Independent Development Trust Corporate Plan 2011 to 2013 & Construction Industry Development Board 2009 indicators

Meeting report

Independent Development Trust (IDT) 2011/13 Corporate Plan briefing
Ms Thembi Nwedamutswu, Chief Executive Officer, Independent Development Trust, presented the corporate plan of the Independent Development Trust (IDT) for 2011-2013. She described the operating environment for the IDT for 2008/10 and stated it was the most challenging period in the history of the world. South Africa, after experiencing 17years of sustained economic growth, experienced a recession that impacted on individuals, households and organisations in the public and private sector, as well as resources available to government. Because of non-transfer of funds by departments, the delivery programmes planned by IDT had to be suspended, and service providers were unpaid. There was a significant decrease in the number and value of social infrastructure programmes confirmed for 2010/11, when compared to previous years.

2009/10 was the year of entry for the IDT’s 2010/13 Strategic Vision, and its Gear-up Project had to strike a balance between its programmes and available resources. These long term financial sustainability challenges impacted on the Corporate Plan.

The CEO outlined the IDT historical background from its establishment in 1990, and its role in the Development Sector. She briefly summarised the IDT’s Vision, Mission and Core Values (see attached presentation for details).

Ms Nwedamutswu went on to present the IDT’s Strategic Vision. The IDT 2010/30 Strategic Vision was premised on the understanding that the eradication of chronic inter-generational poverty required a long-term, targeted, integrated and comprehensive strategy and programmes. The core principles of its development practice were being shaped by the aspirations of the poor households and communities. It was grounded in people’s participation, to lead and own the processes. The IDT planned to strengthen its social facilitation and community mobilisation role through capacity building of people and their structures. It would establish partnerships with civil society, public and private institutions, with investment in community mandated programmes. She explained that strong synergies between the Medium Term Strategic Framework (MTSF), the Plan of Action (PoA) and IDT’s 2010/30 Strategic Vision, aligned with government mandated programmes.

The strategies, strategic objectives and targets were set out for the 2011/13 Corporate Plan. The key initiatives included business growth. This was in line with strategic priorities of government. It included rural development, community based sustainable development projects and targeting vulnerable groups. Intensifying local government support, the long term financial sustainability of IDT and the development of a matching HR strategy were also included.

Ms Nwedamutswu explained that in order to achieve the goals of the Strategic Vision and identify key performance indicators, the IDT adopted three objectives. These were to attain sustainable livelihoods through people-centred development interventions, to pioneer innovative development solutions and ensure excellence in service industry.

The Strategic Objectives, Key performance indicators and targets were aligned to the five key priorities and the MSTF.

Mr Tom Moir, Chief Financial Officer, IDT, presented the 2011/13 IDT Budget. He identified the main considerations of the Financial Plan. He listed the budget shifts responding to accountability challenges. While strategic focus remained a priority, material expenditure reduction had been enforced. A R52 million amount had been ring fenced for direct community driven programme interventions. The revenue generated did not meet capacity, and therefore would not cover expenditure in the short term.

Mr Moir highlighted that expenditure of R350 million had been reduced by 9%. Revenue generated amounts were R78.8 million, a reduction of 33%. Management fees of R40 million had increased by 66%. (See attached presentation for full summary)

Mr Moir outlined the guidelines for the Outer Years. Salary increases would be aligned to National Treasury  recommendations. Contractual escalations and inflation were projected at 6%. Community mandated poverty eradication programmes were maintained. Management fees would increase significantly. (See attached presentation for projection table)

In conclusion, he said that the total budget decreased. There would be limited capacity to significantly impact on revenue generation capacity in the short term. Restructuring would be required for IDT to be sustainable in the long term.

Mr A Wakaba, Executive Officer, IDT, brought Members’ attention to the IDT support of government through provincial departments. He noted that the Corporate Plan, at page 62, contained the summary of the IDT business plan. He updated the Members on the issue of the cost of cement. The IDT previously reported on the uncompetitive behavior of cartels, which artificially inflated cement prices, and was subject to investigation. This process was still under way.

Ms Nwedamutswu expressed the IDT’s appreciation of the Committee’s continued support. She noted that the IDT Regional Offices and projects would support the Committee’s oversight role. She requested the Committee’s support in addressing provincial budget deficits, which impacted profoundly on emerging contractors, and in the process of confirming the IDT’s future role in the development landscape, and the funding for this role.

Discussion
The Chairperson asked what the cost of a classroom was, and by how much management fees would be increasing.

Mr Wakaba, Executive Officer, IDT, responded that the IDT had met the Department of Education. A school accommodating 1 000 learners would cost between R27 million and R48 million to build. This trend had been observed since the start of the recession. He mentioned that the Department of Education was working on standardising the cost of a class. He also responded that management fees would increase by 10%, showing a 2% to 4% increase over the last three years.

Mr D Kekana (ANC) wanted to know how much of the IDT budget was funded and how much was self generated.

Ms N Madlala (ANC) asked what caused the delay of the Department in transferring funds to the IDT. She also referred to the key initiatives targeting vulnerable groups, and wondered whether the indigent and the aged were included in this group. On the topic of schools, she wanted to know if IDT was taking into account lack of access in the rural areas, where schools were not accessible due to bad road conditions and long distances. She asked, in regard to the Free State sanitation project, how many toilets were being built.

Mr Wakaba stated there was a growing trend where provincial departments were unable to transfer funds to IDT, with the result that IDT was in turn unable to meet its commitments. This was seen with the Mpumalanga Provincial Department of Public Works, the Eastern Cape Provincial Department of Education and some North West provincial departments. This in turn affected the service providers, as seen recently in a TV news programme, where a service provider closed a school, due to lack of payment. The problem was largely infrastructural.  

Ms Edith Vries, Executive Head, IDT, wanted to comment on the impact on children. Mr Wakaba had referred to direct beneficiaries, and these were the people referred to in the Corporate Plan. However, as seen in the Annual Report, IDT would go into areas like that and do baseline studies. That baseline information would be compared with other South African statistics, such as the average household size and average classroom size, to reach a calculation that delivery had reached x numbers of classrooms and y learners with an environment where a decent education could take place. IDT was saying, in its development model, that the schools must be left as functional schools. The R52 million that Mr Moir had referred to in his presentation would initiate nine community-based sustainable development programmes. At the end of one year, IDT would have done a full scale community assessment, and would have planned a vision endorsed by that community. It would have been approved, not necessarily by government, but by a functional community structure. Whilst IDT was excited about some of the changes, they could not predetermine exactly how these would be achieved.

Mr Moir added that IDT was not emphasising its corporate targets at this time. However, in a month or so, when IDT returned to the Committee, it would be able to report on the actual achievements in spending the R1.6 billion targeted. He did not have the breakdown of the spending with him, but said that the bulk would have taken place in Eastern Cape and KwaZulu Natal. IDT had very small programmes in the Northern Cape and the Free State.

Mr T Magama (ANC) wanted to know whether the IDT monitored the sites where a school would be built, and if the IDT advised the Department of Education. He felt that the liability of payment was that of the IDT and that they should find a resolution to the problem.

Ms N November (ANC) wanted clarity on who identified the school.

Mr Kekana said there should be a standard measurement for the building of schools, and when there was a deficit the government should not make the problem into one of the communities.

Mr Wakaba responded that with regard to the empowerment of contractors, the IDT had very effective Contractor Programmes where it provided a mentorship service. The Department of Education decided when and where and how the schools were to be built. The price was something that affected South Africa as a whole. IDT should help to manage that aspect and help the Department of Education to come up with a standard. In the matter of non-payment of service providers the IDT engaged with the Minister and government in general and requested the National Treasury to empower the Department to pay in advance, and IDT would hope to engage with National Treasury if it was running out of budget.

Ms Nwedamutswu stated that in order to bridge the gap of non-payment the IDT was writing off the debt.

Mr P Mnguni (COPE) stated that these entities needed to be protected from going out of business.

Construction Industry Development Board (CIDB) Briefing
Mr Ronnie Khoza, Chief Executive Officer, Construction Industry Development Board, gave a summary of the Construction Industry Development Board (CIDB) Personal Plan and Business Plan, an overview of mandate since its establishment in 2000. The first pillar of the mandate lay in the sphere of development, whilst the second lay in a regulatory function over the sector.  CIDB had accepted the role of an enabler or developer and regulator of compliance in the sector. An investigation into how best to provide that role to service sector clients led to the establishment and maintaining of a national registry and national contractor development programmes. It was not the CIDB’s role to determine the ability of contractors, but only their capacity. The benefit of the CIDB was that “chancers” were reduced, since all contractors were tendering at the same level, and the CIDB was able to promote minimum standards while also increasing growth and transformation of the sector. For the first time in South Africa there was a database that listed the level of contractors. The National Register of Projects provided contractors with a track record.

Mr Khoza went on to describe the external context. Infrastructure development was found to be a challenge, and with lack of skills in the public sector this was an area that needed to be driven by the public sector. This needed to be a high government priority. CIDB was developing a framework in which clients’ growth could be monitored in the construction industry, across the five areas of growth, delivery, performance, capability and contractors empowerment. (See attached presentation for full summary)

The CIDB construction indicators (CIs) were measures of the performance of the industry, focusing on clients, the client’s agent, consultants and contractors. The Cls hade been captured annually since 2003 and were currently being captured by the CIDB in partnership with the Department of Quantity Surveying and Construction Management of the University of the Free State.

Mr Khoza then gave an update on corporate matters. CIDB had registered over 100 000 contractors. This positively contributed to growth and revenue generated. CIDB rated contractors on a scale of 1 to 9, and the presentation set out how this was done (see attached document).

Mr Khoza then tabled slides on the CIDB  Budget, Key Focus 201, Compliance and Confidence and Sector Delivery. He welcomed feedback and comments.

Discussion
The Chairperson wanted to know from CIDB if the removal of Grade 1 from the grading system would reduce the bottleneck to Grade 2.

Mr M Manana (ANC) wanted to know what the rationale was for removing Grade 1, and questioned if this was to avoid a “social pyramid”. Grades 3 to 6 were 75% black-owned companies, and he queried why they were not at grades 6 to 9. He also noted that the Register on Contractors did not indicate where the black owned companies were located; whether this was in Civil Engineering, General Building, or other sectors. He also asked where the youth were to be found, their grading and the percentage they represented.

Mr Khoza responded that the reference to removing Grade 1 meant that there was a need to handle them in a different way, because the requirements were different. The Grades usually went through a 21 day waiting period. This was not necessary with Grade 1, which only took a 48-hour and over-the-counter registration process.

In regard to Grade 3 to 6 the CIDB  suspected fronting. It would like to see more black owned companies in Grade 9, but that was based on capacity. He said that in respect of the question about the classes of work, the statistics on the black owned companies were available, but there was so much information that it would be difficult to know exactly what information people wanted to see. When the summaries were given, CIDB was giving information that it thought was appropriate.

Mr Manana wanted to know how CIDB was empowering the youth.

Mr Khoza asked Mr Manana to refer to the CIDB website, where information was available; alternatively he could send it through to him. The Contractors’ Development Programmes must get clients to take on contractors from different grades. Contracting took time, and contractors must be mentored.

In answer to further questions about criteria, Mr Khoza clarified that two criteria were used – financial and technical. If the contractor could not show a proven track record then CIDB could not grade. He invited the Committee to witness the grading system.

The Chairperson welcomed the invitation.

Mr Nkado believed the problem stemmed from the fact that contractors thought that they would, by registering with CIDB, automatically qualify for tenders. He noted that in Haiti the very lack of infrastructure delivery resulted in tragedy. It was important that the contractor be graded according to its capability.

Ms November asked if CIDB was  making learning skills a priority.

Mr Manana said that businesses were stagnating at certain grades and that the CIDB  should empower movement through the grades. He urged that CIDB must “shape up or ship out” as the Committee would be monitoring the position closely.

Mr Nkado explained that it was more profitable for businesses to remain in Grade 4 than to move to Grade 9, because their overheads were less. He believed the real problem lay with the availability of work.

The Chairperson asked that there be a break away from the silo mentality, and that all entities should be breaking down barriers and working together. He noted that the matter would be addressed again later.

The meeting was adjourned.