L Sisulu: Housing Dept Budget Vote 2006/07

24 May 2006

Madame Speaker,
Honourable members of parliament,
Invited guests,
Ladies and gentlemen,

And so we come, Madam Speaker, to the beginning of this, the “autumn” of our
lives, the season of mellow fruitfulness, full of promise, full of hope,
“conspiring with the sun how to load and bless.” We have come full cycle and as
we stand here we can account for a remarkable year and one that also tested us
to our limit.

For the last two or three days the media have carried gruesome stories of
the plight of those who would otherwise be dependent on us for shelter. As the
mercury plummets we know fires follow shortly thereafter and tragedy once again
plays itself out on our front pages and on our screens and as though by some
vengeance the gods have decided to open up the skies in the Eastern Cape and
North West. And again it is the poorest of us in informal settlements that bear
the brunt of this. We don’t need these tragedies to emphasise the urgency of
the challenges that we face. In a country such as ours it should not be like
this. It is at times like these that I am convinced we took the right decision
to set a target to rid ourselves of homelessness, to ensure for the future that
it will not always be like this.

We gather here knowing that due to policies that this government is
implementing, we are experiencing the economy’s longest period of expansion and
growth, enabling us to respond to increasing urbanisation and increasing
homelessness. The amount of resources the government has been appropriating and
spending on the housing vote in the last three years and what is estimated for
spending in the next three financial years is an indication of our commitment
to deal with this. Our expenditure has doubled from R4,2 billion in 2003 to
R9,5 billion in the 2008/09 financial year.

This increase is remarkable but the enormity of the challenge depicted by
the backlog and the annual household growth still remains large and daunting,
requiring us constantly to reach out and find ways of working with the private
sector with our communities to ensure that we can shoulder this problem
together. For while we are mobilising state resources to undertake the task of
providing shelter, we also have to rigorously and constantly mobilise the rest
of society to take its part.

It was with a sense of real achievement and pride that we co-hosted the very
successful Slum Dwellers Conference which ended at the weekend here in Cape
Town, where we were able to forge a formal relationship with those communities
whose daily lives are plagued by the elements, by insecurity and poverty.
Together we forged a new way of doing things and we have formed a partnership,
built on an understanding that we, each of us have a responsibility toward
changing the fortunes of the poor. It was a high point of our time in housing.
The message is out, we are in this together.

We have pledged a sum of R185 million which represents 5 000 subsidies to
the South African Federation because in them we have found an ally that will
help mobilise our beneficiary communities to understand that they have a
responsibility that they can take up arms against poverty and join government
in this crusade, that it is in fact in their interest that they do this.
Together we can do it so much faster. At bottom we need to create and emphasise
a culture of joint responsibility and equally importantly inculcate a culture
of saving.

The conference was held close on the heels of the consummation of yet
another exhilarating partnership with Radio 702. This courtship between the two
unlikely partners, government and the media, has been what in common parlance
we would call “been going on for some time” now. We have just successfully
launched a pioneering project that was a response to our challenge to build 702
houses. Between now and December, together with First National Bank (FNB) they
will have built 702 houses. We are an amazing nation, I have no doubt about
that and I re-discover this fact over and over each time I experience this kind
of gesture. It re-affirms my confidence in us as a people. With incredible
commitment to others Radio 702 with its sister radio station Cape Talk, have
been extraordinarily supportive. And the cherry on top (not literally of
course) is the support that they have brought along in the form of Miss South
Africa, herself a student of architecture.

In the budget vote last year we indicated that we would seek to mobilise all
sectors of our society around a social contract that would serve as a basis for
our collective efforts. We hosted an exhilarating Housing Indaba held in Cape
Town in September, government, civil society including banks and property
developers, agreed to work in concert to accelerate housing delivery in order
to address the housing backlog. A significant outcome of this indaba was the
engagement with private developers on a quid pro-quo for an inclusionary
housing framework.

Following the indaba and in the spirit of engaging government’s delivery
concerns, South African Poverty Owners Association (SAPOA), the Chamber of
Mines, the Banking Association and the construction sector entered into
negotiations with the Department of Housing. Combining the goals of delivery
and inclusionary housing is the ultimate aim.

This newly formed collaboration resulted in the signatories of the of the
Social Housing Contract for Rapid Housing Delivery agreeing to “ensure that
commercially driven housing developments above Rx (an amount to be determined),
will spend y percent (a percentage to be determined) of the total project value
in the housing subsidy category, details of which were to be further explored
with the sectors concerned, taking cognisance of international best practices”
in inclusionary housing.

We can now happily announce that we have committed ourselves to a pilot
project with a private developer who, together with a bank, is willing to test
this model for us in KwaZulu-Natal. This is a very important pilot project for
us; because we are convinced it would show any sceptic out there that this is
possible. It will also show us the limits and possibilities of what can be
done. We might also use this pilot project to determine the x and y
variables.

In our interaction during the social contract conference, it became clear to
us that from the perspective of the developers we as government are a major
stumbling block towards accelerated development. We have taken note of this and
together with my colleagues, the main culprit being poor Minister Van Schalkwyk
with the Environmental Impact Assessments (EIA), we are working on this. He has
recently reviewed the EIA regulations to ensure the process is expedited.

For our part in housing, we have established a special Chief Directorate,
whose responsibility it is to provide support to the sector to ensure that
blockages such as being currently experienced are unblocked. This is the extent
of our commitment because we firmly believe that we can save the private sector
a great deal of money, currently lost in waiting for approval.

We hope that in turn, a percentage of this saving by the private sector can
be ploughed back in a mutual social responsibility, which is housing. We are
hopeful that by the first quarter of next year we will be able to introduce a
bill that will be based on this social contract and the experience of
inclusionary housing in other countries. In the meantime, we are open to the
private sector to come on board as we determine the values of x and y.

Having concluded our policies, we had dedicated our energies to mobilising
support. We have made significant progress in our work on this front and we
hope that for this coming year we will consolidate our relationship with two
important stakeholders. Firstly the religious sector as well as the
non-government organisations (NGOs) who have been very supportive of our
initiatives. We would like to form a firm partnership with them with measurable
goals, especially around social housing.

The other very significant sector is traditional leaders who are an
essential partner for us especially as we seek to revisit and consolidate our
rural housing policy. The provision of rural housing is an important housing
delivery process and in order to increase the scale of delivery in this sector,
a review of the current subsidy mechanism has been undertaken in an attempt to
establish a relevant and appropriate subsidy mechanism that will align the
housing programme with the Communal Land Rights Bill. It would be necessary to
review the current rural environment and the current delivery mechanisms
together with a variety of other issues. We therefore seek the support of our
traditional leaders. In this quest we will be holding a rural housing indaba
with them by the third quarter of this year. We sincerely hope they will
respond positively to our overtures.

On the small but long outstanding matter of the origination of R42 billion I
am happy to announce that the banks, the Financial Services Council (FSC) and
ourselves have finally reached agreement in terms of the Memorandum of
Understanding (MoU) I concluded with banks last year. We are on track. I called
it the small matter because the banks and we have agreed that in line with the
Financial Sector Charter, we will now proceed to the second phase. The Banking
Association has committed to a substantial increase for this phase which amount
will be determined in due course. And of course, true to their nature, this
time the banks are insisting on a number of issues and we are working on these.
Finally, we have summated that hurdle! So, what does this mean for the ordinary
South African? It means, if you earn a household income of between R1 500 and
R7 000 per month, you qualify for the joint assistance of the banks and
ourselves, subject of course to whether your credit rating allows for that.

The Department has embarked on a venture to educate the public on how they
can assess whether they may qualify and further having done that how they may
access that. I am reliably informed that in fact the banks have already loaned
out an impressive amount! As you can imagine, this is a huge relief for me.
Access to housing finance has been a huge impediment.

This brings me to an important point. The banks may only sign one MoU on
housing and that is through me as we have done under the auspices of the
Financial Services Council.

Madam Speaker, today housing delivery is occurring in a context of an
economy whose fundamentals are acclaimed to be well grounded. The “Age of Hope”
the President speaks about is beginning to be felt in the residential market as
a result of the contribution we are all seeking to make. The inflation outlook
is projected to be fairly positive, the interest rates have been sustained at
low levels, the economy has began to absorb more entrants in the labour market
with the Rand Dollar exchange rates being stabilised at within the R6,00 to
R7,00 range for a long time in many years, factors which significantly impact
on the spending of some of the critical commodities constituting input cost to
the basic needs of the household we seek to assist. All of these factors have
contributed to increased disposable household income and increased the
affordability levels for access to housing for individuals. This positive
economic outlook should and is being utilised by all role players in the
housing sector.

However, whilst beneficial to some, this environment has had adverse effect
of raising house prices beyond the reach of low to medium income households. So
the upwards trend one finds in the higher end of the market has not been
reflected in the lower end of the property market where prices in the main have
remained stagnant. One of the ways in which this challenge can be addressed is
the provision of housing finance at scale. This will lead to wealth creation
through an appreciating and unlocking the lead capital for entrepreneurial
purposes.

It is for this reason that it gives me pleasure to announce that the
National Housing Finance Co-operation (NHFC) has transformed itself to be able
to finance homes for low to medium income earners. A process has been initiated
to restructure and transform the NHFC to accommodate this new mandate. The
outcome of this should provide the NHFC with an implementation framework and
systems that not only serve to support project finance and facilitation but
also enable the NHFC to serve low to middle income customers in a housing
bank.

In an attempt to stay abreast of technological advancement and to maximise
our ability to deliver sustainable housing solutions which will deliver houses
within the shortest space of time, I indicated last year I would establish an
innovation hub for housing products with the assistance of the National Home
Builders Registration Council (NHBRC) and with the City of Tshwane, who made a
number of serviced stands available. Housing Product Innovators and Developers
were invited to demonstrate their innovative products as part of a housing
product competition. This project generated considerable interest and some 20
innovative houses, incorporating alternative technologies have been built.

These houses cover a broad spectrum in terms of sizes and cost, ranging from
small units compatible with the housing subsidy scheme target to the bondable
houses in the larger and more expensive category. To ensure that the products
are thoroughly evaluated and to test the products against housing needs, the
public was invited to express its views in written surveys. Absa has offered
the prize of R250 000 for the winner and his Royal Highness Kgosi Leruo
Moletlegi, an architect by profession, served as our adjudicator. Madam
Speaker, we will announce the winner of the competitions at a ceremony arranged
for the occasion this evening. We hope that this concept will generate and
sustain innovation in the housing field. This is an exciting project even if I
have to say so myself, which will aim at bringing better quality products and a
wider choice of housing consumers. I invite any who might have a spare moment
to visit it and see that we are poised for exciting times in this country.

Madam Speaker, my Department remains committed to accelerating the delivery
of quality housing and an efficient service through a National Housing Consumer
Education and Training Programme. This programme was piloted in the four
provinces of KwaZulu-Natal, Western Cape, Gauteng and Free State and more than
7 700 beneficiaries underwent training. I am happy to report that we are now
ready to implement the programme throughout South Africa.

Now, on the topical issue of the N2 Gateway Project, Madam Speaker. The
first phase of the project will be completed by end of this month. As you are
aware, there have been a number of delays in the completion of the project due
to challenges in construction complexities of building such a huge project.

The allocation of the N2 Gateway pilot units is the responsibility of the
Provincial Department of Housing. This will be done in line with the database
provided by the Auditors Nkonki PriceWaterhouse.

The allocation principles will be in line with a pilot project business plan
that is to accommodate beneficiaries, i.e. 30 percent backyarders and 70
percent from neighbouring communities. The province will determine the date of
occupation without any pressure from either the media or anyone else.
Discussions are currently underway with the communities to work the modalities
of occupation.

MINMEC has decided that phase two and those phases to follow will be managed
entirely by Thubelisha Homes that would operate in the private sector lines and
report directly to MINMEC.

Finally, I am satisfied that despite the hiccups the N2 Gateway project is a
success on a scale that has never before been attempted in the history of
housing construction in this country. It was commenced with ambitious time
frames with an objective to accelerate service delivery on housing. It gave us
an opportunity to implement the breaking new ground policy and as a pilot
project has been hugely successful. And I want to thank the people of Langa for
their patience and understanding. They will not regret having allowed us to
build.

Madam Speaker, as you are aware the National Home Builders Registration
Council currently provides a warranty on government subsidised houses for a
period of five years. This warranty, however, only applies to structural
defects of houses due to for instance poor building practice. Many if not the
majority of our housing beneficiaries are however poor and are not able to
afford insurance on their houses. This has been identified as a critical
shortcoming in our quest to promote housing as an asset. As a result, I have
instructed that this matter be investigated including whether private sector
insurers are able to develop to assist particularly lower income earners in the
affordable housing market.

And now we come to that other critical requirement for housing delivery:
land. The need for a land acquisition programme for housing arises from the
context that land is a finite resource. It is further acknowledged that current
inner city redevelopment programmes will not, on their own, cater for the
demand for housing in well located urban areas. It has been acknowledged by the
public and private sectors that the current form of acquiring suitably located
land has had an adverse effect on delivering integrated and sustainable human
settlements. In view of the fact that the strategy for acquiring land has not
achieved expected results, my Department, working in collaboration with the
Department of Land Affairs has put together a framework for a special purpose
vehicle for land as a new strategy to facilitate the speedy release of suitable
land for housing purposes.

As indicated in my Budget speech last year, Servcon has completed its
mandate. We will be approaching Cabinet with a request to transform it into
this special purpose vehicle for the acquisition of land.

The public will have been informed that Cabinet has given its consent to the
disposal of land by the State Owned Enterprises under the Department of Public
Enterprises. I can now inform you that housing is the major beneficiary of this
move. We are now working on acquiring suitable state land in the hands of the
Department of Public Works. The late Minister Stella Sigcau worked tirelessly
in her last month in office to ensure that such land as we identified as
suitable, can be transferred to housing, through the special purpose
vehicle.

During 2005, an intergovernmental agreement was reached with South African
Local Government Association (SALGA) and municipalities to adopt a moratorium
on the sale of municipal owned land. Through this moratorium we will ensure
that we delay the alienation of municipal owned land assets with a view to meet
the sustainability requirements of integrated development. We note and
congratulate the many municipalities that have passed Council resolutions to
freeze the sale of municipal owned land. We must appeal to the remainder of
municipalities to act responsibly by delaying the sale of land assets and
prioritise housing development that supports our vision of truly integrated
human settlements.

The MECs will ensure further consideration of the moratorium on the sale of
municipal owned land at their respective Premier Mayors Co-ordinating Forums
with a view to secure provincial specific action in this regard.

The Department of Housing has undertaken a number of initiatives to provide
support to small housing enterprises. These initiatives have been undertaken in
line with the government priorities of promoting Black Economic Empowerment
(BEE) and gender mainstreaming. A framework for emerging contractor support has
been developed based on extensive consultations with stakeholders in the
construction industry and housing.

Flowing from this framework a support programme has been developed,
initially focusing on training of emerging contractors. A budget of R10 million
has been set aside through the National Home Builders Registration Council to
develop a pool of housing entrepreneurs who will enhance the delivery of low
cost housing.

The initial funding for the programme of R10 million has been approved and
tenders for the Construction Education and Training Authority (CETA) accredited
service providers. NHBRC has to date trained 1740 emerging homebuilders of
which 610 (or 35 percent of the totals) were women emerging contractors.

Furthermore, the NHBRC has committed R7 million on training the youth on the
National Youth Service (NYS) project. The project aims to support
nation-building through involving young people in the delivery of crucial
government services. This year the NHBRC will train 100 youths in Limpopo.

NHBRC has been involved in the construction of houses at Modimolle. This
Ministerial Special Project, which will comprise of 500 units and are all 50sq
meter houses when completed, was initiated to complement the emerging
homebuilder training. The training is targeting 200 learners. Currently, 65
learners have been trained on the project.

To improve the access of women contractors to housing projects, the
Department of Housing has ring-fenced 30 percent (increased from 10 percent) of
each provincial housing department’s allocations to projects undertaken by
female developers/contractors. During 2005, provincial government departments
allocated a total of 288 housing development projects to the value of 1,9
billion country wide to emerging female contractors in the sector.

After concerns were raised, last year, by honourable members about the
credibility of the housing waiting list I resolved to ensure that the matter
was attended to. As reported, last year an audit company was appointed in this
regard. The task of auditing the list has now been concluded and I can proudly
announce that the waiting list for the Cape Town metropolitan area has been
completed and using the lessons learnt in this pilot we are ready to commence
with other municipalities. We have set out the criteria with the communities
and the website for this is up and running. You, as members of parliament,
would be called upon to help your constituencies verify their details on the
site and ensure that those who are not registered are assisted to do so.

The present has the responsibility to fulfil the promise of fundamental
palpable change in our lifetime. We will achieve that. When the history of this
period is written, this government and its achievements will be writ large. By
then most of us here will perhaps have retired and will have the advantage of
distance and will, I hope, be graceful enough to acknowledge that we did indeed
record remarkable achievements.

We have committed ourselves to removing all those blockages that impede
progress, most of them sadly our own creation. We are building communities and
I cannot imagine that anyone would have chosen for themselves a more onerous
challenge. But it’s a challenge which if we succeed will lead to the society we
dream of, with a new culture forged out of real shared experiences. Perhaps one
day we can talk of a national community, which you all know does not exist. We
have the opportunity to create it. What greater transformation can we hope
for?

Each one of us must be willing to actively participate in this. I believe
the rich have a responsibility and I have consistently called out to them. But
importantly, the poor have a responsibility too. If each were to give our
national community is at hand.

The challenge has invigorated me because I have been called upon to conquer
this crisis.

Thank you,

Issued by: Department of Housing
24 May 2006