L Sisulu: Housing Dept Budget Vote Speech 2007/08

8 June 2007

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 five 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, 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 no 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, 18 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 Students
Representative Council (SRC) President from Wits, Mbali Hlophe, whose ambition
it is to become a Minister of Housing. It is indeed heart-warming when I note
that South Africans from all walks of life are going out of their way to rally
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
fulfil 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 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.

For the current Medium Term Expenditure Framework (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 utilised 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 eight percent 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 (MDGs), the Habitat Agenda and African Ministerial
Conference in Housing and Urban Development (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 R38 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 recognised 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 (PPP) 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 United
Nations (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 wasteland 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 segregation 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 timeframes 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 seven 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 or 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 of housing solutions for people living in
areas of stress by using the emergency housing circumstances programme
(transitional housing) and to be a lead developer or 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 National Homebuilders' Registration Council
(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 five 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. Honourable Members would be aware
that for the delivery of what we then referred to as "Reconstruction and
Development Programme (RDP) housing" as the state we depended largely on
developers and contractors. In the first of my budget statements for housing at
this house for the financial year 2005/06 I reported last year to Honourable
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 recapitalise the National Urban
Reconstruction and Housing Agency (NURCHA) and Rural Housing Loan Fund (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 timeframes 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 the Public Service.

Before I conclude, I need to indicate that we have a partnership with
Federation of the Urban and Rural Poor (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 fed up with us.

I thank you

Issued by: Department of Housing
8 June 2007