L Sisulu: Media briefing on Housing Budget Vote 2006/07

24 May 2006

Greetings to members of the media

Let me start by thanking you for joining us this morning. I will briefly
share with you highlights of our Budget Vote statement to be delivered later
today. I think it is appropriate for me to formally introduce our brand new
Director-General, I think his task is very clear, he will have to ensure that
we eradicate informal settlements by 2014.

I am more than convinced today as we prepare to deliver this Budget Vote
statement for the financial year 2006/07 that our response to the task of
decently housing the poor can only be adequately measured by the amount of
resources the government has been appropriating and spending on the vote in the
three years before 2005/06 and what is estimated for spending in the next three
financial years.

Looking back, our expenditure has doubled from R4,2 billion from 2002/03 to
R9,5 billion in the 2008/09 financial year. This reflects approximately eight
percent average growth rate from 2002/03 to 2005/06 financial year and
accelerating to 21,5% from 2005/06 to 2008/09.

The Housing and Human Settlement Development Grant, representing transfers
to provinces, has consistently taken about 93% of the total expenditure on the
Vote. Expenditure on the Housing and Human Settlement Development Grant will
increase from R4,97 billion in the 2005/06 financial year to an amount of R8,7
billion in the 2008/09 financial year.

While this increase is indeed remarkable, the enormity of the challenge,
depicted by the backlog and the annual household growth, still remains large.
The 2005/06 financial year, the year in which we started implementing the
comprehensive plan for human settlement, has seen for the first time
expenditure on the Housing and Human Settlement Development Grant reaching 95%,
with actual delivery standing at 115 175 sites completed and 137 657 units
completed. We certainly want to grow this delivery significantly if we are to
meet our international and national targets on eradication of informal
settlements in our society.

In an effort to fast track housing delivery to achieve both our national and
international commitments we have begun an all important process to review the
housing delivery value chain and functions performed by various role players.
This process has enabled us to fully appreciate the specific location and
nature of problems and bottlenecks that persistently hamper housing
development.
Our biggest challenge is the management of the concurrency of the housing
function, development planning, project management, and alignments of funding
sources, limitations of bulk infrastructure and the overall capacity
limitations of the construction sector as it relates to housing
development.

The remodelling of the housing delivery value chain is enabling us to
correctly locate and focus the capacity required for delivery as well as
remove, more permanently, the bottlenecks that hamper housing delivery. As a
consequence of this, the housing sector departments across the three spheres of
government will need to realign their organizational structures to maximize on
the efficiencies expected of the value chain.

Broadening access to housing for all

One of the issues that rightfully dominated the media agenda in this
financial year is our Memorandum of Understanding (MoU) with the Banks in which
they committed to release R42 billion by March 2008. I can announce here today
that our negotiations with major banks as represented by the Banking
Association have been concluded. The Director-General of Housing, representing
Government and the Managing Director of the Banking Association of South
Africa, representing the banking sector, will monitor the implementation of
this agreement (R42 billion) and begin discussions on the release of more
resources for affordable housing over the next few years.

We agreed that as part of the second stage of discussions to release a
second batch into the market, we will consider interventions that will,
together with the private sector and in line with agreed principles, support
the creation of mechanisms to raise funds in the market and ways to share risk
and mitigate non-commercial risk.

We agreed that as part of this second stage, we will also lead engagement
with other relevant stakeholders to address constraints on the supply side of
the housing market, to ensure the availability of housing stock to be financed.
A critical part of this engagement will be with the construction and
development sectors and mechanisms will be developed to engage these sectors
with a view to ensuring their active participation in this initiative.

In addition that both banks and government will, within the next eight
weeks, embark on a vigorous joint media education campaign on the rights and
obligations of borrowers and banks.

Implementing the social contract for rapid housing delivery

The first Plenary Assembly of the ‘social contract’ which was held on 15
March 2006 to look at issues such as development planning, land and legal
matters, delivery, consumer education, capacity building and communication,
development planning, supply chain. All signatories continue to be guided by
the principles of the social contract in their contribution to the Government
Housing Programme.

We have noted with great appreciation that a number of developers in our
major cities are beginning to embrace the principle of integration of different
income levels. The recent South African Property Owners Association (SAPOA)
conference also recommitted itself to working with the government to address
the shortage of housing stock and integration of communities.

Guided by the spirit of breaking new ground, individually banks have
initiated a number of projects to increase affordable housing stock in the
market. ABSA is involved in the development at Olievenhoutbosch in Gauteng of 5
436 housing units. The project was launched in February this year. The
development makes provision for business sites, commercial sites, churches,
schools, crèches as well as open spaces.

First National Bank (FNB) has its own project at Protea Glen in Soweto where
it will provide R300 million in the form of bridging finance to the developer
for the development of 3 035 housing units. Standard Bank has set aside R500
million is set aside for end user finance.

Within the context of the social contract Radio 702 has also committed
itself to build 702 houses in Cosmo City for this year, again in partnership
with First National Bank. I challenge all media houses to build a minimum of
five houses in this financial year.

N2 Gateway Pilot Project

All spheres of government and stakeholders in the construction sector agree
that the N2 Gateway Project is the biggest housing project ever undertaken by
any government. We also agree that there was no better place to pilot the
implementation of the Breaking New Ground policy than the City of Cape
Town.
On the N2 Gateway we are piloting the integration of communities, integration
of different income groups, auditing and updating of the database of housing
needs to ensure credibility of the list and choice for beneficiaries, building
human settlements with basic economic and social amenities and a new way of
inter government relations.

We are not surprised by the challenges we are encountering on the N2 Gateway
Project, we knew since day one that the task of building 22 000 units is
ambitious and difficult, but we needed to start somewhere and learn some
lessons. With phase one of the Project about to be completed and Thubelisha
preparing to launch phase two one can say that it has been a great success, it
remains an ambitious and difficult project but a clear demonstration that the
new Government Housing Policy will build a South Africa that truly belong to
all.

The first phase consisting of 705 units would be ready at the end of the
month. The construction phase took longer than we expected. I also want to
reassure all citizens of the City of Cape Town that no one will change the
allocation plan as described and detailed in the business plan of the project
adopted in January 2005. 30% of all units will go to backyarders and 70% to
residents of informal settlements. The province guided by the allocation model
and the housing database developed and audited by Independent auditors will
decide when people will move in. I have cautioned the Member of Executive (MEC)
in the province that the process of moving people into phase one cannot be
rushed, care must be taken. We cannot afford to make mistakes. No amount of
pressure must force us to move people when we are not ready to do so.

Reprioritising to fast track housing delivery

All of us in the housing sector understand the extent of the challenge
facing us in our vision of a South Africa free of slums by 2014. We also know
that this challenge cannot be addressed by small intervention but by targeted
major projects with immediate impact to our people. For that reason we have
redirected funding to projects relating to the eradication of informal
settlements as we move towards 2014.

Following N2 Gateway in our priority list is also the Cosmo City Project in
Johannesburg, where 441 families already took occupation of their houses on 9
December 2005. Other pilot projects in the provinces to which funds have been
redirected are Soweto on Sea in Port Elizabeth where 37 000 units will be
built, Duncan Village, Winnie Mandela in Tembisa where 8 206 units will be
built.

Legae la batho in Limpopo, where 1000 houses are planned and 426 houses are
already under construction, and Phomolong where 400 housing units of which 132
have been completed and 197 are under construction. In the Free State the
project is Grassland where 7272 housing units will be built.

KwaZulu-Natal in Mount Moriah Extension one, two and three where 2170
housing units will be built, Mpumalanga projects are in Nkanini,
Thandukukhanya, Gondwana where 3 155 units will be built and the Northern Cape
has Galeshewe and Ou Boks where 6 500 housing units are being planned. Lastly,
North West has projects to build 8200 units in Jouberton, Stilfontein Ext 13
and 14, Kanana Ext 14: 997 and Rustenburg. All the projects are in various
stages of commencement but are due for completion in 2006/07 financial
year.

Innovation to fast track housing delivery
To ensure quality, innovation and choice, the National Home Builders
Registration Council together with ABSA ran a competition whereby all
registered home builders and contractors in the building industry, who are
involved in the use of alternative building technologies were invited to
participate in the innovation hub competition to show case their technologies
in Rosline, outside Tshwane. A total of 17 show houses were completed under the
competition. The winners of the competition will be awarded prizes this
evening.

One of the lessons we have leant from this Innovation Hub is that we can
build decent quality houses for our people with the current subsidy of R36 000.
We are now more than convinced that all houses build under our Breaking New
Ground (BNG) programme would be between 40sqm – 45sqm. This will cater for a
two-bedroom house with a bathroom, a kitchen and a dinning room. This will give
dignity to our people

Moratorium on sale of municipal land

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. The agreement was entirely voluntary.
Regardless, across the country a number of our Municipalities passed Council
resolutions to effect the agreement. We are more than happy that many of our
progressive municipality understands that the poor have a right to stay close
to areas of both economic and social amenities.

Towards a national database of housing needs

Concerns were raised about the credibility of the housing national database.
We can confirm that the task of auditing the database of the City of Cape Town
as a National pilot has been concluded. Allow me to also say that the auditors
(Nkonki/PWHC) have left us a model and a system that will guide housing
allocation for years to come. We are proud of the work they have done.

Legislative review and programmes

The draft PIE Amendment Bill has now been finalised and will shortly be sent
to the Minister of Land Affairs for her input. Further to this, my department
has finalised the Housing Amendment Bill, Housing Consumers Protection Measures
Amendment Bill, Rental Housing Amendment Bill, Social Housing Bill and the Less
Formal Township Establishment Amendment Bill, 2006. All of which will be ready
to be introduced to Parliament at its next sitting.

Affordable insurance for subsidised houses

The National Home Builders Registration Council provides a warranty on
government subsidized 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 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.

Environmentally sound housing

The department is compiling a framework for environmentally sound housing
that identifies policy gaps and provides guidelines for environmentally
friendly homes. We are also collaborating with the Danida (Danish International
Aid Agency) on a pilot project to mainstream energy efficiency in subsidised
housing. This project, which will receive a contribution of approximately R13
Million from Danida, seeks to fully integrate the aspect of energy efficiency
within the subsidised housing sector.

Affordable rental housing programme for the poor

The department is in the process of preparing a programme to deal with
different forms of public residential accommodation which will allow for an
affordable rental housing option and in this way provide secure, stable rental
tenure for lower income persons in good locations with public support. This
process will also investigate a model which will fund a stabilisation
intervention, re-development, refurbishment, demolition and building new
community residential units.

Enhancing the housing delivery value chain and fulfilling capacity
requirements

Cabinet took a decision that all major projects of National priority must be
managed by special purpose vehicles in order to ensure streamlined project
management and allocation of resources. I have mandated Thubelisha Homes, one
of our housing institutions to manage housing projects and the physical
construction of houses and related engineering services. This will include the
N2 Gateway Pilot Project and the unblocking of housing projects affected by
inflation and other related factors.

The fast tracking housing solution for people living in areas of stress by
using the emergency housing circumstances programme

The National Housing Finance Corporation is now a housing bank. For the
2006/07 financial year the National Housing Finance Corporation (NHFC) will be
able to deliver at least 25 000 units.
I have requested Nurcha to extend its commitment to emerging contractors. In
this regard, I will be capitalising Nurcha to the total value of R60 million
over the Medium Term Expenditure Framework (MTEF).

Emerging contractors, women in construction and youth development

The Department of Housing has undertaken a number of initiatives to provide
support to small enterprises within housing. 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 consultative 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 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 issued. National Home Builders Registration
Council (NHBRC) has up to date trained 1 740 emerging homebuilders of which 610
(35% 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. Currently, the NHBRC will train 100 youths in Limpopo.

NHBRC has been involved in the construction of houses in the Modimolle
project referred to as one of the Ministerial Special Projects. Modimolle will
comprise of 500 units which are all 50 sq meter houses when completed. This
project 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 10% 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 R1,9
billion country wide to emerging female contractors in the sector.

Finally we have completed the process of restructuring the department to
respond to the demands of the new policy. Our enhanced structure will allow us
to attract scarce skills. It will also allow for greater monitoring capacity,
greater capacity to assist provinces and municipality. I will give details in
our budget speech in the coming few hours in the National Assembly. You are all
invited to the Budget Vote presentation and the Awards Ceremony for the best
Innovation at 18:00 on the Ground Floor Sammy Marks building.

I thank you.

Issued by: Department of Housing
24 May 2006
Source: Department of Housing (http://www.housing.co.za)