Cape Town’s disastrous N2 Gateway project began without a funded budget and was starved of agreed funding by the National Housing Department, according to a confidential report by independent forensic auditors, which was leaked to the Mail & Guardian.
Envisaged as a model solution to South Africa’s housing backlog, the Gateway project was to be delivered by the three spheres of government, which, in the Western Cape, were all run by the ANC at the time.
In January 2005 Lindiwe Sisulu, then minister of housing, publicly declared that 22 000 houses would be built in six months. Two years later the project had delivered only 821 units.
The new DA-led Cape Town council asked independent forensic auditors SizweNtsaluba Forensics to conduct an investigation and the company’s report was handed to the auditor general for use in his special audit of the N2 Gateway. The project is being scrutinised by the standing committee on public accounts (Scopa).
The auditors found that the National Housing Department failed to facilitate funding for the project and the Western Cape government had to “reprioritise” its funding to help meet the shortfall.
It provided about R294,6-million — far below the R2,3-billion budget.
“Numerous attempts were made by the City to procure funding commitment from the National Department of Housing, but to no avail,” says the report. “This is contrary to the stipulation of the MOU [memorandum of understanding], which required the National Department of Housing and province to facilitate funding.”
The project made use of funding from the upgrading of informal settlement programme (UISP), the housing subsidy and the emergency housing programme.
While the UISP funded a portion of the units built, the auditors found no evidence that beneficiaries were identified or that the intended beneficiary community qualified for housing subsidies.
The MOU stipulated that the National Housing Department was required to ensure that the project complied with national legislation, to facilitate policy and to channel financial support to the city.
Mziwonke Dlabantu, deputy director general of the Department of Housing, said the Gateway project was conceived by the Cape Town council before Sisulu became housing minister.
When the MOU was signed it was recognised that the National Department of Housing had already allocated funding to the province for housing development, Dlabantu said, which included some precincts seen as part of the Gateway project.
“The role of the national department was then to solicit funding, over and above that which could be allocated by the province from the funds which the national department had already allocated to it in terms of the Division of Revenue Act,” he said.
“As the business plan was developed, discussions with treasury on the project were then initiated and these took place until allocations were made in subsequent years.”
The government’s “breaking-new-ground” designs for the housing specified that units should be no smaller than 40m2. The price hike made them unaffordable by backyarders and shack-dwellers who had been moved off land to make way for the project.
Under the existing subsidy, of about R36 900 a unit, there was a national government-funding shortfall of R44 000 a unit.
SizweNtsaluba found that a statutory separate operating account (SOA) at the City was used as a funding mechanism for the first phase of the project. The account is subject to statutory audit, but the report recommends that internal procedures and policies be developed to ensure “transparency and accountability” in the use of its funds.
“The City was responsible for the SOA and the only requirement for the use of funds from the SOA is that the expenditure is used for an approved housing project,” the report states. “The SOA does not form part of the council’s budget and can be used for unplanned expenditure without conforming to the City’s budget processes.”
Last month hundreds of angry Gateway residents marched on the Western Cape government to complain about structural defects and plumbing problems.
Residents also complained that they were originally told they would be renting with an option to buy, but that the purchase option seemed to have
disappeared.
Sisulu has moved up the ministerial hierarchy, becoming minister of defence in President Jacob Zuma’s Cabinet.