State housing payment shake-up may worsen backlog

Thousands of Eastern Cape families waiting for state houses could face additional delays after the province changed how it pays for housing — a move which could cripple emerging contractors and slow delivery. The Eastern Cape department of human settlements has introduced a new payment system under which contractors will be paid only once housing units are completed, rather than at various stages of construction. The province has a housing backlog of about 38,000 homes.

Eastern Cape human settlements spokesperson Yanga Funani said it would require R11bn to eliminate the backlog. The department says the change in the way invoices are paid is intended to address longstanding problems with incomplete projects and improve accountability. Contractors, however, warn that it could place severe financial strain on emerging developers, threaten jobs and delay the delivery of houses to beneficiaries.

A number of emerging developers criticised the new payment model, saying it would worsen cash-flow challenges and make it difficult to complete projects. Historically, contractors were paid at various stages of construction. Developers said those payments enabled them to buy materials, pay workers and continue construction while projects were under way.

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The Dispatch has seen correspondence dated April 30 in which the department informed service providers and implementing agencies that the new payment system would take effect from April 1. The change comes against a backdrop of persistent complaints of delayed payments by government departments and municipalities. Several contractors, speaking on condition of anonymity for fear of being victimised, said invoices remained unpaid for months.

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