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Sisulu: Housing Dept Budget Vote 2004/2005 (10/06/2004)

10th June 2004


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Date: 10/06/2004
Source: Ministry of Housing
Title: L Sisulu: Housing Dept Budget Vote 2004/2005


Madam Speaker
Madam Deputy Speaker
Honourable Deputy President
Honourable Members of Parliament
Invited Guests
Ladies and Gentlemen:

Madam Speaker, the first Minister to preside over Housing in our democratic dispensation left us with a legacy of his esteemed name and policies. He has been honoured by many informal settlements that have taken on his name - Joe Slovo. We at Housing, have yet to give him the necessary honour.

The last Minister of Housing, Madam Bridgette Mabandla was not with us long enough to even get her name connected to any informal settlement.

However, Madam Speaker, we do have a Minister who embodies much of what we achieved. Ms Sankie Mthembi-Mahanyele, who now is the Deputy Secretary-General of the ANC has laid a firm foundation that has enabled us to be where we are today in terms of housing delivery. We have asked her to be amongst us here today so that we can thank her for the hard work she did whilst she was Minister of Housing between 1995 and February 2003. She has already been thanked and awarded by the international community for the sterling work she did during her term. We are, on our part, like in the case of Minister Slovo, are still thinking of the best way of honouring her. For all of us here and for many South Africans who now enjoy the benefit of a better life, I thought it proper and fitting to ask her to join us today to thank her in your presence. On her hard work, I will add my bit so that we can accelerate the delivery of houses.

Madam Speaker, history has burdened us with responsibilities so immense that at first sight they would seem clearly overwhelming. To be sure, those who ascribe the present challenges related to housing to the policies of government over the past ten years are consistently worried about the possibility of a revolution that would be led from the back of informal settlements, to directly challenge government. In this context Allister Sparks writes in The Star of 20 April this year - barely a week after our third successful general elections, that:

'The huge underclass in our society has shown exceptional patience for its share of the promised better life for all. But that patience will not last indefinitely. Anyone who has ventured into the pullulating squatter camps around our cities knows there is an underlying mood of discontent. If nothing is done to ease the plight of those millions, a leader could emerge from among them and set them alight with populist demagoguery.'

Naturally, the housing challenge was an obvious point of focus in the election period, and the ANC clearly identified it as a priority area in our quest for a better life. However, Allister Sparks had probably not reckoned with our own commitment to deal with this matter when he penned his article.

As we all will know, in the past term of government the envisioned popular revolt did not arise. And if the evidence of my interaction with the people in the short space of time I have had so far as Minister of Housing is anything to go by, there isn't even a whiff of it in the air. And coming from intelligence I a well-attuned nose. Instead, I have encountered responses from people about the housing challenge, which clearly indicate that they themselves have realistic assessments of what can and cannot be done. The responses, furthermore, indicated the readiness of our people to form part of the social contract to create a better life for themselves.

It is to these South Africans, Madam Speaker that we look for answers and the solutions to the challenges we have. This is so because we are under no illusion that the task at hand to ensure as the prescription of the Freedom Charter says that 'There Shall be Houses For All' is indeed massive. Of importance for our purposes in this regard is the recognition of the necessity to mobilize both people and resources as vastly and as speedily as possible to ensure that we reverse the injustice of our historical legacy. This, we must do, by collectively mobilizing communities, business and professionals to enter with ourselves as government into a contract to help build South Africa in the free spirit of solidarity and love which expects no material gain in return. Madam Speaker, I have been so overwhelmed by the amount of goodwill that ordinary but expectant South Africans have shown towards me. In fact, I am beginning to think that South Africans have perfected the art of (blackmail) because with this amount of goodwill, how could I fail them. They have got me trapped just where they want me - but I am very willing to be trapped. Allister Sparks therefore doesn't need to worry about South Africans for they have fine-tuned the skill of getting what they want and in this case they did it without a revolution.

A week ago I hosted a group of South African professionals who showed amazing goodwill and a passion for housing. From the various sectors they represented they have freely offered their time, their support and ideas to help government achieve its stated goals regarding housing. I will soon formalise this support base, which I intend to use as a vehicle to mobilise business, the banking sector and ordinary professionals behind a people's contract to build homes for our people. I hope to tap on this support base in the same way as government tapped on Business Against Crime because at the root of housing can be found a solution for the creation of an economic and a security environment that can build South Africa into the dynamic economy. In short, what we do right will be good for business; it will be good for the economy as it will be for the beneficiaries of what we do.

In fact, I have found that I am heir of one such support base called the Women for Housing, inherited from previous Ministers. On a voluntary basis this group of women professionals and beneficiaries investigate issues and challenges that are relevant for the empowerment of women.

The support base I am talking about, Madam Speaker is therefore the vehicle that is immediately available at my disposal like the people themselves who can make sure we fulfil our goal.

It is now an accepted fact that we have built 1.6 million houses. This has been held by all developing countries as a beacon of hope, another South African success story. It is against this backdrop that we meet, therefore, to consider the first budget vote of the Department of Housing for a third term of a people-centred government that is committed to bettering life for all.

However, as we also know that the President has instructed us to attend to the backlog we have accumulated in some provinces over the past few years, I have had occasion to hold a workshop with my MECs to work out strategies of how to deal with this backlog. I can report that I was very pleasantly surprised to find that not only were the MECs conversant with the reasons for the backlog, they had also worked out strategies, specific for their provinces.

But we sit with a problem of unabated urbanisation, which cannot be met by similar rate of delivery. This is a burden of the past that we will carry with us for the foreseeable future. A consequence of this is the rapid sprawl of informal settlements and basing ourselves on the 2001 census the number of households in these settlements is 1.02 million households.

Madam Speaker, when you consider that this accounts for (16.4%) of all households in the country, when you consider that in Cape Town alone an estimated half-a-million people and growing 40% of these people have no access to services and sanitation that is 200 000 in our midst. These are people with no access to a clinic, a school or a police station.

It is useful in this regard that I quote the South African Cities Network report, which eloquently describes the condition of living in an informal settlement. It reads:

'Ivory Park, with about 225 000 people, accounts for 80% of Midrand's entire population, and has grown steadily over the last decade, although it occupies 7% of land area. Most residents are poor: 70% earn less than R2 500 pm, and of these 34% have no formal employment.' As government, we have articulated our concerns over informal settlements. These are growing at an alarming rate and this government has indicated its intention to moving towards a shack-free society. The difference now is that we are not dealing with intent, we will now be operational. There will be visible results within the timeframes we set ourselves.

The Premier of Gauteng has fired the first salvo in our war against shacks. His bold assertion that informal settlements in his province will have been eradicated in ten years, is the best news I have ever heard in my tenure as Minister. Now if we consider that Gauteng has 24% of households in informal settlements in the country and is projected these would have been dealt with by 2014, it should follow, I would like to think that the other four pressure areas of KwaZulu-Natal, Western Cape and Eastern Cape, can calculate on the same rate of delivery, clear their slates in the next six years. In my discussions with the MECs this has been identified as a doable, so the outer figure of six years then it shall be!

What we shall then be delivering to Cabinet by the end of July is the how, and how many. That is our commitment. And now for the second part of this social contract - you. What will you contribute towards this?

It is important however, Madam Speaker, that when we talk about the urgency of dealing with informal settlements we not cloud our overall strategy and that we are not interpreted to be giving priority to urban areas at the expense of rural areas. It is important that the targeting of informal settlements be raised as a national priority for the reasons already given. Part of the plan is that this objective must also contribute to the achievement of the UN Millennium Development Goals.

In November this year, we will be hosting the African Minister's Conference together with the UN Habitat where our plans and ideas in this regard will be further crystallised.

We will eradicate the backlog I have talked about earlier, by fast-tracking delivery. In this regard, we are going to build the capacity of municipalities, the officials of the Department, contractors and councillors. For the accreditation of municipalities in respect of this purpose we are currently preparing a framework and are aiming to pilot the first set of accredited municipalities by November this year.

In the past few years housing delivery has seen a steady exodus of established contractors whom we suspect have been driven away by low profit margins in low cost housing. As a consequence low cost housing delivery has been driven predominantly by black emerging contractors. A study we have done has therefore shown spending and delivery declines in the past three years which are caused amongst other reasons by problems experienced by emerging contractors in general project management and finance.

The study shows that a typical black emerging contractor is aged on average at between 36 and 40, with experience and some training in the construction industry but with the majority having matric as the highest educational qualification. These contractors are small in terms of assets, income, size of projects undertaken and number of employees. About 76% had an average annual turnover of less than R500 000, and 45% owned only simple equipment whilst 77% had less than 10 employees. For 45% of them the largest contract they had ever undertaken was smaller than R100 000. In addition, for 40% of the emerging contractors the total value of their contracts was less than R50 000 in value.

Invariably this incapacity will be reflected in the quality of work that is delivered in housing. Thus the National Home Builders Registration Council has identified in its investigation that the quality of houses is compromised by, in the main, the use of inferior building materials by emerging contractors as well as poor labour practices.

To address the problems experienced by these contractors a training programme has been started through a start up amount of R10 million. The programme is initially targeting 2700 BEE contractors across the country and has already commenced in KwaZulu-Natal, Gauteng and Western Cape. In addition, regarding access to finance discussions with the National Urban and Reconstruction Agency are being had for the up-scaling of its lending activities to support the emerging contractors.

The study further recommended formal agreements with existing financial institutions on appropriate channels of providing emerging contractors with affordable methods of accessing finance; and, after suitable feasibility studies, the establishment of an emerging contractor development bank in consultation with the relevant public sector institutions. We will pursue the implementation of this recommendation as well as to ensure that as part of creating employment we empower black emerging contractors. A workshop to deal with skills development for them will be announced soon.

To root out corruption and maladministration we have decided to set up a Special Investigative Unit. This will be operational in three months. A hotline, in addition, will be made available within three weeks for members of the public to report any complaints, irregularities and raise any queries they might have regarding housing.

In discussions with the MECs we have resolved that we will devise a communications strategy that will permeate from the national to the provinces. The strategy will encompass a number of pillars which include educating communities about their rights, obligations and responsibilities such as ensuring that a house that is given to them cannot be sold for eight years unless under special conditions; educating them on special arrangements for certain categories such as people living with HIV/AIDS, disabled persons etc; and educating communities about the government's plans regarding their environment. The strategy will also ensure that MPs and MPLs are sufficiently empowered to assist communities.

The workshop I had with the MECs was a very important eye-opener for me and learning from some of the issues that came out it is my intention to work out with the Department an efficient delivery strategy that permeates to the lowest structures, a strategy that ensures that emerging contractors who are struggling to maintain continuity are not driven to bankruptcy by waiting to get paid for the services they had delivered. I believe we can find a way that significantly shortens the period from which a submission is made for payment to the actual time of its execution.

In the short space of time I have had in my portfolio it has been clear that the alignment between the national, provincial and local governments needs to be tightened. A great deal of time is spent in this weak chain. The MECs and I have resolved in this regard that it might work in our best interest if we put together a strategy where senior officials within the Department can for a period be deployed to a province so that all the three spheres can be at one within the same space. To pilot this approach the DG and I have agreed that we are going to prioritise the Western Cape where we will deploy a senior official to drive housing projects relating to our two spheres on our behalf.

At the request of Cabinet the current hostels' policy is being revised with a view to providing people with affordable and sustainable housing opportunities on either a rental or home ownership basis. A further directive from Cabinet was that the current funding limit, applicable to the programme, must be reviewed, with the possibility of replacing it with a flexible set of technical standards and specifications that will in future serve as the national norm for the application of state funding for the programme. Arising from this, pilot redevelopment projects were launched in the provinces of Gauteng, KwaZulu-Natal, Free State and Western Cape, that will inform the revision of the current policy, and which could provide certain examples of best practices.

Most of us, Madam Speaker, would have read the report in the Business Day last week dealing with the Absa Bank regarding the soaring housing prices. According to the report the nominal year on year increase recorded last month was the highest increase in more than 20 years. The average year on year growth rate during January this year was 23% this year as compared 7.6% last year. The average price of a house in real terms currently was R415, 000, the highest since late 1984. The report concluded that if the boom continued the sector might find itself in a position where the prime areas of Johannesburg are only available to the very wealthy. That is the reality of the first economy in relation to housing in South Africa. The reality of the second economy is that an RDP house can be bought for a mere R5000 despite the fact that government spends around R25, 000 to build it. It has no real financial value. There is an almost non-existent housing secondary market in most, if not all, townships with owners failing to sell their properties even if they could afford to buy a better house in the suburbs.

The integration of this first and second economy, therefore, is another of our challenges. Our need to structure interventions that create a single integrated housing market will be reflected in the transfer of functions from other Departments to ours in areas such as Sectional Title management, Estate Agents affairs, alternative building technology, and providing access to credit.

We will be releasing the regulations under the Home Loans and Mortgage Disclosure Act for consultation in three months and continue to participate in the deliberations of the Financial Services Sector Charter in order to monitor the extent to which the targets set for the allocation of credit to low income communities will be met. Through this we hope to achieve the adoption of a housing finance charter, which will spell out roles and responsibilities and obligations on both the parts of the financial institutions and consumers.

A farm-worker housing strategy, which takes into account the needs and the circumstances of farm-workers, furthermore, is being developed. Once approved by the MinMEC in December it will be fully implementable by April 2005. Specific policy proposals in respect of child-headed houses in light of the consequences of HIV/AIDS will also be tabled to the MinMEC in December for implementation by 1 April 2005. Our input on the Extended Public Works Programme for the Social and Economic Sectors will be finalised and submitted by the end of June. Innovative ways of using traditional methods and materials for building are being explored with the assistance of the Council for Scientific and Industrial Research.

Recently, a small community of Prince Albert in the Eastern Cape had the unfortunate occurrence of having their houses attached and sold in execution for minor debts which were not even housing rates, some of which were as low as R58. Their case was taken up by a Cape Town based lawyer, Matthew Walton. This has deeply saddened us and we regret that we could not come to the aid of the affected community on time. However, I have instructed my department to investigate the amending of the Housing Act 1997. This will help us to protect poor people from having their homes taken away from them in circumstances beyond their control.

The Department is not alone in delivering houses. Its housing support institutions play a key role in enhancing norms and standards as well as making housing more accessible In this regard I am able to report for the past financial year Servcon disposed of 19,783 properties. Thubelisha Homes secured 11,713 stands with 5,405 houses handed over to clients. The Peoples Housing Partnership Trust trained 2,329 people on house construction skills, 1,348 community facilitators, 325 people on housing design and costing as well as 16 people on safety. The Social Housing Foundation, which is responsible for capacity building, established fifty-nine social housing institutions that have constructed 30,332 housing units. The National Housing Finance Corporation, which is responsible for mobilising finance outside the state, disbursed fifty-five loans of the value of R632, 367,000 to intermediaries to finance 220,602 houses. The National Urban Reconstruction and Housing Agency, which facilitates the release of funds for low cost housing from financial institutions, has to date received R4.8 million claims on fifty-five housing projects. The Rural Housing Loan Fund funded more than 54,000 home improvements, mostly built by homeowners or small local builders. It committed over R272 million to twenty-two retail lenders and disbursed over R252 million to lenders. The National Home Builders Registration Council registered 19,448 homebuilders and enrolled 281,462 homes. It also conducted 470,921 inspections during the period and received 16,288 complaints.

In order to address issues related to the performance of these parastatals we have set aside the coming two weeks to meet with their management so that we collectively can find our way forward. It therefore has been necessary for me, Madam Speaker, to provide Honourable Members with this kind of information to indicate fully what work lies ahead.

We will shortly embark on an Imbizo programme and intensify other consultative methods to discuss the role of all stakeholders. We will be popularising the concept of Letsema in housing in order for communities to initiate their own housing solutions. Allow me in this context, Madam Speaker, to congratulate and commend the efforts of the former President of Zambia, Dr. Kenneth Kaunda, who through the Habitat for Humanity has committed himself to building twenty-five houses in Mamelodi by the end of this year. This will be in addition to the houses he has built in Durban already. The work will build on a similar project he has done in his home country, Zambia, through the Kenneth Kaunda Work Project he initiated in 2003.

Let me at this point illustrate that on broad strategy Habitat for Humanity has since 1996 built over 3 000 homes across the country utilising over 5 000 volunteers.

If others, Madam Speaker, can sacrifice time to come and help build homes for our people then I cannot see why we cannot do it for ourselves. I would like to take this opportunity to reach out to every South African citizen to come forward and give a hand, starting with ourselves in Parliament. The Portfolio Committee, I am sure, will come forward. I challenge all to come on board in a concrete way. You have the opportunity to do something to make a difference where you live or in somebody's life.

This year's housing budget is R4.8 billion (or R4, 848,941,000). Over the Medium Term Expenditure Framework period it increases to R5, 172,083,000 in 2005/06 and R5, 483,928,000 in 2006/07. The housing allocation formula, which determines the allocation of budgets to provinces, has been brought in line with the new census information so that the resources are available in the areas where there is the greatest need. The effects of this census information are implemented in the 2005/06 budget.

Madam Speaker, I am happy to confirm that the value of the housing subsidy in the current financial year is increased to keep pace with inflation. Households with incomes up to R1, 500 per month will receive subsidies of R25, 800 and be required to make a savings contribution of R2, 479. This means that the house price will come to R28, 279. Indigent households and people building their own houses will receive R28, 279 and not be asked for a contribution. People with disabilities receive even more to cater for their various needs. Households earning between R1, 501 and R2, 500 per month will receive a subsidy of R15, 700 and invest their own monies in the balance. Households earning between R2, 501 and R3, 500 will receive R8, 600 and contribute their own additional amounts.

The central tenet of our new strategy is underpinned by the need to substantially improve the quality of life of our people. Indeed, there can be no more visible intervention than at the lowest levels, among the poorest of the poor. Housing is an area where the steep inequalities of our country are immediately visible. And we who have been given an overwhelming vote of confidence by our people commit ourselves to giving in equal measure our commitment to deliver on our promises. Together, therefore, let us break new ground in housing delivery!

I thank you.

Issued by: Ministry of Housing
10 June 2004


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