Agrément South Africa: briefing on Annual Report 2008/9

Meeting report

Agrément South Africa Annual Report 2008/09 briefing
Mr Pepi Silinga, Chairperson: Agrément South Africa Board, informed the Committee that the Agrément South Africa's (Agrément) mandate was the certification of non-standard material in the built environment. It had an agreement with the Department of Public Works (DPW) and the Council for Scientific and Industrial Research (CSIR) in discharging its mandate. Agrément was administratively integrated into the CSIR as its internal controls and its governance structure were reliant on the CSIR.

Mr Joe Odhiambo, Chief Executive Officer: Agrément South Africa, reviewed Agrément's mandate, functions, origins, key objectives and the highlights of past year's performance. He also briefly explained the innovation evaluation process according to examples of innovation, the typical development cycle, regulatory and legislative arrangements.

Mr Odhiambo also drew a distinction between Agrément and the South African Bureau of Standards (SABS). The SABS’s mandate, role and objectives were presented to clarify this distinction. He reviewed its governance arrangements in terms of legislation and regulation.

Focusing on advances in house construction methods, he stated that the government had built millions of houses since 1995. In line with the current rate of delivery (about 185 00 houses per year, disregarding population growth), Agrément estimated that it would take more than 30 years to eradicate the backlog. Mr Odhiambo then described the impacts and achievements, and reported that Agrément had issued 482 certificates in the 2008/09 financial year. It reviewed its response to the ten priorities in the Medium Term Strategic Framework (MTSF), the approved certificates awarded and all the Agrément certificates. In conclusion, he stated that Agrément would continue to contribute to the country's national presidential imperatives and sustainable human settlements through diverse innovative products. Agrément reiterated its commitment to service delivery and accountability in accordance with its mandate. 
 
Mr Phumlani Myeni, Financial Manager: Agrément South Africa, reiterated that Agrément operated under the corporate governance principles of the CSIR. Agrément received an unqualified audit opinion for the 2008/09 financial year (see document). There was a  net surplus of operations at financial year-end, which was well-received by the Auditor-General (A-G).
 
Discussion 
The Chairperson noted that Agrément operated with a small budget of only R8 million. Due to its administrative integration with the CSIR, he was not sure if the credit for the unqualified audit opinion should accrue to Agrément or the CSIR. 
 
Mr D Kekana (ANC) was interested in the information on the innovative building systems Agrément had certified. He stated that the explanation did not make sense to him. He was particularly interested in how the housing innovations would produce houses faster, more cost effectively, and using more labour. 
 
Mr Odhiambo replied that "tilt up construction" was where the structure was built with doors and windows installed on the ground. The structure was then lifted upright in one operation. This created jobs because production sites were set up on the building sites.  
 
Mr Kekana noted that South Africa still had a housing backlog, and Agrément predicted that it could only be eradicated in 30 years. He asked how these innovations could address the backlog. This was particularly important because the old method of building housing was still widely in use. If there were innovative methods, then people had to be informed and should be able to take advantage of these advances. He noted this particularly in the light of the informal settlements that were still pervasive and growing in South Africa.
 
Mr Odhiambo replied that the Department of Human Settlements had recently taken up a number of projects using new building systems. In the last 40 years, there was very little uptake and the reason for this was difficult to pinpoint. The innovative systems would have more impact in the future. Agrément had recently dealt with products that could be suitable for use in informal settlements. These may be called “temporary housing” but some of these products could last longer than conventional housing. The question centred around how Agrément could get the products into general use. Habitat for Humanity, an international nonprofit housing organisation, and its methods and materials could be used for better informal housing solutions. Habitat for Humanity also used extensive labour input, allowing people to donate its time and energy as an alternative to a money donation. 
 
Mr Silinga added that it had found that the lack of innovation arose from the use of outdated specifications by those who were responsible for design specifications for a housing project. Civil engineering companies had design offices that set out the production line, using the same tender documents the company had used for the past ten years. This aimed to use less of the company's resources, making the projects more profitable. Unfortunately, it also carried the consequence of systemic repetition of old problems.

Academic institutions also perpetuated the old methods and did not keep pace with new developments in their course materials. There was also a reluctance in South Africa to promote or inform engineering students about new products and methods. This was a result of the old beliefs that alternative forms of housing and methods were sub-standard. 
 
The Chairperson stated that his grandmother's mud house lasted longer than some of the Reconstruction and Development Programme (RDP) houses. This directly contradicted the idea that newer must be better. South Africa must use innovation, but this must be innovation that propelled the country forward. The main concern should be the centrality of the end users, being the people who would have to stay in the house for 30 years. 
 
Mr T Magama (ANC) queried the extent to which administrative support was provided by the CSIR and whether the CSIR also provided technical support. 
 
Mr Odhiambo replied that Agrément relied extensively on CSIR technical support because the CSIR had many technical experts in the built environment, specifically roads and structural experts.  
 
Mr Magama noted the conspicuous absence of a full report on environmental issues in the presentation. South Africa had committed to looking at ways to support the "green movement". This should permeate every aspect of what was done in the country. He stated that while the innovative materials may be stronger and more durable, if they were not environmentally friendly, then they would defeat the purpose of the green agenda. 
 
Mr Odhiambo referred to the Committee to slide 9, which dealt with the regulations for compliance. The overarching pieces of legislation were the National Building Regulations and Building Standards Act. South Africa was in the process of developing standards for environmental assessments. Agrément had to await completion of these standards before it could develop and implement its own standards of assessment. It could not anticipate the national standards. Hopefully, the two standards would be completed by this year and implementation could begin in the following year.
 
Mr Magama queried Agrément's interface with the ten priorities. He asked how exactly Agrément would assist in these policy statements. His understanding of the priorities was that government had to do more and do things differently. If Agrément continued verifying the products for fitness of purpose, as it had done for the past 40 years, there was a disjuncture with the spirit of the ten priorities. He asked Agrément to consider how it could best to align itself to the presidential policy statements. 
 
Mr Odhiambo responded that Agrément did what it could, within its mandate, to align itself with the ten national priorities.
 
Mr Silinga replied that, in his opinion, Agrément operated in a reactive, low profile, and free-for-all space. Some of the past problems in housing arose because South Africa did not control the standards in the products that came from outside the country, before these products were sold on the market. There had been poor regulation, and construction companies were able to use these products in low cost housing. The systemic weakness initiated by use of sub-standard products ran through the entire value chain. Legislation to regulate this and to limit use of sub-standard resources would save a lot of the public resources. Use of these products had also killed the domestic economy, because the foreign countries made profit out of the exports to South Africa and the South African people had to carry the costs of sub-standard materials. He felt that a collaboration between Agrément South Africa, the SABS and South African Revenue Services (SARS), through their customs unit, would ensure that these products did not enter the country. This would significantly change the scale of the problem.
 
Mr Magama pointed out that the A-G could not obtain a copy of the contract between the CSIR and the Department of Public Works. He noted that this also raised questions around compliance. 
 
Mr Odhiambo regretted the fact that the contract could not be found. Agrément had searched for it, and even asked people who had been working at Agrément at the time, but had been unable to find it. Agrément apologised for this.  
 
Mr Magama asked why there was such a disparity between Agrément's allocation for human resources (manpower) and the other budget items. More than 50% of the budget was allocated to human resources. This was of particular interest when one considered that it had a total staff of only 13 people. 
 
The Chairperson asked whether the amount for remuneration was exclusively for Agrément personnel, or whether some of the money went to the CSIR for its services. 
 
Mr Magama asked how independent the assessments of CSIR products were, given the statement that it received extensive technical support from the CSIR. 
 
Mr Silinga replied that Agrément had a Technical Committee. This was a Committee of the Board and was composed of experts. These experts were expected to evaluate products against predetermined criteria. The findings were then considered by the Board. The Board was independent of the CSIR. Although there was the possibility of collusion, it would take a series of collusive agreements to compromise the process in favour of the CSIR. There were instances where products were not approved because collusion was suspected. 
 
Mr J Masango (DA) asked for a complete breakdown of the Agrément salary structure, particularly, what was paid to Agrément staff and what was paid to the CSIR. 
 
Ms Caron Petersen, Human Resources Manager: Agrément South Africa, replied that the figures could be found in the presentation. 
 
The Chairperson asked for a more detailed account of the salary structure, and wondered if Agrément would provide this in writing after the meeting. He requested information on whether the salaries were market related. 
 
Ms Peterson replied that she would forward that information to the Committee via the Office of the Chairperson. As to how market related the salaries were, she responded that these were at approximately 80% of the market standard. 
 
Mr Masango asked for an explanation of what Executive Levies comprised and to whom these were paid. 
 
Mr Myeni replied that this was the fee that the CSIR charged Agrément for support services rendered. 
 
Mr Masango asked if the eradication of the housing backlog prediction of 30 years was to apply from 1994 or 2009. He asked whether Agrément had consulted with the Department of Human Settlements on this figure.

Mr Masango noted that the A-G had determined the amount deposited into the CSIR account, by way of the  DPW grant to Agrément South Africa, as R8 070 000. However, Agrément's financial statement recorded the grant received from the DPW as R 7 080 660. There was a difference of almost R1 million between these amounts. He asked for an explanation of this. He also asked whether the money was transferred to Agrément directly, or whether the transfer was done via the CSIR account, and whether the CSIR would decide how much Agrément received.
 
Mr Myeni replied that the difference between the two was the VAT amount. The transfer was done including VAT. The CSIR / Agrément had to pay VAT to the South African Revenue Services, totalling R991 000. Therefore the net amount was reflected on its financial statement.
 
Mr Masango noted that the A-G could not obtain a copy of the contract between that CSIR and the DPW. If this was the case, he had trouble understanding what was the basis on which Agrément operated. 
 
The Chairperson commented that South Africa's institutions were very fragmented. There were gaps created by institutions doing their own thing. Agrément had no legal standing outside of the Ministerial mandate. It was the duty of the legislators to ensure that the centrality of the end-users was respected. This was related to the fact that cheap materials did not last and posed a danger to people. He asked how South Africa might develop minimum standards by bringing the Agrément, CSIR and SABS together. 
 
Mr W Rabotapi (DA) suggested that the Committee invite the SABS to address it, as some of the pertinent issues overlapped. 
 
The Chairperson responded that the Committee needed to go beyond this, and also invite CSIR to present.

Mr P Mnguni (COPE) asked if Agrément was able to talk to the universities to ensure that innovations became part of the study material. He also asked if it was possible to explain these innovations to the ordinary people. He felt that the Committee should conduct site visits to see where the approval of these products was done. 
 
Mr Masango asked what the Agrément stamp of approval looked like.

Mr Odhiambo replied that the certified products did carry the Agrément logo as an identifying mark.

Mr Odhiambo said that in regard to the interaction with SABS, Agrément hoped that the legislation would address this. Currently the SABS had its own mandate and its own standards.  
 
Mr Magama recalled that, at a previous engagement, Mr Odhiambo promised to engage with his counterparts on how sub-standard materials found their way into shops. 
 
The Chairperson thought the Committee should have a direct engagement with the SABS in its oversight work. 
 
The Chairperson stated that the Committee would liaise with the relevant bodies on the site visits and that these visits should take account of what members wanted to see.

The Chairperson noted that Agrément's interaction with tertiary education would be a process, and it would also be important to engage with the professional councils. He noted that a consumer education response was required to educate people on how to identify approved and certified products.
 
Mr Silinga agreed with the suggestions on Agrément's interaction with the universities and training institutions. This was not done in the past and could prove very useful. There had been challenges in the sphere, particularly in the area of transformation. The experts at these institutions were still predominately white males. Work had started on this, albeit informally to date, but Agrément would also interact more formally. The interaction with the professional councils would also be helpful.

Regarding consumer education, he stated that Agrément had tended to be rather inward looking. It had no visibility whatsoever. He agreed that it needed to create consumer awareness and products needed a particular stamp. Agrément took this as a challenge. Agrément was concerned about the extent of copying the certificate, once it became better known, which posed opportunities for commercial crime, which would have to be addressed.

The meeting was adjourned.