Medium Term Budget Policy Statement: Input from Business and Labour And Government's Employment and Economic Development Cluster

Meeting report

JOINT BUDGET COMMITTEE
1 November 2005
MEDIUM TERM BUDGET POLICY STATEMENT: INPUT FROM BUSINESS AND LABOUR AND GOVERNMENT'S EMPLOYMENT AND ECONOMIC DEVELOPMENT CLUSTER

Chairperson: Mr B Mkhaliphi (ANC) [Mpumalanga]

Documents handed out
Medium Term Budget Policy Statement 2005
Department of Communications Submission
Department of Public Works Submission
Department of Transport Submission
Department of Housing Submission [email [email protected]]
FEDUSA Submission
BUSA Submission

Relevant documentation
People’s Budget of the 2nd of November 2005

SUMMARY
The Committee heard inputs from the Federation of Unions of South Africa, Business Unity South Africa and the Departments of Communication, Public Works, Transport and Housing on the impact of the Medium Term Budget Policy Statement on their strategic and expenditure plans. The Department of Transport was questioned on its readiness to implement the Gautrain Project in time for the 2010 FIFA Soccer World Cup, the progress made with regard to its taxi recapitalisation project and its efforts to improve public transport infrastructure. FEDUSA was asked to explain its role in providing skills to ensure job creation. Business Unity South Africa was asked to explain its proposal that company tax be reduced in order to ensure job creation and economic growth. The Department of Housing was asked to indicate its interaction with all other relevant government departments to ensure that the settlements were established with all the necessary infrastructure, and lack of capacity with regard to its monitoring and evaluation functions. Members were impressed by the Department of Public Works’ medium term infrastructure plan, and sought clarity on the devolution of the public works budgets to the client departments. The Department of Communications was asked to explain the additional funds requested by the South African Post Office, whether the Post Office could be used to roll out social grants and whether Independent Communications Authority of South Africa had the necessary capacity to issue licences and discharge its full mandate.

MINUTES
Introduction by Chairperson
The Chair requested all the presenters to restrict their input to issues that pertained to the Medium Term Budget Policy Statement (MTBPS) 2005, as the tendency was for the submissions to contain ancillary information which was not directly relevant to today’s discussion.

Department of Transport Submission
Mr D Pretorius, Department Chief Financial Officer, outlined the background to the MTBPS 2005 and 2005 budget priorities, the MTBPS within the transport context and outlined selected transport key initiatives including public transport, freight logistics, roads and rural transport. 

Discussion
Mr T Ralane (ANC) [Free State] stated that there was a recent boom in car sales which resulted in a huge congestion in the road networks, and he questioned the readiness of the Department of Transport to address that unintended consequence. 

Mr Pretorius responded that the Department of Transport’s freight logistics strategy was aimed at improving the optimum nodal use of transport, which should improve the situation.

Mr Ralane asked whether the bus subsidies were in fact “value for money”.

Mr Pretorius replied that public transport was subsidised in every single country. The Department of Transport certainly believed it to be value for money because it reduced transport costs for commuters. The drive to transform bus subsidies included the targeting of certain routes, and the poor areas in particular. The transformation from bus subsidies to public transport subsidies, including smaller vehicles, would also ensure the provision of bus subsidies into the second economy. It was for that reason that the Department of Transport’s MinMec decided that the current interim contracts needed to be converted into tendered contracts in a two-year period.

Mr Ralane stated that serious train accidents had been reported within the last month, and asked the Department of Transport to explain whether its investment in safety measures was “value for money”.

Mr Pretorius responded that the Department had established a Railway Safety Regulator precisely to investigate the causes of train accidents, and to devise safety regulations for rail transport. The problem was that rail infrastructure was old and outdated and the South African Rail Commuter Corporation (SARCC) was currently rolling out a capital investment programme. This would involve the overhauling and refurbishment of as many coaches as possible, and some of the additional funding for the additional funding will be used to upgrade rail infrastructure and to ensure that the rail system was safe..

Mr Ralane asked whether the Department of Transport’s investment in the taxi recapitalisation programme was “value for money”.

Mr Pretorius replied that in the current year a total of R250 million was allocated for taxi recapitalisation. The Department had to date not recapitalised a single taxi, but systems had been put in place and agreements had been reached with the taxi industry. Agreement was also reached after the new vehicle safety regulations were decided upon in July 2005. Agreements had been reached with the manufacturers of the new vehicles regarding the new safety specifications. It was for that reason the manufacturers indicated that they would only begin supplying those vehicles from June 2006, which was beyond the deadline of 30 November 2005. The Department of Transport was also assisting provinces with their business plans to prepare them for the rolling out of the taxi recapitalisation programme. ..

Mr D Botha (ANC) [Limpopo] asked whether the Department of Transport would reach its 30 November 2005 target for the conversion of taxi permits to operating licenses.

Mr Pretorius responded that the Minister himself had indicated that the 30 November 2005 deadline would remain, and a portion of the funds that had been allocated for the taxi recapitalisation programme would also be employed for law enforcement. Those who had not converted to the taxi permits by that cut-off date would not be included in the taxi recapitalisation programme. With that penalty in place, the Department of Transport expected the deadline to be met.

The Chair stated that interactions with the municipalities and provinces indicated that the Department of Transport plans in some of the localities were not facilitating the successful roll out of the taxi recapitalisation programme. He asked whether the situation had improved at all.

Mr Pretorius replied that there was a detailed report on the matter which could be supplied to the Committee, which outlined all the transport plans and the progress made to date.

The Chair stated that the Limpopo Department of Transport indicated that it was unable to issue licence renewal reminders, which resulted in a loss of revenue in licence fees. He asked whether the Department of Transport would be able to intervene and address the issue.

Mr Pretorius responded that the Department was unfortunately unable to assist as its role was to regulate and to ensure that the National Traffic Information System (NaTIS) system was up and running. There was nothing much that the Department could do if it was due to a failure in that province's administrative system rather than its NaTIS system.

Mr Botha asked whether the Gautrain project would be completed in time for the 2010 FIFA Soccer World Cup. There had been media reports to the contrary.

Mr Pretorius replied that the Department of Transport was not sure whether the Gautrain project would be completed in time for that competition, especially in light of the current developments. It was a provincial initiative but the National Government would support the province to ensure the project was underway. The project was viewed as one of the important public transport infrastructure investments that would enhance 2010, and would also provide scope for the upgrading of further rail lines and public transport facilities within cities and the environs. The Department of Transport was however unable to commit at this point to the completion of the Gautrain by the 2010 FIFA Soccer World Cup.

Mr Botha sought clarity on the progress made with regard to the development of bicycle management plans linked to the 2010 FIFA Soccer World Cup. He stated that he was aware that that programme had been rolled out in the Limpopo province, but it was not a success.

Mr Pretorius responded that the project was continuing as the Department of Transport was rolling out bicycles. The Department of Transport was aware that some of the areas did not have proper roads, and it was for that reason that the Department planned to roll out alternative means of transport to areas that had no or very bad roads. The initiative was thus aimed at providing access to road infrastructure to people who were currently excluded. The Department of Transport was also currently busy rolling out animal-drawn carts. Prototypes that were currently being tested by the South African Bureau of Standards (SABS), and the Department was aware that a certain level of road was needed for those vehicles.

Mr G Schneeman (ANC) asked the Department of Transport to explain its plans to ensure that the public transport infrastructure was a success over the MTEF. Media reports on the recent Car Free Day highlighted the fact that it was not easy to access public transport.

Mr Pretorius replied that the Department of Transport was aware that not all South Africans found it easy to access public transport. It was for that reason that the Department and National Treasury reached an agreement that bus subsidies would not be increased. This would firstly enable the Department to transform the subsidy and, secondly, would allow the Department to extend the public transport road-based subsidy. It was learnt during the October Transport Month that the bus services in many areas were inadequate, as there was a greater demand than what the Department was currently able to subsidise. At the moment not all public transport was currently being subsidised, and the Department would like to change that, but it was however functioning under fiscal constraints.

Mr Schneeman stated that the MTBPS placed much emphasis on the creation of human settlements, and sought clarity on the interaction between the Department of Transport and the Department of Housing to ensure that the necessary transport infrastructure was in place to properly service those settlements.
 
Mr Pretorius responded that there was definitely co-ordination with the Department of Housing on medium infrastructure investments, as part of the thrust of the road infrastructure network, rural roads and the rural transport development.

Mr Schneeman stated the Committee had raised concern with the Department of Transport’s roll overs during last year’s meeting on the MTBPS, and roll overs had also been reported today by Mr Pretorious. He sought reasons for the roll-overs.

Mr Pretorius replied that in the past year the Department rolled over a total of R39,9 million from the previous financial year, with the largest single roll-over being R19,9 million for Arrive Alive activities and contracts. The contracts were entered into before the end of the financial year for media exposure. The smaller amounts included R2 million in contracts for aviation policy, R5,9 million in unforeseen costs for the African Union Ministers Conference, R4 million for late invoicing of oil pollution prevention services and R4 million in unforeseen costs for the establishment of a Departmental office in the United Kingdom for a permanent seat on the International Maritime Organisation (IMO) Council. A total of R4,2 million was rolled over for the upgrading of overlay control facilities.

Mr Schneeman stated that the Department need not answer not, but requested it to provide information to the Committee as to how it would administer the scrapping of the old taxis. The danger was that people could "bring taxi's in, go around the corner and then bring them back in again". Secondly, he proposed that the Department focus on improving the current public transport system in its preparations for the 2010 FIFA Soccer World Cup, instead of investing funds in reinventing the wheel.

The Chair stated that it was clear that the Committee needed further detailed interaction with the Department, as there was not enough time to explore all the issues. He stated that the Committee eagerly awaited the information on the Department's transport plans.

FEDUSA (Federation of Unions of South Africa) submission
Ms Gretchen Humphries, FEDUSA Parliamentary Officer, indicated that FEDUSA (Federation of Unions of South Africa) supported the overall growth strategy of the MTBPS, and proposed that the tax revenue overrun should be made available to the economy at large by tax cuts to employees and small businesses. FEDUSA supported the MTBPS spending priorities on education and welfare and proposed greater spending on the public works programmes for the unemployed, child care and old age grants, better salary levels of police men and women, medical professionals and teachers. FEDUSA was disappointed that the medical scheme tax allowance for individuals had not been raised, as suggested.

Discussion
Ms B Dambuza (ANC) asked FEDUSA to explain its role in addressing skills-related constraints.

Ms Humphries responded that FEDUSA was Vice-Chairperson of the national skills authority, and was thus provided input directly into all the Sector Education and Training Authorities (SETAs) and learnerships. The current number of learnerships had increased, and more skilled and trained persons have been produced and placed in employment. FEDUSA had finalised no less than 132 learnerships within the last year.

Mr Schneeman asked FEDUSA to indicate the actual impact that the Expanded Public Works Programme (EPWP) had on employment levels in communities.

Ms Humphries replied that the EPWP was making a difference, but there were also problem areas. The provision of a minimum wage was not the final solution to the problem, as people were using that wage solely for transportation costs to and from work. FEDUSA proposed that labour-based employment projects would be utilized, but they must be able to give something back to the community. The current indication was that the wage rate was not sufficient to sustain the local community, and FEDUSA was raising this for consideration and possible address in the Budget.

Mr Ralane stated that there were several instances of projects that were built properly and for a much more reasonable amount but by people who did not have the requisite accreditation. He stated that there appeared to be "this bashing of skills scarcity in the country: when there were clearly people with the necessary skills, but they had not yet been accredited.

Ms Humphries responded that FEDUSA was not bashing skills but was instead saying that there was a skills scarcity. Labour-intensive programmes were all good and well, but in reality there was no proper transfer of skills and once the project had run its course the people were unable to use those skills. They needed to be placed in sustainable, long-term projects with secured employment, and they must provide skills within the community. Assistance from government and perhaps business was needed in this regard.

Mr Ralane asked FEDUSA to indicate the extent to which it had implemented the resolutions of the Growth and Development Summit (GDS), in order to ensure growth in the first and second economy.

Ms Humphries replied that FEDUSA had committed itself to the GDS agreement and created learnerships in the various areas. A job creation trust had been jointly established by FEDUSA, COSATU and NACTU which saw, in 2003 for example, the contribution of 1% of salaries of all trade unionists being contributed to that trust. The funds had been employed for various job creation projects, which included a food garden project. FEDUSA was thus actively implementing the GDS agreements that it had committed itself to.

Mr Ralane asked whether FEDUSA had considered investing its pension funds into the economy, as he did not believe that FEDUSA would lose anything by investing in the economy of its own country.

Mr Humphries responded that organised labour had agreed to invest 2% of its pension fund money into the economy, in various ways. FEDUSA was currently reviewing that investment, and the results were eagerly awaited.

Mr Ralane asked whether FEDUSA had costed its proposal that the Child Care Grant be extended to children of 16 years.

Ms Humphries replied that FEDUSA did not want to reinvent the wheel as a costing exercise had already been conducted, by IDASA’s People’s Budget for example. Those figures were reliable and could be used. The discussion document as well as the exact costing could be provided to Members.

Mr Ken Warren, SACOB Parliamentary Office, informed the Committee that CHAMSA (Chambers of Commerce of South Africa) and the National Council of Trade Unions (NACTU) were unable to address the Committee today as planned.

The Chair thanked Mr Warren for the information.

Business Unity South Africa (BUSA) submission
Prof Raymond Parsons, BUSA Economic Consultant, indicated that Business Unity South Africa (BUSA) welcomed the overall thrust of the MTBPS, and believed that the expected growth rate in 2005 would be about 4.5% and expected that growth estimates might well be revised upwards. Despite the better growth platform, the level of output growth has been unable to act as a generator of sufficient new employment. Prof Parsons stated that central to the micro-reform and the 6% economic growth framework was the theme of encouraging enterprise development, especially at the small and medium levels, and proposed vehicles through which the progress made to date could be widened and deepened..

Discussion
Mr Ralane asked Prof Parsons to comment the effect that the huge salaries paid to CEO’s of companies had on job creation efforts.

Secondly, Mr Ralane noted that the construction sector grew by 6,7% in the first half of 2005, which suggested that there was no shortage of skills in that sector. He asked whether that meant that the skills scarcity was more prevalent in the informal sector.

Prof Parsons replied to the two questions by stating that clearly CEOs must be held accountable by their Boards of Directors and shareholders, and that system needed to be strengthened if it was faulty. He was pleased that there appeared to be greater shareholder activism around remuneration packages of. CEOs, to ensure that they were market-related and not excessive. The level of remuneration paid to CEOs was indicative of the skills deficit South Africa was facing, as there were just not enough properly qualified top decision-making executives. That was reflected in distorted remuneration, and was unavoidable when securing such scarce skills.

Mr Botha referred to BUSA’s contention that levels of savings and fixed investment needed to increase if South Africa wanted a growth rate of 6%, and asked what government could do to expedite the process and ensure that target was reached.

Prof Parsons replied private investment had to date performed better than government investment. There were greater efforts to boost the country’s infrastructure investment, and that would ensure that the two items ran in tandem moreso than they had done in the recent pass.

Mr Botha sought clarity on BUSA’s proposal that company tax be reduced in order to ensure job creation and economic growth.

Prof Parsons responded that the research that had been conducted must focus on how South Africa compared with the corporate tax structures in other jurisdictions. South Africa was currently at the higher end of the bracket for developing countries, and he thus saw merit in reducing the rate further to perhaps 25%. It was a very tentative figure, but it would still only bring South Africa into the middle of the loop of the countries with which it was competing. The tax rate was thus only one avenue through which investment in South Africa could be encouraged..

Mr Schneeman stated that a Small Enterprise Development Agency (SEDA) conference was currently taking place, and asked whether BUSA was involved in that process.

Secondly, he asked whether BUSA’s concern with the difficulty that organised business was experiencing in working with local authorities in promotion of SMME’s, was being taken up with government. He stated that his constituency office had met with the local business chamber and related structures, and it did not receive an enthusiastic response from them regarding their role in imparting skills to the community.

Prof Parsons replied to the two questions by stating that BUSA did have very productive meetings with senior Cabinet members, but the ideal situation would be for the municipal representatives themselves to be involved in those meetings. This would ensure that the specific problems at local government level be addressed. There was thus a gap, which lay with government as well as organised business. It was unfortunate that CHAMSA would not be addressing the Committee because it was closer to the ground and had been proactive in creating a culture of local chambers of commerce throughout South Africa. He accepted fully that, as required by the GDS agreements, business was required to create a more vigorous culture of social dialogue, capacity building and partnership at the provincial and local level.

Department of Housing Submission
Ms J Bayat, Department Acting Chief Director: Housing, tendered the apologies of the Department’s Director-General who was unable to attend the meeting. She explained that the Department of Housing intended carrying out MTBPS spending in terms of the new Comprehensive Plan for Sustainable Human Settlements and the prescripts of the Public Finance Management Act (PFMA). She outlined the Department of Housing’s contribution to the construction industry, the number of units produced in the subsidised and private sectors, the estimated investment in housing of R4,5 billion and the creation of approximately 29 000 jobs. The presentation outlined the Department of Housing’s investment in women and youth empowerment, promotion of BEE and entrepreneur development, the contribution to the Expanded Public Works Programme (EPWP), the Peoples’ Housing Process, the upgrading of informal settlements and the accreditation of municipalities.

Discussion
Mr Schneeman stated that the MTBPS placed much emphasis on the creation of human settlements, and sought clarity on the interaction between the Department of Housing and all other relevant government departments to ensure that the settlements were established with all the necessary infrastructure.
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Mr J Leshabane, Department Chief Director: Special Projects, replied that the Department of Housing focused narrowly on the MTBPS as requested by the Committee, yet some of the questions related to other matters and he apologised for the failure of the presentation to deal with those matters. Upon approving the “breaking new ground” plan, Cabinet established the Integrated Management Committee (IMC). Ministers subsequently agreed to use the same IMC for both human settlements and project consolidate, and resulted in a technical IMC that consisted of all the Directors-General.

Over the last few weeks the Department of Housing had been involved in a series of inter-departmental bilateral discussions on the matters that affected specific government departments, and sought to reach consensus on certain cross-cutting issues that were required by the human settlement plan. No conclusion had yet been reached on all the outstanding issues, one of which included the integration of the affected government departments and the alignment of resources towards achieving sustainable human settlements.

The important agreement reached with the Department of Provincial and Local Government was that the next generation of municipal Integrated Development Plans (IDPs) would seek to achieve sustainable human settlement and robust economies, as their objectives. This would ensure integration at the point of delivery and impact.

Ms Bayat added that the Department of Housing enjoyed very good interaction with the Department of Land Affairs, in order to ensure that the breaking new ground plan was a success.

Mr Ralane stated that during the corresponding meeting held with the Department of Housing in 2004 it indicated that it was prioritising the development of quality living environments, build and integrated non-racial society, develop a housing land policy, a framework for municipal housing sector plans, unblock service delivery constrains, ensure capacity building and root out corruption and mal-administration. He asked the Department of Housing to explain the progress it had made on those stated objectives.

Secondly, he stated that the Free State Housing MEC informed the Committee that his province had decided to stall for three years the portion of the Division of Revenue Act which dealt with the accreditation of municipalities, due to a lack of the necessary capacity. He asked the Department of Housing to explain how it was dealing with capacity issues within the metros.

Thirdly, Mr Ralane stated that one of the unintended consequences of accrediting metros would possibly result in more migrations to metropolitan municipalities, which would in turn be problematic as there was not sufficient land on which to build houses. The accreditation would thus result in uneven development and migrations.

Mr Leshabane responded to the three questions by stating that a framework had been developed on the accreditation of municipalities, and it was currently being finalised by the Department of Housing’s MinMec. The guiding principle was that the accreditation of metropolitan municipalities would be prioritised and certain secondary towns, which would allow for those municipalities to better co-ordinate delivery and also increase the capability of the state to deliver on housing.

MinMec intended finalising the accreditation of those prioritised municipalities before the end of the financial year. The Department of Housing was in fact currently in the process of assessing the capacity requirements of those municipalities and provinces. MinMec decided that accreditation was one of the cross-cutting issues that impacted housing delivery, and which required further consideration.

Ms Bayat explained that, with regard to the progress made on the quality of living environments, the comprehensive plan on human settlements indicated very clearly that the Department of Housing would not simply be building houses but instead sustainable human settlements. The Department of Housing has interacted with some of the other government departments on the matter to ensure that sustainable human settlements were prioritised

As far as building a non-racial society was concerned, it was very important for the Department of Housing to ensure that the housing delivery patterns of the previous era were not repeated. To that end the Department of Housing insisted upon the regeneration of the inner city, and those living in informal settlements must not be pushed out to the periphery again but must instead be incorporated into the economic core of the urban environment. This would allow for the integration of the society.

She stated that the Department of Housing was currently considering requiring at least 20% of any housing development be allocated to low-income housing. It had been implemented successfully in other countries, but needed to be tested in South Africa first.

She stated that the Department of Housing believed capacity building to be the cornerstone of any form of growth, especially in the level of service delivery within the housing sector at municipal level. The Department of Housing did have a budget for capacity-building, and the head of the directorate on capacity-building was currently drawing up a full scale plan for the implementation of capacity-building programmes.

With regard to unintended consequence of migration, she stated that the difficulty was that there was a constant influx from the rural areas to the urban areas. It was an issue that the Department of Housing would have to deal with and it was for that matter that its informal settlement upgrading programme needed significant focus.

Mr Ralane stated that the Select Committee on Finance had found on its oversight visit to the Eastern Cape that there were several houses that had been built but were never occupied, and were standing vacant to the very day. He stated that that amounted to wasted expenditure..

Mr Leshabane replied that the Department of Housing had finalised a housing sector plan in the IDPs, which assisted municipalities to map out the housing demand in the local areas. Municipalities had been consulted on the matter and it was being rolled out. The initiative was regarded as one of the interventions that would allow municipalities to better respond to the housing problems, and it required provinces to work closely with municipalities to ensure the success of the intervention.

Mr Botha noted that the presentation indicated that 1,8 million houses had been built over the last financial year, and asked whether those were merely figures on paper or had those houses actually been built. The Select Committee on Finance had, during its oversight visits to the provinces, come across several housing projects that either had not delivered a single house to date or had produced houses that were of a completely unsatisfactory quality for human habitation. He asked the Department of Housing to explain the mechanisms it had put in place to monitor the process and ensure that houses of the proper quality were built.

Mr Leshabane responded that MinMec was currently finalising a series of guidelines aimed at resolving the unblocked projects. The interventions that would be made included holding the accountable official to book, and addressing the issues that lead to the blocking of those projects. The aim was to unblock all those projects by the end of 2008.

He explained that the subsidies granted to provinces with blocked projects would be rolled over, and the provincial Treasuries would then allocate those funds to other provincial government programmes. The result was that once the project was unblocked the funds that were initially allocated to it had been relocated. This was a matter for discussion between the provincial Departments of Housing and National Treasury.

Ms Bayat added that she did not have all the facts at hand and could thus not confirm the reasons for the non-occupation. She stated that should would be taking the matter up further, especially with the projects in the Eastern Cape. The Department of Housing had devised a policy that dealt exclusively with those blocked projects that could no longer be finalised.

The problem was that prior to 2002 the Department of Housing opted for a quantity approach in building houses, and ended up sacrificing the quality because of the desperate need to house citizens. The Department of Housing did however learn from that experience and introduced a rectification programme which aimed at ensuring that those houses were safe and habitable. Subsequent to 2002 the National Home Builders Registration Council (NHBRC) was established as the regulator to ensure that quality housing was being provided.

She stated that the difficulty in compiling the housing statistics was that some of the houses might still be under construction when the study was being conducted. She requested an opportunity to gain further clarity on the precise nature of the figures.

Mr Schneeman stated that his questions would focus on the information provided at last year’s meeting with the Department on the MTBPS. He noted that a large percentage of the Department’s budget was in the form of funds that had been transferred to provinces, and when the Department was asked during last year’s meeting to explain the mechanisms it had put in place to monitor the expenditure by the provinces as well as the outcomes of that expenditure, it replied that its abilities in that regard were very limited because very few people were deployed in those positions. He asked the Department to explain what had happened since last year’s meeting

Ms Dambuza noted that the presentation indicated that the NHBRC was conducting the skills-training projects, and asked the Department to explain the monitoring mechanisms it had put in place to ensure that skills were being transferred and that houses were being built. She stated that she had never before heard of the NHBRC conducting such projects in her constituency.

Mr Leshabane replied to the two questions by stating that a chief directorate had been put in place to monitor an evaluate this, and it was sufficiently capacitated. An enhanced monitoring and evaluation capability was envisaged for the Department of Housing to deal with the “breaking new ground” plan.

Ms Bayat added that one of the NHBRCs responsibilities was to assist with skills training of emerging contractors. The allocation had increased from R10 million to R20 million in the current financial year, as the idea was that the NHBRC must ensure that there were training centres nationally. She stated that she would personally take up the monitoring of this project to gauge whether the NHBRC actually delivered on its mandate.

Ms Dambuza stated that community participation in housing development projects was important, but the municipalities were still struggling to date.

Ms Bayat responded that the Department of Housing was aware of the difficulties. As mentioned earlier, there was a training budget in place because the national department was responsible for ensuring that the provincial and local counterparts had the necessary capacity. .

Ms Dambuza asked the Department of Housing to indicate the extent to which development of housing was ensured in the rural areas.

Ms Bayat replied that the new rural housing policy was currently being formulated, and it should be finalised very soon in the new financial year.

Ms L Chikunga (ANC) sought clarity on the number of subsidies that target housing development projects.

Ms Bayat responded that, as she indicated earlier, the Department of Housing did have a rectification programme in place. The total subsidy amount was currently R29 450.

The Chair stated that the presentation failed to make any mention of the Construction Industry Development Board (CIDB) as a partner in housing development. He asked whether the Department of Housing interacted with that body at all.

Ms Bayat replied that she believed there was some interaction between the two.

The Chair asked whether the Department of Housing had considered offering bursaries for students who wished to study at the technical colleges as well. This would address the Department’s current problem with lack of skills.

Ms Bayat responded that it was very important point. The Department of Housing was in constant interaction with the universities especially those in an around Gauteng, in the Western Cape and Kwazulu-Natal, as they were providing programmes on housing. The University of Witswatersrand also expressed an interest. The Department of Housing was thus optimistic that it would yield properly trained students.

Mr Botha asked the Department of Housing to provide the Committee with the number of those houses on a province-by-province breakdown.

The Chair requested the Department of Housing to get back to the Committee on the matter, as well as the other two outstanding questions, within seven days. He encouraged interaction between the Departments of Housing, Public Works and Transport to ensure infrastructure delivery was provided satisfactorily.

Department of Public Works
Mr J Maseko, Department Director-General, outlined the Department of Public Works role in government’s Programme of Action, the MTBPS within the context of public works, the challenges faced by the Department of Public Works, some of the Department’s initiatives and key programmes and its financial performance over the medium term.

Discussion
The Chair asked whether the Department of Public Works proposal of a medium term infrastructure plan was officially discussed at any Cabinet forum.

Mr Maseko replied that it had been discussed extensively in many forums, and Cabinet even proposed the establishment of an Inter-Ministerial Committee which would bring together all the Ministers that dealt with infrastructure. It would also be addressed at the level of the Deputy President’s Acceleration of Economic Growth Task Team.

The Chair asked whether the business sector was aware of the plan.

Mr Maseko responded that a conference had been held at Sun City a few weeks ago that discussed the need for a much greater level of integrated planning, and industry representatives emphasised the need for that and proposed that all government Ministers should have been present at the conference to address the challenges that faced the construction industry. It was then decided that the conference would take place annually and would include all government Ministers and industry players.

Mr Maseko responded that before 1994 the Department of Public Works was responsible for paying rates and taxes of government, including the provinces. The tasks however became too cumbersome and the user departments never accepted much responsibility for those accounts and ran up large bills, because they never had to pay for it themselves. The costs were now devolved to the provinces to ensure they remained aware of the costs involved. The provinces were now responsible for the hospital revitalisation programmes, but the devolution referred to in the presentation applied to national government departments specifically.

Ms T Mashigo (ANC) sought clarity on the hospital revitalisation programme in Kwazulu-Natal, because that province’s Health Department did not use any of the funds transferred to it by the national Department of Public Works. She asked whether those funds were returned to the national Department of Public Works

Secondly, Ms Mashigo asked the Department of Public Works to explain what “IDIP” stood for.

Mr Maseko replied to the two questions by stating that there was indeed a concern with Public Works Departments across the board, and all efforts were being made to identify the problem areas in order to improve service delivery. It was a common occurrence for the Health and Education Departments to raise concern with the delay by the provincial Public Works Departments to provide infrastructure, yet those provincial Departments in turn lodged the fault with the lack of proper planning skills of those national departments in particular. There needed to be improved co-operation and consultation between those three Departments.

Unfortunately in the Kwazulu-Natal example, the provincial Departments of Health and Education had opted out due to the poor track record of the Kwazulu-Natal Public Works Department, and were using other agencies instead. That was the aim of the Infrastructure Delivery Improvement Programme (IDIP). He stated that he was meeting with the Director-General of the Department of Health to discuss the issue regarding the hospital revitalisation programme, in order to assist the provincial Departments of Public Works to expedite delivery.

The funds for the programme were granted to the provincial departments, and would thus be returned to the provincial treasuries who would in turn decide what would happen to the funds. The national Department of Public Works thus only provided an advisory role.
 
Mr Schneeman proposed that the incubator programme used to assist SMME’s and other similar programmes be simplified to ensure entry into the market. He proposed that the Department of Labour offices be used to assist people to get onto the database.

Mr Maseko replied that these proposals were noted and would be considered.

Mr Schneeman asked whether there was interaction between the specific government department for whom the Department of Public Works was building the facility, because there were actual examples where the facility simply did not meet the needs of the receiving department.

Mr Maseko responded that the Department of Public Works interacted with the client Department before construction began, and that Department would also have to sign off on the plans as a sign of approval. He conceded that there might not be sufficient consultation with the public, but the Department of Public Works did have an extensive partnership arrangement with the client Departments. The Department of Public Works did thus not build a facility without talking to the client Department.

Mr Ralane stated that the medium term infrastructure plan was an interesting development. He suspected that it would involve all three spheres of government, and for that reason he proposed that the medium term infrastructure plan be incorporated into the strategic plans of the provincial and local government structures. It must also be timed properly so that it is not affected by any budgets that were devolved to the receiving departments.

Mr Maseko replied that the discussion on the plan was ongoing, but the actual terminology was being refined.

Department of Communications
Ms L Shope-Mafole, Department Director-General, outlined by way of introduction the Department’s policy priorities that required funding over the Medium Term Expenditure Framework (MTEF).

Mr H Mathabathe, Department CFO, continued the presentation and explained that the Department’s recommendations over the MTEF were aimed at the regional television broadcasting services, the South African Post Office (SAPO) network expansion, implementation of the Department’s restructuring outcomes and funding of Sentech and the roll our of wireless broadband infrastructure. MTEF funding would also be used to strengthen the Independent Communications Authority of South Africa (ICASA).
 
Discussion
Mr Ralane asked whether the Department of Communications had considered using the South African Post Office (SAPO) to pay out the social grants, as it had a vastly extensive network that spanned the entire country. The service could be provided at a much lower cost than the recently established Social Security Agency.

Ms Shope-Mafole responded that the Department of Communications had considered employing SAPO. The Department of Communications had been in discussions with the Department of Social Development on the matter, but the Department of Social Development had specific processes that would have to be adapted. SAPO was currently providing the pension grant payouts in the North West province, and it could possibly be rolled out throughout the rest of the country.
 
Mr Ralane indicated that SAPO was granted R750 million by the Department of Communications during the last financial year to “put its house in order”, yet the presentation indicated that SAPO was yet again requesting additional funds. He sought the reasons for the SAPO request.

Mr Ralane sought clarity on the new policy priorities that requested funding.

Mr Mathabathe replied that the funds were requested for projects such as the establishment of regional television channels and Sentech capitalisation..

Mr Ralane noted that the Department of Communications had consistently reported underspending over the last three years, and he thus questioned the readiness of the Department spend the smaller budget it had been allocated during the present financial year.

Mr Mathabathe replied that the levels of underspending were marginal if one considered the Department of Communication’s policy priorities. Some of the underspending was due to roll-overs granted by National Treasury, and some were due to funds that had already been commited.

Ms Shope-Mafole added that the Department of Communications was addressing the problem with underspending, and the Department had improved its planning and monitoring and evaluation capacities to address this problem..

Mr Ralane questioned the ability of ICASA to monitor and enforce compliance with the new tariffs, for example.

The Chair welcomed the Minister of Communications, Dr I Matsepe-Casaburri.

Ms Shope-Mafole responded that an even more concern was ICASA’s ability to licence speedily and effectively and ensure stability within the sector, in terms of the new Convergence legislation and the amending legislation to ICASA’s governing Act. The legislation imposed new functions on ICASA and its ability and competence would be tested, and it would thus require much more funding to successfully execute its revised mandate.

Mr Schneeman stated that during the meeting held with the Department of Communications during 2004 it indicated that there would be some licences that would be funded by the Universal Service Fund (USF). The presentation however indicated that not all the funds had been spent and he requested an explanation. 

Minister Matsepe-Casaburri responded that if the licences were not granted then the Department of Communications could not provide the equipment, and that was the reason for the failure to spend those funds.

Mr C Wang (ANC) asked whether government’s infrastructure was compatible with the infrastructure of private companies.

Ms Shope-Mafole replied that Sentech was actually using an internationally tested technology, and a recent university study had proven that it was the best carrier of wireless in South Africa. The Department of Communications did however have a directorate that was tasked with testing all new technologies for possible implementation in South Africa.

Mr Wang asked whether the Grenteck project was a Public Private Partnership (PPP) project.

Ms Shope-Mafole replied that as South Africa digitised networks became the norm in South Africa, it was important to bear in mind the ownership structure of Sentech with regard to its strategic role in the communication sector.

Mr Ralane sought clarity on the R3 billion targeted for infrastructure investment in the rural areas, and asked whether it included Sentech.

Minister Matsepe-Casaburri responded that the wireless technology was really the way to go and Sentech would definitely have a role to play In bridging the digital divide.

Mr Schneeman asked the Department of Communications to explain the extent to which it was co-ordinating with the Department of Housing to ensure joint planning with regard to government’s sustainable human settlement programme.

Minister Matsepe-Casaburri replied that the problem was that the local government sphere failed to recognise communications infrastructure as a necessary basic service. Perhaps it was incumbent on Members to instill that kind of mindset in their constituencies.

The Chair asked whether the Department of Communications would once again report huge spending right at the end of the financial year.

Mr Mathabathe responded that in September 2004 the Department of Communications had spent 23% of its budget, whereas in September 2005 it had spent 42% of its budget. There was thus an improvement in spending, and the Department was definitely on target to spending its entire budget.

Concluding remarks by Chairperson
The Chair thanked all presenters for their input and adjourned the meeting.