The Mpumalanga department of local government and housing has threatened to blacklist 23 construction companies which it says have cheated the state by doing shoddy work.
The 23 contractors have had their contracts terminated in the 2007-08 financial year and have since been replaced by new contractors.
Simphiwe Kunene, the department's spokesman, said the blacklisting meant that the companies would never again get any government contracts.
"We, together with other law enforcement agencies, are looking at ways of blacklisting all construction companies building shoddy houses - so that our aim of giving people a better life is achieved," Kunene said.
He said millions of rands of public funds had been lost through contracts in which the contractors received payments for work which they did not do, or built inferior houses.
Mpumalanga has been invaded by fake contractors in recent years.
However, Kunene said despite these negative developments, his department had exceeded its housing delivery target for the 2007-08 financial year.
"We had planned to build 8548 housing units in this financial year, but as at the end of February, the department managed to deliver 11302 units, which are far in excess of what was planned."
He said the department had achieved the success by resolving to use NHBRC-registered contractors and whose financial capacity was endorsed by a bank.
The department also took legal action against officials and contractors who had defrauded it.
Kunene said an additional 1300 units were projected to have been completed by March 31 this year.