Presentation on the 2015 Appropriation Bill 15 May 2015 Director- General: TW Zulu

1. Presentation on the 2015 Appropriation Bill 15 May 2015 Director- General: TW Zulu Confidential

2. Purpose The Presentation is to Brief the Standing Committee on the 2015 Appropriation Bill including matters as requested in the letter of invite including inter alia: • Medium Term Strategic Framework of the Department (MTEF) and • Strategic Plan 2015 - 2019 • Annual Performance Plan 2015-16 MTEF

3. TABLE OF CONTENT • Background • Departmental Strategic Plan • Macro Performance Indicators • Strategic Goals by Programme • Departmental Annual Performance Plan • Background • Delivery Agreements • Budget • Delivery Targets • Challenges and Mitigation Measures

4. Background • The National Development Plan (NDP) in Chapter 8 outlines a vision for human settlements and housing towards 2030. • The emphasis in the NDP is on a government-led strategy to fast-track the development of housing and human settlements whilst at the same time improving the quality of life of citizens. • The Department Medium Term Strategic Framework for 2014-19 prioritises the delivery 1,460 million housing opportunities in partnership with the private sector, all stakeholders and communities. • The human settlements development programme must in the next five years act as a catalyst for radically transforming the national space economy in order to achieve measurable results by 2030.

5. Background • The radical spatial transformation must ensure that poverty, unemployment and inequality must be addressed in the programmes and funding applied by the human settlements sector. • The delivery approach will focus on mega projects of integrated housing mix to cater for different incomes levels and needs and includes housing opportunities for: • the indigent, affordable housing sector, rental units, social housing and serviced stands and • will ensure integration of different income groups, • different races and lead to the building of a South Africa that truly belongs to all.

6. Outcome 8 Delivery Agreement Background The objective of the Outcome 8 Delivery Agreement is to ensure the implementation of the comprehensive human settlements programme with multiple projects that covers extensive geographical spread aiming to improve the workings of the space economy. This will be achieved by realization of the following outcomes: • Providing poor households with adequate housing in better living environments; • Supporting the development of functionally and equitable residential property market; • Improving the institutional capacity & coordination for better spatial targeting Confidential

7. Outcome 8 Delivery Agreement • Housing Delivery: In terms of the Outcome 8 MTSF for Human Settlements, a total number of 1,46 million housing opportunities will be delivered over the MTSF period of five years. The 1,46 million housing opportunities will consist of: • 750 000 households in informal settlements upgraded; • 563 000 individual units for subsidy market; • 110 000 loans (70 000 FLISP plus 40 000 DFIs) • 27 000 social housing; • 10 000 CRU; • 35 000 affordable rental • Other targets • 2 200 informal settlements will be assessed, • 10 000 ha of well-located land will be rezoned and released for new developments targeting poor and lower to middle income households, Confidential

8. Outcome 8 Delivery Agreement • 50 catalytic projects will be implemented, 563 000 title deeds will be issued to new homeowners in the subsidy market; and • The title deeds backlog of 900 000 will be eradicated. • For purposes of the Delivery Agreements, the targets of each Provincial Department in terms of the various objectives will have to be formally agreed and approved by Human Settlements MINMEC; • The Provincial Departments have been requested to revise their business plans to focus on the priorities as set out in the MTSF; • 30% housing opportunities to be delivered by Women contractors • 1956 Houses per Province for delivery in Womens’ Month • 10% Housing opportunities delivered by Youth in terms of the Youth Brigade Programme • 5000 Housing Units for Military Vets • Hosting Provincial Social Contracts Forums • Hosting of Provincial Govan Mbeki Awards • Establishing Inter-Sectoral structures and supporting other sector Departments structures Confidential

9. Human Settlements MTSF Outcomes and Targets Background The 2014 - 2019 Human Settlements Development Medium Team Strategic Framework focuses on achieving the following outcomes: • Ensuring that poor households have adequate housing in better living environments; • Delivering settlements that are spatially, socially and economically integrated; • Supporting the development of a functionally and equitable residential property market; and • Improving institutional capacity and coordination for better spatial targeting. • Qualitative targets to be achieved through policy reforms • Quantitative targets to be achieved through the HSDG

10. MTSF In Numbers MTSF in Numbers

11. Funding Requirements Against Available MTEF Funding Funding Requirements To Meet MTSF Targets

12. STRATEGIC AND ANNUAL PERFROAMNCE PLAN

13. Macro Performance Indicators

14. Macro Performance Indicators

15. Strategic Goals By Programmes

16. Strategic Goals By Programmes

17. Strategic Goals By Programmes

18. Strategic Goals By Programmes

19. Allocations 2015 MTEF Allocations

20. Consolidated Additional Allocations

21. Consolidated Reduction Per Allocation

22. Reduction in Allocation (Consolidated) cont.

23. Impact Of Budget Reductions Over MTEF

24. Allocation Per Programme

25. Allocation By Economic Classification

26. Human Settlements Development Grant

27. Urban Settlements Development Grant

28. Municipal Human Settlements Capacity Grant

29. Departmental MTEF Allocation • The budget allocation of the Department was negatively impacted upon by National Treasury budget reductions as a result of the economic downturn. • The total allocation to the Department for the 2015/16 financial year amounts to R30.9 billion a decrease of R1.9 billion from the previous baseline of R32.8 billion. • The allocation is projected to grow over the 2015 MTEF period to R35.2 billion in 2017/18.

30. Summary • The Operational Budget of the National Department constitutes 2% of the Capital allocation of the Department – This is below the current good practice norm applicable which is 3%. • The Human Settlements Grants constitute 93% of the total allocation made available for actual programmes and projects. • Transfer payments to public entities constitute 5% of the total allocation – These transfer payments contribute towards the MTSF targets and outcomes .

31. Budget Impact • The net impact over the MTEF on the Departmental Budget is a reduction of R4 billion which is mainly made up of the following: • R1.6 billion is due to the transfer of sanitation to Department of Water and Sanitation. • R2.1 billion reduction on grants allocation. • R722 million reduction on the transfer to Departmental Entities’ allocation. • R289.3 million reduction on operational budget.

32. Proposed Targets For the 2015/16 Financial Year including Challenges and Opportunities

33. Planned Provincial Delivery Per Programme

34. Planned Delivery in Mining Towns

35. Planned Delivery in Mining Towns * Rectification

36. Ensuring Improved Entities Performance • The financial and non-financial performance of the public entities are monitored by the Department on a quarterly basis through performance review sessions and through an analysis of quarterly reports; • The public entities are required to motivate deviations from the planned performance targets and expenditure projections and to implement remedial actions to achieve the planned targets and expenditure projections in the subsequent quarters, in order to achieve the annual targets;

37. Ensuring Improved Entities Performance • All virement applications where requestedand appropriate, are evaluated against strategic and annual performance plans to optimize expenditure performance by the public entities; • The Department has planned to conduct administrative and project visits of the public entities to discuss challenges that may be experienced by the public entities that may affect performance and to verify the integrity of the information that is being presented in the quarterly reports, and sampled on the basis through the project visits; and • Funding requested by public entities are submitted to the Department on a quarterly basis for payment to them.

38. Ensuring Improved Entities Performance

39. Inter-Spherical Planning and Funding Alignment • The National and Provincial Human Settlements Development Grant business plans are aligned as the annual national business plan is based on the nine provincial business plans; • Municipal plans are aligned on the basis of reference to the HSDG, the Built Environment Performance Plans and the Integrated Development Plans of municipalities; and • The Department holds quarterly performance review sessions to determine performance and alignment on delivery and spending by Provinces and Metropolitan Municipalities.

40. Inter-Spherical Planning and Funding Alignment and Monitoring • The National Department through its Monitoring and Evaluation and Planning undertakes monthly data and reports on expenditure, outputs, targets and outcomes, which is interrogated in order to ensure compliance with legislation as well as the approved policies and plans; • Through an active Technical MinMec and MinMec reports are tabled on performance and both administrative and political principle interrogation occurs on the reports tabled and corrective and mitigation measures taken. • The DPME undertakes active and robust monitoring and evaluation of performance of policy and programme and project funding.

41. Impact of Increased Costs for Subsidised Houses Versus the Capital Subsidy • The new building regulations of 2011 determine that houses have to be installed with ceilings and isolation material on top, inside walls be plastered and outside walls be finished off smoothly. Window size standards are also applicable to subsidized housing and the type of glass used is more expensive which all increases the cost of subsidized houses; • The cost of providing housing to military veterans housing requires a top up from the Department of Military Veterans of R88 000 and the Human Settlements Development Grant allocation covers the subsidy portion of these houses; • Housing for disabled beneficiaries increases the cost due to their specific needs; and • The subsidy quantum of R160 573 per house will remain unchanged in 2015/16.

42. Macro Human Settlements Drivers • South Africa’s urban population is currently at 59.3% and will grow to 79.6% by 2030; • The National Development Plan estimates that by 2030 South Africa’s urban population will grow by 7.8 million; • This will result in huge demand for housing, socio-economic services, employment opportunities and infrastructure; • The human settlements and housing programmes/instruments through the Human Settlements Development Grant and USDG has been able to facilitate access to cities to ensure sustainable development;

43. Macro Human Settlements Drivers • Various programmes including the Informal Settlements Upgrading Programme, the Integrated Residential Development Programme , the Finance Linked Individual Subsidy Programme and Social and Rental Housing Programme are the main interventions used in housing and human settlements sector to ensure poor urban South Africans are provided with sustainable livelihoods; • The Urban Settlements Development Grant is used by Metropolitan Municipalities to provide bulk infrastructure and land development to support the national human settlements development programme by focusing on poor households; • An evaluation was carried out of the USDG and the recommendations are in the process of being implemented including the adoption of an appropriate policy framework.

44. Macro Human Settlements Drivers • The Department will implement a partnership process with various metos to revitalise inner cities; and this includes activating subsidies available with the social and rental housing programme. • The Minister has and continues to have regular consultations with the Metropolitan Mayors and this includes a thorough process which led to the finalisation of the USDG policy by the Department. • As part of the process unused buildings will be expropriated and assigned for the purposes of building social housing adjacent to places of employment.

45. Departmental Cost Containment Measures • Travel and subsistence: • Officials that travel to the same venue should arrange that bulk transport is utilized to travel together. • Planning of trips is enforced ensuring officials utilize the most economic means of travelling. • Trips must be closely scrutinized by managers. •  Consultants and special services: • The utilization of consultants should be limited to the minimum. • Only in cases where the Department does not have the required skills and specialized services as well as services of a technical nature are needed should consultants be appointed.

46. Departmental Cost Containment Measures • Inventory: Stationary and printing: • The photocopying of documents for management structure meetings can be eliminated by making documents electronically available to participants. •  Inventory: Other consumables: • Electricity could be saved by switching off the lights and air conditioning units between 18:00 to 6:00 every day and switched off completely over weekends and public holidays. • Coordination of provincial visits: • When visits are planned to provinces and metros by various Chief Directorates it is important that they be coordinated. •  Advertising: • Advertising of posts below level 13 should only be done in the Government circular which is free of charge.

47. Challenges The current challenges include: • Slow procurement processes within the Provinces and Municipalities; • Poor cash flow management by both Provinces and Municipalities; • Poor programme and project planning and alignment between the Provinces and Municipalities; • Non-approval of beneficiaries by banks due to credit records and affordability; • Poor or slow performance by contractors; and • Slow delivery due to protracted community consultation and inclement and adverse weather conditions.

48. Challenges • Reduction in the Departmental Operational Budget; • Increased pressures on the National Department to improve monitoring, oversight and evaluation ; • Increased and intergovernmental coordination and alignment responsibilities for the national sphere ; • Non-approval of beneficiaries by banks due to credit records and affordability affecting the FLiSP programmes; • The lack of municipal medium and long term planning for bulk and link services • The lack of clear and decisive action within Provinces and Municipalities to proactively respond to the effects and impacts of urban migration

49. Current Measures To Improve Departmental Performance • The Departmental organisational structure is being revised to ensure that the s government strategy and related planned outcomes is achieved. • The Department has reviewed its outputs and targets matrix and is now reporting on: • 36 Strategic Objectives, that has • 96 Indicators • The rationalisation allows for improved and will bring much needed efficiencies in performance and Monitoring. • A much extensive strategic and planning process will be undertaken during the period leading up the approval of the budgeting to align budgets against strategy. • Improved alignment of strategies of the entities of the Department with the Departmental and Government mandates and strategies. Confidential

50. Current Measures To Improve Departmental Performance • The Department is currently undertaking a process to develop a White Paper on Human Settlements and related legislation and regulations attached thereto. • The Department is in the process of undertaking an process to review and revise the application of the supply chain management process to improve value for money but also eradicate collusion and corruption which may exist in the systems and this includes with human settlement delivery chain including the municipal and provincial spheres. • A comprehensive study is being undertaken to analyze the current subsidy quantum in order to improve short, medium and long term financial as well as socio-economic sustainability of funding being made available. • The Minister has issued a directive that the consolidation of the Human Settlements Development Finance Institutions be expedited, in order to allow for improved leveraging and extension of the current funding sources for housing and human settlements Confidential