Housing The Homeless
We were asked to investigate what, if any, options were available to a concrete brick and block firm and a builder’s hardware company. Both were technically insolvent with a combined loss of R2m.
At the time the huge Century City project in Cape Town was starting and so we approached the main contractors to supply product. When we did the costings, we were unable to match the much larger suppliers so we were back to finding an alternative to liquidation and the resulting loss of jobs.
After exhausting all conventional solutions, we looked, as a last resort, at low cost housing because the Government had undertaken to deliver a million RDP houses per year. Initial research revealed that Government had set aside the funding required, but that delivery was painfully slow.
We knew the money was there, we knew there were millions of poor people squatting in squalid shacks waiting for the promised houses, we knew that a solution would lead to urgently needed job creation, so we decided to find out how it was supposed to work.
So off we went to one of the architects of the scheme. Every indigent citizen could apply for a housing grant based on a means test. He could then apply for a plot of land that formed part of an approved RDP project where the local municipality received the total grant money for the entire project. The municipality was supposed to co-ordinate the entire project, some of which were to deliver 5000 of these houses. The scheme called for so-called 'emerging contractors' from the community to build the houses, thereby creating jobs in the squatter community.
The scheme allowed the beneficiary to upskill himself via building skills courses or have the house built for him. It’s interesting that very few went this route, apparently because the commonly held view was that they had been promised a house and that’s what they wanted.
Once the house had been built the title deeds would be handed to the owner, who then became the legal owner of the property. The intention was that with a tangible asset as security, even an indigent person would be able to approach a bank for a loan, thereby getting a real opportunity to get out of poverty.
The scheme was well intentioned, but it was glaringly obvious that the delivery mechanism (i.e. the municipalities) didn’t have a cooking clue what to do. Corrupt local counsellors demanded money from beneficiaries, anyone who had worked on a building site (even as a labourer!) could for a fee be registered as an emerging contractor etc., etc. It’s no wonder it was a disaster!
We had also discovered the interesting fact that nearly 70% of the total grant went on materials and, further, that the most important factor was the size of the house. The situation at the time was that municipalities were handing responsibility for delivering RDP projects to project managers whilst retaining the inspection sign-offs and payments functions. Unfortunately, this led to an influx of incompetent, crooked 'project management' firms who happily liaised with corrupt councillors to access funds and disappear without delivery of any sort in many cases.
We decided to put together a project management model based on reducing materials prices by buying in bulk from the manufacturers. This meant we could offer a bigger house, which would mean that we could acquire a pilot project. We decided to use seasoned building foremen and supervisors to upskill and monitor members of the community who wanted to work on the project. Those who had little in the way of skills or capacity we formed into little companies that only dug foundations. We formed similar such companies for each stage of the entire process of building what was a basic house.
We then developed a materials handling system as we had seen the utter chaos that ensued when all the materials for the job were handed out at once; they simply disappeared and the houses remained incomplete. Our solution was to have an on-site materials store with 24-hour security from which we issued the exact number and amount of materials required for the work that needed to be done for that job for that day i.e. the bricklaying company received the exact number of bricks and quantity of cement.
We did our pilot project of 200 units in a rural area. We got the project mainly because we could provide a larger house, but also because the municipality was only too happy to handover their RDP responsibilities operationally whilst at the same time taking credit for delivering housing to their community! We also paid some serious school fees and realised how critical it was to have an efficient and effective skills training and supervision team. The company staff performed this function but we realised that to undertake the larger projects of 1000 units upwards we would have to outsource and manage this critical area. Another headache arose after the beneficiaries took occupation of their house; we found that corrupt local councillors were encouraging, for a fee of course, the beneficiary to "sell “their house. The counsellor would get the title deed from the beneficiary, pay them a nominal sum and then transfer the property into one of his friends or family's name. He would then put tenants into the house and pocket the rent every month. The beneficiary would move back into a shack, squander the money very quickly, and sadly return to his original state of extreme poverty. We resolved this by involving the media and this brought the corrupt politicians into line by the fear of not being re-elected.
We had proved that control of all aspects of the material supply function was critical, as was the formation of lots of little companies from the community to work on their own community project. It was pleasing to note that, armed with our certificate of competence and reference letter, many of them could continue after the project. We also, via daily interaction with the financial officials and their building supervisor who signed off every stage of every house, to ensure weekly payment to our community contractors (we thought this sounded much better than emerging contractors!)
We then expanded into local projects of 1000 units and then over a period of 5 years the company was successfully undertaking projects nationally, with the largest being a 5000 unit in Gauteng. We had started by merging two technically insolvent companies into 1 entity which had an initial turnover of R1m and an assessed loss of R1,5m. After a 5-year association, the company had a turnover of R70m and was highly profitable. This success was recognised by it being a finalist in the prestigious Sunday Times Non-Listed Company of the Year award.
It was sad to see that corruption increased exponentially in this critical industry area with the result that it has basically ground to a halt. However, the mixture of sadness and anger we still feel about the situation is more than offset by the immense pride and joy we experienced at being present at the handovers of the houses to often elderly people who had never had a 'proper' house before. It was a privilege to have been part of something so meaningful.