April 21, 2003
By Sheree Russouw
THE Seven Buildings look like many other blocks of flats in the inner city - unremarkable. Dull and moribund, their crumbling façades and broken windows blend easily into the city's dark underbelly.
But over a decade ago South Africa's social housing movement pinned its hopes on the 2 500 tenants of these buildings in Hillbrow, Joubert Park and Berea as the answer to the rebirth of the inner city.
The Seven Buildings Project (SBP) would transform the mostly poor residents of the combined 400 slum-style apartments of Argyle Court, Branksome Towers, Coniston Court, Manhattan Court, Margate Court, Protea Court and Stanhope Mansions into joint owners of their buildings in a collective housing scheme, the scale of which the country had not yet seen.
Not only would the SBP dress the inner city in its best, but it was hoped it would usher in a new era of city housing by serving as a model for future affordable projects. In 1996, the project was officially inaugurated when the tenants became the first recipients of an institutional housing subsidy in South Africa, a veritable coup for the social housing landscape.
"The SBP was the shining light of social housing," remembers Clive Cope, the former project manager. "There was a grand scheme behind it. If it worked well as a social housing initiative, we planned to roll it out in the rest of the inner city and bring other poor city residents into the social housing fold."
But it never made it that far.
In 2000, the tenants of five buildings overthrew the original board of directors of the Seven Buildings Company (SBC), the company created to own and manage the buildings, and fired the management team after the board proposed a 7 percent rent increase.
Since then the project has witnessed the rise and fall of four successive boards. A recent forensic audit report by the Gauteng Department of Housing has fingered at least two former directors of one of these "illegitimate" boards for fraud and corruption, according to Rory Gallagher, the department's social housing director.
In January 2002, the Johannesburg High Court liquidated the SBC. The liquidation order was filed by a major creditor, the Inner City Housing Upgrade Trust (Ichut), an organisation created in 1993 to provide short-term bridging finance to inner city residents. Ichut moved only after the tenants defaulted on its R3.6 million loan to upgrade their rundown buildings.
The liquidated company had also notched up R4 million in water and electricity arrears to the City of Johannesburg - money that seemed unlikely to be recovered. In October last year, the council decided to include all the seven buildings in its Better Buildings Programme (BBP), designed to woo new investors to buy decrepit debt-ridden buildings and revamp them.
In turn, according to Skhumbuzo Ndumndum, the programme manager for institutional housing, the council would write off the outstanding arrears, either partly or wholly. But Ndumndum says it was a "complex situation" as the council did not receive proposals from potential buyers.
On February 28, Ichut decided to cut its losses and sell the buildings at a public auction. Four were sold to private landlords and one was purchased by the Johannesburg Housing Company (JHC). The tenants of Argyle and Coniston courts, who Ndumndum says have a good track record in paying rent, bought their buildings.
"It is good that the buildings are changing hands to new owners," says Ndumndum. "I hope that they are the right investors and that they take care of the necessary reinvestment in the buildings and manage them in the right way."
Tenants, chief architects and housing experts all offer different reasons for the project's collapse. Tracy Cull, a tutor at Wits who is completing her master's degree on the SBP, believes the project was too big to sustain itself and that cross-subsidisation signalled its end. "It involved too many tenants living in buildings spread out across the city - a problem was that they didn't know each other. When one building needed an upgrade, the remaining buildings were liable for the cost, and this created resentment."
Others believe that the project's practice of hiring tenants to work as cleaners, security guards and supervisors contributed to the fall of the project. Towards the end, former taxi drivers were transformed into company directors overnight, not even knowing how to read a balance sheet. And almost all involved in the project cite violence from political factionalism.
Caroline Lethlatle, a resident of Protea Court since 1988, is adamant that collective housing is not the answer to cure the city of its housing ailments. "If I don't pay rent, it's not fair that my neighbour will also have her electricity cut off. Why should we suffer because other people don't pay their bills? It's different when you're paying for something that belongs to you, but our buildings never really belonged to us."
Michael Oelofse, the former operations housing manager for Ichut, agrees. "That's the problem with collective housing. It is based on the premise that rights and obligations are shared. However, it is too tempting for one person to break ranks to their own advantage, and shift obligations to others."
The beginning of the SBP
Under apartheid's Group Areas Act, which entrenched race-based zoning in Johannesburg's cities and suburbs, black people were barred from living in Johannesburg's inner city. Instead it was reserved for whites only and black people were forced to live on the city boundaries. But in the 1970s, affordable suburban housing lured white city dwellers from the inner city, and their exodus left a concrete patchwork of empty flats in its wake.
Black people, desperate for decent city accommodation, became rich pickings for urban slumlords. They started leasing apartments to black people, even though this defied apartheid law. The tenants of the seven buildings were among the black people who moved to the inner city, and although their buildings were interspersed throughout the city, they shared similar living conditions and a common landlord.
In late 1991 the tenants, organised by Actstop, a body set up to fight exploitation by landlords, boycotted rent hikes and eviction orders imposed by their common landlord, David Gorfil of Gorfil Brothers Investments, a multimillion rand property business, who wanted to resell his buildings.
During the boycott, the tenants came up with the idea of buying the buildings themselves and approached lawyers, NGOs and quantity surveyors for expertise and finance. "We called ourselves the 'university' of the seven buildings," remembers Presage Nyoni, a tenant of Argyle Court and the ousted former general manager of the project.
"We were fighting to stop exploitation by landlords like Gorfil. We told him that if he didn't sell the buildings to us, we would demonstrate outside his children's school. One good thing about the SBP is that in the beginning we were able to unite and achieve our goals."
Slow months of negotiations with Gorfil followed. Tenants, advised by outside professionals, formed the SBC to aid their buy-out. Gorfil finally agreed to sell all seven buildings to the tenants for R6 million, whittling it down from his original asking price of R10 million. Formal agreements to purchase the buildings were signed in March 1993. Now it was up to the tenants to find funding.
South Africa's first institutional housing subsidy
"We were all interested in the success of the project but we didn't have any money," says Nyoni. "We met every week and held workshops to discuss how we would get the money to buy our buildings."
At first, the search for the funds needed to buy the buildings seemed elusive. Banks, worried by the hurried trek of industry from the city centre to the north, refused to fund inner city housing schemes.
In March 1993 the tenants applied to the provincial Department of Housing for a subsidy. It proved to be a three-year wait, but in March 1996 they received a R6 million cheque from the department - South Africa's first institutional housing subsidy.
Cope recalls: "This was all pie in the sky then, even to get a government subsidy. Everything was all very new. There was a new government in place and now there was place for social housing. For 20 years we had been watching the slow decay of the inner city and here was our chance to fix it."
But the subsidy only covered the cost of buying the buildings. Money was needed to fix their dilapidated interiors and exteriors. In 1996, the SBC applied to Ichut for a loan to upgrade the buildings and received a short-term loan of R3.6 million. The rent, which ranged from R350 to R650 and is still reputed to be the cheapest in the city, went for interest on the loan, and also covered water and electricity, general administration and maintenance costs.
Lethlatle says the tenants worked well together initially. "There was good co-operation between all the tenants. What kept people going, I think, was at the end of the day we knew we would finish paying Ichut and would own the buildings ourselves."
The Cope Housing Association, a co-operative housing organisation, and Planact, a housing NGO, held training workshops with the tenants in an effort to educate them about their rights and responsibilities in the SBP. Grants also flowed in from USAid, a US development organisation, for education and training.
"There was an immense amount of effort to train tenants in the project, at substantial cost, about rental structures," says Oelofse. "I think most tenants were aware of their rights: perhaps they were less aware or inclined to accept or acknowledge their obligations."
A democratically elected tenant director from each of the buildings represented the residents on the 10-member board of directors. This board also consisted of a representative from the National Urban Reconstruction and Housing Agency (Nurcha), a housing body set up in 1995 to provide finance to inner city housing and which acted as guarantor of R2 million of Ichut's loan; Ichut; and an accountant from Douglas and Velcich, the company's accounting firm.
Tenants were responsible for building maintenance, security and for the collection of rent and levies. The project's job creation slant meant that tenants were employed as cleaners, managers and security guards and paid salaries from the company's coffers. Nyoni was appointed the general manager and was in charge of hiring and managing the project's seven supervisors, one from each building. "The point is that we were trying to create jobs. It all worked well initially. There was a fantastic structure in place," says Cope.
Rent increase
Cope says that the SPB ran smoothly until 1999. "The project was cash positive. We were collecting more money than we could use. We had an 80 percent to 90 percent rent payment rate. Salaries were paid. Maintenance was done. We even set up a provident fund for the employees. There were no arrears until the middle of 1999."
But there were still tenants defaulting on their rent, and slowly, tensions grew as evictions and lock-outs were used to deal with them. According to Cope, 121 people were evicted from their apartments in one year. "There were people living in the buildings who said they couldn't afford to pay rent and demanded to be subsidised. But we were paying their salaries. They had money - so how could we subsidise them? We had to evict them. We were winning the battle against non-payment."
The founders of the SBP had agreed not to raise rent only for the first five years of the project, says Oelofse, "and thereafter to raise them as required by maintenance and upgrading costs. The attempt to do so sparked off the conflicts … It is interesting that the residents were the owners, but failed to honour even their most basic obligation to pay rent and services. It is definitely not because they could not afford to. Up until they fired management, payment levels were excellent."
When the company proposed a rent increase in June 1999, five of the buildings split from the original company. They claimed they had not seen any improvements in the buildings and were not prepared to pay more rent.
Further, the splinter group of five buildings alleged that the company's management was not transparent and accountable. Cope dismisses these allegations, and says that two audits performed by the provincial housing department then had found no evidence of corruption. "As a company, we never handled any money. We did everything through cheque requisitions. Whatever we needed done, the accountants first had to approve and sign a cheque for. There was tight control in the company."
The tenants of the five buildings stopped paying rent to Letcor, the SBC's property company. Instead, they opened a new bank account into which they paid a flat rent rate of R100, which excluded water and electricity and payments to service the Ichut loan. Creditors were not paid and debts started piling up, forgotten in a disused company office. Only Coniston and Argyle continued paying rent, up to R650, thus servicing their Ichut loan.
"In a project like the SBP, some individuals saw direct and immediate advantage in boycotting rentals, in anticipation of other people making up the shortfall," says Oelofse. "In the absence of adequate sanction, such as timeous evictions, this strategy paid off, at least in the short term. Some people lived in this project for years without cost to themselves."
Overthrow of the board of directors
An urgent annual general meeting was called in April 2000 to resolve the rent deadlock. But with a majority on the board, the splinter group fired Nyoni and his management team and appointed their own directors and a new general manager. One by one, the original board resigned.
According to Lethlatle, the new board opened a bank account at Standard Bank in Jabulani, Soweto and urged tenants to feed their rent into this account. She believes that there was more than R100 000 in rent money in this account and substantial amounts were withdrawn to pay for gourmet meals, cellphones and car allowances.
The tenants did not know their money was being used to finance the lavish lifestyles of directors, she says. "We as tenants did not know what was happening. We didn't know that our Ichut loan was not being repaid. We didn't even know that we were not paying electricity. The directors were withdrawing our money every day. We cannot prove anything, but we know that money is hidden somewhere."
Despite repeated calls by Ichut for the council and the provincial housing department to intervene, they refused and cited their reason as the project being outside their jurisdiction. In the end, Ichut had no choice but to liquidate the company.
Ndumndum concedes that council could have acted more decisively. "We have received criticism that we didn't act properly on the matter. It's true that there were no payments to us for water and electricity for a long time and we could have taken stronger action and acted on time."
Ichut's general manager, Nano Makwela, places a large part of the blame on the tenants. "The tenants know why the project failed. They ganged up against the rent increase and against Nyoni, who was the person who guided this project. There was a lot of factionalism in the project and I believe it failed because the proper leadership was sidelined."
From the dingy corridors of Argyle Court, Nyoni speaks bitterly about the accusations levelled against him by the splinter group. "The tenants said I was getting fat out of a project that was meant for poor people. They saw me driving my Camry and they saw me with a cellphone. But that was my own money. I never stole any money. We never ran this project as a secret. Anyone is welcome to look at our books.
"When we left [the original company], we didn't owe the council a cent. It's not because of me that the seven buildings failed. Those thugs came on board and they didn't know anything about running a company. They ran it like a stokvel."
The future of the SBP
"There are good lessons that we have learned from the SBP," says Makwela. "But what has happened to it is sad because it was meant to be the model on how the inner city should provide shelter for city residents. It had the potential to be a success."
The solution for future collective housing projects, he believes, is for tenants to own their buildings, but to outsource management. "When a project is tenant-owned and tenant-managed, the tenants don't pay their rent. All housing projects in the inner city need to be better managed from within."
Social housing can still build on the lessons the SBP left, says Cull. "The SBP contributed to our knowledge of collective housing and the institutional housing subsidy came about because of the SBP. Now institutions are able to access it."
The JHC, which has purchased Stanhope Mansions, says it plans to run the building as a social housing project. Paul Jackson, the operations manager, says it has set aside R2.5 million to renovate the building and will provide the tenants with alternative accommodation during the upgrade, which could take up to six months.
"We are going to run the building in the traditions of social housing. It will be run on a rentals basis and we will keep the rentals as low as sustainably possible. Our approach is on participative management, firm credit control and on creating economic opportunities for residents," Jackson says.
For now, tenants who feared they would be evicted with new owners are assured their place in their buildings - if they pay rent. Nyoni says he will stay at Argyle and will not leave, despite threats on his life. For a moment, he looks nostalgic. "You know I remember when we all cleaned on Sundays. We took our mops and our Handy Andy and washed the floor and the walls together. It's very sad what happened to the SBP. Instead of contributing to the regeneration of the inner city, our behaviour contributed to crime and grime."
