Development Action Group Comments on the 2010/11 Budget

Thursday, 18 February, 2010 - 21:07

The Development Action Group (DAG) is a non-governmental organisation working in the urban development sector and focusing on housing and access to well-located land for the urban poor. DAG anticipated the Finance Minister’s announcements with interest, especially considering the challenges of rapid urbanisation coupled with an enormous housing backlog evidenced by over-crowded backyards and informal settlements, and deepening urban poverty.

The Development Action Group (DAG) is a non-governmental organisation working in the urban development sector and focusing on housing and access to well-located land for the urban poor. DAG anticipated the Finance Minister’s announcements with interest, especially considering the challenges of rapid urbanisation coupled with an enormous housing backlog evidenced by over-crowded backyards and informal settlements, and deepening urban poverty.

The Minister acknowledged that the human settlement grant is one of the faster growing items in the budget together with rising spending on water and sanitation, and that such investments are critical to reshaping our townships, cities, informal settlements and rural areas.

Notwithstanding, the Minister announced a budget that did not convincingly deal with these challenges and that diverged from the nation’s expectations of Government.

The Housing White Paper (1994) recommends that the housing budget constitutes 5% of the national budget to meet current housing demand and eradicate the backlog. However, since 1994, we have been unable to reach 3%, and the housing backlog has further increased. The question beckons whether government is still interested in its policy mandate of 5%.

Minister Gordhan emphasised the country’s commitment to a ‘new growth path’ to build a future in which all can share the benefits. It is refreshing to hear commitments to do things differently - echoing the state of the nation address. This is critical in effectively challenging and addressing factors underpinning poverty and structural inequality.

Last year, South Africa’s Gini-coefficient was 0.679, illustrating vast differences in income inequality between rich and poor, especially in urban centres where poverty is deepening. It is unclear what strategies the Ministry of Finance proposes to address structural inequality through making fundamentally different macro-economic policy choices.

In reprioritising spending towards targeted outcomes, specifically investing in local government and human settlements, the state of the nation address committed to set up a R1 billion guarantee fund to incentivize the private banking and housing sectors to meet the needs of the so called ‘gap market’.

DAG agrees that government should focus on the entire residential market and that middle-income citizens including nurses, the police and teachers, require housing finance assistance from both government and banks.

However, we question whether it is appropriate to invest disproportionately in this section of the population, considering that they earn more than R3 500 per month and constitutes less than 15% of the national housing need, whilst more than 70% of the housing need in South Africa constitutes people who have monthly incomes of less than R3 500.

Government’s approach to urban management and development has to prioritise release and access to well-located serviced land for the urban poor. The state of the nation address committed to setting aside over 6 000 hectares of public land for low-income housing. It remains to be seen how this will be financed as the cost of acquiring well-located land remains an obstacle in delivering adequate housing for the lower end of the market.

The review of the current Municipal Property Rates Act (MPRA) is imperative as it makes provision for a tax on both land and building improvements, discouraging intensive use of land and encouraging land speculation. This, in turn, inflates land prices, making well-located land for housing inaccessible for the poor, impedes efficient use of land, and misses opportunities to generate revenue for municipalities to enable greater access to affordable housing.

While DAG recognizes the Minister’s attempt to balance the disparate needs of our people, there is still insufficient movement in the macro-economic policy arena to match the policy-speak of the new administration. We stand ready to contribute to the creation of truly integrated human settlements through development processes that enhance human rights, dignity and equity.

A community-centred settlement development ethos, a pro-poor policy environment, and finding creative ways such as progressive tax on land to increase revenue for further investments, hold the potential to rekindle the spirit of the generation that was celebrated in the release of President Mandela on 11 February 1990.

Kailash Bhana
Chief Executive Officer
Development Action Group

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