2015 Budget Speech Delivered by Minister Bonginkosi Madikizela

Madam Speaker
Madam Premier
Leader of the official opposition
Cabinet colleagues
Members of Provincial Legislature

Chairperson and members of Human Settlements Standing Committee, HOD Mr Thando Mguli and Senior Managers from the Department of Human Settlements, entities, service providers and all our partners Ladies and gentlemen

Madam Speaker in her State of the Province Address last month, the Premier shared with us a very clear direction on the priorities of this government and the realities we are faced with, she said and I quote

“Budget constraints mean that we do not have the money to provide every person on our housing database with a formal finished house. This would cost an estimated R70 billion, which is almost double the annual budget of the entire Western Cape Government”

She went further to repeat the National Minister of Human Settlements Lindiwe Sisulu’s words that,

“Government free housing projects are not sustainable, which is why there has been a national policy shift towards upgrading informal settlements and backyard dwellings through the provision of electricity, water and decent sanitation”

Madam Speaker, The National Development Plan aims to eliminate poverty and reduce inequality by 2030, and identifies the role different sectors of society need to play in reaching that goal. Chapter 8 sets out the plan for transforming the human settlements, setting out four spatial principles for human settlements development: spatial justice, spatial sustainability, spatial resilience and spatial quality.

During the last term, we’ve laid a solid foundation - providing 101 011 housing opportunities across 16 programs within our housing code. Human Settlements or housing debate has been for far too long very emotive, and many commentators are completely out of touch with reality. Demand for housing in this province has nothing to do with lack of delivery but contributing factors beyond our control. Mushrooming of informal settlements and backyard dwellers is fuelled by joblessness and urbanization, forcing people to migrate to cities to look for employment. We have unfortunately become a scapegoat for these economic realities. That's why even those who receive houses sell or rent them in order to make an income. My recent visit to Rooidakke project in Grabouw was a testimony to that, where many houses just few days after occupation already have shacks. Some of these shacks are occupied by the new beneficiaries while the new houses are occupied by people who are tenants. This is a phenomenon across the province.

In 1995 for example, the housing backlog was 1.5million in South Africa. Fast forward 20 years, about 3.7million housing opportunities have been built of which 601 651 are in the province. The backlog has now increased to 2.3million. We incorrectly assume that every informal settlement is an indication of a housing need. People leave their decent homes; go to cities to look for employment opportunities not necessarily houses. It is not surprising then that many people sell or rent these houses in order to put food on the table.

There are more than 8 000 legal shebeens in the Western Cape and more than 24 000 illegal shebeens, mainly operating from government subsidized houses.

There are also many people earning between R3 500 -R10 000 living in informal settlements because they earn too much to qualify for free government subsidy, too little and heavily indebted to qualify for mortgages. The housing policy is entrenching a culture of dependency and entitlement, undermining the capacity and the culture of saving in our communities. In 2013, African Response did a research on savings in the informal sector and discovered that more than R45billion is generated by this sector in stokvels, food, Burial Societies etc. This is a clear indication that our approach in housing provision needs a rethink; we cannot continue dotting the landscape, perpetuating apartheid spatial planning.

Madam Speaker we are correcting the skewed pattern of housing allocation. Many older and disabled people are neglected while prioritising younger people. This was due to the fact that many municipalities had no reliable database to base the allocation from, which left many hyenas masquerading as community leaders to have a field day in allocation of houses to their family and friends. A number of Councillors and community leaders have been convicted for corruption in housing allocation. This resulted in my intervention through the Housing Demand Database Improvement Programme to assist municipalities with their housing demand database. All municipalities now have a credible database.

After this, in 2012 I announced that no beneficiaries under 30 years of age will be prioritized while we still have many older people still waiting for houses (farming of old people). This was followed by an announcement by National Minister, Lindiwe Sisulu in 2014 when she said no beneficiaries under the age of 40 years will be prioritized until older, and most deserving people have benefitted. This was heavily criticised by some who claimed to be legal and policy experts. These announcements are very much in line with our policy and the principle of first come, first served.

We have to make sure that older people, disabled people, and child headed households are prioritized before younger able bodied individuals. When I asked my department to look at the profile of our database, I discovered that more than 14 300 people between the ages of 60 and 100 years are still on the waiting list. Then I realized that our stance on prioritizing older and most deserving people is justified. I have since issued a circular to all municipalities for this directive to be implemented.

Most of the people on our waiting list are backyarders in various municipalities, this will definitely address their concern and the assumption that we are only looking after those who live in informal settlements. Over and above that we have embarked on a backyarders program designed to benefit them in various programs like ERF 8448 and Mau Mau for Gugulethu and Nyanga backyarders. This comes after Our Pride project in Eerste Rivier that benefitted backyarders from Gugulethu and Eersterivier, Mandela Park 1 000, benefitting backyarders from Gugulethu, Site C and Mandela Park. All these developments taking place in these areas will mainly benefit backyarders.

Madame Speaker when I took over this Department in 2009 farm workers were never part of the waiting list and very few benefitted from housing projects in municipalities. The assumption has always been that farmers are responsible for housing their workers. While that is true to a certain extent, that kind of arrangement deprived farm workers of owning their own homes. We have since then provided 14 571 houses to farm workers in various areas like De Doorns, Tulbagh, Op die Berg, Grabouw, Clanwilliam, Graafwater, De Rust and Slangrivier. The biggest challenge faced by farm workers currently is that after the 2012 strike and wage increase, they no longer qualify for a free subsidized house.

Which brings me to my next point, Madam Speaker, Housing policy and programs have done very little to provide houses for people earning above the free subsidy threshold, in order for them to become home owners as well. I have placed this group on top of my strategic priorities. I have made a submission to the National Minister and the Department to make some amendments in our policy and programs in order to deal with this challenge. I have also appointed a team of officials headed by Mr Willem Steenkamp to focus on strategic partnerships with financial institutions, farmers, and developers. This is yielding very positive results, many projects are already under way, and some in the planning stages for this particular market.

Madam Speaker we do not pay lip service to integration, we walk the talk. Social and affordable housing projects in Scottsdene, Belhar, Foundry Road, Bellville and Glenhaven are currently under construction and will yield a total of 1630 units and will be completed by 2017. Last month I visited Scottsdene Social Housing Project and was touched by Mr Lakay's story.

This gentleman was a backyarder living in a shack paying around R1 500 a month, with no direct access to basic needs like a toilet. Mr Lakay is now part of the first 128 people that have moved into their new houses in Scottedene, lives in a 2 bedroom house paying R1700 a month in a state of the art house with recreational facilities for his kids. The hand over housing ceremony took place last week where all 3 spheres of government were in attendance together with our partners, SHRA, NHFC and Madulamoho, the social housing institution.

When I was there, I was also told by developers that many people who approach them earn between R3 500 and R5 000 but this program does not cater for them in terms of the policy, that's why I've made the submission to the National Minister for amendment on this program in order to accommodate people within this income category. Affordable Social rental Housing projects in outer years will be located in areas like Wetton, Ottery, Bothasig, Retreat, Woodstock, Brooklyn, Lansdowne, Ruyterwacht and a portion of District Six. All are centrally located, well within reach of economic opportunities, transport options, and social infrastructure.

Madam Speaker, yesterday I again did a sod turning ceremony on a project that I pulled out of the dustbin, Belhar Gardens Rental Estate with all our partners, SHRA, NHFC, Nedbank, Calgro. This development was first put out to tender in 2004 but faced many challenges with development rights lapsing several times. I'd like to thank the intervention of Madulamoho as our partner and the City of Cape Town for funding the bulk infrastructure that has unlocked this project. We are spending almost R207m with SHRA, NHFC and Nedbank working with National Department to fund the project. 630 housing opportunities will be provided for those who do not qualify for free subsidized houses. A stone throw away from there the City just launched a BNG project of over 300 housing opportunities 2 weeks ago. The next phase will include commercial and student accommodation.

My Department, in partnership with the Social Housing Regulatory Authority, will initiate a feasibility study aimed at converting strategically located rental stock into Social Housing, in order to maximize available opportunities while analysing how best to utilize the release of prime sites as a catalyst for affordable housing corridors directly adjacent to the CBD. The focus areas encompass a De Waal Drive precinct (which links Gardens to District Six and Woodstock), a Main Road precinct (extending through the Southern Suburbs), and a Century City precinct, linking the Northern Suburbs to the Voortrekker Road corridor). If approached as a collective, these amount to some 449 units, and form a corridor directly adjacent to the CBD.

Madam Speaker, since the transfer of the Estate Agency Affairs Board from DTI to Human Settlements in 2012, the Western Cape has since proactively pioneered engagements with the Estate Agents Affairs Board (EAAB), aimed at contextualising the regional challenges and establishing how the Province must engage to strengthen and take the Sector forward. The Province wants to harness how best we can use stock created by the Department to function as a catalyst for economic development within communities, which are often served by local Estate Agents.

Madam Speaker as we heard from Minister Nene last month, relying only on government subsidy to provide houses is unsustainable. Last year I called a number of developers and financial institutions to announce my intention to make government land available through competitive bidding process as our equity in partnership to provide Gap housing and rental opportunities. I have also engaged my colleague, Minister of Transport and Public Works, Donald Grant and agreed to make other land parcels available for this initiative. The following land release projects are currently being implemented in Belhar CBD, Dal Josafat, Stellendale and Highbury Park and will yield a total of 5590 units. Other land parcels have been released for development in Blue Downs, Eerste River Delft and Brentwood Park; these projects will yield over 1 000 houses.

During the course of the year, some land parcels will be released for commercial purpose with the assistance of the Estate Agents Affairs Board (EAAB). In addition, land parcels will be released for the development of properties in middle-income areas.

Transformation of the Sector remains a priority, from an age, gender and race perspective. It is estimated that 88% of registered agents are still white, with the majority of the Sector being male and /or over the age of 50. It is important to qualify that transformation according to the Democratic Alliance is not a zero sum game or imply “replace”: it means fostering, empowerment and support of seasoned Practitioners to grow the number of disadvantaged professionals entering and/or already engaged in the Sector.

The Province realises that transformation cannot be achieved without the drive, buy-in and support of existing role-players in the Sector. Through the Western Cape Estate Agents Core Group, the Department has been working in partnership with the National Property Forum (NPF), Institute of Estate Agents of South Africa (IEASA), Real Estate Business Owners of South Africa (REBOSA), Black Property Forum, the EAAB, the Black Conveyancers’ Association, etc.

The work emanating from this Core Group has already borne fruit; it was used by our partner, the EAAB, to motivate for an extension of an Education and Qualification deadline set as 31 December 2013, which would have seen a number of predominantly disadvantaged agents expelled from the Sector. The onus to meet the new deadline of 30 June 2015 now vests with responsible agents: an important sector like this, dealing with arguably a households’ greatest asset, must be properly skilled. Estate Agents must take responsibility to undertake the required training, because our consumers deserve to be served by professional, knowledgeable, ethical persons when making important life decisions about their assets.

Madam Speaker another core function of this department is to harmonize relationships between landlords and tenants in the rental housing sector; resolve disputes and unfair practices; inform landlords and tenants about their rights and obligations in terms of the Act; and to make recommendations to relevant stakeholders pertaining to issues related to the rental housing sector.

The Rental Housing Tribunal now also has a fully-fledged office serving the Southern Cape Region [based in George] and this is in line with the latest Amendment Act [nr 35 of 2014] which prescribes that all Municipalities must have a Rental Housing Information Office. The Rental Housing Tribunal is currently engaging the Department of Local Government to enter into MOUs with Municipalities throughout the Western Cape so that the services of the Tribunal are brought as close to every household as possible. Madam Speaker I would like to urge people to make use of this office by calling our call center number which is 086 010 6166.

Madam Speaker, one of the human settlements strategic objectives is to maximize the use of alternative building technologies in order to respond to electricity challenges and climate change. It was quite telling that after numerous engagements, presentations, pilot projects and evidence based research on benefits of using this method over the years, no company had ever won an open tender. I then instructed my officials to call for tenders of only companies that were using these technologies and compete among themselves. One of the challenges we faced was the limited number of people with expertise to test these technologies in SA. The second challenge was the fact that these materials are manufactured outside the country because many people had given up on convincing South African government to use this way of building.

With the assistance of Agreement SA, NHBRC and CSIR, in 2012 we awarded a tender to build almost 2000 house in Delft. After numerous protests from community members who resisted this method of building and saw it as sub-standard to conventional brick and mortar, these houses are at various stages of completion. On the day of hand over the first batch of completed houses, the temperature was 40 degrees Celsius. We felt the benefit of this immediately when we walked into these houses, as the temperature inside the house was moderate. So Madam Speaker even though we have experienced a number of teething problems, I'm convinced that as government we need to take these lessons in future projects of this nature.

Going forward, Madam Speaker in July 2014, the Cabinet took a decision to reduce our government's strategic goals from 11 to 5. My Department is part of PSG 4, 'to enable a resilient, sustainable, quality, and inclusive living environment', together with the departments of Transport and Public Works, Environmental Affairs and Development Planning and Local Government. This was done to streamline and maximize the impact through transversal management in order to bring under one room all the elements that make integrated and sustained human settlements. Over and above that, 8 game changers were identified, with 3 falling under our PSG 4 and 2 under my department namely - Better living model and Water & Sanitation. Work is currently underway on those game changers.

Madame Speaker a game changer is not just about doing more of the same to incrementally improve the outcome. It is also about innovating – thinking differently about the constraints to improve sanitation, and then doing things differently to put us on a different trajectory.

For this reason, my department will host a design lab in May with various experts in the sector to interrogate a number of options where we can innovate around three areas:

1. Innovative technology that can overcome the constraints around bulk infrastructure, space and topography;
2. Innovative procurement models that can overcome the financial and human resource constraints of municipalities to invest in, operate and maintain these new (and traditional) technologies; and
3. Innovative approaches to community-led approaches to the provision, operation and maintenance of sanitation services that ensure that communities not only accept, but also take responsibility for looking after, the services provided.

Madam Speaker, we have also identified 5 catalytic and 9 provincial priority projects in this province which will be funded and implemented jointly with National Department of Human Settlements. The catalytic projects will benefit areas like Barcelona, Gxagxa, Europe, Vukuzenzele, Kanana and Kosovo in the City and Transhex, Thembalethu and Syfontein, Vlakkeland and Vredenburg in the non-metro areas. The provincial priority projects will benefit areas such as Pinelands, De Novo, Delft, Joe Slovo, Boystown, Sheffield Road, Thembalethu, and Dal Josafat. The Department has also prioritised the Louis Fourie Corridor in Mossel Bay, the project is currently in the planning phase and will be accelerated going forward. We are in the process of finalizing our business plans, institutional arrangement and funding model for these projects.

In this financial year 2014/2015 we had a set a target of 17 583 housing opportunities, I'm happy to report that we have exceeded our targets and have delivered 18 817 housing opportunities, consisting of 10 421 housing units against a target of 10 357, 11732 service sites against a target of 6 211 and 1 164 other housing opportunities against a target of 1 015. This is largely due to measures put in place to arrest challenges within the delivery chain. The HSDG grant allocation of R1 934 billion for the 14/15 financial year has been spent. I want to thank Mr Ray Rughubar, Chief Director, Human Settlement Implementation, and his team for turning the ship around in this area.

In the ensuing financial year the Department plans to fund a total of 163 housing projects which will result in the delivery of a total of 18 950 housing opportunities. The Human Settlement Development Grant (HSDG) allocation for the 15/16 financial year will be distributed amongst the regions as follows;

• Metro (included the City and Provincial projects) – R1,06 billion
• Winelands – R154 million
• Overberg – R137million
• Karoo – R37 million
• Eden – R237million, and
• West Coast – R144million

For the new MTEF cycle (from 2015/16 to 2017/18) the HSDG will be distributed amongst the regions as follows;

• Metro (including the City and Provincial Projects) – R3, 633billion
• Winelands – R740million
• Overberg – R426million
• Karoo – R75million
• Eden- R 793 million
• West Coast – R414million

The Department has committed to deliver a total of 56 937 housing opportunities for the new MTEF cycle. The Department implemented the Infrastructure Delivery Management System (IDMS) in new projects; including NEC3 contracts to ensure that projects are delivered on time and within budget. The current contractual arrangements within municipalities will also be addressed. This will be done in conjunction with Provincial Treasury (PT) to identify blockages and develop corrective actions to ensure service delivery by municipalities. The Department will ensure that a fair and transparent procurement process is followed by municipalities to get the best value for money, including economic empowerment for Small, Medium, and Micro Enterprises (SSME) contractors. This will also contribute to boost the local economy of the municipalities. The Department will also be part of the procurement process for projects in municipalities.

Madam Speaker, I'd like to thank all the officials under the leadership of CFO, Francois De Wet who worked tirelessly to turn the mess the Housing Development Fund was in when I took over this department. The fund received unqualified audit opinion, and we are about to finalize the process of classifying every property.

The biggest spending risk is the holding cost of the Western Cape Housing Development Fund (WCHDF) Assets, especially the municipal rates and services charges. The Department is currently transferring the properties to municipalities and qualifying beneficiaries. The Provincial Cabinet also endorsed a debt write-off strategy/programme to write of debt of beneficiaries who would not have qualified under the normal Enhanced Extended Discount Beneficiary Scheme (EEDBS) to obtain ownership. This intervention will further assist in decreasing our holding costs on these properties and will also contribute to the strategic objective, increasing the security of tenure. A total of 4 100 debtors have been written off to date. This includes a total of 1 065 debtors that did not qualify for the EEDBS as their income exceeded R3 500.

The debt write-off policy approved by Cabinet allowed for the debt of these beneficiaries to be written off. The Department has committed to clear the remaining 2 610 debtors within the new five year cycle.

The Department has also received a clean audit opinion for the first time since the dawn of democracy. This is an indication that this department is in good hands despite many challenges we are facing, we can account for every cent spent. Our internal controls and all other matters raised by Auditor General were taken seriously and addressed.

My department is committed to employment equity in the workplace, I am happy to mention that all appointments are done taking the Employment Equity targets into account. The Department is very well represented as a whole, but skew on the respective levels. This cannot be changed overnight, but a concerted effort is made to address this on the senior levels. 51% of the staff members are women. Currently the racial distribution is as follow: African (26%), Coloured (55%), Indian (2%) and White (17%).

Madam Speaker, my Department is in the process of unblocking a total of 35 Peoples Housing Process Projects (PHP). A total of 62 approved contractors have been loaded onto the Enhanced Peoples Housing Process Database with a Construction Industry Development Board (CIBD) grading of 2 to 9, of which 32 contractors have been appointed to do general building from a CIBD grading of 2 to 6,with a total contractual committed amount of R201 125 489. Going forward the Department has committed to creating empowerment opportunities for Small, Medium and Micro Enterprises (SMME’s) and set the following targets for the new five year cycle; 50% of contracts awarded to SMME’s with historically disadvantage individual  representation, 30% of contracts awarded to SMME’s with women representation and 30% of contracts awarded to SMME’s with youth representation. Madam Speaker we have started to connect the dots in our delivery chain, but there's still room for improvement on our turnaround time, especially to pay contractors, particularly SMME’s on time because cash flow is critical for them to remain afloat. Even though we still pay within the 30 days stipulated time frame, we can still do much better than that.  Madam Speaker, I am happy to announce that today we are also joined by Mrs Momkoena who won a national Govan Mbeki award for the best female contractor for 2014.

The Department will also embark on a process to increase own revenue generated from its housing stock whereby strategic properties will be upgraded and rented out to people in the GAP market at market related rental. State owned residential accommodation will be made available in the main City Centres, which will afford the employed an opportunity to live close to work. This will address the income group up to R18 000 per month who has not benefited in the past. The income derived from this will ensure that the holding cost of these properties will be recovered from the end user. This will however be phased in as the current lessees will have to be right sized and provided with alternative accommodation.

Madam Speaker lastly but more importantly, we have improved our planning in order to create adequate and credible pipelines. The Business Plan now only includes projects that are ready for implementation or are in the process of being implemented. We have also made R25million available for the planning of projects, mainly catalytic projects, to be implemented as from 2016/17. In total these projects will yield 62 873 houses in different areas, as I have mentioned them before. I would like to thank Ms Jacqui Samson, Chief Director, Human Settlement Planning, and her team for their diligent work in improving the planning. Madam Speaker, lastly, I would like to thank the head of the department Mr Thando Mguli and his team for making sure that we meet our targets and that we continue to improve the living conditions of the people of this province.

I thank you.