Department of Human Settlements on its Quarter 4 performance; Catalytic Projects progress report

Meeting report

Performance Report: Department of Human Settlements

Mr Neville Chainee, Deputy-Director General, Department of Human Settlements (DHS) gave an overview of the Department’s fourth quarter progress report. He gave a snapshot of the summary and mitigation of under-performing targets. These included information about the management of title deeds projects now being institutionalised, the appointment of project managers to support national intervention measures, the activation of a ministerial task team to intervene and report in all provinces, and the resolution to support the national minister’s intervention actions. On the upgrading of informal settlements, he said that provincial steering committees were now activated in all the provinces and so also was the national upgrading support programme capacity support. The Finance Linked Individual Subsidy Programme (FLISP) was not yet prioritised by the provinces, so the Department would undertake a process to centralise its management and allocation.

The DHS had experienced slow progress in the verification process in respect of qualifying military veterans, but this had now been resolved with the Department of Military Veterans. The minister had appointed a task team to see to this problem. As it stood, all provinces had confirmed the list approved in their areas for allocation and the Department would host a national review session on the programme next month. In this meeting, the Department would be able to take stock of whether all approved beneficiaries were able to be allocated either a house or a stand, as well as a budget for the construction of their unit. The DHS was confident that the Department had the capacity to deliver on its target.

Even though slow performance had been recorded in the social and rental housing sector, progress had improved compared to 2015/2016. The Social Housing Regulatory Authority (SHRA) governance performance improvement plan was now yielding results and the programme and project pipeline had been streamlined with available funding.

With regard to the process of rezoning of land acquired with no development rights, there was a joint coordinating committee on land that was now active, which included representatives from the Departments of Transport, Cooperative Governance and Traditional Affairs (CoGTA), Public Enterprise (DPE), Rural Development and Land Reform (DRDLR) and Public Works (DPW). Agreement had been reached between the DHS, as well as the DPW and the DRDLR, that poor state-owned land, both provincial and municipal, would be transferred to the Housing Development Agency (HDA) to be utilized for human settlements and housing purposes. The Department was pressuring HDA to utilize/develop the land given to it for human settlement purposes, so was hoped that targets reached would change in the next quarter report.

The Department had focused on housing delivery, which would be reflected in the audit, especially in relation to statutory prescripts. The Management Performance Assessment Tool (MPAT) was being implemented, financial statements were now being submitted on time, with reporting to National Treasury on payments within 30 days in terms of the Public Finance Management Act (PFMA), the submission of the estimates of national expenditure database, and an approved human resource plan, which now included the filling of vacancies being implemented.

The Home Loan and Mortgage Disclosure Amendment Bill had now been published for public comment, the Prevention of Illegal Eviction Amendment Bill was in the process of sector consultation, and the draft Human Settlements Development Bank Bill was being finalised. The Department’s communication programme, which profiled the work of the Department and that of the sector, had been implemented.

Regarding the establishment of the Human Settlements Development Bank, the Department said that the reconstitution of the board of the National Housing Finance Corporation (NHFC) had been approved, and this allowed for the improved board to be representative of the Rural Housing Loan Fund (RHLF), the National Urban Reconstruction and Housing Agency (NURCHA) and the NHFC. The Human Settlements Development Bank had been launched by the Minister last Friday, 19 May 2017.

The provinces had been supported with the approved Peoples Housing Process (PHP) policy guidelines to upscale the programme, and a draft White Paper for human settlements was now being finalised. It was imperative to note that 41 849 ha of land was acquired during the quarter, but there had been slow progress in rezoning it. Consultation for the draft backyard rental policy had also taken place and would be submitted to the Minister and when approved, it would be brought to the Committee. The same applied to the Urban Settlements Development Grants (USDG) policy, which was also being finalised and was waiting to be tabled to Cabinet.

Also important was the Social and Rental Housing income bonds and grant quantum, which was now revised for approval and application. The USDG project team was presently doing monitoring at the city of Johannesburg to establish any unspent amounts, so that they would be committed before any roll-over took place. The Department did not want unspent USDG amounts to revert back to the revenue fund, so it was sitting with all the metros to ensure that all unspent money was committed.

It was of concern that between 2014 and now, a preliminary figure of 132 000 had been added to the existing title deeds backlog. This meant that the provinces were now beginning to accumulate a backlog in relation to title deeds. The best performing province in terms of title deeds was the Northern Cape.

On the departmental expenditure report, programme delivery support was well below others at 69.7% performance, compared to administration, human settlements policy, strategy and planning and housing development finance, which had all performed at above 90%.

Discussion

Ms M Nkadimeng (ANC) thanked the Department for the work they were doing to eradicate the title deeds backlog, but felt they could do more because of the seriousness of the problem as people -- even some old people at the point of death -- were still waiting to receive their title deeds. What were the consequence management plans for the underperforming provinces? One could not just sit with folded hands and do nothing.

Ms V Bam-Mugwanya (ANC) also asked the Department to fast track the title deeds process. She asserted that the nation got excited when they heard about banks and money, especially after the launch of the Human Settlements Development Bank last Friday, which had been a success. This excited populace really wanted to know when this bank would be operational. Was it immediately? Would there be another presentation before money could be accessed from the bank? What were the reasons for the underperforming provinces of North West, Gauteng and Limpopo? What made them under-perform in terms of the development grant?

Mr M Malatsi (DA) said his question was limited to the spending trends in the municipalities and metros. In terms of accountability, he noticed that towards the end of the accounting year, there was a spate of spending activities unlike the rest of the year, which was at best sporadic. In the Department’s engagements with them, what more could be done robustly to close the gap in this creative budgeting spending which did not correlate with the targets that were set for the financial year? This was to ensure that one did not have an inconsistent picture whereby the funds rolled over did not match initial performance targets. The same also applied to title deeds. He remembered a presentation a while back where one of the reasons advanced for non-delivery of title deeds was because of the lack of sufficient administrative capacity in the provinces. To say now that task teams were being established, at which level was this -- inclusive of implementing agencies in those provinces? Was this going to be executed from the provinces themselves, or from the national agencies to ensure that there were regular checks to close the gaps quickly discovered? If structures were set, it should be because they were there to drive the required outcomes.

Mr H Mmemezi (ANC) said the Committee felt encouraged when officials owned up to weaknesses such as this Department did. Even though it was aware that the DHS had not met all its targets, it needed to ensure that the DHS rearranged its priorities, because there was little time for delivery to the people, as this Parliament’s tenure would end in 2019. The changes the Department was making were for the better. The informal settlement programme was commendable; the DHS was succeeding against the odds and it was there for all South Africans to see. Other countries wanted to learn from SA, and it was all because of what the Department was doing towards eradicating informal settlements. On military veterans, the Committee was happy the DHS now had a clear number in order for this problem to be closed. He hoped SA could emulate countries like the USA, where the big houses of military veterans were on show to visitors and tourists alike. Military veterans were the persons one should be proud of because they were the people who paved the way for people to be in the offices they occupied. Another area that needed improvement was payments to suppliers within 30 days. The Committee was happy with the human resources (HR) plans to fill the vacancies. The Northern Cape’s achievements were also lauded -- even though they were a small province, one should commend them when they did a good job.

Ms L Mnganga-Gcabashe (ANC) said the Committee wanted to know about the unaudited report for the last quarter of 2015/2016. The under-performance regarding the title deeds was concerning. It was easy to issue title deeds, as there were hardly town planning processes that should inhibit it. The Committee was not in support of metros that did not focus on informal settlements upgrades. The departments must go to the drawing boards to revise their targets, otherwise there would be continued failure in this area. She commended the national Department for assembling a team to deal with these issues.

On the spending by the various provinces in the last quarter, it was reported that the North West under-spent by R200m. The Committee supported the proposal by the Department to request the Treasury to roll over the funds, in line with section 22 of Division of Revenue Act (DORA). North West should be assisted to spend their allocated funds, and wisely too. She was disappointed to hear that Mpumalanga was also under-performing, because they were always doing well, so the Department should focus on interventions to get Mpumalanga back to good performance.  The Department was doing good work in the Eastern Cape and KwaZulu-Natal, but the paying of contractors within 30 days should be a priority, as the Committee had learnt that there were still high value claims unpaid. This situation leads contractors to running out of cash flow and the creation of higher debt, and then the company goes under. This situation cripples the SA economy, which in turn comes back to depend on the government.

On the USDG, the Committee would like to know how many serviced sites had been allocated. The Cape Town and Johannesburg metros were not performing well in that area. The Department should train the various metros to start spending 25% of their allocated funds in each quarter.

The Chairperson thanked the Department for the presentation and also congratulated the Northern Cape for their good performance and meeting their targets. The hope was that they were not going to rest on their laurels in the next financial year. The issue of Gauteng in the report becoming a common denominator and an embodiment of poor performance, was raised. On USDG spending, metros in Gauteng were very prominent in poor spending, with zero performance among mining towns and provinces that had accruals. The province also had a target of 34 000 houses to be built,but had achieved only 23 000. Gauteng was a big contributor to the fact that the national government was unable to reach its targets. It was by far the biggest under-performer, compared to other provinces. This Committee therefore would need to keep a close eye on Gauteng, and also initiate interaction with them. Compared to last year, there had been slight improvements, but they were not out of the woods yet.

The Committee was worried about the delivery support programme that had achieved a 69% performance against target. It was worrying because National Upgrade Support Programme (NUSP) which dealt with the informal settlement upgrades was a part of the programme. If they underperformed, it directly affected the work of this Committee. What systems had being put in place by the Department to engender improved performance? Had there been interactions and concerns raised with Gauteng officials by the DHS? The new subsidy houses seemed to have gone down. There should not be a backlog, so what then were the challenges the Department was facing? On military veterans, when was this issue going to be dealt with once and for all? How was the Department mitigating the 30-day payment challenges faced by provinces like the Eastern Cape?

DHS’s response

Mr Chainee responded that the difficulty was that there were no sufficient reasons from the municipalities and provinces to justify poor performance. The national Department was not fully in a position to answer those questions, but could only deduce some reasons for this state of affairs. The Department could do more on the issue of title deeds. On the consequence management plan, as the Minister had previously indicated, this was a shared frustration. Nobody could say that there was not enough money, but the task team now set up gave the Department an added ability to make certain interventions, particularly in relation to poor performance. The DG had indicated that one of the issues identified was poor contract management in all of the programmes and because of this, in the value chain, when the delivery of a title deed had not happened, one would find the responsible person had left and the Department was left with no one to be held accountable. This was a progressive intervention the DHS wanted to take head on. It was looking at an appropriation that gave the Department the ability to appoint and take over the programme. However, it had to demonstrate that the provinces had being given that opportunity, and the consequence for not performing was a change in relation to DORA, making it a schedule 6 grant, and this was the measure of last resort. The Department was positioning itself in a situation where fundamental monetary and physical change could take place.

The Department had indicated that the launch of the mortgage bond bank was the operational integration of the three entities, which was complete. It was not like the doors were not open rather, but what was outstanding was the legislative underpinning of the bank. What the Department would do was look at the way in which the bank would be recapitalized. This was because the three entities were unable to harmonise their balance sheets, which were separate. As a result, they could not leverage money better. The NHFC funded up to 70% of the Department’s social housing top-up finance, and this allowed it to do its work better, together with the government employment housing scheme.

One could not make excuses for the non-performance of North West, Free State and Gauteng, but one difference in relation to the North West and Mpumalanga was that there was a change of personnel too often. The entire head of department (HOD) and chief director (CD) level was changed. In Mpumalanga, there had been a change of personnel at the CD level, and this had impacted on their performance. In Gauteng, the contributory factor was their inability to maintain a level of stability, as they had had four HOD’s in three years. This did impact on the smooth functioning of the metros and provinces. The Department had had to go back to the city of Johannesburg and point out to the politicians that they did not need to redo the entire process, because there was a strategy and plan in place already. In the Free Sate, there was a substantial amount of non-compliance in relation to minimum norms and standards – it was spending too much, as was Gauteng as well. The Minister had issued a directive that there would be no title deeds issued if the NHFC had not approved a completion certificate.

Mr Pascal Moloi, CEO: HAD, said that in Gauteng, which was the HDA’s first intervention, it had been given R300m for the 2015/16 financial year. This money had been received around November 2015.  The HDA had committed and made sure this money was spent before the budgeting circle ended on 31 March 2016. Last year, around September, the HDA had received an additional R400m, and had up to 31 March 2017 to commit that R400m. It had spent R352m of the R423m that was still available, which translated to 83.2% expenditure just for 2016/17 financial year. In terms of numbers, that gave a target of close to 2 360 units, of which 1 733 (73%) had been delivered. There were still 627 units outstanding, of which 568 were units in progress. The HAD would have an engagement with all the contractors by 1 June.

On creative budgeting and spending, the DHS had said that the CFO and his team were looking into. It was very frustrating, and not only the Committee but also the Minister had asked the DHA to look into it. It sometimes even got involved in operations by asking questions such as why a tender was taking three months. Why was money being shifted from one project to another? On the informal settlements programme, an important thing that occurred was in relation to the Minister’s budget speech about serviced stands. It was a vital shift that would allow the provinces to re-prioritise.

One major positive of the protests had been that the communities were saying that they understood the problems faced by the various departments and organs of state, but they just wanted land and they be would be able to utilize it. The Minister had responded that in the south of Johannesburg, the Department had agreed to look at that model in two pieces of land that had already been identified. On the military veterans, the Department had committed that the 1 421 outstanding units would be completed this financial year.

Mr William Jiyana, Acting Deputy Director General: DHS, said that there was one province the Department had found difficult to get moving in delivering for three years, and that was KZN. He confirmed that the Department had a list of 1 421 military veterans awaiting their houses, which would be dealt with in this financial year.

The DHS had also confirmed that not enough had been done to clear out the outstanding title deeds. One major hurdle was the town planning processes, such as the approvals, the township establishment, and the blockages. The issue was between the provinces and the municipalities, with the municipalities waiting for public comments. The Department’s frustration was over why officials failed to follow up on these issues.  It was not saying that because of the township process delays, the title deed delay was therefore justified.

Another issue that needed the Minister’s intervention was disputes. Analysis showed that 30% of blockages were caused by inter-family and inter-generational disputes. Another case in point was a situation where a subsidy was approved, and between this period the main beneficiary passes on. This situation alone constituted 15% of the current backlog. In this case, an estate had to be opened and then the DHS was stuck with transfer issues. The advisory panel had been asked to focus on intestate succession, registration and title deeds.

The HDA was in the process of assisting the North West province with these issues, but the big challenge there was the lack of stability in the establishment. This province now had a new HOD, but it had also had four different MEC’s in the last three years. These changes hampered the work of the Department.

On cash flow management in the Eastern Cape, the DG and the HOD of that province had agreed that there would be no new projects until the R400m accrual was utilized. The monitoring of expenditure by the metros had seen an improvement. If one looked at what was happening in Ekurhuleni, the Department had deployed people and there had been a marked improvement in quality.

Ms Lucy Masilo, CD: Chief Investment Officer, DHS said that money had been put aside specifically for title deeds. This money had been Gazetted and communicated to the provinces, that it should be used only for the title deeds backlog. With the government employee housing scheme, it was hoped that the numbers would improve in 2017/18 financial year. On metros under-spending, the Department had put in place a ground framework whereby, before the end of the second quarter, metros that did not spend 60% of their transferred funds would have the possibility of future transfers being withheld and reallocated to performing metros. Even for the provinces, at the start of 2017 financial year when the business plans were being developed, the Department had told them that by September, provinces that were not spending must start the process, because the Act allowed the DHS to move funds or reallocate funds from non-performing to performing provinces if no cogent reasons were given. She added that the Minister, in her budget speech, had also indicated that an office of an Ombudsman had being established for Human Settlements. Problems regarding contractors not paid within 30 days could now be referred to this office for adjudication.

The Chairperson thanked the officials for their insightful responses, and said she was pleased about the establishment of the office of the Ombudsman which the Committee had been asking for.

The minutes dated 28 March and 9 May were adopted.

The meeting was adjourned.