Your country wants your money
Tokyo wants R50 000 from every businessman and woman to help him with the 2,2m housing backlog
THE NUMBERS GAME that’s defined the ANC’s housing policy is impressive. But it’s backfiring. While it’s devoured 15 years’ worth of sizeable Budgets, the housing backlog is the same as it was in 1997 – 2,2m homes. Political minister in charge of Human Settlement Tokyo Sexwale is locked into a pledge to kill the backlog to parade tangible proof of ANC delivery.
The former premier of Gauteng turned mining magnate has big plans to solicit guarantees including cash from high net worth individuals and businesses so that backlogs are crushed and government’s housing bureaucracy is hauled into the modern world. Finance institutions need to come up with plans to give SA’s “unbanked” people access to loans and he wants a “personal guarantee” from every “businessman and woman” to build a house or give at least R50 000 – the equivalent of one person’s housing subsidy.
Overall, the odds are stacked against him. Time is not on his side. While the Eastern Cape and Free State are simply not able to spend their budgets, CFOs of other provincial housing departments say they need double their annual budgets (at least) to achieve what’s expected of them. For Government to meet its promise to squash the backlog by 2014, the funding shortfall is around R102bn.
But Sexwale has no plan to be the lone “gladiator” who builds homes while South Africans sit back and say “let’s see what he can do”. He’s on a mission to get South Africa’s wealthy business people to bring their money and ideas to the table. While it’s not clear who falls into the “high net worth” bracket, Sexwale is looking for “innovation, partnerships and out of the box thinking”.
“We need a paradigm shift about South Africans who are destitute and not creditworthy. If you multiply the backlog by five or six (the average number of one family) you are dealing with 10-12m people. Whose problem is this? It’s very dangerous to see it only as Government’s problem. We need a mindset change,” says Sexwale. He plans to take business people out and explain “how the national purse is not going to do it on its own”.
He’s adamant: “It’s about building decent homes for people like the women who iron your shirts and cook your meals but then have to live far away or in hovels in back yards.”
While Sexwale has instructed his “war council on poverty” (his provincial MECs) to pull out all the stops to get the better of the backlogs, chief financial officers in provincial housing departments are warning it’s simply impossible without huge amounts of money.
“Gauteng’s housing budget is R3bn. There’s no way we are going to address the backlog – which is made worse by migration to the city – without at least double the budget,” says Gauteng housing department CFO Anthony Green.
However, it’s far more than just a question of limited budgets. Increasingly, politicians are discovering that Government housing is a lucrative way to boost personal financial and political fiefdoms.
Government’s pilot high-density N2 Gateway Project in Cape Town – which was intended to showcase a “sustainable human settlement” approach to housing – under-
scores just what Sexwale is up against as he breathes new life into this concept. It’s three years behind schedule and R700m over budget. Auditor General Terence Nombembe has pegged fruitless and irregular expenditure on the project, which is close to R100m (see sidebar). The original project managers – Cyberia – were appointed irregularly and without having any expertise to do the job at hand. The R12m paid to Cyberia – before they were fired – was irregular. Thubelisha Homes took over the project management, but were also appointed without a proper procurement process. Thubelisha is now insolvent and all its employees have transferred to the new Government Housing Development Agency, which oversees the project.
While Sexwale vows to “stem the tide of waste and fraud” in his department, SA’s National Treasury is assembling a specialised, high-level unit to clamp down on tender corruption in all spheres of government. Last year a total of 205 (out of 284) municipalities simply failed to account for their spending on conditional grants.
Co-operative Governance and Traditional Affairs Minister Sicelo Shiceka admits municipal integrated development plans and local economic development strategies often reflect politicians’ personal financial agendas rather than those of a unified, co-ordinated public sector.
In the meantime, delivery has started to hit walls. For example, cash flow in Gauteng’s provincial housing department dried up in October last year, which means developers the State relies on to build houses have been paid erratically for the last six months. Several developers Finweek spoke to on condition of remaining anonymous said they were on the verge of going under. Two smaller operators that only had government as a client have shut their doors. One of the developers still functioning, who owes his creditors R200m, says his payments have started to “trickle” in. He’s one of many who have started to go slow on projects so as not to get caught short if this year’s budgets run out early.
Another developer Finweek spoke to said: “I’ve been told off the record by the Gauteng Department of Housing that I should stop all new construction because I might be faced with them not having any budget available
to cover what I have spent to date in this financial year. I have also been told that they will be prepared to allow us to build on risk – which means what we build this year will only be paid out of the 2010/11 budget in April 2010. If you cannot arrange bridging finance to do this, what do we do with all the staff most of whom are previously disadvantaged? Officially, the housing board just keeps telling us the money is coming,” he said.
Aside from not wanting to create a fuss and jeopardize their future contracts, developers don’t have much of a legal leg to stand on. Contracts give little guarantee of government performance and are ambiguous about when the 30-day payment period begins and ends.
Yet another developer Finweek spoke to complained that he’d been waiting for over a year to be paid for 1 000 homes he’d completed in Gauteng.
Companies who supply the developers with materials are also up in arms and are threatening to “go public” with the problem if it is not sorted out this month. “We are also exposed by contracts developers enter into, which essentially allow developers to build on risk. I have not been paid for months and if I don’t get payment soon I will fold,” said a supplier.
Cedric de Beer, who heads Government’s bridging finance outfit, Nurcha, concedes that this situation (cash flow and precarious contracts) opens the system up to departments being able to reschedule projects, delay them or (in some cases) instruct contractors to start building without a final contract being signed. It goes without saying that this opens the system up to inefficiency, corrup-
tion and wasted expenditure.
The key question is whether throwing more private money at the problem is going to solve what is a complex situation? President Jacob Zuma has put national and provincial cabinets on orders to clean up the system and up the delivery ante. And government funds for housing are flowing thick and fast. Housing infrastructure grants to municipalities over the next three years amount to R67bn. A further R45bn will be spent on the Breaking New Ground (BNG) housing programme which was adopted in 2004 – and which proposes a shift in government policy which Sexwale is now aiming to implement.
While housing activists and academics don’t believe the department will have the political stomach to take the shift far enough, the key for now is that Sexwale understands the need to move away from government churning out row upon row of houses on cheaper land (read: far out of urban centers and places of work) and then moving people – often by force – from informal settlements to the new housing projects. Government has been doing this in spite of its own policy and in spite of well-documented evidence that this replicates apartheid spatial planning. It’s also been done in spite of government’s own research confirming that the location of RDP homes has been the main reason beneficiaries sell them or rent them out only to move straight back to the informal settlement they came from in order to be near work, schools, family and friends.
Rhodes University’s Richard Pithouse says government has been setting itself up for failure by denying the real “extent of the urban crisis” and clinging to a “fantasy of what would be nice”. “The State must accept that it’s impossible to eradicate shacks by 2014 by providing everyone with a house. The problem with the fact that these two claims are routinely linked is that the former (eradication) starts to drive State practice more urgently than the latter (building houses). And they’re not always the same thing. It’s impossible to house everybody within the current limits of state capacity and commitment. It’s impossible, full stop,” says Pithouse.
That’s the nub of why SA can’t beat the backlog. In spite of the spectacular rate of building 2,8m homes in the last 15 years (excluding China this is unprecedented for a developing country), the problem is virtually insurmountable. The backlog is also probably much higher than 2,2 mil-