Eastern Cape Department of [name of department]



1 Eastern Cape Department of Human Settlements

2 Budget Analysis

3 2013/14

Yeukai Mukorombindo Chiweshe[1]

May 2013

Monitoring and Advocacy Program, Public Service Accountability Monitor

For more information contact the PSAM, psam-admin@ru.ac.za

Tel: (046) 603 8358, Fax: (046) 603 7578

Key Findings and Recommendations

Finding

According to Table 5 and a brief description in the 2013/14 Eastern Cape Estimates of Provincial Revenue and Expenditure ,the Department of Human Settlements is said to have received one of the largest increases in 2013/14; a nominal increase of 24% from the 2012/13 year. This increase however is calculated using the revised estimate or the Department’s projected expenditure of R2.2 billion for the 2012/13 year. When one calculates the budget increase using the 2012/13 adjusted allocation it is only a 10% increase or an increase of R260 000 from the 2012/13 adjusted appropriation of R2.57million. This increase translates into a mere 4.61% increase when inflation is taken into account. In addition the budget anticipates a budget decline of 19.12% over the MTEF.

Recommendation

This unfortunately means that once again the Department has received insufficient funds for housing delivery for this financial year and it appears that the entire human settlements budget will decline over the MTEF. The Department needs to mitigate against the upcoming budget decline by improving its financial management and using alternative and cost effective housing methods.

Finding

The Equitable Share budget and Conditional Grant budget grow respectively by R25.45 million or 3.73% and R233 million or 4.97% in real terms from the 2012/13 adjusted allocations. The Equitable Share budget is projected to grow in real terms by 0.46% over the MTEF and the Conditional Grant anticipates a budget decline of 21% over the MTEF.

Recommendation

The Department requires significant sustained increases in both the equitable share budget and conditional grant budget to avoid further adverse effects and obstacles to housing delivery. There is a need for Provincial Treasury and the Department to supplement the Integrated Housing and Human Settlements Development Grant (IHSDG) funding with bulk infrastructure funding. The Department is also urged to clarify roles and responsibilities with other Departments as well as improve conditional grant spending for increased allocations over the MTEF.

Finding

In the 2012/13 Programme 2 was originally allocated R19.6 million according to the 2012/13 source documents. However this figure is contradicted in the 2013/14 source documents where an amount of R11.8 million is reflected for this line item.

Recommendation

The Department must explain this anomaly as the adjusted appropriation for 2012/13 does not support the changed programme allocation. The Department currently does not have sufficient financial and human resources allocated to provide the necessary support to struggling municipalities in the Eastern Cape.

Finding

The Department’s housing target for this financial year is 17 865 units. This is an increase of 1 675 units from the previous financial year. There appears to be slow progress with regards to achievements of the 2012/13 housing target as a result of stalled projects and bulk infrastructure funding. The Department also anticipates to grow its housing target to produce a total of 50 000 units by 2015/16.

Recommendation

The Department needs to begin using alternative housing options and typologies which address bulk infrastructure and funding challenges. Department needs to step up its strategic partnerships with other Departments, businesses and civil society in the province, particularly with the Eastern Cape Development Corporation (ECDC). A partnership between the Department and the ECDC can improve and make possible cross-departmental and cross sectoral housing initiatives. Disciplinary action must be taken against those officials found to be responsible for wasteful expenditure and recovery of all monies stolen must be priority. In the current economic climate and the anticipated budget decline in the human settlements budget, the Department cannot afford to continue losing millions in wasteful expenditure, corruption and double handling.

Finding

The Rural Intervention Programme receives the largest sub-programme increase of 89% or R297 million from the 2012/13 adjusted allocation. This sub-programme seeks to expedite women contractors’ involvement in the delivery of key projects and in addressing backlogs in housing delivery.

Recommendation

The Department must be commended for supporting the empowerment of women contractors through the Rural Intervention or Emerging Contractor Development Programme. The Department is encouraged to continue to make a meaningful contribution to the development and empowerment of women contractors through its Programmes.

Finding

The majority of resources will be directed towards rural areas to prioritise rural development. The department will accelerate the rural housing development programme through the rural voucher scheme which has been piloted in the 2012/13 financial year.

Recommendation

Given the latest migration and population data emanating from Census 2011, the Department must guard against over-prioritisation of rural housing development. As part of implementing the NDP the Human Settlement Development Grant funding must be equally allocated towards eradicating informal settlements and building integrated urban settlements.

Introduction

The South African Constitution commits government departments to the progressive realisation of socio-economic rights within available resources. These rights include the right to education, healthcare, housing, a healthy environment and social welfare.[2] The PSAM defines social accountability as the obligation by public officials and private service providers to justify their performance in progressively addressing the above rights via the provision of effective public services. In order to effectively realise these rights through the delivery of public services, state departments and private service providers responsible for the management of public resources must implement effective accountability and service delivery systems. These include: planning and resource allocation systems; expenditure management systems; performance monitoring systems; integrity systems; and, oversight systems. The effectiveness of these systems can be established by monitoring their information outputs. To evaluate these systems, the PSAM has developed a set of evidence-based tools for monitoring the information produced annually by each system. Government seeks to ensure that it addresses the most pressing social and economic needs of those that they serve through the prioritisation of public resources within the annual budget.

This report analyses the impact of policy priorities (national, provincial, sectoral and departmental) on the Eastern Cape Department of Human Settlement’ s 2013/14 budget and on its ability to implement effective and efficient service delivery and accountability systems in the up-coming financial year. In addition, assumptions informing both policy priorities and budget allocation trade-offs are analysed in terms of the Department’s external and internal service delivery environment.[3]

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In this section, key policy priorities for the 2013/14 financial year will be highlighted and discussed. They are drawn from the following:

– the 2013/14 Eastern Cape Overview and Estimates of Provincial Expenditure,[4]

– the Eastern Cape Human Settlements’ most recently available Strategic Plan,[5]

– the Provincial Growth and Development Plan (PGDP),[6]

– the National Development Plan (NDP) [7]

– the President’s 2013 State of the Nation Address (SONA),[8]

– the 2013 Budget Speech by Minister of Finance Pravin Gordhan[9]

– the 2013/14 Housing Policy and Budget speech delivered by Eastern Cape Human Settlements MEC H. Sauls-August[10]

– the 2013/14 State of the Province Addresses delivered by Premier Noxolo Kiviet,[11]

- the 2013/14 Budget Speech for the MEC for Finance MEC.P. Masualle[12]

1.2. National and provincial priorities

This financial year, the national and provincial focus will be on the implementation of the National Development Plan (NDP). According to the Minister of Finance, Mr Pravin Gordhan “the 2013 budget takes the NDP as its point of departure.”[13] The Eastern Cape Provincial Planning Commission is currently facilitating the development of a provincial development plan for the effective implementation of the NDP in the province.[14] The government’s budget and strategic plans for this financial year and over the MTEF will be aligned to realise the NDP objectives which are:[15]

– Reduce poverty and inequality

– Growing an inclusive economy

– Building capabilities

– Enhancing the capacity of the State

– Promoting leadership and partnerships

More specifically for housing, the objectives listed in the NDP include:[16]

– Upgrading informal settlements on suitably located land

– Reversing the spatial effects of apartheid by establishing new norms and a national spatial framework

– Building environmental sustainability and resilience

– Diversity in housing product and finance options

The provincial housing priorities as listed in the 2013 policy and budget speech include:[17]

– The roll out of the Finance Linked Individual Subsidy Programme (FLISP) to middle income earners

– Participation of communities in the Rural Housing Voucher Scheme

– Finalisation of the Destitute and Vulnerable Groups Policy

– Youth Development Programmes

1.3. National and Provincial Housing Need

In 1994 the White paper on housing estimated the urban housing backlog at 1.5 million units and the 1996 Census data on urban informal households showed that 1.5 million households lived in informal houses in urban areas and that 1.6 million households lived in informal or traditional housing rural areas.[18] In 1999, the National Department of Housing (NDoH) estimated an increase in the total backlog to 3.7 million households.[19] Based on Census 2011 data and the National Department of Human Settlements Estimation backlog, the Department estimates a national backlog of 2.3 million households as of September 2012.[20] However, according to the Department, accurate data on housing backlog figures is not readily available as data on the approval of housing subsidies is incomplete and difficult to match.[21] The housing demand in the Eastern Cape has also not been fully established. In 2006, the Eastern Cape Human Settlements Department’s (the Department) own informal research put the backlog at 800 000[22] but this figure did not verify if it referred to people or housing units. Backlog analysis conducted by the Department in the 2011/12 financial year indicated a provincial backlog of 705 506 units which has been recently updated to 750 854 units which will require approximately 44 years to deliver.[23]

According to the Socio-Economic Rights Institute of South Africa (SERI) the housing backlog has grown exponentially since 1994[24] and the National Department refers to the housing backlog as “a moving target.”[25] This is mostly due to global economic pressures with increasing households failing to access housing finance and the rural-urban migration as a result of lack of employment opportunities in rural areas.[26] President Zuma noted in his 2010 State of the Nation Address that over the next 5 years, government is committed to eradicating the massive housing backlog.

Table 1: Nationwide housing delivery over the last 10 years[27]

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Table 1 shows that in the last 10 years, the Department of Human Settlements countrywide has delivered close to 2 million housing units. The latest official statistics from National Department on housing delivery between 1994 and 2012 is 2.6 million units.[28] The Table also shows that housing delivery between the 2003/04-2007/08 is double the housing output produced in the last five years. This is because in the earlier post- apartheid years, government prioritised housing with significant housing allocations. The last 5 years has seen a decrease in the delivery of housing units particularly in provinces such as the Eastern Cape despite a growing backlog. A graphic analysis of completed housing output figures collected between 2009/10 to 2011/12 is depicted in Graph 1 below.

Graph 1: Housing delivery trends over the last three financial years[29]

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According to figures provided by MEC August-Sauls in her latest budget vote speech, the Department states that it has delivered 51 247 units out of a target of 56 419 units.[30] The MEC also announced that the Department has serviced 11 250 sites out of a set target of 16 190 sites in the last three financial years.[31] Although there are discrepancies between the housing output figures from our research and the figures provided by the MEC, there is one significant point in common which is that the Department is lagging behind in terms of housing output. There are multiple factors affecting the performance of the Department but the major factor identified is insufficient resources to complement the growing conditional grant allocation for planned housing projects. The Equitable Share budget is often insufficient to support the implementation of housing projects such as insufficient personnel for project management and quality assurance.[32] Supply Chain Management and Contracts Management has also been affected as a result of insufficient equitable share funding.[33]

More recently conditional grant allocations have also become increasingly insufficient for implementing bulk infrastructure thereby delaying the implementation of projects. By the end of the third quarter of the 2012/13 financial year, the Department had only managed to achieve a quarter of their annual target in this regard.[34] As of the end of the fourth quarter of 2012/13 , 20 projects have been blocked as a result of insufficient bulk infrastructure funding of R2.1 billon.[35] Similarly inadequate equitable share and bulk infrastructure funding are also being identified as major obstacles in housing delivery by other provinces as depicted in the table below.

Table 2: Nationwide housing allocations vs Actual delivery over the last five years (2008/09-2012/13 financial years)[36]

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The table above indicates that despite the billions being allocated for the delivery of housing as well as the year on year increases in allocation, expenditure often matches allocation but housing output is not necessarily increasing with the increases in allocation. An insufficient equitable share compromises the necessary skills to implement the conditional grant. Furthermore an insufficient conditional grant means that the Department struggles to meet bulk infrastructure costs and also struggles to cover increasing costs of building materials. This in turn affects the pace of service delivery which is not only a challenge in the Eastern Cape but nationwide.

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Table 3: Eastern Cape Department of Human Settlement by Economic Classification, 2009/10 to 2015/16.[37]

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2.1.Total Allocation

For the 2013/14 financial year the Eastern Cape Department of Human Settlements has received a total budget allocation of R2.83 billion.[38] According to Table 4 below and a brief description in the 2013/14 Eastern Cape Estimates of Provincial Revenue and Expenditure[39] the Department of Human Settlements is said to have received one of the largest increases of 24% from the 2012/13 year. This increase however is calculated using the revised estimate or the Department’s projected expenditure of R2.2 billion for the 2012/13 year. When one calculates the budget increase using the 2012/13 adjusted allocation it is only a 10% increase or an increase of R260 000 from the 2012/13 adjusted appropriation of R2.57million.[40] This increase translates into a mere 4.61% increase when inflation is taken into account (See Table 3).

The total national budget for Integrated Housing and Human Settlement Development Grant (IHHSDG) has increased by R1.86 billion from the R15.12 billion 2012/13 adjusted allocation. A closer look at the Eastern Cape budget shows that the IHHSDG conditional grant accounts for 90% of the Department’s entire budget with an increase of 10.44% but when inflation is taken into account it amounts to an increase of 4.94%[41] (see Table 4 below). Table 4 also shows the Department’s Equitable Share budget is set to increase from R277 million in 2012/13 to R 303 million in 2013/14.[42] This is an increase of 3.73% in real terms with a real average growth of less than 1% over the MTEF.

Table 4: Eastern Cape Department of Human Settlements Equitable Share and Conditional Grant allocations, 2009/10 to 2013/14[43]

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Respectively, the Equitable Share budget and Conditional Grant budget grows by 3.73% and 4.97% in real terms. The Equitable Share budget is projected to grow in average real terms by 0.46% over the MTEF and the Conditional Grant anticipates a budget decline of 21% over the MTEF.

This unfortunately means that once again the Department has received insufficient funds for housing delivery for this financial year and that the entire human settlements budget will decline over the MTEF.[44] The Finance MEC attributes the overall provincial budget decline (of R5.1 billion over the MTEF) as being primarily due to a reduced population within the Province as established by the Census 2011 survey.[45] The Finance Minister has however indicated that R1.2 billion has been allocated to the province over the MTEF to try and mitigate against the effects of Census 2011.[46] Funding has already been set aside for the construction of 50 000 units across the province.[47] Currently the Department requires a further estimated R2.1 billion in order to unblock and complete 20 stalled housing projects from the previous financial year. In his National Budget Speech the Minister of Finance highlighted the introduction of a further “bulk infrastructure grant” this financial year. It is unclear from information provided in the Minister’s policy speech whether sufficient funding will be made available via this grant to meaningfully address stalled projects.[48]

Inadequate bulk infrastructure continues to be identified as an obstacle to human settlements development in the province. The Department anticipates it will spend 86% or R1.9 billion of the 2012/13 conditional grant allocation.[49] This could be as a result of the many housing projects that have been stalled as a result of municipalities failing to provide bulk infrastructure. The Department needs to provided explanations in this regard. The 20 stalled housing projects emphasises of course how the delivery of housing is heavily dependent on functional municipalities.

2.2 Municipal Capacity and Support

The relationship between the Department of Cooperative Governance and Traditional Affairs (COGTA) and the Department of Human Settlements is an extremely crucial one. According to the Housing Act, municipalities are the driving implementers of Housing policy.[50] This therefore means that the Department is unlikely to achieve the target of delivering 17 865 units this financial year and the 50 000 housing target over the MTEF if municipalities are unable to adequately fulfil their roles as implementers of housing delivery. Both the COGTA and the Department of Human Settlements need to adequately capacitate and support municipalities to reduce the many blockages and the delivery of poor quality houses as a result of insufficient monitoring and evaluation of municipal housing and bulk infrastructure programmes and projects. One of the ways is ensuring municipal development through prioritisation of funds towards capacity building programmes, reducing vacancy rates and increasing the number of capacity builders on a provincial level as well as at a local level.

There is also a need for strong inter-sectoral partnership between the Departments of Human Settlements, COGTA and other key Departments which have been established this financial year. The MEC has admitted that inter-sectoral partnerships are amongst the Department’s biggest challenges today.[51] This financial year, a task team between the Department, COGTA, Office of the Premier, Department of Rural and Agrarian Reform and the Provincial Planning and Treasury has been set up to improve housing municipal service.[52] It is hoped that such a task team has developed clear terms of reference to assist in improving the current state of under delivery

Table 5: Eastern Cape Department of Human Settlements by Programme, 2009/10 to 2015/16[53]

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Programme 2 is responsible for a number of important activities namely facilitating the development of housing policy and legislation, coordinating housing planning, capacity building as well as undertaking research which will inform planning. Furthermore, Programme 2 is required to render support to municipalities by assisting in planning and implementing municipal housing multi-year plans.[54] In the 2012/13 this Programme was originally allocated R19.6 million according to the 2012/13 source documents [55]. However this figure is contradicted in the 2013/14 source documents where an amount of R11.8 million[56] is reflected for this line item. The Department must explain this anomaly as the adjusted appropriation for 2012/13 does not support the changed programme allocation.

Over the last four financial years the Department has been functioning at 50% of its capacity.[57] This is particularly as a result of the long history of insufficient equitable share allocations which impacted negatively on the Department’s ability to recruit and retain the much needed human resources. According to the most recent Annual Report, Programme 2 has a vacancy rate of 41% and the Department is planning on reducing the vacancy rate to 30% over the MTEF. Recently the Capacity Building and Accreditation Programme has been moved from Programme 2 to Programme 3[58] in order for the sub-programme to receive more funding and to become more effective. However it should be noted that Should Programme 2 failure to boost human resource capacity for this sub-programme will result in failure to provide the much needed and necessary support to municipalities for successful housing delivery.

2.2.1. Addressing municipal challenges

The MEC for Human Settlements recently observed that municipalities face a two- pronged challenge. The first challenge is a lack of capacity to spend grant allocations and the second is an inadequate grant allocation to respond to housing needs.[59] As indicated already National Treasury will be introducing a new bulk infrastructure grant to municipalities and the provincial Department of Local Government in conjunction with Provincial Treasury will roll out the CFO support programme in municipalities which will provide increased municipal support.[60] This programme has been allocated R38.7 million over the MTEF.[61] Furthermore municipalities receive the Urban Settlement Development Grant (USDG) introduced in the 2011/12 to assist them in completing housing projects. Accredited municipalities such as the Buffalo City Metro are struggling to spend its USDG. Reports say that BCM has only spent 19% of its R400 million 2012/13 USDG allocation by the end of the third quarter.[62] Nelson Mandela Bay Metro has just recently upgraded its accreditation to level 2.[63] With this in mind, municipalities will require more hands on support which will require more financial resources to implement local government capacity building for service delivery projects. The Department is also strongly encouraged to introduce an additional sub-programme within Programme 2 to enhance capacity building and municipal accreditation.

Training and retention of skills is key to the successful planning and implementation of housing projects. The Department must demonstrate its commitment to improve housing delivery at a local level by growing the necessary skills required both within Provincial Department and within municipalities. It is therefore disappointing that the MEC announced the use of consultative services to provide much needed internal support to municipalities in Chris Hani and Alfred Nzo Districts to establish housing needs register.[64] This initiative is to be extended to Amathole, OR Tambo and KSD municipalities.[65] We believe this money can be better used to augment capacity within Programme 2. Establishing a Housing Needs Register is a permanent and essential skill within human settlements development which ideally should be within Departments and municipalities.

The MEC has also highlighted the introduction of a new unit within the Department – “The Internal Planning Integrated Development Unit” which maintains the ‘Provincial Housing Project Register’ and improves integrated planning with municipal IDPs.[66] Once again this is a function of Programme 2. The Department is urged to streamline and consolidate its internal planning and municipal relationships or collaborations within a single Programme for effective and efficient use of resources. The Department can improve internal planning capacities and maintain housing needs and project registers by providing the necessary skills, financial and human resources in a single programme.

2.3. Sustainable human settlements development: The MTEF and beyond

As previously noted this year’s conditional grant budget and equitable share budget will not be sufficient to meet housing demand and targets considering a 5% real increase in the Department’s budget and a decline in the Department’s budget on an average of 19.16% over the MTEF. Furthermore without sufficient human resources and capacity building this will have a negative impact on the Department’s ability to increase the rate of housing delivery. The Department anticipates to grow its housing output only by 2 406 units over the MTEF from a housing output of 17 685 in 2013/14 to a total housing output of 21 306 in 2015/16.[67] The province needs to put in place plans to cushion the impact of budget reductions beyond the MTEF particularly the Human Settlements Department. The right to housing and basic services must continue to be realised despite reductions in budget allocations over the MTEF.

The Department’s plan over the MTEF must be to introduce changes within its policies and implementation structures to ensure that available resources are used more effectively and efficiently.

2.3.1. Rural Development vs Urban Development

As part of the “outlook for the 2013/14 financial year” the Department has stated that “the majority of resources will be directed towards rural areas to prioritise rural development…the department will accelerate the rural housing development programme through up scaling of the rural voucher scheme which has been piloted in the 2012/13 financial year.”[68] This therefore means that the majority of Programme 3’s R2.69 billion[69] will go towards implementing rural housing projects as well as prioritising rural housing subsidies.[70]

However it should be noted that updated data from Census 2011 show large shifts in the need for housing towards larger urban centres within the province.[71] Both Census data and the NDP recognise that we are a rapidly urbanising society.[72] Census statistics reveal that 63% of the population are living in urban areas and is likely to increase to over 70% by 2030.[73]

In his 2013 State of the Nation Address, President Jacob Zuma acknowledges that while rural development remains a priority, government must remain mindful of rapid urbanisation and the growing demand for housing in urban areas.[74] As part of implementing the NDP the Human Settlement Development Grant funding must be equally allocated towards eradicating informal settlements and building integrated urban settlements.[75] Given the latest data and policy prioritisation emanating from National Government, the province must guard against over-prioritisation of rural housing development.[76]

2.3.2. Public Private Partnerships

The NDP emphasises effective partnerships between the Department, municipalities, local businesses and civic associations will help reduce the funding burden and backlog facing the Department.[77] The Minister has also acknowledged that current housing delivery for the poor is unsustainable and that the private sector must contribute to the provision of housing.[78] The Minister of Human Settlements together with other provincial human settlements departments have launched the “Each One Settle One Campaign” in the last financial year.[79] This campaign partners with the national department, businesses, individual citizens, business companies as well as mining houses to build houses for families or communities that are in need. Last year, the Free State Province, Limpopo and North West Province in partnership with businesses and Mining Houses are constructing houses for the poor as part of the campaign.

Currently it appears as if the Department has yet to adopt the ‘Each One Settle One Campaign’ . We implore the Department to not bypass this opportunity and to invite business and mining houses to play a role in the human settlements agenda in the province. The Department has a number of development corporations and businesses available for public private partnerships to launch the ‘Each One Settle One Campaign’ in the province.

The Coega Industrial Development Zone (IDZ) is one such example. Covering 110 km² of land, Coega is situated within the Nelson Mandela Metropolitan Municipality near Port Elizabeth, in the Eastern Cape province of South Africa.[80] It is a multibillion industrial development complex customized for heavy, medium and light industries which aims to drive local and foreign direct investments in export-oriented industries - positioning South Africa as the hub for Southern African trade.[81]

Coega also has a Development Corporation which[82] strives to improve the delivery of infrastructure in the Eastern Cape by addressing skill shortages, unemployment and advances socio-economic development and transformation within the Eastern Cape and South Africa as a whole. If the Department has not already, it is suggested that the Department approach the Development Corporation to consider housing provision for surrounding poor communities and to assist in building homes for employees who qualify as beneficiaries as part of their corporate social investment responsibilities.

Another option is the Eastern Cape Development Corporation (ECDC) which is the official economic development and investment agency for the Province.[83] ECDC is wholly-owned by the Eastern Cape Government and was formed to plan, finance, co-ordinate, market, promote and implement the development of the Province and all its people in the fields of industry, commerce, agriculture, transport and finance.[84] Currently hundreds of residents and businesses face eviction from ECDC properties.[85] A Daily Dispatch investigation team discovered close to 200 people living in dilapidated properties and poor conditions with some occupants owing the ECDC unpaid rentals.[86] It is proposed that the Department approach the ECDC and encourage it to contribute to the provision of housing for the poor as part of the “Each One Settle One Campaign” or as Corporate Social Responsibility initiative. The ECDC also works together with other provincial and national ministries, municipalities, chambers, private business, communities and other development agencies to implement the economic development policies of the Eastern Cape provincial government.[87] A partnership between the Department and the ECDC can improve and make possible cross-departmental and cross-sectoral housing initiatives.

The Department is to be commended for entering into a strategic partnership with the Department of Social Development which has resulted in the building and renovating of certain foster homes for abused women and children.[88] This is ground breaking indeed and the Department is urged to create more opportunities such as these with other stakeholders as it still has a long to way to go in this regard.[89]

2.3.3. Sustainable and Alternative/Green Housing

The Minister of Human Settlements admits that the Department’s mandate of housing the poor is currently not sustainable.[90] This is partly because of the alarming building costs which the Minister of Human Settlements outlined in his 2011/12 Budget Vote speech as follows:[91]

• Economic performance in the 2011/12 financial year as measured by GDP hovers around 3% substantially short of the National target of 7%.

• While inflation according to the Reserve Bank is around 6.3%, the building cost index as measured by the Bureau for Economic Research (BER) was at an alarming 14.1% in the fourth quarter of 2011.

• Building materials have recorded prices well above inflation with reinforcing steel up 38.9%, ceiling material up 10.8%, hinges by 9% and bricks by 8.6%.

• Transportation and labour costs in the building industry have also gone up. For 2012 the BER forecast for building costs is 12.1% rising to 16.3% in 2013.

• Interest rates at around 9% remain high for working people and especially the poor.

Given the 19.6% decline in human settlements budget over the MTEF the Department cannot sustain the current housing provision model. A new, alternative and more cost effective model is needed to meet demand provincially and nationally. The Department needs to change its current housing model of bricks and mortar to more sustainable, environmentally friendly and cost effective alternative building materials. The Department’s feedback regarding progress in this area has been poor. In this year’s policy and budget speech, the MEC only announces developments in social housing projects.[92] Although the growth of social housing projects is welcome, more alternative housing methods need to be explored.

The Eastern Cape is lagging behind other provinces in this regard, some of which have already started introducing sustainable and cost effective alternative building methods. The Free State Department of Human Settlements has started installing solar water geysers as part of its housing delivery which will help reduce energy costs.[93] The KZN Department of Human Settlements has come up with an innovative way of incorporating water harvesting in the Rural Housing delivery Programme. This addresses the issue of water shortage in rural areas as well as cutting costs of basic services through the installation of water tanks.[94] The Cape Town Department of Human Settlements plans to build 1 951 housing units in Delft using alternative building materials (ABTs), which are more environmentally friendly.[95] ABTs will ensure the homes stay warmer in winter, experience less damp and have reduced energy costs. Other green building interventions introduced for low cost housing include the use of compact fluorescent light bulbs, insulated ceilings with a thermal resistance to assist in the warming and cooling of the houses.[96] Planting trees and creating food gardens have also been introduced to improve health and safety whilst contributing to the transfer of skills to beneficiaries.[97] The Province needs to provide greater attention to the resource efficiency of the current low cost housing projects. Substantial savings in water and electricity construction could be made and the quality of life for income residents improved if low cost houses could be constructed using green building interventions like those currently being implemented in other Provinces.

2.3.4 Corruption and Financial Management

Preventing corruption and recovering funds lost to the Department after being defrauded by the private sector and public officials plays an important part in effectively and efficiently using resources. The President announced that investigations into construction companies shows improper conduct by large construction companies on corruption tender fraud and price fixing in the infrastructure programme in his State of the Nation address.[98] He also urged government departments to investigate allegations of corruption, fraud or maladministration.[99] It is pleasing to hear the MEC prioritising anti-beneficiary corruption activities[100] however corruption by contractors and public officials continues to be a problem. According to the AG 2009-2010 findings, many of the beneficiaries who were on the housing subsidy system were indeed government employees.[101] These findings led to the National Department of Human Settlements forging a relationship with the Special Investigating Unit (SIU) in 2009/10.[102] 

Given the tight fiscal budget over the MTEF, the Department must prioritise protecting its already limited budget from corruption and maladministration. According to the Auditor General findings on Eastern Cape Audit findings revealed that public officials are deliberately or negligent when it comes to complying with PFMA and SCM legislation and regulations.[103] A lack of monitoring and enforcement of applicable legislation and policies coupled with a lack of enforcement of consequences was found across all government departments and state entities.[104] The Head of Department (HoD) must (also obliged by the PFMA) to take all the necessary steps to prevent irregular and fruitless expenditure as well as take disciplinary measures against officials who are not complying with all legal and regulatory provisions outlined in the PFMA. The implementation of a ‘Fraud and Prevention Plan’ is a step in the right direction[105] but the Department needs to ensure that irregular and wasteful expenditure is kept at a bare minimum.

The HoD also needs to recover all monies stolen by employees who have been found to have defrauded the Department. By recovering this money, it can make a significant difference to the Human Settlements budget and its ability to provide more houses than what the budget currently allows. In 2009 an SIU investigation revealed that 319 Eastern Cape Administration employees have admitted to fraud in connection with housing subsidies to the amount of R4.7 million.[106] Erstwhile MEC Mabandla allowed the guilty parties to pay off the sum stolen. Since the investigation none of those officials had criminal charges brought against them because of the plea bargain.[107] The Department is urged to recover these stolen funds from these and other investigations to supplement the insufficient equitable share and to prevent such behaviour from reoccurring. Over time money lost to corruption adds up with negative effects on resources and the Department’s ability to meet targets. There therefore must be serious consequences for those who fail to comply with laws and regulations or for officials who defraud the Department of its already limited resources.

On the 20th of February 2013, Public Protector Thuli Madonsela presented findings to the National Assembly on a nationwide investigation into complaints her office received on RDP homes since the 2010/11 financial year.[108] Her investigation revealed shoddy workmanship by contractors and the Department of Human Settlements failure to ensure housing quality. Madonsela’s investigation reveals that the evidence of low cost houses falling apart has increased over time.[109] Each year government loses millions in rectification and double handling. Given the decline in Human Settlements budget over the MTEF, Departments cannot continue to spend money on rectifying poorly built houses. According to the Public Protectors findings, problems surrounding the poor construction of houses are mainly because of housing officials and inspectors abdicating their responsibilities and failure by departments to work with the NHBRC on housing projects.[110] Madonsela also warned of government losing billions due to corrupt construction companies.[111] The Department is urged over the MTEF to ensure that all their housing projects are enrolled with NHBRC and that the number of project inspectors is increased poor quality houses and rectification will continue to drain the Department of resources which could be used to construct new homes.

2.4. Gender empowerment in Programmes

According to National Department of Human Settlements data, between 1994 and September 2012, a total of 2 526 169 beneficiaries were approved for state housing subsidies across South Africa.[112] 55,7% (or 1 407 351) were female beneficiaries according to their records.[113] Gauteng has the highest number of female beneficiaries with 52.8% or 293 729 approvals followed by KwaZulu-Natal with 61,3% proportion of female beneficiaries with the second highest number of female beneficiaries (276 819) after Gauteng.[114] Limpopo province registered the highest proportion of female applicants at 68% (160 114 females) in relation to all its beneficiaries (a total of 235 549).[115] The Eastern Cape was among the Provinces with the highest number of female beneficiaries, recording 57.2% or 174 297 female beneficiaries over the period.[116] In view of South Africa’s socio-economic factors the Department is encouraged to sustain this high proportion of female applicants and beneficiaries.

According to the NDP women make up a large percentage of the poor, particularly in rural areas.[117] The plan proposes a range of measures to advance women’s equality including that “the transformation of the economy should involve the active participation and empowerment of women.”[118] It is therefore important that the Department contributes towards the empowerment of women housing contractors. In this regard, the Department must be commended for supporting such contractors through the Rural Interventions or Emerging Contractor Development Programme.[119] This programme seeks to expedite women contractors’ involvement in the delivery of key projects and in addressing backlogs in housing delivery. This Programme receives the largest Programme increase of 89% from the 2012/13 adjusted allocation.[120] The Department is encouraged to continue the empowerment of women’s construction over the MTEF. The Department is also encouraged to grow its partnership with Social Development to provide more shelter for abused women and children.

The Department intends to grow the number of female staff by almost double from 125 female staff in 2012/13 to 237 female in the 2013/14 financial year.[121] However it is disappointing that growth of female staff members is not sustained over the MTEF with the Department planning on growing its female staff composition by only 22% or 53 female staff members.[122]

2.5. Conclusion

For the 2013/14 financial year the Department has received a 10% increase from the 2012/13 adjusted allocation however when inflation is taken into account it is an increase of 5%. The Department’s budget anticipates a budget decline of 19% over the MTEF which is mainly attributable to the R5.1 billion decrease in the overall provincial budget attributable primarily due to a declining provincial population according to the Census 2011 results. Furthermore an additional allocation of R1.2 billion meant to assist the Province in dealing with the significant budget decreases will be discontinued post the MTEF. It is therefore vital that the Department identify ways of mitigating this budget decline through cost cutting exercises that are least detrimental to the delivery of key projects as well as the Department’s efforts to address the housing backlog. Necessary changes must clearly involve sustaining efforts that to date have improved upon the Departments efforts to ensure effective and efficient use of its limited resources. Like the Provinces Health and Education Departments, the Human Settlements Department must pursue a HR capacity building plan for the effective and efficient use of resources. All senior staff must have performance agreements in place and these must be reviewed annually to reward productivity and address under delivery by staff whose performance detracts from the service delivery mandate. The Department must commit to alternative building methods, material and housing design in order to be more efficient and to respond more meaningfully to the housing demand. The Province has much to learn from other Provinces in this area and also in the area of strategic partnerships with citizens, businesses and civil society. Strategic partnerships will supplement funding and increase the pace of housing delivery in the province. The on-going influx of people toward urban areas remains a key driver of housing demand and the primary guide for the prioritisation of resources over the MTEF. With rural development prioritised by the Province this is likely to further compromise the backlog in demand for urban housing and related development.

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[1] Yeukai Chiweshe (nee Mukorombindo) is a human settlements researcher at the Public Service Accountability Monitor. Yeukai joined the PSAM in 2009 as a researcher in the Monitoring and Research programme, monitoring the Eastern Cape Department of Housing. In 2012 she graduated with a Masters in Social Science and her broader research interests include government structures, social accountability and development.

[2] Constitution of the Republic of South Africa, sections 26, 27 and 29.

[3] In producing this report, the PSAM wishes to acknowledge the Centre on Budget and Policy Priorities (CBPP) who have provided support via a grant from the International Budget Partnership of the CBPP

[4] Province of the Eastern Cape Provincial Treasury, Eastern Cape Overview and Estimates of Provincial Revenue and Expenditure 2013/14

[5] Eastern Cape Department of Human Settlements Strategic Plan (2010/11-2014/15), Eastern Cape Department of Human Settlements Annual Performance Plan (2011/12-2013/14)

[6] The Eastern Cape Provincial Growth and Development Plan (2004-2014) covers the overarching national and provincial strategic frameworks.

[7] The National Development Plan is government’s plan to reduce poverty and inequality by 2030 available at

[8] Delivered on 14 February 2013

[9] Delivered 27 February 2013

[10] Delivered on 27 March 2013 and accessible at:

[11] Delivered on 21 February 2012

[12] Delivered on 7 March 2013

[13] National Budget Speech delivered on 27 February 2013

[14] State of the Province Address delivered on 21 February 2013

[15] National Development Plan 2030: Our future make it work, p.17

[16] Ibid, p.35-38

[17]Eastern Cape Human Settlements policy and budget speech 2013/14 delivered by MEC August Sauls on 28 March 2013, p.22

[18] “A Resource Guide to Housing in South Africa 1994-2010:Legislation, Policy, Programmes and Practice.” Socio-Economic Rights Institute of South Africa (SERI), 2009, p.33

[19] Ibid

[20] Department of Human Settlements Progress Report on creation of human settlements’ delivered on 13 Nov 2012 at the National Assembly. Report accessible at

[21] “A Resource Guide to Housing in South Africa 1994-2010:Legislation, Policy, Programmes and Practice.” Socio-Economic Rights Institute of South Africa (SERI), 2009, p.31

[22] Eastern Cape Department of Housing, Local government and Traditional Affairs, Amended Strategic Plan, 2005-2010; Annual Performance Plan 2007-2010, p.9.

[23] Eastern Cape Department of Human Settlements Annual Performance Plan 2011/12-2013/14, p.15

[24] “A Resource Guide to Housing in South Africa 1994-2010:Legislation, Policy, Programmes and Practice.” Socio-Economic Rights Institute of South Africa (SERI), 2009, p.34

[25]Department of Human Settlements Progress Report on creation of human settlements’ delivered on 13 Nov 2012 at the National Assembly. Report accessible at

[26] Socio-Economic Rights Institute of South Africa: A Resource Guide to Housing in South Africa 1994-2010, p.34

[27] Housing delivery figures from 2003/04-2007/08 were refer to houses completed both nationally and provincially based on research data accumulated by the Socio Economic Rights Institute of South Africa, 2009. Housing delivery figures from 2008/09 -2012/13 refer to houses completed and in the process of completion both nationally and provincially based on provincial Housing and Human Settlements Annual Reports and Budget Vote Speeches between the 2008/09 and 2012/13 financial years.

[28] Department of Human Settlements Progress Report on creation of human settlements’ delivered on 13 Nov 2012 at the National Assembly. Report accessible at

[29] All housing delivery figures have been audited with the exception of the 2012/13 financial year. The 2012/13 housing output figure includes completed houses as of December 2012. The other housing output figures are taken from Eastern Cape Department of Human Settlements Annual Report, 2009/10, 2010/11 and 2011/12.

[30] Eastern Cape Human Settlements Policy and Budget Vote Speech 2013/14 delivered by MEC August-Sauls on 28 March 2013, p.7

[31] Ibid

[32] Ibid, p.20, Eastern Cape Department of Human Settlements 2011/12 Annual Report, p.96

[33] Ibid

[34] Eastern Cape Estimates of Provincial Revenue and Expenditure 2013/14, p.654

[35] Ibid

[36] IHHSD grant allocations and expenditure for the 2008/09 -2012/13 taken from 2012/13 Provincial Estimates of Provincial Revenue and Expenditure available at National Treasury website .za According to the Human Settlements 2012/13 National Estimates of Provincial Revenue and Expenditure by 27 February 2012 67.5% of the entire national IHHSDG was spent by Provinces. Housing output figures are taken from Provincial Annual Reports and Budget Vote Speeches for the 2008/09-2012/13 financial years.

[37] Eastern Cape Overview and Estimates of Provincial Expenditure 2013/14, p.695. In all tables, the figures for 2009/10, 2010/11 and 2011/12 are audited expenditure. The Main Appropriation figures for 2012/13 represent the initial allocations for that financial year while the Adjusted Appropriation figures are the revised allocations subsequent to the tabling of the Adjusted Appropriation Act. The Revised Estimates are a combination of un-audited incurred expenditure and projected expenditure (what the Department thinks it will spend by the end of the 2012/13 financial year). The outer years are MTEF projections (projected allocations). All figures (R’000) are nominal (they do not factor in the effect of inflation on buying power), with the exception of the second to last “Real Change” column. The percentages in this column were calculated using real figures. CPIX figures provided by the International Monetary Fund (IMF) Inflation, average and consumer price Index were used to calculate what the real buying power will be for this financial year compared to last year (Real Change between-2012/13 and 2013/14). The CPIX figures were also used in the last column to calculate the growth of budget allocations over the MTEF in percentage term. The budget allocations used to calculate average growth over MTEF are also real (including inflation).

[38] Ibid, p.695. According to the 2013/14 Estimates of National Expenditure and Revenue for Vote 31: The National Department of Human Settlements received R28.11 billion up from the R25.14 billion received via the 2012/13 adjusted allocation.[39] This is a nominal increase of 11%.

[40] Eastern Cape Overview and Estimates of Provincial Expenditure 2012/13, p.659

[41] The PSAM uses the adjusted appropriation when comparing allocations between the previous financial year (2012/13) and the year under review (2013/14). Eastern Cape Overview and Estimates of Provincial Expenditure 2012/13, p.659

[42] Eastern Cape Overview and Estimates of Provincial Expenditure 2012/13, p.656

[43] Ibid

[44] Eastern Cape Overview and Estimates of Provincial Expenditure 2013/14 p.656

[45] Ibid, p.659. See also Table 5 of this document

[46] Eastern Cape Budget Speech 2013/14 delivered by MEC for Finance P. Masualle on 7 March 2013, p.13

[47] Eastern Cape Budget Speech 2013/14 delivered by MEC for Finance P. Masualle on 7 March 2013, p.13

[48] Ibid, p.19

[49] National Budget Speech 2013/14 delivered by Minister of Finance P. Gordhan on 27 February 2013

[50] Eastern Cape Overview and Estimates of Provincial Expenditure 2013/14 p.658

[51] Housing Act, 107 of 1997, Part 4, Section 9 (1)(a)

[52] Eastern Cape Human Settlements Policy and Budget Vote Speech 2013/14 delivered by MEC Sauls-August on 28 March 2013, p.21

[53] Ibid

[54] Eastern Cape Overview and Estimates of Provincial Expenditure 2013/14 p.658

[55] Ibid

[56] Eastern Cape Overview and Estimates of Provincial Expenditure 2012/13 p.496

[57] Eastern Cape Overview and Estimates of Provincial Expenditure 2013/14 p.658

[58] Eastern Cape Department of Human Settlements Annual Report 2011/12, p.165

[59] Eastern Cape Department of Human Settlements Annual Report

[60] Eastern Cape Human Settlements policy and budget speech 2013/14 delivered by MEC August Sauls on 28 March 2013,p.20

[61] Eastern Cape Budget Speech 2013/14 delivered by MEC P. Masualle 7 March 2013, p.20

[62] Ibid, p.20

[63]“BCM in a hurry to spend R499m” by Z. George,Daily Dispatch 6 March 2013, p.1

[64] Eastern Cape Human Settlements policy and budget speech 2013/14 delivered by MEC Sauls-August on 28 March 2013,p.16

[65] Ibid

[66] Ibid

[67] Ibid, p.17

[68] The Department is planning a housing output of 17 865 in 2013/14; 20 100 units in 2014/15 and 21 306 in 2015/16. Eastern Cape Provincial Estimates of Revenue and Expenditure 2013/14, p.668

[69] Eastern Cape Provincial Estimates of Revenue and Expenditure 2013/14, p.655

[70] Ibid, p.667

[71] Ibid, p.666. Programme 3 is responsible for managing and implementing the IHHSDG for the provision of integrated sustainable human settlements.

[72] Budget Speech 2013/14 by MEC of Finance P. Masualle delivered on 7 March 2013,p.14

[73] National Budget Speech 2013/14 by Minister of Finance P. Gordhan delivered on 27 February 2013

[74] State of the Nation Address 2013/14 by President J. Zuma delivered on 14 February 2013

[75] Ibid

[76] Ibid; National Budget Speech 2013/14 by Minister of Finance P. Gordhan delivered on 27 February 2013; Budget Speech 2013/14 by MEC of Finance P. Masualle delivered on 7 March 2013,p.14

[77] Eastern Cape Policy and Budget Speech 2013/14 delivered by MEC Sauls-August on the 28 March 2013

[78] National Budget Speech 2013/14 by Minister of Finance P. Gordhan delivered on 27 February 2013

[79] “Sexwale: Housing for poor is not sustainable” by A. Majavu. The Sowetan Live, p.1

[80] “Sexwale: Housing for poor is not sustainable” by A. Majavu. The Sowetan Live, p.1

[81] coega.co.za

[82] Ibid

[83] Ibid

[84] ecdc.co.za

[85] Ibid

[86] “Rental Axe falls down on families” by S.Miti and B. Fuzile, Daily Dispatch 15 March 2013, p.1

[87] “R700 for factory shack” by S.Miti and B. Fuzile, Daily Dispatch 18 March 2013, p.1

[88] ecdc.co.za

[89] Eastern Cape Human Settlements Policy and Budget Speech 2013/14 delivered by MEC Sauls-August, p.11

[90] Ibid, p.21. The MEC announced a new partnership with the Department of Military Veterans that will cover ‘additional features’ to all homes provided for military veterans.[91] The Department has also entered a ‘ground breaking’ partnership with NUMSA Investment Corporation which will provide mixed mode housing for workers in the Nelson Mandela Metro as well as make land available for such housing projects.

[92] “Sexwale: Housing for poor is not sustainable” by A. Majavu. The Sowetan Live, p.1

[93] Minister of Human Settlements 2011/12 Budget Vote Speech delivered dated 19 April 2011

[94] Eastern Cape Human Settlements policy and budget speech 2013/14 delivered by MEC Sauls-August on 28 March 2013.

[95] Free State State of the Province Address 2012/13

[96] KZN Budget Vote Speech 2012/13

[97] urbanearth.co.za

[98] urbanearth.co.za

[99] Ibid

[100] State of the Nation Address 2013/14 by President J. Zuma delivered on 14 February 2013

[101] Ibid

[102] Eastern Cape Human Settlements policy and budget speech 2013/14 delivered by MEC August Sauls on 28 March 2013.

[103] Progress report on Department of Human Settlements Special Investigation Unit presented to the National Portfolio Committee on Human Settlements on 18 August 2010

[104] Ibid

[105] A general report on the Provincial Audit Outcomes Eastern Cape PFMA 2011/12, p.61

[106] Ibid

[107] Eastern Cape Human Settlements policy and budget speech 2013/14 delivered by MEC August Sauls on 28 March 2013, p.18

[108] “Bhisho housing fraudster make payback bargain” by P. Cull, The Herald 2 December 2009

[109] Ibid

[110]

[111] Ibid

[112] Ibid

[113] Ibid

[114] “Department of Human Settlements Progress Report on creation of human settlements’ delivered on 13 Nov 2012 at the National Assembly. Report accessible at

[115]“Department of Human Settlements Progress Report on creation of human settlements’ delivered on 13 Nov 2012 at the National Assembly. Report accessible at

[116] Ibid

[117] Ibid

[118] Ibid

[119] National Development Plan 2030: Our future make it work, p.33

[120] Ibid

[121] Eastern Cape Estimates of Revenue and Expenditure 2013/14,p.667

[122] Ibid

[123] Ibid, p.672

[124] Ibid

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I. Policy Priorities

II. Budget Analysis

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