Stones unturned in crackdown on housing graft
Andile Sokomani

ON THE face of it, the government appears to be cracking down on housing fraud. According to recent media reports, more than 50000 public servants who appear to have been receiving low-cost houses irregularly have been identified, and the state is in the process of bringing them to book. The Special Investigating Unit has also started investigations into an estimated R3bn fraud committed between 1994 and 2004 by unscrupulous housing developers and contractors. Does this therefore suggest the government is nipping the problem in the bud? Unscrupulous public servants, private developers and contractors are indeed part of the problem, but they are not the exclusive culprits. For a start, the risk posed by private developers is no longer significant. The increasing emphasis on municipalities as developers removes the private developer from the payment transaction chain.

As a result, municipalities are increasingly taking on the risk of fraud and corruption associated with developing low-cost housing. This is evident from the numerous reported instances of housing fraud and corruption perpetrated at municipal level. Antifraud crackdowns are yet to deal systematically with this.

The model used in investigating housing fraud and corruption by public servants at national level could prove effective in identifying unscrupulous employees at local government level. In this case, investigators had only to run the electronic government personnel salary database against the national housing subsidy database (NHSDB), which generated more than 50000 cases of suspected housing fraud and corruption by public servants. A similar exercise with municipal employees in all 283 local authorities may present instructive findings. Housing fraud probes at municipal level are mostly ad hoc and narrow in focus. They tend to be strictly restricted to those local authorities where fraudulent activity has already been uncovered.

The numerous instances of reported low-cost housing fraud at municipal level should be enough to spur a national probe into the affairs of local government. This would not be the first time localised corruption triggered a comprehensive national investigation. The irregularities uncovered during an audit of KwaZulu-Natal provincial government employees, who were accessing housing subsidies, were enough to urge the government to institute a nationwide probe against public servants. This yielded more than 50000 suspected cases of fraud and corruption. More than 30000 of these are now being investigated for possible prosecution.

Considering the increased risk at municipal level, it is crucial for the government to take the next logical step and look into the affairs of municipal employees.

Perhaps the most serious risk is that posed by low-cost housing beneficiaries employed neither in the public service nor in local government. Numerically, these individuals are far more significant than municipal employees, and the cumulative effect of the fraud is therefore likely to be more devastating. Once again, applying the model used to investigate private beneficiaries, who were fraudulently accessing social grants, may present illuminating findings. This involved comparing the social pension system against other private databases such as the Unemployment Insurance Fund , which revealed nearly 500000 suspected cases of social grant fraud by private beneficiaries.

A similar comparison of the NHSDB against databases such as the South African Revenue Service (SARS) may yield intriguing results. It is already fairly easy to verify subsidy eligibility criteria, such as whether the applicant is married, is a citizen of SA, is competent to contract, has not yet benefited from government housing, and is a first-time property buyer. This is achieved by means of the following tests, among others:

* comparing the housing subsidy application to the population register to ensure that applicant and spouse have valid ID numbers, and are not dead;

* comparing the application to the NHSDB to ensure applicant and spouse have not previously benefited from government housing assistance; and

* comparing the application to the registrar of deeds to ensure that neither applicant nor spouse has previously owned property.

But there has not been a reliable way of determining if an applicant’s monthly household income does or does not exceed R3500. The current approach of relying on the prospective beneficiary’s goodwill to submit adequate proof of income is not particularly judicious. Proof of income can easily be falsified. For this reason, national housing needs to consider seriously the possibility of using the SARS and other private employee databases to verify incomes.

To properly address the low-cost housing fraud problem, nationwide probes into non-qualifying private beneficiaries and municipal employees are imperative. The scale of the problem is likely to be far bigger than just public servants, private developers and contractors. Left unchecked, low-cost housing fraud may thwart the government’s quest to eliminate informal settlements by 2014.

* Sokomani is a researcher in the Institute for Security Studies’ Corruption and Governance Programme.