Budget Cuts Leave Provinces Struggling to Pay for Completed Housing Projects
Several provinces are battling to pay suppliers for completed housing development work following significant budget cuts to key housing grants.
Funds were slashed from the Human Settlements Development Grant (HSDG) and the Informal Settlements Upgrading Partnership Grant (ISUPG), which are managed by the national Department of Human Settlements. The department is responsible for ensuring full grant expenditure by the end of each financial year and reallocates budgets based on provincial spending reports.
Gauteng saw a R300 million cut to its HSDG, the Western Cape R200 million, and the Free State R50 million. In addition, R100 million was cut from the Western Cape’s ISUPG and R150 million from Gauteng’s. Meanwhile, the Free State received a R50 million top-up for its ISUPG, and the Eastern Cape, Northern Cape, North West, KwaZulu-Natal, Limpopo, and Mpumalanga received additional funding for either the HSDG or ISUPG.
The national department cited underspending in the first half of the financial year as the reason for reallocations. However, the affected provinces argue they were on track to fully utilize the funds by year-end.
“You cannot claim ‘underspending’ in the second quarter. Departments have 12 months to spend their budgets,” said Western Cape Infrastructure MEC Tertius Simmers.
The Free State’s Human Settlements Department also criticized the funding model, saying the uniform quarterly disbursement approach doesn’t align with the actual timeline of infrastructure projects, which tend to ramp up spending in later stages.
By the end of the second quarter of the 2024/25 financial year, all three affected provinces had spent less than 45% of their allocations. The Western Cape had spent only 41% of its HSDG and 21% of the ISUPG, which the national department used as a basis for reallocations.
However, spending improved significantly by January. The Western Cape had spent 80% of its HSDG and 57% of the ISUPG. Gauteng had used 67% of its HSDG and 62% of its ISUPG.
Despite submitting a business plan approved by the national department, the Western Cape’s funding was still reduced. “We’ve continued spending in line with our plan,” said Simmers. “By March, our expenditure had reached 84%, showing we’re on track to spend the full amount.”
The province now faces R243 million in unpaid invoices for certified work across at least 14 developments. Simmers has requested the national department to provide documentation justifying the cuts but says no response has been received.
Gauteng’s Human Settlements MEC Tasneem Motara echoed similar concerns, stating that while Gauteng was also on track to spend its full budget, the reallocations have hindered the department’s ability to pay for completed work. The shortfall will now have to be addressed in the new financial year, reducing the number of housing units that can be allocated to developers.
