DIVISION OF REVENUE BILL HEARING 2006

1
DIVISION OF REVENUE BILL HEARING 2006

• DEPARTMENT OF HOUSING PRESENTATION TO SELECT
  COMMITTEE ON FINANCE ON THE DIVISION OF REVENUE
  BILL (B-2006)
• PUBLIC HEARINGS ON
• 07 MARCH 2006

2
Overview

• Introduction
• Purpose of Grants
• Allocation Formula
• Integrated Housing and Human Settlement
  Development Grant
• Human Settlement Redevelopment Programme
• Motivation for Retention as Conditional Grants
• Fund Allocations for 2007/08
• Spending Priorities
• Comments on the Bill
• Conclusion

3
Introduction

• Housing will administer only one conditional
  grant in the 2006/07 financial year, namely the
  
• Integrated Housing and Human Settlement
  Development Grant
• Grows from R4,843 billion in 2005/06 to
• 06/07 R6,459 billion
• 07/08 R8,117 billion
• 08/09 R8,971 billion

4
Purpose of Grant

• Integrated Housing and Human Settlement
  Development Grant
• To finance the implementation of National Housing
  Programmes
• To facilitate the establishment of habitable,
  stable and sustainable human settlements in
  which all citizens will have access to selected
  social and economic amenities
• Progressive eradication of informal settlements
  on a phased basis through formalization of
  informal settlements by 2014.

5
Allocation Formula

• The allocation formula which is consistent with
  the principles and provisions contained in
  Section 214 of the Constitution has been applied
  in Housing for provincial allocations
• Provincial allocations are currently made
  according to a formula approved by MINMEC.

6
Allocation Formula cont.

• For 2005/06 the 2001 Census was applied as funds
  were allocated over the MTEF period and are
  committed
• For 2006/07 the allocation is still based on the
  2001 Census figures
• MINMEC approved an amended formula on 6 December
  2005 which will be phased in as from 2007/08
  financial year in view of its impact.

7
Allocation Formula cont.

• The current formula recognizes the following
  factors
• A population indicator, weighted at 20 percent,
  as a measure of each provinces share of total
  population
• The formula provides for weighting in order of
  the priority of the elements as defined below
• A P(20) HH(30) HN(50) where
• A Allocation
• P Population.
• HH Households earning less than R3 500
• per month (affordability indicator)
• HN Housing Need

8
Allocation Formula cont.

• Housing Need (HN) used in the formula is defined
  on a weighted formula that takes into account the
  following factors
• HN RBY(0.5) SBY(1.0) SE(1.2) FR(0.5)
• TC(1.0) HL(1.25) where
• HN Housing Need
• RBY Flat/room in backyard
• SBY Shacks backyard
• SE Shacks Elsewhere
• FR Flat/room on shared property
• TC Tents and Caravans
• HL Homeless People

9
Allocation Formula cont.

• MINMEC resolved that new allocation formula shall
  comprise of two elements, namely an empirical and
  non-empirical element
• The empirical part of the formula, forming 80 of
  the 80/20 split, concentrates on housing needs,
  weighted at 90 and development potential of 10
• Need weight (empirical part) is broken down into
  inadequate housing, poverty and population.
  Aforementioned is further broken down into
  sub-components
• Development potential (empirical part) is broken
  down into economic growth potential and net
  migration
• Will recognise such issues as migration patterns,
  NSDP principles, impact of cross border household
  changes etc.

10
Allocation Formula cont.

• The non-empirical element comprising the 20 of
  the split will focus on national and provincial
  priority projects based on an evaluation of
  business plans for key housing projects submitted
  by provinces to MINMEC
• In view of a negative impact on certain provinces
  it was decided to soften the impact by phasing
  in the new formula over a two year period with
  effect from the 2007/08 financial year

11
Allocation Formula cont.

• The budgetary and legislative consequences,
  brought about by the Constitutional amendments,
  will be addressed by National Treasury and the
  Department of Provincial and Local Government
  (DPLG)
• In view of the aforementioned it is anticipated
  that the changes can only be fully implemented
  with effect from 1 April 2007.

12
Integrated Housing and Human Settlement
Development Grant
13
Expenditure Status 31 Jan 2006
14
Expenditure Status 31 Jan 2006
15
Housing projects approved
16
Number of subsidies represented by approved
housing projects
17
Number of serviced sites and housing units
completed
18
Male vs Female headed households

• To date the programme achieved a 48,5 to 51,5
  split allocation between male and female headed
  households.

19
Monitoring Mechanisms

• Monitoring is performed in accordance with
  requirements of the DORA on a monthly basis
• The Department has developed a specific and
  targeted monitoring framework for monitoring the
  grant
• Department has installed a Transversal system
  which has been rolled out to provinces (HSS)

20
Monitoring Mechanisms Cont.

• Provincial reports are presented to MinMec and
  HOD meetings at least on a quarterly basis
• Structured Provincial visits take place targeting
  all provinces. In cases of persistent under
  spending appropriate interventions are made
  based on analysis of underlying reasons and
  discussions
• Letters are addressed to provinces when it is
  observed that under spending could occur and
  request that problems be addressed.

21
Monitoring Mechanisms Cont.

• During 2005/06 the Minister personally visited
  most of the provinces to discuss the rate of
  expenditure and related matters
• Increased visits and hands-on support to
  Provincial Housing Departments
• Significant increase in monitoring capacity and
  reviewing ME Framework.

22
Human Settlement Redevelopment Grant
23
Expenditure Status 31 Jan 2006
24
Expenditure Status 31 Jan 2006
25
Motivation for Retention as Conditional Grant

• The Integrated Housing and Human Settlement
  Developed grant will continue for 2006/07 under
  the current mechanisms/framework in order that
  the Minister of Housing can fulfill her functions
  adequately
• The aforementioned mechanism/frameworks provides
  the basis for uniform norms and standard across
  the country
• Human Settlement Redevelopment Grant is being
  phased out.

26
Allocation in respect of the 2006/07
Province New Baseline allocation based on the 2001 census R,000
Eastern Cape 761,994
Free State 522,601
Gauteng 1,757,666
KwaZulu-Natal 1,048,376
Limpopo 521,331
Mpumalanga 421,002
Northern Cape 104,774
North West 613,405
Western Cape 598,800
TOTAL 6,349,949
27
Spending Priorities

• The allocation will be utilized to fund the
  approved national programmes with emphasis on the
  national priorities such as
• Informal settlement upgrading Eradication by
  2014/15
• Urban and rural development works
• BEE/Emerging contractors
• Women in construction
• Job creation

28
Spending Priorities cont.

• Emergency housing fast track delivery
• Housing Chapters of IDPs
• Multi-purpose social facilities
• PHP projects
• Subsidies for disabled
• Integrated development.

29
Comments on the Bill

• At the request of the Nat. Department Section 17
  (Accreditation of Local Authorities) of DORA,
  2005 was retained, with minor adjustments, in
  the 2006 DORA Bill (Section 14)
• The purpose of the retention of the accreditation
  section is inter alia to indicate that the
  commenced process must be continued and finalized
  to achieve the objectives as stipulated in the
  Housing Act of 1997

30
Comments on the Bill cont.

• The Department made representations to the
  National Treasury to ensure that no housing funds
  are lost by this sector
• Sections 17, 18, 19 and 20 which deals with
  withholding, stopping of the allocation and
  re-allocation is consequently welcomed, as it
  will facilitate the optimal utilization of money
  for housing delivery

31
Comments on the Bill cont.

• The budgetary and legislative consequences,
  brought about by the Constitutional amendments in
  respect of former cross border local authorities,
  was also a concern the Department raised in view
  of the housing delivery taking place in those
  areas
• However, the processes in respect of above are
  addressed in Sections 38 and 39 of the Bill and
  the Department is satisfied that housing delivery
  will be able to continue as planned and will not
  be affected.

32
Conclusion

• The current reforms are welcomed
• Significant increase in monitoring capacity
• Challenges
• The Accreditation Framework and the resources
  allocated to create the capacity in Local
  Authorities
• The use of information and its application

33

• THANK YOU