Presentation to Portfolio Committee Progress on the Departmental Under-Expenditure and Recovery Plans -Mr. T. Zulu Director-General 1

Contents 1.Departmental Programme Expenditure 2. Transfer Payments 3.Underspending Challenges and Mitigation Measures 4.Human Settlements Development Grant 5.Delivery Performance 6.USDG Expenditure and Performance 2

Context 1.Departmental operational expenditure is less than satisfactory but steps have been taken to address poor expenditure. SITA Office Accommodation Vacancies SIU RHIG 2.Provincial expenditure has improved since the last appearance before the Portfolio Committee 3.There is still challenges on expenditure patterns in the USDG and steps to review current expenditure patterns is underway 3

Preliminary Expenditure per Programme as at 28 February Programmes Final Allocation 1 Commitments 2 Expenditure 3 Variance = % Spent 1. Administration 256,606,00018,815,160136,163,889120,442,11153% 2. Housing Policy, Research and Monitoring 46,719,000514,94029,012,43717,706,56362% 3. Housing Planning and Delivery Support 224,460,0001,912,184124,273,594100,186,40655% 4. Housing Development Finance 24,440,076,000179,238,26622,838,361,4881,601,714,51293% 5. Strategic Relations and Governance 169,944,00022,646,971102,762,85767,181,14360% Total 25,137,805,000223,127,52123,230,574,2651,907,230,73592%

Preliminary Operational Expenditure 5 ProgrammesFinal AllocationCommitmentsExpenditureVariance% Spent 1. Administration 256,606,00018,815,160136,163,889120,442,11153% 2. Housing Policy, Research and Monitoring 46,719,000514,94029,012,43717,706,56362% 3. Housing Planning and Delivery Support 215,460,00055,898115,236,480100,223,52053% 4. Housing Development Finance 68,478,0003,456,98546,373,90322,104,09768% 5. Strategic Relations and Governance 168,944,00021,363,238102,762,85766,181,14361% Total 756,207,00044,206,221429,549,567326,657,43357% Note: Expenditure excludes all Transfer payments.

Grants and Transfer Payments 28 February PaymentsTotal AllocationExpenditureVariance% Spent Human Settlements Development Grant 15,725,959,00014,421,857,0001,304,102,00092% Urban Settlements Development Grant 7,392,206, % Social Housing Regulatory Authority: Operational 21,096, % Social Housing Regulatory Authority: Capital Restructuring Grant 647,401, % Rural Housing Loan Fund 31,975, % Housing Development Agency 92,336,00069,252,00023,084,00075% National Urban Reconstruction and Housing Agency 120,000, % Bursaries Scheme 9,000,0009,037,114-37,114100% UNHABITAT 1,290,0001,283,7336,267100% Rural Households Infrastructure Development 340,625,00088,200,584252,424,41626% Total 24,041,263,00022,714,107,8471,579,579,56994%

Under Spending - Personnel Costs Reasons for Under Spending Non/Slow Filling or of Vacancies. Turn Around Strategy Additional Office – Actions taken 95% of vacancies have been advertised and are in a process of being filled. Payment of outstanding performance rewards for SMS members payable before year end will improve expenditure for personnel costs. – Projected spending and possible under-spending It is projected that 92% of the personnel budget will be spent leaving an approximate R55 million of under spending for the year. 7

Under Spending- Goods and services The primary contributing factor to the under spending of goods and services is the delay in filling of personnel vacancies. It is expected however that 74 % will be spent on goods and services, and an amount of approximately R109 million will not be from the goods and services budget. 8

Delays in the implementation of the NUSP program – Initial delays were experienced in the finalization of the approval process. – Actions taken 5 bids for the appointment of service providers to develop an informal settlement upgrading programme in various areas have been advertised on 2 November 2012 bulletin with closing date of 27 November The above bids have been referred for re-evaluation 5 other bids of less than R amounting to about R2 million for the development of an informal settlement upgrading programme in various smaller municipalities have been awarded. – Projected spending and possible under-spending It is projected that 4% will be spent leaving an approximate R55 million under spent for the year. 9

Lack of Invoicing from Special Investigation unit. – Initial challenges were experienced with SIU not providing the Department with invoices due to changes required to SIU legislation – Actions taken A review on the proclamation and the finalization of the Service Level Agreement between the Department and SIU. Some invoices have since been received and paid with the last invoice for the year for R14.5 million still to be processed. 10

– Projected spending and possible under-spending The total expenditure for the SIU thus far is R8.1 million or 18% of total allocation. The invoice of R14.5 million will bring the total expenditure for the year to R22.6 million which is 52% of total expenditure and R 18 million of the budget has been shifted to other operational items that required funding. 11

SITA Services to the HSS environment – Challenges Initially problems were experienced with the signing of the service level agreement between SITA and the Department. SITA is only able to provide limited servicing of the HSS environment – Action taken The service level agreement was signed and SITA was requested to provide invoices. The process of receiving invoices is still slow – Projected spending and possible under-spending Of the adjusted budget of R43.8 million for HSS maintenance, R17.4 million (42%) has been paid. It is projected that 74% will be spent leaving an amount of R11 million unspent. 12

Additional office accommodation – Challenges Although the additional office accommodation was secured delays were experienced in the landlord complying to Departmental installation requirements and other refurbishments which resulted in the Department not being able to utilize the accommodation and consequently not able to make payment. – Action taken Challenges within Public Works delayed the finalization of negotiations with the landlord Engagements between the two the Departments to resolve the issues is now yielding results. The outstanding matters have been resolved and the office accommodation is currently receiving attention and indications are that it will be finished in four months time. 13

– Projected spending and possible under-spending – R1 million has been paid in January bringing the total expenditure to R14.2 million or 37%. It is projected that 50% will be spent leaving an amount of R19 million unspent. 14

Rural Household Infrastructure Grant – Challenges Slow performance in terms of delivery by the existing contractors has been experienced in respect of this grant. Delays in the appointment of the additional contractors – Action taken A task team has been established to address issues related to the slow delivery performance by Mvula and IDT including the project manager Additional 6 contractors have been appointed to speed up delivery 15

– Projected Spending Of an adjusted budget of R340.6 million, a total of R88.2 million (26%) has so far been expended. At least R27.2 million has been paid in February 2013 to the two service providers, and a marked increase in payments is being experienced as work progress towards completion and subsequent invoicing. It is projected that a approximately R164 million will not be spent by 31 March

Projected Under Spending – It is projected that the operational budget expenditure will reach R611 million or 81% by March; – Taking the above projected expenditure into consideration is it anticipated that the Department on its operational budget will surrender about R144 million or (19%) of its operational budget; – If the funds on the HSDG are not transferred to two Provinces (Limpopo and Eastern Cape) underspending will amount to R578 million on the HSDG; – On the RHIG the underspending is projected to be R164 million; – It is estimated that the total amount to be surrendered will amount to R886 million which is approx 4% of the total budget allocation of the Department. 17

Human Settlements Development Grant – Eastern Cape and Limpopo Provincial Human Settlements Departments declared savings of R284 and R294 million respectively and; – This amounts to a total of R578 million which translate into 4% of the total allocation of the HGDG. 18

Preliminary Human Settlements Development Grant Expenditure 19 Total Available Year to Date 1 April 2012 to 28 February 2013 Transferred FundsSpent by Provinces Variance Spent vs Transfer-red Variance Spent vs Total Available Unspent as % of Total Available R'000 % % Eastern Cape 2,292,859 2,008,04688% 1,603,59370% 404, ,26630% Free State 961, ,57197% 773,74880% 163, ,87120% Gauteng 4,003,776 3,631,28791% 3,471,07787% 160, ,69913% KwaZulu-Natal 2,915,297 2,687,27192% 2,521,96287% 165, ,33513% Limpopo 1,471,617 1,425,50397% 980,71267% 444, ,90533% Mpumalanga 965, ,08484% 810,90084% ,22716% Northern Cape 339, ,43588% 274,91181% 24, ,64019% North West 1,050, ,54095% 1,009,42296% -12,882 54,3934% Western Cape 1,725,180 1,625,12094% 1,470,63785% 154, ,54315% Total 15,725,959 14,421,85792% 12,916,96282% 1,504,895 2,808,99718%

Delivery Performance – 31 January

Urban Settlements Development Grant Expenditure - 31 January

USDG - Delivery Performance 22

Thank You END 23