Department of Human Settlements on its 2013 Annual Report & Evaluation Plan

Meeting report

Opening remarks
The Chairperson said the Committee would receive the Annual Report. Another item on the agenda was the report on evaluations. The Budgetary Review and Recommendations Report (BRRR) had started and would be finalised in the coming week. The information should be available on time so that the BRRR report was not compromised. It was important that entities be present so that they could respond to questions that were pertinent to their area of work immediately.

Department of Human Settlements (DHS) Annual Report: Executive Summary
Mr Thabane Zulu, DHS Director General, said the presentation was an executive summary of the Annual Report, and would focus on five performance areas. The report looked at the performanc, and financial expenditure. Special focus would be given to the targets and most importantly on Outcome 8. DHS was also part to Outcome 12 in terms of the outcomes based approach Government had introduced in 2010. The presentation would focus on communication and outreach undertaken during the year, and finally on the delivery agreements relating to Outcome 8.The human settlements sector was crucial to Government’s focus on job creation. The sector had the potential to contribute meaningfully to job creation and DHS budget was geared towards that objective. Accreditation of municipalities was another programme that the Department looked at with keen interest. The presentation would reflect on its progress, challenges, and achievements. At the end there would be an analysis of the financial performance.

This was a third financial year that DHS had existed as a department of human settlements. That change came with responsibility, in that the mandate of the Department had been elevated in the outcomes based approach. DHS would have to embrace the new mandate of ensuring sustainable households. One of the most important areas of DHS’s work related to the upgrading of informal settlements programme. The view was to indicate the kind of work the Department had done in informal settlements upgrading, and the challenges encountered. There had been progress in putting delivery framework and systems in ensuring the outcomes and the achievements.

He was pleased that the Committee had invited the Chief Executive Officers (CEOs) of housing entities, as they were central to delivery. But the CEOs of the Social Housing Regulatory Authority (SHRA) and the National Housing Finance Corporation (NHFC) could not be present. The Department had been challenged with the Mortgage Default Insurance (MDI). These challenges had been reported to Cabinet and National Treasury. DHS awaited response, but for its part it had done the work. The Department had provided a model which it believed it was viable and submitted it. They waited to hear whether Treasury would agree or not, but the MDI programme was crucial as it was meant to assist the gap market.

The Department had in the financial year revised the Finance Linked Individual Support Programme (FLISP), and had outlined the categories and the income levels that should benefit from the programme. The policy was done, and the Department was busy with implementation in this financial year. Seven provinces had identified programmes that would benefit through FLISP, and all provinces had been instructed to ensure that FLISP was implemented. Various protocols had been signed with provinces and commercial banks. The banks were expected to assist with the challenge of the gap market.

DHS had implemented the Urban Settlement Development Grant (USDG) which was an important aspect of getting spheres of government working together. DHS knew which municipalities were beneficiaries. There had been challenges but the grant had assisted the sector with delivery of basic services. This was the most important component in the delivery of houses. Many projects were successful because of the USDG.

The Department was able to introduce the turnaround strategy. When the massiveness of this mandate was realised, DHS undertook to review the strategy for implementation in order to reposition the Department. A comprehensive process of reviewing the strategy was entered into. That resulted in DHS having to establish a new structure wherein a project management unit (PMU) was initiated. If the unit continued on the path it travelled in this financial year it would yield good results. This structure had also been implemented in line with the turnaround strategy. DHS had committed that during the implementation of the new structure there would be no interference with the programmes. The expenditure was impacted on nevertheless. This was normal considering that, during transition, programmes would be impacted.

DHS identified areas of intervention in relation to its employee development. This was in line with the new strategy. A new degree had been introduced to deal with the requirements of the new mandate. The degree would ensure that the mandate was understood broadly. If DHS wanted to be successful it had to work with other stakeholders and other Government departments, most notable the departments of Cooperative Governance and Traditional Affairs (COGTA), Water Affairs (DWA) and Treasury. Different Ministers had signed memoranda of understanding (MOU) to ensure the strategic areas of collaboration were identified. This would help DHS realise its vision of integrated human settlements. The Minister (Ms Connie September) headed Troika-IMC (inter-ministerial committee) whose intention was to ensure DHS programmes were aligned with other departments.

Overall achievement for the Department was 57%; out of 128 targets, 73 were achieved. Given that the Department implemented a new strategy, adopted a new structure, and went on a new recruitment drive – 57% was a good achievement. But the Department was not at all comfortable with failing to achieve 43% of the targets. A number of the reasons for not achieving these included office accommodation, vacancies, changes within the Special investigating Unit (SIU) and the State Information Technology Agency (SITA). Changes that happened at the SIU impacted on the programmes as the unit was contracted to do investigation work for DHS. The change in the management of SITA impacted on the Department as there were contractual arrangements with SITA to procure Information Technology (IT) services. The IT issues had been consistently raised by the Auditor-General; this related to the challenge with SITA. Some of the key deliverables related to the IT sphere, and this was one of the reasons some targets were not achieved.

There were challenges with the implementation of the Rural Housing Infrastructure Grant (RHIG), but institutional arrangements had since been put in place. One of the key challenges DHS had during the year under review was a clear contextual definition of the sanitation function. In 2010, the President announced that this function ought to be under DHS. Much debate ensued on who should bear the ultimate responsibility of administering the function. The Troika-IMC had clearly defined the challenge; the Ministers clearly understood that sanitation ought to be the responsibility of DHS. They agreed there was no confusion about the function. DHS was putting in legal processes to ensure that all the items that had not happened since the 2009 proclamation, would now happen. The MOU cleared any confusion around this mandate.

The main challenge was the RHIG but that had since been addressed. Six additional providers were brought on board to enhance implementation of the programme when it was realised that the initial contractor was failing. But also the terms of reference associated with the implementation protocols were tweaked. In the current financial year, the responsibility of sanitation had been broadened.

Communication and outreach
Ms Sindisiwe Ngxongo, DHS Chief Operations Officer (COO), outlined the communication and outreach programmes that the Department undertook. These included the Govan Mbeki recognition awards within the sector, an estate agency summit related to the transfer of the Estate Agency Affairs Board (EAAB) from the Department of Trade and Industry (dti) to DHS; a construction sector breakfast to encourage the construction sector to provide input into the mandate of DHS; a sod-turning function in Lephalale. The Cornubia project was launched. DHS launched a human settlements qualification and a chair at the Nelson Mandela Metropolitan University

DHS managed to deliver assessed business plans from provinces to ensure alignment with the mandate. The Peoples Housing Programme (PHPs) had been successfully implemented in five provinces. In responding to the audit outcomes, the Director General had met with the Office of the Auditor-General and an action plan had been developed in response to addressing the recurring audit findings. The Department signed an agreement with Cuba for the technical support that DHS required from the Cubans. The technical skill in the built environment was too little in the country.

There was an understanding with Denmark on a pilot project for energy-efficient low-income housing. This initiative was crucial in saving the poor from the brunt of high electricity bills. The BRICS (Brazil, India, China, and South Africa) summit dialogue on urbanisation was held in Delhi (India). The country hosted an international conference about "Making Slums History". There were visits by Botswana ministry on Land and Housing but the deputy minister visited Namibia. The Department visited Rwanda and the Brooklyn Institute for Social Research in the US.

The Govan Mbeki 2010 award framework was reviewed and approved internally. DHS could not deliver alone on the mandate, and had thus roped in COGTA, Treasury, and Department of Mineral Resources (DMR). The Department would continue to forge stakeholder relations internally and abroad. This was even more necessary due to the scarcity of skills in the country.

Delivery agreement: Outcome 8 performance
Mr Mbulelo Tshangana, DHS PMU Deputy Director General, explained that Government’s outcomes approach had about 18 programmes. Provinces were required to indicate to DHS how they would achieve their yearly targets as reflected in their business plans. Programmes that DHS oversaw and measured progress on were the upgrading of informal settlements, rental housing, and PHP. These programmes would help DHS achieve both the informal settlement upgrades and the provision of the basic services. Few provinces had been performing on this aspect, and as a result most were doing catch up. Although the outcomes approach started in 2009, DHS only started with it in 2010; a year was lost already.

The actual number of households upgraded was 177 598 households, excluding the USDG metros. These figures came from the performance of provincial business plans. This represented 44% of the 2012 targets. If the USDG was included, which was introduced in 2010, the figure went up to 230 000. This was about accounting for what the USDG bought to the metros. This represented 57% of the 400 000 set to be achieved under Output 1. This information was all important because DHS delivered both serviced sites and top structures to various informal settlements. He had been informed that the Committee had quarrels with the figures the previous day, and would gladly explain the figures if and when given time to do so.

Mr Tshangana detailed performance information by province and said the Department of Performance Monitoring and Evaluation (DPME) and DHS were busy with a process to ensure there was no double counting and that the areas funded by the Municipal Infrastructure Grant (MIG) in informal settlements were also included in the reporting. The outcomes based approach was not so much about what DHS could control, but accountability for services in informal settlements. It did not matter who funded the services because the target was a countrywide target and not DHS’s.

The National Upgrading Support Programme (NUSP) was a project-preparation for technical upgrading and it had started very slowly. Upgrading of informal settlements could take up to ten years. For a green-field project that could be reduced to three. The reason this was introduced was to ensure project preparation and early intervention for upgrading of informal settlements. This entailed counting the dwellings within the informal settlements. Some of the informal settlements would never be upgraded due to the geo technical requirement. DHS had performed all the categorisation exercises to help municipalities. This was a tedious and time consuming process. He gave a statistical breakdown of where provinces were with the programme.

Provision of well located rental accommodation was challenging, and the funding arrangement would not allow DHS to reach the target. The Department set itself a target of 80 000 rental units in this term of administration. At the end of March the actual delivery was 33 000 and with the figures from the USDG the figure slightly improved to 35 000. DHS did not have adequate budget to be able to buy the required 80 000. There were too many competing demand for the R28 billion that the sector got. The money was simply not sufficient. DHS would not achieve the five year target, and would probably settle for 70% achievement.

Eight municipalities and one district municipality achieved Level 1 accreditation status, while 8 metros achieved Level 2. Three district municipalities and 8 local municipalities achieved Level 2 accreditation. This was accumulative reporting; 27 municipalities had been assessed and accredited. Provincial departments of COGTA and DHS would provide coordinated capacity expertise and technical support to municipalities. Treasury had deployed special technical assistance to assist metros. Each province had been assigned with professional teams to assist in the facilitation, coordination and conflict resolution pertaining to accreditation and assignment processes. Negotiations happened behind the scenes regarding accrediting the metros because tension resulted from this process. A determination had to be made on issues such as staff deployments, municipal assets, and office spaces. Officials from national, provinces and the municipalities were all involved in the negotiations.

On land for human settlements developments, 69 hectares had been identified. Well located land for extension of existing settlements had been released. DHS had also identified over 10 000 hectares of privately-owned land. The Department was making progress on this target.

The Department had been struggling with Output 4: an improved property market. This was an important target because it reflected the economy of the country. This target was likely not to perform because the economy was not performing. Even if the MDI and FLISP were in place as early as 2009, this particular market would not have performed. There were high levels of debt at household level.

The National Housing Finance Corporation (NHFC) had helped DHS with developing a model for the MDI and it had been presented to Treasury and the Ministers. Treasury indicated it was not happy with certain aspects of the model - DHS was waiting to hear what those were. FLISP policy had been revised and was implemented last year. The instrument started slowly and was not performing, but the good news was that the “Big Four” – Standard Bank, First National Bank, Allied Banks of SA, and Nedbank – had all signed with the NHFC. Over 5 000 applications had been received. Once the MDI processes had concluded with Treasury, DHS would be able to come up with a firm proposal.

Mr Zulu commented that all of this would require money. Ms Borman added, “plenty of money”.

Financial performance
Ms Funani Matlatsi, DHS Chief Finance Officer (CFO), said there were similarities in the financial challenges that were discussed the previous day. DHS had a budget of R25.1 billion. This was supplemented by a rollover funding of about R13.5 million from the previous financial year. Rollovers were a complex phenomenon and, if not spent, could not be approved again. Adjustments and virements had been made due to the funding pressures that DHS had as a result of unfunded mandates. There was a declared or forced saving on the RHIG. This emanated from the material under-spending from the previous financial year on the same programme. An amount of R138 million was cut from the allocation of R400 million for the RHIG.

DHS did not have any funding for Servcon and was in the process of closing down the entity. DHS had money to close down the entity but that had since been surrendered to Treasury. An amount of R36.8 million had been requested from Treasury, as part of closing down. There were outstanding obligations for this entity and the major one was tax. DHS managed to pay contractors who had not been paid by Servcon, and the staff who were still in the employ of the entity. Complete close down would not have been possible had these commitments not be honoured. DHS used the operational budget to settle that debt.

The Department spent R24.5 billion (98%) of the R25.1 billion adjusted figure; there was a variance of over R600 million. The 98% was transfers to the entities, and did not constitute expenditure, but in the books of the national Department that was recorded as expenditure. There was material under-spending on the sanitation programme, the NUSP, office space, and as well as on SITA. The Department recorded a variance of about R207 million that it could not spend in its operational budget, but had since requested that the money be rolled over.

The Human Settlements Development Grant (HSDG) took up well over R15 billion of the budget. The money was transferred to provinces but two provinces – Eastern Cape and Limpopo – could not spend the money by year end. The provinces submitted recovery plans; sadly they could not prove beyond reasonable doubt that they would spend. They had to surrender funds to the amount of R330 million that could not even be used for other commitments as it was already late. The request for rollover was turned down by Treasury; the Department lost that money to the fiscus.

Performance of the USDG was also not pleasing. Metros failed to utilise 6% of the funds, and the Department still awaited a roll over. There were challenges with Buffalo City Metro and Mangaung. In terms of the operational budgets and transfers all of the institutions had received their portions. It was crucial that while DHS transferred money ensured that the money was used for the purposes they were intended for. The R138 million surrendered from RHIG impacted negatively on the financial statements of the Department. And in an attempt to improve performance on that programme DHS appointed six service providers to assist with the work. A rollover was requested from Treasury and R100 million was approved; the money had already been committed in the current financial year.

She took the Committee through the provincial breakdown expenditure on the grants. The issue was not whether funds were being spent, but where were they spent and whether the Department was able to identify the value for money. The non-financial information on the USDG indicated there were a number of targets that the metros had performed. There was an evaluation to establish whether the targets that the metros claimed to have achieved contributed to the upgrading of informal settlements. And whether they were acceptable within the framework of what the USDG should buy. It would be emphasised to metros that the USDG was for infrastructure and upgrading of informal settlements as well as the issue of security of tenure in needy areas. DHS was in discussion with Treasury to determine what exactly the USDG should buy, and for a possible extension of the grant to the municipalities in need, who could not meet their bulk infrastructure obligations from the MIG allocation.

DHS received an unqualified audit opinion with matters of emphasis. Measures had already been put in place to address the matters the Auditor General (AG) had raised. The matters of emphasis were in the main two, with other departmental matters: 1) The contingent liability of the lease agreement that the Department could not honour. In the event that the lease was honourable, means would be made to pay the Department of Public Works (DPW). The Portfolio Committee said the previous day that it would intervene and facilitate a meeting with the DGs from DHS and DPW. If this was not addressed, DHS would find itself in the same situation next year. 2) DHS would have to have monthly monitoring of the RHIG to ensure the non-spending did not recur.

The Department had a challenge with proper controls for safeguarding assets. There was payments made in advance for receipt of goods or services in contravention of Treasury Regulations. Contractors had been paid, and yet by 31 March – time of closing the books – there was no proof that the materials had been received. The financial statements had to be adjusted. DHS agreed that an adjustment be made. Measures had since been put in place to counter this from happening again. Some of the business plans were not approved by 31 March, but DHS had to pay provinces. This contravened the Division of Revenue Act (DORA). DHS should allow itself time to analyse the business plans in order for the DG to sign without challenges at the end of the year.

Discussion
The Chairperson said there appeared to be an omission about the performance of the National Home Builders Regulatory Council (NHBRC). All other institutions had been reported on, but the NHBRC was not in the report. Nothing had been said about Thubelisha as well and not much was known about what was happening with that entity. The AG indicated this entity was still there, despite calls for it to be closed. The issue of the South African Housing Fund should be clarified; information had been outstanding for too long.

Mr S Mokgalapa (DA) requested that the lease of office space by DPW be clarified. What was the amount of the payout; was the R22 million an accumulative figure from 2009 or was it the per annum payment?

Mr Mokgalapa commented that although irregular expenditure was insignificant (R500 000), the R166 000 non-approved trip to New York should be elaborated on. Who undertook the trip, and what corrective measures had been taken against this occurring in the future?

Mr Mokgalapa asked why the FLISP was not popular among South Africans while a number of media campaigns had been undertaken. Those who were supposed to benefit - the intended market for this programme - knew nothing about it. The Department had illustrious campaigns and yet FLISP was not accommodated. He asked why serial offending occurred when it came to internal controls. Out of 100 commitments, over 60% could not be done; chief among those was 'taking action against transgressors'. He asked what the situation was with regards to entities having to prepare monthly financial statements as requested by the AG. The Committee was made aware of legislative constraints where entities were not obliged to produce these. That needed to be addressed.

Ms G Borman (ANC) commented that it was evident from the presentation that there was a correlation between under-spending, missed targets and vacancies. This resulted in non-delivery on the ground.

Ms Borman asked how long it would take DHS to come up with legislation that would allow for a full transfer of the sanitation function. She noted the comments that had been made about sanitation and the Troika-IMC.

Ms Borman asked what the EAAB had been doing in promoting the FLISP programme. Servcon operations had been closed in 2009 and yet the entity kept finding its way into the books of the Department. Would the Department still report on the entity next year?

Ms Borman commented that the action plan developed to address the findings in the AG’s report would adequately address challenges. What action was DHS contemplating against those officials who had been fingered for dereliction of duty by the AG?

Ms J Sosibo (ANC) requested that the Department give the Committee timeframes for addressing vacancies. This had gone on for too long. Were there any plans to put measures in place so all the challenges identified by the AG would be addressed? How much money was paid as advances in contravention of the Treasury regulations?

Ms N Njobe (Cope) commented that there were no findings on wasteful and fruitless expenditure - this was reason enough for the Department to be congratulated. Comments of the AG in the Annual Report were worrisome. This was a long list of findings and made one wonder whether progress with staff development had achieved its objectives. The frequency with which serious neglect of programmes by officials occur, made her wonder if interventions were really empowering to officials. She asked rhetorically if DHS was developing interventions or was it at a point where it had accepted that it was overwhelmed by challenges.

Ms Njobe said Programme 2 – human settlements delivery frameworks – worried her especially as it had under-spent by 31%. Even more worrying was the fact that under-spending occurred because “a bid for the research to be done had to be put on hold”. Those areas of research were crucial; this was the kind of information that was needed to understand what human settlement was about. Given the history of the country and how citizens were settled, research ought to be prioritised and not put on hold. How long should the country wait for the research? The 57% was pathetic. Surely this could be improved upon. DHS should work hard to ensure that it met the requirements that the AG mentioned. However, from the presentation there were things that one could be happy about, especially the alignment of departmental programmes. Ms Njobe said that sanitation function had finally been moved to DHS, and that ought to motivate the Department to improve performance. The Department should indicate the lessons it had gained as a result of the visits to other countries.

Ms N Mnisi (ANC) said DHS owed the Committee a report on how it planned to effectively deal with recurring matters of emphasis on the audit report. She asked if DHS had put in place measures to improve Programme 4 performance. This was a core programme for delivery. When under expenditure happened in Programme 4, service delivery was impacted upon and people on the ground suffered.

Ms Mnisi commented that the Housing Development Agency needed to spread its footprint to all provinces including the Eastern Cape and Mpumalanga. She asked why the HDA did not have offices in Mpumalanga.

Ms P Duncan (DA) commented that an unqualified report with matters of emphasis was not good enough. DHS played a critical role in terms of economic freedom of the people. She asked what really challenged the Department in employing people.

Ms Duncan said the report was silent on title deeds and yet municipalities indicated that this was the competence of the national government. She commented that the Committee should engage DHS on how, why and who decided whether a municipality was a priority.

Ms Duncan commented that the reason targets were continually missed was because local government was not serious about the Integrated Development Plans (IDPs) and the Spatial Development Frameworks (SDFs). She challenged DHS to closely scrutinise the IDPs and SDFs and much land within these could be found for human settlements. Provinces did not look at the SDFs, but these gave an ideal picture of where land was available.

The Chairperson said the report was silent on the use of consultants. If there was a report on this item the Committee would like to see that report. The Committee wanted to put an end to the use of consultants by DHS. It was intolerable that DHS would employ people, and yet opt to use consultants in tasks that were not technical, and could be performed at the office. Consultants should only be used for technical expertise.

The Chairperson sought clarity on the Cuban technical support programme. What kind of resources were used in the relations that the country had with other countries? It would be important for Members to understand this aspect; previously the Committee was told the Cuban engineers were deployed throughout the country, and yet their impact was not seen. In some provinces these engineers resorted to working as clerks because they were not being used optimally. She sought clarity on how DHS addressed Cuban engineering qualifications obtained from a university that was not recognised. More information was required on the Netherlands and the Denmark programmes and agreements.

The Chairperson said she did not want to go into the figures that had been presented. It was agreed the previous day that a date be found to more closely scrutinise these figures. The proclamation by the President was clear that 400 000 households had to be provided with houses. How DHS defined a household; had it had discussions to clarify the matter? The confusion about what a household ought to be need not happen.

The Chairperson commented that the NHFC’s dual role was a challenge and needed to be unpacked. This entity was failing on FLISP. The entity should come to Parliament and explain the budget it got, and the interest it accumulated because the money was not being used. What would the entity do with the interest?

The Chairperson said the MDI was frustrating. The Committee understood that challenges on this programme had been thrashed out and should have been implemented.

The Chairperson said the Committee had resolved to take over and address the matter of office accommodation with DPW. This issue impacted on the performance of DHS and service delivery. A decision would be that both DGs would be called in to Parliament, and if possible the Ministers. But the Committee resolved to resolve the matter this October.

The Chairperson said it was unacceptable to report unachieved targets. DHS should avoid a situation where it promised things it could not achieve. The SITA matter was another that the Committee would take over. The Committee was of the view that all provinces had to use the Housing Subsidy System (HSS) so that delivery could be traceable.

The Chairperson pleaded with DHS sort out all the items that had been underscored by the AG.

The Chairperson complained that the Committee was not getting the pieces of legislation that were meant to be processed. These laws were critical if the DG was to transform entities like the EAAB. DHS should bring the outstanding bills on private rentals. In the absence of policy and legislation, what guided processes on property?

The Chairperson asked why there was no programme for student rentals. She commented that SHRA was not serious about green buildings and water conservation. There had to be change house design.

The Chairperson said the sanitation programme was still too fragmented; nothing was being said about schools and clinics sanitation. Sanitation in schools was in shambles and needed to be attended to urgently. She requested that the DG delegate someone to her office so that a motivation for a change in the scheduling of the function could be done.

The Chairperson voiced concerns as well on the land issue. A glaring contradiction was pointed out the previous day. DHS continued to claim lack of suitable land for human settlements, and yet reported on the 7 000 ha it had acquired. When would DHS build units on the 7000 ha of land that had been found? She noted that there was an improvement, but it was ideal that DHS got to a point where it reported no issues.

Overall responses
Mr Zulu, DHS DG, said some of the questions would be taken away as homework to consider in the coming year. Most of the work contained in the Annual Report was a result of the engagements DHS had with the Committee. Most of the things that were raised during the year had been implemented. He cited the PMU Unit, which he said had been a challenge for DHS. DHS would try by all means possible to implement those items that had been highlighted and report back to the Committee.

DHS had tried to engage the AG on some of the audit findings, but sadly the AG was the final arbiter. Explanations had been provided to the AG, and there were differences as would normally be the case. This was no different on the matter of the lease arrangement. It was explained to the AG that the agreement on the office accommodation was that payment would only be effected upon taking occupation of the building. He emphasised “upon taking occupation”. How could one describe that as irregular? DHS could not afford not to budget for it, because it would not know when it would be ready to occupy. The accommodation was budgeted for but sadly there were legal issues between DPW and the landlord. This impacted on DHS because the money had been budgeted for. He clarified the R22 million was money DHS budgeted for the year under review.

Ms Borman sought clarity on whether the contract specified “paying upon occupation”. Surely, that could be used as evidence.

Mr Mokgalapa asked what would happen with the money that DPW had been paying all the years. Would DHS be required to pay retrospectively?

The Chairperson requested that the matter not be discussed until a meeting with both DGs had taken place. Members should accept the clarification by the DG for now; and reserve the questions for DPW. She would facilitate that meeting with the Chairperson of the Committee on Public Works. If this was left to the officials, it would forever stain DHS.

Mr Zulu said the trip to New York was undertaken by the Minister but was approved only after it had happened. The comment on targets had been noted, but changing the structure was a massive task and affected programmes. Filling of vacancies could not have happened without the structure being approved by Department of Public Service and Administration (DPSA) and Cabinet. DHS staff worked hard to address vacancies and would ensure all funded vacancies were filled.

The theory that in the absence of staff, service delivery would be hampered was correct. Absence of staff would affect performance, as once the skills were not there, targets would be missed. Vacancies were a standing item at all the management meetings.

Mr Zulu said the point on media campaigns to popularise department programmes had been taken. Entities needed to engage the DG if there was a lack of funding for that purpose in any of the entities. Marketing the programmes was a must, especially the FLISP as it was an important instrument to deal with the gap market. He promised to work with the NHFC on their media strategy.

The advance payments were a measure to deal with under-spending within the sanitation programme. This was not money that could not be accounted for. It was merely that payment happened before toilets could be seen on the ground. Verification was done on how the money was used for delivery. While the AG picked up advance payments as an issue, it was allowed by Treasury. If one wanted contractors to move with speed, one ought to assist them with purchasing materials. One had to put systems and delivery mechanisms in place to ensure that advances indeed translated into delivery. The money was used for that purpose, but at the year end, the AG could not see where the money was spent. Subsequent to the audit, evidence was forwarded to the Office of the AG.

The question that had evaded the national Department was why municipalities had been unable to deal with informal settlements. This was a question that DHS had to answer and it would appear that it was the lack of technical capacity. Municipalities did not have technical capacity to deal with informal settlements. DHS engaged Treasury, and it was budgeted for through NUSP. DHS was now assisting with identifying additional municipalities that required technical support to be able to deal with informal settlements.

A measure had been put in place on the recurring issues from the AG. There was a management letter that the AG sent to the fortnightly executive meetings. Every issue raised was looked at, and possible ways to resolve such were devised. Some issues were beyond the control of DHS. One such issue was the IT and SITA; this was an area where DHS lacked expertise. It needed SITA's assistance; hence that agency was contracted and paid money to provide a service. SITA’s continued failure was a challenge.

DHS had decided to find a better way of dealing with IT issues and the Minister had agreed. He had arranged to meet with the new SITA CEO, Mr Freeman Nomvalo and had written letters to him highlighting the challenges that DHS had with SITA. IT was central to operational efficiency at DHS and was particularly important to matters of supply chain. One needed a viable electronic system to account and monitor effectively.

Regarding the MDI, the Minister had resolved to meet with the Finance Minister, Pravin Gordhan. DHS and the NHFC had done everything on the matter to the point of submitting a model. Treasury could contradict the model, but would have to come with an alternative. The assignment had been done even though it remained a "red issue" with the AG on Outcome 8 deliverables. The finalisation of the matter had been outstanding for three years. The outstanding pieces of legislation would be provided to the Committee.

Ms Matlatsi replied DHS had taken Servcon into its hands now. It was difficult to indicate the date for the final closure. There were parcels of land and buildings that ought to be taken into consideration. Some had been sold with the assistance of the HDA. The proceeds from such sales had been used to clear some of the debt with the SA Revenue Service (SARS). DHS had been engaging HDA on the possibility of taking over the land. That land ought to go out of Servcon books in order for it to be liquidated. DHS wished this matter could be finalised by the end of the financial year. There had been funding challenges relating to this. As soon as the land and the buildings were sorted, it would be much easier to close down. It would be ideal if HDA could indicate if DHS should hold on to the assets or sell to HDA.

The Executive team had drawn an action plan with the DG to guard against the findings raised by the AG but, even more so, new issues were cropping up. Some of the issues that had been raised were difficult but some were administrative in nature. SCM had been dealt with; there were strategies in place to deal with payroll certification. DHS was working towards clean audits and placing much emphasis on vacancies so DHS could attain a clean audit in the next financial year.

Mr Tshangana commented that the matter of Cuban expertise had been raised by the Minister as well. Some provinces were not utilising the technical support from Cuban engineers, though other provinces used them and were successful. DHS had been asked to look at why the technical support worked for some provinces and not for others.

The IDPs and SDFs comment was practical and related more to investing in the creation of the human settlements chapters. DHS took a conscious decision to invest in the packaging of upstream activities. Before provinces and municipalities submitted business plans to the DG, officials needed to be satisfied that those business plans were credible. DHS needed to invest in packaging these chapters in the IDPs. DHS had already started the exercise with various provinces. In 2013, DHS undertook a quick exercise to determine the credibility of the business plan. It was found that in some cases the business plans were submitted purely for compliance. They did not represent the true picture. DHS was worried that if the business plan targets were not credible, it meant the sector targets would be compromised as well. There were provinces that performed well like the KZN. It showed in the performance of that province because it performed well both in the financial and non-financial side. The process had started to ensure credible business plans.

With regards to NUSP, a study was done and it was discovered that the majority of informal settlements were in the 49 towns. The majority of the informal settlements were in these towns and the Cabinet approved that there was a need to focus on these; 35 municipalities had already been targeted. The expenditure on the programme would improve. The NUSP budget was also linked to the eradication of the bucket system in informal settlements. There was a relationship between the two programmes – NUSP and sanitation. There was a need to up skill the technical aspect in both programmes. He was confident the NUSP budget would perform satisfactorily next year.

The comment on sanitation being fragmented had been noted as a recommendation. All programmes on sanitation still needed to be rationalised and managed together.

Comments by DHS entities
Mr Mongezi Mnyani, NHBRC CEO, said the entity had resolved all issues with the North West province. The Council had resorted to the inter-governmental relations process. The MEC issued a directive that all projects had to be enrolled with the NHBRC. However, the NHBRC had to issue the non-compliance certificate so that the province took the Council seriously. Subsequently there had been meetings with the MEC and the HOD and the agreement was that all projects, including those undertaken by municipalities, would be enrolled.

NHBRC had submitted its Annual Report and the audit report was good, with few matters of emphasis. The NHBRC was dealing with the audit findings that had been raised; these came from previous years. There was an improvement. There was one issue with Mpumalanga where no inspections were done. He clarified that the issue was with the delivery programme such that the Premier took a decision to deal with the entire department. Last year there were enrolments and there were no inspections. The Council was working in arrears this year. Delivery was starting to happen with geo-tech investigations. Other provinces were doing well and there could not be there any complaints.

The Chairperson issued a directive that all the entities comply with producing monthly financial statements as requested by the AG. This was only meant to benefit the entities themselves, and they should not continue to counter that this was not a legislated requirement.

Mr Jabulani Fakazi, CEO Rural Housing Loan Fund (RHLF), commented that there was movement on the issue of the vouchers, and that he would leave the issue of funding to DHS.

Mr Samson Moraba, CEO NHFC, agreed with the DG’s response regarding the FLISP. The entity would scale the programme up and would provide more detail to the Committee at the next meeting. There was an improvement and with increased publicity NHFC could scale up its activities. A set of recommendations on issues that needed to be tackled had been submitted to DHS.

Mr Taffy Adler, CEO HDA, said the entity could only work when asked. The HDA worked with local authorities and provinces as it depended on their funding until the entity was capitalised. The entity only got asked to find land, and the 7 000 ha should yield about 30 000 housing units. But that could only be done via the local authority of the province. He was shocked that the HDA was not known in the Eastern Cape as it had done work at both metros in the province, as well as in the KSD Municipality. The entity assisted DHS with the Servcon liquidation and would continue to do so. He was not aware of any conflict the entity had with the City of Cape Town.

Mr Bryan Chaplog, CEO EAAB, said the entity had worked well with the NHFC on the FLISP programme. The entity had been to almost all provinces doing awareness programmes. The Northern Cape and Limpopo would be done in November. EAAB had worked on the details of how the FLISP would operate. About 4 000 estate agents had been covered. The agents gave EAAB a lot of important information that was shared with the NHFC. One of the key challenges had been the legacy issue of the banks not wanting the process, but the banks had since signed up with the NHFC. Banks had been delaying the process so they could give personal loans at a higher rate to the consumer. The draft Property Practitioners’ Bill had gone through all of the processes and was in its final stages. The EAAB would soon be submitting the regulatory impact assessment and then the Bill should be ready to come to Parliament.

Mr Zulu said DHS believed in continuous improvement. The Minister had been fully briefed on the work, but sadly she had to attend an urgent matter in Welkom.

The Chairperson reiterated that except for a few things there was improvement. She said oversight should be extended to the municipalities as well.

Human Settlements evaluations: progress report
Dr Zoleka Sokopo, DHS Chief Director: Strategy, said the evaluations were based on the national evaluation policy framework approved by Cabinet in November 2011. The custodian of the policy was the Department of Performance Monitoring and Evaluation. The purpose of the evaluation was to improve performance, and to increase accountability for decision making. DHS conducted evaluations on the outcomes of the human settlements programmes with a view to draw lessons. But also DHS wanted to strengthen development and implementation of its policies and programmes.

The evaluations were designed to test various aspects of DHS performance. They looked at outputs, and on whether the designs were correct. Five programmes that were evaluated for the DHS were: the USDG, Integrated Residential Development Programme (IRDP), Informal Settlements Upgrading Programme (ISUP), and assets creation, and access to the cities. The Committee had been concerned about whether DHS created assets or not, hence the evaluation of assets creation. Two new evaluations had been added, development of housing finance institutions and the social housing programmes.

The evaluation on assets was meta-analytical in that DHS did not want to collect new data. The information was already there, it was just a matter of analysing it. The questions this evaluation sought to address were whether the goal of creating housing opportunities for low income earners had been realised, but also whether there had been an impact. Often, focus had been on the beneficiaries and very little attention was given on whether local government generated revenue from the houses provided.

The second evaluation was whether DHS enabled South Africans access to the cities. This was the kind of access that was provided to services, amenities and economic opportunities through the provision of houses. This was particularly crucial given the history of the country.

The third evaluation was assessing the IRDP, which came about in 2004 when DHS came up with an area-based approach that was not only intended for upgrading informal settlements, but also coming up with different typologies and tenure options. DHS was interested in finding out how the IRDP had changed the cities morphology, and also if spatial reconfiguration issues had been addressed. In the current spatial proposals in the Medium Term Fiscal Framework, DHS proposed that projects be IRDP type projects.

The fourth evaluation was determining how the USDG found itself within the built environment performance plan. It wanted to ascertain if anything had changed about how provinces handled the build environment, and if monitoring had changed. The questions that were investigated were whether there was spatial impact on the urban structure layout; had anything changed? This was a grant that was intended to improve the lives of the poor.

The fifth evaluation was the baseline for what impact had been made on informal settlements upgrading. This was about creating the baseline; informal settlement upgrades had been done before. There was much progress on this front; DHS had a technical group comprised of DPME officials and experts were part of the advisory group.

A service provider had been appointed to do the evaluation on the USDG, and hopefully by the end of November all the data should have been assembled. An evaluation workshop had happened in September. The service provider had been appointed for the asset creation evaluation, and would be briefed in two weeks' time. DHS would still appoint service providers for the other programmes.

The country should be excited about the evaluations. Five of the eight evaluations included as part of the national evaluations approved by Cabinet would be undertaken by DHS. Most importantly, DHS was part of the DPME cross governmental evaluations technical working group. DHS was at the forefront of advising government.

Discussion
Mr Mathale commented that the evaluations ought to be commended. Often people celebrated things without having to go back and check results. This was a good initiative and the Committee should support that.

Mr Mokgalapa agreed and said anything that could enhance delivery, as long as was not a duplicate, was welcomed. He asked about USDG reporting and how Members could assist the metros to understand where to spend the USDG. This process should assist Members and municipalities in achieving the objectives of the grant and ensure there was infrastructure.

Dr Sokopo replied the evaluation would indicate to DHS the challenges that the USDG experienced. It would inform DHS whether the challenges like under expenditure resulted from poor planning or implementation capacity challenges. It would look at whether officials understood policy as to where the grant should be spent. All these questions would be answered in the evaluation. Then a decision would be taken as to whether to review the current policy.

Mr Matshoba asked how much would be paid to the appointed service providers.

Dr Sokopo replied the money differed; the service provider on the USDG was paid just over a million rand and for assets creation was R490 000. The option was given to people with technical know how. And one of the service providers was the University of the Free State. DHS got people that were highly qualified to do the evaluations.

Ms Sosibo asked how many evaluations in total would be undertaken by DHS.

Dr Sokopo clarified that in the first year, DHS undertook five, then the following year it would be two. The seven was not for the same year. All Government departments wanted to submit, and they all wanted to be on the national evaluation plan.

Ms Duncan said she was so glad that DHS would be doing the evaluations on the issues that had been raised. She too wondered about the financial implications of appointing service providers. Other than government spheres who else would be part of the stakeholders in the reference groups? This process should provide the Committee with information on title deeds. She asked if there would be criteria that would be specified to service providers as how to go about sourcing the information.

The Chairperson clarified that the question looked to address capacity requirements.

Dr Sokopo replied that DHS had developed terms of reference for each evaluation. The process was lengthy but it sought to ensure the right questions were asked. Once that was done, it went through DHS’s internal assessment processes. Then this was taken to the technical team working group to advise on the validity of the questions. The information on terms of reference could be shared with the Committee.

Dr Sokopo said DHS would welcome if the Committee could be represented in the reference group - maybe by its researchers.

The Chairperson said DHS should look into increasing the number of research institutions involved in the process.

Dr Sokopo replied the title deeds would be addressed through the evaluation on asset creation.

Mr Mokgalapa suggested that the evaluations should also look at assisting Members with early warning signals, so that under-expenditure and non-performance challenges were detected early.

The meeting was adjourned.