SPEECH BY LN SISULU MINISTER OF HOUSING AT THE OCCASION OF THE BUDGET VOTE 2007/8 FOR THE DEPARTMENT OF HOUSING

8 June 2007

National Assembly

Cape Town

___________________________________________

Madame Speaker;

Honourable Members of Parliament;

Invited guests

Ladies and Gentlemen:

 
Occasionally, Madam Speaker, good news is necessary.  No, in fact, essential for the soul, for it gives hope – and hope sits at the core of what drives human kind, as it is inexorably drawn to achievement.

And our good news, like a ray of light, breaking through a forbiddingly gloomy sky:  We have to date produced 2.4 million houses in the last 12 years, by any standard a tangible achievement.  To give you some idea of the sheer impact of it, when you consider that the average poor household consists of 5 people, this would mean we have housed more than four times the population of Cape Town.  Our good news is not just the numbers, but this important fact: that we have broken through the backlog barrier and have produced more houses than there are people in our backlog, (which has been dislodged from its 2.4 million mark) - and now stands at 2.2 million.  This in effect means we are now over the apex, steadily we are overcoming our greatest challenge.  This is the first time in our history that our backlog has been less than the number of houses produced.  Put differently, we have housed more people than those needing houses.

Our annual production has grown from 252 000 (which in itself was a record we were proud of), to 272 000 (and still counting), for the past year.  We need to tell this good news it portends a good future for millions still trapped in poverty and it attests to the fact that the inhospitable firmament is clearing and there will be better days! 

It is a unique achievement for us. For it we credit the incredible generosity of spirit and goodwill of ordinary South Africans. In fact, the goodwill, Madam Speaker, has been so infectious that just two months ago, the Portfolio Committee spent a whole week in the Eastern Cape on housing, inspecting the quality of  housing and building two houses to what we count as our delivery!

It is on this collective achievement and on other benchmarks of progress that we intend to build by further rallying together South Africa’s collective effort, in this way our clouds will more easily yield to a blue sky.

I know right now that our veteran, the late Ms Adelaide Tambo is smiling down on us.  She was a member of the first Portfolio Committee on Housing of this Parliament until 1999, who even in her retirement monitored the progress of housing and would regularly phone me to urge me to give hope to our people.  I now longer get these calls. I can only imagine her smile.  We will give hope to our people.

Allow me at this point to recognise the presence in this house of my Provincial MECs. As well, Madam Speaker, as our main guest, eighteen-year old Refilwe Makau, who allowed us to use her to get through to the hearts of South Africans regarding the plight of the disabled. At the end of March we had the privilege of building her house in Alexandra with the support of generous South Africans who donated money to better her life. I would like to welcome her and her courageous mother and family.  Through our experience with her, we have amplified and refined our policies on our preferential treatment of our physically challenged citizens.

I welcome too, a young and determined architectural student, the SRC President from Wits, Mbali Hlophe, whose ambition it is to become a Minister of Housing.

 
It is indeed heartwarming when I note that South Africans from all walks of life are going out of their way to tally around us as we deal with the housing challenges, for the people who have gathered in our gallery help us on a daily basis chase the clouds away.  Our recognition also extends to the representatives of the banks who have now finally come to the party.  I do want to recognise in particular Mr Steve Booysen and ABSA Bank. We also have present in the House the Chief Executive Officer of JP Morgan, Mr. Jon Zehner.

 
In 1994, this Government promised to fulfill the mandate of the Freedom Charter and ensure that people lived in dignity and were protected from the cold grip of poverty and the elements.

When Justice Yacoob of the Constitutional Court noted in the celebrated Grootboom case in 2001 that:

“The people of South Africa are committed to the attainment of social justice and the improvement of the quality of life for everyone; The preamble to our Constitution records this commitment; The Constitution declares the founding values of our society to be ‘human dignity, the achievement of equality and the advancement of human dignity and freedoms’”,

 
he spoke directly to our reason for being, that which defines us and drives us and provides fulfilment. 

Justice Yacoob noted that the case dealt with the realisation of those aspirations because it concerns the state’s constitutional obligations in relation to housing: a constitutional issue of fundamental importance to the development of South Africa’s new constitutional order, and if I may add, of fundamental importance, the creation of the society we envisioned.

 
This budget speech is being delivered during the middle of one of the coldest winters experienced in our country, right here in the Western Cape, where the housing crisis is the most acute.

Our commitment is to remove those previously impenetrable clouds in the form of the historical backlog and the deep seated challenges of an intractable, somewhat insensitive state machinery. 

My Department has to respond to the challenges as they relate to the alleviation of poverty; access to land for housing development; access to housing finance; protection of housing consumers from sub-standard work; eradication of corruption or the possibility thereof from our system; the normalisation of the housing market to create a single residential property market and finally, the realisation of the asset we are creating.

Although we have broken the back of our backlog, these challenges remain.  To add to our woes, building costs have increased exponentially due to the increased demand for building materials as we approach 2010.

This has had serious implications for the delivery of housing and this will exacerbate our ability to deliver the projected number of houses at our current housing subsidy quantum of R38 984-00.

For the current MTEF period, the housing budget increased from R8,8 billion in 2007/08 to R12,5 billion in 2009/10. This represents a growth of R3,7 billion or 19.5%.   

Now for those of you who listened to the Minister of Finance when he gave his budget, he publicly said my budget had gone up three times!  I eagerly waited to see the figures.  Now, whichever way you work it out, 19% is not three times of anything.  He said I was un-ambitious to have asked him to double my budget because he had tripled it.  Now I intend to show him what ambition is and I intend to hold him accountable for his public statement.  Because three times my budget is exactly what I might settle for.

However, back to our 19%, the grant allocation for the last financial year was R6,8 billion and the allocation for the current financial year is R8,2 billion. The majority of the grant funding will be utilized for project linked subsidies in current commitments, including phased development approach subsidies, the informal settlement upgrading programme and the unblocking of blocked projects.

Although we appreciate the increase in the housing budget, the 19% that is, our projections indicate if we are for instance to eradicate our backlog by 2014, a funding shortfall of R102,5 billion would exist, while if we attempt to  eradicate the backlog by 2016 the funding shortfall would increase to R253 billion. In view of this I believe that the housing backlog must be eradicated within the shortest time possible and our cost projections indicate a doubling of costs for every two years delayed. Madam Speaker, this cannot be allowed to happen.

 
Our housing delivery continues to uphold the tenets of the Comprehensive Plan and in our third year of implementing this strategy we continue to break new ground with the various role players, in terms of our Social Contract. My Department has worked to ensure that we have fulfilled the undertakings that I made to this House last year.

I have indicated that in the last financial year alone there was an 8% increase in the rate of delivery from the previous year. Further it is anticipated, that as our momentum in housing delivery is up-scaled, our land facilitation machinery in place and more housing funds are provided, we will be able to meet our commitment eradicate the current informal settlements, as required in terms of our pledge to the Millennium Development Goals, the Habitat Agenda and AMCHUD.

Representatives of our major partner – the Banks – are here.  When you consider traditionally where the Banks were a few years ago and where they are now, then you will understand why South Africa is called a “miracle country”.  I did not think I would be standing here with such positive feelings for the banks.  But now I am practically glowing with confidence that we are making it in our partnership with the banks.

Further to our continuous interaction with the Banking Association of South Africa, and in line with the Financial Services Charter and the Memorandum of Understanding between the four main Banks and the Department, we are pleased to announce that in terms of the Banking Association’s calculations, to date an estimated R32 billion has been expended out of the R42 billion pledged.  Madam Speaker, if this figure is indeed correct, then the Banks have not only come to the party, they are threatening to take over the dance floor.

But we would need to indicate to the Banks, that we would now like to ensure that we can monitor that indeed such monies as they indicate, have been expended and expended on the right categories.  Our Office of Disclosure, whose purpose it is to do precisely this, has now been established and the Presidential Minute was signed earlier this week.

What we now need to concentrate on in our partnership with the banks, is the matter of educating our consumers.  My office is inundated with woeful letters from people who are faced with eviction for non-payment .  Part of our responsibility now, will be to ensure that there is responsible borrowing.   Responsible in the sense that the borrowers have to understand that they are bound by certain obligations and those that lend have to understand that they have a responsibility to educate and transform their consumer assistance, and provide it with a human face that will give comfort to defaulters to feel free to discuss ways of resolving difficulties that may arise.

Happily, the National Housing Finance Corporation (NHFC) has quite surprised me with a new product that aims to ensure that we can assist with some of these cases.

As we continue, in the process of housing delivery, to restructure the urban landscape and make the urban environment accessible to the poor who were historically excluded from living close to economic opportunities. We have harnessed the efforts of private sector developers to augment our housing delivery.  Our Inclusionary Housing Policy has now been finalised after extensive consultations with the relevant and affected stakeholders.

The negotiations were an extensive and careful process that we embarked on, a process that took into account the fact that the spatial segregationist residential patterns of apartheid planning was extremely strong and continues to have a negative impact on our attempts to create a non-racial and more inclusive society. It recognized that since the advent of democracy there has been a commitment to creating a more integrated society, particularly in our cities where the burden of the dysfunctionality of apartheid spatial planning continues to fall largely on the poor, the majority of whom continues to be Africans.  It also took into account our commitment to assist developers to ensure they thrive and are successful.  The policy is reasonable, has been tested and works.

This policy makes provision for the utilisation of government owned land and proactive engagements between the private sector and Government who will effect mutually beneficial Public Private Partnership arrangements. While Provincial Authorities will largely be responsible for the implementation of the Inclusionary Housing Programmes, the National Department will articulate the desired outcomes, set direction, provide certain incentives and specify certain key parameters to be followed.                             

There are in essence two parts to the current policy. The first part is voluntary and the second compulsory. In terms of the voluntary component all spheres of government will proactively enter into voluntary arrangements with the private sector to produce inclusionary housing projects.  In such voluntary initiatives we will amongst other things bring state land into the equation. In the case where government is providing the land, it will be quite demanding in terms of achieving inclusionary outcomes.

The voluntary component of the policy will be applied immediately whilst awaiting the development of the necessary legislation. This in fact is presently the case. For example, the Johannesburg Housing Company, our UN-Habitat Award winners, has embarked on a major inclusionary housing project in Bertrams, Johannesburg. Representing a R250 million investment, the project will provide a much needed boost to the degenerated area north east of the 2010 World Cup Ellis Park site. It will help stimulate upgrading in the Bertrams area in the same way as the Brickfields project has uplifted the open waste land of Newtown.

Several inclusionary housing initiatives have already been  undertaken by private sector developers in collaboration with financial institutions and we can already see the positive integrative impact of the Inclusionary Housing Programme, for example, Olievenhoutbosch in Pretoria, Cosmo City in Johannesburg, Hlanganani in Springs and at Blythedale in KwaZulu-Natal, where integrated housing projects have been developed.

It is worth stressing, Madam Speaker, at this point that the policy we have developed is only one instrument and that in order to counter segregationary or exclusionary  outcomes of our built environment processes we will need several other tools. We need for example to thoroughly overhaul our development control and town planning systems at local level. Of necessity, this will have to make planning more responsive to the crisis we would inevitably face if we do not expedite these processes. In this regard, we have decided to set time frames to ensure that these processes can be expedited.

An enhanced working partnership with all stakeholders is necessary as, despite the commendable achievements we have made together we still face some serious challenges. These relate in particular to increasing the affordability of houses for those sections of our people who have as yet to own a home. Some of them who on average earn less than R7 000 per month are steeped in debts that seriously reduce their eligibility for housing loans. Their situation is obviously being impacted on by movements in interest rates that have increased by 200 bases points from 7 percent in May 2006 to 12, 5 percent in December of the same year. For all of us this must be an urgent cause for concern for if not carefully but deliberately attended to it will nullify the goals we have and the achievements we have made.

With the adoption of the new policy, our Housing Institutions were required to ensure their compliance.  We can report now that this has reached fruition. 

The legislation that establishes the Housing Development Agency has been completed and together with the Department of Land Affairs, we are presenting it to Cabinet in two weeks’ time.

NHFC’s mandate has been expanded to enable the institution to directly lend to low and medium income end users.  A new business model for the Corporation has been developed and approved for implementation. The process to operationalise all the components of the model is underway and has been piloted as from May 2007 through the Post Office bank with a view of a full roll out towards the end of the financial year.  The pilots are taking place in Johannesburg, Soweto and Pretoria Central Thubelisha has been positioned to be a developer/project management company and its mandate was extended to tackle the upgrading of informal settlements, the unblocking of housing projects affected by inflation and other related factors, the fast tracking housing solutions for people living in areas of stress by using the emergency housing circumstances programme (transitional housing) and to be a lead developer/contractor in Mega-projects.

As a project management company, Thubelisha has been outsourcing most of its work to construction companies in terms of government procurement policy. It is envisaged that once the Housing Development Agency is established these functions will also be transferred to the Agency and Thubelisha will be merged into the Agency to provide its project management arm.  An interim Board has been established to ensure that Thubelisha is fully compliant with all governance requirements.

We will be requiring from the NHBRC to step up its inspectorate to take greater care of quality at all stages of development so that we can limit harm passed on to consumers.  Further I had earlier mentioned the threat posed by the shortage of building materials, especially cement. Fortunately, in this regard I can announce that the NHBRC is in process of establishing secure supply lines, specifically for government purposes.

Continuing homelessness obligates us each day to take a vow that we will not let the fog patches darken our sky again without us dislodging from their places those constraints that hinder further progress.

We intend this year to implement a restitutive national housing programme, paying particular attention to long outstanding matters.

Thirteen years into our democracy, full restitution has not taken place in District Six and this continues to blight our efforts to transform South African society and redress past imbalances.

We need to recall that District Six was not only a symbol of the forced removals undertaken in the name of Apartheid. It was also a place of resistance.

It is important for District Six to regain its rightful place in our history. We must remember its past by developing its barren wastelands as quickly as possible for all to enjoy. District Six must unite and integrate into the city of Cape Town, as a matter of priority.

Further, we have a responsibility to resolve the continuing plight of those communities that the Truth and Reconciliation Commission (TRC) Report to the President in 2004 identified as being in need of specially established housing projects as a form of compensation for the gross violation of their human rights and the mass destruction of property they suffered.

We carry with us also an obligation to ensure that those who were both the spear and the shield of the liberation struggle, those who gallantly stood in the trenches to give us democracy are accorded priority in the services we offer. Whilst acknowledging that to do so would not be to fully compensate for the assets they forfeited or lost in the years of the liberation struggle, it will be necessary to make a gesture of sincere gratitude. We are therefore adding to the arsenal of the housing delivery instruments we have a restitutive housing programme for ex-servicemen.

After World War II, South African military veterans were successfully demobilised in terms of various strategies that the government of the day provided, such as:

          ○       preferential access to farm land;

          ○       preferential access to housing schemes provided in and around Johannesburg;

We therefore have a precedent.  The policy has been tested and it worked.  I am certain it will go a long way to alleviate a great deal of indignity to people that we owe so much to.  Policy now exists that will allow for the increased allocation of housing units to ex-combatants and –servicemen, on a preferential basis.

With this, the formulation of measures will result in the increased allocation of housing units in all housing projects to ex-combatants and for TRC reparations. Ideally we would like to see that over the next 5 years an average of 30 percent of all newly produced subsidised units go to this target group. This would mean that their applications for housing subsidies or access to current state financed rental housing stock would be granted on a preferential basis.

Further to the introduction of these policies I would like to announce possible changes in the tendering processes. Honorable Members would be aware that for the delivery of what we then referred to as ‘RDP housing’ as the state we depended largely on developers and contractors. In the first of my budget statement for housing at this house for the financial year 2005/6 I reported last year to Honorable Members that as a result of this delivery framework what the state and the people were provided with was shoddy work and in some instances incomplete houses.

Poor communities felt as a result that government was not exercising its powers adequately enough to protect them against these unscrupulous contractors.

We have suffered a great deal from both unscrupulous contractors and inexperienced ones. Coupled with the fact that government itself was negligent of its responsibilities to pay on time.

We have decided that we need innovative interventions to ensure that the highest quality housing products are acquired by the Government for allocation to the housing subsidy beneficiaries.  We also need to accelerate delivery and to harness the considerable skills and capacity of the private sector to achieve these goals.

In order to achieve this objective we will engage the private sector to determine appropriate levels of risk sharing, inter alia to explore the possibility that the private sector provides quality fully developed integrated housing projects in the housing subsidy category for the Government to acquire. Developers and contractors will therefore, as part of the revised National Housing Code be required to sell to the state houses that they have built whose quality they can vouch for. Henceforth the state will only buy quality!

We will support these changes with the introduction this year of the Housing Development Agency. The Agency will identify and facilitate the rapid release of well-located land for integrated housing in accordance with our Breaking New Ground strategy.

Our intention is to upscale delivery and prioritise mega-projects.  For this we would need to re-capitalise NURCHA and RHLF for them to play a greater role in bridging finance. 

We intend to remove unnecessary burden on the industry by de-linking the beneficiary lists from projects.  And we have to cut down by at least 50%, the time that developers have to wait for any approvals from government.  We have to set time frames and hold officials of government accountable, if not liable for any unjustified delays.

Whatever good intentions we may have, it will come to naught if we don’t  pay particular attention to our own internal maladministration.

My Department has gone through a rigorous assessment and restructuring process to ensure we are poised to deliver intelligently and efficiently.  The Special Investigating Unit has been given additional muscle to fight widespread corruption in the housing sector through a Single National Presidential Proclamation. This will bring deviant officials to book through intensive criminal prosecutions and civil recoveries.

A National Anti-corruption Forum is being set up to co-ordinate cases of fraud, corruption and maladministration matters between the National Department of Housing and Provincial Departments of Housing and a Whistle-blowing Policy for the National Department of Housing is being finalised.

Processes are now in place to deal with the issues raised in the Auditor-General’s Report. Government officials are being investigated and prosecuted for defrauding the Government by providing incorrect information in respect of their incomes and thereby unfairly benefiting from the Housing Subsidy System. A number of Public Servants have, as a result of this process, voluntarily come forward and surrendered their fraudulently obtained houses. We are putting in place guidelines to deal with the management of irregularities of other employees outside Public Service.

Before I conclude, I need to indicate that we have a partnership with Fedup, a partnership that was announced to this house last year.  In terms of this partnership, provinces had pledged a number of subsidies to the organisation.  Sadly, not a single Province has delivered on this pledge.  I have now resolved that I will seek Treasury approval to divert these pledges directly from the National Department to our partner.  They indeed have a right to be fedup with us. 

I thank you

CONCLUSION

Madam Speaker, we want to upscale the delivery of housing and we want to make housing affordable to everyone. For that reason, notwithstanding the challenges we have I am able to pronounce that it is a good place to be in housing today. For indeed I continue to trust on your collective spirit and will.

 
In conclusion, I would like to extend an invitation to the Honourable Butch Steyn to make use of the opportunity in September to cross the floor to the ruling party, because soon the housing delivery machine would be so well oiled, he would not have much to say.