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Date: 06/08/2004
Source: Ministry of Housing
Title: L Sisulu: Matthew Goniwe Annual Lecture


LECTURE BY LN SISULU, MINISTER OF HOUSING, AT THE OCCASION OF THE 2ND MATTHEW GONIWE ANNUAL LECTURE, IN HONOUR OF THE LEGACY OF CHIEF ALBERT LUTHULI, Wits Centre for Urban and Built Environment Studies, Johannesburg, 6 August 2004

Chairperson
Invited Guests
Comrades
Ladies and Gentlemen:

Chairperson, in addressing the topic at hand, I think it would be appropriate for us to first look at the issues that pertain to African cities and their urbanisation challenges. This detour is necessary in order to appropriately contextualise the challenges faced by the national Department of Housing in its efforts to chart new policy directions for housing development in South Africa.

Studies and observation have shown that the most significant features of the transformation of human settlements are rapid urbanisation, the concentration of the urban population in large cities, the sprawl of cities into wider geographical areas and the rapid growth of mega-cities.

Popular belief has it that Africa is a rural continent and, indeed at its present average urban level of 35%, it is the least urbanised continent. However, Africa has the world's highest growth with an annual average rate of 4.0%, almost two times faster than Latin America and Asia. This high rate of urbanisation implies that main cities are growing at 4% to 5% per annum. As a result, over the next two decades 87% of the population growth in Africa will take place in urban areas.

However, Africa's urbanisation is not accompanied by sustained growth precisely because the continent has been perceived as primarily rural. Cities in Africa are becoming homes of the poor and, islands of deprivation, desperation and squalor for large contingents of people. They are also becoming sites and sources for environmental pollution and degradation, as well as social anomie and insecurity.

Poverty on the continent is a phenomenon that has for long been associated with rural areas but has increasingly become urbanised. Three hundred million urban poor (earning less than one US Dollar a day) live in the slums of Africa, which are growing at twice the rate of overall urban growth. It is expected that by 2030, more than 450 million people will be living in African cities in conditions of poverty. Most newly arrived migrants are not able to find decent shelter or sufficient work and reside in unpalatable slum conditions. These poor people pay inflated rents to rapacious slum landlords. They also pay more for basic services such as water, as they have no access to subsidised municipal supplies.

How these international urbanisation trends manifested themselves in the South African housing challenge is reflected in that, first, there has been an average population growth of 2.1% per annum resulting in the population increasing by 10.4% or over 4.2 million people between 1996 and 2001. Second, the country has also experienced a 30% increase in the absolute number of households, where only a 10% increase was expected. The reason for this is the drop in average household size from 4.5 people per household in 1996 to 3.8 in 2001, which is a significant difference and has serious consequences for housing demand and hence service delivery. Thirdly, as a result of the foregoing, the housing backlog has increased and current figures indicate that there are over 1.8 million dwellings which can be classified as inadequate housing, either in the form of backyard shacks (4.1% of all dwellings) and non-backyard shacks (12.3% of all dwellings). In total this means we have 16.4% informal dwellings. Fourth, urban populations are increasing as a result of both urbanisation and normal population growth. One fifth of urban residents are relative newcomers to urban area (i.e. first generation residents) and urban areas are expected to continue to grow at a rate of 2.7% per annum.

Gauteng has a significantly higher population growth rate, of twice the national average. The Western Cape, KwaZulu-Natal and Mpumalanga also have population growth rates above the national average.

Fifth, employment is scarce with the economy creating only 12% more jobs over the last five years. While the number of potentially economically active individuals has increased threefold. Added to which, of those employed, over half earn less than R3500 a month.

These factors have affected the number of individuals who join the informal economy.

Despite the scale of delivery by government, the changing nature of demand has meant that the size of the demand has increased in the face of the 'stubborn' growth of informal settlements, i.e. the overall backlog has not been reduced. Even with full delivery the backlog is likely to have remained static. The informal settlement figures demonstrate that the large number of housing units that have been delivered have had the effect of limiting the growth of such settlements.

The number of households living in shacks in informal settlements and backyards increased from 1.45 million in 1996 to over 1.83 million in 2001, an increase of 26%, which is far greater than the 11% increase in population over the same period according to Statistics South Africa.

More recently low cost, furthermore, formal housing delivery rates have slowed, meaning that the backlog for the next decade is unlikely to decrease especially if quality settlements with higher public investment in housing units and settlement infrastructure are pursued with a substantial increase in public and private investment.

Housing delivery (both public and private sector led) remains in a transitional state. The location of low cost housing has continued to be on the periphery of urban (and rural) economies (whether spatially, economically, or socially) and an impact of this has been that new settlement development has continued to exacerbate urban inefficiencies both for individuals and for organisations responsible for urban management (examples being the extended transport and service infrastructure systems necessary to serve such settlements).

The rapid delivery of housing has not been matched in pace by the coordinated supply of social infrastructure such as schools, clinics, sports and recreation facilities. Added to this, the continued growth of informal settlements also largely without concomitant social infrastructure development leaves many communities in settlements in which it is very difficult to sustain their own livelihoods. Where social infrastructure is developed, the operational costs associated with managing and providing the services is not as easy to secure. This holds back the initial investment in the capital infrastructure in view of the lack of operational budget that will be forthcoming.

Informal settlements beyond declared urban edges effectively exclude people from urban investment planning. In addition, informal settlements are often addressed through the predominant approach of relocating communities to new housing areas and in the process coping strategies of the very poor are often disrupted by these formal interventions.

Both the demand for housing and the housing market has changed but, the benefits of a buoyant higher end property market have not been felt by the poor. The sale of second hand houses is currently highly profitable for the well-off but often constitutes a loss for the poor, particularly those with subsidised housing. Refocusing the housing programme upmarket from the current target group, while it may make narrow investment sense (more self-funded housing stock and the inclusion of 'bankable' people), will probably exacerbate this situation rather than more equitably distributing benefits. If wealth creation is to be stimulated amongst the current beneficiaries of the programme, then the housing asset needs to have functional value (a usable physical asset to create social and human capital) and an exchange value (an ability to create financial capital), and this depends on investment in inner city, township and informal settlements so that the property market works for everyone. Hence, significant public investment and substantial private sector collaboration are called for.

To be sure, we approached the last general elections of April 2004 having delivered 1.6 million houses. This was accompanied by the extension of related social services, which saw increases from 62.2% in 1996 to 65.9% in 1999. The percentage of households with access to electricity increased from 62.1% in 1996 to 69.7% in the same period whilst access to water in dwellings or on site increased from 47.6% in 1996 to 55.3%. But as the 5th Economic and Social Rights Report Series 2002/2003 by the South African Human Rights Commission states, despite these achievements, our challenge in terms of housing delivery in particular and poverty eradication in general remains immense.

It is in the light of this challenge, I believe, that the legacy of late Chief Albert Luthuli is primarily relevant to us. Common among the descriptions that are given to his character is his militancy and discipline. By his comrades, he was also known for being a fierce fighter. Yet, despite his fierceness, despite his militancy Chief Luthuli was to be awarded the Nobel Peace Price in 1960. When presenting the award to him Gunnar Jahn, then Chairman of the Nobel Committee, said the following:

"To get some idea of Lutuli's achievements, we must know something of the society in which he worked. The white population of South Africa settled there in the latter half of the seventeenth century. The first settlers were French Huguenots, followed later by Dutch farmers. They cleared the land, and their descendants - the Boers - have lived there ever since. They look upon the country as their fatherland; they have no other. The English settlers, who arrived on the scene at the end of the eighteenth century, maintained close contact with their mother country.

The first natives whom the Dutch pioneers met were Hottentots and Bushmen. The Hottentots have now virtually disappeared as a separate racial entity; but through intermarriage with European and other races they have contributed in large measure to the racial characteristics of those so-called "the coloured people".

When the Boers moved into the interior, they encountered other native tribes, among them the Zulus, whom they fought and conquered. These tribes constitute the largest part of the population of South Africa today. In the course of time other racial elements were added: the Dutch imported a number of Malays from the East Indies as slaves, while the British introduced Indian labour to the sugar plantations. In the nineteenth century two communities took shape: the Boer republics of Transvaal2 and the Orange Free State, and the British colony of South Africa, both ruled by whites. At the turn of the century these two communities fought the Boer War of 1899-1902, from which Britain finally emerged victorious. The ultimate result was that the Union of South Africa was set up as an independent British Dominion in 1901. At that time the outside world heard little about relations between whites and nonwhites.

Then he continues to say:

In this community, nonwhites are denied all right to participate in the government of the state. They are discriminated against legally, economically, and socially. And this discrimination between whites and nonwhites has grown steadily during the post-war years. The aim of those now ruling the country is to draw a line between the two communities - between whites and nonwhites - despite the fact that the march of events has clearly shown that the whole community has been developed by the efforts of all races.

It was the discrimination between white and non-white that prompted non-white Africans in 1912 to establish the African National Congress. Its founders were non-white Africans who had obtained a higher education, either abroad or at home, in the days when they still had the opportunity to do so. At first the African National Congress tried to influence political development by means of petitions and deputations to the authorities, but when the attempt proved fruitless and new laws restricting the rights of nonwhites were passed, the African National Congress adopted a more active line, especially after 1949. It was in the mid-1940s that Lutuli began to participate in this work of the African National Congress, of which he became a member in 1944. He was elected to the Committee of the Natal Section in 1945 and in 1951 became president of the Natal Section. In December 1952, he was elected president of the entire African National Congress, a position he retained until the organisation was banned by the government in 1960.

It was during these transitional years of adopting stronger action, based on boycotts, defiance campaigns, and strikes that Lutuli came to influence so profoundly the African National Congress.

In conclusion he said:

But if the day should come when the struggle of the nonwhites in South Africa to win their freedom degenerates into bloody slaughter, then Lutuli's voice will be heard no more. But let us remember him then and never forget that his way was unwavering and clear. He would not have had it so.

It is now 37 years since Chief Luthuli died. The hallmark of what he left us with is enshrined in the Freedom Charter, which, after mass participation in its drafting identified housing as one of our key development priorities. Housing was thus provided in the constitution to progressively ensure that there shall be housing for all. This is the legacy Chief Luthuli left us with and which we are charged to take on.

In 1994 the people for whom he died in struggle tasted freedom for the first time. His voice was already silent at the time but freedom came not through a bloodbath but through an agreed upon negotiated settlement which paved a way for our first democratic elections in 1994. Since then two other general elections were delivered and both indicated overwhelming support for the ANC which had premised its manifesto on delivering fundamental change in the people's living condition by fighting poverty and creating jobs. Related to housing, the manifesto committed the ANC to ensuring lower interest, government debt as well as inflation as means of encouraging higher investment by both the private and the public sector. The challenge therefore for all us here today is to measure Chief Luthuli's vision for South Africans against the achievements of the government of the ANC.

The challenge then for the next five years, is to deliver sustainable human settlements and a sustained effort to move away from the kind of developments we witnessed these past decades.

In 1997, the Presidential Job Summit established programmes to enhance this delivery. The Growth and Development Summit Agreement in June 2003 provided a further platform for the constituencies to work in partnership to increase investment in housing. Finally, within the Financial Sector Charter, targets and goals are being finalised.

Since 2001 government began implementing an expansionary budget in respect of social services, which include housing. The share of housing for 2004/05 in terms of the budget was increased slightly from 2,89% to 2,9%.

We are however disappointed that private sector investment has not matched the government's investment. This disappointment stems from the fact the private sector has benefited from an economic growth, which averaged 1.8% from 1980 to 2000 including accelerated real gross domestic product (GDP), which grew at 3.5% in 2000, 2.8% in 2001 and 3.0% in 2002. Through consistent fiscal policies double-digit inflation was also reduced to 9.3% in 2002.

An indication of the private sector's reluctance to support the government's initiative is given in this regard by the South African Reserve Bank in its March 2004 Financial Stability Review which notes that as a percentage of disposable income household debt increased slightly to a mere 52% in 2003, from 51.8% in 2002. Comparing the first quarter of 2004 to the same quarter of the previous year (2003), the household debt as a percentage of disposable income increased to 54% from 52.1%. Household debt as a percentage of financial assets, which serve as collateral for loans and advances, only increased marginally.

The South African Reserve Bank also notes that total lending in terms of mortgages as a percentage of GDP by financial institutions only increased from 23.7% in 1994 to 27.7% in 2003.

In light of these indications the key question that all of us need to ponder upon is why this has happened. In 1994, government signed the 'Record of Understanding' with the banks and created a number of institutions as part of the agreement reached with the private sector. Delivery, however, remained painfully slow.

Some of this responsibility must be accepted by government for not outlining the clear responsibilities of the partnership with the private sector and the roles of different levels of government. The message that must come from today's lecture is that we must establish partnerships that work and a partnership that recognise each other's responsibility. In this regard we see the role of government at all levels as concerning itself with policy - its the implementation and monitoring. In order to expedite delivery, government will facilitate and involve itself with partnerships that are able to implement these policies. It will create incentives, an enabling environment and remove bureaucratic systems to ensure maximum participation by the private sector as the government's partner to implement policy at scale and speed.

In turn we expect the private sector to partner with government at all levels to deliver the "People's Contract" including sustainable human settlements. The private sector must provide innovative financial instruments to all South Africans wishing to purchase a home or participate in projects relating to human settlements. It must create an enabling environment and remove 'bureaucracy' in the financial system to ensure maximum housing finance provision including product quality standardisation and consumer education.

The Ministry of Housing is reviewing the current policy and its implementation against the backdrop of the experience of the previous decade and the fact the government received a majority of 70% of the votes in the last elections. It is our intention to deliver sustainable human settlements, including housing. We will shortly be making a series of policy announcements that would expedite the delivery of a "People's Contract". These policies will contribute to a growing economy, increase in employment and opportunities for entrepreneurs, creation of an environment that facilitates the entry of empowerment players, consumer education programme and contribute to delivering a "People's Contract".

Secondly these steps will create an enabling environment to encourage private sector initiatives to focus on medium to long-term growth activities rather than short-term shareholder returns.

Our approach is to deliver some quick wins in parallel with the installation of highly resourced teams (implementation & research) to give effect to the implementation of policy, with the ability to quickly fix what is not working. These teams will be driven from the centre in consultation with provincial and local government. The policies will be part of a living document, which spells out the actions for the Department of Housing in the next five years to deliver human settlements, which are sustainable.

We are moving away from a 'one size fits all' policy approach, to a dynamic one that will be informed by experience and feedback from old, current and new projects. In saying this, utmost care will be taken to ensure that continuity and predictability become a norm in this sector. Our challenge therefore is to ensure a balance between a sustainable development path, which contributes to the overall growth of the economy, and the speedy delivery of integrated human settlements.

Let me share with you, what the policy announcements will mean for each sector. First, all South Africans will have an opportunity to access homes in well designed, serviced and located human settlements. Second, pensioners and the indigent will access to a home with no savings requirement. Third, previous subsidy beneficiaries will enjoy increased access to credit and choice. Fourth, new subsidy beneficiaries will have access to credit and a choice of top structures. Fifth, rental accommodation seekers will have access to innovative rental options in a secure environment. Sixth, informal settlement inhabitants will enjoy certainty, access to proper services, security, choice and formal top structures. Seventh, the financial sector will be able to commit to a partnership and will have an enabling environment as well as incentives to make profit. Eight, the construction sector will receive our commitment to a partnership, an enabling environment as well as incentives to make profits. If all the partners deliver on their commitments in terms of the "People's Contract" I am certain that we will indeed break the new ground housing delivery.

Our people are in desperation. Luthuli was to instruct us:

'You dare not fail them for failing them is failing the best in life - LIBERTY, for which they and others throughout the ages everywhere have sacrificed all to secure it and preserve it. We young fighters for freedom in this age stand between these heroes of freedom and posterity and our bounden duty is to defend and preserve this divine heritage - LIBERTY and all it stands for - and hand it unimpaired to generations'

Comrades, friends and academics, we all have a key role to play in achieving the dream of Chief Luthuli. I invite all of you to critique and offer suggestions on policy to deliver sustainable human settlements, a viable and vibrant economy and job security for all.

I thank you for the invitation.

Issued by: Department of Housing
6 August 2004
Source: Department of Housing (http://www.housing.gov.za)

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