Corruption crackdown? Corruption, backlogs, housing quality, #KZN #SANews, But, unless the tag of corruption is dealt with decisively, these economic benefits will continue to be seriously undermined.

credit and thanks: Is a new model to deal with corruption, backlogs and housing quality emerging?.

One of the challenges facing the Department of Human Settlements (DHS) is housing service delivery, with a backlog of about 2,2-million units.

Optimal service delivery requires internal processes and systems to be working at optimal level. Where this is not happening, delivery will be hampered.

The DHS says that the current housing backlog will be tackled over an eight-year period at a cost of over R170-billion. This will be realised at an annual public housing construction rate of over 250 000 houses a year.

However, the acceleration in the annual rate of household formation will affect the size of the backlog, as this hinges on the country’s overall gross domestic product, which determines the amount of money allocated annually to housing, as well as the overall poverty and education levels of the country’s citizens.

As long as the numbers of less educated and unemployed young people increase, dependence on social security, including shelter provision, will not decrease, but will create a nominal annual growth of the waiting list.

The challenge, therefore, is not only how the department performs in terms of eradicating the waiting list, but also how the economy performs and whether this performance ensures that fewer citizens depend on the State for survival.

2010 Housing Target
At an average cost of about R84 000 a unit, the department will oversee construction of between 200 000 and 250 000 new houses during the 2010/11 fiscal period, which began on April 1.

The provincial housing departments are currently revising their annual performance plans to reflect their envisaged outputs given the appropriated budgets.

The DHS says that it is on track to reach its target of over 200 000 planned new houses. Plans for about 217 000 houses were approved for the 2009/10 financial year and indications are that this target was achieved.

At the end of January 2010, the collective efforts of the nine provincial departments had ensured that 180 890 new houses were constructed. This figure may increase to around 220 000 when reconciliation is done during April.

In his State of the Nation address, President Jacob Zuma vowed that government was working to upgrade well-located informal settlements and provide proper service and land tenure to at least 500 000 households by 2014.

“We plan to set aside over 6 000 ha of well-located public land for low-income and affordable housing. “A key new initiative will be to accommodate people whose salaries are too high to get government subsidies, but who earn too little to qualify for a normal bank mortgage,” Zuma said.

He added that government would set up a guarantee fund of R1-billion to incentivise the private banking and housing sectors to develop new products to meet the housing demand.

Fraud, Corruption and Delays
There has also been an acknowledgement that fraud, delays, corruption, absentee contractors, ghost houses, shoddy workmanship and corruption around waiting lists are chronic impediments to the delivery of housing.

There are currently 800 government employees who have been found to be unlawful beneficiaries of housing subsidies – 120 of them at municipal level.

Over 90%, or about R12-billion, of the department’s budget for the financial year, was allocated to provincial governments for expenditure on housing delivery.

However, it will cost South Africa R1,3-billion, or 10% of this year’s budget, to rectify badly built Reconstruction and Development Programme (RDP) houses.

The state of affairs stems from questionable contracts and tenders approved by government officials and implemented by the private sector.

Processes are under way to have restrictions placed on contractors who have not delivered houses of an acceptable standard. Provincial departments have been advised that they must make a clear legal demand for outstanding work, so that the restriction process can be initiated.

Five members of the legal fraternity have already been struck from the roll for corrupt activities associated with housing and the DHS is hot on the heels of identified companies involved in nefarious activities.

Damning AG Report
In 2006, the Auditor General published a damning audit report on subsidies for the period January 1, 1994, to March 31, 2004, revealing that there were 3,8% exceptions. These potential irregularities required the forensic investigation of 53 426 subsidies amounting to R800-million.

According to the report, which was com- missioned by the DHS, about 85% of sampled government employees (2 359) received irregular subsidies.

The report propelled the DHS to enlist the services of the Special Investigation Unit (SIU) as a way of targeting housing subsidy fraud.

Further, former DHS director-general Itumeleng Kotsoane said last year that the department continued to be pained by the impact of the contractors’ activities, as they left many poor people in shoddy and low-quality houses.

“We will find those contractors, prosecute them and ensure that they return those funds to the State. “We will be even harsher on government officials who assist contractors in their fraudulent activities,” warned Kotsoane.

He vowed that the department would root out fraud and corruption.

The SIU and the DHS have a service level agreement on subsidies from April 1, 2007, to March 31, 2012, and for contracts from November 1, 2008, to March 31, 2012.

Among the challenges facing the DHS and cited by the unit are gaps in the processes and systems, and in the capability to prevent and detect fraud or corruption, as well as the need for a sound governance framework.

Combating Corruption
Responding to questions posed by Engineering News, Human Settlements Ministry special advisor Chris Vick says that the National Audit Task Team’s investigations have progressed well. During the four months since the team’s formation, several comprehensive investigations are said to be under way at both national and provincial level.

The SIU, which heads the National Audit Task Team, briefed Human Settlements MinMEC on its progress, in Durban, in mid-March, where provincial Human Settlements’ MECs committed their departments to full cooperation in identifying and rooting out corruption.

(A MinMEC is a forum where a national Minister and MECs with similar sectoral responsibilities coordinate their activities.)

At the same MinMEC, MECs were briefed by the SIU on the various steps that had to be followed to ‘blacklist’ or restrict contractors found guilty of wrongdoing.

“It is an intensive process, and one which requires strict adherence to timelines and processes in relation to the procurement process. But the complexity of the process will not deter the drive to ensure that we clean out dodgy contractors and prevent them from doing business with Human Settlements in future,” affirms Vick.

He reiterates that the Ministry takes the anticorruption message in the President’s State of the Nation address seriously. “In line with the call made at the last meeting of the African National Congress National Executive Committee, there must be no doubt that the Ministry is totally committed to ensuring we turn the corner when it comes to dealing with corruption.

“It is important to note that the [work of the] Task Team is both a punitive and corrective process. It is punitive in the sense that it tracks down and punishes wrongdoers – whether they are public servants or private contractors. “It is corrective in that it recommends steps that should be taken to close loopholes in the housing delivery process, and which will help to eliminate fraud.”

The SIU says that, since the inception of the investigation, some of the key challenges in the initiative relate to systems and processes that do not support the effective delivery of low-income housing.

Systemic Gaps
These systemic gaps enable the abuse of the low-income housing subsidy scheme and compound the problem of lack of accountability on the part of contractors.

The cases under investigation date as far back as 1994, making it difficult to trace witnesses, which has a direct impact on the success of the investigations.

The vast geographical area that needs to be covered by this investigation and the time-scale in which results must be achieved have warranted a phased approach with greater focus more recently on prioritised contracts.

SIU head Willie Hofmeyr tells Engineering News that the investigation has certainly created a greater awareness among DHS officials and contractors, as well as the public at large, as to the consequences of unlawful or irregular conduct.

“We are convinced that it has assisted in promoting a culture of legal compliance in the public sector especially,” affirms Hofmeyr.

He adds that a total of 924 officials have been arrested and placed before court. About 1 606 officials have signed acknowledgements of debt totalling more than R21-million to repay the subsidies they were receiving fraudulently, while 971 officials have been referred for disciplinary action. This investigation has been finalised, with the exception of 63 court cases pending.

To date, the SIU has recovered more than R37-million and the target for the 2009/10 financial year is R10-million, which has been exceeded with recoveries amounting to just over R13-million.

Hofmeyr states that a lack of accountability structures remains a critical gap in the department’s systems and processes and a lack of proper compliance with respect to the legislative framework that governs these poses a potential risk.

“A lack of suitable capacity and skills to effectively supervise and monitor systems and processes within the department makes it more vulnerable to fraud and corruption,” he says, adding that the department has made clear pro-gress in ensuring that it improves its corporate governance at all levels, especially in contracts governing agreements with third parties.

According to Hofmeyr, the department has made considerable progress, but it is clear that there is much to be done before one can say that it is winning the fight.

“The Minister has made it quite clear that all allegations of fraud and corruption will be investigated, and those found guilty will be subjected to the full penalty as set out in law. This forms a central pillar in the department’s zero tolerance approach towards any and all criminal behaviour.”

He warns that the DHS needs to improve compliance with the legislative framework that governs its work and should also make legislative amendments, where necessary, to improve accountability.

Hofmeyr notes that training and develop- ment must be provided to staff to upskill them so that they can better perform their duties. Some provinces are dealing with staffing shortages, and increased capacity will assist them. Where necessary, the department must employ suitably qualified professionals in areas that require specific expertise.

Seven syndicates are also currently under investigation for selling RDP houses in various parts of the country, and, as a result of the National Audit Task Team’s investigations, two housing department officials in KwaZulu-Natal were arrested this month for selling State-owned houses.

The Task Team recently completed what it calls ‘walk-through audits’ in all nine provinces, looking specifically at the abuse of low-income housing projects by both public officials and private contractors – whether through abuse of the tender process, being complicit in nondelivery or in overpaying contractors.

This process has involved an assessment by the SIU of more than 9 000 housing contracts concluded between 1994 and 2007. As a result of this initial scan, the SIU has already been able to identify the top ten ‘dodgy’ contracts in each of the nine provinces, and has teams working around the clock in each province to bring the culprits to book.

The SIU has nullified a number of significant housing contracts, which it describes as “problematic”. Fully fledged investigative teams are now focused on two particular problematic contractors, who have worked in a number of provinces, and detailed reports are expected on these soon. Arrests and civil action to recover monies cannot be ruled out.

“In terms of corrective action, the SIU submitted a report, early this year, which made several far-reaching proposals on how to close loopholes and prevent fraud from happening in the future. These proposals are currently being studied by the national department and by provinces, and we expect they will form part of a general tightening up of procedures in the coming months,” notes Vick.

He points out that, although investigations are intensive and time consuming, and the Task Team has only been in place for four months, it has made significant progress in meeting Human Settlements Minister Tokyo Sexwale’s call for a thorough process which ensures that there is no place to hide for those involved in fleecing the poor by abusing the housing delivery process.

This is important for another reason as, despite the barriers, government sees low- cost housing as a potential area of economic development and job creation.

Indeed, the process of delivery is labour intensive, does not require a high level of skills and has a low import content.

Employment in low-cost housing is informal in nature. Considering that the majority of South Africans are unskilled and that most South Africans survive through informal employment makes the contribution of low-cost housing to the entire labour market more important.

Increasing employment of local communities as a result of housing delivery triggers the demand in local businesses and enables skills development. The economic impact of investment in low-cost housing is expected to be higher than that of investment made in upmarket housing.

But, unless the tag of corruption is dealt with decisively, these economic benefits will continue to be seriously undermined.

Edited by: Martin Zhuwakinyu

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