HEARINGS ON THE DIVISION OF REVENUE BILL, 2005

1. HEARINGS ON THEDIVISION OF REVENUE BILL, 2005 DEPARTMENT OF HOUSING PRESENTATION TO THE SELECT COMMITTEE ON FINANCE 07 MARCH 2005

2. OVERVIEW • INTRODUCTION • PURPOSE OF GRANTS • HOUSING ALLOCATION FORMULA • HOUSING SUBSIDY GRANT • HUMAN SETTLEMENT REDEVELOPMENT PROGRAMME • MONITORING OF PERFORMANCE • MOTIVATION FOR RETENTION AS CONDITIONAL GRANTS • FUND ALLOCATIONS FOR 2005/06 AND PROPOSED SPENDING • COMMENTS ON THE BILL • END

3. 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)

4. 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.

5. 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.

6. 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.

7. ALLOCATION FORMULAcont. • 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 .

8. ALLOCATION FORMULAcont. • 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

9. ALLOCATION FORMULAcont. • 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

10. 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,

11. 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.

12. 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. -

13. 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.

14. Expenditure Status ( HousingSubsidy Grant) 31 Jan 2005.

15. Expenditure Status 31 Jan 2005.

16. 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)

17. Expenditure Status(HSRP) 31 Jan 2005.

18. Expenditure Status (HSRP)31 Jan 2005.

19. 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.

20. 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.

21. 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.

22. 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.

23. Allocation to Integrated Housing and Human Settlement Development Grant

24. HSRP ALLOCATION

25. 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.

26. 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.

27. 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,

28. 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.

29. 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.

30. 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

31. THANK YOU