SUBMISSION TO THE PORTFOLIO COMMITTEE ON HUMAN
SETTLEMENTS
RURAL INTERVENTION:
INDIVIDUAL RURAL HOUSING SUBSIDY VOUCHER
PROGRAMME:
1.
Purpose:
The purpose of this submission is to inform the Committee on the Programme, to highlight the risks
identified that will be associated with the implementation of the Programme and to indicate the current
status of the programme.
2.
Background
The Voucher Programme was designed as a joint initiative by the Department and the Rural Housing
Loan Fund (RHLF). The Programme was approved by MINMEC during the meeting held on 21
August 2009 in East London. The Committe also authorisation the development and finalisation of
pro-forma legal agreements to be concluded between all role players. The Committee provided a final
opportunity to the South African Local Government Association to comment on the programme.
Subsequently the Department, in collaborastion with thre RHLF, identified the possible risks
associated with the implemnetation of the Programme and the RHLF developed strategies to mittigate
the possible effects of the these risks.
The Individual Rural Housing Subsidy Voucher Programme has been developed as an alternative of
last resort to augment housing choice in rural areas where project-based delivery is not feasible.
The Individual Rural Housing Subsidy Voucher Programme is based on the principle of ownerbuilders who take charge of building of their own homes with subsidy support. Eligible rural residents
residing on communally “owned” land who enjoy either old-order land tenure rights protected in terms
of the provisions of the Interim Protection of Land Rights Act, or new-order land tenure rights in terms
of the Community Land Rights Act (CLaRA), will have the option to claim their housing subsidy on
an individual basis in the form of cash vouchers that can be used for approved building materials, offgrid basic services and a limited proportion of necessary labour.
The RHLF was also approved as the lead implementation agent for the Programme and will therefore
act as the official Subsidy Administrator and Financial Agent for the Programme.
RHLF will organize the beneficiary application process, the accredited materials merchant network
and administer the progress payment system. RHLF also will ensure the use of approved building
designs, manage the housing impact monitoring and provide reporting and accountability to
stakeholders.
Most of the direct beneficiary contact, the ongoing liaison with materials merchants and the
community outreach efforts will be subcontracted by the RHLF to voucher intermediaries. Initially,
the role of voucher intermediary will be assumed by retail housing lenders currently working for RHLF
in its traditional incremental housing finance activities. Once the programme implementation
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progresses to the national implementation phase, the voucher intermediary service could be extended
to other qualified non-financial institutions and community organisations.
The main benefit of the Programme is the empowerment of rural households who will be awarded the
means to actively participate in the construction of their own houses and shape their families’ future.
Owner-builders will often employ local artisans to assist them with specialised services such as
plumbing, electricity, roof trusses, etc. The use of local skilled labour invigorates economic activity in
the area and creates income and employment within the community.
Building activities through the application of the Programme can be linked to existing economic
development and cooperative support programmes. Once voucher disbursements reach significant
scale, it is expected that the creation of community construction and manufacturing cooperatives will
be stimulated, for example brick making and door installation ventures, roof truss manufacturing,
window frames construction etc., subject to quality assurance certification.
3.
Institutional arrangements for the Programme
The initial implementation plan and risk mitigating strategy developed by the RHLF were considered
by the Departmental and the Department expressed its concerns regarding the cost indicators tabled.
However, the Department came to the conclusion that the RHLF is the most suitable and currently the
only implementing agent that exist that can undertake the Programme implementation. The RHLF has
established rural funding provision networks, experience and processes. The RHLF is currently
furthermore the only institution, other than provinces and municipalities, that is in position to
administer public sector funding. The capacity of provinces and municipalities is already exploited to
the maximum and the Programme implementation will require substantial “deed rural” networking and
presence. The Programme was furthermore, from the outset, conceptualised against the backdrop of
the fact that the RHLF will be acting as the implementing agent as provinces and municipalities will
not be able to assume responsibility for the tasks required by the Programme.
4.
Discussion on the Programme risks
A publicly funded subsidy voucher system is naturally exposed to a number of very significant risks.
These can broadly be summarized in three risk groups:
a) Possible funding misappropriation, i.e. funding not reaching beneficiary households or being
allocated to ineligible households.
b) Possible inadequate housing outcomes: transport losses, materials compromised by inadequate
storage, inferior workmanship, incomplete dwellings, unsuitable building sites and resulting
structural damage.
c) Inadequate or inefficient administrative processes and lack of coordination among
implementation agents leading to delays and frustration of beneficiary expectations.
The risk groups and individual component risks have been identified and mitigation strategies have
been developed in a risk planning exercise conducted by the RHLF. Generally, the risk of
misappropriation of funds will be mitigated by RHLF through the proposed payment of accredited
building materials merchants directly instead of releasing funds up front to financial agents for this
purpose.
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Safeguards against inadequate housing outcomes include (1) the provision of NHBRC-approved
standard building designs with fully specified bills of quantities that must be obtainable within the
Voucher quantum and (2) the system of regular building site inspections and progress payments.
The issue of potential failure or inefficiency of administrative processes is addressed by using RHLF’s
tested retail lender and building materials merchant network as the initial front-end infrastructure
serving the Voucher applicants.
However, the single most important risk mitigation element is to implement the Voucher scheme in a
phased approach, starting with a limited pilot programme in a small number of eligible rural
communities. Starting small is critical, because many details of program processes and resource
requirements are not knowable ex ante and should be discovered and tested during a low-volume /
low-risk pilot. The specifics often depend on the actual beneficiary response, technical feasibility, and
the willingness and ability of stakeholders to collaborate etc. The pilot phase also allows the
institution to gradually build its own organisational capacity and ensure readiness of the voucher
intermediaries. The pilot phase can largely be accommodated with existing and approved resources,
which avoids premature theoretical debates about long-term budget requirements for the Voucher
Scheme on a nationwide scale.
It was furthermore agreed that in respect of the subsequent national roll-out of the Programme, a
phased approach should also be followed through clusters of eligible communities, as a way to manage
the impact on provincial subsidy budgets and the implementation management capacity and thus avoid
frustrating wait-list experiences for beneficiaries.
5.
Implementation of the Programme
As indicated, the RHLF will act both as Subsidy Administrator and Financial Agent and will be
entitled to the 2 x 2.5% statutory fees calculated on the gross cost of the voucher awards. RHLF will
then separately sub-contract with service providers for consulting and subsidy intermediary services
for the pilot phase as well as for the following national roll-out. However the RHLF indicated that it
will require at least R8 million additional funds in year one of the implementation phase. In addition,
it will required an estimated additional amount of R 25 million, over and above the 5% subsidy based
fee, for a three year MTEF period.
Based on the financial implications tabled by the RHLF, Human Settlements: MINMEC decided to
defer the implementation of the Programme until the investigations and possible establishment of the
Human Settlements Development Finance institution have been finalised. This investigations are in
process.
DEPARTMENT OF HUMAN SETTLEMENTS
August 2010
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