1. HEARINGS ON ANNUAL REPORT OF THE DEPARTMENT OF HUMAN SETTLEMENTS 2010/11
11 October 2011
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2. Presentation outline About the Financial & Fiscal Commission
Highlights of the Department of Human Settlements (DoHS) Strategic Plans in 2010/11
Selected DoHS’s Achievements in 2010/11
Expenditure Outcomes
Progress on past FFC recommendations
FFC recommendations for 2012/13
Conclusion and issues for the future
FFC’s Hearings on Housing Finance
Presentation on 2010/11 DoHS Annual Report - PC on Human Settlements
11 October 2011
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3. About the Financial and Fiscal Commission
The Financial and Fiscal Commission (FFC) established in terms of S220 of the Constitution and the FFC Act (2003) as amended
FFC makes recommendations on the equitable division of nationally raised revenue among and between the three spheres of government (and on any other financial and fiscal matters).
The criteria that the FFC must use in making the recommendations are listed in S 214 (2) of the Constitution.
FFC required to submit its Recommendations 10 months prior to the tabling of the DoR Bill and the budget in Parliament.
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4. Selected DoHS’s Strategic Objectives for 2010/11
Target
Actual delivery
Housing units per annum
Not specified in the Annual Report
housing completed (NDoHS website)
Facilitate affordable social and rental units (over 2010/11 MTEF (target not specified per annum)
It is difficult to ascertain the progress under this objective as the NDoHS does not differentiate between units under construction, completed and handed out to beneficiaries
Access to basic services
Roll out of Free Sanitation Strategy (FBSS) to 30% municipalities
To serve households through Accelerated Community Infrastructure Programme (ACIP) and households through Rural Household Infrastructure Programme (RHIP)
FBSS rolled out to 63% of municipalities
8 426 households were served through ACIP and through RHIP.
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Presentation on 2010/11 DoHS Annual Report - PC on Human Settlements
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5. Expenditure Outcomes: 2010/11
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6. Conditional Grants Performance
Human Settlements Development Grant
Overall high levels of aggregate expenditure (98.6%) of total adjusted budget
But in-year reallocation of funds away from Free State (less R or 20%), KwaZulu Natal (less R or 2.9%) and North West ((less R or 7.8%) of voted allocation
Material Underspending of the Rural Household Infrastructure Grant
The grant underspent by R or 38.4% of total allocation (AG Report, p.140)
DORA Violation
The Accounting Officer did not complete and submit to the National Treasury the Compliance Certificate as required by S10(1)(a) of DORA by 15 April 2011, in respect of the Rural Household Infrastructure Grant (AG Report, p.141)
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7. Progress on past FFC recommendations
The FFC’s previous work has revealed that the current institutional arrangements, funding and some of the policy issues relating to the delivery of housing have to reviewed
As a result, the FFC has made a number recommendations pertaining to policy (especially accreditation of municipalities based on their capacities to administer housing programmes), funding and institutional issues over the past years
The process of accreditation is very slow and to date not a single municipality has been accredited with level 3
Only six metros have been given level 2 accreditation
The number of municipalities accredited in 2010/11 remains at 18, same number as in 2009/10 financial year
There has been no progress
Government should consider the funding implications of any further policy changes, for example higher building standards
E.g. policies promoting densification referred to in an annual report
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8. Progress on past FFC recommendations
On Social and Rental housing the FFC recommended
Relaxation and flexibility on
Eligibility criteria for accessing Social Housing Restructuring Conditional Grant to allow projects falling outside the zones to access funding;
Number of DRZs to respond to excess demand for rental housing;
Minimum unit size for redevelopments of existing buildings
A sustainable financial framework for rental housing should be developed
A progress has only been made with respect to increasing number of DRZs as according to the annual report there is 75 DRZs in total
Considerations should be given to link new housing subsidies with MIG and LES formula to ensure that the LES allocations keep pace with the installation of new housing infrastructure among other things
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9. Progress on past FFC recommendations
While there is a progress for cities as MIG is merged with the Housing Grant, there has been any attempt with respect to linking Housing Grant with LES
The FFC recommended that a process for collection of data on homelessness be initiated and be included as part of the indicators in the housing formula
There has not been any progress on this
The qualifying income bands should be reviewed to ensure that individuals are not unfairly excluded from benefiting from the subsidy
Due to increases in the cost of living
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10. FFC Recommendations for 2012/13: impact of inefficient land-use
Land use is key to address some of the challenges indicated by the NDoHS (that the housing subsidy programme has continued to entrench segregated spatial patterns, marginalising the poor from economic opportunities)
In its Annual Submission for the 2012/13 DOR, the FFC highlighted a number of issues on inefficient land-use and the current funding for built environment which is uncoordinated and not supporting the delivery of integrated and sustainable human settlements
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11. Energy savings in a compact city compared to a sprawling urban form
The City Efficiency Costing Model has shown that a sprawling city is more costly than a compact city-- Costs savings in a compact relative to sprawling city amount to 7% after 10 years If this is extrapolated to 6 metros, saving amounts to approximately 1.4% of GDP by year Energy savings in a compact city compared to a sprawling urban form 22% less carbon emission resulting from more efficient public transport and less travelling
The City Efficiency Costing Model has shown that a sprawling city is more costly than a compact city--
Costs savings in a compact relative to sprawling city amount to 7% after 10 years
If this is extrapolated to 6 metros, saving amounts to approximately 1.4% of GDP by year 10
Energy savings in a compact city compared to a sprawling urban form
22% less carbon emission resulting from more efficient public transport and less travelling
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12. Specific fiscal instruments include
Government should actively and specifically pursue development of a more spatially compact urban form for cities, by developing and adopting appropriate policies and financing instruments Specific fiscal instruments include Wider use of development charges in financing infrastructure associated with the land development process Public transport subsidies that specifically target high density low-income areas Fiscal incentives for urban land development projects located within the existing urban form Fiscal incentives to promote densification and in-fill development Government should conduct a broad-based review of the efficacy of current housing finance arrangements in meeting housing needs within the context of creating sustainable and more compact human settlements
Government should actively and specifically pursue development of a more spatially compact urban form for cities, by developing and adopting appropriate policies and financing instruments
Specific fiscal instruments include
Wider use of development charges in financing infrastructure associated with the land development process
Public transport subsidies that specifically target high density low-income areas
Fiscal incentives for urban land development projects located within the existing urban form
Fiscal incentives to promote densification and in-fill development
Government should conduct a broad-based review of the efficacy of current housing finance arrangements in meeting housing needs within the context of creating sustainable and more compact human settlements
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13. Climate change real threat to Human Settlements
Climate change real threat to Human Settlements Cost of climate change to human settlements is real – Evaluated costs associated with climate change in LG sector & in particular on important Infrastructure that underpins Human Settlements Climate change induces increases in water & electricity infrastructure expenditures Municipalities forgo provision of essential services as they stretch budgets to cater for climate change consequences
Climate change real threat to Human Settlements
Cost of climate change to human settlements is real –
Evaluated costs associated with climate change in LG sector & in particular on important Infrastructure that underpins Human Settlements
Climate change induces increases in water & electricity infrastructure expenditures
Municipalities forgo provision of essential services as they stretch budgets to cater for climate change consequences
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Energy Related Recommendations of the FFC
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14. Government should ensure that municipalities develop their own climate change mitigation and adaptation strategies and plans as part of the IDP process. Government should consider providing municipalities with a performance-based conditional grant which rewards or incentivises actions that are environmentally efficient. Specific focus areas for this grant should include:  Efficient water management practices in human settlements & firms, including minimisation of water losses, effective asset management or rehabilitation programmes, and demand management  Efficient energy management practices, energy efficient human settlements including minimisation of electricity losses (unaccounted for electricity), elimination of illegal connections and energy savings by households and industry
Government should ensure that municipalities develop their own climate change mitigation and adaptation strategies and plans as part of the IDP process.
Government should consider providing municipalities with a performance-based conditional grant which rewards or incentivises actions that are environmentally efficient. Specific focus areas for this grant should include:
 Efficient water management practices in human settlements & firms, including minimisation of water losses, effective asset management or rehabilitation programmes, and demand management
 Efficient energy management practices, energy efficient human settlements including minimisation of electricity losses (unaccounted for electricity), elimination of illegal connections and energy savings by households and industry
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Energy Related Recommendations of the FFC
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15. Built environment related grants have an urban focus and ignore rural challenges and setting Little infrastructure delivery taking place in rural areas Limited capacity to deliver in rural areas and interventions are not appropriately targeted There is a lack of information on the performance (non- financial data) of Rural Household Infrastructure Grant Reporting format makes it difficult to understand the actual delivery in some instances as for example units completed and under contraction are combined (CRU and SH) The overall spending of the department is 98.8%, however, there is a concern that some programmes (housing policy, research & monitoring, and strategic relations & governance) under-spent by 25% & 40% respectively
Built environment related grants have an urban focus and ignore rural challenges and setting
Little infrastructure delivery taking place in rural areas
Limited capacity to deliver in rural areas and interventions are not appropriately targeted
There is a lack of information on the performance (non-financial data) of Rural Household Infrastructure Grant
Reporting format makes it difficult to understand the actual delivery in some instances as for example units completed and under contraction are combined (CRU and SH)
The overall spending of the department is 98.8%, however, there is a concern that some programmes (housing policy, research & monitoring, and strategic relations & governance) under-spent by 25% & 40% respectively
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16. Conclusion and issues for the future
There is a need to fast-track and conclude the accreditation process
Need to rationalise and change approach in the management and funding of built environment related grants
Department to provide capacity development and assistance in struggling provinces and municipalities in terms of housing delivery
Development of the monitoring system for verification of housing projects delivered in all provinces
Measurable objectives need to clearly defined (for example housing policies aimed to promote densities)
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17. FFC Public Hearings on Housing Finance
1st public hearing
Proposed for 13 and 14 October 2011
A number of issues on challenges and opportunities in housing finance in South Africa will be the trust of discussion covering a wide range of issues on:
The nature and extent of demand for land and housing in SA
Issues on the supply-side, sustainability and related challenges in the South African Housing Market
Issues relating to finance, policy and legislative environment
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Presentation on 2010/11 DoHS Annual Report - PC on Human Settlements
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Research Committee 13 July 2011
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18. Issues for Discussion During Public Hearings
FFC discussion document to form basis of discussion
Background document to present retrospective overview of housing delivery challenges and highlight key issues for debates
All stakeholders are requested to present views on issues and challenges in the housing sector and develop some recommendations on how to address such challenges
Debates are aimed at the development and firming of a problem statement from which the FFC will undertake further research work and make recommendations
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