Outcome 8: Human Settlements: progress report by Department of Human Settlements

Meeting report

Mr Mbulelo Tshangana, Deputy Director General, Project Management Unit (PMU), National Department of Human Settlements extended apologies on behalf of the Director General and other staff who were away on ministerial duties.

Mr Tshangana presented a progress report on Outcome 8 looking at the objectives, outputs and targets set. He reminded Members that the objectives of Outcome 8 was to create a sustainable Human Settlements and improved quality of life. Outcome 8 encompasses upgrading of informal settlements, the National Upgrading Support Programme (NUSP), providing well located rental accommodation, the accreditation of municipalities, the efficient utilisation of land for human settlement development as well as an improved property market.

In 2010 DHS was contracted to deliver services to 400 000 households in informal settlements with the intention of ensuring that the households had access to security of tenure and basic services; the implementation of the National Upgrading Support Programme by upgrading informal settlements in 49 municipalities using a Technical Support Grant received from Treasury; deliver 80 000 well located and affordable rental accommodation units linked to the declaration of restructuring zones as the department was not rebuilding rental accommodation everywhere only in areas that were well-located, close to public transport amenities which makes it easy for people to commute. The department had undertaken Level 1 to Level 3 accreditation of 27 municipalities to undertake human settlements functions. The department had set a target of efficient utilisation of 6 250 hectares of land to be released human settlement development. Another target for the department was improved property markets by ensuring that the Mortgage Default Insurance Scheme, the Finance Linked Individual Subsidy Programme (FLISP) loans financed by finance development institutions was in place. This was to help provide relief for those needing affordable housing who were in the R3 500 – R15 000 monthly income bracket.

Mr Tshananga stated that the grants in this sector were dispersed to provinces and various entities. The department had asked the Minister to sign delivery agreements with the MECs as they were responsible for the implementation of the grant. The delivery agreement was signed between the Minister and the MECs, the National Director General and the Provinces to hold each other accountable where progress was not forthcoming. The targets and budgets for each financial year were contained in the provincial business plans and municipal built development plans. Mention was made of the Urban Settlement Development Grant (USDG) and the Human Settlement Development Grant (HSDG). The department already had a number of programmes which were used to assist in the upgrading of Informal Settlements such as the Upgrading of Informal Settlements Programme (UISP), Integrated Residential Development Programme (IRDP) and People Housing Process Project, Rural Housing Programme and Emergency Housing Programme. Also other funding streams grants were the Municipal Infrastructure Grants (MIG) which goes outside the Metropolitan centres and the Rural Housing Development Grant (RHIG) specifically for sanitation were available for use.

Performance was measured in terms of formalisation of informal settlements whereby lives of the people were improved through access to basic services such as water and sanitation, electricity, refuse removal and access to roads.

Security of tenure was an aspect of upgrading that was being addressed. Firstly it should be established that an informal settlement was upgradable as some were located in hazardous areas.  If a settlement was upgradable and geo-technical evaluations were carried out then low level security of tenure was offered to the beneficiaries to assure them that they would not be moved but upgraded where they reside.

The department presented its statistics for achieving the 2014 targets as of 30 September 2013:

Upgrading of informal settlements:
263 989 households were provided with upgraded services representing a 65.9% achievement of the 2014 target for services. Provinces had delivered 205 239 formal housing units to households in informal settlements of which an estimated 123 143 units were constructed on newly serviced sites. In terms of overall achievement 382 915 households had been provided with upgraded services representing a 95.7% achievement of the 2014 target. Some provinces performed exceedingly well whilst other provinces performed below their set targets.

Provincial performance showed some provinces such as the Free State (139%), Gauteng (105%), the Northern Cape (168%)  and Western Cape (104.8%) performed exceedingly well - beyond their 2014 targets, whilst other performances such as Kwazulu Natal were just below their target (75.8%).

National Upgrading Support Programme (NUSP):
There were more than 720 informal settlements in the country due to urbanisation which was a global phenomenon. More people were moving to urban areas seeking jobs but could not afford accommodation hence the creation of the National Upgrading Support Programme (NUSP). It intended to assist municipalities to put processes in place to upgrade informal settlements. Upgrading took a lot of time and required expertise, and enumeration must be conducted to count each house, identify the beneficiaries and carry out a geo-feasibility study. All this could take as long as ten years. Currently technical assistance was being offered to 43 municipalities.

Increased provision of  well-located rental accommodation:
The national department acknowledged underperformance as the target was to provide 80 000 rental units and it had managed to deliver 33 020 units. This was attributed to funding restraints since the programme was funded by different programmes such as the Social Housing Programme, Community Residential Unit Programme (CRU) and the Institutional Housing Subsidy Programme. The department stated that it was very difficult to package a housing programme and this was worsened by the fact that the department failed to do a reality check in 2009 to assess whether the existing budget was sufficient for the targets set. Overall the department achieved only 41.3% of its 2014 target and this made it very unlikely that it would be able to meet the target. In addition, to providing rental units, the programme aimed at increasing home ownership through rent-to-buy so that those in the R1 500 to R7 000 income bracket could build up a credit record so that they could afford to buy.

Accreditation of Municipalities:
The department had managed to accredit eight District Municipalities/ Municipalities with Level 1 accreditation; 8 Metros / 12 District Municipalities/ Local Municipalities had received Level 2 accreditation. Implementation protocols had been signed with 24 municipalities. No metros had yet recevied Level 3 accreditation. Six Metros were supposed to have been assigned Level 3 accreditation by July 2014 pending Cabinet approval which meant that grants would be disbursed directly to them and allow them to take full control of the provision of housing in their areas. The Financial and Fiscal Commission had identified a number of operational issues that are currently receiving attention. The target date for signing the Executive Assignment Agreement is still being negotiated.

Efficient utilisation of land for human development:
The department targeted to deliver 6 250 hectares of land and the department had identified 278 497, 9 hectares of land for assessment of which 70 934, 8 hectares had been assessed for suitability for release.  A total of 7 587, 4 had been released in the Free State, Gauteng, Kwazulu Natal, Limpopo and the North West. The land was to be utilised to extend existing settlements, land tenure upgrading, integrated development or the GAP market. About 10 218, 9 hectares of private land had been acquired but not much had been done with land. The efficient utilisation of land for human development was faced with many challenges such as lack of capital funding for acquisition, poor land release turn-around time, company interest on land, land claims on some prioritised properties, poor planning and preparation for acquisition and release of land. Also some of the land needed to be rehabilitated and would cost a lot of money.

Improved property market: The department achieved 55.3% of its 2014 target for the provision of 600 000 housing finance opportunities to households in the GAP market. The performance for this output target was low due to the fact that property markets and the economy were not performing well. Also the insurance scheme, the Mortgage Default Insurance Scheme (MDI), which was meant to incentivise lending institutions to lend more, was not yet in place. However Treasury was working on the model, to attract more private bankers such as FNB and Standard Bank. In addition, the Financed Linked Individual Subsidy Programme (FLISP) had been reformed as it was not working. For instance, banks were not happy with the pre-emptive clause which speculated that if the owner of the house wished to sell, government should have first priority. As a result many people resorted to selling their houses on the black market at prices below the market value. Also it was difficult for government to enforce the pre-emptive clause as there were insufficient mechanisms in place to do so.

Also under this output, the department was targeted to deliver the rationalisation of Development Finance Institutions. The amalgamation of NFHC, RHLF and NURCHA was underway as per cabinet directive and a service provider was already appointed to prepare due diligence. The presentation contained a breakdown of each DFI’s contribution. In total banks had contributed 94 772 loan opportunities which brought the total up to 331 679 representing a 55,3% achievement of the total target.

Discussion
Ms M Themba (ANC, Mpumalanga) thanked Mr Tshangana for the presentation. She noted that it was interesting that there were employers who were interested in helping employees to acquire housing and it would be in the Members’ interest to know about such employers or companies.

Ms Themba asked for a provincial and gender breakdown of the loans granted. She wanted more details on the number of women who had benefited from the loans so comparisons could be made on how many women could now say they owned a house as compared to the apartheid era where women were not allowed to get a loan. She asked about what mechanisms were used for monitoring or if there was any kind of reporting mechanism and how often was monitoring conducted.

Ms Themba recommended that it was important for the National Department of Housing (NDoH) to communicate with the Committee so that Members could be assisted when doing their constituency work. She referred to Orange Farm which the Members visited and found that some residents had been at Orange Farm for a long time and some had taken initiative to mould bricks so that they could construct their own houses but were stopped. She asked the NDoH to clarify whether Orange Farm was in line with the NDoH’s programmes.

Mr M Jacobs (ANC, Free State) thanked the NDoH for the presentation and acknowledged that the issue of human settlements was very problematic and wondered whether it would ever be possible to give each and every South African a house as so many people need houses. The issue needed well-oiled machinery to address the problem. He made a follow up on what Ms Themba had said and referred to the Members' visit to Winterveld which was an area that had blocks and there were disputes between the municipality and block owners. He mentioned planning as the main challenge of human settlements. He gave an example of where a house was built next to a mud hut and if an outsider comes to occupy the house it would only create more problems. He suggested that the programme should be implemented in phases and target one area at a time.

Mr Jacobs agreed with Ms Themba on monitoring. He wanted to know how accredited Metros would be monitored to ensure that they would not do whatever they liked and follow proper procedures. He asked for specification of towns in municipalities and areas where there had been deliveries so that as elections were approaching Members would be able to state what had been achieved; for example, how many houses had been constructed in the Free State.

Mr Jacobs called for the need to move with speed in the construction of housing. He asked whether it was possible for the municipalities to build houses themselves and move away from tendering because in the past during the apartheid era municipalities were constructing houses which were very economical.

Mr Jacobs called for the need to fast track the construction of rental houses to accommodate people who move to urban areas and may not be able to acquire a house if they already had a house somewhere else. As such, rental housing could be a better solution for these people.

Mr Jacobs asked whether a portion of the acquired land had been kept for people who may have money to build but were not able because they did not own land as land kept going to RDP houses. Perhaps a certain portion could be kept for people who could buy and build instead of forcing them to get bonds from the banks.

Mr Jacobs wanted a response as to what happened to defaulters of loans. Were they taken to court or vacated from their premises. If they had to vacate, did it not lead into homelessness which resulted in the emergence of informal settlements?

Mr Z Mlenzana (COPE, Eastern Cape) referred to an informal settlement under NUSP that he visited together with Ms Themba. He was not asking about formalisation of informal settlements in a negative way but the term formalisation itself meant the design of the area which was well designed on paper to the point of title deeds being issued and electrification of shacks by ESKOM. He questioned whether this was not perpetuating current circumstances so that people continued to live in shacks because they had been formalised and some sell their shacks. He asked how the NDoH dealt with such formalisation.

Mr Mlenzana asked how the NNDoH controls the implementation of the programme because there were provinces which had performed really well on paper but the reality on the ground was a shame and communities were desperate and crying. He also wanted to check if there was any consistency between the targets and the NDoH’s approved strategic delivery plans of 2011 -2014.

Mr Jacobs added to the point he raised on accreditation that in addition to constructing houses were municipalities going to build infrastructure and did they own the capacity to build infrastructure? He asked how the NDoH resolved issues concerning spatial planning as most municipalities did not plan where they were going to build residential areas and declare townships. He asked for an explanation of the figures on upgrading of informal settlements for the Free State as it failed to meet the target for top structures yet overall performance exceeded the target.

The Chairperson expressed confusion as to how some of the information was presented. For instance did the NDoH still have any land and if so where was the land? NDoH talked of deliveries without an explanation as to why they did certain activities. He expressed concern about the presentation of various funding institutions without alluding to the rural masses and how they were reached and whether they were aware of the programmes as the focus was on metros and cities.

He agreed with Mr Mlanzana about security of tenure for informal settlements as most of them were situated in wrong places such as wetlands, along rail lines and some had settled on old mines with the intention of conducting illegal mining. He wondered how the NDoH modified or formalised such settlements as people had put themselves in danger. He asked the NDoH to provide a written audit of settlements which had been upgraded well.

The Chairperson said he felt there was a contradiction between the funding constraint and the issue of rentals and questioned if the grant was sustainable and if it was not, why should the programme continue? He asked if there was a relationship with the Department of Co-operative Governance and Traditional Affairs (COGTA).

The Chairperson highlighted that Ms Themba had raised a pertinent issue as it was not only the Winterveld as in Western Cape there was the issue of the N2 Gateway which still stood empty. There were many other such cases. The NDoH needed to have the upper hand as far as mechanisms for controlling and monitoring.

The Chairperson raised a question about the number of houses that were sold illegally and what was done about this. He suggested that the different spheres such as Local Government, COGTA and the NDoH should talk to each other in order to curb the problem.

The Chairperson expressed concern that the NDoH did not provide any alternatives to ensure that its plans were achieved and neither did it talk about any stakeholders which contributed negatively so that an amicable solutions could be found.

Responses
Mr Tshangana acknowledged that most of the issues raised by Members were challenges faced by the NDoH. In some areas the NDoH was performing well whilst in others it was struggling.

Mr Tshangana said that so far it was only mining companies that were engaged in Employee Assisted Programmes. He named Impala Platinum as an example. A project was launched two years ago to assist those in the R3 500 - R14 000 income bracket with soft loans in collaboration with DFIs. Other mining companies such as Romijn had joined and had donated land.

In relation to gender and provincial breakdowns, he said this would be done as the information was available and if there was a resolution the information would be submitted to the Committee.  Mr Tshangana stated that in the past there were no hands-on mechanisms to monitor grants to provinces as the NDoH relied on quarterly review sessions when reality called for the need to be on the ground to carry out effective monitoring. Nevertheless, he said the NDoH followed up on housing and kept track of how money was used. The biggest challenge was planning which could take more than 36 months.

He did not have the specifics on Orange Farm and would have to go back to the NDoH. The biggest problem for Winterveld was poor planning and lack of proper beneficiary and housing administration. Also some beneficiaries in informal settlements might not have qualified, earned more. They may be using waiting lists that were not centralised. Currently proposals had been made to develop the phased approach to allocate houses. Such an approach was successful in Langa.

NDoH had made a proposal that the Project Performance Unit should hold quarterly meetings to monitor performance and it had geared up in acquiring professional project managers and town planners so that what was on paper could be translated into reality. Furthermore, public finance  rules required that where there was centralisation, capacity must be created to manage those entities and National Treasury had specialists working in entities tracking funds. The NDoH was interested in adopting the tracking system used by Treasury.

In response to the need for a written breakdown by area of targeted municipalities, Mr Tshananga said a breakdown of basic services by area and the municipalities targeted for the financial year could be provided. The biggest share of the budget was allocated to Mangaung even though for the past few years they had struggled to spend the entire Urban Settlements Development Grant. However they had done an amazing job in terms of investing in bulk infrastructure such as from Bloemfontein CBD en route to the airport on the eastern side of the road, a lot of developments had taken place. The municipality had just completed construction for a 35 megalitre water reservoir next to Naval Hill. The reservoir was going to help the municipality to deal with sewer and bulk water supply so they could upgrade services and construct houses.  He added that a rental housing project would be launched around November and December managed by Social Housing Regulatory Authority (SHRA). All municipalities assigned accreditation would do infrastructure and construct houses.

Mr Joseph Leshabane, NDoH Chief of Operations, responded to the question on the sustainability of the rental housing target by stating that the 80 000 target included social housing, community residential units, institutional subsidies and the private sector. The missing figures were from the private sector where the National Housing Finance Corporation (NHFC) was funding some private individuals together with a private institution. He assured the Committee that the target in social housing would be met.

He reminded Members that the management of CRU went to municipalities but the actual model was about cost recovery as houses were built so that people would rent to recover the costs. This might not be a sustainable model and there might be a need to look elsewhere to move forward. On the institutional subsidy where development happened outside the restructuring zone, recently requests were made by rural districts that indicated they had professional and public servants servicing a district but not residing in the district. The districts were sourcing the means for providing accommodation which raised the question of the need for increased supply of rental stock to deal with the problem of informal settlements. NDoH was about restructuring South African cities and it would provide more rental stock only if this was in a good location to avoid the creation of slums. Some informal settlements were located in bad places and some in inner cities and nothing could be done there.

Mr Leshabane mentioned that there was a need for a conversation between informal settlements upgrade and rental housing but the challenge was how to match the two. Furthermore not everyone would be interested in rental accommodation in informal settlements even if they were upgraded hence the need to provide people with more options to rent and the option of rent to buy.

Mr Tshananga stated that the Social Housing programme was one programme that dealt directly with the inefficient spatial planning challenges. Hence the need to promote efficient spatial planning to restructure some of cities, having restructuring zones [geographic areas identified by local authorities and supported by provincial government for targeted, focused investment] in well-located land.

On land acquisition, Mr Tshanganana said that the programme allowed individuals to acquire land so that they would be able to construct a structure. If during the upgrading process for one reason or another a beneficiary could not benefit from the Social Housing Programme, that beneficiary would not receive a top structure but would receive a service grant to enable the beneficiary to construct elsewhere. FLISP was a financial mechanism used to facilitate individual construction and close the gap for the R3 500 to R15 000 income group. The challenge might be in communicating to beneficiaries but the NDoH housing programme was one of the most flexible in the world with eighteen different programmes.

Mr Tshananga attributed the poor performance of the economy as a possible cause for individuals defaulting on loan repayments. It was not possible for individuals who had lost jobs to repay the loan. The NDoH had mechanisms in place to monitor mortgage loans to monitor defaulters. However, banks must still follow due process. The situation of defaulters might be worsened by the fact that the MDI was not yet in place. It was meant to manage the process of defaulters so that when it became impossible to repay the loan then the insurance fund would pay (risk sharing). At the same time the fund did not want to promote reckless lending.

On Orange Farm, Mr Tshananga said he did not want to take a chance by commenting. He would rather be certain but nonetheless the comment was more about formalisation and upgrading of informal settlements which takes time He gave the example of Khayelitsha Site C which started in 1984 and was yet to be completed.

Mr Tshananga stated that the question on monitoring beyond service level agreements was alluded to earlier on in the discussion. There were provinces that were struggling and others that were doing well. Again the biggest challenge was planning but once the project was on the ground it was easier to monitor. In the past the approach adopted was more transactional but now emphasis was on getting on the ground. To overcome the monitoring challenges, the NDoH had increased buying power but professional geo-planners were costly.  Despite the manpower scarcity, the NDoH was making an effort to create a pool of professionals as different provinces had different resource endowments.

On the question of whether the rural masses were beneficiaries in the programme Mr Tshananga responded that one of the grants under the DFIs was Rural Housing Loan Fund (RHLF) whose mandate was to provide finance to rural households. Also there was the RHIG which was about the provision of rural sanitation. There was the Human Settlement Development Grant which targeted rural provinces such as Limpopo and within the province a huge chunk of the grant was allocated to rural housing subsidy programmes.

Mr Tshananga addressed the comment about alternatives for informal settlements that could not be upgraded if they were on wetlands or under pylons. The solution was to move the settlers but that was not always possible as people refused to move. Also some people might have refused to move because they did not qualify to benefit from the housing programme. This problem called for patience and social facilitators.

On the funding constraints for the rental housing programme, Mr Tshananga explained that this might be so because it was partly funded by the fiscus and the private sector and institutional grant. The NDoH was optimistic that the programme could succeed as it helped to deal with the legacy of apartheid planning. The NDoH had drafted a medium term plan strategy framework to help achieve its targets.

Mr Tshananga acknowledged that Output 4 was underperforming as its target was to provide 600 000 loans. The NDoH considered that a workable alternative was for the MDI to kick in as once implemented, the number of beneficiaries with access to loans would rise. Private banks seem reluctant to contribute to MDI. As such it looked like the fund would be financed from the fiscus. Hence the need for Treasury to review the model to push private banks into contributing to the fund.

Mr Tshangana responded that the N2 Gateway was a pilot targeting informal settlements along the N2 initiated in 2005 by Minister Sisulu who wanted to pilot the Breaking New Ground Programme which was an advanced human settlements policy.  Minister Sisulu started talking to banks such as FNB and private developers. Some of the targeted settlements were in Langa. The challenge with the FNB houses in Cape Town was that they were constructed on a servitude. The programme was still continuing as informal settlements had been upgraded and in Delft more than 6 000 people were moved from backyards and had been settled. Six precincts had been concluded in Delft and more than 12 000 people had been accommodated since 2005. He stated the N2 Gateway Project was still in place.

On its relationship with COGTA, Mr Tshananga stated that the NDoH had a threefold relationship with COGTA. Firstly there was a programme based relationship encompassing the Programme 9 and Programme 8 delivery agreements. COGTA was more concerned about management of MIGs but the NDoH benefitted out of MIG because some it was used to fund the housing programme and some was used to fund the servicing of area sites. The second relationship existed on sanitation. There was an Inter-Ministerial Committee (IMC) comprising Human Settlements, Water Affairs and Cooperative Governance and Traditional Affairs (COGTA) with a tripartite agreement on sanitation between Ministers Molewa, Tsenoli and September. The agreement was intended to upgrade the provision of basic sanitation services to formal and informal settlement to eradicate the bucket sanitation system in the country. He stated the NDoH had a strong relationship with COGTA as they constantly report to each other on targets concerning Programme 8 and Programme 9.In addition the three ministers met fortnightly.

Mr Tshananga mentioned that the Hostel Redevelopment Programme was now under the Community Residential Unit which was a difficult programme to manage because former hostel dwellers would be asked to pay rent once the hostel had been upgraded. Some dwellers could be unemployed which became extremely difficult to manage. He mentioned that some of the hostels could still be empty due to challenges relating to beneficiary identification and some unions might have refused to pay rent.

Mr Tshananga stated that the NDoH’s targets and strategic plans were in sync. The provincial business plans give output from provinces. All plans were prepared on an annual basis and must be aligned to the NDoH's strategic plans and, if not, they were not approved. He gave the example of Mpumalanga - its plans were only approved in June as they were not aligned with the NDoH’s national strategic plans. Limpopo would not benefit this year as its plans were not ready.

On enforcement of title deeds, Mr Tshananga referred to his earlier response and added that the title deeds had a pre-emptive clause where government had the first option to buy. It was difficult to enforce this due to limited resources and few provinces had mastered the conveyancing process. He mentioned the need to review section 10 of the Housing Act so that home owners should be able to sell when they desired to.

The Chairperson raised a concern about the question on COGTA as it was loaded. He commented that the NDoH should know whatever local government was doing in terms of human settlements. He questioned whether the targets of Outcome 8 were achievable.

Mr Jacobs asked the NDoH why there was so much underspending and rollovers on housing. He considered this to be an indicator of under planning whereby NDoH ended up over-funding provinces that were underspending. He suggested that perhaps NDoH should first focus on planning and then move on to construction of top structures. He emphasised the need to provide people with more options other than being directed to FLISP or the banks.

The Chairperson asked the NDoH to ensure that the geographical and gender breakdowns were forwarded to the Committee. He emphasised that the NDoH should seriously address the concerns raised as Committee Members were aware of the human settlement atrocities on the ground.

Mr Jacobs emphasised that the information should be sent to everyone.

The Chairperson closed the meeting and requested Committee Members to remain for the adoption of minutes. That part of the meeting was closed to the public.