ECDC feels the pinch as contractors fall short

FAILING small building contractors are “biting” the Eastern Cape Development Corporation’s pocket – so much so that 60% of its construction industry loans had to be written off in the past financial year.
Speaking at the parastatal’s Integrated Emerging Contractor Development Model graduation ceremony, ECDC chief executive Mxolisi Matshamba warned that because of the high failure rate their loan requirements would become stricter in the future.
The development model, designed for the ECDC by the Centre for Science and Industrial Research, aims to mentor emerging contractors on financial and project management skills so they can attain “emerged” status.
“Every project that fails bites our pockets,” Matshamba said. “We have picked up that this is because of a lack of financial planning, tendering with incorrect prices or the fact that contractors deliberately underquote out of desperation to win.”
He said another reason for their failure was that, instead of executing their projects, some contractors bought themselves Mercedes “ML-Class” vehicles once they clinched a contract.
“After that, your profit is already gone and you are already using up your capital,” he said.
Matshamba said the ECDC was completing its financial reports for scrutiny by the Auditor General and included the financial year that ended in March.
Development model project manager, Eugene Mfaka said 54 small contractors from the Port Elizabeth, Queenstown, East London, Mthatha and Kokstad regions graduated from the 24-month programme.
After completing the programme, some contractors moved up three notches in the official Construction Industry Development Board register, he said.
“We want to invite other organisations and the government to join the programme. We have a budget for mentors that we can increase to help ensure more contractors are developed,” Mfaka said.
He said the ECDC used the services of 13 mentors throughout the programmes. They include retired construction professionals, established contractors and consultants.
“This is the first programme of its kind in South Africa. We have talent in the Eastern Cape and you find that many contractors doing work in other provinces are from here. We also need to retain our skills,” he said.
ECDC Enterprise Development manager Belinda Vabaza said the training programme was based on a holistic model that comprised theoretical and practical skills training. “We wanted a development programme that would take emerging contractors through the entire development cycle. In the end, a vast pool of construction experience and knowledge was developed.”
Vabaza said because the development model produced measurable quantified data, the development principles that had been established were generic in nature and could be transported to other economic sectors, such as agriculture, trade and industry and manufacturing.

THEY are rich and hungry for investment opportunities. Private investors, a common investment force in the US and Europe, are starting to come out of the shadows in SA and could play a major role in boosting economic growth and job creation if the right conditions are created. Dubbed business angels, private investors are best described as high net worth individuals with sufficient surplus resources to invest. Typically, angels are early-stage investors looking for entrepreneurial business ventures to invest in, usually in exchange for equity. The amounts involved can be anything from R100000 to R5m. Angel investors usually precede venture capitalists, who tend to invest in established businesses — making angel investors a potentially highly valuable resource in a developing economy such as SA. It is common knowledge that entrepreneurs the world over struggle to secure finance. The 2004 Global Entrepreneurship Monitor report, an international research project involving more than 40 countries, lists access to finance as one of the top three stumbling blocks for entrepreneurs. Those that struggle most are start-ups that are too small to be of interest to venture capitalists and lack the collateral required to secure a bank loan. Fortunately, angel investors are less risk averse than banks. They also often contribute time and energy to their investment, and introduce entrepreneurs to their networks. They do not cost this time in the same way venture capital firms might. This, and the fact that angel investors generally require a share of equity in a business — which does not strip the business of cash flow in the initial, vulnerable stages — makes angel finance an attractive prospect to start-ups. Little is known about angel investors in SA. Research conducted in 2002 by Ian Hollander, Michael Shirnig and Lance Stringer at the University of Cape Town Graduate School of Business, provides some insights. They found that in almost all respects, angels operating in Cape Town are similar to those around the globe: mostly male, with extensive business experience and entrepreneurial backgrounds. They are in their late 40s and early 50s, well educated and wealthy. Their reasons for investing are also much the same: they are seeking superior returns or are semiretired individuals who want something interesting to do. But SA’s angel community is underdeveloped and entirely informal. Lack of co-ordination hampers their ability to play a significant role in aiding entrepreneurs. Many could be put off by the difficulties of finding a good investment and invest offshore — something South African entrepreneurs can ill afford. To address this, David Murray, Tony Mallam, Andrea Bohmert and Geoff Hainebach from Cape Venture Partners pioneered one of SA’s first structured networks of angel investors. The idea is to help angels to find appropriate investments in the most discreet way possible. “Angels by their very nature are hesitant in coming forward. They fear being swamped with applications for funding,” says Murray. “One of the key services we provide is to … narrow choices down to feasible concepts driven by entrepreneurs who have the ability to succeed. We also assist in matching opportunities to an investor’s own criteria, for example empowerment compliance, a particular industry, and so on.” Murray’s network also provides practical advice to angels, such as how to structure deals and how best to exit or harvest their investment. To unlock the potential of angel investors, more such networks will need to be established, and incentives to encourage angels to come forward may need to be brought to the table by government. While one wealthy individual investing in one small start-up may not be anything to write home about, the collective power of a well-networked angel community in SA could have significant benefits for entrepreneurship and economic growth. Can we really afford to overlook this vital source of investment any longer? Von Broembsen is lead researcher for the Global Entrepreneurship Monitor SA, run by the UCT Centre for Entrepreneurship and Innovation at the Graduate School of Business, University of Cape Town. This article has been sponsored by Liberty Life.

Report says SA gem is losing its glow

No business? South Africa may have to switch some of its policy focus, says Marlese von Broembsen, author of the GSB's Global Entrepreneurship Monitor.
If government is serious about creating jobs in South Africa, it must make some tough policy decisions and focus on those entrepreneurs identified as job creators.
This according to the latest Global Entrepreneurship Monitor (GEM) study - which measures entrepreneurial activity - conducted in South Africa by the Centre for Innovation and Entrepreneurship at UCT's Graduate School of Business (GSB).
The numbers speak for themselves. The latest data shows that in the study's entrepreneurship rankings South Africa has dropped from 20th position (out of 34 countries) in 2004 to 25th position (out of 35 countries) in 2005. And the country's Total Early-stage Activity (TEA) was only 5.1% in 2005, down from 5.4% in 2004.
Significantly, South Africa also has the lowest entrepreneurial activity rate of all the developing countries participating in GEM.
According to Marlese von Broembsen, principal author of the South African GEM report, the key findings that should concern South Africa are those that show that micro and survivalist enterprises, a major focus of government's small, medium and micro enterprise (SMME) support, are unlikely to create jobs in the numbers needed to combat South Africa's economic inequalities.
The evidence from the GEM South Africa Report shows that, in truth, less than 3% of necessity businesses - which constitute all "survivalist" businesses and most micro-enterprises in the informal economy - are likely to create a significant number of jobs. In fact, businesses created to take advantage of an opportunity, rather than out of necessity, are over four times as likely as micro-enterprises to employ six or more people.
In addition, the low wage levels and generally poor conditions of employment in these necessity enterprises means they are unlikely to contribute significantly to a poverty alleviation objective either.
The research also demonstrates the extent to which South Africa's history of unequal access to education, finance and opportunity impacts on the job creation capacity of entrepreneurs. GEM data confirms that Indians and whites are more likely than coloured or black people to start a business.
Their businesses are also more likely to survive the start-up period, and to employ staff in significant numbers.
The level of education of entrepreneurs impacts significantly on their capacity to create employment. The potential of tertiary-educated adults to create employment is 2.5 times greater than those who only completed secondary education, and a massive 11 times greater than those who have not completed secondary education.
An interesting finding is that Indian entrepreneurs with secondary education are the most likely category of entrepreneurs to create employment for others.
The research also shows that men create more employment for others than women do - GEM estimates suggest that the job creation potential of men is 2.3 times that of women.
"The policy implications of these findings are important," said Von Broembsen. "While other studies have underlined the fact that significant job creation may only be possible at the expense of redistribution, GEM provides empirical support for these critical policy debates."
The report argues that government needs to create a hierarchy of policy objectives, with job creation as an immediate priority.
This may mean shifting focus in the short-term away from SMME programmes that support a redistribution of wealth or poverty alleviation objective towards programmes for entrepreneurs that create jobs, said Von Broembsen.
"Given our high levels of unemployment and the indisputable relationship between unemployment and poverty, we would argue that job creation should supersede poverty alleviation, not as a national objective, but as an SMME objective. Job creation in itself is the most effective, sustainable strategy within the context of SMME policy that could alleviate poverty and reduce inequality."
This policy position would be in line with the one taken in the White Paper on small-business development and promotion, added Von Broembsen.
The paper envisaged that poverty alleviation should be contextualised within the Reconstruction and Development Programme (RDP) programme and that survivalist business owners be skilled to find employment, rather than given business support.
"In the light of the GEM findings, this policy position would make the most sense," said Von Broembsen.
The report acknowledges, however, that decisions like those would be tricky in South Africa, given its past. But, it adds, there are a number of government programmes that contribute to the development and growth of high-potential firms in South Africa.
In the long-term, though, education remains the key to entrepreneurship and job creation in the country.
GEM is the largest and most rigorous study of entrepreneurship in the world and this is South Africa's fifth year as part of the study. The South African 2005 GEM study was sponsored by Liberty Life, HBD Venture Capital, South African Breweries Limited, Standard Bank, Khula Enterprise Finance Limited and the National Research Foundation.

South African Housing Gap Sparks Anger as Squatters Seize Homes

Bloomberg.com: Exclusive:

By Janice Kew
May 2 (Bloomberg) -- Sello Timothy Mbamba's dream of owning his own home came true -- and for more than a year he's been too afraid to move in.
Mbamba was one of more than 100 people who won government funding to build one-bedroom houses at Olievenhoutbosch, 19 miles northwest of Johannesburg. When the house was completed 18 months ago, people who were still living in shacks accused him of leapfrogging over them and threatened his family.
``I was worried I'd be killed in my sleep,'' said Mbamba, a 55-year-old unemployed builder. In response, his wife Josephina fled 185 miles north with their son and daughter. Today he lives in a hut patched together from scrap lumber and corrugated iron sheets 600 yards from the house he bought for 4,100 rand ($580).
The fight for scarce homes has triggered violence and intimidation across South Africa, where 12 million homeless black people are still struggling to overcome the legacy of apartheid. Although President Thabo Mbeki and his African National Congress have pledged to speed up their building program, the effort has been hindered by anger directed at new homeowners.
Those tensions erupted into violence on April 20, when 150 people barricaded roads with rocks and burning tires near the Johannesburg township of Alexandra to protest housing shortages. That followed incidents in East London and Soweto, where apartheid police massacred hundreds of schoolchildren in 1976.
Mandela's Era
Under Nelson Mandela, the ANC came close to meeting its goal of building 1 million homes in the five years through 1999. Since then, the government has consistently missed its annual housing targets.
The government has pledged to eliminate the 2.4 million-home shortfall by 2014, which would mean doubling construction to 500,000 a year. That would cost a total of 345 billion rand ($49 billion), the Housing Department said.
``Some municipalities have been operating far below what is expected of them,'' because they don't have the necessary personnel and skills to manage housing projects, said Housing Department Director-General Itumeleng Kotsoane.
More than a third of South Africa's 47.4 million people live in poverty, many without access to electricity, clean water and equipped schools.
The waiting list for government-backed homes is about five years, and some people have been homeless since the ANC came to power in 1994, Kotsoane said.
New Target
While extra support is being given to local authorities, the construction of stadiums for the 2010 soccer World Cup further threatens the government's target by reducing the resources available for low-cost housing, he added.
Dissatisfaction over housing may fuel the formation of a new party to the left of the ANC, said Nic Borain, a political analyst who counts HSBC Holdings Plc among his clients.
Under apartheid, legislation forced blacks to live in remote rural areas where jobs were scarce. Many people had to leave their families and travel hundreds of miles to work in mines and factories. The repeal of the Land Act in 1991 sparked a wave of urban migration.
``Government's efforts to alleviate the housing problem are not negligible, but there are so many new settlements springing up'' that its difficult to keep up, said Marie Huchzermeyer, an assistant professor at Wits University's school of architecture and planning.
`Take What is Yours'
Back in Olievenhoutbosch, the 220 government-funded houses, including Mbamba's, were finished in 2005. A local trust used grants to purchase the property, with members paying for the homes and monthly charges for electricity. On Feb. 26, a mob of squatters foiled the latest attempt by trust members to move in.
Local police couldn't guarantee their safety and advised against occupying the houses on the land belonging to the trust called Thathazakho, which means ``take what is yours'' in Xhosa.
People are tired of broken ANC promises of proper homes with running water, said Peter Molelemane, a 54-year-old bricklayer, who lives in a shack half a mile from the trust's houses.
``I've had my name on a waiting list, but I'm not sure how to actually get a house,'' Molelemane said. ``The houses end up belonging to those with money.''
Financial support is coming from South Africa's banks, which agreed in 2004 to make 42 billion rand available for low-income homebuyers by 2008. Less than half of that amount has been provided as banks wait for the government to underwrite part of their lending, said Cas Coovadia, managing director of the Banking Association of South Africa.
Those wrangles have left Mbamba sleeping under iron scraps.
``I've been waiting 10 years for a home,'' said Mbamba, who believes his wife will return when they can safely enter his house. ``I'm angry with the council for making me wait even longer.''

Cheaper solutions needed to housing backlog

By Anel Powell - Alternative building materials could alleviate many of the structural problems at the N2 Gateway development, says Richard Dyantyi, MEC for local government and housing.Speaking at the opening of a two-day conference on innovative building methods on Monday, Dyantyi said: "The conventional system of brick and mortar has proved to be costly and in relation to the rate at which the backlog is increasing, to no longer be a viable option." At a weekend public meeting, Dyantyi admitted to residents of the N2 Gateway development that work on some of the houses was sub-standard. He said work on the second phase would continue once the problems in the first phase had been solved.

Dyantyi said on Monday that the N2 Gateway could be one of the sites identified for a pilot project of alternative building methods.He said structural problems, such as those at the N2 Gateway, were caused by incompetent contractors and inferior building materials. Dyantyi said the government had to work with the private sector to find cost-effective solutions to the housing backlog, estimated at more than 400 000.He said the biggest challenge would be to convince home owners that structures made of steel and other materials were as reliable as conventional brick or timber houses.Alternatives discussed at the workshop included using light-weight steel frame structures, which cost less and can be erected more quickly.John Barnard, of the SA Light Steel Frame Building Association, said these structures could be used for multi-storey complexes, were fireproof, provided insulation and acoustic protection, and could be built in less than a month using unskilled labour.

Hennie Botes, of Moladi Construction Technology, said using alternative building methods would allow for the rapid delivery of quality houses, while empowering the local community. "With housing, we can stimulate job creation."

moladi solves key low-cost housing challenges

By Roux van Zyl Business Reporter
WHO would have guessed that houses could be exported from Nelson Mandela Bay?
Local entrepreneur Hennie Botes, designer and owner of Moladi, has been doing just this for the last two decades, of which five years were spent in Port Elizabeth.
Technically speaking he does not export a whole house, rather the means to build a house within one day.
The concept is based on casting technology. First a mould is built from plastic shutter panels in the form of the planned house and is then filled up with a light-weight mortar.
The mortar takes only one day to dry and is then ready to receive a roof and other finishes like window frames and plumbing.
Botes, a tool-maker by trade, started designing the system in 1986. While building a wall at his house he wondered if it might not be possible to cast a whole wall.
Botes developed a plastic injection moulded shutter system that was strong enough to handle the pressure of concrete.
“However, you can‘t live in concrete – it is too cold in the winter and too hot in the summer. So I had to develop an alternative material. “This material is like Kentucky Fried Chicken, it has secret ingredients,” he laughed. His cementitious material consists of river sand, cement, water and the “secret” chemical admixture.
He subsequently patented and received SABS approval for the entire concept.
Botes felt Moladi addressed the three key challenges in the low- cost housing market, namely lack of funds, skills and time.
The wall forms are removed in sections and can immediately be re-erected on an adjoining site thus speeding up the construction process.
He said Moladi brings the cost of low- cost housing down to about R680/m². A Port Elizabeth building contractor contacted by the Weekend Post this week estimated the building cost of a typical RDP house using cement building blocks at between R1 250 and R1 600/m².
Despite Moladi‘s potential benefits, Botes said it took him a number of years to sell the concept because of a reluctance in the building industry to embrace new building methods, with “outdated building methods, like bricks” still the order of the day .
He markets Moladi mainly to third world countries like Panama where he plans to set up a factory, Mexico, Angola, Botswana and Kenya and negotiations are being finalised with Nigeria, Zimbabwe, Ghana, Sudan, Algeria, India, Indonesia, Sri Lanka, Costa Rica, Guatemala, Ecuador and Venezuela.
He sells the concept as a licence to building contractors and provides support in the form of a business plan while assisting the new licensee to build their first show house as part of a skills transfer process.
Because most of his customers are outside South Africa he moved down to Port Elizabeth to be close to a harbour.
“Although most of my customers are currently outside South Africa, local interest is growing,” he said.
To confirm this belief, Botes recently won a subsidy housing merit award at the Innovation Housing Competition sponsored by the National Homebuilders Registration Council (NHBRC) and Absa Bank.
Looking at the future Botes remains confident.
His vision is to establish an assembly line for constructing houses. This could even see the cost of building lower even more, he said.

Gauteng competes for building material and skills

Gauteng competes for building material and skills
The Gauteng Provincial Department of Housing is considering setting up building material warehouses as an option to address concerns about the possible shortages of building material due to high demand linked to the building of stadia for the 2010 Soccer World Cup. (What a JOKE - there are no skilled artisans!!!!)
Competition for building material is gaining momentum in the building industry and small and medium developers contracted to deliver higher volumes of low-cost housing are concerned that the country may soon run out of building stock including cement, if government fails to intervene on time. This emerged during the Gauteng Housing Stakeholder Workshop convened this week in Nasrec, Johannesburg to present the Department's performance plan for the 2007/08 financial year.
Addressing delegates, Gauteng Housing MEC Ms Nomvula Mokonyane pointed out that both the Provincial and National departments of Housing are already investigating a number of options to cushion small-and-medium size developers from the ongoing competition. “However because Gauteng faces unique challenges, we are looking at warehousing as a serious option” said MEC Mokonyane
MEC Mokonyane also told delegates that the Provincial government is also aware of the current competition between government and the private sector for technical and project management skills. She said the Department of Housing has therefore conceptualized a successful business model in which outside Professional Resource Teams are contracted to provide the relevant skills.
The Department has introduced service level agreements with contracted companies to ensure that professionals with the best skills were commissioned to undertake housing projects.
The MEC emphasized that while the provision of low-cost housing remains a priority, the department will also accelerate the provision affordable rental units. The department plans to convert hostels across all municipalities into affordable rental accommodation, as well as to continue with a pilot project to build backyard accommodation in Soweto (Orlando) and the Vaal (Sebokeng). “Our housing backlog consist of a high number of people who come from other provinces with no intention to settle permanently in the province. We therefore need to make sure, as the provincial government, that we provide them with decent rental accommodation while working in the province,” added MEC Mokonyane.About 60 000 housing units will have to be built every year for the province to have a serious dent on the housing backlog. MEC Mokonyane called on municipalities and government departments, state owned enterprises and other interest groups to start planning jointly in what she referred to as ‘central planning'. She said this (central planning) will address both the housing and infrastructure backlogs with speed. She said housing projects in Ekurhuleni were moving faster because the local Municipality has ring-fenced over R1 billion to assist the Department in accelerating housing and delivery of essential services.

Iranian President Speech Highlights Need for Low-Cost Housing

Iranian president Mahmud Ahmadinezhad has highlighted the need for low-cost housing. In a speech on 24 April 2007 before a joint meeting of provincial governors and provincial directors-general of housing, Ahmadinezhad also spoke of the need to create jobs of the country's baby boom generation. He said xxx. The following is the text of the speech, a recording of which was broadcast by Iranian TV on 27 April; subheadings inserted editorially:
Housing
In the name of God most compassionate, most merciful. [Koranic verse recited] I will submit some issues to you the most important of which is housing. Please note that housing, as a cultural phenomenon in our country is quite different from that of many of these western countries. Housing for us is not just a roof over our heads. In other words [it is not] a place where the owner comes to after doing a days work only to go back out again to resume his life. Housing for us is a place to live, to development, to have security, to be constructive. It is a place to establish an important institution called the family. You see quite palpably, what beliefs people in our country have on accommodation across generations. Unfortunately, and despite the fact that the government is charged with providing housing to all strata of society today, and despite all the attempts that have been made so far, a clear and coherent policy does not exist. The situation has so developed that for a certain few people who are now in possession of housing would otherwise not have been able to afford a place now. For many others a substantial part of their livelihood has to be sold or pre-sold so that they can provide a basic minimum of accommodation for themselves.
This is neither in our constitution nor in our culture. The potential of our country should allow us to change this situation. The reality is that our country possesses the necessary potential and capabilities of the nation. The factors that are essential to the housing include land. Today, one of the most important issues is land. Between 25 and 90 percent of the final price or selling price if you will, is dependant upon land or the situation of land and terrain. Its share of the price formation is high. Then there is the question of building materials and workforce and sources of finance. For each and any of these we need to formulate some kind of solution. As far as land is concerned, I shall relay one sentence to you that probably encapsulates all the issues therein. Other than the armed forces, who have their own facilities and who if they wanted to use the rights afforded to them to help their own personnel can benefit from this law. The remaining land which is available, be they natural resources or those for dwelling or for co- operatives, whoever has come by some land through the government then they have to remember that this land belongs to the government and the government alone.
That someone should come and say: This is mine, this belongs to the electricity company, this belongs to the finance department, and this belongs to that department and so on. We will not have any of this. From the start when I announced it, land, in general, all this land belongs to the government. Now, if you want to hand it over for construction, the land that belongs to [government] bodies or companies, give their employees priority. That is the first point.
Second, if we remove the cost of the land from the cost of the finished the product, it would be a big help. It was decided that, from now on, the land will be a long-term leasehold. The land belongs to the government and the government leases it out.
The second [as heard] point is the [construction] material. In other words, the second factor is the material. Go and set up a committee on material and work on it.
Provinces that have border markets - in the south and north - and can import, should import the required ironware without limit, because iron and cement are two main types of material for the construction of housing. The import of these is allowed. There's no limitation. Not customs, no one should impose limitations. Of course, standards and so on should be maintained. In other words, announce this and allow people to import. There are no tariffs in border markets. In other words, multitudes of tariffs are not imposed as they are elsewhere. Go, get it and import it; these two construction material. Ironware for use in construction, don't allow them to import steel under this guise. No! Steel girders and steel rods for use in construction and door and window fixtures are the only [items allowed]. For now, for five, six months, [also] cement, either the clinger [as heard] or cement. After five, six months, God willing, our own domestic cement will suffice, because new plants will come online, God willing. That's as far as the material is concerned.
As to the human resources - well, one of the friends here pointed this out: We have this. Sit down with vocational training [department], and put some of your provincial resources at their disposal - it's in the regulations, I'm just underlining it.
Hold some quick courses and certify them. The plan is already prepared by the vocational training [department]. Give certificates, labourer, grade III labourer, grade II, mason, plumber, welder, whatever; hand it to them. This can be an extensive programme in each province and can be very constructive. Financial resources, these resources are now at your disposal. In other words, you can direct the councils, the ones you have created for the banks, similar to the percentage that went for job creation. Although, and in spite of all your efforts and the banks' efforts, it did not, that is to say the twenty thousand odd billion tomans did not perform so well, and we have to makeup for it this year. I will tell you about it later and we will give a part of it to housing. There are also subsidies. I will explain the details of it in due course. I should flag a few things for your attention; one is the preparatory work. Right now, the provincial governor is responsible for everything. You are the head of the taskforce. You have to take decisions and that's that. You have to prepare quickly. It's up to you who does it and how they do it. But bring the costs down. We can charge the public for the preparatory work. In low-income areas, these charges will be paid in part by the ministry of hosing and you can allocate some provincial funds for this purpose and recover the costs form the beneficiaries over time. You are allowed to do this. Get the money back in instalments, like over 5 or 10 years. It will be 200 tomans a month. The utility companies should come now to do the groundwork. It's up to you, you can tell them come do the work fast, and get paid for it in instalments. Allocate some provincial funds; charge the public for it, whatever you have allocated from provincial funds get the money back in instalments form the beneficiaries. These things are possible. Find formulas to fit local situations in each town. We are not going to give a formula for the entire country.
Your mandate is to house the population starting from the lowest denominator. This means you should start form smaller towns, give more incentive in smaller towns, provide higher subsidies in smaller towns. We will also put you in charge of the subsidies. You can say in a town the loan I provide will be at 4%, and in another town, it will be at 10% and still in that other town, it will be 12% or 14% or whatever. It's up to you. You have to move towards decentralization. You are a regional manager. Pay close attention. The over arching policy is decentralization, you are regional manger and you have to manage things so that this decentralization will happen in your province. You are both the head of the housing council and the head of the article 55 commission. Use this position well. In some towns, you can increase the allowable building extension ratios. We have allowed for up to 300% in the regulations. I don't think you will need more than 300%. Sit down; decide if you need to change the usage [of land]. It's up to you. You can convene a meeting of the article 55 commission and change the usage or grant building extensions. In rural area the ministry of agriculture will fully cooperate. You can have a meeting and change the usage. You can say in such and such place the land is agricultural land and the harvest is inferior. You can change the usage [of the land]. After all, we need housing. You should be mindful of urban sprawl, because later on, the cost associated with that will be higher. These are urban planning issues.
You should then set up a special committee. The committee should benefit from the services of a number of urban developers in your province as advisors. These advisors should be expert, honest and have an Islamic and national outlook to urban development. These advisors should draw the plans and you should act accordingly.
I am asking you to carry out a job on a fast-track basis, and I will explain why. Urban development is in your hands, unless, you would want to make a major change; then the work would be referred to the Urban Development Council. You have however the power to change the use of properties and lands; or allow extensions. This is in your hands. So lands no matter which body owns them or where they are located - inside or outside the city - are under your control.
You have the financial resources and you can quickly organize the manpower. We have decided at the national level to import some construction material, such as iron beams and bars, which we have some shortage. Fortunately, we do not have problem with the production of other construction material; and they are produced more than what we need domestically, such as sanitation amenities, bricks and the like. However, if there were any shortages, you can easily grant loans for the construction of Hoffman furnaces to produce as much bricks as you like.
You can manage the work and succeed. You should be careful not to mix a number of issues. The housing situation in our country is as follows: About 78 per cent of the people live in their own homes; and about 22 per cent do not own houses. They either are tenants or live with their parents or others, i.e. two or three families live in one residential unit.
Today our society is moving in a direction where every family wants to have its independent residential unit; or if there are communal houses, there is some sort of boundary separating the families. For example, in the past, there were some rooms around a yard and the father and his children used to live in each of the rooms. Now the same families live in apartments. [For example] four apartments are built on a plot of land and the children live close to their parents. There is no problem with this; and the system works better for these people as compared to those who live far from each other.
It seems that everyone wishes to have independent residential units. In other words, we have about 22 per cent of people demanding houses; i.e. 22 per cent of 17m [households]. It is 17m now, right? We have 17m households. Some 22 per cent [of 17m households] would mean that there is demand for 3.5m residential units.
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This is one issue. The other issue is the dilapidated areas of cities and villages that need to be renovated. There are 5.5m such residential units. So altogether, there are about 9m units. There are also about 700,000 to 800,000 new families formed every year. If we want to address the accumulated demand and the dilapidated areas within ten years, we should create the capacity for the construction of 1.7 to 1.8m residential units every year.
The more houses we build the better. Some are not interested to work on the dilapidated areas. We should therefore plan to encourage investors to work on these areas. If we create the capacity for the construction of 1.7 to 2m residential units every year, the pressure will decrease and the housing market will calm down.
This is while one-third to one-fourth of the work should be done in villages. If we build between 300,000 to 500,000 residential units in villages, the problem would be settled. We have set the target of granting loans for 300,000 residential units this year. Of course, some finance the cost of construction themselves.
I told the officials at the Ministry of Housing and the Housing Foundation, and I will tell you as well, if this money is quickly used up, we will increase it to cover 500,000 residential units. The problem should be solved within four to five years. Why should there be 2 to 2.5m dilapidated houses in our villages? Lorestan incident led to the destruction of 40,000 houses. We had to spend hundreds of millions [of tomans] for the reconstruction of the houses. Apart from that, human casualties can never be made up for. When we lose people, we suffer as long as we are alive.
This is possible. In the council that you will set up, you should have two specialized committees, one for villages and one for cities. You will also have certain committees for manpower, construction material, financial resources, urban development, etc. You may create these committees and proceed with the work.
If you manage the work properly, you can reduce the construction costs too. There are some unnecessary costs incurred. In some places, people are taxed, without any reason, several times higher than the normal rates. It has been written in the law that taxes and levies should be approved by the Interior Ministry. However, the law is not always practiced. There are some parts in the country where taxes are introduced and approved by the governor and the interior minister is not informed at all.
You should brief governors and hold meetings with the [local] councils and mayors. You should explain the importance of the work to them and try to involve them in the work. When there is mass construction, local government revenues will increase as well. There is no need to multiply taxes with various excuses. I have heard that in some cities the taxes have increased 60 fold. I don't want to name the places. But this is oppression. It is not right to impose such taxes on people.
It is however the responsibility of the Interior Ministry to stop such actions. Astronomic rates of taxes are imposed on people. The people deserve to have some place to live in. Taxes in some places exceed the cost of construction. This is not good, is it? Such issues should be under control.
Concerning lowering prices, we believe that every province should act independently. We do not want to act in a centralized manner. You should go and work with factories that can introduce prefabricated material or new designs that decrease the weight of buildings. A province that will have at most two-storey buildings for the next 100 years would not need heavy and expensive plans. We can observe how some provinces show that there is not going to be [a need for] six-storey buildings there in near future. Their people believe that the sixth floor is no place to live.
Don't make a hovel and force thirty people to go inside one unit; and claim that you have built housing for people. You [will] destroy their culture and whatever else. Try to the extent possible to provide people with houses or at most construct three or four flats in a building. Those occupying such flats need to know each other to accept to live there. They should be brothers, sisters and cousins to be able to live together. There should not be cultural differences among them so that their culture and privacy is protected.
These issues should be taken into consideration. You can however build inexpensive houses. Some houses may also be developed in dilapidate areas. You may say for example that this dilapidated area is entitled to a 120 per cent extension [building permits issued based on a ratio of land to building], but we will grant a licence for the construction of 180 or 300 per cent of building area. The municipality may then levy taxes or provide incentives as encouragement for people to replace old rundown houses with new and bigger ones. However, you should bear in mind that from here on out you should not transfer the ownership of the land.
By the end of the year, I want you to get to a point where you could tell a young person, who has for example graduated and has completed his military service, when he will have a house of his own. You can do this. You can tell the person that your plot of land is there and you will have your own house in two or three years. These are all possible. Don't think that it is not possible. We should not allow a person to build 300 or 500 houses and sell them to the people. When you grant land on a leasehold basis, you give it to an individual. So a person representing a cooperative should provide you with for example 150 names and you should enter these names into your computer to indicate that those 150 people have received their share [of land]. Then, in the name of those 150 people, you hand over the plot of land to the cooperative. You should set preconditions.
In the beginning, in preparation, you have to go and build the schools and the mosques and so on. It shouldn't be the case that you ask others to build it, with them saying, 20 years later, we've come to build a mosque. The people don't have a place to congregate, to worship, and then they say, We want to build it now. It can be done. Bring these under the heading of preparation. But don't allow heavy costs. Low costs. It really can be done. If you dedicate time to it, these things can be done. There are people who will invest in these sectors. Of course, in rented [housing], they'll probably be more takers. [But] In this arena, too, they're ready to invest. Set a reasonable profit for them, so that they'll take on the construction of a cooperative. Supervise it. Don't let the past repeat itself. Hundreds of cooperatives collected money from people. Went away. Weren't able to finish it at the agreed cost. There were irregularities, abuses. Now the people are left in limbo. They're neither landlords nor do they have the money in their hands. They've given the money and it's gone. They don't have a house either. Sit together and [discuss this]. If you have any questions, raise them. I'll allocate time myself, here, at the Housing Council, so that we can answer you.
Contrary to the views of some friends - and no doubt their views have changed now, at this meeting - you can set the engine of housing rolling this year. Housing is something that's different from a textile plant, a petrochemical plant, a this-or-that plant, where you have to set the industry rolling. Then, you have to go and be connected up over there and connected up over here, and so on. Let me tell you, anyone of you who is able to bring in foreign investment, too, in the field of construction or new technology, go ahead and do so. The Housing Council will just give you the authorization. You will say, we want to sign an agreement with this or that group in this or that country, so that it will get a factory rolling here. If it's kept informed, it will give you the authorization. That you should imagine that a group of people are sitting in the ministry of housing totally devoted to the issue of housing round the clock, running around and ready to solve all these issues, this isn't even possible. Even if they are sympathetic people - and, God be praised, they are - is such a thing even possible? This is Iran after all. Iran is very big. No-one has the sense that I have now of how big Iran is, because everyone [else] understands it on paper, whereas I've gone and seen it with my own eyes. We have seven, eight, ten provinces that are each the size of a big a country. This is the way you need to think. Each one of you should think that you have a country. You have to think and decide on this kind of scale. You shouldn't think that a bunch of people are sitting and taking care of all the country's affairs, big and small, from our villages to here, and we, for our part, can keep an eye on things. No! Imagine that your province is a country and you're its manager, in charge of everything. Manage things on this basis.
You can use these quick-yielding facilities to produce the material or even to produce parts. It's at your disposal after all. Tell them to set up a part-making plant; concrete-beam making; pillar making; reinforced concrete making; mesh making; whatever. You can give part of these [facilities; i.e. loans] to them to set up this sort of thing. Of course, you have to keep an eye on the quality too. I want to underline again, all the water, sewerage, and communications - bring all of this under the preparations committee. Everyone must consider this as his or her own [work]. A movement has to be set in motion in the country.
Don't say, We don't have it. In this Tehran, for example, there is both a great deal of land in the city itself and outside, in the surrounding townships. Don't go and say, We're going to design a township - with just the design and preparation taking 10, 20 years. In these 20 years, Tehran's whole shape has changed. The demand and the models for housing have changed. Now, to be just on the point of saying, Well, what should do now?
Things have to be done quickly. This is why the governor-general steps in, because the governor-general is the head of the province and has the authority. He has the bodies under his jurisdiction. And the Housing Ministry fully supports the governor-general. You have to go and do this. Everything is in your hands.
Of course, as I said, I hope you'll pay sufficient attention to indigenous planning and architecture. My expectation is that, by the end of the year, we'll see that a heavy train is on the tracks and is advancing at a good speed. In other words, a good outlook for the future of housing should be placed before the people.
We can't have this where a young person doesn't even know what's happening now. What's going to happen. Bunches of people turn up. They strike some kind of deal with some of the public and non- public bodies, with people who provide financial resources and so on and so forth. Then suddenly they produce a 30 per cent, 40 per cent, 10 per cent, 60 per cent fluctuation in the housing market. Someone has prepared everything, sold everything he had, is in debt, has sold his wife's dowry, has made things hard for his wife and kids, has put some money together, is going to go and sign the contract tomorrow and get the house. Suddenly, it jumps up by 30 per cent. He's at his wits end now. His life will fall to pieces. We have to do something to create calm. Housing is a place for calm. Now, it's turned into a cause of anxiety for many. However, housing is for calm, for living and calm. It should make people calm. Now, it's turned into a cause of anxiety. You can do it. You have to consider yourselves in charge.
Employment
The second issue is the question of employment, which we discussed together. The issue of employment is very important. Bear in mind, in particular, that people born in [13]59, 60 to 63, 64 [1980-85], when the population growth was 3 per cent, 4 per cent, 5 per cent, are now entering the job market. They've finished their studies, their military service. Now, they're entering the job market. In other words, the demand is going up in an accelerated way. This is the way you have to look at it. Follow this through. Look at things upstream. Many of the units that you've worked for are now getting up and running. A new company has to be created to collect their products, to give them raw material, to take care of marketing. If they need to export, then, export it. Put this kind of support on your agenda this year. They'll come [to you] later and they may, God forbid, fall down.
The next point is the issue of the payment of salaries and benefits. This year, as you know, salaries and benefits will be concentrated in the Economy and Finance [Ministry]. This is a big new decision. The person in charge of a province's financial resources is the governor-general. Now that we've put the Plan and Budget at your disposal, it's you [who is in charge].
We've had one problem up to now. Funds for current spending are put at the disposal of bodies. Costs other than salaries and benefits are paid. In the last three or four months of the year, everyone comes and says: We don't have salaries and benefits. Constant deficits, [budget] addendums - the volume of current spending is going up rapidly. This is very dangerous for the country. We'll all fall down. By 20 per cent, 30 per cent each year. What's going on? We'll soon reach the point where there'll be no money left for development work. There'll be no money for policy making, for subsidies. You have to manage this.
Salaries and benefits are put at the disposal of [changes of] - the Economy and Finance [Ministry] pays it. All the increases and so on go there. They'll deduct it from your funds starting now. The amount that's left in your hands, you need to manage. Whatever you save, part of it will be at you disposal again for giving bonuses and providing services to your employees.
I think it can be done. It is possible to consume little and produce a lot. It really can be done. Some of our systems have become very profligate. Nothing is accounted for. Money for their cars, money for their petrol, money for their water, electricity, fuel, repairs. Never mind about all the stationery - no one even thinks pens and paper are worth anything, although if you add it up for the whole country, you'll see that it adds up to 40bn, 50bn tomans.
A manager - if you can put someone there who thinks well, who knows the administrative system well, who can go from body to body, look at the expenditure and cross things out, saying: No need for this, no need for this, no need for this.
We should give priority to things that support our mission. Whatever is not directly related to our mission should be put aside. Nothing will happen. We should experience this for one year. We should put this on our agenda and pursue it seriously.
We ask some organizations about the number of their personnel and they don't know. Neither the Ministry of Finance and Economic Affairs nor Plan and Budget [Organization] know the exact number of civil servants. Even [government] organizations do not know how many people work there.
We once asked the Ministry of Education to let us know how many people work there. In one report they presented ten different numbers. We asked the same question from another ministry, it gave six different figures. When I review your reports at the provinces, I see that the figures you give on the population of the province on the first page are different from that of the second or eighth page. You should revise these figures and pay attention to the details. This is possible.
All those who receive wages from the government should be registered. Mr Danesh [-Ja'fari, minister of finance] should seriously pursue this issue from all organizations and he should start from his own ministry. There should be an extensive data bank. It should be clear who is working at the electricity office in Birjand today. We should have the information to be able to plan. We should also know how much each person is being paid.
You are responsible to ask organizations about their current budget. You should see how much of the money is being paid on wages and benefits. You should allow that money to be kept at the treasury and the remaining part should be accounted for. You should know why those amounts are spent. Why should an organization spend 170,000 tomans on the recreation and welfare of its employees, while another organization would not even have 30,000 tomans for the same purpose? Is there a difference between employees? Employees are the same. This person is also a human being. He also has children and stomach. He also needs welfare. Prepare accurate statistics and control the costs, so that God-willing the issue would be solved.

Shoddy builders in trouble - Power Construction

EAST LONDON - Against the backdrop of housing delivery protests, building contractors in the Eastern Cape who deliver sub-standard work may have met their match.The Housing and Local Government Department is determined to force such contractors to fix their shoddy work.Power Construction is already being forced to fix its workmanship at both Maclear and Ugie housing projects, department spokesman Mbulelo Linda said yesterday.Linda said Power Construction was given until July to rectify defects.Arcus Gibb, the consulting engineer for Power Construction, responsible for foundation design and supervision, is fixing defects at Ugie.The moves follow several site visits by departmental officials and Elundini Municipality after complaints relating to quality.In response to the complaints, the department compiled a report listing defects and recommendations.The department last week announced sub-standard work in housing projects would be investigated and the contractors forced to effect repairs at these projects.This announcement comes amid housing delivery protests throughout the province.Yesterday Linda said developers bent on shoddy work would be tracked down."Only Power Construction has been identified so far. We are going to look for others in East London, Port Elizabeth, Humansdorp and other places," he added.The constructors would have to do the repairs at their own cost. "It's only when they are untraceable that the department can take funding from the (housing) budget," Linda said."Government cannot afford to carry the costs of repairing shoddy workmanship when it has to deal with huge backlogs," he said.Linda said there was no funding for new projects in some municipalities. The only available funds were those with which to restart stalled projects.The department planned to rope in the National Homebuilders Registration Council to register contractors and do follow-up inspections on their work. The departmental report on the Maclear housing project indicated that after completion of the first batch of houses there was a problem in the bulk water supply to the project.The bulk main burst and beneficiaries could not be moved into the houses that did not have water.The municipality did not have the budget to effect repairs running to around R120000.The report also said Power Construction should have handed over the keys of completed units to the municipality. This was not done and the units were subsequently vandalised.The vandalism mostly affected windows and window fittings. Doors and plumbing were less affected.Other findings of the site visits to Ugie and Maclear included issues with foundations as well as exposed water supply and drainage installations which caused soil erosion."Cracks are evident on most of the slabs, which might indicate a problem with the foundation design or construction." Drainage of basins is inadequate with the end of drainage pipes simply buried in the ground outside the house. This will likely result in blockages as soon as the wash basins are used, the report said, adding that some septic tanks were found to be blocked or missing.