Relationship between the Department, Utshani Fund & Trust, FedUp, & SDI

1. Relationship between the Department, Utshani Fund & Trust, FedUp, & SDI Effect on projects such as Ekupumeleni, Victoria Mxenge Village in Philippi, Western Cape 7 November 2007

2. Outline • Background • FedUp, SDI MOU • SAHPF, Utshani Fund, Trust, People’s Dialogue and old debt issue • Effect on projects in the Western Cape • Towards resolution

3. Background • Housing Dialogue on Western Cape PHP projects held on 5 September 2007 some issues relating to SAHPF projects emerged • Problems in projects include securing of subsidies and project approval status, houses built with no infrastructure, linkages/role of Utshani Fund • Requested to visit projects and investigate issues further towards resolving problems in the projects

4. Background The Committee requested that: • Clarify the relationship and arrangements between the role players • Investigate the situation at the SAHPF projects, specifically Victoria Mxenge Village & Ekuphumeleni and report back to the Committee on how the issues in the project can be resolved asap.

5. FedUp, SDI MOU • Federation of Urban Poor (FedUp) – member-based association of women saving for housing • Shack Dwellers International (SDI) – international support, capacity building and information sharing, lobbying NGO

6. FedUp, SDI MOU • In May 2006 a MOU signed between the NDOH, Slum Dwellers International (SDI) & Federation for the Urban & Rural Poor (FedUp) • Signatories to the MOU were FedUp, SDI and NDOH, noting that Utshani Fund was not a signatory • Objective of the MOU is to focus on informal settlements and the implementation of Community driven housing development processes by FedUP / SDI

7. FedUp, SDI MOU • The MOU is in force for an indefinite period • MOU covers both PHP programme and ISUP • FedUp / SDI intend using Utshani Fund as their implementing agent. A further MOU has been signed between FedUp & Utshani Fund appointing them as Support Organisation (SO) and Accounts Administrator (AA) for FedUp

8. FedUp, SDI MOU The MOU implementation arrangements has established the following: • National joint working group (NJWG) – oversight and strategy • Provincial joint working groups (PJWG) – practical / implementation focus • Provincial joint working groups not exclusively for FedUp / SDI but other PHP partners may participate

9. FedUp, SDI MOU • Subsidy pledges were made by provinces to FedUp, SDI as follows: Eastern Cape – 1000 Free State – 1000 Gauteng – R50million Kwazulu-Natal - 1000 Limpopo – 1000 Mpumalanga - 1000 Northern Cape – 17 North West - 1000 Western Cape - 1000

10. SAHPF, Utshani Fund, People’s Dialogue • South African Homeless People’s Federation (SAHPF), now registered as Sec 21 company, but previously member-based organisation • People’s Dialogue – Support Organisation (SO) that has subsequently closed • Utshani fund – Sec 21 company to act as Account administrator / channel funding for SAHPF

11. Utshani Fund / Trust • Fund = NGO, Section 21 company founded in 1994 • Established to channel & administer funding (incl. donor funding) on behalf of schemes created by SAHPF & People’s Dialogue • Fund held technical skill and capacity to administer small scale loans to individual scheme members

12. Utshani Fund / Trust • Trust = Trust established as an obligation from Grant agreement with NDOH (1996) • NDOH granted R10m to a trust to be formed for the purposes of making loans and advances on behalf of schemes so as to enable the schemes to onlend to their members for construction of residential dwellings = revolving fund • Formed to hold R10m, could only advance funds to Utshani Fund, Utshani fund to schemes, schemes to individuals • Repayment from individuals repaid to schemes, then to Utshani (nominal interest rate charged) • No expectation of repayment to NDOH

13. Grant / Agency Agreement • Grant agreement = between Utshani Trust Trustees and Utshani Fund, signed July 1996 • Agency agreement = Utshani Fund and NHB in Sept 1996 • Gave Utshani status of “lender” to be able to access, administer & disburse subsidies • Recovered R 70/subsidy for admin • Utshani Fund receive subsidy applications and forward to PHB. Upon approval, subsidy funds would be remitted to Utshani Fund for disbursal to qualifying beneficiaries (Section 11, Housing arrangement act, 1993)

14. Interim guidelines • Interim guidelines drafted: • “Interim Guidelines for the provision of housing & consolidation subsidies to members of SAHPF” • Required Utshani Fund to confirm that subsidy funds were (1) Available (2) received before any disbursements were made • Fund had to keep sound &accurate financial records that had to be audited by AG

15. The arrangement NDOH Interim guidelines Revolving Fund – loans to schemes R10m + donor funding UTSHANI FUND Utshani Trust Grant agreement Agency agreement Access, administer & disburse subsidies from provinces Lender status Member schemes Individuals

16. Practical implications of arrangement • Time lag between subsidy approval & payout • Utshani disbursed funds prior to receiving actual subsidy and expected PHB to make good on their approvals – “Innovation” • Agency agreement had no financial force except that it presumed PHB would naturally comply with the arrangement

17. Practical implications of arrangement • Grant agreement provided once-off seed capitalisation • When R10m exhausted, no need for Trust • Fund may have made bridging funding/prepayments prior to actually receiving subsidies, contrary to stipulations in guidelines

18. Practical implications • Utshani should have concluded written agreements with PHB separately over and above agency agreement – negated misunderstanding – 1993-1999 transitional period; PHB interim measure • Audits and financial records? • With introduction of housing Act, 1997, powers of PHB moved to MEC

19. Practical implications • It was expected that all bodies/legal entities & structures that had relationships with Boards would be re-assessed and ratified by superseding authority – Fund allowed to operate same as under PHB • Interim guidelines not incorporated into Housing code • PFMA – all agencies of government subject to financial disclosure process. Neither Fund or trust incorporated here

20. Practical implications • Grant agreement – funds advanced as once-off seed capital based grant • Interim guidelines – Utshani Fund did confirm that subsidies were approved for qualifying beneficiaries but DID NOT wait for receipt of subsidies before advancing bridging capital or pre-financing • Subsidy approvals made by PHB which have been abolished – Utshani only party with claim records

21. Practical implications • Utshani further indicates that many beneficiaries are now deceased, have moved on – making proof of claims difficult • No. of projects nationally part of this arrangement & need to be resolved • Loans advanced to members would have been based on repayments of loans or offset against subsidies when received

22. Practical implications • MECs cannot just make a commitment to honour prior commitments that they were not aware of • Annually departments have to give an indication of what commitments it already has on its books and what new projects are planned – basis for budgets • unless there is sufficient under-expenditure/savings/virement of funds can be approved – payment of old claims is not conceivable in short-term • If NDOH/MEC convinced of indebtness – future commitment is possible

23. Practical implications • Performance audits as basis to pay claims – required for 15000 units claimed to be delivered to date – basis for repayment of subsidy • NDOH in process of contracting and facilitating this process nationally.

24. Western Cape projects • SAHPF Projects visited/discussed – • Ekhupumeleni, Victoria Mxenge, Kayalitsha Site C, Vusaninshlapo; Kuyasa, Vusaninsuntsha, vukuzenzile • Loans have been made to members to start construction on houses, to be off-set against subsidies (approx R10000) • No subsidies forthcoming • Lack of clarity on land status, hence no servicing • SO withdrawn

25. Towards resolution • Resolve ownership of land – SAHPF, HA, Utshani Fund • Servicing of private land – municipality cannot assist with the servicing of private land – will require subsidy • Provincial subsidy – linked to resolution through performance audit process