[DEBATE] : (Fwd) Remembering Slovo

[Patrick Bond]

(Lest we forget... "In honour of the role that he played in his short
tenure as Minister of Housing, the SACP will persuade our government to
set up the Joe Slovo Housing Scheme to finance the housing of the poor
and accelerate access to credit by those who are denied by the barbaric
capitalist finance institutions. We will be guided by his hatred for
Capitalism in all our endeavors to roll back the current accumulation
path which has prioritized the logic of the capitalist market over the
developmental objectives of our revolution." Far below, find an article
which recalls how Slovo's hatred of capitalism translated into housing
policy. In September 2000, Slovo's housing policy was found to be
unconstitutional in the Grootboom judgment - for ignoring the poor.)


SACP Media Release, 6 January 2008


13th Anniversary of the passing away of Cde Joe Slovo


Today, January 6th 2008 marks the 13th anniversary of the passing away
of Cde Joe Slovo, the former National Chairperson and General Secretary
of the SACP, a former commander of uMkhonto we Sizwe and a leading cadre
who served in both the NWC and NEC of the ANC.

We honour this hero of our struggle and we pay homage to his
contribution in the struggle for the liberation of our people.

We are this year commemorating Cde Slovo’s anniversary, in the wake of a
historic ANC National Conference, whose resolutions impel us to
accelerate economic transformation of our country for the benefit of the
overwhelming majority of our people. This historic conference has also
elected a leadership instructed by delegates to rebuild the ANC as a
campaigning organization, rooted amongst the mass of the people of our
country, matters that were very close to the heart of Cde Joe Slovo.

We commemorate his death against a background of a challenging year
ahead of us as the SACP specifically, and the working class and the poor
of our country generally. The SACP, in the wake of the ANC’s 52nd
National Conference has to further strengthen its own structures, in
order to ensure that the political capacity of the working class as the
leading motive force of our revolution is drastically strengthened.
There can be no better tribute to Cde Joe Slovo than to ensure that the
working class remains, in practice and through struggle, at the head of
the national democratic revolution, as our direct route to socialism.

His commitment to working class struggles and his selfless character
will continue to guide us throughout this year as we see through the
challenges of the year.

His versatility will be with us as we take forward the campaign on an
efficient, accessible public health system and consolidate all our
campaigns on the Financial Sector, land and agrarian reform, public
transport and building sustainable livelihoods. It will be his
revolutionary morale and commitment that will be at the back of our mind
as we build active, safe and healthy communities - our 2008 Programme of
Action!

Together with our Allies, we will deepen the campaign against
corruption, patronage and the many ills that are threatening to erode
some of the basic values of our revolution. Cde Slovo’s life and work
was exemplary in fighting to defend the dearest values of our movement.

He understood that our struggle for Socialism, and ultimately communism,
is not opposed to the construction of a united, democratic, non-racial
and non-sexist South Africa, but that these were important for socialism
to triumph. At not stage has there ever been a fundamental distinction
between these tasks of the National Liberation movement and that of the
socialist forces for socialism. This has always been the basis for a
common national democratic programme of our revolutionary alliance.

In honour of the role that he played in his short tenure as Minister of
Housing, the SACP will persuade our government to set up the Joe Slovo
Housing Scheme to finance the housing of the poor and accelerate access
to credit by those who are denied by the barbaric capitalist finance
institutions.

We will be guided by his hatred for Capitalism in all our endeavors to
roll back the current accumulation path which has prioritized the logic
of the capitalist market over the developmental objectives of our
revolution.

On this occasion, we salute and honour the memory and sacrifices of Cde
Slovo!

Issued by the SACP

Contact: Malesela Maleka


YCLSA Media Release, 6 January 2008


YCL remembers Joe Slovo!


The Young Communist League commemorates the 13th anniversary of the
untimely departure of one of its own products [YCL member] and the late
National Chairperson of the South African Communist Party [SACP], Cde
Joe Slovo.

Slovo was a paragon and a thinker that reigns supreme in the galaxy of
many working class and Communists heroes that the ANC – SACP Alliance
has ever produced. His untimely departure robbed our country one of its
leading cadres and agents in the reconstruction and development of our
nascent democratic state we now all belong to.

Slovo was a selfless and dedicated Communist, a fighter par excellence
for the working class and the poor. He knew that a better life for our
people meant three basic things, namely shelter, affordable health care,
quality education and quality life. In the words of our former President
Nelson Mandela, Slovo was not only a theoretician, but a pragmatist in
our concerted and revolutionary efforts of changing the lives of our
people for the better, “When the working people start enjoying, as a
right, a roof over their heads, affordable medical care, quality
education and a rising standard of living, they will be right to say
Comrade Joe was a chief architect who helped lay the foundation for a
better life”.

Over the past 13 years of our nascent democratic dispensation the
majority of our people, especially the youth have not benefited from the
freedom that Slovo had dedicated to build. Instead, big business has
benefited a lot living the majority of our people in the gallows of
poverty. Today, 70% young people have joined the unemployment queue; 51%
of those live below the poverty line; only 20% of youth are furthering
their studies and 55% of the prison population falls under the youth
category. The challenge is to empower the youth with education, skills
and opportunities, and not through patronage!

As the Young Communist League [Ufasimba] and the youth of South Africa
in general we commit ourselves that the freedom and the democracy that
Joe Slovo fought and helped to build benefits the vast majority of our
people, especially the working class and the poor. We will mobilise
young people across the length and breadth of our country to access
education and go to school to acquire knowledge as part of building and
defending the revolutionary gains ushered by the 1994 democratic
breakthrough.

We further call on government and the Department of Education [DoE] to
genuinely honour Joe Slovo in a befitting manner by making sure that the
‘doors of learning and teaching are opened’ without any financial
impingements.

Forward to the Joe Slovo Right to Learn Campaign!

The YCL together with the components of the Education Alliance, namely
SADTU, COSAS, ANC YL and SASCO will be during the course of this week
launch the Joe Slovo Right to Learn Campaign.

The purpose of the campaign will be to draw together all actors in
education to ensure that we have a smooth school re – opening programme.
This will further accord administrators in schools to ensure there is
effective and speedy registration, proper information for parents and
learners who cannot afford and access learning for all. A detailed
programme will be unveiled during the week. The YCL will continue to
strive for free, quality and compulsory education for all.

Issued by Young Communist League

Castro Ngobese
National Spokesperson


***


“The Failure of Housing Policy in Post-Apartheid South Africa”

by Patrick Bond and Angela Tait

Urban Forum 8, 1 (1997).

Introduction

There are enormous implications to the failure of what can be accurately
described as a “market-centered” approach to housing policy for public
health, the environment, safety and security, the welfare of women and
children, education, public hazards, urban planning, the labor market,
and related economic sectors (building materials, manufacturing, etc).
The failure of housing policy is also a cause of growing political
alienation, which could see government undermined in coming elections
and in its attempts to forge unity and reconciliation.
   For these and many other reasons, it is critical to revisit housing
policy. Although it is true that the so-called “incremental”
policy--which derived directly from the National Housing Forum (which in
turn was dominated by experts from the pro-business Urban
Foundation)--was initially endorsed by a popular hero of the liberation
struggle, the late Minister Joe Slovo, it is no secret that this
endorsement occurred during a period of “unrealistic expectations”: both
that robust, durable, job-creating economic growth would ensue, and that
reconciliation would be fully embraced by white business interests
(particularly bankers and developers). Such expectations were
subsequently dashed, as shown below, and by July 1995 a Business Day
journalist described the incremental approach as “remarkably like the
discredited site and service schemes advocated during the apartheid
era,” while at the same point Housing Minister Sankie Mthembi-Mahanyele
labeled the policy she had inherited “toilets-in-the-veld” (Business Day
21/7/95). (The Minister subsequently retracted her criticisms and
repeatedly provided assurances that the market-centered policy would not
be challenged.)
   In this context, the key policy documents--the Department of Housing’s
“Record of Understanding” with commercial banks, the Housing White Paper
(HWP), the proposed Housing Bill, and two reports by the Department of
Housing’s “Task Team on Short Term Housing Delivery” (also known as the
Ministerial Task Team)--together represent an uneven but sustained
official commitment to the market.i Beginning with the most recent
report, we consider the most important aspects of this policy, and
explore how the policy has failed on its own terms and in terms of the
mandate government was given to build one million houses within five years.
   The analysis we offer is different from that provided recently by most
other critics,ii who have largely focused on institutional shortcomings
(e.g., Tomlinson 1996),iii government’s failure to accurately understand
household-scale dynamics (e.g., Spiegel, Watson, and Wilkinson 1996),iv
the “top-down” character of the policy and delivery process (e.g., South
African Homeless People’s Federation 1995),v or the Department of
Housing’s perceived anti-urban bias (e.g, Crankshaw and Parnell 1996).vi
It strikes us instead that the most extreme problems that characterize
the housing policy adopted following the 1994 election are related to
its various market-centered features, and that an alternative based on
the Reconstruction and Development Program (RDP) would have solved many
of these.

Will Ministerial Task Team recommendations
make any difference?

In October 1996, the Ministerial Task Team released a document that,
according to the accompanying press release, is well “within the
framework of current housing policy” (as described originally in the HWP
and codified in the Housing Bill), yet that nevertheless “identifies the
need for a far greater and more proactive role for the state as being
essential to speed up the delivery process of affordable housing”
(Department of Housing 1996b). Given that the Task Team is headed by the
Department of Housing’s Director-General, it can be assumed that this
report represents official thinking about the way forward for housing
policy.
   But contrary to relatively shallow interpretations in the media (e.g,
Star 17/10/96), the Task Team’s policy proposals do not, in reality,
provide the means to truly empower the state--especially local
government--to deliver housing. In particular, the notion that
government has now adopted a state rental housing policy is extremely
misleading, given the methods and parameters that are being applied. In
reality, the rental policy appears to have been tacked onto existing
policy primarily as a response to the delivery crisis. Instead, as shown
below, the “new” housing policy amplifies many of the worst features of
the existing approach, of which at least six critical shortcomings
deserve mention at the outset.
  First, the central intention remains that the state gradually withdraws
entirely from housing provision.
  Second, there is still no attention to limited consumer
affordability--which remains the key problem preventing large-scale
market delivery of township housing--and there is still no increase in
the housing subsidy for those millions of South Africans who will be
unable to afford the products of proposed public-private “joint ventures.”
  Third, the proposed joint venture delivery mechanisms put large
corporate developers in the driver’s seat, and neither provide
sufficient new funding to build much-needed state and community capacity
so as to ensure meaningful partnerships, nor require developers to
construct inexpensive houses at the lower (approximately R20-30,000) end
of the affordability scale.
  Fourth, there is still no protection against “downward raiding” of
low-income subsidy beneficiaries by higher-income groups (even as this
phenomenon will become more important due to the promised improvement in
location of housing projects).
  Fifth, there are still no plans to creatively provide access to
state-owned land or to otherwise intervene to make more land available,
which would permit more of the subsidy to be spent on the actual house
and services.
  Sixth, likewise there is still no effort to intervene in the
construction and building materials markets notwithstanding severe
market imperfections.
   Various other features reflect government’s ongoing reliance upon a
market-centered approach, which was adopted in 1994 in spite of the
existence of what is generally considered the “people-driven”
alternative spelled out in the RDP.vii These include unnecessary
constraints on the quantity and quality of subsidies and extremely
generous incentives for banks. Together they help explain the failures
of the market-centered housing program to date.
   Following a critique of these components of market-centered housing
policy, we can consider the “new” strategies--the devolution of
responsibilities to local authorities without devolution of sufficient
resources, and increased incentives for developers--in more detail, and
ask whether they represent any real departure from the failed policy and
whether they will deliver the goods. Finally, some truly different
alternatives should be considered, particularly those that emanate from
the RDP. The contrast between such alternatives and the failed policy
(with its recent amendments) is clear, and will continue to provide
South Africa’s progressive labor and social movements with sufficient
confidence to demand that the debate on housing policy be reopened.

Problems internal to market-centered policy

To begin, it is important to contest conventional wisdom regarding the
financing of housing. As has often been remarked, housing policy is
premised on an overall understanding of “fiscal constraints,” which when
considered carefully in fact appears as a misunderstanding. Perhaps most
importantly, the maximum R15,000 subsidy (for those households with less
than R800 per month income) is not sufficient to build decent
accommodation; hence the policy requires beneficiaries to also gain
access to credit if they want a house (not merely a serviced site). The
reason for this, the HWP argues, is that “The required annual delivery
rate...., relatively high proportion of poor households and budgetary
constraints do not allow sufficient subsidy money per household to
enable the construction, at State expense, of a minimum standard
complete house for each household not able to afford such a house.”
    In reality, there is not a “fiscal constraint” to affordable housing
for all in South Africa. If we assume that a minimally decent house
costs approximately R30,000, and that--using National Housing Forum
calculations--the country’s income distribution requires an average of
50 percent subsidy for urban housing, conventional wisdom is easily
shown to be incorrect. The actual cost to the budget of meeting the RDP
goal of one million new low-income houses built over five years (an
average of 200,000 per year), at an average cost to the state of R15,000
per unit ‑‑ not including the other R15,000 per unit, which would come
from private sector resources via the national housing bank, to be
repaid at the market rate of interest ‑‑ would be just R3 billion per year.
    Are sufficient funds available to meet this need? Consistent with the
RDP, government’s goal for resource allocation (as confirmed in the RDP,
HWP and draft Urban Development Strategy) is to acquire 5 percent of the
total budget for housing by the year 1998, which would exceed R9
billion. This is obviously sufficient to meet not only the RDP goal, but
to go far beyond that goal, easily financing 350,000 houses per year by
1998.
   Even if income distributions are more skewed than the National Housing
Forum originally estimated, there remain sufficient funds budgeted for
the state to afford the required subsidies to achieve Affordable Housing
for All. Indeed, the 1995-96 budget alone contained more than R4 billion
for housing (although more than R2 billion of this was rolled over, as
was also the case in 1994-95, which again suggests that existing subsidy
amounts have been excessively stringent). The 1996-97 budget was
(including past rollovers) R4.6 billion. Simple mathematics shows the
inaccuracy of the fiscal constraint argument about capital costs.
  The argument that the subsidy is only the first step in an “incremental
housing” system that will ultimately generate “top structures” is
unrealistic given the lack of appropriate and affordable credit. The
incremental housing strategy is further undermined by the
likelihood--based on the Municipal Infrastructure Investment Framework
under consideration by the Department of Constitutional
Development--that future stands occupied by families earning under R800
per month will not include water-borne sewage or a reliable supply of
electricity. The draft Urban Development Strategy (a document released
in October 1995 which continued to reflect government thinking on
service provision through 1996viii) was based upon conventional
fiscal-constraint wisdom: “Relative to the needs, the level of resources
available from the Government is not sufficient to provide the necessary
basic infrastructure in municipal areas.” Yet in designing the
infrastructure framework, the Department of Constitutional Development
and its advisors (especially a World Bank team) had failed to factor in
the additional benefits--including public health, environment, and
macro- and micro-economic multipliers--gained from higher levels of
services, and hence overplayed the net capital cost to the fiscus of
providing high levels of infrastructure.ix
   Nor did government’s infrastructure design team heed the RDP in its
consideration of the recurrent (operating and maintenance) costs of
water, sanitation and electricity services (see Part 2 of this book). In
addition, the “upfront capital subsidy” approach to financing
incremental housing inherited from the late-apartheid era is far less
efficient than a flexible loan whose interest rate--a blend of a subsidy
and market-rate borrowings from, for example, pension funds (backed by a
state guarantee, as the RDP suggests)--could vary over time to reflect
changing borrower affordability.
   The fact that nearly all subsidies are geared to an individualized
“nuclear family” model, will generate speculation, “downward raiding,”
and shacklordism. Due to the phenomenon of downward raiding (purchase of
the subsidized plot by higher-income households for cash, typically at a
large discount), it is very likely that subsidized properties will soon
be in the hands of higher-income groups, as initial occupiers find if
difficult to meet the range of ongoing water, electricity, and rates
charges associated with the current “full cost recovery” policy
approach. In this event, the subsidy program will have done little to
solve the low-income housing crisis, and instead it may well raise the
population of homeless people, who in turn will no longer be eligible
for a future housing subsidy. As noted below, the RDP insists upon
protections against subsidies being lost in this manner.
   Access to housing subsidies remains largely dependent upon the actions
of private sector developers, and in particular relies upon specific
plans and the delivery of infrastructure. These technical requirements
prevent communities from independently addressing their housing needs.
In the absence of appropriately-skilled government personnel available
to assist communities, beneficiaries of subsidies have few options but
to turn to private sector developers. The housing NGOs that are able to
provide these services are few and far between, and with rapidly
declining funding for NGOs there seems little promise that they will
play a significant role in the future (as do NGOs in many Latin American
countries).

Existing private sector incentives

Generous incentives for banks and developers characterized the late
apartheid era, as--at the same time the state retreated substantially
from black “African” public housing provision--all manner of subsidies,
financial engineering schemes, deregulatory changes and other measures
were adopted to promote private sector housing. Those measures resulted
in a burst of township housing construction and financing during the
late 1980s, characterized by extremely poor quality construction
practices (with no consumer recourse), poor or nonexistent consumer
education, terrible location of housing (on the far sides of segregated
townships), no protections against interest rate increases or against
the emergence of “negative equity” (when due to various factors the
value of most township bonds rose to levels higher than the value of the
houses which served as their collateral), and an inability to sustain
the building pace beyond mid-1990.
	Nevertheless, notwithstanding the well-documented failure of the
state’s retreat from low-cost housing during the 1980s and the reliance
upon the private sector, the new government’s Department of Housing
proceeded nearly immediately to reward financiers in a variety of
ways--using four new institutions that were allocated funding of more
than R650 million during 1994-96--in exchange for delivery promises that
were not fulfilled, as shown below. (When these measures failed, the
Ministerial Task Team subsequently shifted financial support and
incentives to developers.)
	First, the Mortgage Indemnity Scheme announced in October 1994
guarantees banks against politically-related non-payment of new housing
bonds in those areas covered by the scheme, up to 80 percent of the
value of the bond. By September 1996, 113 areas of South Africa had been
either denied cover by the scheme (i.e., formally redlined) or
“deferred,” leaving 437 areas covered (Sunday Times 22/9/96).
    Second, Servcon is a joint venture established in 1994 in order to
“rehabilitate” non-paying bonds and ultimately to “right-size”
households to properties they can more easily afford. There are
approximately 14,000 houses in technical default within Servcon’s
portfolio, of which half are being successfully brought to fruition in
the form of a settlement with the existing residents. If the other
7,000--as well as another 26,000 low-cost bonds in arrears or default on
the banks’ books--are not resolved, the Mortgage Indemnity Fund will be
utilized to refund the banks (Sunday Times 22/9/96). As proposed,
government will capitalise Servcon with R50 million, but no details are
available about the use of these funds or the ability of Servcon to
raise other funds (thus far it has been supported entirely by the
private sector).
    Third, the National Housing Finance Corporation was established in
early 1996 to provide wholesale funding to retail banks, to encourage
banks to increase their low-income loan portfolios. The Corporation is
meant to ultimately finance 700,000 houses, but this goal is seen as
extremely unrealistic, especially in the wake of fatal problems
experienced by one of the prime vehicles for the Corporation’s funds,
the Community Bank. The Corporation has also indicated its unwillingness
to offer loans at below-market interest rates (notwithstanding a
directive to do so in the RDP, by blending wholesale finance with
subsidy funds).
   Fourth, the National Urban Reconstruction and Housing Agency, another
post-apartheid institution, guarantees bank-originated bridging finance
for developers. The agency claims it will make available R2 billion in
low-cost housing finance by the year 2000 (SA Housing Scenario 8/96).
Aside from a R25-million state grant, much of the agency’s funding is
sourced internationally, by development foundations (e.g., Open Society)
and governments (e.g., Swedish) which would otherwise be better occupied
in funding actual housing.
	In addition, one of the most generous incentives that government
granted banks was to permit their imposition (in mid-1995) of a 4-5
percent interest rate premium on housing bonds to low-income borrowers.
In view of the banks’ 1 percent (and greater) discounts to many
higher-income borrowers, this represents a substantial “reverse Robin
Hood” mode of redistributing income from the poor to the rich. Further,
government failed to promulgate legislation or policies aimed at reform
of the financial sector (especially prohibitions on discrimination)
called for in the RDP. Central government also took unusual steps--not
even attempted by the apartheid regime--to support banks in their
default proceedings against borrowers, even where non-payment was due to
temporary involuntary unemployment or other conditions beyond the
borrowers’ control (the RDP, in contrast, insisted that demand-side
guarantees be provided to support borrowers rather than bankers under
such circumstances). In addition, government’s market-centered housing
policy was echoed by a variety of other incentives and sometimes hidden
subsidies offered by different tiers of government (e.g., the Inner City
Housing Upgrading Trust in Johannesburg) and international agencies
(e.g., US AID guarantee and financing schemes).

Critique of bank incentives

The incentives enjoyed by the banks have thus far not succeeded in
fostering--and in future are unlikely to significantly
increase--low-income housing delivery. Indeed, the “Record of
Understanding” in which banks committed to providing 50,000 bonds in
their first year of activity, on the basis of the incentives, resulted
in fewer than 20,000 bonds granted in applicable areas in the intended
price range. There appear to be two main causes of this dramatic failure.
   First, without any “stick,” the hope that providing “carrots” will
dramatically raise the level of bank low-cost home financing is
unrealistic because of the costs to the banks of administering a large
portfolio of small loans. It should not be surprising that banks do not
favor low-income bonds. As profit-oriented companies their rate of
return is much higher when they service fewer, larger loans. In light of
this, either mechanisms such as a Community Reinvestment Act are needed
to compel banks to make available loans (and savings products) to
low-income customers--along with providing (presently nearly
non-existent) township and rural branch, agency, or automatic teller
facilities for payments and savings--and/or this function should be
outside the retail commercial banking system (such as through a national
housing bank or transformed Post Office Savings Bank system). Neither
the old nor the new housing policy even considers either promulgation of
a Community Reinvestment Act as mandated in the RDP, or the
establishment of an effective state housing retail agency.
   Second, low-income housing policy is based on the assumption that most
people eligible for subsidies will be able to secure bond finance or
other forms of credit to top up the housing subsidy. However, the poor
can seldom afford bank loans or meet bank lending conditions (such as
having secure regular employment), particularly at the present rate of
interest (the highest, in real terms, in South Africa’s history) and
given the policy of permitting extremely high interest rates for
low-income borrowers. Other forms of less formal credit have simply
failed to materialize on the scale needed.
   Thus despite the financial incentives directed at retail banks, during
the period mid-1994 through mid-1996 only 18 percent of houses built
under the subsidy scheme were linked to credit (a figure which actually
began to decline in 1996) (Housing Facts 20/9/96). Put differently, 70
percent of the poor could not secure bank loans, yet 43 percent of the
Housing Facilitation Fund was directed to those beneficiaries who,
because they were in higher-income categories, were more likely to
secure these loans.
	The December 1995 report of the Ministerial Task Team itself
acknowledged profound practical limitations to carrying out the
market-centered housing finance policies, including “projects being
delayed due to excuses put forward by banks.... the Mortgage Indemnity
Fund being positioned as a red-lining process.... inadequate or
inappropriate pressure being applied to banks to lend in areas where
lending is most needed.... [and] additional (more onerous) barriers
being perceived to be erected by banks to historically disadvantaged
borrowers.” Yet, as shown above, neither that report nor the subsequent
Ministerial Task Team report of October 1996 provided any remedies.
Instead, through the absence of strong countervailing policies or
programs, these Task Team reports effectively endorse the status quo.

The consequences of market-centered policy

The consequences of a market-centered approach to low-income housing
delivery are, in most respects, detrimental to the needs of South Africa
to build houses for poor people and workers. These include:
• an inequitable allocation of funding between different low-income
groups (favoring those with higher incomes because they have the
capacity to gain access to credit and hence are the target of private
sector developers’ projects);
• an extremely low rate of delivery, witnessed by the fact that only 74
254 subsidies were delivered between March 1994 and July 1996, the vast
majority providing little more than serviced sites, notwithstanding the
expectation that more than 400,000 houses would be built by this stage
to reach the figure of one million within the first five years of democracy;
• the destruction of existing housing construction capacity due to the
failure to recognize contradictions within the market and provide a
state-driven counter-cyclical construction boost, as 1994 witnessed the
liquidation of 228 construction firms and 1995 witnessed 232 closures
and the lay-off of more than 10,000 construction workers in 1995, thus
reducing total industry employment to fewer than 200,000 workers;
• communities being disempowered in project planning as well as in
their more general needs for capacity (given that many local leaders
moved into government), which led to unwanted products as well as an
increasing gap between developers’ promises and community expectations,
often resulting in intense conflict;
• a reluctance on the part of the private sector developers to be
involved in conflict-ridden areas where the need for housing was often
the greatest;
• abuse of the scheme by local authorities and developers (according to
the Housing Director-General in September 1996), leading to a reduction
in value of the subsidy by 50 percent in some cases;
• the failure of the Mortgage Indemnity Scheme (which is indirectly
acting as a red-lining instrument) and Servcon (as there were
practically no available low-cost properties for households to rightsize
to);
• a lack of success by the National Housing Finance Corporation in
reducing interest rates or increasing access to credit for low-income
households (and indeed in keeping afloat the targeted intermediary
lenders, such as the now-defunct Community Bank);
• the demise of humane levels of service provision--such as water-borne
sanitation, a reliable supply of electricity, stormwater drains and
tarred roads--as part of the vision of incremental housing, due to the
fact that households with under R800-per-month income were not projected
to afford the running costs of (mostly-unsubsidized) water/electricity; and
• the inevitability of reproducing apartheid-style ghettoes, although
these in future will not be segregated along racial lines but in class
terms, specifically whether the new slum settlements include--as a
matter of public policy--sewage systems, electricity lines, stormwater
drains, and tarred roads.
Just as importantly, the implications of a market-centered approach to
housing include the withering of state capacity in fields as diverse as
construction, building materials management, public works delivery,
retail financing, and management. The ability of provincial and local
governments to take up the additional responsibilities they are now
being given appears severely limited.

New strategies to resolve policy failure

Ironically, perhaps, the second report of the Ministerial Task Team on
Short-term Delivery (Department of Housing 1996a:1,2,7) identifies
problems relating to the market-centered character of its policy:
  Large private sector developers and the banking industry remain largely
uninvolved in the delivery of housing [in the R18-50,000] price range,
often blaming each other and the state for their non-involvement.... It
is clear that private capital is seeking alternative avenues where
risk/reward relationships are more favorable.... The sterile and
unimaginative products and processes being propagated by many private
sector actors in the affordable housing market reinforces the
marginalization and stigmatization of the poor.
Yet notwithstanding the Task Team’s critique of present trends, its
philosophical “points of departure” exacerbate the market-centered
character of present housing policy: “The state’s involvement should be
structured to enable gradual withdrawal without disruption.... Measures
introduced should not constitute an additional subsidy and the principle
of full cost recovery should apply.... Measures introduced should
entrench savings as the primary mechanism for prioritization of access
to housing opportunities created” (Department of Housing 1996a:4).
Although other principles are somewhat more flexible, such points of
departure ensure that there will be no dramatic improvement of access to
housing for South Africa’s poor, and particularly, that apartheid’s
geographical legacy will ever be transformed.
   Indeed, the primary objective of the Task Team, from its origins in
1995, appears to be improving private sector returns by further reducing
risks. In the December 1995 report, the Task Team proposed that risks be
reduced by enabling provincial MECs to override social compacts, thus
allegedly reducing conflict and opposition to projects (although this
provision does not address the underlying causes of problems);
attempting to contain opposition to the policy (and/or the standards
implicit in incremental housing) by requesting high level intervention
to prevent dissent and ruling out major policy amendments; and allowing
more rapid draw-downs of subsidies by developers so as to reduce their
reliance on full bridging finance.
   The Task Team’s second report suggested that accredited local and
provincial authorities should enter into joint ventures with private
sector contractors so that housing can be delivered at scale. This will
supposedly speed up the rate of delivery and--assuming cost savings with
large-scale delivery--will increase the amount of money available for
each unit. But not only does devolution of responsibilities conflict
with the financially stricken state of most local authorities, the
incentives to developers will pose additional costs that represent a
redirection of subsidy funds towards the private sector. Both factors
are considered next.

Devolution of responsibilities to financially impoverished local governments

Under the current legislation and the proposed Housing Bill (expected to
pass through Parliament in 1997), accredited local authorities will be
given the “power” and responsibility to administer the low-income
housing policy. But insignificant resources and capacity--budgeted at
merely R10 million for national, provincial, and local governments--are
available through the Housing Facilitation Fund to exercise this power.
The options available to them are to enter into joint ventures with
private sector developers. Virtually all decision-making and quality
control will be in the hands of these developers, while the local
authority will be obliged to carry the risk and to provide finance, and
little more. (This system quickly prompted at least one metropolitan
council and at least one provincial government to decide not to take on
such responsibilities, as they do not wish to be accountable for housing
developments over which they had little control.)
   Where local governments do not have the financial or administrative
capacity to administer the housing program (as defined by the National
Department), the provincial tier will act on its behalf until the lower
tier is accredited. But provincial government capacity has been
significantly undermined through public service rationalization
policies. And where the provinces are not able to administer the housing
program, there is no back-up (under the current policy) in the form of
national-level intervention or even facilitation.

Incentives for private sector developers and managers

The new policy provides R100 million of central government funds for
joint venture housing projects between provincial/local state housing
departments and developers, a sum that is to be matched by the private
sector. Furthermore, another R400 million in guaranteed housing sales
financing is to be provided by central government through the National
Housing Finance Corporation to underwrite the bulk purchase of property
through proposed “Housing Corporations.” Unspecified subsidies will go
to support “professional” expertise related to management of rental
housing (but not, apparently, to community- or tenant-managed housing
corporations). Funding for various private sector incentives will be in
excess of R510 million, not including the capital subsidies which
already effectively entail permission for a substantial mark-up by
private-sector developers.

Likely outcomes of the amended policies

Such proposals hold out little promise for a successful mass housing
program, particularly regarding rental housing, because
• rents will probably increase if the private sector plays a major role
in managing Housing Corporations (as the rents will be the only source
from which profits can be accumulated);
• there will probably not be sufficient maintenance on properties (as
the need to generate profits for the management institution will leave
little money for maintenance costs);
• rental stock may well be sold as freehold housing (no protections
have been introduced to ensure the housing stock continues, in
perpetuity, to be available for rent to low-income people); and
• the most immediate problem is that rental housing (as a tenure
system) will be jeopardized by the short-term delivery (not long-term
residential) interests of private sector partners.
Notwithstanding the proposed amendments to the failed policy, there are
no guarantees that the cost savings of delivery at scale will be passed
to the beneficiary or that the increase in the subsidy (to R15,000 for
all institutional projects) will go to increasing the size or quality of
the housing unit. It is likely that in a market-centered joint venture
program, much of the savings will be absorbed by the developer. While
this approach does increase the probability of an increase in the rate
of delivery of low-income housing (from an extremely low base level), it
does little to solve the housing crisis of at least 40 percent of the
poor who will not be able to afford units proposed under the scheme.
Most importantly, perhaps, there is no target for the proportion of
joint venture housing construction at the lower cost range of delivery.
   Those households earning below R1,000 per month will have few options
other than the self-build strategy, facilitated by government’s new and
as yet untested “People’s Housing Process.” Yet this strategy has
long-term costs to poor households and represents a general decline in
the social wage and in the state’s capacity to meet its citizens’ needs.
Moreover, as a delivery system, self-building undermines society’s
broader attempts to spur macroeconomic growth, create formal sector
jobs, and restructure apartheid urban geography, which have long-term
economic costs not taken into account in current policy formulation.

Departure from government’s mandate

At his victory speech on 2 May 1994, Nelson Mandela observed, “We have
emerged as the majority party on the basis of the program which is
contained in the Reconstruction and Development book. That is going to
be the cornerstone, the foundation, upon which the Government of
National Unity is going to be based. I appeal to all leaders who are
going to serve in this government to honor this program” (Business Day
3/5/94).
	Previous pages have shown that the first democratic government’s
housing policy was based on market-centered principles and is failing on
its own terms. One reflection of the frustration of attempting to reform
the existing policy is witnessed in the contrast between the HWP (and
subsequent policy amendments) and the mandate given to the Housing
Ministry in section 2.5 of the RDP book. This is apparent regarding
policy objectives, the roles of the market and of communities, the
notion of the housing backlog, housing standards, cost recovery for
services, the National Housing Finance Corporation, interest rates,
savings, bond guarantees, construction regulation, building materials
prices, emerging builders, tenure bias, and other aspects of the RDP
mandate. Each is considered in turn.

Housing policy objectives

The HWP Preamble states the policy’s objectives, namely that the
approach adopted “aims to contribute to the certainty required by the
market, as well as give the Provincial and Local Governments their
capacity to fulfil their Constitutional obligations.” Nowhere in the
objectives is the RDP’s broad aim of fostering “people‑centered
development” mentioned (when finally referred to, much later in the HWP,
it is only in passing). Only in the belated People’s Housing
Process--still being developed with only a few small pilot projects--is
a system established to help people build their own houses (supported by
training), but this is apparently limited to the very poor, in ghettoes
segregated from formal township housing developments as well as from
better-located settlements formerly reserved exclusively for whites,
which together consolidate the geographical legacy of apartheid.

The role of the market

The HWP celebrates “the fundamental pre‑condition for attracting
[private] investment, which is that housing must be provided within a
normalized market.” (This is technically incorrect, since private
capital could still be attracted into non-market housing, via state
housing bank securities.) The Ministerial Task Team confirms that the
withdrawal of the state from housing provision is a fundamental
principle. In contrast, the RDP critique of “The housing problems
created by apartheid and by the limited range of the capitalist housing
markets” was based on the dismal recent experience in private sector
township housing, namely, the approximately R10 billion in
unsustainable, disastrously-implemented investments by developers and
banks during the late 1980s. Hence the RDP concluded that a housing
policy far beyond the realm of the market should be urgently
implemented, including two crucial non-market mechanisms: a national
housing bank (to provide borrowers with low-interest loans by blending
subsidies with private financial resources such as pensions that can be
attracted out of stock market and luxury real estate portfolios by
virtue of market-returns plus government guarantees), and mechanisms
that ensure state expenditures on housing take the form of
“non‑speculative” subsidies (that either must be repaid upon leaving or
are passed through into the stock owned by housing cooperatives).
Neither has been given serious consideration in the HWP. Indeed, the
latest Ministerial Task Team report reinforces the downward raiding
problem, particularly due to the attempt to build on better-located land
in a manner that leaves the land without the necessary protections
against speculation.

The role of communities

Civic associations and other community groups are completely ignored
throughout the HWP, reflecting only the document’s mere lip service to
people-driven development. This is in glaring contrast to the RDP, which
states: “Beneficiary communities should be involved at all levels of
decision‑making and in the implementation of their projects. Communities
should benefit directly from programs in matters such as employment,
training and award of contracts. Key to such participation is capacity
building, and funds for community‑based organizations must be made
available.” The Ministerial Task Team continues to ignore community
organizations, with the exception of a vague proposal to “target
community interests” on the boards of Housing Corporations.

The size of the housing backlog

After noting, correctly, that residents of hostels and rural areas are
inadequately housed, the HWP defines the “present housing backlog”
merely in terms of urban informal units not located on titled land (1.5
million). This is half the amount the RDP estimates as a backlog and
implicitly signals an abdication of the RDP’s commitment to meet the
housing needs of hostel‑dwellers and rural residents as well as urban
shackdwellers on registered plots.
   Indeed the overall lack of attention to rural housing in the HWP, in
the Ministerial Task Team reports, and especially in the draft Rural
Development Strategy increases the likelihood of more rapid migration to
the towns and cities.x The policy focus on private, individualized land
tenure, as well as the orientation to avoid giving subsidies in outlying
areas (such as former homelands), together mitigate against rural
housing ever being delivered at scale and where it is most needed.

Inadequate standards

The HWP’s stated commitment to width over depth directly conflicts with
the earlier HWP (and RDP) commitment that housing (not a shack) is
considered a basic human right.xi The apartheid regime also emphasized
width over depth, hence the massive numbers of informal site‑and‑service
programs built on cheap land a great distance from employment and
commerce (which now are being revisited as “market anomalies”). As noted
above, sufficient resources do exist to increase the subsidy to the
amount required for all South Africans to eventually live in a decent
house (with a commitment of 5 percent of budgetary expenditure as the
basis for more generous subsidies), in other words to achieve both width
and depth.

Cost-recovery for services

The HWP insistence upon cost‑recovery on tariffs for basic services
(water, electricity, rubbish removal, etc) ignores the huge subsidy that
black township dwellers historically provided to white municipalities
(by virtue of having no township tax base), as well as the failure to
bill residents at local level and many other manifestations of systemic
break-down. In contrast, the RDP recognized such problems and hence
advocated redistributive (“lifeline”) tariffs established at
national‑level for services such as water and electricity. The HWP
implicitly rejects the RDP’s commitment to more equitable, efficient
national tariff structures based on cross-subsidization (see above,
Chapters Three-Five).
   In short, the HWP’s attempt to impose cost‑recovered tariffs upon even
the poor, who cannot afford to pay for ongoing water, water-borne
sewage, and electricity, will likely result in continuing rent boycotts.
Moreover, it suggests a lack of understanding of the township household
budget. The Ministerial Task Team entrenches the problem by providing
more responsibilities for local authorities, but no specific increase in
resources.

Design of the National Housing Finance Corporation

As noted above, the HWP endorsement of a National Housing Finance
Corporation ignores the crucial RDP provision that the housing bank must
blend public and private funds to reduce the interest rate. And the
HWP’s emphasis on mobilizing consumer savings (as opposed, for example,
to pension funds presently wasting in the stock market and luxury real
estate) is misplaced, given the very limited disposable income of poor
people and the extremely high costs of housing.

Interest rate affordability

The single most crucial determinant of housing market affordability ‑‑
the interest rate ‑‑ is completely missing from the HWP’s list of
“economic issues” which “militate against a massive increase in
effective demand for” housing. The interest rate for housing bonds rose
from 12.5 percent to 21 percent from early 1988 to late 1989, thereby
causing an unprecedented affordability crisis and leading to massive
numbers of involuntary defaults. With the Department of Housing
permitting banks to discriminate against low-income borrowers by raising
the rate to 23 percent (compared to 18.5 percent for high-income
borrowers), affordability remains impossible to attain through the
market. In real (after‑inflation) terms, the low-income housing bond
interest rate of roughly 15 percent is unprecedented in South African
history.
	What this omission suggests is that the HWP authors were either
inexperienced at actually designing housing packages (where they would
confront the interest rate constraint), philosophically opposed to
blending subsidy and private funds to achieve a below-market interest
rate, or anxious to avoid confrontation on the issue of monetary policy
with the Reserve Bank. Whatever the reason, the HWP ignores the RDP
suggestion that “Interest rates [on housing finance] must be kept as low
as possible.” Subsequent policy amendments ignore the issue entirely.
  Moreover, the HWP commitment to the “up-front capital subsidy” approach
(in contrast to lower interest rates spread over time) is a direct
violation of the RDP, which insists that “Government funds and private
sector funding must be blended in order to make housing finance
affordable.” Worse, the HWP endorses a bank plan to charge “a higher
interest rate on [low‑income] bonds than the prevailing bond rate,” an
unprecedented form of class discrimination. Moreover, the National
Housing Finance Corporation confirmed in 1996 that below-market interest
rates (based on blending subsidies) are not being considered.

Emphasis on personal savings

The HWP explains that declining rates of personal savings “reduced the
availability of savings for investment in housing.” This is highly
questionable, given the massive increases in credit granted by the banks
during the late 1980s (when savings rates were falling at their fastest
levels). Indeed, the SA financial system has shown an impressive ability
to disregard savings and instead to create housing credit (mainly for
the white market) based on factors such as the property market cycle,
the unusually high spread on interest rates (the difference between what
banks pay savers and lend to borrowers) and inter‑bank competition. The
failure of the HWP drafters to recognize this reflects a conservative
economic bias reminiscent of the Normative Economic Model, and bodes ill
for future interventions in housing finance markets. The Ministerial
Task Team is apparently considering a new study on savings, reflecting a
continuing reliance upon market mechanisms and insensitivity to the
plight of the very poor who cannot save.

Supply-side bond guarantees

The flaws in the October 1994 housing finance insurance deal (Mortgage
Indemnity Fund) between the Department of Housing and the commercial
banks are too numerous and serious to be discussed in depth here. In
short, however, the Mortgage Indemnity Fund disempowers communities (by
taking away their sole leverage to prevent foreclosure and occupation),
ignores the underlying reasons for bond boycotts or defaults, gives too
much leeway to banks, fails to prevent redlining (and even permits
redlining), and hence will simply not make much of a difference to the
availability of credit in areas where it is most needed. As a
supply-side (pro-bank) scheme, the Mortgage Indemnity Fund also directly
violates the RDP provision that “Unemployment bond insurance packages
and guarantee schemes with a demand‑side orientation must be devised.”
As noted earlier, the demand-side feature--which is common to housing
guarantees in many other countries--would allow people who lose their
jobs or other sources of income through no fault of their own to
continue living there. The R400 million National Guarantee facility
proposed by the Ministerial Task Team, to be administered by the
National Housing Finance Corporation, will effectively underwrite future
private-sector housing, again on the supply-side.

Regulation of the construction industry

The HWP suggests self‑regulation for the construction and
building-materials sectors. In contrast, the RDP states, “Cartels, price
agreements and market share agreements must end, and consideration must
be given to public, worker and community‑based ownership where the
market fails to provide a reasonably priced product.
Community‑controlled building-materials suppliers must be encouraged,
possibly with government subsidies to enhance competitiveness. An
enforceable Code of Conduct must be established to guide developers.”
The HWP falls far short in addressing the traditions of severe problems
in these industries, which are known to be virtually impossible to
self‑regulate. Subsequent policy amendments continue to ignore this
issue, and the National Home Builders Registration Council is applicable
only to homes built with bank bonds.

Building-materials price inflation

The HWP notes that “it is necessary to determine whether a rapid
increase in supply will lead to an increase in the price of housing”
without also acknowledging the RDP’s demand that if inflation is
generated artificially by highly concentrated building-materials
suppliers (as has happened, by all accounts, in past years), the
government should intervene to break down such cartels. Where there are
supply bottlenecks, in short, government should ensure a smooth supply
of inputs for housing construction. However, the Draft Housing Bill
prevents the Department of Housing from making interventions in the
construction and materials markets.

Emerging construction firms

Incredibly, the HWP comments, “the growth and support of the emerging
(black) construction sector is not seen as a primary housing
responsibility and therefore does not justify the allocation of housing
funds” even though the RDP commits the opposite: “The development of
small, medium‑ sized and micro enterprises owned and run by black people
must be incorporated into the housing delivery program.” The RDP further
states, “Special funds must be made available to support small and
medium‑sized enterprises. Resources should be provided as loans for
bridging finance, and grants for training and entrepreneurial
development” and, furthermore, “If necessary, the democratic government
must provide some subsidies as a catalyst for job‑creation programs
controlled by communities and/or workers, and target appropriate job
creation and development programs in the most neglected and impoverished
areas of our country.” Housing is a particularly good example of such
programs, yet the HWP only weakly commits to “proactively seek to
facilitate the participation of this sector in the housing process”
without any specific endorsement of financial support to emergent black
businesses. The People’s Housing Process and the Housing Support Centers
(of which there are at present fewer than a handful) are apparently
going to address this need, but it is likely that the clients will be
individual self-builders rather than emerging contractors.

Bias in tenure

The RDP insists that “Sufficient affordable rental housing stock should
be provided to low‑income earners who choose this option.” The HWP does
not consider rental stock, and even leaves out public housing stock from
a list of housing functions to be fulfilled by local government. And
while the RDP suggests that “Locally controlled Housing Associations or
cooperatives must be supported, in part to take over properties in
possession of banks due to foreclosure,” the HWP simply ignores such a
solution to the properties-in-possession problem. Later, the HWP notes
that “Government rejects the elevation of the individualized private
homeownership above other forms of secure tenure,” yet the HWP policies
are nearly entirely geared to precisely this tenure form. As noted,
subsidy policy encourages market transactions, speculation, and
downward-raiding, not permanently affordable housing. The subsequent
proposals made by the Ministerial Task Team are based on rental systems
geared largely to the private sector, which are not likely to be
affordable to the poor.

Other omissions from the RDP mandate

The RDP calls for legislation protecting tenants’ rights, squatters’
rights, and the rights of people living in informal settlements. The RDP
also suggests the need for further legislation regarding evictions,
exploitation in rentals, and many other housing-related problems, as
well as interventions in the land market. The RDP notes that “All
legislative obstacles and constraints to housing and credit for women
must be removed.” Elsewhere in the RDP, the rights and needs of disabled
people are also cited. All of these are missing from the HWP and have
been, at best, mentioned vaguely in subsequent legislation and
Ministerial Task Team reports.

The time for policy debate has arrived

The HWP Preamble stated, “The time for policy debate is now past.” While
mass housing construction is already long overdue, this was an
unnecessary closure of debate and threatened to shut out those social
forces which had fundamental objections to the HWP approach. Moreover,
this position has not proved durable over time, as land invasions,
occupations of vacant buildings, rent strikes, and other forms of
popular resistance have continued. Yet notwithstanding public pressure
to revisit the policy, the December 1995 report of the Ministerial Task
Team on Short-term Delivery categorically confirmed that “No review of
the fundamental position of government in respect of [minimum standards
and levels of housing subsidies] is on the table and will be on the
table for some time to come.”
   However, due to the untenable character of market-centered housing
policy, there have subsequently been heated official debates (though
rarely in the public sphere) and some minor alterations to policy. But
this has never occurred in a context of true public consultation and of
participation on the part of those forces within society opposed to
market-centered policy. In particular, key issues--the role of the
state, the nature of rental policy, housing standards, worker and
community participation and control, and the alleged “fiscal constraint”
to higher subsidies, etc.--have not been convincingly addressed by
government officials, leaving constituents and civil society
organizations nearly uniformly angry and alienated.
  Given the widely recognized failure of existing policy, there should be
an intensified search for options that do not place as much reliance on
the market as is currently the case. For example, housing strategies
recommended by many progressive organizations at the March-April 1996
Parliamentary Public Hearings on the HWP are significantly different
from those advocated by the Department of Housing and the Ministerial
Task Team. The fact that the Hearings received so little attention from
decision-making bodies and the media--and hence the difficulty of
launching a fruitful public debate--is no doubt because the strategies
are so different from those that seek to protect the interests of the
private sector, even though these vested interests are usually in direct
conflict with those of the poor and workers who most need housing.
   Many of the alternative strategies center around ways to increase the
size of a unit that can be built within the subsidy (by preventing
leakage to profit-motivated institutions, for instance). Others address
the “risk” problem by suggesting that the responsibility for
implementing the housing program and managing rental stock be shifted to
communities and/or to locally elected government. Yet even these limited
recommendations become progressively less realizable as each new
market-centered policy proposal is adopted and implemented by the
Department of Housing.
   Finally, the possibility of expanding state capacity to deliver and
6finance housing through rationalization of the central state’s and
other agency’s housing capacity into a national housing agency has gone
entirely unconsidered within official circles. Trade unions and some of
their allies have advocated this route for more than a year, but society
has for too long been lulled into thinking that a market-centered
approach would finally deliver or that sufficient amendments are being
made to make the failed policy work.
	But given the continuing deficiencies of market-centered housing
policy, and given the fact that an alternative policy framework achieved
wide support (in Chapter Two of the RDP) yet was never applied, it is
likely that more meaningful debate will emerge again, but catalyzed by
civil society and progressive politicians rather than by government
bureaucrats and policy drafters who avoid self-reflection even when
confronted with glaring failure.