Department of Housing Budget

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Meeting report

HOUSING PORTFOLIO COMMITTEE
13 March 2002
DEPARTMENT BUDGET

Documents handed out
Budget Briefing Powerpoint Presentation
Disestablishment of South African Housing Trust Limited Bill [B3-2000]

Chairperson: Ms Zoliswa Kota

SUMMARY
The Department outlined its budgetary estimation to the Committee noting that there were many challenges facing delivery of housing. Important issues were capacity building, the effect of other Departments on housing delivery and interdepartmental coordination on infrastructure capital grants.

Achievements of the Department included development of capacity at local government level, improvement of coordination at Provincial and Local government levels, reduction of under expenditure, improved access to housing finance and enhanced monitoring processes.

MINUTES
Ms Uhuru Madida - briefing
Ms Madida, acting director general briefed the Committee on the Housing Budget 2002/03 to 2004/05. The aim of the department was to determine, finance, promote, co-ordinate, communicate and monitor policy in respect of housing and human settlement. The vision of the Department was to achieve a nation housed in sustainable human settlements.

Ms Madida said that the Strategic Overview of the Department was written in housing environment since the 1994 white paper and that since then 1.2 million housing opportunities had been created thereby housing more than five million poor people. Department was now focused on quantity, rather than quality in its housing projects. She pointed out that the Department was addressing the housing needs and backlogs by enabling policies and legislative instruments.

Ms Madida contended that the current challenges facing the housing programme  was the effect of changing demographics and resource constraints on housing delivery. She also sited the Grootboom judgement and recent land invasions as some of the problem areas. Other areas of concern were the current shift towards medium density housing as a priority and integrated development.

Department was heavy laden to create high quality housing and proper living environment but at the same time reduce dependency and promote a culture of savings. Ms Madida said that the Department was looking at ways in which it could intervene in areas of natural disasters where it impacts on housing.

Ms Madida informed the Committee that the current policy trends in housing programmes were aimed at promoting new and innovative building technologies. She underlined the fact that house related priorities of the National Government included Urban renewal, Integrated Sustainable Rural Development, the eradication of poverty, transformation and Black Economic Empowerment and engendering a culture of saving.

Department was focusing on medium density housing, social housing initiative and rental housing. The thrust, she said was on environmentally sound housing policy and accommodating the needs of special groups in addition to housing savings scheme.

The Department had lined up various bills which it intended to table in the National Assembly to create the necessary legal framework to meet its housing objectives.

Several programmes had been put in place by the Department and among them was the administrative and policy planning programmes. The former, she said was to provide administrative and management support services to the Department whilst the latter was meant to ensure a sound national housing policy framework

The other programme by the Department was the management policy whose object is to manage national housing programmes. The fourth programme was housing performance whose main goal was to monitor and assess the impact of housing delivery, manage housing information, and support housing institutions.

The fifth programme was communication and this helped to facilitate and promote the free flow of information between the Department and its different stakeholders. She added that the sixth programme under this cluster was that of housing funding whose mandate was to manage the funding of national housing programmes

Ms Madida acknowledged that there were many challenges facing delivery of housing. Some of the pressing issues were namely capacity building, the effect of other Departments on housing delivery and interdepartmental coordination on infrastructure capital grants.

Amid all these challenges, Ms Madida noted that there were significant key success factors which included development of capacity at local government level, improved coordination at Provincial and Local government levels, reduction of under expenditure, improved access to housing finance and a fairly enhancement monitoring processes

Richard Thatcher - briefing
Mr Thatcher, director of housing framework legislation briefed the committee on the background to establishment of the South Africa Housing Trust Limited (SAHTL). The company was established in 1987 to promote and facilitate the provision of affordable shelter and security of tenure to the South Africa's lower income earning communities in a way that would maximise job security.

The business of the company had evolved through various stages since its establishment. He added that on incorporation the company distributed 10,000 ordinary shares with a par value of R1, 00 each to various institutions.

During the 1992/3 financial year, the government made a non-refundable grant of R40 million and the year 1993/4 an interest free loan account of R445 million was converted into share capital in order to improve the debt/equity ratio of the company.

Mr Thatcher said that the delay in, and low profitability of, stood together with the bond repayment boycotts by home owners severely hampered the growth of the company and that therefore, the company had substantial accumulated losses for each year from 1995 to 1998.

During 1999-2000 the company sold its two subsidiaries namely Nu-way and Khayalethu with the approval of the cabinet. He added that the cabinet also agreed that steps be taken to disestablish the company. Mr Thatcher continued to submit that after the sale of the two subsidiaries the liabilities of the company amounted to R571 million, which he said had been transferred to the government.

Mr Thatcher informed the committee that the assets of the company that remain after the sale of the two subsidiaries amount to approximately R70 million, which consist mainly of loans to various housing corporations of the former TBVC States.

The government had directed the company to transfer its assets of approximately R70 million to the National Housing Finance Corporation for a nominal fee of R1.00. The National Treasury therefore became responsible for the servicing and payment of the debt obligation after April 1 2001.

Mr Thatcher said that the Bill seeks to disestablish the company from April 1 2002 ("the effective date"). He explained that the Registrar of Companies must deregister the company in terms of the Companies Act, 1973 (ACT No. 61 of 1973), from the said effective date.

All rights and assets of the company would then vest in the National Housing Finance Corporation - which is wholly owned by the government. All obligations and liabilities would vest in the Government as a national state debt and that the Government becomes bound to meet these obligation and liabilities on the dates stipulated for compliance. The directors of the company would retire as directors as from the effective date.

Mr Thatcher noted that payments made by the Government during the 2001/02 financial year to meet the obligations and liabilities of the company must be direct charges against the National Revenue Fund. Due to the fact that those payments cannot be defrayed from funds appropriated under the Housing Vote in the appropriation Act, 2001 (Act No. 2 of 2001).

He added that in the subsequent years payments made to the Government to meet those obligations and liabilities must be in terms of an appropriation by an Act of Parliament.

Mr Thatcher concluded that all relevant stakeholders and institutions have been adequately consulted regarding this matter. He added that the State Law adviser and the Department are of the opinion that this Bill must be dealt with in accordance with the procedure prescribed by either S 76(1) or (2) of the Constitution since it falls within a functional area listed in schedule 4 to the Constitution, namely "Housing".

Disestablishment of South African Housing Trust Bill [B3-2002]
The preamble
introduces the objects of the Bill.

Clause 1 is the interpretation section of relevant terminologies

Caluse 2 states that as from the effective date the company ceases to exist and that, therefore the Registrar of Companies must deregister the Company in terms of the Companies Act

Clause 3 deals with the rights, assets, obligations and liabilities of the company. It also deals with the issue of retirement of the company directors

Clause 4 deals with the financial implication of the disestablishment to the National Revenue Fund and the fact that the expense in paying off the company's liabilities cannot be defrayed from funds appropriated under the Housing Vote in the Appropriation Act, 2001 (Act No.2 of 2001)

Election of Chairperson
The first business to be transacted was the election of the Chairperson. Mr Schneemann (ANC) proposed the name of Zoliswa Kota (ANC) for the Chair. He was seconded by Ms Mabana (ANC) and since there were no other contenders Ms Kota was by acclamation elected the new Chairperson for the Committee.

Ms Zoliswa thanked members for the vote of confidence and promised to work closely with them to ensure that the Committee's business run smoothly.

Discussion

Mr Douglas (IFP) said that many houses had already been built and that a substantial number of them were defective. People were facing many problems in this regard. He asked if the Department had any plans to address these concerns.

Ms Madida explained that specific funds were allocated for the construction of the houses and that at present there were no funds set aside to address these concerns. She however pointed out that the Department was in the process of educating communities on how to deal with some of these problems. Communities were also encouraged to take the responsibility of maintaining the structures.

Mr Shneemann (ANC) asked if the Department had plans to put up more houses or bigger ones in this financial year.

Ms Madida pointed out that the housing subsidy had not been increased to enable the Department put up bigger houses. She said that the annual incident of inflation also affected the Department's service delivery efforts and that this impacted negatively on the number of units completed. The Department had moved to address the issue of inflation in this year's budget.

Mr Shneemann asked what plans the Department had to address the vexing issue of the quality of the housing units it puts up.

Ms Madida replied that the Department had resolved to move towards the provision of medium density housing which would assure the element of quality for the constructed units.

Mr Shneeman asked what plans the Department had to ensure that there was proper monitoring and overseeing of these construction projects to forestall the rampant incident of poor quality housing.

Ms Madida replied that the Department's policy on monitoring was on an ad hoc basis. She explained that it would be too costly to set up permanent monitoring units for the huge construction activities the Department oversees. She however promised to improve the current monitoring systems

Mr Skhosana (ANC) questioned the policy implication of programme 6, which to him suggested urban bias in housing provision.

Ms Madida replied that the Department was acting under a specific Cabinet instruction to find ways and means of addressing and if possible eradicating informal settlement. The incidence of informal settlement was concentrated in urban centres.

Ms Madida added that rural communities would rather be assisted to construct their own housing units. She noted that often time rural people complain that the Department is setting up townships in their villages. She said that the Department encouraged people to put up their own structures because normally they build bigger houses.

Ms Madida pointed out that whereas the Department was striving to meet the a huge demand for housing in urban centres, it would not overlook the needs of the rural people

Ms Semple (IFP) asked if the Department considered the case of people with special needs like those living with Aids in their housing projects.

Ms Madida said that the Department had commissioned a joint study with the US government on the effect of HIV/AIDS on the housing subsidy and that a report on the same was due to be tabled. She said that once the results of the study had been presented the Department would be able to identify intervention areas in this respect.

Mr Montsitsi (ANC) asked where the responsibility for defective houses was between the Department and the contractor.

Ms Madida replied that the NHBRC normally undertook an assessment of eligible contractors and gave them a certificate of compliance where the laid down specification had to be met. She stated upon the issuance of such a certificate the contractor is absolved from liability.

She added that the important measure was that there was close monitoring of the work in progress to ensure quality was not sacrificed at the altar of expediency. She pointed out that the Department takes up the responsibility of repairs and which will run for five years.

Mr Ntombela asked if the Department factors in its project the question of poverty eradication.

Ms Madida replied in the affirmative. She explained that the Department utilised local labour in its projects. She hastened to clarify that these jobs are not sustainable given that they are tied to the period of the project.

She pointed out that there was another spin-off in the form of skill development since those that are contracted learn and acquire relevant construction skills. She added that the Department does make use of these skills whenever it undertakes repairs to the housing units.

Ms Ntombela (ANC) enquired what the Department was doing to stop the staff exodus in search of greener pastures.

Ms Madida said the Department acknowledged the Constitutional rights of people to move on to other jobs whenever they chose to do so. The Department, she said, had no legal powers to hold on those who wish to leave except of course those it had given bursaries on condition that they work with the Department for a given period of time.

Mr Shneemann enquired how the Department handled the important issue of communication. He suggested that the Department start a housing web-site in order to reach out to people more effectively.

Ms Madida said that the Department normally set up a community liaison unit immediately a project commenced. She said these people were trained from the time of construction to ensure that communication was channelled effectively to the people. She added that the Provincial Departments and ward counsellors were all taken aboard to get involved. She accepted the suggestion of starting a web-site and promised to look into the issue fairly seriously.

Ms Gcina (ANC) asked whether the Department pays attention to gender issues in its programmes.

Ms Madida pointed out that the Department had programmes focusing on women empowerment and that it has prioritised the engagement of women contractors. She added that the Provincial Departments was under an obligation to file regular reports on this item

Mr Shneeman asked if the Department offered any assistance to people who come out to put up their own houses.

Ms Madida said that people's initiative to put up their own houses was one of the most effective policy instruments the Department used to build bigger housing units. She added that the Department actively created this opportunity and that it was therefore one of its main delivery tools

The meeting was adjourned.

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