Provincial Housing Expenditure 2005 and Budget 2006: hearings

Meeting report

HOUSING PORTFOLIO COMMITTEE
9 May 2006
PROVINCIAL HOUSING EXPENDITURE 2005 AND BUDGET 2006: HEARINGS

Chairperson: Ms Z Kota (ANC)

Documents handed out:
Eastern Cape Department of Housing presentation
Kwazulu-Natal Department of Housing presentation
Free State Department of Housing presentation: Part 1 & 2
North West Housing Department presentation
Western Cape Housing Department presentation
Mpumalanga Housing Department presentation
Gauteng Department of Housing presentation
Limpopo Housing Department presentation : Part 1, 2 & 3

SUMMARY
The Departments of Housing of the Eastern Cape, Gauteng, KwaZulu-Natal and Free State provinces met with the Committee to provide information on expenditure pertaining to the housing delivery process. Housing planning and research objectives were outlined and housing performance explained. Detail was provided on the housing conditional grant expenditure. A sustainable development programme would be applied to housing. Expenditure anomalies were explained.

Members asked numerous questions including the need for basic infrastructure to complement housing projects, the pace of pilot projects, housing sector plans at the municipal level, the role of inexperienced contractors, the reduction of housing backlogs, the predominance of unoccupied houses, the nature of establishment grants, high rentals in converted hostels, the need for rural housing, youth involvement in training programmes and co-operation between relevant departments to fast-track projects.

In the afternoon session the North West, Limpopo, Western Cape and Mpumalanga provincial housing departments briefed the Committee on their expenditure for the 2004/5 and 2005/6 financial years, their budgets for the current financial year, the mechanisms they put in place to monitor their expenditure, the projects on which they have expended funds over that period and the challenges facing their housing delivery programmes. Members posed questions on the efforts to provide housing for farmworkers who had been evicted from their farms, the extent to which the departments had rolled out their Breaking New Ground projects and the use of the housing beneficiary lists. The Departments were asked to explain the extent to which they utilised the housing support institutions to provide services, and the number of emerging contractors empowered by the housing programmes. The Committee was dissatisfied with the recurring backlogs in housing delivery, and were especially vocal with the Western Cape department. The consequent under-expenditure on housing delivery was unacceptable.

MINUTES
Eastern Cape Department of Housing presentation
Ms Kwalita (Member of Executive Council (MEC)) recounted certain key issues in the housing sector such as high demand, internal delivery processes, municipal involvement, community participation and Integrated Development Plans (IDPs).

Mr Mzamo (Head of Department (HOD)) provided detail on the housing conditional grant expenditure. The imbalance between projections, transfers and expenditure would be corrected. Sustainable human development would be pursued.

Discussion
Ms B Dambuza (ANC) stated that alignment of resources between the provincial Treasury and the various departments had to occur. Challenges in housing delivery should be outlined. Basic infrastructure was needed to drive the housing process. She sought clarity on the pace of pilot projects. Housing sector plans should be available at the municipal level. The high level of vacancies within the department had to be addressed.

Mr G Schneemann (ANC) declared that the continued involvement of inexperienced contractors severely hampered attempts to meet housing demand. He asked whether suitable programmes were in place to enhance contractors’ skills levels. The backlog within the province had to be reduced. The size of the backlog should be elucidated.

Ms N Ngele (ANC) referred to large numbers of unoccupied houses in the province and asked why such units were not being allocated.

Mr Mzamo responded that institutional capacity would be improved and certain key appointments would be made. Twenty project managers would be employed to speed up delivery. Fifteen building inspectors had been permanently employed. Internal capacity-building programmes would be introduced to avoid the use of consultants. A service provider had been appointed to address the backlog and verify available data from municipalities. The backlog consisted of 800 000 units. Housing Chapters were included in IDPs. The Municipal Infrastructure Grant (MIG) would be used to create pilot projects. Provincial Treasury had been approached to provide additional funding to deal with the backlog. Guidelines were in place to govern the use of emerging contractors. A database of trained contractors had been compiled. Housing sector plans had been discussed at recent IDP hearings. The Housing Department would work closely with other departments to achieve results. The sectoral approach would be avoided. Informal settlements would be removed over time.

Mr S Masango (DA) sought clarity on establishment grants and asked whether incomplete projects would be prevented in future. He asked what priorities informed spending patterns and whether a waiting list for houses was available.

The Chairperson noted that housing developments should also occur in deep rural areas and not be confined to urban areas.

Mr Mzamo replied that a provincial waiting list would be established. Inspectors would determine build quality before payment to contractors would take place. Suspect blocked projects would be investigated and prosecutions initiated if required. The housing policy was flexible and larger size structures would be constructed if adequate funds were available. R 570 per beneficiary would be provided in terms of the establishment grant.

Gauteng Department of Housing presentation
Ms Mokonyane (MEC) stated that quality of projects was of prime importance. Beneficiaries should be assured of security of tenure and a sound top structure. A waiting list had been compiled and a profile of housing needs was being formulated. A two-pronged approach would be utilised to eradicate informal settlements. A sustainable development strategy would be applied to the housing programme. All financial resources would be co-ordinated to ensure efficacy.

Adv Moname (HOD) provided detail on the Department priorities and plans to address housing needs. Hostels would be targeted for removal. A performance review had been conducted to evaluate progress. R91 million had been committed for the renewal of Alexandra. Urban regeneration was an important component of the housing strategy. Expenditure was explained relative to budget and targets for the medium term outlined. Environmental challenges that impacted on service delivery were presented.

Discussion
Mr Masango suggested that the repair of Reconstruction and Development Programme (RDP) houses would divert scarce financial resources from development projects and subsequently delay the delivery process. He asked whether corrective measures were in place to improve build quality. Rental prices in converted hostels tended to be high.

Mr Schneemann acknowledged the sound development programmes in Gauteng. The plan to eradicate informal settlements was relevant but urban migration would continue placing further strain on demographics and housing demand.

Mr B Dhlamini (IFP) declared that more funds were needed to address the hostel crisis and he asked whether 2009 was a realistic target to complete the project.

The Chairperson referred to overspending on the conditional grant of R8.8 million and sought reasons.

Ms Mokonyane responded that a quality audit had been conducted to assess effective use of financial resources to build sound structures. The department’s internal capacity to monitor expenditure had been improved. A specific quality assurance unit had been established. Balanced development between urban and rural areas was needed to meet demand caused by influx from rural areas. Converted hostels should have affordable rentals. The R91 million in committed funds were sourced from the provincial housing allocation. Land was being acquired to initiate the project.

Adv Moname stated that defective houses had to be repaired in conjunction with development projects. Life-threatening situations had to be addressed urgently.

The Chairperson concurred that life-threatening structures had to be repaired as a priority.

Adv Moname stated that a consumer education programme had been developed in partnership with Nedbank to improve skills within the housing development process. Local government officials would be instructed on the housing development process. A training model had been developed internally.

Ms Mokonyane stated that the department worked closely with certain housing support institutions and received technical expertise when required. Institutions were assisting to eradicate informal settlements and backyard structures.

KwaZulu-Natal Department of Housing presentation
Mr L Mpambani (Chief Financial Officer (CFO)) provided detail on financial performance in relation to the budget. Background information on key programmes was outlined. Reasons were provided for spending anomalies. The objectives of the housing sector strategy were outlined.

Discussion
Ms Dambuza asked which areas had been targeted for rural housing projects. She referred to unoccupied houses in the Shayamoya area and asked whether the problem was being addressed. Clarity was sought on the farm workers housing programme. The role of women in emerging contractors and tender awards had to be monitored.

Mr Schneemann asked whether interdepartmental budgeting took place to assist in the development process. Joint budgeting would contribute to effective development initiatives.

Mr D Mabena (ANC) referred to the training of 25 contractors and asked whether assistance was provided to them to find employment after course completion.

Mr Mpambani replied that three rural regions had been identified for housing projects in terms of breaking new ground. R113 million was being spent on rural development. Project managers would be used to accelerate the People’s Housing Process (PHP) process. Three farm worker programmes would be approved. More female contractors would be actively recruited. The department intended to cover a wide rural area and two pilot projects had been developed to facilitate further development. The recent 25 trainees had been placed with service providers. Municipalities should also use their own available funds to augment allocations in terms of sanitation provision.

Ms N Ngele (ANC) referred to housing developments in Phoenix characterised by poor planning and inadequate infrastructure.

Mr Masango asked for a progress report on addressing blocked projects and whether municipalities had compiled waiting lists.

Ms M Ramakaba-Lesia (ANC) declared that Black Economic Empowerment (BEE) had to be intensified.

Mr M Sonto (ANC) asked whether a common communication strategy had been formulated to provide comprehensive coverage of the housing programme.

Mr Mpambani replied that a project had been blocked within the Ethekweni municipality due to failure to comply with regulations. A provincial waiting list would be completed and credible data would be accumulated. BEE was difficult to implement due to an insufficient skills base. A Bid Committee had been established to oversee the tender process. Gender equality remained a concern as only one of twenty-five trainees was a woman. Marketing programmes within the department had been formulated and would be implemented in the short term.

The Chairperson noted that over-expenditure by the department had to be monitored by the Committee.

Free State Department of Housing presentation
Mr K Ralikontsane (HOD) provided detail on allocations and actual expenditure. Numbers of completed housing units were recounted and factors impacting on expenditure outlined. Expenditure on the human settlement and redevelopment grant was explained. External challenges and the housing strategy were discussed.

Discussion
Mr D Mabena (ANC) asked how interaction with Technikons would transpire and commented that timeframes for implementation of PHP projects were important.

Mr Schneemann sought a progress report on pilot projects and asked where such initiatives were taking place. Co-operation between relevant departments was vital to achieve progress.

Mr Masango asked why the number of completed units had decreased in the past year. The use of housing allocations for the construction of a road was questionable given high demand for housing. He asked how land acquisition could be fast-tracked to assist development projects.

Mr Sonto sought clarity on reasons for increased underspending and asked why incomplete houses were accepted.

Mr Ralikontsane replied that an agreement with Technikons and the University of the Free State was in place to guide training programmes for department and Local Government officials. Certain People’s Housing Process projects had been fraudulent and police investigations were underway. Pilot projects would be approached in three phases and land acquisition had to be completed before the project could continue. Housing provision would be tackled in a cluster approach. Housing funds had been expended on a road to achieve a holistic human settlement strategy. The road would serve to create economic nodes. A project management component within the department was needed to monitor progress and address blocked projects. Blocked projects contributed to underexpenditure. Municipalities required housing units to drive the delivery process.

Mr Schneemann asked whether the Grasland project had been implemented and if not, what obstacles existed.

Mr Mabena asserted that the youth should not be ignored in training programmes. The People’s Housing Process required a competent monitoring mechanism.

The Chairperson asked whether all PHP projects were under investigation and when positive results could be expected.

Mr M Mafereka (MEC) responded that adequate systems were in place to monitor the PHP projects. 216 housing support centres had been established and the youth would be involved in a specific training programme over the next three years. The Grasland pilot project was bedevilled by political infighting. The department would work with various housing support institutions to achieve progress.

Afternoon session
Limpopo Provincial Department of Housing briefing
Ms Maite Nkoana-Mashabane, MEC for Local Government and Housing, stated that she would be making a few comments on the issues raised by the Committee during the morning session. Mr N Molokomme, Limpopo Deputy Director-General (DDG) for Integrated Sustainable Human Settlement, would then conduct the presentation.

Organisation within the Department
The MEC stated that her predecessors had tried to improve the organisation of the Department, and a business placement re-engineering exercise had now been completed for both the administrative and technical needs of the Department. She informed the Committee that the DDG present at that meeting was in fact a product of that exercise. The lack of proper implementation was due to the fact that the Department had no planning unit, nor did it have a product management unit. This problem has however been resolved. The Department also had nine Cuban engineers who were assisting with skills development, and the terms of service of a few of the Cuban engineers have now been extended for a few years.

Expanded Public Works Programme (EPWP)
The Department was currently running programmes alongside the EPWP to train women to enable them to participate in the EPWP. The best performers on housing delivery in Limpopo were programmes headed by women. The province also had a youth and housing pilot programme doing a pilot, which will be officially launched on 16 June as a theme project of the province.

Breaking New Ground (BNG) initiatives
The Department was conducting a project that dealt with the upgrading of squatter settlements, which involved the building of houses of 50 m². The decision was taken to do away with the hostels for mine workers, and during 2005 the Department concluded an agreement with the National Union of Mineworkers South Africa (NUMSA) which dealt the provision of a living out allowance to unskilled labourers in those mines. The Department approached the mining sector to enter into a partnership to ensure that the mine workers qualified for BNG houses. A total of 2 000 houses will be built through that partnership.

Blocked projects
The Department currently had 91 blocked projects, which were historic. One of the first projects she commissioned was the conducting of a complete audit of the blocked projects, their precise definition and nature, where they were situated and how the Department could unblock them. The fact of the matter was that that remedy would require significant funds. Funds could be sourced from the provincial allocations. The Department could also use a portion of its 2006/7 allocation. The Department was considering committing all its conditional grant funding into that process, but realised that would create problems with accountability for those conditional grant funds.

Housing beneficiary list and the impact of HIV/AIDS
The Department’s decided, in working with communities, that it needed to review its housing beneficiary list because the list needed to prioritise the provision of housing to elderly people. A total of 60% of the Department’s housing projects beneficiaries were in their twenties and were not yet indigent. The Department discovered multitudes of HIV/AIDS orphans within the province. It approached one of its developers for assistance, and donations were given to child headed families. Those developers would also be building ten houses for those recipients in the current financial year. The Department will work with the provincial Social Development department to arrive at a more coherent and integrated plan, as a strategy that involved the totality of government was needed to deal with this problem.

Consumer education
This was a very serious problem because the Department discovered many cases of beneficiaries who rented out houses built by the Department, or just left them vacant. In Messina, a total of 7 out of 10 houses built by the Department were not occupied by the actual beneficiaries. The services of KPMG were enlisted to do an audit of the situation and the aim was to remove those persons from the houses by the first week in June this year.. A programme on consumer education will be launched, and the Department’s client services unit will be addressing the problem created by those persons who wilfully aim to defraud government. .

Housing for farm workers
Limpopo was basically an agri-economy province and as such was faced with the challenge of providing housing for farm workers who were no longer able to reside on the farms because they had lost their jobs. A programme of agri villages was launched, which were built near farms. Such a project would be launched in Ellisrus. She handed over to the DDG to conduct the presentation.

The Chair thanked MEC for her eye opening words.

The DDG very swiftly went through the presentation, in the interests of time. He outlined the funds voted to the Department in 2004/5, the key objectives, programmes and achievements of the Department in the 2004/5 financial year and the Department’s future allocations over the Medium Term Expenditure Framework (MTEF) cycle. The cash flow and expenditure for the 2005’6 financial year was outlined, as well as the spending on conditional grants, some of the key expenditure highlights and challenges for that reporting period and the provincial interventions taken into the housing grant and the human settlement redevelopment programme.

Discussion
Mr S Masango (DA) stated that he was aware of a place in Ellisrus in which Reconstruction and Development (RDP) houses were build right into the bush, with the result that the beneficiaries refused to take occupation. He asked the Department to explain the stes it was taking to ensure those houses were occupied.

The MEC responded that those houses were a typical example of the manner in which housing delivery was provided in the past, when houses were provided without any planning. In the past hosing delivery was developer-driven. The current practice was however to now include this as part of the housing Integrated Development Plan (IDP) process.

Difficulties were experienced with the Polokwane municipality. It wanted to build houses in the city, but the Department disagreed because that did not fall in line with its priorities. The matter was currently being resolved politically.

Mr Masango noted that each year the Department reported underspending, and that the presentation indicated that it was due in part to the fact that monies were not claimed. He sought clarity as to the reasons for underspending in the previous years.

The MEC replied by expressing her concern that the trend of underspending within the Department was becoming a culture of underspending. During the first two months of her term she called for the entrenchment of a business plan process as a matter of urgency. In an effort to resolve the problem with underspending, each unit within the Department must report to the Head of Department on a monthly basis on their budgets. If this was not done and if the results were not satisfactory those officials would not be receiving their bonuses, or they could be removed from the Department. It was unacceptable for to continue preying on the plight of our people.

Ms N Ngele (ANC) stated that the presentation failed to mention anything about backlogs in housing delivery, and asked whether that meant the province’s housing delivery was up to scratch and that the province had no informal settlements.

The MEC responded that the province needed approximately 200 000 houses. As she explained during her address, the province had pilot BNG projects focused on upgrading sqatter settlements. Now that the Department had a fully functional planning unit it was able to detect a mushrooming of shacks brought on by a rush into the mining towns. It was realised that it houses were not built near their places of work then shacks would simply crop up constantly. The Department’s housing delivery plan stipulated that it did not want to suffer the same consequences as Gauteng did at the advent of the Gold Rush, and the province plans to be completely shack-free by 2014. To that end it had dedicated the construction of 33 000 sites per annum.

The Chair requested the Department to provide actual figures on the precise number of women contractors providing houses, as well as the portion of the Department’s budget that was allocated to them.

The MEC replied that it was approximately 30%, but the exact figures would be provided at a later date.

The Chair requested an answer in writing from the MEC on the number of houses that were constructed after the recent floods in the province.

The MEC responded that she had planned to deal with this problem as part of the blocked projects. An audit will be conducted on the number of houses constructed, and the exact information will be provided to the Committee.

The Char stated that there appeared to be no synergy or monitoring at the moment between the various projects conducted by the various government departments. Secondly, clarity was needed on the non compliance by contractors on with regard to payment of claims, as well as the time frames put in place by the Department to resolve that problem.

The MEC replied that the Department had identified that problem and for that reason it established an in-house project management unit. At the next meeting with this Committee the Department would account for all the promises it had made today.

She stated that non-compliance of contractors was due to the fact that the housing secretariat was weak. Those Departmental officials who dealt with the tenders simply discarded those that would not qualify on a technicality, they would not contact the emerging contractor himself and offer to assist in presenting a suitable tender. The Department’s business management unit must instead be proactive and assist emerging contractors.

She agreed that there was little or no synergy, but that was now ensured to ensure accountability.

The DDG added that the Department would be engaging municipalities proactively during the course of its product and feasibility studies. In fact, when he returned to the office he would be conducting interviews for a new Chief Director position responsible for identifying suitable sites for housing development.

Mr Masango asked whether the Department made use of the housing delivery support institutions to process claims.

The MEC responded that all the Department’s contractors were 100% Black Economic Empowerment (BEE) companies. The challenge was not only in ensuring that they were paid. The DDG was currently intervening to ensure that the contractors acquired building equipment near the actual sites of the projects. It was realised that the contractors were being cheated by the suppliers who were providing them with the building material, because they would only invoice them for the material without necessary actually delivering it. The Department had compiled a registry of all building material suppliers within the province, to resolve this problem.

The Chair stated that the MEC mentioned that there were beneficiaries of housing service s who were in their twenties and who were not truly indigent, and that the elderly were prioritised. She explained that that was not because the Department did not want to provide houses to the youth, but rather that it had limited resources within which to provide housing and for that reason the decision was taken to prioritise the elderly. She thanked the Department for the presentation.

Mpumalanga Provincial Department of Housing briefing
Ms Gladys Sibeko, Head of Department, apologised for the absence of the MEC, who was currently engaged in the provincial legislature. She stated that she would be delivering a very brief presentation that focused on the Department’s expenditure, and more detailed information on other areas could be requested. She reported on the Department’s financial performance in the 2004/5 financial year and its financial focus in 2005/6.

She concluded the presentation by agreeing with the Limpopo presentation that the Mpumalanga experience has also been that women builders were the most successful.

Discussion
Ms L Chikunga (ANC) stated that there were problems with housing delivery in her constituency in Mayflower. She asked the Department to explain the steps it was taking to resolve the problem, as well as the timeframes it had put in place for the completion of the projects.

Ms Sibeko replied that it was an area that suffered from a huge scarcity of building materials, especially bricks. The Department was currently engaged in discussions with NAFCOC and the material suppliers within the province, and have identified certain suppliers who would be able to supply the building materials directly to the site. This was one of the campaigns launched by the Department which aimed to securing building materials directly from the supplier. A pilot project was conducted to test the efficiency of this model, and it was discovered that it was a much easier and more efficient option, which the Department would like to pursue.

Mr Masango stated that there were media reports regarding the MEC focusing primarily on incomplete housing projects. He sought clarity as to how many of those had indeed been completed, because he still saw many incomplete foundations.

Ms Sibeko replied that this was mentioned in the presentation. There were many incomplete projects because the problem was that many of the emerging contractors and builders only had sufficient start up capital, and could not follow through and complete the project because they were black-listed. Some of those contracts were terminated and re-issued. The Department had completed 14 000 of the total 17 000 sites it had targeted. It was true that the Department was focusing on completing those projects, because they must be finalised.

Mr Masango asked whether the Department in fact used the national Home Builders Registration Council (NHBRC) to inspect the RDP houses.

Ms Sibeko answered in the affirmative. This was done on selected projects and for those that have enrolled. Some contractors have not been enrolled because they were still busy with old business. Some of the new projects were in and around Delmas, due to the steady supply of acute dolomite, and the Department was enrolling the assistance of the NHBRC. This made it possible to subcontract for services trough that inspection. It was the preferred mode to ensure the Department managed the capacity requirement needed for the inspections.

Mr Masanga expressed concern with the Thimbalethu building foundations that have not been completed, even though six months have already elapsed.

Mr G Schneeman (ANC) noted that the presentation was silent on the province’s BNG projects. He sought an Indication of the progress made and, more importantly, whether there was sound interdepartmental planning to ensure synergy and the successful completion of a project.

Ms Sibeko replied that there were three BNG projects in the province. The Department’s 2005/6 programme focused largely on the upgrading of informal settlements. Research was completed on the matter which yielded very interesting results. Some in informal settlements wanted to build their own houses, and some actually lived in the rural areas and only wanted to rent property while in the city. There were also a number of elderly people who needed RDP housing. The Department was able to quantify the number of foreigners living in the informal settlements, the majority of which were in the country illegally. They indicated that, as the housing situation became more formalised, they were interested in securing rental stock. The research thus indicated that the province needed to provide more rental stock and owner-built housing.

Mr Schneeman stated that this meant that the Department had in fact not yet began construction on its BNG pilot project, and asked when progress would commence.

Ms Sibeko responded that the Department was currently making progress with regard to acquiring the land needed, and it was busy appointing constructors. The Department’s planning procedure was such that construction began in the second quarter of the financial year. The province currently faced a backlog of 260 000 housing units. Its current budget allowed it to address that backlog in 20 years, at the current spending rate.

Mr Mabena suggested that curious names such as Daggaskraal should be changed.

Ms Sibeko responded that the provincial Department of Arts and Culture has a list of town names that will be changed, and informed the Member that Daggaskraal has in fact been changed.

Mr D Mabena (ANC) asked whether the Department was addressing the unacceptable practice in which emerging contractors were ceding or selling the tenders they were awarded to the well-established contractors.

Ms Chikunga asked whether the Department had a plan in place to deal with the RDP houses that were already showing signs of dilapidation.

Ms Sibeko replied that the Department did have a budget to deal with that.

The Chair expressed her dismay at the Department’s spending patterns. She noted that it had only spent 20.6% of it budget, and sought clarity on the reasons.

Secondly, she noted that the province’s human settlement grant expenditure stood at R7 million, yet it had not budgeted for it.

Ms Sibeko responded to the Chair’s two questions by stating that some of the Department’s 2004/5 projects ran over into 2005/6 and were still not completed, and it had requested that those be rolled over. The Department regarded underspending very seriously, and all its officials were deployed to work in community to support the staff on the ground. The Department’s finance directorate was not responsible for the underspending, as it was instead a problem with project management.

North West Provincial Department of Housing briefing
Mr H Kekana, Chief Director for Housing, tendered the formal apology of the MEC, who was on leave due to a death in the family. The DDG was representing the Department at a local government presentation meeting, and could also not attend. He stated that his presentation would stick to the issues raised by Members in the presentations of other provincial departments, in the interests of time. He explained that the Department had spent 100% of its funds in the previous financial year, which was a marked improvement from a R100+ million underspend in previous years. It improved on its housing delivery by providing 14 000 housing units in the 2005/6 financial year, as opposed to 10 000 in the previous accounting period.

Disaster management
The province had been hit hard recently by bad floods, and the Department had committed more funds to address the question of rural housing because it was a rural province. The upgrading of in situ housing and mud houses would take place, and the budget allocation targeted mud houses and informal settlements specifically. The problem however was that municipalities did not always possess the necessary capacity to provide this. An audit of municipality capacity conducted by the South African Local Government Association (SALGA) indicated that there were many problematic municipalities with only 1% of its capacity allocated to its housing manager. Those municipalities were thus battling because they needed capacity.

BNG pilot projects
The province had two pilot projects. The main pilot project was an integrated village in Rustenburg, which included 1000 houses, 800 rental properties and hundreds of BNG houses.

Empowering of emerging contractors
Emerging contractors were a problem. The biggest problems faced by the Department in this regard were from the women contractors. The Department had conducted a special seminar on the very matter to encourage women contractors to apply for tenders. It was clear from that seminar that very few women were involved in housing, as a business.

It also emerged that fronting was a huge problem. One woman at the seminar admitted that she would apply for tenders and would be awarded them, and would then sell them to established contractors while she stayed at home and watched television all day. This was a matter of concern that must be resolved.

Delays in housing delivery
The Department was committed to speeding up housing delivery. The rate of service delivery was hindered by historical problems. One of the primary reasons was that the Department in the past adopted a hand-off approach to housing delivery. This resulted in a lack of management of contractors which in turn led to non-compliance of contractual obligations. It also produced blocked projects and delays in the processing of claims. The Department was currently auditing all these contracts, because some did not even contain a termination clause. The Department had reduced its number of blocked projects from 67 to 52.

The housing waiting list must be revised, because people cannot be kept in abeyance for years.

Role of housing institutions
The Department did work together with Thubelisha, but most of the housing institution did not have the necessary capacity. They only had one project management official, and the Department was working with them to provide capacity.

People’s Housing Process (PHP) projects
This was a good programme, but did not allow the Department to deliver on houses in the necessary amount.

The ratification of houses had been approved, and funding was afforded for it.

Discussion
Mr Mabena sought clarity on the housing roll-out in the Matateng municipality after the floods. He asked whether it was part of the PHP, because it was driven primarily by women in the rural areas.

Mr Kekana replied that a total of 275 houses fell due to that disaster, and to date 196 houses were standing. The contractor was supposed to finish in March 2006 but requested an extension till April 2006. Only a few still had to be built by May 2006 because the beneficiaries still had to be approved, and the approval had since been secured. The Matateng municipality was a pure location, which was now provided with new houses.

Mr Mabena was of the view that the R10 million invested in the Kananaus project was now all in vain.

Mr Kekana responded that information on the matter was still being collected. He stated however that the hostel redevelopment project had already begun, and were being converted into family units. The project was fully operational and stated that the Committee would be invited to the official launch upon its completion.

Mr Schneeman requested a progress report on the Department’s BNG projects, especially the extent to which interdepartmental planning and synergy was ensured. He asked whether all the relevant provincial departments were buying in in ensuring that both the housing units and all the necessary infrastructure was being incorporated.

Mr Kekana agreed that an integrated approach was crucial. The Department had written to all the other relevant departments, but not all have responded. The Rustenberg project was a good example of a fully integrated pilot project. An integrated approach was being ensured through the relevant provincial government cluster, which the MEC chaired.

Ms Masango stated that it appeared that most of the contracts that were cancelled by the Department were those of the emerging contractors, and sought information on the Department’s strategy to provide those contractors with the necessary capacity. He asked whether the Department enjoyed a healthy working relationship with the housing support institutions that were supposed to assist it.

Mr Kekana assured the Committee that the housing support institutions were playing an important role. This problem with a lack of information was discovered through the Department’s housing consumer education projects for developers and contractors, and the Department instructed the housing support institutions to provide that information. The developers and contractors were also encouraged to market themselves more aggressively.

He stated that the Department was trying no to cancel their contract but rather ran their project side by side with the Department’s operations, to create capacity. Unfortunately many of the emerging contractors were blacklisted. They were however penned with the big developers to give them experience in the big projects, and to create capacity.

Mr Masango failed to understand the Department’s rationale for not having a waiting list for houses. He was of the view that an absence of the list meant that people would constantly be approaching the Department for housing. Furthermore, when the Department did provide housing, how would it explain its choice of beneficiaries to the community.

Mr Kekana responded that the Department was discouraged by the beneficiary list because all of its 21 municipalities currently had more than two projects running simultaneously. The ward councillors were requested to submit lists of areas they have identified as needing housing. A subsidy application and approval process still has to be conducted, even if the Department did have a list.

The Chair stated that the Department had a tendency to over expend on its budget. This year was no different, as the Department reported 31.5% over-expenditure. She requested reasons in writing.

Western Cape Provincial Department of Housing briefing
Mr R Rughubar, Chief Director: Housing Delivery, apologised for the absence of the MEC, who was currently involved in the local government MTEC hearings in the southern Cape for the entire week. The Acting Head of Department instructed him to conduct the presentation on that day, which dealt with the Department’s expenditure for the 2004/5, 2005/6 and 2006/7 financial years. He outlined the challenges that faced that Department and its expenditure trends, its financial performance in the 2004/5 and 2005/6 financial years, its budget for the 2006/7 financial year, the mechanisms it put in place to monitor capacity and the constraints that prevented it from spending its full budget.

Discussion
Ms Masango noted that the presentation made no mention of any BNG pilot projects, but only mentioned the N2 gateway project. He saw clarity on the pilot projects.

Mr Rughubar responded that the Department’s pilot projects were split into two categories viz. pilots and lead projects. The Department currently had two pilot projects. The first was a restructuring project launched by the MEC in Plettenberg Bay, in which the Department’s planning and development unit was looking at providing facilities within what was presently the commercial and retail area of the city. The creation of economic facilities in the municipality and other prime commercial areas would benefit that town. The other project was called Blueberry Hill. It and was aimed at the gap market and involved the partnering of employer organisations to look at housing projects that could be funded by the employers.

There was also the Diamond Valley project in Simonstown. The lead project was however the Site C project in Khayelitsha, which was intended to be a transitional housing area while housing development was taking place in other areas. The project needs to be dealt with in terms of the province’s new settlement strategy.

Mm M Ramakaba-Lesiea (ANC) noted that the presentation indicated that R335 million would be allocated to the Cape Town Metro, and sought clarity on the backlogs in housing delivery. The problem was that the Langa and Gugulethu townships were of the oldest, and saw generations of people living out there lives there. Secondly, she stated that the presentation made no mention of the PHP programmes, nor did it provide an update of the situation with the Pelican Park residents.

Mr Rughubar replied that the City of Cape Town metro would itself present to the Department a list of housing projects that it would spend its funds on. The townships would be looked at, as well as the problem with backyard dwellers. The Department was looking at locating some of those housing units on the N2 and in other projects. The intention was to have those informal settlements and backyard dwellers take occupation of those N2 units. PWC had conducted a study to consolidate all the various waiting lists within Cape Town city, and the new housing allocations were done in terms of that new list.

The province currently had over 100 PHPs. Some required the Department to allocate additional management and supervision services, which was effected in conjunction with NGOs like the Development Action Group (DAG). The PHP projects that did not have the necessary capacity were requested to work with institutions like DAG to provide project management skills, so as to better assist the community.

With regard to the Pelican Park residents, the adjacent community requested a portion of the land which was identified for development. This would form a separate development project. The Department was currently engaged in discussions wit the developer to cut off part of the leasing land for that adjacent community.

Mr M Sonto (ANC) stated that he experienced some difficulty in interacting with the presentation. It mentioned backlogs, but he needed clarity on the specific kinds of houses involved. He asked the Department to explain the corrective action it was taking to resolve the backlog.

Mr Rughubar responded that the conditional grants were not adequate to overcome the backlogs in the province’s housing needs. The Department had finalised its human settlement strategy and had entered into partnerships with the banks and employer groups, like Pick n Pay, to encourage them to enter into the housing market to provide funding for their employees who had housing needs. A large migration into the province from the neighbouring provinces was identified, and the MEC was discussing the matter with the MECs of the Eastern Cape and Northern Cape Departments to arrive at an influx management strategy. It was discovered that not all of those migrants necessarily wanted permanent housing, as their actual homes were in those neighbouring provinces. The Department would thus have to consider alternative types of housing for those within the province for only a temporary period.

Mr Sonto sought clarity on the statement in the presentation that the Department planned to spend its entire 2006/7 budget by December 2006.

Mr Rughubar replied that the decision was taken in response to a request from the provincial government that the Department demonstrate its ability to fast-track housing delivery. The Department thus planned to spend its budget by December 2006, and it would then look at other sources of funding for the last three months of the financial year.

Me Sonto asked for progress on the projects to convert hostels to homes, as well as the challenges faced. He expressed dissatisfaction at the fact tha the presentation contained only financials, and did not provide progress indicators.

Mr Rughubar responded that it was initially envisaged that rental stock would be funded on the basis of hostels to homes type development, but the decision has however been take to construct completely new structures in that project. The progress has been slowing down over the last year, and the province must work on speeding it up again.

Mr Schneeman stated that the response confused him. The Plettenberg Bay and Blueberry Hill projects mentioned did not appear to be true BNG projects.

Mr Rughubar responded that that BNG strategy looks not only at providing housing but also improving the environment and creating sustainable communities. The Plettenberg Bay restructuring project involved many areas in order to provide opportunities for the old communities. The Department had not yet devised in-depth plans, but the MEC intended re-planning and restructuring certain areas to ensure sustainability and commercial viability.

Mr Shcneeman asked whether the NHBRC was playing an active role in the province in terms of inspecting the PHP houses.

Mr Rughubar replied that the PHP projects did not require NHBRC registration. The formal projects however definitely required NHRBC approval before final funding could be approved, and that required an NHBRC inspection to take place..

Mr Schneeman sought clarity on the province’s provincial spatial development framework.

Mr Rughubar responded that this was a plan devised by the relevant provincial departments to look at areas that should be concentrated on for development. The nodal points of high impact and with good sustainability would be evaluation. Thus housing and other related development was being evaluated as an integrated approach within the province.

The Chair noted that the Department’s actual expenditure figures reported in the presentation was in fact over-expenditure, which meant that the financial management systems were not efficient.

Mr Rughubar replied that as the Department monitored the expenditure of the municipalities in the city throughout the year, it realised that some would be underspending. It this shifted funding from those under-performing projects to those that were developing fast and which would be completed by the financial year’s end. There were phased approvals for the funding of these services. Basic services were funded and provided first, and further applications for top structure funding were entertained once that first phase was provided. This essentially was the Department’s re-prioritisation process. It was an important took because, rather than rolling over funding, the funds were moved to areas where there was currently capacity to provide housing, while efforts were being made simultaneously to ensure capacity in the projects that were falling behind.

The Chair contended that that amounted to fiscal dumping

Mr Rughubar answered in the negative. All the re-prioritised funds were fully accounted for.

Mr L Modisenyane (ANC) expressed concern at the figures in the presentation on housing delivery, as it suggested that the Department would never be able to overcome its housing backlog because the funding it received was too small. He questioned how R456 million could be used to provide 13 000 units.

Mr Rughubar responded that the figure had increased as the province provided just over 16 000 in current year. As explained earlier, in the Department’s new project of upgrading informal settlements, it would first provide the service level and then provide the top structures later. In future the Department would this provide more service sites first and less formal structures, so that it could provide basic services first and then come back to provide formal structures. In 2006 the Department anticipated building 16 000 new top structures and servicing 18 000 sites.

Ms N Ngele (ANC) expressed her dissatisfaction at the fact that the Department had now repeatedly reported underperformance in housing delivery. She knew of countless cases in Langa in which families were living in people’s backyards. Year after year the Department appeared before the Committee and promised that it would prioritise the matter, yet each year it still reports backlogs. Housing backlogs was a critical issue that must be resolved with the utmost urgency.

Mr Sonto asked the Department to indicate the number of houses that have come out of the service sites visited by the Department, and what kind of houses they were.

Secondly, he asked why the Department had spent the huge amount of R51 million in April this year, whereas in the previous financial year it only spent R6.5 million.

Mr Rughubar replied that in previous years the late approval of the revised subsidy amounts occurred at the beginning of the financial year. A consequence was that developers in the past would withhold their submissions for funding until the new subsidy quota was announced, so that they could qualify for the new amounts.

Furthermore, the Urban Informal Settlement Program (UISP) was announced in 2004 but only come into operation in 2005, and that was the reason for only spending R6 million in April 2005. This year the Department ensured it had improved mechanisms to track expenditure.

The Chair stated that the Department did not have to answer any questions posed on the N2 Gateway project, because the Committee would be receiving a comprehensive and dedicated briefing on the project in the near future.

Mr Mabena expressed concern that there were people living in squalid conditions which could not be allowed to continue, especially at this time of the year. There were many informal settlements in his constituency that had incomplete structures. This had to be resolved.

Mr Rughubar reiterated the phased approach the Department followed in providing houses. The intention was definitely not to leave people living in shacks indefinitely, but rather to have phased development. The Department had also provided temporary relocation areas in Langa to accommodate those affected by the recent fire, as well as to move some families out of the path of construction taking place as part of the N2 Gateway project. They would suffice until the formal housing was provided.

Ms Ramakaba-Lesiea asked the Department to explain what happened to farm workers who were evicted from there farms.

Mr Rughubar replied that the Department was interacting with the municipalities on this matter. In many instances the Department had provided funding for temporary accommodation under the emergency housing programme. But at the same time the national Housing Department was working on a farm worker assistance policy..

Ms Ramakaba-Lesiea expressed her concern at the fact that he spatial development framework was not being rolled out on large enough a scale, despite the fact that discussions had been waging since 1996 on providing similar upliftment in less fortunate areas. It was unacceptable for the Department to play with the minds of the people in this manner, because they have been expecting houses since the 1990’s.

Mr Rughubar responded that he would have to consult his fellow Chief Directors on the history of the process and the date of its origin, as well as for further details on the process..

Mr Modisenyane stated that the presentation indicated that the Department had put in place various monitoring mechanisms, yet the fact of the matter was that the capacity of some municipalities to implement housing programmes was weak. He asked the Department to explain the steps it was taking to strengthen monitoring capacities of municipalities.

Mr Rughubar replied that the Department presently had a team of engineers and officials tasked with monitoring projects who focused purely on the construction of services and stop structures within housing projects. It was discovered that in the greater scope of the municipal environment, there was no comprehensive monitoring and evaluation of all programmes, in addition to housing. The directorate of monitoring and evaluation was being created to track progress and quality, and would report back to both the national and provincial departments. The work done by the engineers would thus be fed into that directorate.

The Chair noted the figures in the presentation that indicated that the Cape Winelands district had spent 0% of its budget for the 2005/6 financial year, and the Breede River/Winelands district had spent 32% of its budget. The low spending rates was worrying, and she asked the Department to explain the steps it was taking to assist such struggling municipalities to spend their budgets.

Mr Rughubar responded, with regard to the Cape Winelands district, there was an amount of R171 000 reflected in the presentation that was set aside for a small project. The District Municipality itself was to have undertaken that work. Some has been done with its own funding, and did not claim those allocated funds from the Department. The Breede River/Winelands municipality did convey to the Department that it was experiencing capacity constraints in terms of housing delivery, and the Department was engaged in discussions with them to fulfil their housing mandate.

The Chair contended that the presentation indicated that both technical and financial support was needed within the province to properly roll out the PHP process, as there was currently no dedicated team supporting the PHP programme within the province. She asked the Department to indicate the number of engineers currently allocation to the PHP programme. This was a crucial matter that needed to be addressed.

Mr Rughubar replied that generally where PHP projects have been undertaken, developers or municipalities would undertake the servicing of the sites, and the community would then become involved in the top structure construction. There was one particular case in which the Department approved top structure subsidies through a PHP organisation, the construction of the houses commenced, but unfortunately they neglected to undertake the basic services construction. The Department was now pushing for those services to be constructed.

With regard to support services for PHP programmes, the Department had created a new sub-directorate for PHP, which consisted of engineers and monitors. In addition quite a few of the Department’s Cuban professionals were working within that sub-directorate. The PHP unit was thus operational only over the last six to nine months, and they were presently building capacity and filling vacancies. It was hoped that all the vacancies would be filled by the end of June 2006, at which time it would become more involved and provide more support to projects.

The Chair stated that the Committee discovered during its oversight visit to George, that there were state constructed houses that were nearly collapsing. The Committee informed the NHBRC and asked them to follow-up on the matter. They in turn conducted a study, the results of which were handed over to the Department. She sought an indication of the progress made in terms of that study. She expressed her disappointment at the absence of the MEC from the meeting because there were very important issues to be discussed, which were now simply multiplying

Mr Rughubar responded that no conclusion had yet been reached on the way forward, and discussions were still being had.

Concluding remarks by Chairperson
The Chair thanked all the presenters for their input, and adjourned the meeting.