SEVEN YEARS TOO LATE FOR A SCANDAL
Statement on the imaginary “R2 bn Housing Scandal” reported by the City Press Newspaper on Sunday July 22, 2007.
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The Minister of Housing and all housing MECs have expressed their shock at the headline of the Sunday newspaper City Press which was written to attract readers to a R2 Billion scandal they uncovered, when in fact this is a story of projects that were stopped seven years ago. A number of newspapers reported on this matter at the time. Over the last seven years, the government has been dealing with the projects that emanated from the initial stock, constructed by inexperienced contractors. What has happened over the past two years is that the Minister has insisted that these projects should be finalised by March 2008. It is therefore a scandal that was unearthed and concluded seven years ago and government took a stand that it would not accept this shoddy work.
The facts are that the newly elected Government in 1994 introduced a housing subsidy scheme with a vision to build 1 million houses in 10 years. Many provinces and municipalities did not have the capacity not only to project manage but to administer the funds transferred, as a result some of the projects were left incomplete because developers defrauded Government and some cases due to lack of skills and capacity to manage implementation of major projects by various sphere of Government.
By 2002, most of these projects were stopped by the government, so that they can be rectified. By 2004 the department instituted an enquiry into all blocked projects to understand the scale and impact on government. The scale has now been put in monitory terms and obviously the costs have increased inter alia due to the rising cost of materials. Some projects have legal implications, i.e. where fraud was committed and these are before the courts. Where there are no legal implications, the Minister has insisted that these be prioritised so that even as we build new stock, that which was stopped in 2002 is completed.
A breakthrough was made in 2004, when the Minister of Housing and all Housing MECs commissioned the National Home Builder Registration Council, (NHBRC) a Government agency tasked with ensuring quality of each house in the country to audit and give a final total of all incomplete projects up to 2004 with a view to ring fence all the projects, and complete them by 2008.
The NHBRC and all the provinces identified among other causes of projects being left incomplete are lack of project management skills in the early 90s, fraud and corruption by some developers in collusion with Government officials and community conflicts in some provinces. They also found that some of the funds were not lost as they were directed to deal with floods and new emergencies.
On completion of that Government initiated audit, the Minister and all MECs of housing approved in early 2005, guidelines to be used by the private sector and Municipalities and Provinces to complete all this projects by March 2008. Resources were allocated to fast track the completion. On the other hand Government initiated a process to recover the funds from those developers who vanished with some of the funds. The President has signed a national proclamation for a full investigation into fraud and corruption in the Government housing scheme. Working with other law enforcement agencies a number of developers are being investigated, some of them have been to court and the due process of law will take place until funds are recovered. Where officials have been involved in fraud, we will finalise investigations, see if we can recover the funds and where necessary criminal charges will be laid against them.
What the City Press describes as work of a highly investigative team of journalists is a sensationalized report of the work the Minister and MECs of housing have been working hard to finalise since 2004. The Department has learnt a lot of lessons from the 1994 - 2004. Our quality assurance systems have been improved, all Municipalities and Provinces, supported by the National Department and specialists project management companies have developed new ways of monitoring implementation and ensuring that South Africa will never have a history of incomplete projects again.
On quality of Government subsidized houses, the NHBRC now enrolls all Government subsidized projects; it will ensure that the highest quality is delivered, the NHBRC warranty is now applied on Government subsidy housing where necessary.
It must be emphasized that the Minister of Housing and MECs initiated the process to audit all incomplete projects, committed resources, started a process to recover funds from developers, and will finalise all incomplete project by March 2008. No new incomplete project has been identified since 2004, our stringent project management structures and systems will ensure that the word “blocked or incomplete” housing project never exist in housing delivery.
This is a historical problem and these projects were stopped in 2002 for legitimate reasons. It is a major headache for the government, to be dealing with this in its third term in government. If proper legislation was in place from the start, many of these challenges could have been avoided. We now have the necessary legislation in place and the NHBRC was commissioned to establish whether we can revive the blocked projects. If approval is granted by the NHBRC, Thubelisha has been appointed, in terms of its new mandate to see to the successful unblocking of these projects.
Issued by:
Ndivhuwo Mabaya
Head of Media Services
Date: July 23, 2007
Contact details: 083 645 7838 or ndivhuwo@housing.gov.za