Housing Consumer Protection Bill: Department response to submissions; Western Cape negotiating mandate

Meeting report

Department response to submissions
Mr Paul Masemola, National DHS Chief Director: Legal Services, took Members through the document that contained the public comments on the Housing Consumer Protection Bill and the Department’s response to each submission (see document).

The Department responded to public comments about enrolment and who was responsible for enrolling a house; decisions about non-compliance with the Bill; the alternative dispute resolution mechanism provided in clauses 68 and 69 of the Bill, which was argued to be in conflict with Section 34 of the Constitution where a person has a right to take a matter to court. Other concerns included affordable housing; lack of housing in some areas; uninhabitable serviced plots granted to communities that were wet and unsafe to construct structures on; succession and home entitlements when a subsidy house owner dies and how the warranty works in the event there is a defect in the house; types of training and certification by NHRBC; and enrolment red tape. It was suggested that NHBRC should help small contractors with technical requirements to ensure accessibility for them.

The Department said it would provide guidelines on who is responsible for enrolling a home and how to do so.

Further public comments dealt with consequence management for builders for structural defects; the NHBRC database; what the Bill envisaged for old dilapidated house with no building plans; monitoring of exceptional circumstances; the meaning of dwelling unit; inclusion of people with disabilities; title deeds; houses with structural defects seeking government intervention; penalties and how enrolments would be monitored to ensure that no one builds before enrolment.

One public stakeholder accused the NHBRC of 'stealing' contractors' money as the minimal inspection work that NHBRC does can be done by municipal inspectors at a much cheaper rate – it was daylight robbery to pay so much money to NHBRC. The stakeholder suggested that perhaps the money can be repaid after a period has elapsed without any structural defects found in the built houses.

Discussion
Mr P Marran (ANC) said that the stakeholder used strong words and accused NHBRC of stealing money and he asked why DHS did not respond to that comment.

The Chairperson asked how due diligence between the municipality and NHRBC would link up and how NHBRC would ensure that construction companies were covered for inspections.

Ms Natasha Fouche, NHBRC Head of Legal Services, replied that it was difficult to respond to allegations that were not tested or accompanied by evidence. However, when fees are calculated, it is done in terms of the rules and the legislation. The value of the property would determine the value of the enrolment fee.

As for inspectors, the municipalities have their own inspectors as well as the NHRBC. The former inspects in terms of legislation and the NHRBC considers certain standards, technical skills and expertise and inspections at various stages of the construction, over and above the legislation. If there is a deviation from the technical standards, it issues a notice of non-compliance and recommends the resolution of these findings.

The professionalisation of inspectors entailed additional training that they would undergo to get accreditation from the South African construction professional body.

The Chairperson said that further deliberations and case studies need to be undertaken so that everyone can understand how such case studies are assessed.

Mr Marran said that it is the legislation that permits the NHRBC to calculate and charge the fees. Thus, NHRBC ought to indicate that to its clients when they enquire about the fees. It is legislated; not discretionary.

Mr I Seleku (DA) said that there are houses that have been standing for many years that were built by people who were not registered or had qualifications. What are the exceptional cases where one would be allowed to continue building without the papers or registration? There is a need to consider how the Bill accommodates everyone.

Ms C Murray (DA) said that training has come up consistently and many people worry that they will lose out on business because of the requirements. However, what is the skills training pipeline, set targets for training and demand for training? Does the NHRBC believe that it will get there by implementing this Bill?

The Chairperson noted this Bill is about the consumer but it must not shortchange other stakeholders in the sector.

Mr Masemola replied on exceptions that it is not likely to grant exceptions now because they differ from case to case. It is often things that are not foreseen that would qualify as exceptions. There are builders that have been building for many years without proper certification – there is a process of taking them on board to assist them with certification.

Concerns about the extremely high unemployment rate in the country and that NHBRC seems to have no reach in the rural areas and wondered if the Bill would provide these opportunities. The NHRBC indicated it has an online registration service with offices in George and the City of Cape Town and provides training in various areas. It also has contact with local municipalities; thus, it reaches rural communities.

Mr Seleku said that training has been given to up-and-coming contractors for many years and it has not been felt in rural areas. Mostly, in rural areas, people will contract people that are local and know but there is no protection for that person. As much as NHBRC is providing training, it has not reached the rural areas and areas like Caledon.

Mr Marran said that people in rural areas had concerns and wanted to know how long urban entrepreneurs in rural areas must wait for assistance for training and registration. It is not covered in the comments or responses of the Department.

Ms Fouche replied that all the comments relating to training and reach will be attended to as they were noted.

Mr Seleku added that the Bill emphasizes that some of the money the NHRBC receives can be used for development and assisting and training people.

Ms Fouche replied that the NHRBC was ensuring that it was assisting builders to have the test and indicate their preferred languages for questions and communication, amongst other things. The main aim of the Bill is to protect the housing consumer through enforcement and warranty, which will ensure long-term sustainable housing for consumers.

Mr Marran asked about the two-year warranty cover for roof leaks.

Ms Fouche replied that the cover was two years for roof leaks and five years for structural defects.

Mr Marran indicated that the question by Mr Klaasen suggested that there should be a cover for everything for five years, but the Department’s response is focused on only the roof leaks.

Mr Masemola said that one of the requirements for enrolment is approved drawings from the municipality. What is approved, is what is inspected. Anything outside of that is beyond the NHRBC’s control.

Western Cape Government submission
Clause 15
The Chairperson asked for clarity on the contractual terms of the Chief Executive Officer and Chief Financial Officer when appointed.

Mr Masemola replied that this clause speaks to contract issues as both CEO and CFO are appointed by the board. Thus, one must abide by their contractual terms as agreed to in conjunction with the board. The Department did not provide for the termination of a CEO and CFO, but only indicated how they can be appointed. When they get appointed, they enter into a contract with the employer. Thus, termination would flow from their contracts signed with the employer.

Adv Romeo Maasdorp, Western Cape Parliamentary Legal Advisor, said that he has read Bills before where provision is made for termination and the termination terms are not left up to the board or any other person. South Africa comes from a damaging history of public entities being run into the ground through financial mismanagement and incompetence of those charged with governance and operational efficiency. Often there are instances where these highly-paid CEOs and CFOs are released with multi-million rand handshakes. He would be comfortable if provision is made to release people from these positions if they are incompetent, subject themselves to irregular conduct in their performance and fiduciary duties expected from persons occupying such an office.

As much as the Bill proposes that the relationship between the board and CEO or CFO is contractual, thus, legal; however, people do not know the depth of these contracts. The moment we provide for an appointment, we should be equally obliged to provide for release objectively. It is a grave oversight if we do not give confidence to the public to provide for this in the legislation. It is imprudent and short sighted.

The Chairperson agreed with Adv Maasdorp and indicated that Clause 16(4) on their remuneration package should also be considered.

Mr Masemola said that there are operational functions that should avoided being included in the legislation. The CEO is also responsible for appointing other people. The Act should provide for what the board should do and the board through its fiduciary responsibility is to ensure that the organisation is able to move. If there is a failure to have a proper board that would bring about issues. The board can be cognizant of such terms when drafting the contracts.

The Chairperson welcomed the Department's view but the reality in the country is that boards have failed in state-owned entities. The Bill seems silent on the control measures that have to be in place for remuneration. If the Minister is going to do oversight over the appointment of the Rental Tribunal, remuneration is not up to the Minister; the focus is on oversight only.

Ms Murray says that vesting more power in the Minister is centralising power. She asked what role the provincial minister [MEC] plays in consultation with the board as well as local government in consultation with the board. She asked if the board was appointed by the Minister.

Adv Maasdorp explained the Minister appoints the board and that creates a fiduciary relationship between the two. There is a reporting responsibility between the Minister and the board; hence, board remuneration must be done in consultation with the Minister. A CEO or CFO ordinarily reports to a board and their remuneration is not the business of a minister. These two positions are operational in the entity they serve. It is not the business of the Minister to get involved in operational matters.

Ms Fouche indicated that the Department has noted all the submissions that were made and the Committee’s comments.

Adv Maasdorp said that he was satisfied with the Department’s responses. If the Committee is mindful of the purpose of the Bill, then the text of the Bill throughout speaks to forward-looking, consumer-protecting instruments. Where recommendations made by Members and members of the public were rejected by the Department, it is within its prerogative. There are no constitutional reservations about the Bill and it is in the interest of protecting consumers.

Ms Murrary asked what the alternative dispute resolution "agent" meant because the term seems loose and there is no clarity on who can represent people in dispute resolutions.

Adv Maasdorp replied that “agent” was applied in a generic approach, not a specific entity or person.

The Chairperson thanked the Department. The Committee would complete its negotiating mandate and consider the comments made before the final mandate is completed.

Negotiating Mandate on Bill
The Chairperson read out the negotiating mandate which outlined the support for the Bill with the list of submissions attached.

The Bill was supported without any objections.

The meeting was adjourned.