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The 2022/2023 budget and its relevance to human settlements

Isandla Institute | 2022-03-10 | 1054 views

Finance Minister Enoch Godongwana tabled the 2022/2023 budget on 23 February 2022. What implications does the 2022/2023 budget have for human settlements, and informal settlements and backyard housing in particular?

The allocations to human settlements, specifically the conditional grants to provinces and municipalities, including the Human Settlements Development Grant (HSDG), Informal Settlements Upgrading Partnership Grant (ISUPG), and Urban Settlements Development Grant (USDG) appear to have only included inflation-related increases over previous budget allocations, as they are on average around 6% higher. While R398mn has been added to the HSDG specifically to rehabilitate houses affected by natural disasters in KwaZulu-Natal [1]; and R548 million is ring-fenced to upgrade human settlements in mining towns with significant informal settlement challenges in six provinces, these inflation-linked increases mean that there is no proportional increase in the budget share for human settlements purposes.

It is good news that that this share has not been reduced amid budget cut pressures, however it is worrying, particularly considering COVID-related impacts on housing vulnerability, employment, and the low economic growth environment, that the more complicated conditions now present in the human settlements context are not being met with concomitant increases in funding to address these new circumstances.

Over the 2022/23 – 2024/25 MTEF period, the National Upgrading Support Programme (NUSP) target is to assist provinces and municipalities with town planning and township establishment processes to formalise an estimated 900 informal settlements and upgrade 180 000 serviced sites with access to municipal services. This appears to be an ambitious target, and the concentration on serviced sites is reductive in terms of the necessary broader socio-economic focus needed in informal settlement upgrading on e.g., placemaking and sustainable livelihoods.

This is an element of the Presidential Employment Initiative - which provides unemployed youth with support through a combination of job creation, job retention and income and skills support interventions – and focuses a portion of the Neighbourhood Development Partnership Grant (NDPG) on placemaking in, and upgrading of, informal settlements. Additionally, the municipal ISUPG requirements include a sustainable livelihood implementation plan, as part of the informal settlement upgrading plan for each settlement. However, there is no mention of a requirement for social compacts or agreements concluded with communities outlining their role in the upgrading process. Thus, there is somewhat of a disconnect in grant funding aims, and a need for more linkages between these aims to create a more holistic upgrading funding focus.

When one looks at the 2022 Division of Revenue Bill (DORB – or DORA once assented to), the required USDG outputs now include an increase in municipal bulk and link infrastructure, and construction/provision of internal engineering services, including to “backyarders and densification overlay zones”[2]. This is an important step in acknowledging the need and obligation to provide engineering services to residents in various backyard rental contexts.

There still does not appear to be clarity on whether emergency housing grants can be used by municipalities towards providing emergency housing to people living in informal settlements - on land not suitable for upgrading – that have resulted from land invasions as result of the increase in housing vulnerabilities during the COVID-19 pandemic. This is particularly pertinent in terms of the imminent lifting of the National State of Disaster, which may once again result in municipalities renewing eviction efforts.

Given the creation of standalone provincial and municipal informal settlements upgrading grants, National Treasury has highlighted in the current DORB/DORA the need for review of the human settlements grants that used to include allocations to informal settlement upgrading, to determine programmes to be funded in place of the significant informal settlement upgrading elements of those grants.

However, funding needs to be accompanied by effective and efficient expenditure. Issues of concern, raised in a parliamentary review of the National Department of Human Settlements (NDoHS) 2021/22 Annual Performance Plan, included a reduction in the number of housing units delivered; major backlogs in the transfer of title deeds; high usage of consultants and related questions of internal capacity; and the underperformance of provinces and municipalities in meeting ISUPG targets, and lack of adequate support to these underperformers [3]. One of the major concerns is the high degree of underspending of capital expenditure-related conditional grants in some provinces and municipalities. NDoHS data indicates low USDG expenditure performance in 2018/19 and 2019/20, and 39 municipalities (18% of all municipalities) spent less than an average of 70% of their total cumulative Municipal Infrastructure Grant (MIG) allocations over the 2017/18 – 2020/21 period [4]. Only 53% of municipalities spent 90 to 100% of the MIG over the same period. Inadequate planning and budgeting result in poor expenditure, and there have also been concerns about the quality of expenditure.

In conclusion, while the 2022/2023 National budget contains increases in allocations that can directly impact the lives of low-income and informal settlement residents, these are inflation-linked increases, and the quantum of funding does not necessarily take the more complicated current context into account. Socio-economic aims of the various grant instruments could also be more closely aligned. It is vital, however, for the ongoing institutional and capacity issues in certain provinces and municipalities to be resolved, together with a continued focus on co-production and sustainable informal settlement upgrading interventions, through the increased use of social compacts/agreements and a sustainable livelihood implementation plans. Improved quality of life for informal settlement residents can only be made possible through meaningful community participation, municipal officials well capacitated in both the technical and social aspects of upgrading, and partnerships between all stakeholders, including NGOs and the private sector.

[1] National Treasury. 2022. Budget Review.
[2] National Treasury. 2022. Division of Revenue Bill.
[3] Parliament. National Council of Provinces. 2022. Select Committee on Cooperative Governance and Traditional Affairs, Water and Sanitation and Human Settlement: National Department of Human Settlements 2021/22 Annual Performance Plan. 28 May 2021.
[4] South African Local Government Association (SALGA). 2022. National Conference 2022: Commission 2 Briefing.

Image Credit: Isandla Institute / Eric Miller. Photo taken in Mfuleni

Slum upgrading remains the most financially and socially appropriate approach to addressing the challenge of existing slums. UN Habitat (A Practical Guide to Designing, Planning, and Executing Citywide Slum Upgrading Programmes 2015 (PDF), page 15)

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