Council for the Built Environment and Agrément South Africa Strategic Plans & Budgets 2011/12

NCOP Public Services

05 October 2009
Chairperson: Mr M Sibande (ANC; Mpumalanga)
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Meeting Summary

The Council of the Built Environment was established in 2000 and oversees and facilitates the work of the six professional councils for architects, engineers, landscape architects, quantity surveyors, project and construction managers and property valuers. The presentation described the strategic objectives and projects of the Council and how these were aligned to government objectives. The focus was on improving the delivery of skills into the built environment professions by working in schools, universities and with graduates. The budget for the Council showed an overall surplus for 2009/10 and 2010/11, but was a deficit was forecast for 2011/12. The Auditor General had given an “adverse opinion” to the CBE and it explained the steps it had taken to correct the problems. The main response was to deregister for value added tax, settle the VAT liability of R2,1 million and adjust the financial statements accordingly.

Agrément South Africa’s mandate was to certify the fitness-for-purpose of non-standard construction products and building systems. Agrément South Africa had issued 482 certificates, of which 169 were still valid. The rest had become standardised products. The presentation outlined how the organisation’s work contributed to the 10 strategic priorities from the government’s Medium Term Strategy Framework and set out the benefits of the certification process. The budget for Agrément South Africa had an underspend in 2008/09 and the budgeted amounts for following years were R9.6 million (2009/10), R10.3 million (2010/11) and R11 million (2011/12).

Members asked asked about the gender and racial breakdown of the Council for the Built Environment, the professional councils and the professions. They also asked about the education and skills aspects of the Council’s programme and how they were encouraging maths and science in schools. They sought clarity on the surplus budget funds in the Council’s budget statements and about the “adverse opinion” given to the Council by the auditor general because of Value Added Tax liabilities.

Many of the questions by members to Agrément South Africa concerned the poor quality of the Reconstruction and Development Programme housing, and poor quality road improvements. Agrément South Africa pointed out that they only dealt with non-standardised and innovative products, not standardised materials. Members also asked about the achievements of the organisation and why the number of issued certificates was so different to those that were still valid.

Meeting report

Council for the Built Environment (CBE) briefing
Mr Bheki Zulu, Chief Executive Officer (CEO), CBE gave a presentation on the strategic plan of the CBE and its budget. As background, he said that the CBE had been established in 2000 and reported to the Department of Public Works. The CBE had 20 members and the breakdown was 12 professionals, four members from government departments and four members representing the general public. The CBE oversees and facilitates the work of six professional councils. These were for architects, engineers, landscape architects, quantity surveyors, project and construction managers and property valuers. Three of these councils had been in existence for some time, and three were established in 2000. He said that it was important to recognise the importance of these six professions within the wider economic system.

Mr Zulu said that the CBE had started operating in 2001 and had been listed as a Section 3(a) entity in 2006. Its mandates included protecting the interests and safety of the public, developing human resources in the built environment professions and applying norms and guidelines to professional councils. Its mission statement was to, “through leadership of the built environment professions, facilitate integrated development, whilst promoting efficiency and effectiveness”.

Mr Zulu said that the strategic objectives of the CBE fell into five areas. The CBE would aim to create partnerships to improve delivery, improve the skills delivery pipeline, align their work with national initiatives, effectively protect the public and consolidate the regulatory, institutional and structural framework. He then went on to explain how all of these objectives were aligned to the State of the Nation Address (SONA) of May 2009 and the national development indicators. He emphasised the importance of improving the delivery of skills. The CBE worked in schools to improve maths and science, at universities to reduce drop-outs, and after graduation to get graduates into employment.

He highlighted the importance of working with the newly established Department for Rural Development to ensure that the skills coming through the skills pipeline match with needs of rural development. It was noted that the target group for much of CBE’s work was youth. Their bursary scheme was aimed at young people and there were direct interventions to get previously disadvantaged individuals into these professions.

Mr Zulu outlined a skills audit that had been carried out by the CBE. It showed that shortages and surpluses of professions varied across the provinces. For example, Gauteng, Limpopo, North-West and Western Cape all had a severe shortage of engineers. There was a general surplus of architects and a shortage of landscape architects across most provinces.

Ms Maphefo Sedite, Chief Financial Officer: CBE, outlined their budgets for the current financial year (2009/10) and the next two years, until 2011/12. The CBE’s income came from government, levies and bank interest. The total revenue for 2009/10 was R26.5 million. However, the 2009/10 expenditure of R32.1 million exceeded income. She explained the breakdown of expenditure between operating costs (R13.1 million in 2009/10) and programme costs (R19 million in 2009/10). In subsequent years the assumed increases were 6%, in line with National Treasury guidelines. The deficits of R5.6 million in 2009/10 and R6 million in 2010/11 would be covered by CBE’s surplus fund which would result in an overall surplus for those two years. However the budget for 2011/12 remained at a deficit of R6.4 million.

Ms Sedite explained that the Auditor General had given an “adverse opinion” to the CBE and outlined the responses CBE had taken to correct these matters. The main response was to deregister for value added tax (VAT), settle the VAT liability and adjust the financial statements accordingly.

Mr Zulu finally described the challenges facing the CBE in terms of integrating planning among the six professional councils. The inadequate funding provided serious problems, especially for the three councils created in 2000 who were struggling to carry out their legal mandate due to a lack of funds. The outlook for the CBE was to focus on the skills pipeline, promote integrated planning and provide an “information hub” to advise government, industry and the professions.

The Chairperson asked which of the councils had been created in 2000.

Mr Zulu replied that the councils for landscape architects, property valuers and project and construction managers had been created in 2000.

Ms M Themba (ANC; Western Cape) asked how long the councils were in office and asked for a gender breakdown and demographic spread.

Mr Zulu replied that councillors were in office for four-year periods. Both gender and racial representation were still a challenge, but the Minister was aware of this when making appointments to the council. He also said that representation within the professions remained a larger challenge, but that this needed a long-scale solution as people came through the education system and into the professions.

Mr R Lees (DA; KwaZulu Natal) asked how many people were employed by the CBE.

Mr Zulu replied that the CBE had 30 employees, this included 18 females. He also offered to send the Committee a gender and racial breakdown on the professions.

Mr Lees asked why town planning was not included as one of the professional councils.

Mr Zulu replied that this had been raised previously and that CBE were discussing this with the Minister. Currently, town planners were regulated under a different ministry so any changes would require cross-ministerial discussions.

Mr M Jacobs (ANC; Free State) asked who sponsored the professional councils.

Mr Zulu replied that no one sponsored the councils. The councils received funds from charges levied on registered people. However registration was not compulsory and perhaps only around 30% of people register with the relevant council.

Mr D Feldman (ANC; Gauteng) pointed out that partnerships, such as national housing regulatory bodies, already exist and asked how the CBE works with these.

Mr Zulu said that the CBE worked with the National Home Builder’s Registration Council (NHBRC) on the issue of skills improvement, but in no other ways. The CBE worked with other government entities only as they related to the professions which were regulated by the CBE.

Ms Themba felt that the CBE’s programme was something that was still to be implemented. Was implementation succeeding and were there statistics to show this?

Mr Zulu pointed out that the presentation had described the CBE’s projects and how they applied to the strategic objectives of the CBE and of government, as described in the SONA.

Ms Themba asked what measures were being put in place to deal with the weaknesses of safety and security.

Mr Zulu said that the way CBE could address this, was by properly regulating the professions and they were developing a framework to work towards this.

Mr Lees pointed out that there were very few references to the natural, rather than the built, environment. Was this part of the CBE’s mandate and, if so, why was it not addressed?

Mr Zulu recognised that the natural environment aspects had not been strongly emphasised in the presentation. However, the green building project focused on sustainability and the CBE was working with the Green Building Council of South Africa. The primary role for the CBE was to ensure that professionals took account of sustainability issues in their work.

Mr Lees pointed out that the mandate to “ensure uniform application of norms” could result in a lack of innovation and worsen standards. He believed the mandate should be about “minimum” standards, rather than “uniform” ones.

Mr H Groenewald (DA; North West) asked about the CBE’s involvement in the mining industry, especially regarding the safety aspects of their mandate.

Mr Zulu replied that the CBE had no involvement whatsoever in the mining industry.

Mr Jacobs raised the issue of job creation from the SONA and asked how the CBE could contribute towards this.

Mr Zulu replied that, directly, the CBE could not contribute much to this target. The way they could contribute was through facilitating employment of graduates into the system.

The Chairperson asked what measures were being undertaken to make sure that the brand of the CBE was taken out to rural people and rural areas.

Mr Zulu replied that some budget funds were used to raise awareness of the CBE, but much of this rested with the individual councils.

Ms Themba agreed that maths and science in schools was crucial and asked what was being done to encourage these subjects.

Mr Lees commented that the emphasis on skills needed to start at school level and asked how the CBE worked with the Department of Education.

Mr Jacobs felt the amount of money budgeted for bursaries was very low.

Mr Zulu said that CBE had a school programme to attract students into the built environment professions. The CBE interventions were in addition to what the Department of Education was doing in schools to promote maths and science. The CBE also had a bursary fund to assist those coming into the professions. Mr Zulu agreed that the bursary fund was nowhere near large enough.

Mr Lees wondered why there was a strong focus on the provinces in the skills audit. He believed that the market would determine where people work. Professionals would move to where jobs were available.

Mr Zulu said that the focus was on the provinces to allow municipalities to know whether the skills were in their area or not. Highlighting provinces was a useful exercise in this regard.

Mr Groenewald asked what success was being achieved in the field of training. He also thought that the skills audit was not very helpful, but pointed out that, overall, it showed the large shortages of professionals in South Africa. He believed there was a need to get people to stay in South Africa and not leave to live and work elsewhere.

Mr Zulu admitted that thus far the success had not been great and that this was a big challenge. The CBE wanted to attract people to their professions and, although people had been leaving the country, this had slowed down. As a result of the financial crisis and attractive government policies, people were returning to South Africa.

Mr Lees commented that it would have been useful to see 2008/09 actual figures in the budget presentation.

Mr Zulu accepted this point and would do this in the future.

Mr Lees asked for clarification of the surplus funds and how a R1.1 million surplus at the end of 2009/10 became a R6.2 million surplus in 2010/11.

Mr Zulu said that the surpluses come from previous years, and they were a result of the levies and bank interest payments.

Mr Jacobs asked why the CBE were budgeting for a deficit. It would be better to start with the surplus as an amount brought forward from the preceding year.

Mr Zulu replied that this was just one way of presenting the surplus figures. The CBE was engaging with the National Treasury to prevent budgeting for deficit.

Mr Lees asked about income levies, he wanted to make sure that this was not another tax on professionals.

Mr Zulu replied that the levies came to the CBE from professional councils and were not an additional tax on individual professionals. The levy was calculated based on the number of people registered with each council and was only a small proportion of what the councils received.

Mr Jacobs asked what an “adverse opinion” was.

Mr Zulu explained that it meant that the Auditor General was not able to express an opinion on the financial statements of the CBE because the amount involved in the VAT liability was sizeable. It was a severe opinion from the Auditor General.

Mr Lees asked how much the VAT liability was, and when it was paid.

Mr Zulu replied that the amount had been R2.1 million and that this had been paid in the 2008/09 financial year.

Mr Lees pointed out the difference between “third party” and “related party” relationships. He was confused as to how the South African Revenue Service (SARS) could be a related party to the CBE.

Ms Sedite explained that SARS had to be disclosed as a related party due to an accounting statement because both SARS and CBE were government entities.

Mr Groenewald wanted to know why “lack of integration” remained a challenge and what was being done to deal with this challenge.

Mr Zulu said that this was partly a structural issue in terms of legislation. There were seven councils to be dealt with, as well as the whole built environment professions. The CBE had started to plan in an integrated fashion with all the councils.

The Chairperson gave an example of a recent bridge collapsing in Mpumalanga and asked what the role of CBE was in this sort of incident.

Mr Zulu replied that the relevant council could investigate the incident. If it was found that mistakes were made then the council could discipline the professional involved.

The Chairperson asked how the CBE could ensure that people were registering when they were meant to.

Mr Zulu replied that by 2010 there would be steps towards compulsory registration and ensuring that unregistered people could not practice the professions.

Agrément South Africa briefing
Mr Joe Odhiambo, CEO: Agrément South Africa, gave a presentation on the strategic plan and budgets up to 2012. He began by setting out Agrément’s mandate to “provide assurance by carrying out testing, evaluation, confirmation and certification of fitness-for-purpose of non-standard construction products and systems through quality products and services and improved speed of service delivery”. In the product development cycle Agrément certification came after the research, development and testing stages and before the product begins to become standardised.

Mr Odhiambo said that 482 certificates had been issued by Agrément, of which 169 were still valid. The reason for the difference in these figures was that once products became standardised there was no need to continue to hold a certificate because the standards take over.

He described the typical scope of a product evaluation and explained how the work of Agrément contributed to the 10 priorities highlighted in the government’s Medium Term Strategic Framework. For example, the programme to build economic and social infrastructure was supported by Agrément’s certification of innovative solutions. Also, the aim of cohesive, caring and sustainable communities was enhanced by proper housing and improved infrastructure. Other benefits of Agrément certification included local economic stimuli, improvements of existing products and promotion of South African products abroad.

Mr Odhiambo described some examples of building systems that had been tested and certified by Agrément and briefly outlined their benefits. One of the benefits was the use of local, unskilled labour, especially women, in some of the building systems.

Finally Mr Odhiambo explained the financial statement for 2008/09 and the budget until 2012. Total expenditure in 2008/09 was R7.4 million, with a budget of R8.9 million, resulting in an underspend. The budget amounts for the next three financial years increased by over 7% per year and were R9.6 million (2009/10), R10.3 million (2010/11) and R11 million (2011/12).

Ms Themba requested the breakdown of women involved in all provinces, and of women employed by Agrément. She also wanted to know the contacts for Agrément in each province.

Mr Odhiambo replied that Agrément employed 13 staff, three of which were female. The proportion of female certificate holders across the country could be provided to the Committee at a later date.

Mr Feldman asked for a detailed budget as he felt that a R4 million budget for 13 staff was too high.

Mr Odhiambo said that he would provide a detailed budget. The 13 staff were also supplemented by staff through a shared services agreement within the CSIR.

Ms Themba described an example from Mpumalanga where a reservoir had leaked and left people without water. She asked that, if the offices for Agrément were only in Pretoria and Port Elizabeth, who she could contact about this problem.

Mr Odhiambo said that the office in Pretoria covered Mpumalanga, but that Agrément only dealt with non-standardised, innovative materials. If the reservoir was built of standardised products then this would be outside of the mandate of Agrément.

Mr Lees asked about the relationships between the Council for Scientific and Industrial Research (CSIR), who carried out research, SABS, who tested products and Agrément, who certified products. He also requested clarification on whether the certification was only for housing, or on a wider range of products.

Mr Odhiambo replied that Agrément was part of the CSIR and worked closely with SABS. Agrément dealt with all construction-related products and building systems covering the entire construction industry, not only housing.

Ms Themba noticed that local people would be trained in use of the products, but asked what happened to these skills once the development was finished. Was it sustainable?

Mr Odhiambo replied that the skills could be used in the local area, through self-employment or otherwise. Or trained individuals could move elsewhere to find work.

The Chairperson asked about the use of indigenous products and highlighted the use of asbestos in building material.

Mr Odhiambo confirmed that asbestos was banned in South Africa and was not being used.

The Chairperson raised the issue of global warming and the impact on road building. He asked if the materials that were being used should be changed as the climate was changing, as had been done in the Middle East.

Mr Odhiambo replied that there were products being developed to improve this situation. Thin layer concrete and thin layer asphalt were being used in trials.

Mr Groenewald asked what government support was involved in building houses through Agrément, and wanted to know what profit was made by Agrément.

Mr Odhiambo pointed out the Agrément received funding from the government, but did not build houses directly. Agrément was a non-profit agency of the Department of Public Works.

Mr Jacobs asked about the scope of Agrément’s operations. He was concerned about Reconstruction and Development Programme (RDP) houses which were of very low quality. He wanted to know how Agrément could intervene to improve these.

Mr Odhiambo pointed out that Agrément did not work with standardised materials, only with non-standardised materials. RDP houses were built from standardised materials.

The Chairperson raised the issue that the material used, for example, in repairing roads in townships was of very poor quality, and that good quality material was used on main roads. He felt this was a disgrace.

Mr Odhiambo replied that it may not be the products which were failing in RDP houses and township roads, the problem could be, for example, poor implementation, or poor quality assurance or control. They needed to investigate the reasons behind the low quality of housing and road materials.

Mr Jacobs was not satisfied with this response and said that investigations should have been carried out earlier.

Mr Odhiambo again re-iterated that Agrément only tested non-standardised products and that their mandate did not cover standardised materials.

The Chairperson asked why the difference between the number of certificates issued and those still valid was so large and asked about the achievements of Agrément. Why were South Africans suffering with the cheapest materials when some of the best materials were being manufactured in the country? He felt strongly that “still investigating” was not a valid response.

Mr Odhiambo explained the product development cycle. After research was carried out, a new product would be tested and then certified by Agrément. This happened for a few similar products and then the producers within the industry began to set standards for the product. At this point the product became standardised and the Agrément certificate was no longer in use.

Mr Feldman felt that the problem was with the expiration of the certificate. He asked if people could cut costs by producing lower quality products when the product had become standardised and was not being tested.

Mr Odhiambo replied that Agrément carried out inspections of all certificate holders and that they were always assessing quality. This included after the award of the certificate, at least annually, and a comprehensive review every three years.

Meeting adjourned.


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