HEARINGS ON THEDIVISION OF REVENUE BILL, 2005

DEPARTMENT OF HOUSING

PRESENTATION TO THE SELECT COMMITTEE ON FINANCE

07 MARCH 2005

OVERVIEW

1. INTRODUCTION2. PURPOSE OF GRANTS3. HOUSING ALLOCATION FORMULA4. HOUSING SUBSIDY GRANT5. HUMAN SETTLEMENT REDEVELOPMENT PROGRAMME6. MONITORING OF PERFORMANCE7. MOTIVATION FOR RETENTION AS CONDITIONAL GRANTS8. FUND ALLOCATIONS FOR 2005/06 AND PROPOSED

SPENDING9. COMMENTS ON THE BILL10. END

INTRODUCTION

Housing administers two conditional grants in 2005/06 financial year:

Integrated Housing and and Human Settlement Development Grant ( amalgamated grant in line with the “Breaking New Ground”Comprehensive plan). Human Settlement Redevelopment Grant (being phased out)

PURPOSE OF GRANTS

• Integrated Housing and Human Settlement Development Grant.:

• To finance the implementation of the national Housing programmes(excluding recurrent costs recoverable from assets fallling under the pre-1994 stock),

• To facilitate the establishment and maintenace of habitable, stable and sustainable human settlements in which all citizen will have access to selected social and economic amenities.

PURPOSE OF GRANTS

• Progressive eradication of informal settlements on a phased basis in accordance with the goals set out through the target for reducing slum dwellers through formalisation of informal settlements by 2014 and eradication of such by 2020.

• Human Settlement Redevelopment Grant: To facilitate the process of housing delivery through the various national housing programmes by supporting elements that contribute towards the broader notion of sustainable settlements and more efficient towns and cities.

ALLOCATION FORMULA

• Provincial allocations are currently made according to a formula determined by MINMEC and approved by Cabinet.

• The Allocation formula is consistent with the principles and provisions contained in Section 214 of the Constitution has been applied in Housing for provincial allocations.

ALLOCATION FORMULA cont.

• Up to 2004/05 the Census 1996 was applied as funds were allocated over the MTEF period and are committed.

• For 2005/06 the allocation is based on the 2001 Census figures.

• The formula is being reviewed so as to ensure it is in line with the principles of the Comprehensive plan and incorporate ability to prioritize budgets on that basis .

ALLOCATION FORMULA cont.

• The formula recognizes the following factors: – The formula provides for weighting in order of the

priority of the elements as defined below-• A = P(20%) + HH(30%) + HN(50%) where

– A = Allocation

– P = Population.

– HH = Households earning less than R3 500 per month (affordability indicator)

– HN = Housing Need

– A population indicator, weighted at 20 percent, as a measure of each province’s share of total population

ALLOCATION FORMULA cont.

• Housing need used in the formula is defined on a weighted formula that takes into account the following:– HN = RBY(0.5) + SBY(1.0) + SE(1.2) +

FR(0.5) + TC(1.0) + HL(1.25) where:– HN = Housing Need– RBY = Flat/room in backyard– SBY = Shacks backyard– SE = Shacks Elsewhere– FR = Flat/room on shared property– TC = Tents and Caravans– HL = Homeless People

Integrated Housing and Human Settlement Development grant

The elements to be funded under this programme:• Basic Social and economic amenities,• Well located land acquisitions ,• Development of and maintenance of Housing

Chapters,• Operational expenditure that support the capital

expenditure,• The consolidation subsidy or top structure,

Integrated Housing and Human Settlement Development grant

The elements to be funded under this programme:• Institutional subsidies up to the approved set subsidy

limits for Social Housing institutions including rental stock,

• Provision of facilities (interim),• Emergency housing needs programme,• In integrated communities provision of deposits for

higher income groups to facilitate credit by banks.

CURRENT AND PAST PERFORMANCE OF HOUSING GRANTS

Subsidies• Since 1994 – more than 1,74 million houses have been built or

under construction and more than 2,6 million subsidies approved to benefit more than 6,6 million people.

• Subsidies approved in the last 3 years average 248,861 per annum.

• Housing units delivered in the last 3 years average 175,585 per annum

• To date the programme has achieved a 49.65% to 50.34% split allocation between male and female headed households.

-

CURRENT AND PAST PERFORMANCE OF HOUSING GRANTS

Human Settlement Redevelopment Programme• Introduced in 1999/2000 as pilot programme started very

slowly at R20 million p.a. and grew to current levels of over R100 million.

• Currently there are 156 projects approved throughout 9 provinces on a multi year basis with a gross commitment value of R348m.

• Of the 156 projects, 19 projects are located in Rural Development Nodes and 57 projects are located in Urban Development Nodes.

• It is expected that approved projects will be completed during 2005/06 as this programme is only allocated sufficient funds to finalise the contractually committed projects.

Expenditure Status ( HousingSubsidy Grant) 31 Jan 2005.

Spent by

Provinces

R'000 R'000 R'000 R'000 R'000 R'000 R'000

Eastern Cape 598,900 - 792,623 598,900 598,900 511,000 87,900 100% 85% 85% 85% 15%Free State 385,641 140,381 464,531 526,022 335,641 363,964 -28,323 64% 69% 94% 108% -5%Gauteng 1,117,463 - 968,462 1,117,463 941,501 831,559 109,942 84% 74% 74% 88% 12%KwaZulu-Natal 748,463 -8,522 912,037 739,941 639,557 585,649 53,908 86% 79% 78% 92% 8%Limpopo 369,818 - 426,160 369,818 314,346 225,417 88,929 85% 61% 61% 72% 28%Mpumalanga 296,457 4,273 355,113 300,730 285,000 294,246 -9,246 95% 98% 99% 103% -3%Northern Cape 89,442 994 104,191 90,436 89,442 90,436 -994 99% 100% 101% 101% -1%North West 421,378 85,380 401,959 506,758 352,088 183,647 168,441 69% 36% 44% 52% 48%Western Cape 446,035 141,417 281,818 587,452 367,237 325,145 42,092 63% 55% 73% 89% 11%Total 4,473,597 363,923 4,706,894 4,837,520 3,923,712 3,411,063 512,649 81% 71% 76% 87% 13%

2004/05Table 1: Spending analysis as at 31 January 2005

Provinces

Voted Rollovers at

provincial level

Spend as at 31 March

2004

Year to date (1 April 2004 - 31 January 2005)Spent as

% of Transfer-

red Funds

Unspent as % of

Transfer-red Funds

Spent as % of voted

Transferred Funds

Unspent Transfer-red funds

Transfer-red as % of total

available

Total Available Spent as

% of Total

Available

Expenditure Status 31 Jan 2005.Analysis of expenditure for the period ending 31 January 2005

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

Total Available

Spent by Provinces

Unspent Funds100%

29%

71%

Human Settlement Development Grant (HSRP)

• Purpose: To facilitate the process of housing delivery through the various national housing programmes by supporting elements that contribute towards the broader notion of sustainable settlements and more efficient towns and cities. (This grant is being phased out and only actual commitments will be funded during 05/06)

Expenditure Status(HSRP) 31 Jan 2005.

Spent by

Provinces

R'000 R'000 R'000 R'000 R'000 R'000

Eastern Cape 11,660 11,509 23,169 9,660 6,414 3,246 42% 28% 66% 34%Free State 9,010 17,526 26,536 9,010 6,805 2,205 34% 26% 76% 24%Gauteng 22,260 8,092 30,352 16,260 8,960 7,300 54% 30% 55% 45%KwaZulu-Natal 27,560 38,076 65,636 18,758 8,940 9,818 29% 14% 48% 52%Limpopo 11,660 14,039 25,699 10,933 3,508 7,425 43% 14% 32% 68%Mpumalanga 7,420 6,330 13,750 6,110 3,950 2,160 44% 29% 65% 35%Northern Cape 3,180 3,709 6,889 2,607 3,709 -1,102 38% 54% 142% -42%North West 8,480 8,086 16,566 7,480 5,894 1,586 45% 36% 79% 21%Western Cape 14,310 22,234 36,544 11,476 8,746 2,730 31% 24% 76% 24%Total 115,540 129,601 245,141 92,294 56,926 35,368 38% 23% 62% 38%

2004/05

Transfer-red Funds

Unspent Transfer-red funds

Total Available

Year to date (1 April 2004 - 31 January 2005)

Provinces

Voted Unspent Funds at

ProvincesTransfer-red as % of total

available

Spent as % of Total Available

Spent as % of

Transfer-red Funds

Unspent as % of

Transfer-red Funds

Expenditure Status (HSRP)31 Jan 2005.Analysis of expenditure for the period ending 31 January 2005

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

Transferred Funds

Spent by Provinces

Unspent Funds100%

33%67%

MONITORING MECHANISMS

• Monitoring is performed in accordance with requirements of the DORA on a monthly basis;

• The Department has developed specific and targeted monitoring framework for monitoring the grant;

• Detail project performance reports from provinces are used to determine the extent of project performance and progress.

MONITORING MECHANISMS CONT.• Department has installed a Transversal system for subsidies which has been

rolled out to provinces (HSS);• Provincial reports are presented to MinMec and HOD meetings on a

quarterly basis;• Structured Provincial visits take place targeting all provinces.• Regular interactions with provinces (including necessary pointed

correspondence) if it is observed that underspending could occur and request that problem be addressed,

• In cases of persistent underspending appropriate interventions are made based on analysis of underlying reasons and discussions,

• In line with imperatives of the “Breaking New Ground” strategy the monitoring capacity is increased significantly.– Provides for dedicated provincial monitoring focus and analysis– Programme management capacity includes deployment to provide leadership and

guidance on programme implimentation.

MOTIVATION FOR RETENTION AS CONDITIONAL GRANTS

• Housing is a concurrent legislative function between provincial and national governments while implimented at a local sphere.

• It is proposed that both the grants continue for 2005/06 under the current mechanisms/frameworks in order that the Minister of Housing can full fill her functions adequately.

• The aforementioned mechanism/frameworks provide the basis for uniform norms and standard across the country.

MOTIVATION FOR RETENTION AS CONDITIONAL GRANTS CONT.

• The Human Settlement Grant will during the phasing out period provide for the corrective mechanism for addressing dysfunctional settlements and provides the Department with the lessons as basis for policy intervention which could be applied with the execution of the new Comprehensive plan.

• It is confirmed that both Housing Grants meet with the Constitutional Requirements – s214.

Allocation to Integrated Housing and Human Settlement Development Grant

Province Allocation

Eastern Cape 581,218,000

Free State 398,618,000

Gauteng 1,340,675,000

Kwa-Zulu Natal 799,659,000

Limpopo 397,650,000

Mpumalanga 321,123,000

Northern Cape 79,917,000

North West 467,880,000

Western Cape 456,740,000

Total 4,843,480,000

HSRP ALLOCATION

Province Allocation

Eastern Cape 0

Free State 9,475,000

Gauteng 4,130,000

Kwa-Zulu Natal 0

Limpopo 1,418,000

Mpumalanga 0

Northern Cape 0

North West 0

Western Cape 9,373,000

Total 24,396,000

Allocations and spending from the new Integrated grant

• 2005/06 provides for the completion and phasing out of programmes /projects developed under the old subsidy regime(RDP).

• The new grant will seek to address housing delivery in a coordinated manner with clear indications of the components/breakdown in terms of sub programmes that are funded,

• Clear indication of planned outputs disclosed upfront in the strategic plans against which progress can be measured, within the reporting framework designed across government.

Allocations and spending from the new Integrated grant (continued)

• Guidelines on the percentage spending for each aspect would be developed and approved by MinMec on the basis of agreed upon priorities.

• The framework will in future form the basis for the conditions of the grant in the Division of Revenue Act Framework and disclosed in each provincial department’s strategic plan.

• The National Department is at present assisting provinces to align their strategic plan with new Comprehensive plans.

Allocations and spending from the new Integrated grant continued

• Development and maintenance of Housing Chapters of the IDP’s limited to limits as set in terms of applicable guidelines developed from time to time,

• Operational expenditure that support the capital expenditure(OPSCAP) up to 2% of the grant based on costs determined through a procurement process that conforms to requirements of the Constitution and applicable prescripts,

Allocations for the HSRP

Only committed projects are provided for which must be completed in terms of the approved business plan and contractual agreements.

• As pointed out the HSRP pilot programme is being phased out and all new projects will be carried out in terms of the thrusts indicated in the new Comprehensive plan and the framework in respect of the new Integrated Housing and Human Settlement Development Grant.

COMMENTS ON THE BILL

• Generally there are no substantial comments on the Bill as most of issues have been discussed with National Treasury

• Concerns around the ability to effect adjustments “in year” within the sector have been provided for – a mechanism that will ensure that the sector is able to protect funds allocated within the sector.

COMMENTS ON THE BILL

Section 30 Matters relating to internal audit units• This is also a new section which is welcomed by

housing• Implications on the Capacity requirements for our

Internal Audit Unit will be taken into account• It will certainly assist in ensuring better

management of Risks associated with Housing delivery

THANK YOU