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PUBLIC HEARING ON CONDITIONAL GRANTS

AND CAPITAL EXPENDITURE – 1ST

QUARTER 2006/2007 Presented By MEC NP

Mokonyane 12 SEPTEMBER 2006

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CONTENT

1. Vision and Mission

2. Service Delivery Environment and Challenges3. Organizational Environment and Challenges4. Conditional Grant/s and Capital Expenditure:

Budget Allocation – 2006/20071st Quarter Expenditure Profile – 2006/2007Reasons for Variance

5. MTEF Budget Allocation6. Overview of the organizational environment7. Issues requiring ongoing attention8. Conclusion

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1. VISION AND MISSION STATEMENT

• Vision : A province where all households inhabit quality homes in vibrant and sustainable communities.

• Mission : To provide appropriate quality services, tenure, housing in targeted precincts and communities working in partnership with stakeholders.

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DEPARTMENTAL PRIORITIES TILL 2008/9

The Department of Housing has refocused its plan and the following has been prioritised

• Formalisation and Eradication of Informal Settlement

• Development of Social and Mixed Income Settlements

• Regeneration of Twenty Old established Townships

• Affordable Rental Accommodation

• Urban Regeneration

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DEPARTMENTAL PRIORITIES TILL 2008/9 (Cont)

This will be achieved through:• Fast tracking of top structure delivery • Provision of Housing in targeted areas in line with

Growth and Development Strategy and Global City Region approach.

• Renewal of 20 prioritised townships• Social Housing program to be refocused to include

affordable rental – low and middle income earners• Job Creation through housing development• SMME/ BBBEE - Empowerment and Participation

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2. Service Delivery Environment and Challenges

• The rapid economic growth and expanded social services delivery has led to increased in-migration and placed pressure on housing budget and available resources

• Gauteng Department of Housing during 2005/6 had moved from applying the one size fits all to implement principles of the Breaking New Ground

• Department revised its strategic plan document to address challenges and build on the desire to implement a people’s contract in order to fight poverty, create work and continue building a better life for all.

• Our focus was and is still on development of mixed income and mixed use settlements on well located land and to allow people to have access to economic opportunities.

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2. Service Delivery Environment and Challenges (Cont)

• The major challenge facing South Africa, is Affordability of Houses.

• The income profile of Black and White households is skewed and there is a large wage gap, albeit gradually closing.

• The income differential between black and whites in the country is about 8:1.

• This means that 60% of the black majority live in conditions of poverty.

• Of these people, between 8 and 9 million are destitute, the majority being woman.

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2. Service Delivery Environment and Challenges (Cont.)

• The housing subsidy system for first time (Homebuyers) is currently the preferred mechanism to improve the livelihood of non- affording families.

• A further reality is experienced at levels of household income below R800, where government subsidised (RDP) houses have been the main source to deal with housing shortage.

• It is at this level that sustainability of the current house and services is now becoming a new challenge to BNG and its drive for sustainable communities.

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2. Service Delivery Environment and Challenges

The implementation of the Gauteng BNG and the pace of delivery of affordable housing is threatened by a few but critical challenges which pose a threat to its success. Some of the critical challenges are the following:

• Housing Backlog• Access to suitable land;• Inadequate funding;• Private Sector Capacity• Lack of inter-sphere co-ordination;• In-migration & Illegal invasions• Outdated Spatial Framework and Integrated planning• Managing HIV and Aids & other legislative requirements

(e.g. BEE targets)

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3. Organizational Environment and

challenges • In achieving the objective of building an effective

and caring government the Department realizes that the following factors remain a challenge:– Capacity of municipalities – Payment Process– Information Technology to support business processes– Culture of service and work practices– Project Management & contract management skills

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4.1 Trend in Allocations, Transfers and Actual Expenditure i.r.o. Conditional

Grant Name of

Conditional Grant

Amount Transferred

2004/05

Planned Transfers 2005/06

Planned Transfers Q 1

Actual Transfers Q 1

Actual Expenditure Q 1 R'000

% Deviation from target

Housing Fund 1,117,463 1,340,676 346,026 268,000 346,026 -23%

Human Settlement 30,353 4,130 882 0 882 -100%

Land Distribution: Alexandra 6,335 8,000 8,000 8,000 0 0%

TOTAL 1,154,151 1,352,806 354,908 276,000 346,908 -22%

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4.2 Trend in Allocations, Transfers and Actual Expenditure i.r.o. Conditional

Grant Name of

Conditional Grant

Planned Transfers 2006/07

Planned Transfers Q 1

Actual Transfers Q 1

Actual Expenditure Q 1 R'000

% Deviation from target

Housing Fund 1,757,666 400,473 400,473 300,095 25%

Land Distribution: Alexandra 8,000 8,000 0 0 0%

TOTAL 1,765,666 408,473 400,473 300,095 25%

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4.3 Conditional Grant/s and Capital Expenditure

Data on trends in allocations, transfers and actual expenditure of conditional grants and capital expenditure of the Department as well as a brief assessment on this departments monitoring capacity for the financial year: 2006/07 is captured in the next few slides i.t.o. a tabular format.

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BUDGET ALLOCATION (2006/2007)Particulars of the financial resources available funding of the

activities of the Department are summarized in the Table hereunder:

Particulars AmountR’000

TotalR’000

Integrated Housing and Human Settlement Conditional Grant [Note 1]Provincial Allocation for Urban Renewal [Note 2]Administration [Note 3]Goods, Services & Machinery [Note 4]

1 765 666

191 50087 15037 146

1 765 666

191 500124 296

Total : IHHSCG, Dedicated & Operational Budget 2 081 462

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BUDGET ALLOCATION (2006/2007) cont.

• Note 1: This represents the capital allocation to the Gauteng Housing Department in terms of the Division of Revenue Act [DORA] for the funding of the implementation of National Housing Programmes and Provincial Housing consistent therewith

• Note 2: This is an allocation from the Provincial Revenue Funds towards the funding of the Urban Renewal Programme in Gauteng Province.

• Note 3: An allocation with the Operational Budget of the Department for the funding of compensation of employees during the 2006/07 financial year.

• Note 4: The available funding for expenditure in terms of Goods & Services with the Operational Budget of the Department.

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First Quarter Expenditure Profile: 2006/2007

GRANT BUDGET Projected Expenditure

Actual Expenditure

Variance

Integrated Housing and Human Settlement Development

1,757,666 400,473 300,095 100,378

Conditional Grant

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First Quarter Expenditure Profile: 2006/2007 cont.

Economic Classification

Budget Projected Expenditure

Actual Expenditure

Variance

Compensation of employees

93,378 22,027 21,570 457

Goods and Services

32,700 7,123 5,777 1,346

Buildings and other fixed structures

53,925 13,125 6,701 6,424

Machinery and equipment

4,446 835 72 763

184,449 43,110 34,120 8,990

Current and Capital Expenditure

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First Quarter Expenditure Profile: 2006/2007 cont.

Urban Renewal

GRANT BUDGET Projected Expenditure

Actual Expenditure

Variance

Urban Renewal 369,433 48,881 92,918 -44,037

Payments made for projects that concerned previous financial year

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Service Delivery Statistics for the 1st Quarter of the2006/07

Financial Year Unit of Measure Projected Actual

delivery

Essential Services Houses 3,354 669

Stands 3,354 6,387

PHP / CBP Houses 11,000 1,401

Project Linked Stands/Houses 2,676 2,344

Individual Stands/Houses 2,587 106

Relocation assistance Stands/Houses 17 3

Upgrading of Hostels Beds 18,697 0

TOTAL STANDS/HOUSES

22,988 10,910

BEDS 18,697 0

Institutional Subsidies units 1,382 0

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Reasons for VarianceA deliberation of the reasons for the variance in expenditure in comparison the allocation In terms of DORA is as follows:

• MEC Priority Projects [Under Expenditure of R 52,028m]Claims to the value of R 41,0m for work completed was in the possession of the Department prior to 30 June 2006 but could only be processed and paid during July 2006.

Individual Subsidies [Finance Linked] [Under Expenditure of R 11,375m]

• The under expenditure represent monies allocated in terms of the New finance–linked Individual Subsidy Instrument, the payment thereof has not yet being effected but two projects are already in the implementation stage and we expect payments to start in this quarter.

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Reason for Variance cont.• Turnkey Development Projects [Under Expenditure of R

15,272m]Claims to the value of R 13,0m for work completed was in the possession of the Department prior to 30 June 2006 but could only be processed and paid during July 2006.

• Essential Services [Over Expenditure of R 29,536m]It confirms the concerns raised Department with regard to the general under allocation of funds for the honoring of contractual commitments.

• Social Housing : New Build [Under Expenditure of R 32,47m]

Can be attributed to a temporary delay with regard to the approval of business plans, capacitating of institutions and external loan funding for the construction of thereof.

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Reasons for Variance cont.General factors which negatively influence the implementation of delivery and / or payment of claims:

• Department has reviewed its strategy on provision of Essential Services and as part of eradicating informal settlements and this had major impact on budget and payment process.

• As a result of the change in delivery strategy, i.e. to replace the delivery of serviced stands with toilet structures only with formal housing units.

• The Departmental Acquisition Council [DAC] has therefore not considered a substantial number of tenders but refer such proposals back for re-advertising in terms of the new formal housing strategy. This causes a delay and “saving” in terms of allocated funding resources for the current financial year.

                           

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Reasons for Variance cont.

• The processing of claims has, in general during the 1st quarter, been delayed due to the implementation by the Gauteng Provincial Government of a revised procedure for payment of claims in terms of a greater share of involvement and responsibility by the GSSC as against those of the Department of Housing itself. A lot of time was wasted to setup the new procedure and capacity and to adapt to the changed circumstances it caused.

• It must also be noted that the value of legitimate claims already in possession of the Department for processing and payment as at 30 June 2006 exceeded R 180,0m.

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5. MTEF Budget Allocation2006/2007

R’000

2007/2008

R’000

2008/2009

R’000

Main Appropriation R2,081,462 R2,520,532 R2,728,445 Conditional Grants R1,765,666 R2,197,223 R2,414,079

Housing Subsidy Fund R1,757,666

R 8,000

R2,197,223

R 0

R2,414,079

R 0 Alexandra Renewal :

Land distribution

Provincial Earmarked Allocations

R 191,500 R 190,000 R 175,000

Urban Renewal R 171,500

R 20,000

R 175,000

R 15,000

R 175,000

R 0 GDS Allocation: 20 PTP

Discretionary Allocation R 124,296 R 133,300 R 139,366

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6. Overview of the organisational

environment • During the first quarter the Department implemented it’s revised

organisational structure. • Key management positions including the CFO;COO; Chief Business

Officer; Strategic Planning; Financial Management; etc were revised and vacant positions filled during the month of June 2006.

• The Department has rearranged its expenditure management processes and delegations have been finalised.

• A process of appointments of Professional Resource Teams (PRT’s) to replace the Regional Professional Team’s whose contract ended on the 30th of June 2006 was also finalised.

• Regrouping of established developers and improve on the procurement system

• The Department also appointed contractors on the procurement rooster who will assist in implementing projects. The contractors have been appointed in two categories which the established and emerging contractors

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7. Issues requiring ongoing attention

• The persistent challenge confronted by the Department in implementing the Breaking New Ground Strategy on sustainable human settlements is large-scale poverty experienced by our communities.

• This has brought about the need to integrate developments to promote local economic growth and employment activities.

• Our empowerment targets in preferential procurement of Broad Based Economic Empowerment, Women, Youth, Disabled and local contractors in housing projects is an attempt to alleviate poverty, and stimulate local economies for value-adding income opportunities.

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7. Issues requiring ongoing attention

cont. The following are the issues that require ongoing attention:-

• Demarcated Municipalities across Provincial Borders• There are local municipalities within Gauteng whose areas of

jurisdiction incorporate some parts of other provinces, as is the case with the West Rand District, the City of Tshwane Metropolitan and the Ekurhuleni Metropolitan Municipality. This often burdens the Housing Waiting List with an increasing population, and consequently negatively impacts on the housing backlog.

• Although there are attempts to expedite housing delivery within these areas through inter-governmental co-operation, it is imperative that budget allocations for the relevant municipalities reflect the ability to engage effectively on such cross-border issues.

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7. Issues requiring ongoing attention (cont)• Shortcomings in the Integrated Development Plans (IDP)

• Most of the IDP’s submitted by the municipalities do not address the challenges posed by the housing backlog within their areas of jurisdiction. In addition the absence of the spatial development frameworks in most IDP’s, means that Gauteng Housing activities are not integrated in these plans, thereby undermining the sustainability and successful integration of housing within the wider urban environment. Municipality Housing Development Plans (MHDPs) are prepared by the department in co-operation with the municipalities to address this gap.

• The MHDP review will consistently ensure revelation and implementation of the Department’s strategic objectives to those set by municipalities. The MHDPs will comprise the housing component of the municipal IDP’s.

• The Implementation of National Norms and Standards relating to Size and Quality

• Maintain the National norms and standards to regulate the quality of the housing projects as well as tenders awarded for construction of housing and units..

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Monitoring and Evaluation• A Monitoring and Evaluation has been established to

evaluating progress in the implementation of the strategy against the targets set.

• It will further recommend intervention mechanisms in areas where there is little or no progress.

• This unit is still in its infant stage and will be grown by the end of financial year 2006/07.

• Departments submits various reports as prescribed by the PMFA to various institutions such as Provincial Treasury and Legislature.

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Conclusion • Our plans are starting to yield results and there's hope

amongst communities that government is addressing housing their needs.

• We are putting proper plans and re-prioritizing our approach that must always adhere to the principles of the Breaking New Ground policy.

• There’s a need for greater integration of plans and funding for Human Settlements in all spheres of government and private sector

• Better coordination and integration of planning process and implementation between province and municipalities to realize our key priorities with focus on the following:– Utilization of Municipal Infrastructure Grant– Utilization of Land Acquisition Grant– National Infrastructure Support Grant

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Conclusion (cont)• Reinforcing diversity of housing and settlement types, in

increasing choice, through densities, locations, tenure options, housing credit and delivery routes.

• Intervening in land and rental markets to ensure that equitable development and integration is achieved.

• Harnessing the resources of the private sector to deliver at scale – through the intended PPP approach

• Involvement of communities and other civil society organizations in development issues.

• Capacity within the Department and improvement of our internal systems will contribute towards the realization of the GPG priorities.