R2bn housing scandal
R2bn housing scandal
FRAUD and corruption by developers in collusion with housing department officials are among the key factors for the collapse of hundreds of low-cost housing projects throughout the country.
As a result, the government is now spending more than R2 billion to refinance the completion of the low-cost houses that were abandoned by unscrupulous developers across the country since the dawn of democracy.
The problem has its roots in massive fraud scams by developers who colluded with some of the country’s housing department officials to siphon off millions of rands for work not done.
Across the country, developers left swathes of foundation slabs or mere toilets while others built houses, but could not put on the roofs as they feverishly guarded their profits. In some cases, houses were never built, but the developers were paid. This meant that the rural poor lived for prolonged periods in rickety shacks and corrugated iron houses.
Other common problems in several provinces were shoddy workmanship and rising inflation – especially where projects took longer to complete and prices for building materials skyrocketed.
This comes as provinces race against time to ensure that all the incomplete houses were finished before a 2008 deadline set by Housing Minister Lindiwe Sisulu.
Several documents in the possession of City Press show that developers in the nine provinces claim the non-completion of low-cost houses was caused by several problems, including unresolved land issues and delayed environmental impact assessment studies on sites earmarked for government’s low-cost houses.
But a common concern among developers was the claim that the profit margins in the RDP housing construction were very low.
But government dismissed the complaints. It said tenders were allocated based on submissions by developers and the low-cost housing subsidy had been increased annually to cater for inflation.
Government said there was the discernible problem of a propensity by developers to buy luxury items before they could determine the profits they would make. This resulted in a shortfall.
“We think the problem is that some of the developers are irresponsible in using the money . . . Some use the money they should buy material with or pay workers to buy luxury cars and houses. They forget they have a responsibility to finish the project,” said Ndivhuwo Mabaya, national housing department spokesperson.
Government is now forced to re-finance some of the projects as attempts to get the developers to pay took too long.
In the Eastern Cape, the provincial housing department has allocated another R311 million to unblock 183 housing projects that were either incomplete due to fraud and corruption or escalations and other “implementation-related issues such as land invasions, sudden inaccessibility of construction sites due to roads and bridges washed away”.
But Limpopo is the hardest hit with a whopping 40 000 incomplete houses that have to be finished at a cost of R1 billion in three years.
The Northern Cape’s bill stands at R104 million for 4 300 units, while the Western Cape has allocated R20.9 million this year to complete 1 902 houses.
The lowest bill is the Free State’s. The province has put aside R13 million to finish 909 units.
Phumlani Mndolomba of the Eastern Cape Housing Department said the province’s model of building houses – using the People’s Housing Delivery vehicle – resulted in a slow pace in completing houses.
“A second major factor . . . is that the province elected to build a 40m² house using a conditional grant allowance which was based on a 30m² unit as the national norm,” Mndolomba said.
The province has already spent R211 million to finish 134 of the 183 incomplete housing projects and has allocated another R100 million to finalise the remaining 49 projects in this financial year.
Limpopo housing spokesperson Clayson Monyela said there were a total of 40 000 incomplete houses. About 8 500 of these would be completed by the end of this financial year at a cost of R331 million. Another R780 million will be used in the next three years to finish the remaining houses.
Monyela said government had now reviewed the tender contracts and included penalties for shoddy work and lock-in clauses to ensure developers finish their projects.
Bronwyn Thomas, provincial department spokesperson, said that in the Northern Cape, most of the housing projects were halted between 2000 and 2001 when the subsidy allocations did not keep up with rising building costs.
In the past three years, the department had completed 2 100 houses and hoped to finish the remainder by March next year.
In North West, price increases of material supply, unresolved land issues and the delay in processing approvals for environmental impact studies resulted in about 40 projects being halted.
Provincial spokesperson Lesiba Kgwele said a subsidy policy had been approved that allowed the department to "increase the subsidy amount to enable developers to complete the projects while land-related matters are ?being resolved".
Two years ago, the Mpumalanga housing department froze new housing projects and started a process to finish a total of 17 000 units abandoned by unscrupulous developers.
The province was also forced to destroy a R9.5 million housing project after it was found that the developer had used "weak bricks" to build the 427 units. But in Premier Thabang Makwetla's 2006 state of the province address, he ?announced a R234 million budget to deal with these units.
In KwaZulu-Natal, 80 low-cost housing projects were halted as a result of "social and political" ?issues.
Spokesperson Lennox ?Mabaso could not provide the number of units to be refinanced nor the costs involved.
Gauteng spokesperson Mongezi Mnyani could only say that the department had commissioned a study to list the number of un?occupied homes.
Mabaya said in instances where houses were of poor quality or where developers had disappeared after being paid, government would track the developers and recover the money.
Mabaya said the Special Investigating Unit in the National Prosecuting Authority had been mandated to investigate all forms of fraud and corruption since the low-cost housing programme had been introduced.
FRAUD and corruption by developers in collusion with housing department officials are among the key factors for the collapse of hundreds of low-cost housing projects throughout the country.
As a result, the government is now spending more than R2 billion to refinance the completion of the low-cost houses that were abandoned by unscrupulous developers across the country since the dawn of democracy.
The problem has its roots in massive fraud scams by developers who colluded with some of the country’s housing department officials to siphon off millions of rands for work not done.
Across the country, developers left swathes of foundation slabs or mere toilets while others built houses, but could not put on the roofs as they feverishly guarded their profits. In some cases, houses were never built, but the developers were paid. This meant that the rural poor lived for prolonged periods in rickety shacks and corrugated iron houses.
Other common problems in several provinces were shoddy workmanship and rising inflation – especially where projects took longer to complete and prices for building materials skyrocketed.
This comes as provinces race against time to ensure that all the incomplete houses were finished before a 2008 deadline set by Housing Minister Lindiwe Sisulu.
Several documents in the possession of City Press show that developers in the nine provinces claim the non-completion of low-cost houses was caused by several problems, including unresolved land issues and delayed environmental impact assessment studies on sites earmarked for government’s low-cost houses.
But a common concern among developers was the claim that the profit margins in the RDP housing construction were very low.
But government dismissed the complaints. It said tenders were allocated based on submissions by developers and the low-cost housing subsidy had been increased annually to cater for inflation.
Government said there was the discernible problem of a propensity by developers to buy luxury items before they could determine the profits they would make. This resulted in a shortfall.
“We think the problem is that some of the developers are irresponsible in using the money . . . Some use the money they should buy material with or pay workers to buy luxury cars and houses. They forget they have a responsibility to finish the project,” said Ndivhuwo Mabaya, national housing department spokesperson.
Government is now forced to re-finance some of the projects as attempts to get the developers to pay took too long.
In the Eastern Cape, the provincial housing department has allocated another R311 million to unblock 183 housing projects that were either incomplete due to fraud and corruption or escalations and other “implementation-related issues such as land invasions, sudden inaccessibility of construction sites due to roads and bridges washed away”.
But Limpopo is the hardest hit with a whopping 40 000 incomplete houses that have to be finished at a cost of R1 billion in three years.
The Northern Cape’s bill stands at R104 million for 4 300 units, while the Western Cape has allocated R20.9 million this year to complete 1 902 houses.
The lowest bill is the Free State’s. The province has put aside R13 million to finish 909 units.
Phumlani Mndolomba of the Eastern Cape Housing Department said the province’s model of building houses – using the People’s Housing Delivery vehicle – resulted in a slow pace in completing houses.
“A second major factor . . . is that the province elected to build a 40m² house using a conditional grant allowance which was based on a 30m² unit as the national norm,” Mndolomba said.
The province has already spent R211 million to finish 134 of the 183 incomplete housing projects and has allocated another R100 million to finalise the remaining 49 projects in this financial year.
Limpopo housing spokesperson Clayson Monyela said there were a total of 40 000 incomplete houses. About 8 500 of these would be completed by the end of this financial year at a cost of R331 million. Another R780 million will be used in the next three years to finish the remaining houses.
Monyela said government had now reviewed the tender contracts and included penalties for shoddy work and lock-in clauses to ensure developers finish their projects.
Bronwyn Thomas, provincial department spokesperson, said that in the Northern Cape, most of the housing projects were halted between 2000 and 2001 when the subsidy allocations did not keep up with rising building costs.
In the past three years, the department had completed 2 100 houses and hoped to finish the remainder by March next year.
In North West, price increases of material supply, unresolved land issues and the delay in processing approvals for environmental impact studies resulted in about 40 projects being halted.
Provincial spokesperson Lesiba Kgwele said a subsidy policy had been approved that allowed the department to "increase the subsidy amount to enable developers to complete the projects while land-related matters are ?being resolved".
Two years ago, the Mpumalanga housing department froze new housing projects and started a process to finish a total of 17 000 units abandoned by unscrupulous developers.
The province was also forced to destroy a R9.5 million housing project after it was found that the developer had used "weak bricks" to build the 427 units. But in Premier Thabang Makwetla's 2006 state of the province address, he ?announced a R234 million budget to deal with these units.
In KwaZulu-Natal, 80 low-cost housing projects were halted as a result of "social and political" ?issues.
Spokesperson Lennox ?Mabaso could not provide the number of units to be refinanced nor the costs involved.
Gauteng spokesperson Mongezi Mnyani could only say that the department had commissioned a study to list the number of un?occupied homes.
Mabaya said in instances where houses were of poor quality or where developers had disappeared after being paid, government would track the developers and recover the money.
Mabaya said the Special Investigating Unit in the National Prosecuting Authority had been mandated to investigate all forms of fraud and corruption since the low-cost housing programme had been introduced.
