Eastern Cape Department of Human Settlements. Budget Analysis 2013/14. Yeukai Mukorombindo Chiweshe 1. May 2013

Transcription

1 Eastern Cape Department of Human Settlements Budget Analysis 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) , Fax: (046) 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 R 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. 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. 1

2 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 units. This is an increase of 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 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. 2

3 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. 3

4 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 evidencebased 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 I. Policy Priorities 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 2 Constitution of the Republic of South Africa, sections 26, 27 and 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/ /15), Eastern Cape Department of Human Settlements Annual Performance Plan (2011/ /14) 6 The Eastern Cape Provincial Growth and Development Plan ( ) 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 Delivered 27 February

5 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 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 10 Delivered on 27 March 2013 and accessible at: 11 Delivered on 21 February Delivered on 7 March National Budget Speech delivered on 27 February State of the Province Address delivered on 21 February National Development Plan 2030: Our future make it work, p.17 16, p Eastern Cape Human Settlements policy and budget speech 2013/14 delivered by MEC August Sauls on 28 March 2013, p.22 5

6 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 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 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 units which has been recently updated to 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 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. 18 A Resource Guide to Housing in South Africa :Legislation, Policy, Programmes and Practice. Socio-Economic Rights Institute of South Africa (SERI), 2009, p Department of Human Settlements Progress Report on creation of human settlements delivered on 13 Nov 2012 at the National Assembly. Report accessible at update-department-human-settlements-human-settlements-completed-both- 21 A Resource Guide to Housing in South Africa :Legislation, Policy, Programmes and Practice. Socio-Economic Rights Institute of South Africa (SERI), 2009, p Eastern Cape Department of Housing, Local government and Traditional Affairs, Amended Strategic Plan, ; Annual Performance Plan , p Eastern Cape Department of Human Settlements Annual Performance Plan 2011/ /14, p A Resource Guide to Housing in South Africa :Legislation, Policy, Programmes and Practice. Socio-Economic Rights Institute of South Africa (SERI), 2009, p Department of Human Settlements Progress Report on creation of human settlements delivered on 13 Nov 2012 at the National Assembly. Report accessible at update-department-human-settlements-human-settlements-completed-both- 26 Socio-Economic Rights Institute of South Africa: A Resource Guide to Housing in South Africa , p.34 6

7 Table 1: Nationwide housing delivery over the last 10 years 27 Housing output 2003/ / / / / / /13 Total 2008/ /13 Eastern Cape 133,678 18,424 18,965 10,784 14,498 16,726 79,397 Free State 85,873 13,854 12,526 15,931 25,000 14,015 81,326 Gauteng 343,012 40,288 32,407 25,876 21,496 29, ,951 Kwazulu Natal 179,035 36,068 23,587 19,873 25,987 43, ,515 Limpopo 121,716 16,868 18,500 15,555 13,410 12,000 76,333 Mpumalanga 81,438 17,626 8,204 9,860 7,702 10,985 54,377 Northern Cape 28,618 4,914 3,455 3,077 3,683 2,704 17,833 North West 90,953 15,912 16,557 16,816 16,333 10,932 76,550 Western Cape 107,543 31,011 16,566 11,860 11,065 15,567 86,069 Total 1,171, , , , , , ,351 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/ /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. 27 Housing delivery figures from 2003/ /08 were refer to houses completed both nationally and provincially based on research data accumulated by the Socio Economic Rights Institute of South Africa, Housing delivery figures from 2008/ /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 update-department-human-settlements-human-settlements-completed-both- 7

8 Graph 1: Housing delivery trends over the last three financial years 29 60,000 EC Housing delivery 50,000 housing units 40,000 30,000 20,000 10, / / /12 Total Housing target 15,000 19,000 15,419 49,419 Actual output 18,965 10,784 14,498 44,247 According to figures provided by MEC August-Sauls in her latest budget vote speech, the Department states that it has delivered units out of a target of units. 30 The MEC also announced that the Department has serviced sites out of a set target of 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 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 The other housing output figures are taken from Eastern Cape Department of Human Settlements Annual Report, 2009/10, 2010/11 and 2011/ Eastern Cape Human Settlements Policy and Budget Vote Speech 2013/14 delivered by MEC August-Sauls on 28 March 2013, p , p.20, Eastern Cape Department of Human Settlements 2011/12 Annual Report, p Eastern Cape Estimates of Provincial Revenue and Expenditure 2013/14, p

9 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/ /13 financial years) 36 18,000, ,000 R'000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 Housing Output 200, , ,000 IHHSDG Grant Allocation Grant Expenditure Housing Output 4,000,000 2,000,000 50, / / / / /13 Financial Year Year IHHSDG Grant Allocation Grant Expenditure Housing output 2008/09 9,852,842 10,047, , /10 12,442,276 12,593, , /11 15,026,763 15,156, , /12 14,941,516 15,080, , /13 15,725,959 10,615, ,813 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. 36 IHHSD grant allocations and expenditure for the 2008/ /13 taken from 2012/13 Provincial Estimates of Provincial Revenue and Expenditure available at National Treasury website According to the Human Settlements 2012/13 National Estimates of Provincial Revenue and Expenditure by 27 February % 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/ /13 financial years. 9

10 II. Budget Analysis Table 3: Eastern Cape Department of Human Settlement by Economic Classification, 2009/10 to 2015/ Outcome Medium-term estimate % Real Real change Change Average Main Adjusted Revised from between Growth (R' 000) Budget budget estimate Adjusted 2012/13 over 2012/ / /13 Appropri and MTEF Audited Audited Audited ation 2013/ / / / / / / /15 Current payments 203, , , , , , , , , Compensation of employees 142, , , , , , , , , Goods and Services 61,581 61,316 71,408 68,521 74,752 72,727 64, ,123 69, Interest and rent on land Transfers and Subsidies to 1,316,535 1,504,067 1,897,431 2,292,872 2,293,996 1,994,376 2,526, ,314,985 1,306, Provinces and municipalities Households 1,316,535 1,504,067 1,897,431 2,292,872 2,293,996 1,994,376 2,526, ,314,985 1,306, Payments for capital assets 12,399 4,187 3,751 3,350 2,700 2,761 11, ,543 15, Machinery and equipment 12,399 4,187 3,751 3,350 2,700 2,761 11, ,543 15,377 Payments for financial assets Total economic classification 1,532,801 1,727,782 2,143,154 2,574,536 2,570,745 2,269,492 2,830, ,645,826 1,645, 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 R from the 2012/13 adjusted appropriation of 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, 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. 38 This is a nominal increase of 11%. 39 Eastern Cape Overview and Estimates of Provincial Expenditure 2012/13, p

11 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/ 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 Conditional Grant Allocation (R ' 000) Audited 2009/10 Outcome Audited 2010/11 Audited 2011/12 Main Adjusted Revised Approriation Appropriaton Estimate 2012/ / / /14 Medium term estimate % change from Adjusted Appropri ation 2012/ / /16 Real Change between 2012/13 and 2013/14 Equitable Share 206, , , , , , , , , Housing Disaster Relief Grant 56,700 92,853 92,853 92,853 94, , [IHHSDG] 504,773 1,638,146 2,177,676 2,200,006 2,200,006 1,900,385 2,429, ,314,985 1,306, Expanded Public Works Programme Incentive Grant 3, Departmental receipts 11,411 16,255 10,238 2,610 2,610 4,892 2, ,963 3, Total payments and estimates 710,968 1,847,432 2,478,321 2,574,536 2,570,684 2,269,490 2,830, ,645,826 1,645, Real Average Growth over MTEF 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 40 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 Eastern Cape Overview and Estimates of Provincial Expenditure 2012/13, p Eastern Cape Overview and Estimates of Provincial Expenditure 2013/14 p , p.659. See also Table 5 of this document 45 Eastern Cape Budget Speech 2013/14 delivered by MEC for Finance P. Masualle on 7 March 2013, p.13 11

12 mitigate against the effects of Census Funding has already been set aside for the construction of 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 units this financial year and the 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 46 Eastern Cape Budget Speech 2013/14 delivered by MEC for Finance P. Masualle on 7 March 2013, p.13 47, p National Budget Speech 2013/14 delivered by Minister of Finance P. Gordhan on 27 February Eastern Cape Overview and Estimates of Provincial Expenditure 2013/14 p Housing Act, 107 of 1997, Part 4, Section 9 (1)(a) 51 Eastern Cape Human Settlements Policy and Budget Vote Speech 2013/14 delivered by MEC Sauls-August on 28 March 2013, p

13 Table 5: Eastern Cape Department of Human Settlements by Programme, 2009/10 to 2015/16 53 Programme (R ' 000) Outcome Medium-term estimate Real % change from Change between Main Adjusted Revised Adjusted 2012/13 Audited 2009/10 Audited 2010/11 Audited 2011/12 budget 2012/13 budget 2012/13 estimate 2012/ /14 Appropriati on 2012/ / /16 and 2013/14 1. Administration 111,427 92, , , , , , , , Housing Planning and Research 9,372 9,960 10,814 11,895 11,131 10,997 12, ,001 13, Housing Development 1,403,191 1,618,686 2,022,200 2,442,054 2,437,080 2,139,916 2,693, ,494,983 1,493, Housing Asset Management 8,811 6,619 7,396 10,231 9,612 10,426 10, ,867 11, Total payments and estimates 1,532,801 1,727,782 2,143,154 2,574,536 2,570,745 2,269,492 2,830, ,645,826 1,645, Average Growth over MTEF 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 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 53 Eastern Cape Overview and Estimates of Provincial Expenditure 2013/14 p Eastern Cape Overview and Estimates of Provincial Expenditure 2012/13 p Eastern Cape Overview and Estimates of Provincial Expenditure 2013/14 p Eastern Cape Department of Human Settlements Annual Report 2011/12, p Eastern Cape Department of Human Settlements Annual Report 59 Eastern Cape Human Settlements policy and budget speech 2013/14 delivered by MEC August Sauls on 28 March 2013,p.20 13

14 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 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 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 units over the MTEF from a housing output of in 2013/14 to a total housing output of in 2015/ 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 60 Eastern Cape Budget Speech 2013/14 delivered by MEC P. Masualle 7 March 2013, p.20 61, p BCM in a hurry to spend R499m by Z. George,Daily Dispatch 6 March 2013, p.1 63 Eastern Cape Human Settlements policy and budget speech 2013/14 delivered by MEC Sauls- August on 28 March 2013,p , p The Department is planning a housing output of in 2013/14; units in 2014/15 and in 2015/16. Eastern Cape Provincial Estimates of Revenue and Expenditure 2013/14, p

15 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 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 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 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 Eastern Cape Provincial Estimates of Revenue and Expenditure 2013/14, p , p , p.666. Programme 3 is responsible for managing and implementing the IHHSDG for the provision of integrated sustainable human settlements. 71 Budget Speech 2013/14 by MEC of Finance P. Masualle delivered on 7 March 2013,p National Budget Speech 2013/14 by Minister of Finance P. Gordhan delivered on 27 February State of the Nation Address 2013/14 by President J. Zuma delivered on 14 February ; 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 Eastern Cape Policy and Budget Speech 2013/14 delivered by MEC Sauls-August on the 28 March National Budget Speech 2013/14 by Minister of Finance P. Gordhan delivered on 27 February Sexwale: Housing for poor is not sustainable by A. Majavu. The Sowetan Live, p.1 79 Sexwale: Housing for poor is not sustainable by A. Majavu. The Sowetan Live, p.1 15

16 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 Rental Axe falls down on families by S.Miti and B. Fuzile, Daily Dispatch 15 March 2013, p.1 86 R700 for factory shack by S.Miti and B. Fuzile, Daily Dispatch 18 March 2013, p

17 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 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 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 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 88 Eastern Cape Human Settlements Policy and Budget Speech 2013/14 delivered by MEC Sauls- August, p.11 89, 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. 89 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. 90 Sexwale: Housing for poor is not sustainable by A. Majavu. The Sowetan Live, p.1 91 Minister of Human Settlements 2011/12 Budget Vote Speech delivered dated 19 April Eastern Cape Human Settlements policy and budget speech 2013/14 delivered by MEC Sauls- August on 28 March Free State State of the Province Address 2012/13 94 KZN Budget Vote Speech 2012/13 17