Department of Housing Budget 2007/8: public hearings

Meeting report

HOUSING PORTFOLIO COMMITTEE
22 May 2007
DEPARTMENT OF HOUSING BUDGET 2007/8: PUBLIC HEARINGS

Chairperson: Ms Z Kota (ANC)

Documents handed out:
Free State Local Government and Housing presentation
KwaZulu Natal Housing presentation
Limpopo Province Local Government and Housing presentation
Eastern Cape Department of Housing presentation
Northern Cape Department of Housing and Local Government presentation
North-West Province Developmental Local Government and Housing presentation
Gauteng Provincial Government Department of Housing presentation
Mpumalanga Province presentation
Western Cape Provincial Government DLG&H presentation

SUMMARY
The Departments of Local Government and Housing (DLG&H) of all nine provinces briefed the committee on their achievements and financial performance during 2006/07 and presented their budgets for the 2007/08 conditional grants. Most departments listed funding constraints, limited skills, the unavailability of suitable land for development and the lack of bulk services and infrastructure as the major challenges affecting the provision of housing. All the provinces reported large backlogs in spite of progress made in completing blocked projects and in the delivery of new houses. Most departments had spent the allocated funds.

Members raised a number of questions and were particularly concerned about the departments’ ability to implement the Director-General’s recent directives regarding the minimum size of houses (increased to 40m2) and the restriction of the subsidy to construction of the top structure. Several questions were asked about the standard and quality of construction and materials, the progress made in upgrading hostels into family units and in clearing the blocked projects, the development of sustainable communities and the provision of social housing facilities.

MINUTES
Free State Provincial Government – DLG&H presentation
Mr Joel (M) Mafereka (MEC – DLG&H – Free State Province) gave a brief introduction of the province’s briefing to the committee. He stated that the total housing expenditure during 2006/07 was within the budgeted amount, in spite of actual expenditure exceeding the budgeted cash flow amount during the last quarter. He said that measures were introduced to allow the department to monitor the progress of contractors and other suppliers and to recover funds from them in the event of non-delivery.

Mr Kopung Ralikontsane (Head of Department – DLG&H – Free State Province) provided details of the province’s planned programmes and budget for 2007/08 (see attached document). He reported that a total of 11 670 units were completed during 2006/07, against a target of 12 000 units. The province’s total housing grant allocation for the previous year amounted to R528.6 million of which R528.4 million was spent. An amount of R6.02 million was rolled over from 2005/06 and included in the Human Settlement Grant for 2006/07 of R9.4 million. He added that the department now had all the names of the beneficiaries of the People’s Housing Programme (PHP) on record. He pointed out that an amount of R340.334 million in respect of blocked projects was not included in the figures. He explained that the reason for the cash flow deviation during the last quarter of the year was the result of policy choices that were made by the department.

Mr Ralikontsane presented the department’s business plan for 2007/08 and listed the amounts allocated to each of the province’s programmes. The total housing grant allocation amounted to R653.284 million of which R516.845 million was in respect of remaining commitments from 2006/07 and R68.527 million was allocated to business plan commitments. This left a total of R67.913 million available for 2007/08.

Mr Ralikontsane listed the challenges facing the department in terms of service delivery as well as the action taken to address these challenges. Areas of concern were the lack of Technical Inspectors employed by the department, the quality of construction and the fact that the implementation guidelines and policy framework for the Finance Linked Individual Subsidies were not yet finalized. In addition, not all deeds were correctly registered, the beneficiary lists received from municipalities were not credible and their township registers were unavailable.

Discussion
Mr A Steyn (DA) commented that an inordinately large percentage (almost 80%) of the budget for 2007/08 was in respect of outstanding commitments from the previous year. It was clear that targets were not reached and he found it an anomaly that the department claimed to be on target in terms of expenditure.

Mr Ralikontsane replied that housing projects often stretched over more than one year. He cited the example of the project-linked subsidies that were put out to tender in June 2006, where the funds to complete the projects were committed over more than one year. Another example was the special projects to empower women and the youth that stretched over three years.

Mr Steyn expressed concern over the huge increase in expenditure during the last quarter of the year. He said this pattern raised a red flag as this could be interpreted as a dumping of funds. He asked for an explanation, especially in the light of the Auditor-General’s (A-G) comments regarding the 49% vacancy rate in the reports on the previous financial year.

Mr Ralikontsane replied that a change in departmental policy was made in January 2007 when it was decided to address the problems experienced with the supply of materials by advancing the necessary funds to allow contractors to purchase the necessary materials. An amount of R49 million for the purchase of materials was paid into the account of the housing agency the department had decided to use. He added that the department was able to appoint more staff to fill the vacancies since the A-G’s report.

Mr G Schneemann (ANC) asked how many housing units were involved in the blocked projects amounting to R340 million.

Mr Ralikontsane replied that he was unable to provide exact figures of the number of units involved in the blocked projects as the subsidy amounts varied over the period the projects became blocked. He said however that the department knew the exact location of all the projects but it was necessary to re-assess the scale of the projects and to re-allocate the beneficiaries of the units.

Mr Schneemann asked how the department kept track of and monitored expenditure and how it reported to the National Department of Housing (DoH).

Mr Ralikontsane replied that the department reported on a monthly basis on its progress and expenditure to both the DoH and Treasury. He added that the department worked closely with the NHBRC in monitoring its progress.

Mr Schneemann commented that the poor quality and low standard of construction were often observed during the committee’s inspections and asked what measures the department had put in place in addition to working with the NHBRC to ensure the quality of building and that the contractors were adequately trained.

Mr Ralikontsane replied that the department worked closely with the NHBRC and had appointed a project management team to monitor the progress of contractors and quality of construction. He added that the problems with poor quality of building had become history and that the department was confident that a better standard of construction was being achieved.

Mr Mafereka added that the department worked closely with the municipalities and monitored the quality of building and the materials used during construction. On completion of the project, the standard of construction was approved before handover to the occupants. He said that the materials used in the building of houses were tested and approved by the South African Bureau of Standards (SABS).

Mr Steyn expressed doubt that the targets could have been reached if funds for the purchase of materials were only paid out in the last quarter of the year. He expressed concern that the department was making use of a housing agency and said that previous experience had shown that departments risked losing control over how the money was spent and tended to abdicate responsibility.

Mr Steyn asked what the department had done to address the concerns raised by the A-G in the last audit report in relation to the lack of an internal audit department and not having a functional audit committee for the last four years. He asked if the department had addressed the problems highlighted by the A-G with the appointment of contractors, in particular with the provision of security, the declaration of financial interests and the registrations for VAT. He also wanted to know what was done about correcting the deficiencies that were found in the application of the allocations regarding the provision of special needs facilities, the 65 houses that remained unoccupied, the sites that could not be found and the R3.5 million in PHP expenditure that could not be accounted for.

Mr Ralikontsane replied that the department had already reported to the committee on the findings of the A-G’s report in 2006. He confirmed that an internal auditor was appointed and that the tender conditions for the qualification of contractors were implemented.

Ms B Dambuza (ANC) asked what role was played by Cuban engineers in addressing the need for technical inspectors.

Mr Mafereka replied that seven Cubans had been appointed to assist the province and were mainly involved in PHP. He added that the department had appointed additional staff to carry out the monitoring functions and he was confident that they had sufficient human resource capacity.

Mr Schneemann referred to recent newspaper reports on the Director-General’s directive that the size of houses must exceed 40m2 and that the subsidy of R38 000 per house may not be used to provide infrastructure. He welcomed the directive but wanted to know what the impact would be in terms of delivery. He asked if any delays were anticipated and asked if the municipalities had sufficient funds to provide the necessary infrastructure.

Mr Schneemann wondered if the implementation of housing policy would not be better placed at the legislative level.

Mr Ralikontsane replied that 11 670 units were actually completed in 2006/07. An amount of R96 million was paid out in January and February 2007 for the tenders awarded in September 2006 that were realised in December 2006. He explained that the department changed its policy in January 2007 to pay out the full amount of the subsidy to the housing agency up-front as this would allow the agency to release funds to the support organisations for the supply of materials. He stated that the housing agency was able to monitor the projects and contractors better than the department.

Ms Kota observed that, in the Committee’s experience, the reason for a spike in the expenditure trend just before the end of the financial year was often as a result of the dumping of funds. She stated that the Committee accepted the department’s explanation for the variance.

Mr Ralikontsane replied that the department would indeed be severely affected by the new directive and that the matter was already under discussion at MinMEC. He pointed out that the department was previously able to allocate the full subsidy to the top structure and to build houses that were larger than the minimum 40m2 only because it had serviced land available. He remarked that the need to acquire more land for housing and putting in the necessary services were a general problem affecting all the provinces. He added that the upgrading of existing informal settlements also required the provision of basic infrastructure.

Ms Kota noted the province’s improvement in expenditure and services delivery and thanked the department for its presentation.

KwaZulu Natal Provincial Government – DLG&H presentation
Mr Jeffrey Nxumalo, General Manager – KZN Housing, apologized for the absence of the MEC and presented an outline of his department’s presentation to the committee (see attached document).

The province had identified a number of priorities to address the estimated housing backlog of 950 000 units. These included the eradication of slums by 2014, a major focus on providing housing in the rural areas, improved service delivery, the creation of jobs through the provision of housing, the upgrading of hostels into family units, the completion of all the blocked projects by the end of 2007, the provision of rental and social housing near the areas of economic development, capacity-building in municipalities, the promotion of ownership, the housing of vulnerable groups such as those infected by HIV/AIDS, the provision of incremental housing and the implementation of the Financial Service Market Programme.

Mr Nxumalo reported on the province’s performance during the 2006/07 financial year and gave a breakdown of the total expenditure of each of the four main programmes. The total budget was R1.251 billion and total expenditure amounted to R1.252 billion. The Housing Development Implementation programme accounted for 73% of all expenditure – an amount of R911.4 million was spent against a budget of R893.5 million.

Mr Nxumalo submitted his department’s budget for 2007/08, totaling R1.52 billion. This included an amount of R1.192 billion (78%) for the Housing Development Implementation programme (programme 3). He gave a breakdown of the anticipated expenditure for the period 2007/08 to 2009/10 under each of the four programmes and included details of the service delivery targets for programme 3.

The department’s main source of funding (86%) was the Integrated Housing and Human Settlement Development conditional grant and an amount of R1.31 billion was allocated for 2007/08. The department’s infrastructure budget of R1.255 billion was linked to the conditional grant. The department expected donor funding from the Flemish Government of R1.56 million during this financial year.

In conclusion, Mr Nxumalo listed the major challenges facing the department as the lack of bulk infrastructure (an estimated backlog of R34 billion), the mushrooming slums and prevalence of slumlords and the competitive environment for development resources created by the 2010 Soccer World Cup.

Discussion
Mr Schneemann noted that of the 120 blocked projects identified in 2005, 117 had been completed and asked for details of how the department had managed to achieve this. He also wanted to know how many units were involved in the 120 projects.

Mr Nxumalo replied that the same request was made by the provincial committee on housing and that he would forward the details to this Committee. He added that the department had formulated a strategy in 2005/06 to complete the blocked projects and that this plan was duly implemented.

Mr Schneemann noted that the department’s total allocation for 2007/08 was R1.52 billion but he was in possession of a document listing the allocation to KZN as an amount of R1.31 billion. He wanted to know which amount was applicable.

Mr Nxumalo replied that the one amount was the conditional grant and the other the province’s equitable share of the funds available for housing.

Mr Schneemann noted the R34 billion backlog in spending on infrastructure development as well as the large amount budgeted for providing infrastructure in 2007/08 and asked if the department was able to adhere to the Director-General’s directive that the housing subsidy may not be spent on infrastructure development.

Mr Nxumalo replied that in addition to the MinMEC meetings, the department was engaging with the municipalities to address the issues raised by the directive. He pointed out that the subsidy amount of R38 000 was allocated to the provision of a top structure but that an additional amount of R18 000 was provided for below-ground services. Thus the total amount available per unit was R56 000.

Ms Dambuza asked if the National Home Builders Registration Council (NHBRC) was actively involved in ensuring that the quality of houses conformed to the standards set. She wanted to know if the environmental impact assessments were properly completed and that the quality standards were being adhered to.

Ms Dambuza asked if the houses built in Matatiele by KZN, which had construction problems, were going to be repaired by the Eastern Cape province.

Ms Dambuza wanted to know how many houses were built in the rural areas and how much was spent on them.

Mr Nxumalo replied that there were several categories applicable to housing delivery and that the NHBRC was engaged in some but not in others. He asked the member to provide specific details of the project where there were problems with the environmental impact assessments, as that would allow him to investigate further and report to her on whether the NHBRC was involved in that particular project.

Ms N Ngele (ANC) asked what the department’s priorities were for the provision of housing in the rural areas and whether the targets for 2007 were met.

Mr Nxumalo replied that a detailed report was compiled by KZN on the provision of houses in rural areas and that he would make the report available to the Committee. He added that the houses conformed to the minimum size standard of 40 m2 in the rural areas as well.

Mr Steyn asked how the completion of the blocked projects was funded as the funds from the conditional grants allocated to the province could not be used for this purpose.

Mr Nxumalo replied that completion of the blocked projects was included in the department’s planning. He said that a number of policies had been formulated in line with the minister’s focus and that funding was authorized after the department’s application was approved. He added that the approved funding was included in the overall grant funding.

Mr Steyn asked for clarification of the correlation between the number of sites provided and the number of top structures planned for those sites.

Mr Nxumalo explained that a serviced site must be available before construction of the top structure can commence. There was a correlation between the number of sites and the number of top structures but the difference was the time delay between the two issues.

Mr Steyn asked how many hostels were being re-developed in the province.

Mr Nxumalo replied that he did not have the exact figures to hand and would forward the information to the Committee. He added that in one project, a surrounding slum area was also cleared when the hostel was re-developed.

Mr Steyn noted that the department had no under-expenditure for 2006/07 and wanted to know what the targets were and how they were met.

Mr Steyn wanted to know what agreement had been reached between the KZN and Eastern Cape provinces regarding the houses built in Matatiele.

Mr Nxumalo replied that a task team and a coordinating committee led by the local MEC was appointed by the two provinces to deal with the Matatiele and Umzimkulu issues as it was a cross-boundary matter. The province responsible to resolve the various issues was identified and memoranda of agreement (MoA) were signed. In addition, the guidelines for dealing with subsequent matters arising after the signing of the MoAs were agreed. He explained that generally, the province who had budgeted for rectification was responsible for carrying out the repairs to the houses. He added that KZN had completed the tasks allocated to the province.

Mr Steyn asked for more information on the R120 million budgeted for social and economic facilities under the Housing Development Implementation programme.

Mr Nxumalo replied that this referred to the policy approved by the housing MinMEC in 2005 to include the provision for social and economic amenities such as community halls and sport and recreation areas in housing development over the next three years.

Mr B Dlamini (IFP) asked what challenges the department faced in the re-development of the hostels and how they were overcome, especially in the light of an absence of clear guidelines and the reluctance of local governments to be involved in these projects.

Mr Nxumalo replied that the reasons why KZN province was successful in the re-development of the hostels were that the department had developed very good relationships with the municipalities and was able to contribute funding for the projects. He added that in some cases, the municipality involved had also contributed funds towards the costs of re-development. He noted that with regard to Kwa Mashu in particular, there was a great improvement in the area since the re-development of the hostels into family units and the removal of the surrounding shacks.

Mr Schneemann asked for clarity on who was funding the social and economic development projects. He wondered if the department was providing the funds for the initial development over the next three to four years and thereafter they were to be funded by the municipalities. He wanted to know if facilities that were neither provincial nor municipal responsibilities (such as police stations and schools) were included in the projects and how many (if any) were planned and implemented.

Mr Nxumalo replied that the department had formulated detailed policies and project plans and that funding for the projects was approved by the housing MinMEC. The projects included a range of amenities such as sport fields, market stalls, clinics and taxi ranks. He added that funds were limited and that it was important that the department worked closely with the municipality as it would have to take the responsibility for further development and maintenance of the facilities. The plan was implemented in a number of new and existing developments and included the ongoing maintenance and development by the municipality.

Mr Steyn remarked that when the Committee visited the Eastern Cape a week prior to the meeting, the members were told that there was no agreement with KZN on the matter of the rectification of the houses in Matatiele. He wanted to know when the agreement was signed.

Mr Nxumalo replied that there were two committees appointed to deal with the KZN / Eastern Cape matter – one was a technical committee and the other was at a provincial level. The MoAs were signed during the last financial year (June / July 2006) at the provincial level and it was agreed that KZN would continue with and complete all housing projects in Matatiele and the Eastern Cape will do the same in Umzimkulu. The agreement was amended in December 2006 to include matters that arose subsequent to the original signing, and was on record.

Mr Steyn commented that the department had a 67% vacancy rate for personnel responsible for monitoring the quality of construction projects and asked what the department had done about this. He asked if the problems in the department in respect of the lack of internal controls to prevent incidents of fraud as reported by the A-G were attended to.

Mr Nxumalo replied that applicants to fill the last 14 vacancies were being interviewed and it was expected that the lack of personnel to carry out the monitoring function would be resolved. He added that the department had a functioning internal control section.

The Chairperson explained that the Committee wanted to know who was responsible for the design of the uninhabitable houses built in Matatiele and who had approved them. She said that although the members understood that the problem was an inherited one, she felt that it could have been prevented by adequate monitoring and quality control taking place during the construction phase. She mentioned that the Committee would be forwarding a report to the KZN MEC for housing on the member’s recent visit to the area.

Mr Nxumalo noted the Chairperson’s comments and said the department looked forward to receiving the committee’s report.

Limpopo Provincial Government – DLG&H presentation
Mr Daniel Molokomane, Deputy Director-General – DLG&H – Limpopo Province, delivered the department’s presentation on behalf of the MEC, Ms Maite Nkoana-Mashabane, to the committee.

Mr Molokomane outlined the department’s key objectives and listed the four main programmes under the department’s housing development responsibility (see attached document). The department’s achievements during 2006/07 included the completion of 12 366 houses (against a target of 13 268) mainly in the rural areas, the establishment of a toll free line to address issues of quality and fraud, the training and deployment of 66 project managers responsible for monitoring at municipal level and the reduction of the time to effect payment to contractors to an average of eight days.

Mr Molokomane reported that three well-located pieces of land situated in Lephalale, Phalaborwa and Polokwane were purchased for the implementation of the Breaking New Ground (BNG) policies of the department. He explained that the department was addressing the issue of informal settlements with a two-pronged approach – to provide suitable, new land for development and to upgrade the existing settlements in order to supply housing with access to the economic development areas. In addition, the department had signed a memorandum of understanding with the Northam Platinum Mine to construct 300 houses for occupation by the current hostel-dwellers. The department had developed a Multi-Year Settlement Plan to identify growth nodes and to guide housing development in those areas and had passed the Limpopo Housing Act of 2006 to pre-empt the sale of subsidized houses for a period of eight years.

In terms of financial performance for 2006/07, Mr Molokomane reported that the department’s total expenditure amounted to R648 million against a budgeted amount of R651 million.

The key challenges for the 2007/08 period were identified as delivery capacity constraints (i.e. the limited capacity of contractors to deliver on a large scale as well as constraints on the supply of materials such as bricks and cement), challenges related to planning co-ordination, the lack of suitable land for housing development, an increase in the migration from rural to urban areas and the challenges to complete the blocked projects.

Mr Molokomane listed a number of interventions initiated by the department to address the challenges, including the introduction of contracting strategies to mix highly capacitated and emerging contractors, emphasizing the importance of forward planning to municipalities by the identification of suitable land prior to development, the completion of blocked projects, the development of Housing Chapters in municipalities, forming partnerships with the private sector and the acquisition of well-located land for the development of sustainable communities.

The sub-programmes for 2007/08 included the construction of 6000 houses to upgrade current informal settlements at a cost of R230 million, the development of 2400 serviced sites at a cost of R38 million and the completion of 8495 units in blocked projects at a cost of R325 million. In addition, the department planned to transfer ownership to 3339 houses to beneficiaries at a cost of R8 million.

Other sub-programmes included the continued acquisition of suitable land for development, the development of housing policy, guidelines and regulations, the review and development of provincial and municipal housing plans and enhancing the capacity of municipalities and service providers to deliver the housing objectives. Mr Molokomane reported that the Polokwane municipality was in the process of becoming accredited and that the rest of the municipalities were to follow. The department was providing support for this process.

In conclusion, Mr Molokomane presented a monthly cash flow projection plan for 2007/08.

Discussion
Mr D Mabena (ANC) asked for the location of the three pieces of land that were acquired by the department.

Mr Molokomane replied that they were in Lephalale, Polkwane and Phalaborwa respectively.

Mr Mabena asked where the 66 trainees who were trained for deployment in the municipalities were recruited.

Mr Molokomane replied that candidates were mostly recruited from the technikons where engineering courses were offered, and that some interns completing their practical training in the department were also appointed. He added that there was no shortage of suitably qualified graduates who needed practical experience. He commented that although some trained staff had left for better-paid positions, 90% remained with the department.

Mr Mabena noted that there was a problem with the supply of materials such as bricks and wanted to know if the department had policies in place to support emerging suppliers, in particular women and the youth from disadvantaged backgrounds.

Mr Molokomane replied that the supply of materials was a serious challenge and that there was a shortage of bricks in the province because demand had outstripped supply. He advised that the department had introduced a transport allowance to allow for bricks to be sourced and transported from neighbouring provinces like Gauteng. He pointed out that the country as a whole could only supply 60% of the demand for cement and that alternative sources must be found as a matter of urgency.

Mr Mabena asked how many informal settlements were in the province and how many would be eradicated by 2010.

Mr Molokomane replied that he did not have the exact numbers to hand but the largest concentration of informal settlements was situated in Polokwane. Plans to eradicate all the informal settlements by 2010 were on track. He added that it was essential that housing was available for migrants from the rural areas to prevent squatting in informal settlements in the urban areas.

Mr Schneemann noted that although the number of units in blocked projects was given, no details were provided on the number of blocked projects. He wondered if there were any remaining blocked projects and when these would be completed. He asked how long the blocked projects remained uncompleted.

Mr Molokomane replied that the department used the number of units involved in blocked projects rather than the number of projects as a measurement. He stated that the 8 495 units were the target for 2007/08 but there were more units scheduled for completion over the next three years.

Mr Schneemann noted a peak in expenditure in March 2007 but that the cash flow projection indicated no such pattern in 2008. He asked why this was not expected to occur again and remarked that it was useful to the committee to receive similar cash flow projections from all the provinces.

Mr Molokomane explained that contractors were reimbursed on submission of a claim but that the expenditure was only accounted for on completion of the project. He said that during 2006/07, most of the projects were finalised at the end of the year and the paperwork was completed at the beginning of the year. He added that the process of land acquisition was lengthy and the purchases of land during 2006/07 were only concluded at the end of 2006, with payment falling due at the beginning of 2007. He said that the department’s experience was that the highest expenditure occurred at the end of the year when contractors submitted their claims before having to pay out annual bonuses. He stated that the department was working very hard to smooth out the year-end peak as this had a negative effect on its cash flow.

Mr Schneemann asked what impact the D-G’s directive on the limitation of the housing subsidy to the construction of the top structure would have on the department. He asked for the assurance that there would be no delays in the provision of houses as a result of problems experienced by the department with the provision of bulk infrastructure in both urban and rural areas.

Mr Molokomane replied that in terms of the D-G’s directive, an amount of R38 000 was available for the top structure plus an additional R15 992 for internal reticulation. Where the municipality provided a serviced site, the total amount of R54 000 could be used for the top structure. He said that so far, municipalities were able to donate serviced sites, but the new land was not serviced and the provision of bulk infrastructure involved major cost. He added that discussions were under way between Local Government and the Department of Housing to address the challenge of providing funds for bulk infrastructure developments.

Mr Steyn noted that 12 366 units were completed and asked what the target was.

Mr Molokomane did not reply to the question but had mentioned a target of 13 268 units for 2006/07 in his earlier presentation.

Mr Steyn commented that the toll-free line was introduced country-wide and asked what percentage of the 10 000 calls received were for the Limpopo province.

Mr Molokomane replied that approximately 90% of calls to the department’s toll-free number were for the Limpopo province and the balance related to projects in other areas. He added that the department replied to the queries within three to four days and that the calls were referred to the project managers in the relevant municipality for action.

Mr Steyn asked what percentage of the department’s waiting list was to replace dwellings in the informal settlements.

Mr Molokomane replied that most projects were the in situ upgrading of settlements in the rural areas where 45m2 houses were being built. He stated that 7 000 houses in rural areas and 5 000 in urban areas were built during 2006/07.

Mr Mabena asked how many women contractors were supplying services to the department.

Mr Molokomane replied that in 2006/07, 32% of contractors were women and that the department expected this number to increase.

Mr Mabena asked how the department utilised the R15 992 portion of the subsidy intended for providing services in areas where there was no bulk infrastructure.

Mr Molokomane replied that houses of 40m2 were constructed in both rural and urban areas but that the service subsidy portion was used in rural areas for the installation of Ventilation Improved Pit (VIP) toilets as bulk sewage infrastructure was not available.

Mr Mabena asked whether the three pieces of land that were acquired by the department were sufficient to absorb the waiting list.

Mr Molokomane replied that the land purchased in Lephalale was sufficient for 5 000 houses. He added that consultations were under way with Eskom to provide a further 3 000 houses in an integrated settlement for a mix of Eskom employees. He offered to provide the Committee with a written report on the Ellisras project.

Mr S Masango (DA) referred to the Thabo Mbeki development that was built in a very remote area and asked what the department planned to do about it.

Mr Molokomane replied that the emphasis in future would be on the building of sustainable communities with access to water and bulk services rather than on simply the number of houses that were built.

Mr Masango commented that the shortage of materials provided opportunities for unemployed persons and wondered if Government provided any support for emerging entrepreneurs.

Mr Molokomane replied that he was aware of some Government interventions regarding the supply of bricks for the housing projects. He added that entrepreneurs must also develop their own enterprises as there was a demand for building materials and there were various sources of funding available to them.

Mr Schneemann asked for clarity on the R15 992 portion of the subsidy intended for the provision of services and was concerned that the impact of the D-G’s directive would result in fewer houses being built. He asked if there were any parameters.

Mr Molokomane replied that the D-G had issued a directive that provided all the information about the subsidy. He explained that the R15 992 portion was intended for the connection of the house to the bulk services. He stated that the provision of bulk infrastructure was going to be a major issue in future and the department expected an increase in its allocation over the next three years as a result.

Mr Steyn insisted on an answer to his question about the department’s target for the number of units to be built in 2006/07.

Mr Molokomane replied that the target was 13 268 units.

Mr Steyn stated that he did not understand the explanation given for the peak in the March 2007 expenditure and expressed his concern that funds were being dumped at the end of the financial year.

Mr Molokomane pointed out that the department had spent 99% of its budget for 2006/07 and mentioned that it was congratulated by the Department of Housing on the correlation between the number of units built and the amounts spent per unit.

Ms Kota remarked that an excessive amount of R255 million (out of a total expenditure of R648 million for the year) appeared to have been spent during March 2007 and asked if the department had transferred funds to a housing agency.

Mr Molokomane replied that most of the March 2007 expenditure was for the purchase of the land mentioned in his presentation.

Mr Mabena accepted Mr Molokomane’s reply regarding the land purchased in Lephalale but also wanted to know about the land that was bought in Phalaborwa and Polokwane.

Mr Molokomane replied that the land purchased in Polokwane was 17.6 hectares in extent and that in Phalaborwa measured 6 hectares. The department intended to develop social housing projects that will integrate communities.

Mr Mabena asked if the department was involved in any projects to re-develop hostels.

Mr Molokomane replied that funding was not available for hostel re-development projects and added that it was necessary to conduct a study to determine the economic needs of persons currently occupying the hostels before re-development could take place.

Mr Mabena asked if there were any interactions with the local kings, princes and princesses regarding tribal land and if any land was available for housing development in tribal areas.

Mr Molokomane replied that most of the work done in the tribal areas was the in situ upgrading of existing dwellings and the replacement of houses destroyed by recent flood disasters.

Mr Steyn asked for a written report to explain the department’s excessive expenditure in March 2007. He stated that the funds available were a conditional grant that should not to be used for buying land.

Mr Molokomane pointed out that one of the major objectives contained in the DORA for 2006 was the acquisition of land for housing developments. He added that the land purchases were budgeted for in 2006/07 and that this was approved by Treasury.

The Chairperson suggested that the matter be discussed outside the meeting. She pointed out that houses could not be provided if no land was available and that it was necessary for funding to be used for this purpose.

Eastern Cape Provincial Government – DLG&H presentation
Mr Johan Gerber (Manager - DLG&H – Eastern Cape Province) presented the department’s report on its performance during 2006/07 and the budget for 2007/08 to the committee (see attached document).

Actual expenditure during 2006/07 amounted to R636.8 million (84%) against a total conditional grant allocation of R761.9 million. R84.9 million of the under-spent amount of R125.1 million was withheld by the Department of Housing and R40.1 million was retained. Mr Gerber provided a breakdown of the expenditure and listed the department’s non-financial achievements.

Mr Gerber presented the department’s budget for 2007/08, totaling R1,052.5 million. An amount of R629.2 million was allocated to project-linked subsidies and R248.2 million to informal settlement upgrading.

Mr Ngwadi Mzamo (General Manager - DLG&H – Eastern Cape Province) explained that 103 of the original 175 blocked projects had been completed and the department expected to complete the remaining 72 during 2007/08 at a cost of R129 million.

Mr Mzamo advised the Committee that the increased expenditure during March 2007 represented advances paid to contractors for large development projects in Buffalo City and Nelson Mandela municipalities. He said that the D-G’s directive for the minimum size of the houses and the restriction on the amount of the subsidy for the top structure would have a negative impact on the number of houses that could be built by the department.

Mr Mzamo said that the department intended to use the R85 million withheld by the DoH for the rectification of houses built between 1994 and 2002. It had applied for the balance of the under-spent amount of R40 million to be rolled over to 2007/08.

Discussion
Mr Mabena remarked that people living in the Alfred Nzo municipality were subjected to unsanitary sewerage systems and were at risk of cholera. He wanted to know why the department had not used the available funds to correct this situation.

Mr Mzamo replied that the replacement of the septic tanks in the Alfred Nzo municipality was included in the planned rectification projects. He added that a meeting with the Alfred Nzo municipality and the Department of Water Affairs and Forestry to address the issue had been scheduled.

Mr Mabena asked for clarification on the 14 761 title deeds transferred and the 17 768 houses under construction that were mentioned in the report.

Mr Mzamo replied that no title deeds existed for houses that were built in the former Transkei. The department had appointed conveyancers to deal with this matter and they had met with officials from Bisho in an attempt to speed up the process. He said that the houses under construction were the R350 million Matatiele projects A and B. An assessment was done and the report was in the process of being compiled.

Mr Steyn commented that the department’s report on the 17 768 houses under construction differed from the impressions gained by members of the committee during a recent visit to the province. He said that he was informed during his visit that no agreement existed between the KZN and Eastern Cape provinces (regarding the houses built by KZN in Matatiele).

Mr Mzamo replied that an agreement was definitely signed and subsequently amended. He added that it was possible that the person the committee member spoke to was unaware of the agreement.

Mr Steyn noted that the department had under-spent its allocation in the previous year yet presented a new budget for almost double the amount that was actually spent. He asked how the department planned to effectively apply the allocation when it had a 43% vacancy rate.

Mr Mzamo agreed that the lack of resources resulting from the high vacancy rate was a constraint and stated that the department had implemented an aggressive recruitment campaign and was in the process of appointing candidates. He added that the department was phasing out the use of contracted project managers and was employing permanent staff. The regional offices were in the process of being re-established in order to provide improved service levels.

Mr Mzamo said that plans for a number of projects were finalised at the end of 2006 and would be implemented during 2007. He was confident that the department would spend its allocation during the coming year.

Mr Steyn said that a year ago, the department had no policy in place for the collection of rents and did not know how many rental properties it owned yet now it included a budget of R12 million for the maintenance of rental properties.

Mr Mzamo replied that a rental policy was formulated and an agency was contracted to identify all the rental properties owned by the department.

The Chairperson asked how the department could justify an under-spent amount of R40 million when there were 600 people in the area who were living in tents. She asked for an undertaking from the department that houses would be provided, by the end of 2007, for all these people.

Mr Mzamo gave the assurance that the MECs target for the year included the eradication of all the tents. He said that the department was working with the affected municipalities to erect temporary shelters that were better than the tents.

Mr Schneemann welcomed the department’s commitment to address the problems in the Mount Frere and Mount Ayliff areas and their inclusion in the rectification plans. He asked for an indication as to when these projects would be completed.

Mr Mzamo replied that the Mount Frere and Mount Ayliff projects were on the agenda for discussion with the allocation committee later in the week. The projects included both the completion of blocked projects and rectification of dwellings. He said that there was a need to commence building as soon as possible.

Mr Mabena considered the erection of temporary structures to house the people who had been living in tents since 2000 to be a waste of money. He asked why the department was not providing them with proper houses.

Mr Steyn remarked that when the members visited Matatiele two weeks prior to the meeting, a number of half-built houses were observed but not a single builder was on site. He suggested that alternative building methods must be considered that blended in with the environment.

Mr Mzamo replied that the MECs from the KZN and Eastern Cape provinces had met in March 2007 and reached agreement on the outstanding issues regarding Matatiele. He agreed that alternative building methods need to be investigated that would preserve the character of the region.

Mr Mzamo added that the department’s turnaround strategy was unfortunately finalised too late in the year. Had it been finalized earlier, he had no doubt that the entire allocation could have been spent.

The Chairperson concurred with the members’ concerns and informed Mr Mzamo that the Committee planned to re-visit the area in six months’ time. She approved of the department’s turnaround plans and remarked that attention must be given to improving the standard and quality of the houses that were built.

Northern Cape Provincial Government – DLG&H presentation
Ms R Soodeyal, Executive Manager - DLG&H – Northern Cape Province, apologised for the absence of the MEC. She presented the department’s budget for 2007/08 and a report on the achievements for 2006/07 (see attached document).

The department’s total allocation for 2006/07 amounted to R104.77 million, of which R104.71 million was spent. A roll-over request of R60000 was submitted to Treasury. Ms Soodeyal provided a breakdown of the expenditure as well as the monthly and quarterly cash flow during the year. The department had appointed Thubelisha as the housing agency to assist the department with the implementation of housing projects. Challenges during the year included a lack of capacity in the department and problems with non-performing contractors, which resulted in legal action being taken against them. New service providers were appointed. During the year, a total of 2295 houses were built against a target of 2100. The department had 52 blocked projects, of which 25 were completed and 24 were under construction and scheduled for completion by March 2008. Due to budget constraints, the remaining three blocked projects were planned to be completed in 2009.

The department’s conditional grant allocation for 2007/08 was increased to R130.976 million (an increase of 20% over the previous year). The amount excluded funding for the cross-boundary projects taken over from the North-West province. Projects budgeted for included the construction of 2 666 new houses and the provision of 2 785 serviced sites at a total cost of R125.177 million. Provision was made for maintenance on 27 units, the transfer of ownership of 3 055 units and the cost of providing emergency housing.

Ms Soodeyal reported that the department had a housing backlog of 40 000 in the Northern Cape plus an additional 20 000 from the North-West province. In terms of the cross-boundary agreement with North-West, the Northern Cape were taking over the completion of two of the seven housing projects (1100 units), with North-West completing the other five projects (3450 units).

Discussion
Ms Kota remarked that, during a visit to the province in September 2006, the Committee observed that housing appeared to be at the bottom of the municipalities’ priorities. She wanted to know if the situation had since improved.

Ms Soodeyal replied that an independent service provider was appointed to assist the municipalities with compiling their housing sector plans and that these were due for completion in July 2007.

Mr Mabena noted that the department had a waiting list of 60 000 but that relatively few houses were being built. He asked if the previous problems with the title deeds were resolved.

Ms Soodeyal confirmed the size of the waiting list and stated that the department was constrained by the lack of funding and capacity. She said that the matter of the title deeds was resolved with the Deeds Office in Cape Town and added that the surveying of the land was in progress.

Mr Mabena queried that no mention was made about the re-development of hostels in the department’s presentation.

Ms Soodeyal replied that the hostels in the province belonged to the mines and were therefore privately owned. She conceded that there was potential to re-develop the hostels into family units if ownership could be transferred to the department.

Mr Mabena asked what the reason was for the non-performance of the contractors.

Ms Soodeyal replied that four contractors were paid by the department for projects they had undertaken but they absconded without completing them.

Mr Masango asked what was being done by the department to improve capacity.

Ms Soodeyal replied that since her appointment, the vacancy rate was reduced from 40% to 15%. She added that the department was in the process of restructuring and planned to appoint several contractors to permanent positions in the near future.

Mr Masango asked why completion of the three remaining blocked projects was postponed to 2009/10.

Ms Soodeyal replied that an additional amount of R40 million was required to complete these projects and that the allocated funds for 2007/08 were not sufficient. She added that an application for additional funding was made by the MEC to MinMEC.

Mr Steyn asked what the outstanding amount was from the non-performing contractors.

Ms Soodeyal undertook to confirm the amounts involved to the Committee in writing.

Mr Steyn expressed concern that too much reliance was placed on external contractors such as Thubelisha instead of building the necessary capacity within the department.

Ms Soodeyal replied that it was the department’s intention to phase out Thubelisha as it increased its own capacity.

Mr Steyn felt that not enough emphasis was placed on the eradication of informal settlements and asked how the department planned to address this issue and where it was provided for in the budget.

Ms Soodeyal replied that two projects were undertaken in 2004. The one at Ouboks comprised 2 220 units and the estimated cost was R130 million (equal to the department’s entire 200/08 budget). The other settlement involved 5000 units. She estimated that at the current rate of progress and the limited funding available, it would take six to ten years to eradicate these settlements but that it could be completed in two to three years if the developments were fast-tracked. She added that the MEC was applying for additional funding for these projects as well.

Mr Steyn asked whether the problems previously identified with the cross-border projects were resolved.

Ms Soodeyal replied that the department was concerned by the slow progress and the low quality of construction in these projects but was working with North-West on resolving the issues.

Mr Steyn asked if the design of the houses was changed to provide for more adequate ablution facilities.

Ms Soodeyal replied that a tender was put out for the installation of washing and toilet facilities inside the houses.

Ms Kota asked whether the Koi and San communities were being consulted about the design of houses for them.

Ms Soodeyal replied that the department was engaging with both communities to provide information and to educate them about the housing projects. She reported that the department was trying to acquire adjacent land and confirmed that the communities would be consulted regarding acceptable designs for the houses.

Ms Kota concluded that the department was considered to be a work-in-progress by the committee as a number of issues still needed to be addressed. She noted the progress that was made, in particular the reduction in the number of vacancies.

North-West Provincial Government – DLG&H presentation
Mr Iqbal Motala, Head of Department - DLG&H – North-West Province, reported on the department’s achievements during 2007/06 and presented the budget for 2007/08 to the Committee (see attached document).

The total allocation for 2006/07 amounted to R699.915 million, including R2.5 million rolled over from the previous year and R84 million received from the Taung Housing Emergency fund. The department spent a total of R696.544 (99.95%) of its budget during the year. Mr Motala provided a report on the monthly expenditure amounts. The department managed to complete 29 406 units and exceeded the target of 22 000 units.

Mr Motala presented the department’s business plan and budget for 2007/08. Total allocations amounted to R766.8 million with the major portion (R485 million) intended for the incremental housing programmes, which included the upgrading of informal settlements and PHP. The department’s target was to build 39 000 units in the twenty municipalities. Mr Motala mentioned that insufficient funds and a lack of capacity were the major challenges faced by the department in achieving its objectives. He pointed out that the department had 233 projects at varying stages of completion but that most of the initial planning work and provision of services had been done.

Discussion
Ms Dambuza asked where the cross-border projects with the Northern Cape featured in the department’s plans.

Mr Motala replied that the cross-border projects with the Northern Cape were included in the budget for the department’s incomplete projects, as North-West had agreed to complete them.

Ms Dambuza asked if the department was dealing with any blocked projects.

Mr Motala apologised for the omission in the presentation and said that the department had reduced the original 106 blocked projects to 58 with the assistance of Thubelisha and other service providers. He explained that the remainder could not be completed due to a lack of funds. He mentioned that the department was considering closing some of the blocked projects without completing all the units because the beneficiaries of those units could not be traced.

Ms S Sigcau (UDM) asked what the department was doing about addressing the challenge of insufficient funds.

Mr Motala replied that additional funding needed to be made available where departments had the ability to complete projects and cited the example of the department’s success in eradicating the bucket system. He added that the provision of services and the building of houses were multi-year processed and funding could be spread over more than one year. He admitted that the target of 39 000 units for the coming year was steep but was confident that the department was able to manage the available funds and to avoid over-spending.

Ms Ngele asked why the department planned to build 1 500 houses in “Tswane”.

Mr Motala explained that the houses were planned for Tswaiing, which was a town in the province’s central region and not for Tswane.

Ms Ngele remarked on the good standard of the houses that were built by a group of women contractors in the Taung area.

Mr Motala explained that the houses were in one of the worst-hit villages in Taung and were part of the disaster emergency project to provide 2 000 houses. He said the women contractors were appointed by a main contractor and more than 1 000 houses had been completed.

Ms Dambuza asked to what extent the department suffered from a lack of capacity.

Mr Motala replied that the department experienced capacity problems similar to those of the other provinces. He explained that the approach was to use two or three large contracting firms and to ensure that those firms provided opportunities to local emerging contractors. He added that this approach required ongoing monitoring to ensure the desired result was achieved.

Ms Dambuza asked what progress was being made in the development of the youth.

Mr Motala explained that the department had access to funds from the former Boputhatswana and worked with the Department of Labour to utilise the money made available for the improvement of skills in the construction industry. He said that the most successful youth development programme was in Moses Kotane municipality where 746 young people were trained. He added that some of them were now supplying the platinum mines with bricks and roofing materials rather than the department’s housing projects.

Ms Dambuza asked if the department experienced a shortage of available land for housing development.

Mr Motala replied that sufficient land was still available and that much land in the province belonged to Government and could be made available. He admitted that there was a shortage of well-located land as most of the available land comprised extensions of the former group areas. These areas were however long-settled and provided with services by the municipalities.

The Chairperson noted that the department took the provision of emergency housing seriously. She asked how much of the budget was earmarked for women.

Mr Motala replied that a percentage of the budget was committed for the benefit of women contractors but admitted that much of it remained unused as so far the department had not managed to influence the municipalities (who did all the procurement for the housing projects) to give precedence to women contractors. He added that the department had developed a database of women contractors and had specified in tender advertisements that only women contractors need apply.

Ms Kota asked if the department had formed relationships with other housing institutions.

Mr Motala replied that the only direct relationship with a housing agency was with Thubelisha.

Ms Ngele asked for more information on the PHP projects.

Ms Kota asked for an update on the progress made with a named hostel in the area. .

Mr Motala replied that the department faced a financial challenge to provide the necessary services to the hostel but this was now resolved and good progress was made. He regretted that the committee was unable to inspect the hostel during their last visit to the province.

Mr Steyn commented that there was a difference between Incremental Housing projects and PHPs. He asked for an update on the Moses Kotane youth development programme.

Mr Motala noted Mr Steyn’s comment and offered to provide a detailed progress report on the Moses Kotane programme to the committee.

Mr Steyn complimented the department on its achievement in completing more than 29 000 houses during the previous year.

Mr Motala concluded by commenting that the department was reaping the benefits of the forward-planning efforts that were made during the last three years.

Gauteng Provincial Government – DLG&H presentation
Ms Benny Monama, Head of Department - DLG&H – Gauteng Province, apologised for the absence of the MEC and presented the department’s 2006/07 achievements and 2007/08 budget to the committee (see attached document).

The total budget allocation for 2006/07 amounted to R2.171 billion of which R2.137 billion was spent on the department’s five programmes. Details of the service delivery achievements were provided by listing the actual outputs against the target outputs for each of the department’s sub-programmes (refer to the attached document.

Ms Monama presented the department’s budget for 2007/08, totaling R2.638 billion. She provided a breakdown of the appropriation for the four main programmes as well as the conditional grant allocation for each of the main responsibility areas. A cash flow projection for the year was given. The bulk of the funds (R2.379 billion – 90%) were earmarked for the Housing Development Implementation programme.

The challenges faced by the department included linking beneficiaries to the housing subsidy, shortening the long lead-time in the provision of houses, the lack of suitable land for development and the integration of communities, increasing the rental stock, finding alternative sources of additional funding, increasing capacity within the department and finding alternative construction methods to brick and mortar.

Discussion
Ms Ngele asked for more details of the hostel re-development projects.

Ms Monama replied that there were 60 hostels in Gauteng. Initially, the department attempted to make the hostels more livable by correcting defects while plans for the re-development into family units were drawn up. She anticipated that the plans would be finalized by the end of 2007. She reported that construction had commenced at Sebokeng to convert the hostel into family units and that those at Atteridgeville and Mamelodi had been completed. She remarked that funding for the projects was a challenge as each unit cost R74 000 to convert and the municipalities who owned them were not always able to provide the additional funds.

Ms Ngele commented on the poor quality of houses in the Shoshanguve area and asked what was being done to correct the situation.

Ms Monama replied that the damage to the houses was a result of the poor quality of materials used in their construction. The department had a programme in place to identify and correct the defects and progress was being made, particularly in Mamelodi and Hammanskraal.

Ms Dambuza asked what progress was being made on the pilot projects. She understood that there were some challenges with the provision of amenities and asked whether the department or the municipality was the main driver in getting the problems resolved.

Ms Monama replied that the pilot projects were progressing according to plan. The main challenge was the provision of power and the department had held discussions with Eskom. Facilities were being provided and included schools, clinics, recreation areas and roads. She added that the Department of Health was involved in discussions to include a hospital in the area.

Ms Dambuza remarked that not everyone was buying into the developments in Bekkersdal and asked what progress was being made.

Ms Monama answered that the projects were progressing according to plan but there was a need to acquire more land to re-settle those communities who were currently living on dolomitic ground.

Ms Dambuza asked for more information on the housing assistance provided to farm workers in Gauteng.

Ms Monama replied that the province only had one rural project, comprising 200 units. She mentioned that progress was slower than expected because there was no bulk sanitation infrastructure in the area.

Ms Dambuza reported that although the houses that were being built for the social housing programme were of a high standard, people complained that they were very expensive. She also wanted some assurance that the good standards will continue to be applied.

Ms Monana cited the example of the project completed in Kliptown where the houses offered on a rent-to-buy basis were oversubscribed. The high rents were being charged to recover the cost of development and the department risked over-capitalising unless additional funds were injected to cover the cost of managing and maintaining the project. She reported that the MEC was assessing alternative sources of funding to make the houses more affordable. Alternatively, the projects might have to be re-assessed to deliver more affordable options.

Mr Steyn noted that there were several instances where targets were not met, yet the department had spent the bulk of its allocation for 2006/07. He asked for an explanation from the department.

Ms Monana responded that the developments were demand-driven and she was aware that not all targets were met. Some of the explanations were linked to beneficiaries who could not be traced and inadequate linking of the subsidies.

Mr Steyn asked why only 5 144 transfers out of a target of 12 000 were finalised in terms of the Discount Benefit Scheme.

Mr Steyn remarked that the A-G reported a year ago that the department had no procedures in place to identify fruitless and wasteful spending, and wanted to know if such procedures had now been put in place.

Mr Steyn asked whether the presidential projects in Alexandra and Bekkersdal were still in place and wanted to know if the R8 million set aside for the re-location of the Bekkersdal inhabitants was sufficient.

Ms Monama admitted that the amount included in the budget was unlikely to be enough. She added that the initial target was for 2 000 units but some of the projects were still in the initial planning phases.

At a later stage Mr Steyn commented that the Bekkersdal project was announced in 2003 and he was concerned that the department was still only in the planning phase.

Ms Monama responded that some of the projects were completed but the process was delayed because the area was spread across more than one municipality.

Mr Mabena noted that only two hostel re-development projects were completed and asked if more projects were being implemented.

Ms Monama responded that the department was committed to the upgrading of all the hostels but was constrained by the lack of funding available. She explained that they were able to complete the two projects in Tswane because the municipality contributed 80% of the funds required. The other municipalities did not have sufficient funds available. She added that four hostels would be upgraded during the 2007/08 financial year.

Mr Mabena reported that there was dissatisfaction in the community over the department’s decision to build 36 m2 houses amongst the larger and more attractive PHP houses they occupied.

Ms Monana confirmed that 36 m2 houses were being built and that this had been the department’s norm for non-PHP developments. She felt that people generally understood the difference between the two types of projects. She was concerned about the department’s ability to meet the D-G’s new directive as 40 m2 houses were only built for PHP.

Ms Kota remarked that one of the issues in Cosmos City was the failure of the department to integrate economic development facilities. She added that the absence of community halls was another problem and the issue of security needed to be addressed because of the lack of a police station in the area.

Ms Monama replied that the Chairperson’s point was taken. She commented that the provision of housing tended to guide further development and the other departments needed to come on board to provide facilities like schools and hospitals. She pointed out that the other departments were also cash-strapped.

Mr Steyn asked where the hostel dwellers were accommodated during the re-development of the hostels.

Mr Steyn asked for an explanation of the difference between the transfer, sale and devolution of rental stock.

Ms Monama responded that the transfer of properties was outsourced to a service provider. Some problems were however experienced and a forensic investigation was underway.

Mr Steyn expressed his concern over the low numbers of affordable and high density housing being provided by the department.

Ms Monama replied that the department favoured projects where more units were delivered in a shorter period than the lengthier PHPs that deliver only 200 units per year.

Mr Steyn said that he did not understand how the department planned to reduce the rents by ploughing in more funds into the PHPs.

Ms Monama explained that loans were raised by the municipality to complete the Kliptown project and that the loan had to be repaid to the NHBRC. Funds were also needed to maintain the complex on an ongoing basis. The rents paid by the occupants were the only source of income but if the amount of the outstanding loan was reduced by a large cash injection, the municipality would be able to reduce the amount required to repay the loan.

Ms Dambuza wanted to know how the department planned to achieve its objectives when it had a lack of project managers. She wanted to know what role the construction SETAs played in addressing the skill shortages.

Ms Monama replied that the department was able to employ 45 project managers but more were needed. She added that trained staff were in great demand in Gauteng, where the Gautrain project and many other capital developments were under way. Engineering skills in particular were in short supply and candidates were being offered better salaries in the private sector.

Mpumalanga Provincial Government – DLG&H presentation
Ms Gladys Sibeko, Head of Department - DLG&H – Mpumalanga Province, gave an outline of the department’s presentation to the committee.

Ms B Mojapelo Chief Director - DLG&H – Mpumalanga Province, presented the department’s report on the 2006/07 conditional grant allocation and expenditure and the 2007/08 budget (see attached documents)

The housing grant allocated in 2006/07 amounted to R421 million but this was subsequently adjusted by R90.1 million. The department spent R329.9 million of the available R330 million (100%). The department did not report on the achievements, targets and expenditure of the housing projects in the province for the period. The lack of appropriate staffing and skilled personnel (particularly project managers) and the high vacancy rate within the department were listed as major challenges. Corrective measures taken included the re-organisation of the department into two directives responsible for housing and for local government, the appointment of 12 Cuban professionals in November 2006, securing contracts with suppliers of materials, termination and/or counseling of poor performing contractors and the purchase of land and buildings for development into integrated human settlements. In addition, the turnaround time for payment to contractors was shortened, efforts to increase the capacity of officials were continued and service level agreements were signed with two of the 18 municipalities.

The measures taken during the previous year allowed the department to identify eight main areas for housing delivery in the province in 2007/08. There was a shift in focus from smaller projects to larger scale deliverables and a substantial portion of the budget was set aside for land acquisition. The department was also in a position to complete some of the blocked projects and to accelerate delivery in slow-moving projects. A detailed breakdown of the number of units targeted and the amounts allocated to the municipalities was submitted. The total budget for 2007/08 amounted to R525.259 million.

Ms Sibeko commented that the concept of the Breaking New Ground policy presented the challenge to build new settlements. Since 1994, the focus was on building new houses to address the housing backlogs and little provision was made for additional facilities such as schools, clinics, community halls and roads. Thus funding was provided for the purpose of addressing the backlogs rather than for the building of new settlements. This issue was taken up with the MEC at the housing MinMEC. She requested the support of the Committee in raising awareness amongst other departments for the need to build new sustainable communities.

Ms Sibeko added that the planned acquisition of land included in the department’s budget was to allow for the completion of “old business”. New projects required intensive research and planning efforts before they could be effectively implemented.

Discussion
Mr Steyn asked what use was being made of the 12 Cubans and where were they deployed.

Ms Mojapelo replied that two were assisting the department with local government projects, four were employed as community architects on PHP projects and the rest were deployed as architects and project managers in the districts.

Mr Steyn asked what procedures were used in the appointment of the contractors whose services were subsequently terminated. He wanted to know if the department had suffered any financial losses as a result of these poor performing contractors,

Ms Mojapelo explained that incidents of fraud and collusion between officials and contractors were uncovered when the department investigated the old, slow-moving and blocked projects. This resulted in disciplinary action being taken against the officials and the termination of contracts where fraud was involved. She undertook to provide the committee with a written report on the amounts involved and the progress made in the recovery of the money. She said that the contractors were originally selected from a database but that the department had since introduced new procurement and tender procedures.

Mr Steyn asked for clarity on the provision of amenities that were listed twice in the budget presented.

Ms Sibeko explained that one item referred to the provision of child care facilities and the other to community halls.

Mr Steyn asked for more information on the Mpumalanga Housing Finance Corporation (MHFC).

Ms Sibeko explained that the MHFC provided housing finance to sidelined and blacklisted people as well as the lower income groups.

Mr Schneemann said that the committee encouraged inter-departmental planning and budgeting and wanted to know what challenges and areas of resistance existed where the committee may be able to provide assistance.

Ms Sibeko replied that most departments had five year plans and were locked into the mind-set that the focus must be on the clearing of backlogs. Such an approach led to available funds being spent on clearing of backlogs alone and no provision being made for planning new developments. She proposed that efforts were concentrated on first clearing the backlogs and on finding alternative sources of funding. She added that it was necessary to set new combined goals to deliver the necessary schools, health care facilities, roads, water and electricity required by a housing settlement.

Mr Schneemann noted the department’s problem with the lack of skilled personnel. He asked what measures were taken to overcome this constraint and what the impact on housing delivery in the province was.

Mr Schneemann wanted to know how the department managed to spend 100% of its allocation in 2006/07 as most other provinces reported under-spent amounts.

Ms Mojapelo replied that R135 000 remained unspent at the end of the year.

The Chairperson noted that the department’s focus was on completing blocked projects rather than on spending on new developments. She wanted to know how many blocked projects there were and how many remained incomplete or blocked.

Ms Sibeko replied that the department decided in 2005/06 to clear all outstanding projects as soon as possible. She offered to submit full details to the committee in writing. She mentioned that an audit was currently in progress to determine the state of progress but that some projects were carried over to 2007/08 for completion.

The Chairperson related remarks made by some of the Cubans that South Africans tended to expect Government to provide them with housing instead of building their own houses. She wondered to what extent the people in Mpumalanga province participated in the building of houses.

Ms Sibeko agreed with the observation but pointed out that PHP allowed for contributions from owners. She said that there was a need to classify owner contributions as these were not necessarily financial and could include supplying building materials and skills. She added that the primary goal for many was to find employment and although people often left because they found a job after receiving training through PHP, a contribution was still being made because the person remained involved in the building of houses. She felt that PHP was unfairly discredited and there was a need to conduct further research and document the findings. She added that PHP was a slow process and it often took a long time for a person to raise the funds to allow participation in the project.

Mr Steyn requested that the department forward details of the outcomes for 2006/07 to the committee.

Ms Dambuza congratulated the department on the improvement in its performance.

The Chairperson thanked the department for its presentation and said that the committee intended to visit the province before the end of 2007 to inspect the projects under way and warned that particular attention will be paid to the quality of the houses that were provided.

Western Cape Provincial Government – DLG&H presentation
Ms Shanaaz Majiet, Head of Department - DLG&H – Western Cape Province, apologized for the absence of the MEC and introduced the members of the delegation to the committee.

Ms Majiet gave an overview of the department’s grant and other funding received during 2006/07 and provided details of actual performance in the same period (see attached document). Total funds available amounted to R997 million, of which R767 million was spent. R230 million was rolled over to 2007/08 – R226 million in respect of the N2 Gateway project and R4 million for the HSRDP. During 2006/07, the department completed 16 042 houses (exceeding the target of 16 000) and provided 18 543 serviced sites (exceeding the target of 18000). The 2006/07 allocation, actual expenditure and 2007/08 allocation per municipality were discussed in fine detail.

She presented the department’s budget for 2007/08. The total grant amounted to R948 million, excluding the R226 million rolled over from the previous year for the N2 Gateway project. R426 million was available for the N2 Gateway project and other major items included R307 million that was ear-marked for project linked expenditure, R305 million allocated to the upgrading of informal settlements and R143 million allocated to consolidation projects. PHP received R78 million, EHP got R64 million and R51 million was set aside for operational capacity development and disaster relief.

Mr Rob Smith, Director - DLG&H – Western Cape Province, listed the typical problems experienced by municipalities that affected their ability to deliver the desired outcomes and resulted in under-performance. These included delays while awaiting approval of the environmental impact assessments (EIA) (Breede River-Winelands, Overstrand and De Doorns), the lack of bulk services capacity, in particular sewerage and water supply (Berg River, Prince Albert, Cederberg and Matzikama), problems with contractors and slow progress (Witzenberg, Theewaterskloof, Beaufort West and George) and the invasion of newly-built houses (Breede Valley). He remarked that the provision of bulk infrastructure required significant amounts of money as a basic sewerage plant cost upwards of R50 million.

Discussion
Mr Schneemann remarked that any under-spending by a municipality on housing was regarded as a problem by the members of the committee. He asked what action the department took against municipalities that did not spend their allocations.

Mr Schneemann noted that several municipalities exceeded their allocations and two did so by more than 300% (Mossel Bay and Saldanha Bay). He asked for an explanation and wanted to know what action was taken by the department about the over-spending.

Mr Steyn also wanted to know why municipalities were allowed to over-spend on their allocations and where the funds to cover the shortfall came from.

Mr Steyn observed that municipalities were required to submit quarterly reports to the department and any delays should have been picked up and addressed at an early stage.

Mr Smith replied that the department shared the committee’s concern regarding under-performance by municipalities. He explained that five-year projections were provided and performance was closely monitored by the department. In the event of under-spending or serious delays, the department re-directed funds to other projects. This accounted for certain municipalities reflecting expenditure amounts in excess of their original allocations.

Mr Schneemann asked why R226 million for the N2 Gateway project was not spent during 2006/07 and rolled over. He added that, with R426 million available, he expected to see major progress in 2007 on this project.

Ms Majiet explained that there was a six-month delay between the application for and the receipt of the additional funds for the project. The funds were only made available in November 2006 and the department was unable to spend it all before the end of the financial year and applied for the balance to be rolled over to the following year. Most of the planning and preparatory work was completed for the next phases of the project and she assured the committee of significant delivery during 2007.

Mr Smith added that the department had recently agreed the project schedules with Thubelisha and the contractors and that there was every indication that the funds would be spent. He said the project was up and running and the department was managing the cash flow.

Ms Dambuza noted that no mention was made of blocked projects in the province.

Mr Smith replied that all blocked projects had either been completed or were closed off.

Ms Dambuza asked if the department had a policy in place to deal with the correction of defects in houses as a result of poor construction methods and materials.

Mr Smith confirmed that the department had a rectification strategy in place.

Ms Dambuza asked what the backlog for the upgrading of informal settlements was.

Mr Manny Sotomi, Chief Director - DLG&H – Western Cape Province, answered that the largest informal settlements were in the Cape Town metropolitan area and there were projects underway to install basic services and to identify the number of dwellings required. He added that particular attention was given to the settlements in the disaster-prone areas.

Mr Steyn wanted to know why the allocations to Prince Albert and Berg River were doubled when it was made clear that there was no bulk service capacity in those municipalities to support a housing development programme.

Mr Smith replied that funds were allocated to allow those municipalities to immediately implement their housing projects should Municipal Infrastructure Grant (MIG) funding be made available for infrastructure development.

Mr Sotomi added that there was a need to align the MIG funding for bulk infrastructure development with the project funding.

Ms Majiet said that the department had been aware of the infrastructure problems in the province for some time. The MECs met with the municipalities to discuss the matter on a regular basis, She felt that more MIG funding need to be made available for infrastructure development and felt that the formula for calculating the amount of MIG funds allocated should be changed. Alternatively, the housing grants should allow for the provision of bulk services and not be limited to the construction of top structures. She remarked that the inadequacy of the existing infrastructure made the area unattractive to investors and suggested that the state-owned enterprises were involved in upgrading the infrastructure as well.

Mr Steyn asked why the department had increased the allocation for PHP while it was reduced by most other provinces.

Mr Smith replied that PHP’s failed due to a lack of support of the organisations involved in them. He said that the department had restructured the section dealing with PHP’s, appointed three project managers to provide administrative support to the community, involved NGOs in the projects and raised additional funding to support the administration of the projects.

Ms Kota asked if adequate financial control was being exercised over the municipalities to prevent over- and under-spending.

Ms Majiet replied that the department had introduced more stringent financial controls and engaged in more active monitoring of expenditure by municipalities. She explained in detail the measures the department had introduced to keep control of the financial performance and progress of the municipalities.

Mr Mabena was concerned that funds were made available to the wealthier municipalities at the expense of the poorer areas.

Mr Smith replied that the bulk of the department’s funds were directed at providing housing to the poor. He cited Kyamandi in Stellenbosch as an example where a major plan was under way to upgrade the settlement and where the municipality was also providing substantial amounts out of its own funds for the project.

Mr Mabena was concerned that people were being settled far from the economic hubs and that available open space nearer the economic centres were not utilized.

Mr Sotomi replied that the department was considering using assets owned in the Cape Town city centre to rent out to key professionals such as nurses, teachers and firemen.

Mr Mabena wanted to know if the blocked project in Gordon’s Bay was going to be completed in the near future.

Mr Smith replied that Gordon’s Bay fell under the Helderberg municipality’s projects.

Mr Schneemann was perturbed by the informal settlements within the railway reserves and the potential for disaster should a train be derailed. He asked what plans the department had in place to resolve the matter.

Mr Sotomi replied that a pilot project was planned to move one of the informal settlements along a railway line to a site in Happy Valley. He remarked that dangerous areas tended to be re-occupied as soon as people were resettled on the assumption that people would be given houses sooner.

Mr Mabena asked if the department was doing anything to repair the dilapidated houses in Langa.

Mr Sotomi replied that most of the houses in Langa belonged to Cape Town and that the department continued to engage with the municipality to improve the housing stock it owned in the area. Mr Smith added that many of the hostels had been converted into homes.

Mr Schneemann remarked that the blocks of flats in Elsiesriver (near the airport) were also in a bad state of repair.

Ms Kota suggested that the renovation of old houses must be included in the municipalities’ planning.

Mr Steyn asked if the department experienced a peak in the cash flow at the end of the financial year, similar to the other provinces.

Mr Smith replied that there was no year-end spike.

Ms Kota asked if the department had a section that was responsible for dealing with the complaints, queries and correspondence on housing matters that were received from the public.

Ms Majiet replied that the department had such a section as well as a help desk to assist with general queries. In addition, a complaints manager had been appointed to deal with matters related to the rental properties.

The meeting was adjourned.