Department of Human Settlements on its 2010/2011 Annual Report

Meeting report

Department of Human Settlements (DHS) presentation
Mr Thabane Zulu, DHS Director General, gave an introduction and overview to the Annual Report. The audit’s Matters of Emphasis would receive attention, particularly performance management and reporting. The Outcome Based Performance Management introduced by Cabinet came into place and this meant substantial readjustment in how the Department worked. The Department was “internal” focused and there was a clear need for the Department to take its place as the leader and driver of ensuring sustainable human settlements and improving household quality of life. A Departmental turn-around strategy was commenced to ensure the mandate from “housing to human settlements” was achieved.

Mr Zulu said that a key issue was the DHS monitoring and reporting programme was weak and this would be strengthened in the turn-around. The lack of appropriate programme and project management capacity at the provinces and municipalities was a matter which clearly was reflected in performance and measurement of the outcomes. A number of policy, planning, funding and implementation gaps had been identified including data collection and integrity, value for money, improved performance of the grants and subsidy instruments. Governance and compliance gaps would also be closed, improved and strengthened and this included the entities under the Department’s control.

Mr Neville Chainee, DHS Deputy Director General and and Chief Operations Officer (COO), presented the outcomes for human resources management and gave an outline of personnel and vacancies. Of a total of 863 posts, 696 were filled which left the vacancy rate at 19.4%. The annual staff turnover rate was at 15.4% with the highest number of terminations as a result of contracts expiring. This was followed by an overview of performance rewards, labour relations management and training and development (slide 10 to 12). A total of 20 bursaries and 42 internships were awarded for the year under review.

Mr Chainee went on to discuss legal and governance matters. The Sectional Titles Schemes Management Act 2011 and the Community Schemes Ombud Service Act 2011 was promulgated. for introduction into Parliament. The Department was a party in the Makhaza case where the City of Cape Town was ordered to build and enclose the unenclosed toilets. The Department held a watching brief in the Blue Moonlight case where Johannesburg City’s differentiated approach to the provision of emergency housing measures was declared unconstitutional. The drafting of regulations for the Social Housing Act had commenced.

Mr Chainee spoke about fraud investigations by the Special Investigating Unit: 401 municipal employees were arrested, 334 court cases were finalised and 860 acknowledgements of debt to the value of R8.2 million were signed by municipal employees who committed fraud related to the National Subsidy Programme. With regards to government employees, 936 government officials were arrested, 871 were convicted of offences related to the National Subsidy Programme and 1615 acknowledgements of debt to the value of R21.7 million were signed by civil servants who defrauded the Department and/or provinces. The Department had to date recovered a total of R19 million. This figure was a consolidation of both government and municipal employees.

The DHS research programme for 2010/11 included:
▪ Economic Impact of Government Housing Programme in low cost housing construction
▪ Assessment of the performance of government subsidised housing as an asset
▪ The costs of building an informal dwelling in informal settlements
▪ Understanding beneficiaries’ perceptions on alternative technologies.

The Monitoring and Evaluation Unit had completed the physical verification of project performance in 285 projects in all provinces and monitoring reports were completed. An Impact Assessment Study of the Upgrading of Informal Settlements Programme in Limpopo, Free State and Gauteng provinces was completed. Specific physical monitoring was done and reports were produced on projects in Matatiele, Mount Frere, Mount Ayliff, Flagstaff and Jansenville in the Eastern Cape. The Unit prepared and submitted a progress report on the development of a Human Settlements Index. In addition, the Unit prepared and submitted quarterly Programme of Action (POA) summary reports and a Cabinet Memorandum on DHS the performance for Outcome 8 and updated the POA system accordingly.

Mr Chainee said DHS capacity-building support meant that 281 previously disadvantaged learners were awarded scholarships to study towards human settlements qualifications. Four provinces (Limpopo, Eastern Cape, Western Cape and North West) were supported to effectively implement the South African Cuban Technical Support Programme. Hands-on support was provided to all provinces in developing credible provincial capacity development business plans. Human Settlements specific training programmes were conducted and 998 councillors, officials and community members were reached. 30 000 beneficiaries were reached through Human Settlements consumer education programme sessions and print materials.

Mr Chainee discussed the DHS Priority Projects support in all provinces. Of a total of 21 projects, eight projects had not yet started due to various reasons but most projects were on course (see document for details). The Sanitation Unit had served a total of 13 923 households from a target of 17 418 and had created 275 sustainable jobs.

With regards to intergovernmental relations and stakeholder management, eight municipalities were recommended for accreditation to levels one and two; six metropolitan municipalities and two district municipalities in the Northern Cape. The Municipal Capacity and Compliance Assessment Panel (MCCAP) had been re-established with two key outputs: to assess and determine state of readiness for the priority municipalities to assume level one and two accreditation functions; and to facilitate and manage the post accreditation transitional process. The Department had in place a Technical MinMec as well as a MinMec. The Implementation Forum with a technical component had been established. A joint MinMec with Cooperative Governance and Traditional Affairs (COGTA) was held as well as a joint MinMec with Water Affairs and COGTA. A special Presidential Coordinating Council was convened and this was the first of its kind chaired by the President. Delivery agreements on Outcome 8 were concluded with all provinces as well as with the Ministers of Rural Development and Land Reform, Cooperative Governance, Public Enterprises and Public Works.

Mr Chainee gave a summary of the performance of DHS entities:
▪ National Urban Reconstruction and Housing Agency (NURCHA): The Department authorised a loan of R75 million approved from Cadiz as well as recapitalisation of NURCHA in the amount of R300 million. The contractor training and development programme was completed. The value of loans disbursed under the affordable housing for houses and sites serviced was R84.9 million. The number of houses built and sites serviced under the affordable housing programme were 2 092. A total of 33 projects under the infrastructure and community programme were completed during the period under review.
▪ The Rural Housing Loan Fund (RHLF) was rated as one of the best performing entities in an assessment of government entities. The Department approved the recapitalisation of the Fund to the value of R49 million. The number of loans disbursed was 40 289 against a target of 44 933. The value of the disbursed loans was R133.6 million against a target of R112 million. Total disbursement was R224.4 million against a target of R202 million.
▪ National Housing Finance Corporation (NHFC): The Mortgage Default Insurance Program was approved by the MinMec in November 2010. The Department supported the approval of an agreement with the European Investment Bank for the rand equivalent of €30 million. An agreement with Old Mutual Life Insurance Company and its BEE partners was reached to participate in an affordable housing fund with initial funding of R900 million to finance the development and sale of 25 000 affordable units. The Trust for Urban Housing Finance (TUHF) loan portfolio reached more than R1 billion mark (R1.2 billion). The distressed clients turnaround and collection recovery strategy was successfully implemented.
▪ The Housing Development Agency (HDA) had done much preparation work and this year would see a lot of land being released. Seven implementation protocols had been signed with the provincial governments of Limpopo, Free State, Western Cape, Eastern Cape and the City of Tshwane. In excess of 33 000 hectares of state land was identified for evaluation for release for human settlements development focused on Outcome 8 which required the release 6 250 hectares of public land. A joint coordinating committee on state land release had been established by the Department with the HDA as secretariat to manage the requirements of Output Three of the Delivery Agreement. A policy outlining the criteria for identifying land, and a procedure for the transfer of state-owned land to the Department and/or HDA had been finalised with the relevant state Departments. In Limpopo the HDA had taken transfer of 72 hectares of land in Bela Bela, acquired on behalf of the Limpopo Department of Local Government and Housing, for human settlements development.
▪ The Social Housing Regulatory Authority (SHRA) accredited and managed the Social Housing Regulatory Programme (SHORP) and the Social Housing Investment Programme (SHIP). A total of 18 social housing institutions were accredited by SHORP. A call for a proposal for SHIP II was issued and in summary a total of 11 242 units were applied for with a budget of R1.2 billion. SHIP launched the Emerald Sky, TAU Village and Drommedaris Projects. They also facilitated the delivery of 1 050 social housing units. SHIP implemented the regulatory programme which assisted the SHRA in identifying some policy and legislative challenges with respect to the current programme.
▪ The National Home Builders Registration Council (NHBRC) had targeted to enrol 39 000 non-subsidy homes. Of these, they managed to enrol 32 424 homes. The variance of 6 576 was due to difficult economic times. The number of houses completely inspected was 15 631. The NHBRC also targeted to enrol 94 000 subsidy homes. Of this total, they managed 49 929. This left them with a variance of 44 071 and the total number of houses completely inspected was 57 420.

Mr Nkameko Mbengo, DHS Acting Chief Financial Officer, gave the financial report by providing a breakdown of funds allocated and spent for Programme 1 (Administration), Programme 2 (Housing Policy, Research and Monitoring), Programme 4 (Housing Development Finance) and Programme 5 (Strategic Relations and Governance). A rollover amounting of R82,678 million was approved as follows:
▪ Programme 1, R7,1 million was approved for the renewal of Microsoft licences which were delayed due to outstanding documents from State Information Technology Agency (SITA); the renewal was paid in April 2011 and R5,2 million was paid for the purchasing of a server which was delayed and had to be imported.
▪ Programme 2, R1,2 million for an outstanding payment on a contract to the value of R1,2 million.
▪ Programme 4, R34,9 million for a transfer payment to the SHRA for its establishment;
▪ Programme 5, R7,7 million for outstanding payments for the closure of Thubelisha Homes; business plan and establishment of SHRA; policy development for SHRA and determination of institutional arrangement and establishment of Human Settlements Development Finance Institution; Treasury approved R31,5 million for outstanding sanitation expenditure not approved for in the Department 2010/11 budget.

Mr Mbengo then outlined the virements approved R27 million was required to fund the Special Investigating Unit (SIU) for an audit in the provinces. This audit was an extension for the expanded mandate to the current agreement between the Department and the SIU to provide for the proclamation of 2007. R14,4 million was to fund the appointment of a service provider to develop and facilitate a DHS turnaround strategy. R34 million was to assist Servcon with its outstanding income tax liability and R7,6 million was required to fund the Servcon closure process. From its adjusted allocation, DHS had spent 99% of its budget. Overall the Department had spent R16,091 billion. On the Human Settlements Development Grant (HSDG), three provinces (Free State, Limpopo, and North West) had underspent and amounts were reallocated to other provinces. At 31 March 2010, provinces had unspent funds of R412,878 million. The total annual target for delivery for provinces overall was 213 634 units and at 31 March 2011 they had delivered 185 425 units.

Mr Zulu presented the challenges the Department faced:
• Under and non-reporting by Provinces on the total value chain indicated Outcomes 8 targets were not being reached.
• Lack of a planned and implementable programme and project pipeline indicated that all provinces needed to establish and implement a Project Management Office.
• Failure by provinces to prioritize and budget for the resolution of blocked projects.
• Lack of capacity to verify performance of all projects in the nine Provinces;
• Reliability and verification of reported programme and project performance data;
• Availability of reliable data for indicators to measure Human Settlement Index
• Intergovernmental co-ordination of Capacity Development Programme.

• Improvement in provincial allocation for resources for the implementation of the capacity development interventions including training and consumer education.
• Required improvements in the alignment and accuracy of delivery performance between the Local, Provincial the National Department.
• Delays in reporting timeframe and gaps in the information reported needed to be addressed.
• Lack of availability of capacity and expertise at provinces for project management to ensure the effective utilisation of available resources within current priority programmes and projects
• Alignment of provincial and municipal budget allocations to achieve required national outputs/outcomes.

Mr Zulu proposed interventions to eradicate these challenges. A Departmental turnaround strategy had been approved for implementation and it was awaiting the Department of Public Service and Administration to finalise it. The establishment of a programme management unit had commenced and an Implementation Forum had been established to adhere to Outcome 8 to ensure that other departments also did their part and to ensure proper accountability for agreed outputs and outcomes. A Human Settlements and Basic Services Task Team made up of officials from DHS and COGTA had been established to improve national, provincial and municipal coordination. This unit was up and running and meeting regularly.

Required evaluations were to be conducted on key programmes including informal settlement upgrading and social and rental housing to improve performances in funding, planning and implementation. The development and commissioning of an appropriate Performance Management System to monitor and manage internal and stakeholder performance had commenced with the assistance of SITA (State Information Technology Agency). Improved governance, compliance and performance oversight of provinces, Human Settlement entities and municipalities was a consistent work-in-progress. Improved human resource recruitment, capacity training and development were planned when the revised organisational structure was implemented.

Discussion
Mr H Groenewald (DA, North West) congratulated the Department on receiving an unqualified audit report. He referred to slide 5 and asked why the gaps mentioned were only identified now after ten years and not sooner.

Mr Zulu replied that each year, the Annual Report was reviewed by the Department. This time they did a more in-depth assessment of their mandate and as a result they found more gaps. They had to identify gaps within the Department.

Ms L Mabija (ANC, Limpopo) said that the Annual Report was good and detailed. The progress on intergovernmental relations confirmed that the Department was working as a collective with other Departments such as Water Affairs, Rural Development and Land Reform, Cooperative Governance, and Public Enterprises.

Mr Z Mlenzana (COPE, Eastern Cape) said that he was glad the recovery of funds was occurring. A total of R19 million out of R30 million was recovered and he was grateful for this. He wanted to know whether there was a cash flow projection for the remainder of the funds.

Mr Mbengo replied that the cash flow projection was a general requirement from National Treasury. The Department had to submit it.

Mr O De Beer (COPE, Western Cape) asked how the Department measured value for money dispatched to provinces. Was it only measured by under-expenditure figures?

Mr Zulu replied that value for money was measured in different ways and by different means. This was one issue which formed part of the new Project Management Office plan. The Department would go down to the ground to check the quality of houses built. Under-spending indicated that the planning cycle was not right.

The Chairperson asked what criteria was used to allocate the conditional grants to provinces. He felt that the poorer areas were not receiving enough funds.

Mr Chainee replied that the criteria for the allocation of the conditional grants was reviewed every year in consultation with the provinces and their municipalities. There were still some areas of concern that DHS was looking at when it came to the criteria but it was all inclusive of what was happening in the provinces.

Mr Groenewald (DA, North West) asked why the Department had such a high vacancy rate; 20% was not normal as it indicated that the Department was lacking one fifth of its capacity.

Mr Zulu replied that the vacancy rate of 2010/11 had not included the appointment of certain posts. The Department found that some vacancies were not adding value to their new mandate and strategy. Critical vacancies were being filled upon analysis. However, 20% was still a high percentage and the Department was working on having vacancies reshuffled and filled.

Mr Mlenzana (COPE, Eastern Cape) said that the report was very detailed and would help the Committee with its oversight functions. There were a few capacity challenges, especially in the North West (slide 49 and 50) where the province had only spent 87% of its allocated budget.

Mr De Beer (COPE, Western Cape) said that the Department did not have a uniform way of drawing up beneficiary lists. He suggested that the Department should come with a set criteria for all municipalities to follow. If this was fixed, many problems would be solved.

Mr Chainee replied that the Department was putting together and rolling out a national database which would inform how beneficiary lists were set up. However, there were some challenges as the Department did not want to impose a format which would seen as racial and inequitable. Provinces and municipalities should also try to take charge of this matter.

The Chairperson asked which steps were being taken by the Department to unblock blocked projects.

Mr Zulu replied that the Department was engaging with the different stakeholders to address this problem. The Department did not currently know how exactly to unblock these projects but was consulting with the Technical MinMec to address this issue.

Mr Groenewald asked what exactly was the content of the training programme for councillors.

Mr Johan Wallis, DHS Acting Deputy Director General: Service Delivery, replied that the content of the training programmes had been developed five to six years ago and had been ongoing. Its function was to assist councillors with regards to housing policies, decision-making, and consumer education and especially with regards to handling beneficiaries. Every five years, new councillors was appointed which meant that the Department had to re-educate new councillors. The exact training document could be made available to the Committee if needed.

The meeting was adjourned.