year.

He pointed out that the deficit of R33 million was not accurate because R55 million was owed to Thubelisha by the provinces. Mpumalanga owed R25 million that would be paid in the new financial year. They were looking for new offices in the Eastern Cape, North West and Western Cape because they felt that it would assist them in working with the local authorities and provinces. In terms of absorption into the provinces, they felt that Thubelisha as an entity and its expertise and staff could be of much assistance to local authorities, but that they played an important role in rural areas where government development had fallen behind.

Ms Msimang said that absorption might be a problem because the local authority was a political structure and that to improve service delivery, there was a need for a non-political organisation.

Ms M Ramakaba-Lesiea asked if Thubelisha Homes had the capacity and manpower to build houses in the Western Cape and how long it would take, especially since they said they would assist with subsidies, which people needed, particularly for PHP houses.

Mr M Sonto (ANC) reminded them that the Minister was at war with informal settlements, so he asked how upgrading and thus sustaining the informal settlements could occur in tandem with the Minister’s efforts to remove them.

Mr T Dodovu (ANC) noted that Servcon had mentioned some discussion with other institutions that wanted to reposition themselves in light of the new approach to housing, so that there was no duplication or overlapping of activities. Thubelisha had indicated that one of their elements for attention would be job creation. He asked why this was, because every institution that was set up by government had job creation as part of its mandate. He asked what job creation meant in this particular instance and asked what Thubelisha's ‘delivery enhancing mechanisms’ would be, as they had only indicated project management and intervention. He also asked how much it cost to sustain Thubelisha.

Ms Msimang said that they did have the capacity to help people in the Western Cape. One of the reasons they were opening an office in the Western Cape was because there was a demand for their services there. They were not in Kwazulu-Natal because there had been no Servcon-Thubelisha agreement in that province. They wanted to set up an office in the Western Cape in order to have help nearby and to assist with subsidy applications and ensuring that houses were available. There had been a Housing Conference in KZN, where it had been indicated that there was a shortage of land. This shortage prompted the Minister to say that they should look at existing housing stock wherever it was to develop social housing. Informal settlements were dangerous and an eyesore, so many felt that they should just be destroyed, but the problem of land availability made this difficult.

Mr Rawjee explained that Thubelisha was in contact with Servcon and he did not think there was any overlap in their activities. They were in constant contact with the Minister and Department about their new mandate and felt that they played an important role in assisting with housing provision. There was a strong case for their mandate being changed. In every area they went into, they tried to ensure that they used local contractors and created local opportunities and jobs.

Mr S Masango (DA) said that Mpumalanga owed them R25 million, but they had only built 700 homes. He asked if this was cost effective for the provinces and how long the projects had been blocked.

The Chairperson said that as Thubelisha did not have all the facts in front of them it would be hard for Thubelisha to answer that question.

Mr Schneemann said that his first question had not been answered and that the answers being given gave the impression that not much was happening, so he asked what Thubelisha was doing currently and when that work would finish. How could they open offices around the country if their mandate had not changed?

Mr Steyn asked if they were looking at a winding-down process if the government turned down the request for a change of mandate. He said that Mpumalanga could not afford the R25 million owed.

Mr Rawjee answered that Mpumalanga had overspent and could not pay Thubelisha. Various projects had been blocked from 1998 onwards.

National Homebuilders Registration Council submission
Mr P Makgatho said that government had asked the NHBRC for input on possible ways to improve the homebuilding industry and to submit plans to government. The NHBRC proposed to approach homebuilding with three separate categories of need: hardcore poor, low-cost housing, and medium-cost housing. The NHBRC had submitted this plan and expected that government will make this part of its strategy for home building.

He noted that South Africa had had a problem with a lack of available land. The hardcore poor had not been able to acquire land. The medium-cost group has also had difficulty in acquiring land because property prices had gone up.

NHBRC has proposed a common housing design and these quality houses would be guaranteed. There would also be integrated community development with clinics and shops. NHBRC has given provincial government actual building plans which meant there will be no extra expenditure. NHBRC has calculated all the quantities for material. For example, a 45 square meter house would require 85 packets of cement and a 50 square meter house would require 88 packets. This has been predetermined so housing builders and developers would not have to ask for extra funds. That has been NHBRC’s broad contribution

The NHBRC’s mission has been to regulate the homebuilding industry. It protected housing consumers by monitoring quality standards in the homebuilding industry. Its new motto for 2005/20006 was "Quality is Priority". Strategic outcomes for the year would be optimal compliance with the requirements of its enabling Act and sustained growth of the warranty reserve to cover structural defects in new homes.

NHBRC would be very hard on homebuilders that have broken the law. It wanted to increase the number of competent homebuilders in the industry. It would eliminate bad builders, regulate insurers and maintain favourable actuarial risk assessment. NHBRC has been advised by an independent actuary that it could expand its benefits. Other sources have advised against this because NHBRC had only been in the market for five years and needed a longer record of accomplishment.

NHBRC has not planned to ask government for any money in the non-subsidy sector. One short-term objective was to establish a customer awareness program. It has been accused of being a "fat cat". Those who have accused NHBRC were not fully aware of its mandate or of international warranty schemes and how they functioned. South Africa used five-year warranty plans while the rest of the world used ten-year plans. NHBRC had not covered additions to houses. There had been a range of things that NHBRC were not doing. NHBRC would investigate those things and make suggestions. NHBRC would link its homebuilders database with the construction industry. The industry has been asking if South Africa needed both the NHBRC and the Construction Industry Development Board (CIDB). NHBRC would create more satellite offices. Every house in the country would be inspected.

Strategic additional budget expenditures included an inspection rate increase at R14 million, satellite offices at R6 million, training at R4.7 million and a subsidy allocation at 41 million.

Discussion
Ms B Dambuza (ANC) asked what the NHBRC’s definition of a "bad builder" was. What was the NHBRC going to do for rural areas and to reach previously disadvantaged people who have not known the seriousness of such matters?

Mr T Dodovo (ANC) said that Members had already been aware of NHBRC’s mandate and mission, and requested specific information about the number of complaints dealing with poorly built houses and how many builders had been deregistered for sub-standard building. How many complaints were from women, black and previously disadvantaged groups? These were important issues.

Mr G Schneemann (ANC) asked if the NHBRC had built full size models of these houses. What was the long-term financial sustainability of the NHBRC?

Mr A Steyn (DA) inquired if consumers would have a choice as to what their homes would look like with the NHBRC’s uniform housing plans. Would the NHBRC actually participate in the building of these houses?

Mr Makgatho answered that NHBRC would not participate in construction. It would provide the designs and be on site to inspect construction. Houses based on their models would be built in the near future and they had been doing a geological assessment of the sites. The Council would not go beyond its mandate and would only monitor the building for quality and to ensure it was built according to the NHBRC specifications. There would be a variety of sizes and designs and the consumer would decide what they could afford.

NHBRC has introduced a surcharge of 3 percent for builders who have continued to defy the law. NHBRC has not covered roof leaks. The Minister has approved NHBRC to cover roof leaks.

A bad homebuilder is one who has cut corners and not built to standards. NHBRC demanded compliance or it would intervene. He admitted that it was true that NHBRC could not do as much in the rural areas. NHBRC had trained 2 700 homebuilders. NHBRC has not deregistered any homebuilders but had suspended some.

Mr Steyn inquired about the status of projects left over from 2004 that the NHBRC could not complete because of compliance issues.

Ms S Ntombela (ANC) asked where the NHBRC satellite offices were located.

Mr Makgatho answered that satellite offices were in the North West, Limpopo, Eastern Cape, and Kwazulu Natal provinces. The Free State did not often use NHBRC’s services.

The Chairperson asked if there were projects still to be completed in the Western Cape.

Mr Makgatho replied that the NHBRC had recalled some projects for non-compliance. Projects had come to NHBRC suddenly in large numbers and it has taken time to deal with the volume.

Mr Dodovo asked for more information about how many projects had been recalled and what training could be offered to homebuilders.

Mr Schneemann asked if there was capacity to inspect all homes. What impact would the recent announcement by banks to give R45 billion in homebuilding subsidies have an NHBRC?

Mr Makgatho answered that for every 500 units, NHBRC had a full-time project inspector. The announcement by the banks was good because if the banks put money into medium cost housing then the NHBRC would benefit.

National Department briefing
Mr M Dlabantu (Finance Officer and Deputy Director-General) reported on its policy framework, policy shifts, . In addition to the Medium Term Economic Framework (MTEF) budget, R50 million has been allocated in 2005/06 for institutional reform, capacity building and accreditation. Additional allocations for the remainder of the MTEF totalled R600 million in 2006/07 and R1.6 billion in 2007/08.

Mr Dlabantu presented the Department’s strategic plan according to the six component programmes:

Programme 1: Administration. MTEF allocation expanded from R83 737 000 in 2005/6 to R97 948 000 in 2007/08 due to planned growth in the staff component

Programme 2: Policy Planning and Research. This core function enabled the department to develop sound national human settlement and housing policies. Budget expansion would be limited over the remainder of the MTEF. Key activities included Housing Land policy, due in December 2005, and Guidelines for Farm Worker Housing in July 2005. The Rural Subsidy programme would be revisited in April 2006. It was expected that the Social Housing Act would be passed in December 2005. Research activities would include studies into upgrading of informal settlements, promotion of alternative technologies, and socio-economic and ethnic integration.

Programme 3: Programme Management. Matters relating to capacity building accounted for 62.2% of the 2005/06 programme budget. A new Procurement Regime would be completed by October 2005 to meet fast-tracking needs, the HIV/AIDS Assistance programme would be implemented from March 2005, and the new Hostels Programme from December 2005.

Programme 4: Housing Sector Performance. The Department was starting to build capacity to monitor the performance of the various Housing Institutions that receive fund transfers. Growth over remainder of MTEF was from R130 606 000 to R211 620 000.

Programme 5: Housing Equity. This programme was occupied with transformation of financial institutions and development of affordable housing finance instruments.

Programme 6: Housing Development Funding. The Integrated Housing and Human Settlement Development Grant (IHHSDG) would replace the previous subsidy grant. The costs thereof dominated the programme budget (99.8%). There was planned 15.6% year on year growth over the MTEF, from R4.8 billion in 2005/06 to R6.9 billion in 2007/08, comprising IHHSDG allocations to provinces. By the end of the MTEF, all provinces with the exception of the Northern Cape, would receive an allocation of R500 million or more by the end of the MTEF. Gauteng would receive the most significant portion, rising to R1 914 887 000 in 2007/08.

Discussion
In response to Ms Kota asking about a previous query on the sudden escalation in spending levels in the Northern Cape, Mr Dlabantu explained that, given the relatively small housing budget in that province, large contracts were liable to run ahead of cash flow projections. The Department had discussed this with Treasury and would continue to engage with the province.

Ms B Dambuza (ANC) remarked on the slow progress in finalising the Farm Worker Housing guidelines.

Mr D Von Broemsen (Chief Director: Policy Planning) responded that the delay was a function of limited capacity and a rapidly changing environment. Farm worker needs were being investigated and an initial report had been received, leading to the establishment of a rural housing task team. Good progress had been made in terms of understanding the needs and possible solutions to a wide diversity of worker needs, depending on the type of farming. Non-commercial farming areas supported by the Department of Land Affairs (DLA) required an alignment of strategy between departments. Models of on-farm and off-farm housing (agri-villages) were being explored to limit the establishment of unsustainable settlements and instead strengthen existing settlements, where there was an infrastructure. The Department intended to complete this part of the process within the next three to four months. Mr Broembsen added that the rural subsidy programme had delivered very few projects to date due to lengthy procedures to achieve consensus where there was communal ownership. There was a need to bring them in line with recent land affairs legislation.

Ms Dambuza (ANC) requested more information on the new Housing Designs and Typologies policy.

Mr Broembsen explained that the intention of the policy was to develop more architecturally interesting designs The Department had established a competition to reward best designs, and bring these to the attention of provinces planning new settlements.

Mr G Schneemann (ANC) asked how the national Department could improve monitoring of provincial spending of allocated grants to mitigate against underspend.

Mr Dlabantu responded that underspend was identified and dealt with early through provincial and project visits and that the Department would increase its monitoring capacity. The National Department of Housing had been on target throughout the past financial year; the final figures would be released on 15 April. One or two provinces had underspent; these were known and the problems were being addressed.

Mr A Steyn (DA) queried whether programme management capacity building was confined to the National Department.

Mr Dlabantu explained that the bulk of the budget was committed to strengthening national capacity to ensure that National Department was capable of making interventions in a consistent way, having learned lessons from blockages in the past, and given the level of sophistication needed by the new programme.

Mr Steyn asked whether there was verification of information received from provinces, given the potential for inaccurate reporting.

Mr Dlabantu agreed that the quality of data varied. The Department had budgeted for building capacity in the area of information management and had allocated additional resources to assist the provinces to process information.

Mr Steyn expressed concern about the lack of progress in the arena of Alternative Building Technologies.

Mr Broembsen explained that a number of alternative technologies had been certified and registered with the CSIR. Key considerations included community preference for building materials, the sustainability and quality of the products, and climatic conditions. Economies of scale required the establishment of large plants to make volume costs reasonable in comparison to traditional technologies. In response to Mr Schneemann suggesting that new technologies be showcased to allow for proper evaluation of methods, Mr Broembsen agreed that this idea was worth consideration.

Ms Z Kota commented that the issue of energy efficient innovations was critical, especially in rural areas.

Mr Broembsen explained that there was a planned revision of housing to incorporate energy efficiency recommendations. Pilots had been conducted in different climatic zones throughout the country.

Mr T Dodovu (ANC) noted that the budget included costs of the fraud and corruption hotline established by Department some years previously, and asked whether it had proved effective. Mr Dlabantu explained that the hotline received calls, some of which indicated instances of corruption, and that cases were being investigated.

Ms Z Kota expressed concern that the pieces of legislation that the Department expects to be passed by the end of the calendar year; were not yet before the Committee. Mr Broembsen affirmed that they said that the Department anticipated a substantial legislative programme this year. He explained that most drafts were awaiting cabinet approval, but had been delayed.

Mr Steyn requested that Committee members receive the Department’s four annual publications on housing delivery. Mr Dlabantu agreed that this was critical to enable the Committee to perform its oversight function of the Department’s performance.

Mr Ahmed Vawda, Acting Director General, summarised that the intention of the budget was to map complex changes, from the adoption of Breaking New Ground policy framework to its translation into new programmes. The budget therefore attempts to bring old business to conclusion and drive new business. There was greater alignment between the Department and the Housing Institutions, particularly in terms of agreement on mandates. The provinces and Housing Institutions were looking at the comprehensive settlement plan and engaging with it more robustly, using the available instruments, which enabled them to attune their responses to the peculiarities of the provinces. Establishment of series of task teams allowed provinces to pursue their priority concerns. This required a more complex monitoring system.

Western Cape Department briefing
Ms Shanaaz Majiet, Acting Head of Department of Local Government and Housing, introduced her team. Mr Mannie Sotomi (Chief Director: Planning and Development) presented that the Department had amalgamated from 1^st April 2005 to promote integrated and sustainable housing delivery. A key challenge was the housing backlog of 320 000 units. With 48 000 immigrants to the province per year, and current delivery capacity of 18 000 units per year. 30 000 additional units would be required per year. The MTEF budget for the province had increased from R475 million in 2005/06 to R671 million in 1007/08

Discussion
Ms Z Kota (ANC) requested a breakdown of the figures in the presented budget statement. Mr Seth Maqetuka (Chief Director: Housing Delivery) assured the Committee that planned expenditure and timeframes would be made available.

Mr A Steyn (DA) asked about delivery capacity and timeframe for dealing with housing backlogs. Mr Maqetuka stated that the province would have to deliver 30 000 units per annum for the next ten years to eliminate the backlog. Mr Steyn asked whether the recent amalgamation of department would detract from its capacity to provide support to municipalities. Ms Majiet responded that a senior management recruitment drive had brought over 20 senior managers into the department and a cadre of middle management would be recruited. While the capacity to support municipalities was not yet in place, the Department’s partnerships complemented capacity gaps. A report on the capacity of municipalities to deliver on housing targets would be received at end of April 2005.

Mr Steyn queried the status of the People’s Housing Process (PHP) in the province. Mr Maqetuka said that there are 42 PHP projects in the province, the majority of which were in the Metro, and that these are popular.

In response to a question from Mr T Dodovu (ANC), Mr Maqetuka clarified that the costs of the N2 Gateway project were not included in the presented budget.

Mr Doduvu questioned the provincial government’s strategy for managing floods and fires. Ms Majiet responded. human settlement issues would have to be resolved before the Western Cape would be able to deal with the implications of changing climate patterns in the province and that hard rainfall would no longer qualify as a natural disaster once this had happened. The Department was starting to build capacity within affected communities to prevent fires. The N2 Gateway project, as a medium-to-long term strategy, was expected to mitigate against the impact of floods and fires. The Provincial Disaster Management Centre had been invloved . Ms Kota proposed that the Department be more proactive in budgeting for disaster relief given the annual incidence of floods and fires in the province.

Asked for clarity on the planned closure of projects older than five years within the Housing Subsidy Scheme (HSS) Clean Up programme, Mr Maqetuka explained that projects inherited from the past were blocked because of insolvent contractors or the escalation of costs of materials. The province was addressing stalled projects and had already unblocked about 20. Closure meant that they had to be reconciled and finalised, to tie up loose ends.

Ms M Ramakaba-Leseia (ANC) asked about women contractors in construction and tendering processes. Mr Sotomi said that there was a dedicated section for capacity support to women in construction. The Department was establishing a partnership with Standard Bank to offer an incubation programme for emerging contractors - especially women - to receive training and mentoring. The skills of youth were being addressed through a partnership with the Umsobomvu Youth Fund and the Construction Sector and Education Authority (SETA) in Paarl, Mossel Bay and Khayelitsha.

Ms Ramakaba-Leseia enquired whether the province had considered energy efficiency needs in terms of housing projects. Mr Sotomi informed the Committee that over 3 000 pilots in Khayelitsha had been fitted with solar panelling.

Ms Kota raised the issue of savings to beneficiaries in the context of the plan to collapse subsidy bands and extend the subsidy programme. Would savings be made a precondition and what mechanisms were being put in place for collection of savings? Mr Maqetuka said it was not a precondition, but that the Department was making contact with established savings groups to give preference to people who had taken initiative to save. It would provide support to these savings groups. The City of Cape Town had established a partnership with ABSA to collect the savings and thus ensure proper financial controls and accountability.

Ms Kota asked the province to return to the Committee in September to monitor expenditure patterns.

Eastern Cape Department briefing
Mr N Mzamo (Chief Director: Housing) told members the Departments of Housing, Local Government and Traditional Affairs restructured into one department from the beginning of April 2005. The Housing Development Branch aimed to construct 25 813 houses in current financial year because they could concentrate on building top structures only, having put the infrastructure in place over previous years. 10 000 houses would be transferred in terms of the Capital Discount Benefit scheme, 35 stalled projects would be unblocked and the rural pilot would be finalised. The plan included creation of 6 250 jobs. Budget for 2005/06 was R581 million.

Discussion
Mr G Schneemann (ANC) asked whether the projections took into account the backlog and how long it would take to reduce the backlog. Mr Mzamo explained that total backlog had been calculated at 864 000 units, but that the Department was concerned that this figure might not be based on reliable data. They will approach a local Housing Institution to verify the figure. The Eastern Cape had been given until 2010 to reduce the housing backlog, but accurate figures and the budget allocation from the National Department would determine how rapidly the province could eliminate the backlog.

Ms B Dambuza (ANC) queried the province’s target of 25% female building contractors when the current standard was 30%. Mr Mzamo noted this discrepancy.

Mr T Dodovu (ANC) asked about what approach the province was following in terms of its human settlement projects in Soweto-on-Sea and Duncan Village and how far the projects were. Mr Mzamo explained that the Soweto-on-Sea settlement was already established, and thus required in-situ upgrading. The Duncan Village project had been launched in February 2005, while consultations on the Soweto on Sea project still needed to take place.

Mr A Steyn (DA) enquired about the declining targets in the light of budget increases each year. Mr Mzamo explained that the budget increase was minimal except for the third year of the MTEF and that the decline was due to pressure on additional funds from the wide variety of housing needs that the Department was trying to meet. In response to a question about the province’s rental stock, Mr Mzamo clarified that the province’s rental properties in Port Elizabeth and East London were being transferred to municipalities for their revenue production, but that he did not have precise figures on the remaining rental units.

Ms Kota reminded Mr Mzamo to submit financials to the Committee.

The meeting was adjourned.