Progress made on the Budget Review Recommendations Report; Follow-up meeting with Nelson Mandela Bay Municipality on complaints received from Metro Builders and Civil Construction and Chatty 600 Contractors

Meeting report

The Chairperson said that in October, Parliament debated the BRRR process and recommendations were made by the different Committees - including the Portfolio Committee on Human Settlements. After two weeks, the Speaker circulated the correspondence to the various Ministers.  The memos were circulated in November and after 30 days, the Department had to respond to the recommendations raised by the Portfolio Committee. The Chairperson said she was quoting this information, because the Department had had ample time to respond and address all issues that were raised by the Committee.

The Chairperson said that there were a lot of complaints from contractors in the Eastern Cape.  It was not clear how the national Department was dealing with the matter. Even before the Department came to the Committee, they had to play a critical role in monitoring and evaluating the processes in the provinces and metros.   The Constitution gave the Committee an obligation to ensure that they listened to the people who brought their complaints and petitions, and ensured that they were addressed accordingly. However, the Department was making things harder for the Committee, as they were not assisting people in this plight.  If the Department was doing its job, it was not doing it appropriately.

Government had to govern and solve the problems of the people. The national Department had to go to the Eastern Cape and tackle all the challenges and see what the problem was. The complaints of contractors being victimised were piling up.  It was clear that there was a problem to be addressed. The national Department was asked to bring the Nelson Mandela Bay Metropolitan Municipality to the Committee.  The Metro could not claim that the projects were undertaken by Thubelisha Homes and HDA. There could not be a project in a sphere of government for which that sphere did not take responsibility. The Chairperson said Newtown was another sore spot, but Members did not have a presentation on this issue.
Briefing by DHS on progress made on the Budget Review Recommendations Report
Mr Mbulelo Tshangana, Deputy Director General (DDG): Programme Management Unit (PMU), led the progress report on the recommendations made by the Portfolio Committee on 16 October 2013 in respect of their Budget Review and Recommendation Report (BRRR).   He said that eight district/local municipalities were accredited at level 1, and eight metros and 12 district/local municipalities were accredited at level 2.  Implementation protocols were concluded with 24 of the 28 municipalities accredited. The Department had appointed a panel of experts who assisted the provinces for the last two years in the evaluation of the municipalities prior to accreditation, and to facilitate compliance with the legal requirements and the process leading up to official accreditation

Human Settlements Policies
It had been a policy requirement that the construction of houses may not proceed before the properties were transferred to the beneficiary and registered in the Deeds Office. This policy principle was abandoned in 2007 through a decision of MINMEC, in view of the delays the rule had caused in housing delivery. An alternative strategy will be considered during the 2014/15 financial year to resolve the matter.

The Ministerial National Norms and Standards would be adjusted with effect from 1 April 2014, to comply with the National Building Regulations in respect of energy efficient buildings. The standards apply nationally and had replaced the Southern Cape Coastal Condensation Area (SCCCA) measures, with the exception of the plastering and painting of external walls, which remains a requirement in the SCCCA to prevent moisture penetration in cold and wet winter months.

In regard to backyard dwellers, the Department and SALGA had cooperated in their efforts to finalise possible interventions that might be considered. SALGA was now finalising its report for submission to MINMEC while the Department was finalising policy proposals to be considered by MINMEC.

Auditor General (AG) Management Report
Mr Nyameko Mbengo, Chief Director, DHS, said the Department had developed an action plan immediately after the audit.    The plan was based on the management letter from the Office of the AG, and was also forwarded to the office of the AG for their possible comment. The action plan was updated monthly by the responsible managers.  Inputs were collated by the office of the Chief Financial Officer (CFO).  Internal auditors verified progress on a monthly basis and reported to executive management. The appointment of consultants was approved by the accounting officer.  Units have to do a gap analysis before approval, indicating reasons for the appointment of consultants. The appointment of consultants would be reported in a quarterly performance report.

Vacancy rate
Ms Sindisiwe Ngxongo, Chief Operations Officer: DHS, spoke on the topic of vacancies in the Department, which had been raised as a concern by the Committee.  A recruitment drive was under way, and the vacancy rate currently stood at 19%. There were a number of factors that delayed the filling of vacancies.  Posts had to be re-advertised due to fact that no suitable candidates could be found, and the was a problem with non-disclosure of criminal records on applications, disqualifying selected candidates.

Disaster Funds
Ms Lucy Masilo, Chief Director: DHS, addressed the status of the disaster fund.  The Department had received R44 million in additional funding during the 2014 Adjustment Budget for disaster relief. The total allocation for disaster relief amounted to R343.4 million, of which R76.2 million had been spent by 31 January 2014. The Eastern Cape spent R76.1 million while Gauteng spent R60 000.
Mining Towns
Ms Julie Bayat, Chief Director: Project and Programme Planning, DHS, gave a progress report on mining towns as at 31 January 2014.

There were five projects in Rustenburg due to be completed within a year.   The Meriting Ext 4 and 5 -- an Upgrading of Informal Settlements (UISP) project – would deliver 1 590 units.  Installation of services had been fully completed, and the project was expected to be finished in March 2014. However, there were challenges as a result of a lack of bulk water supply (Rand Water cited unavailability of water in their reserves), and locating approved beneficiaries, for whom approval was granted in 2004.  Consultation with Rand Water and the municipality was under way to resolve the issues.  Another other project to be completed in February 2014 was Monakato, a UISP project with 515 units. The rest of the projects stood to be completed towards the end of 2014 and the middle of 2016.

On the Madibeng Projects, Sunway was due to complete 1 000 units in June 2014. Internal services were completed and outfall sewer was incomplete and so was construction of top structures. The Mamba Informal Settlement and Lethabong projects had both experienced significant delays.

The last group of projects were in Moses Kotane.   Saulspoort Phase 1 was an old project which was supposed to deliver 921 units, but to-date only 85 had been completed. The project was blocked and was recently resuscitated to complete 921 units in 12 villages. Two developers were appointed for the job.  Saulspoort Phase 2, on the other han,d had made strides.  Out of 900 units, 700 were in the final stages of completion and in Mabeleapudi, 32 of 200 units were outstanding

Rural Households Infrastructure Grant
The Rural Household Infrastructure Grant had been implemented in 23 municipalities.  Of the 23 municipalities, 19 had submitted their business plans for approval before the Department could transfer funds.

Finance and Fiscal Commission (FFC)
Mr Tshangana went through the findings of the study conducted by the FFC on housing finance options. The Commission used the expertise of Housing Finance in Africa (a division of FinMark Trust) to conduct their research. The results of the study revealed that there was a discrepancy between the growth of budget allocation versus the number units delivered. As a result of this, FFC made a number of recommendations including the following:

• Accreditation of municipalities to administer housing programme, in cases where municipal capacity exists.

• Government should consider the funding implications of any further policy changes.

• Consideration should be given to linking new housing subsidies with the municipal infrastructure grant.

• Government should conduct a review of the efficacy of current housing finance arrangements in meeting housing needs within the context of creating sustainable and more compact human settlements.

Mortgage Disclosure Insurance Process
The commercial banks and the Mortgage Default Insurance Company (MDIC) had signed a contractual agreement. The borrower could apply for a home loan at any bank; once the home loan was approved, it was automatically insured by MDIC if it fell into the affordable housing market. The banks sent an electronic file daily to MDIC, with all pending registration home loans. The insurance came in effect only once the premium was paid on registration of the home loan. Once the home loan was registered, the bank would send MDIC a file with the payments as well as all the application information that MDIC needed to run the business (monthly). On a monthly basis, the bank would send an electronic file summarising the payment profile of each insured home loan account to track the performance of the Bank, as well as forecast the expected insurance claims:

If the borrower could not pay and wished for their home to be sold, then the house would be sold (at auction or other means). The MDI would be notified by the bank of the intention of sale and the expected selling price. Once the house was sold, the Bank would submit a claim if there was a shortfall. The MDIC would then verify the claim using external as well as internal sources and pay out the claim.

Extension of Urban Settlements Development Grant (USDG) to secondary cities and district municipalities
Ms Funani Matlatsi, Chief Financial Officer: DHS, said the extension of the USDG to secondary cities and district municipalities would be an alternative to the top slicing of the Human Settlements Development Grant (HSDG) and USDG, to focus on the bucket system eradication over and above the agreement signed by Trioka on issues of bulk infrastructure. The 2014/15 HSDG allocation included funds for mining towns. The Department had engaged National Treasury on possibilities of extending the USDG to mining towns, secondary cities and district municipalities. A consensus was reached with National Treasury to focus on secondary cities and mining towns during the next Medium Term Expenditure Framework (MTEF). The DHS planned to draft a business case to this effect and submit a formal proposal to National Treasury.

Housing Development Agency (HDA)
The HDA was supporting provinces and municipalities with land identification, assessment and acquisition. However, the entity was proactively doing land identification, but not land audits. In the Western Cape, of the land identified, requested and assessed, 703.2627 hectares were acquired. In contrast the Eastern Cape, which was among the provinces with the highest number of hectares identified, requested, assessed and donated, only a mere 5.1924 hectares were acquired. All the provinces did not meet their expenditure targets regarding the purchasing of land.

Appointment of engineers and town planners
The Department had been using Cuban technical experts for a number of years in implementing human settlements programmes. The Department also intends to appoint about 48 Cuban engineers and hydrologists that would be deployed to sanitation projects at both provincial and national level. The Minister visited Cuba in November 2013 to conclude an Agreement and the Department would be interviewing the Cuban officials during March 2014 to ensure rapid deployment. These Cuban engineers would be used in various sanitation projects that include bucket eradication, management of waste water treatment plants, and designing alternative rural technology to address sanitation challenges.

Closure of Servcon and Thubelisha
Servcon had concluded a sale agreement on 26 February 2013 to sell five properties to the HDA for R27.68 million. To date, the transfer of three properties (erf 2663 & 1826 in Queenstown, Portion 237 of 78 Farm Hartebeespoort No. 328 JR and erf 10509 in Philippi) had been concluded. The outstanding tax liability of Servcon had been reduced from R13.4 million as at 1 April 2013, to R1.7 million as at 1 September 2013. The transfer of the remaining two properties (farm Eloffs Park No. 772 and Rem Farm 755/2 Machiel Heyns) was in progress and was set to be completed by 31 March 2014. The conclusion of the transfer of any of the two remaining properties would enable Servcon to settle its tax liability. Servcon would subsequently be able to make an application to the Master of the High Court for the appointment of a liquidator to wind-up the company through a voluntary liquidation process.

Thubelisha Homes was placed under liquidation on 29 March 2012, with Admiral Trust as the liquidator. The issues of staff and provincial project account reconciliations had been concluded and Thubelisha was in the process of transferring the stands that were registered in the name of the company. The transfers were being held up due to issues relating to un-traceable beneficiaries, restrictions on transfers from interdicts and moratoriums, as well as challenges with obtaining rates clearance certificates. The final closure of Thubelisha was dependent on the finalisation of the transfer of the stands.

Utilization of the USDG
The USDG was a schedule 4 grant supplementing Metros capital budget. In terms of the Division of Revenue Act (DoRA), metros were allowed to utilise the USDG allocations on any of their infrastructure projects for the development of human settlements.  A performance matrix had been established for monitoring and reporting of the USDG.

Monitoring and Evaluation Unit
The Project Management Unit was established in April 2012. All vacant posts advertised and filled where suitable candidates were identified.  However, some posts had to be re-advertised as no suitable applications were received. Additional capacity was being contracted through Professional Resource Teams (PRTs).  Tender proposals in this regard had been received and the evaluation of proposals was currently underway. The process was taking time due to the detailed nature and complexity of the expertise required.

Discussion
Ms M Njobe (COPE), said the presentation was well thought out and well presented. She asked for clarity regarding the disaster fund.  There was R343 million to spend, and of that R76 million was spent, leaving R267 million not spent towards the end of the financial year. Would there still be use for that money - were there disasters that needed to be attended to?  If the money was not going to be used in the current financial year, would it be possible to roll it over to the following year? Regarding the engineers and the recruitment of Cubans, there was no problem with South Africa strengthening its relations with other countries and recruiting them to assist where needed. However, was it only about the Cubans coming into South Africa, or was there a programme where South Africans went to Cuba and were trained in the areas that the country needed?

The presentation had also mentioned that the Department had to re-advertise because they could not find suitable candidates for posts. Again the question was: were higher education institutions producing the outcomes that the country needed, and was the Department satisfied that they were providing the manpower that government needed? If not, what was the Department doing about it?  On the question of land availability, it was not clear what was meant by land released and land acquired. For instance, in the Eastern Cape there was substantial land released and donated, but little was acquired; if the land had been released, did it mean that that land was now ready for the Department to utilise, or was there another process before the Department could use it?

Mr Tshangana said in the health sector, the government was sending a lot of young health practitioners to Cuba for training. This had not been done with the built environment, and may need to be considered as a recommendation - to send young graduates in civil engineering and regional planning for training. There was a budget to do that.

Mr S Mokgalapa (DA) emphasised the point made by Ms Njobe regarding the appointment of engineers.  There needed to be a skills transfer in the relationship between Cuba and South Africa. The vacancy rate was concerning.   It was an urban legend that within the whole skills base of South Africa, not a single suitable candidate could be found. With such high youth unemployment, it could not be said that a suitable candidate could not be found, unless suitability needed to be defined. Academic suitability was a different story - there must be suitability in different meanings and interpretations.

A Member commended the Department for meeting with the FFC and listening to their recommendations individually. The essence of the recommendation by the FFC of finding an alternative funding model, was not for the Department to abdicate their constitutional responsibility regarding access to housing opportunity. What they were saying was how to best move forward within the parameters of the Constitution with the resources that the country had, and craft something viable. Until the economy started picking up, everyone agreed that the current funding model was not sustainable and that was what the FFC was trying to drive home.

With the Auditor General’s (AG) report, one would have loved to see the specifics, rather than the processes.  The detail on the processes that the Department was undertaking for remedial action was appreciated. However, there were specific issues that the AG had raised that the Committee hoped the presentation from the Department would focus on. In the BRRR, the Committee had made very specific recommendations based on what the AG had said.  What the presentation had provided was the “umbrella” process of how they would address those issues.

Mr Mokgalapa congratulated the CFO on ensuring that the USDG went to secondary towns and hoped that when it went to those towns, the template was also provided. When the metros first started with the USDG, they did not have the template and were spending erratically. The Department also needed to ensure that there was monitoring. He asked what the problem was with the mining towns - the issue was not with resources, as there was funding provided for them. Perhaps there was a lack of political will to implement on the ground. This was a presidentially-proclaimed project, and so it could not be hindered by bureaucracy.

Ms Ngxongo, COO,said that the Department acknowledged that the vacancy rate was still very high at the current 19%, but they were doing the best they could to fill the vacancies. There were two main areas that the Department looked at - qualification and experience. The higher education institutions were providing quality graduates with the qualifications that were needed. However, the problem was that the Department was grappling with the experience they required from the prospective candidates. However, what they were looking at now was the potential of the candidate.

Mr J Matshoba (ANC) said when talking about infrastructure, the relationship between the DHS and the Department of Water Affairs was important. For instance, in Mpumalanga and the Eastern Cape there were serious problems. Regarding HDA and the land requested and assessed, the land mentioned was away from the central business district, as it was between Khayelitsha and Mitchell’s Plein. Why was it that when land was issued, it was far from the centre of towns where people worked?

Furthermore, there was a disaster that had happened in 1998, which had been mentioned since 2009 and now it was 2014. Nothing had been done in the Chris Hani district of the Eastern Cape - Intsika Yethu municipality, to be specific - yet there were funds for disaster management.

Ms Masilo said they had met with the provinces to discuss the under-spending of the disaster grant. It was agreed a rollover of the grant should be requested from Treasury. The Department was working with the National Disaster Management Centre, and they were assisting the Department to request the rollover.  On the question of the 1998 disaster, the National Disaster Management Centre had done an analysis, and funds had been allocated for Alfred Nzo, Amathole, Chris Hani, Joe Gqabi and OR Tambo.

Ms J Sosibo (ANC) asked for clarity on whether Public Works had sorted the accommodation problem out. With regard to the quantum going from R60 000 to R110 000, would that not delay the building of houses, as there were already complaints. With the land assembly statistics, in KwaZulu-Natal - out of 39 identified hectares - nothing was acquired.  Saulspoort had a budget of R17.7 million for 900 units, and the presentation said 700 units were in the final stages of completion.  Where did the money come from, as there was nothing spent of the R17.7 million?

Ms Ngxongo said there was an understanding from both parties (Department of Human Settlements and the Department of Public Works), and the matter of credit notes was an accounting one. The Department would pay the agreed amount when they moved into the offices.

Mr K Sithole (IFP) asked about the purchase of land by the provinces.  In the Eastern Cape there was money spent, but there were no hectares bought.   What was the Department’s engagement with the municipalities in instances such as the disasters in Gauteng (Mamelodi, Nkangala and Soshanguwe)? Nothing had happened in those communities to assist them.

Regarding the accreditation of municipalities, did the Department have a programme to assist the accredited municipalities with capacity issues?  There was an issue with backyard dwellers, which was a disaster in Gauteng.  Had the national Department engaged with Gauteng to find out what was going on, because it could not keep referring to the province like it was a success story.

Mr Tshangane acknowledged that the land identified between Khayelitsha and Mitchell’s Plein was far from the city centre.  However, that land would integrate two communities - Khayelitsha (a predominantly black township) and Mitchell’s Plein (a coloured township). That land was a 15 to 20 minute walk to Promenade Shopping Mall, and was a well located piece of land. The only concern was if the Department would get value for their money, as there were environmentally sensitive pockets in the land. The HDA was doing a cost benefit analysis.

Mr Tshangana said the Department had accepted that the backyard dwellers policy was a complex one, and there was no clinical solution to it. Some of the people in backyards did not qualify for the subsidy and some had received subsidies elsewhere. The landlords who owned the stands may not qualify for the subsidy as well. There were a lot of challenges.   Gauteng had started to deal with backyard accommodation, but had had to halt their programmes because of the complexity of the matter.

Ms G Borman (ANC) said the presentation spoke of the title deeds, and changing the policies in this regard this was a move in the right direction in setting up pipelines, as this was desperately needed. However, it seemed that because of informal settlements, the initiative could be held back.  Was it possible to move forward with what was ready so as to not hold everything back because of complications in one area?  Regarding backyard dwellers, this was indeed a complex area.  What criteria would the Department be using?  Was it possible for someone to rent for three months and then qualify for a month?  With the mining towns, there were some good things happening but there were also problems with deadlines not being met.   The Committee would be watching that.

Ms Borman said she was satisfied that the Department was doing a thorough job in the assessment of metros before they were accredited.  However, there seemed to be delays. With mortgage default insurance (MDI), where did the buck stop?   This was not clear.

Ms Masilo said the MDIC would be an independent company, registered with the financial services board, in terms of the Company’s Act. Currently it was seating with the National Housing Finance Corporation (NHFC).

Ms Matlatsi said the buck stopped with the national Department of Human Settlements.

The Chairperson said MDIC could not account to the NHFC, whereas the NHFC accounted to the national Department itself.  This needed to be clarified, to avoid any problems,

Ms P Duncan (DA) said that there needed to be a report on the actual accreditation of municipalities so that the Committee could see the status of every municipality, instead of relying on figures. The title deeds backlog remained a problem.  This was largely attributed to policy direction. Out of the three million RDP houses built, over a million title deeds were outstanding.  What was the Department doing about that? The title deed was the most important in the housing delivery, as it gave access finance and opportunities.  The issue of title deeds had to be accelerated.

Backyard dwellers remained a concern in terms of the capacity of infrastructure.  Had there been an assessment of the infrastructure required to carry the load of backyard dwellers?  Also, the same statement kept coming up in terms of moving developments and people closer to the main cities.  Why did the government not look into adjacent towns?  Could the amenities not be taken to the development, instead of overloading already crowded cities?

Mr Tshangana said that every time one increased the services in downstream areas, there would need to be an increase in the capacity network (for example, waste management). Most municipalities and metros knew how to plan and balance this, given that most of them were receiving the USDG and using it for delivering bulk infrastructure.

Regarding the accreditation of municipalities, the Director General had put the process on hold because there were a number of significant steps that had to be achieved first. The Minister had to go back to Cabinet and present a full report on accreditation and then the Department would also come back with a full detailed report to the Portfolio Committee, especially on the six metros.

Mr Tshangana said that the question on title deeds and planning was very relevant.  The bulk of the title deeds that were at issue were an old problem.  Most of the provinces had embarked on an initiative to specifically issue title deeds. The biggest challenge was, “who do you give the title deed to?”  Some of the original recipients of the houses had moved on and were no longer the occupants and owners of the houses.

The Chairperson said a recommendation was sent through MINMEC regarding land for human settlements.  The report said that was incomplete. There were gaps, which meant that what the Committee had asked for had not been done. The Committee had also asked about the rationale in appointing 48 economists rather than appointing technical staff, such as engineers and town planners. The Department was now complaining they did not have skills they needed, but they were housing 48 economists.

The Department was also selective in the reporting on Chapter 9 institutions.  The Public Services Commission (PCS) had come to the Committee, and their report was included in the BRRR, but it was not addressed. The presidential proclamation on the mining towns could not be emphasised enough, and the issues that were raised as hindering the process were not acceptable.  Were the communities in mining towns being briefed on these challenges and progress made?  Regarding Saulspoort, that was an old project -- it was a rectification programme -- but what was the problem?

Mr Tshangana said the last visit by the members of the Mineworkers Investment Committee (MIC) to mining towns was in Rustenburg.  The Department had met with the Ministry of Water Affairs to discuss how to make the existing thirteen schemes in Rustenburg synergize, and the location of these schemes had been looked into, as the biggest challenge was water supply in the region.

The DDG acknowledged that with land acquisition, the Department had missed the recommendation of the Committee. It seemed that what the Committee wanted was to look at how much was spent on land acquisition in the last five years. The Department had taken a conscious decision that they would start on the land owned by government and release it, for the bulk of it the Department did not have to pay. Land had to be paid for if it was owned by the private sector. However it seemed the presentation did not deliver the information Members were looking for. The presentation only looked at 2013/2014.   The gaps in provinces were a matter of poor planning.  One of the things Human Settlements was still grappling with was planning for the upstream, hence the Department was putting together a pool of regional planners to assist provinces, as they were struggling. Only three provinces were planning adequately, the rest were struggling. The Free State did an amazing job -- they brought in HDA to assist with their upstream planning activities. The Eastern Cape also had a good pipeline.

The Chairperson interjected and said there was expenditure, but there was no record of the land purchased.

Mr Tshangana said they had not done a good analysis in that regard.  Then again, that was attributed to poor planning and the Department was going to be investing that.

Ms Bayat admitted that Saulspoort was indeed a long standing issue but in the process of the presidential package, the projects were monitored, and the Department could obtain more in-depth information whenever they required it. The Department was working with the province to ensure that the information they were receiving was a true reflection of what was going on.

Follow-up meeting with Nelson Mandela Bay Municipality on the complaints received from Metro Builders and Civil Construction and Chatty 600 Contractors
The Chairperson said in the previous week the Committee had ruled that the national Department would bring the Eastern Cape provincial Department of Human Settlements and Nelson Mandela Bay Metropolitan Municipality to the meeting, with a properly compiled report.  She had written a letter to the Mayor raising a serious concern that the Nelson Mandela Bay municipality had not come in front of the Portfolio Committee after many requests to do so. In the correspondence, it was stated that the Portfolio Committee did not want to summon Nelson Mandela Metro, but if they missed another meeting the Portfolio Committee would be left with no other option but to summon them in terms of the Constitution. Projects were implemented, government funds were spent, and all three spheres of government should come and account to the Portfolio Committee, irrespective of their role in the project.

Ms Borman supported the stance taken by the Chairperson.  The matter was unacceptable.  It was as if Nelson Mandela Metro was openly defying the Portfolio Committee and it was of critical importance that the issues that had been brought up were dealt with. The Metro needed to be summoned to the next meeting.

Mr Suresh Galahitiyana, Head of Project Management and Quality Assurance, Eastern Cape DHS, apologised that the Nelson Mandela metro was not at the meeting, as they had the responsibility to bring them to meeting. The matter would be taken up with the accounting officer and the MEC. He said this was a long outstanding matter.  Thubelisha Homes was assisting Human Settlements and Nelson Mandela Metro in implementing the Zanemvula project. The project consisted of 950 units that were not completed. Thubelisha Homes then appointed two main contractors, but one of the contractors during the project indicated that they did not have the capacity to deliver the 475 units allocated to them.  The units were then handed over to the other contractor. Subcontractors were brought in and payments for the work that had been done were made.

The matter was presented to the Select Committee on Public Accounts (Scopa), the Premier of the Eastern Cape and the Petition Commission, and it had gone to all the relevant platforms. True, there had been no contract with the subcontractor, as they had a contract with the main contractor, but it was clear that the main contractor had done something wrong with the subcontractor. The provincial Department had intervened and asked that the subcontractors bring invoices to evaluate and see if they could be paid. The outcome of the process was that there was no legitimate claim that could be paid out.

The Chairperson asked that it be confirmed that there were no outstanding payments.

Mr Galahitiyana confirmed that all payments had been made, nothing was outstanding and the contractor was more than willing to come to the Portfolio Committee to attest to that. The main contractor had also said that they did not have outstanding payments to their subcontractors.

Ms Mpho Ndoni, Regional Director of Nelson Mandela Bay Metro, DHS, read through the provincial report regarding the processes they had taken with the complaints that had made their way to the Committee.

Thubelisha Homes was appointed to undertake the construction of 950 units at Joe Slovo in the Nelson Mandela Metro. Verern Builders and Nomagwayi Developers were employed to deliver 475 units each, to which there was a contractual agreement with them, as of July 2008. In August 2009, Nomagwayi Developers wrote a letter to Thubelisha Homes requesting that they be allowed to withdraw from their contract with Thubelisha Homes, as they were about to be liquidated. 

After the withdrawal of Nomagwayi Developers, the remainder of the units were reallocated to the current contractor on site.  Thubelisha then entered into an addendum agreement with Verern Builders for the completion of units not finished by Nomagwayi Developers, accepting all contractual obligations and commitments.

Verern Builders then appointed subcontractors, and upon value created on site and certification of work invoices were submitted, with a letter of instruction to pay what was due to the subcontractors by Verern Builders.  Metro Builders, one of the subcontractors, was paid via the abovementioned arrangements taking all due process into consideration. All houses built on site and certified by the National Home Builder Registration Council (NHBRC) issued with a Final Unit Report under the name of the main contractor (Verern Builders) were paid for.

After numerous meetings with Metro Builders to resolve the matter of outstanding payments within the confines of the law and administrative processes, the subcontractor decided to take the matter further. The matter was presented to the following platforms: Provincial Human Settlement Portfolio, then the Provincial Petitions and Arbitration Commission, Office of the Premier and then the national Department of Human Settlements. The Eastern Cape Department of Human Settlements presented the above report with supporting documentation.  The matter was supported by the findings from the Thubelisha Homes closing report which was with the national Department. All monies due for the units delivered on the site and certified by the principal agent were paid in full.

The Eastern Cape Provincial Department of Human Settlements recommended that the Portfolio Committee took note of the report, as delivered.

Discussion
The Chairperson read the recommendation of the report which read: “It is recommended that the Portfolio Committee of Human Settlements take note of the report.” She asked what that meant - the Committee did not understand what that clause meant.

Mr Galahitiyana said there was a petition and complaint lodged before the Portfolio Committee, and the report was producing evidence of the processes followed in trying to resolve the matter even long before it came to the Committee.

The Chairperson said the Committee had an obligation, so what did that statement mean to the Committee. Were they implying that the Committee should forget about the issue because they were saying they had dealt with it?

Dr Sjekula Mbanga, COO of Eastern Cape Department of Human Settlements, said they were presenting the Committee with the facts of the claim by the contractor. The point that the presentation was raising was that they had done their own assessment of the situation, and as far as that assessment went, there was no legitimate claim.

The Chairperson said the Eastern Cape was saying they had done everything, so were they telling the Committee that it was “well and good”.  She suggested that they withdraw the statement, as it was offensive to the Committee.

Mr Galahitiyana humbly apologised, and withdrew the statement.

Mr Matshoba interjected, and said that Mr Mbanga had said they were satisfied with the reports from the principal contractors, but they were not saying if they were satisfied with the report of the subcontractor.

Ms Borman said in July 2008 there were 475 units to be built by each contractor, and in August 2009 Nomagwayi Developers wrote in and said they could not fulfil the requirement.  It was not clear if they had built any units in that year, although it seemed that Nomagwayi had delivered some units. Also with the finances that were paid over, there was no accountability of how much was for the project ,and how much was paid over to the contractor.  

Ms Njobe said there were figures for the units, but the report made no mention of how much was paid over, as the complaints were about money. According to the report, the province had done all they could and the matter was closed. Did the people who had complained to the Committee have the same understanding as the province, because the matter was not resolved on their part?

Ms A Mashishi (ANC) asked that a report be presented in writing to the Committee after the Eastern Cape Department had met with the complainants.

The Chairperson introduced Mr Litho Suka. She said Mr Suka was a Member of Parliament and the constituency in question was his. Mr Suka had pressured the Chairperson to call the province to account, as he had been cornered by the contractors in his constituency office. The Chairperson gave Mr Suka the platform to express whether or not he was happy with the report.

Mr Suka urged the provincial Department to have passion as a department and government when reporting to Members of Parliament. He reminded the officials that when they spoke in Parliament, they spoke under oath. The report did not say anything.  It was vague. If the Committee had to report back on what was in the report, there was nothing of substance – and that was not to be taken kindly. Officials could not treat members of Parliament as though they were ignorant.  What made a good public representative (Member of Parliament) was information. The officials had responded as though they were hiding something, because Members of Parliament were also under pressure from constituencies.  The report was saying that Parliament should just sweep the issue under the carpet. If this was a report on a good job done by the Department, then there would not need to be this kind of meeting dealing with problems on behalf of contractors. What the report indicated was that there certainly was a problem in the construction of houses.

Mr Suka said he had met with not fewer than five contractors who had said they had not been paid, yet people were staying in the houses they had built. The contractors were being tossed from “pillar to post” by the metro and the province, and the response had been generally slow.  This was an old project from 2007, and in 2014 there were still unresolved issues. Moving forward, the provincial Department had to provide a quality report, invite the Metro and even some of the subcontractors that had submitted complaints. This would ensure that the matter was put to rest and closed.  If the Department was at fault, they had to tell Parliament so that it could be corrected. The current report was not good, and Members could not report on it.

The Chairperson said regarding subcontractors, there was a process of inviting them so that their side of the story could also be heard. Government was given the opportunity to bring forth a quality and honest report. If the report was honest, it would have thrashed out all the issues. In the next meeting the affected parties would be invited, and the Department should not think they were delaying the matter because the House was rising - the Committee could work until 14 March 2014. These matters had to be closed by the fourth Parliament and not the next one.  Resolutions were going to be taken by this Parliament so the next Parliament could implement them. Before the contractors had complained to Parliament, they had first exhausted the available provincial structures - the office of the Premier and national government included. Where were the reports from those structures?  All of these should have been in writing, showing the sequence of what transpired so that by the time the contractors were called in, the facts were available to see where the problem was. There needed to be clear and credible information so that Parliament could assist.

The meeting had to be postponed. However, the Chairperson directed the DDG to set up a team from the national Department that would meet with the Eastern Cape Provincial Department and the Nelson Mandela Metro. The first thing that had to be clarified was the role of Nelson Mandela Metro in the whole matter.  There was a cooperative agreement - what was the content of that agreement? There was a stage where the agreement had to be amended - what was the initial agreement and then the amendments?

Ms Ndoni said in that case, the municipality was the landowner and the project was in its jurisdiction.

Mr Matshoba said there had to be detailed information on each contractor, including the number of units they were contracted to build and how many units they actually delivered.

Ms Matlatsi said it would be suitable to give some background on Thubelisha, to establish where the whole matter had started.

The Chairperson interjected that the matter would be discussed further in the next meeting.   Nelson Mandela Bay metro would be summoned and there had to be detailed reports.

Newton Housing Co-operative update on social issues and property status
The Chairperson said that the Committee expected that the affected parties were present in the meeting. She asked where Mr Jiyana got the information for the report he was going to present.

Mr William Jiyana, ADDG - Strategy: National Department of Human Settlements, said the report was a collation of all the reports that the Department had made to the Portfolio Committee, but it would also touch on what happened after the evictions.

The Chairperson said that was not answering the question.  She asked again: where had the information come from?  If it was from the documents that had been presented to the Committee, then it was information that the Committee had already heard.

Mr Jiyane said the Committee had not heard the conclusion of what had happened to those evicted.

Mr Jiyane spoke on the two areas of concern that had been brought up regarding the evictees.  The first was what happened to the children that were going to school in the area. The Department had met with the provincial Department of Social Development which was dealing with the issue, and they had provided the whereabouts of the particular persons.  All the children were taken away by their parents and moved to other places, and the Department could not trace them. They were no longer at Newtown. The second concern involved a disabled citizen - the Department was unable to trace her as well.   She was offered to be moved to another shelter by the city, but she had refused.   

Overall, the response from the Department was to assure the Portfolio Committee that everyone affected had been taken care of by the City of Johannesburg, and the role of the Department had been concluded.

The Chairperson said the report did not say anything.  The Committee had asked for the affected persons to be present at the Portfolio Committee meeting. What the Department presented could not be a report of a national department, and as Mr Suka had asked earlier, officials needed to take Members of Parliament seriously. In the response of the City of Johannesburg, it was clear there had not been a meeting between them and the national Department, as their correspondence referred to an email and telephone call regarding the Newtown matter, and then they had attached a report of what had happened and what they had done. There was nothing done and there were no efforts by the national Department.

The report by the national Department was unacceptable, as it was not their report. The Committee was still going to discuss why the Department would sell a building bought by government for cooperatives, as per a mandate from 2005. The Chairperson said the Committee would find the affected parties for themselves, because the Department had failed the Portfolio Committee on the matter.

The meeting was adjourned.