Expanded Public Works Programme Incentive Grant performance : Department of Public Works, Financial & Fiscal Commission, National & provincial Treasury reports

Meeting report

Expanded Public Works Programme (EPWP) Incentive Grant: Updates on performance, 3^rd and 4^th quarters
Chairperson’s opening remarks
The Chairperson said that it was clear from a previous meeting that there were still challenges surrounding the incentive scheme coupled to the Expanded Public Works Programme (EPWP). Statistics South Africa calculated that 170 000 jobs were lost in 2009, and this trend was still continuing. The stadiums for the World Cup had all been delivered. There was a need to create sustainable jobs. There should be an element of training. The figures in the third quarter report revealed a low uptake of the incentive scheme.

The Chairperson said that one of the challenges was to ensure that all municipalities could access the grant. The Committee was concerned about the roll-over of funding. Government was not in the business of making a profit. In fact, its profit was in service delivery. He wanted to see this goal being achieved. It was crucial that jobs must be created. The issue was not necessarily about money but about delivery.

Department of Public Works briefing
Mr Stanley Henderson, Acting Deputy Director-General: Expanded Public Works Programme, National Department of Public Works (NDPW) said that the incentive scheme had been introduced to encourage the provincial and municipal levels of public works to create more jobs. An amount of R4.2 billion had been allocated in the Medium Term Expenditure Framework (MTEF) for the period 2009/10 to 2011/12, to finance the incentive grant. Many innovations had been introduced. The incentive scheme was provided for the provinces and municipalities which had performed over and above the targets set for them for the creation of working opportunities. The grant did not replace the normal budget for job creation.

Mr Henderson said that a rural bias had been introduced. The current allocation of R4.2 billion would increase to R5.4 billion. The incentive grant had been introduced to foster job creation in the infrastructure sector but would now be expanded into the social and environmental sectors. This was the first financial year (FY) in which the grant had been applicable. The incentive was worth R50 per person per day of work created. In the 2010/11 FY this amount would increase to R60. Eligible public bodies would sign an agreement with the NDPW and would be held accountable. Targets and incentives would be set for each public body but they would have to prove to NDPW that the work was indeed created. The grant was based on performance.

Mr Henderson listed the criteria. The first was the number of full time equivalent (FTE) jobs being created. An FTE was defined as being work for one person for 230 days in a year. A minimum threshold was set. The threshold did not apply to rural municipalities. To be eligible, the province or municipality had to report to the NDPW on its implementation of the EPWP. Data from the 2007/08 report had been used to calculate the threshold. Agreements were concluded between NDPW and the public body on specific targets and amounts that could be claimed. Workers on the EPWP projects had to be receiving a salary of at least R50 per day. This amount would be increased in the new FY to R60. The funds had been appropriated and included in the budget. However, evaluations were only carried out on a quarterly basis. At present, KwaZulu-Natal (KZN) had successfully accessed the incentive grant.

Mr Henderson presented the formula used to calculate the benefits. It was (FTE target - FTE minimum threshold x 230 days x R60). At the end of the quarter, an organisational check was carried out and NDPW calculated the numbers. If the entity had earned the incentive then it would be paid out, approximately forty days after the end of the quarter. This meant that any incentive achieved in the fourth quarter of the FY would only be paid out in the new FY. This did not constitute roll-over funding. The situation was even more difficult with municipalities, since their financial years ended in June. A nominal incentive of R500 000 was allocated to provinces that did not exceed their targets. The minimum FTE target for a metro was 6 for each R1 million allocated. Rural municipalities had a zero threshold provided that they achieved the other criteria. The same formula for calculating benefits was used.

Mr Henderson said that the Division of Revenue Act (DORA) still applied. He presented the figures for each province. By the end of the fourth quarter, over 600 000 jobs had been created by the EPWP. The target of 550 000 for the entire EPWP had been exceeded. Eight of the sixteen provincial departments had qualified for the incentive grant. The total payment to municipalities was R171 million out of an allocated R201 million, which equated to 85%. Of this, R147.2 million was allocated to rural municipalities and R54.5 million to the metros.

The Chairperson noted that time was limited and asked Mr Henderson to spiral into the fourth quarter figures.

Mr Henderson posed the question as to whether the incentive grant was working. Provincial departments in KZN, Gauteng, the Western Cape and Eastern Cape had all exceeded their targets and had been paid incentives. Eleven of 68 eligible municipalities had already exceeded their targets. The number of municipalities that would access the incentives would increase to 126 in the 2010/11 FY.

Mr Henderson said that measures were being put in place to improve performance. Support was being provided to the public bodies. A partnership had been formed with the Development Bank of Southern Africa (DBSA). Municipal officials had been trained in labour-intensive methods of construction. An extra 90 data capturers had been appointed. New conditional grants would be available in the MTEF.

Mr Mohammed Hassan, Senior Manager: Public Finance, KZN Provincial Treasury, said that the DORA allocation had not been included in the baseline.

Financial and Fiscal Commission (FFC) briefing
Mr Bethuel Setai, Chairman and Chief Executive Officer, Financial and Fiscal Commission (FFC), said that there had to be a link between the equitable share and conditional grants. Only R22 million had gone to the provinces although an amount of R151 million had been gazetted in terms of DORA. R5.1 million had been transferred by the end of December 2009. Expenditure was low. The issue had been discussed at the Budget Council. Transfers took place after the provinces had appropriated their budgets.

Mr Setai said that it was difficult to get a consolidated report from the municipalities. The administration of the grant was a challenge. DORA should be used as a public document. DORA had been passed by Parliament. It should be used to assess the performance unless there was an adjustment. Allocations to some provinces and municipalities had been made after the promulgation of DORA. A proper plan was needed.

Mr Setai had issues with the incentive grant. Independent research was needed to inform the FFC. The question was whether the grant was a stand-alone grant or a supporting grant. He asked if there were any other programmes to encourage job creation. He asked if the incentive grant was related to the infrastructure grant. Targets needed to be clarified.

Mr Setai said that the FFC had discussed the grant, and noted that it was related to other priorities. It was important to streamline the process. The grant should be planned with other projects. An independent evaluation was needed of the number of jobs created. In terms of the design of the grant, it should be clarified whether it was a matching grant or an incentive.

South African Local Government Association (SALGA) briefing
Ms B Mahlangu, National Executive Committee Member, South African Local Government Association (SALGA), said that she had a problem with the figures. They were only for infrastructure projects. She wanted to see the municipalities performing. That would show that the municipalities had gone through with the concept.

Mr Mayur Maganlal, Executive Director: Economic Development and Planning, SALGA, needed to repeat the point that the incentive grant was a complicated matter. There was a real commitment to accelerate the EPWP as a vehicle for job creation. There was gross under-reporting at municipal level. The system was very formal and a lot of information fell through the cracks.

Mr Maganlal said that SALGA had engaged with the NDPW since December 2008. SALGA was aware that the plan was to create 1.4 million job opportunities by 2013/14. SALGA wanted to see the EPWP being more accessible and inclusive. SALGA's concerns had been raised through the mandating forums. There were three conditions for provinces and municipalities. Firstly, they had to have met the minimum participation targets for women, youth and people with disabilities. Secondly, they had to have met a minimum threshold. Finally, they should have reported on their contribution. Only 44 municipalities would qualify according to these criteria for the 2009/10 FY. Another 26 municipalities had reported but were ineligible. The incentive grant did have a rural bias. There was a threshold target for urban areas that did not apply in the rural areas. The rural areas therefore entitled to the incentive for every FTE created, while the urban municipalities had to have created seven FTEs per R1 million expenditure.

Mr Maganlal said that the qualifying parties, after the revision for 2008/09, included 68 municipalities, five cities and ten Integrated Service Rural Development Programme (ISRDP) nodes. There was no detail on the quality of the jobs being created. The overlaps in the FY definitions for the different bodies made it difficult to understand what was happening. Even mayors were confused. There had been an increase of 84% in the number of reporting municipalities. However, there were still 158 municipalities that were not reporting already.

Mr Maganlal presented the figures of the DORA draw-down by municipalities. Those in Gauteng had fared the best, drawing down 190% of their allocation, while those in Mpumalanga managed just 12%. Ten municipalities had drawn down nothing. There might be problems at municipal levels. Of the 68 qualifying municipalities, 32 had either no reporting or just the bare minimum. A workshop was needed in all provinces. There should be a formal relationship with the NDPW. SALGA had attempted to do this, but with little success. SALGA believed that with the right political and technical support a joint EPWP Unit and SALGA partnership could be formed.

Mr Maganlal said that the extension to the EPWP reporting deadline for municipalities was 15 October. SALGA had set itself a target of assisting at least three municipalities in each province.

Mr Maganlal said that many challenges lay in the municipalities. There was an inconsistent level of support. Many of them had not even met with Ms Mahlangu. A greater focus was needed on reporting. Little had been said about the 158 municipalities that were not reporting to NDPW. There was limited access to peer-to-peer learning networks. This was preventing the sharing of innovations. Experience of the EPWP Management Information System (MIS) showed that municipalities needed capacity. Some of them did not even have access to the internet. Reporting standards were affected by the mismatch of FY periods. The different sectors, namely infrastructure, environmental and social, sometimes combined their reports and sometimes they were separate. It was unclear if figures for women, youth and the disabled were being captured.

Mr Maganlal outlined some further challenges. There was limited awareness on the part of Councillors. There was also a lack of ownership of the EPWP portfolio. There was a need for greater role clarification between local economic development (LED) officials and owners of infrastructure projects. Capacity challenges existed. Municipalities were often dependent on third parties to capture data and make their monthly reports. Another challenge was that only 68 municipalities had been identified as being eligible for the EPWP in 2008. They were only able to draw down in the 2009/10 FY. The number of identified municipalities was increased to 105 in 2008/09 but would only be eligible to draw on the grant in the 2010/11. An additional 20 municipalities had been identified in the 2009/10 cycle but once again they would only have access to the benefits in the 2011/12 FY. This showed that it would take 5 financial years to raise the number of benefiting municipalities from 68 to 125.

Mr Maganlal said that SALGA had some suggestions. These included more extensive training on the MIS. The systems should be simplified. Standard reports should be made available. More technical support had to be provided by the EPWP Infrastructure unit. There should be more direct face to face interaction. SALGA could support an EPWP knowledge platform. He felt that a generic municipal policy should be developed. Fiscal incentives should be fast-tracked. Municipalities should be able to borrow against the incentive grant to finance their projects. Age incentives could be used to expand on the EPWP beyond infrastructure projects.

Discussion
The Chairperson noted that several critical issues had been raised. He had not invited the provincial treasuries to make formal invitations but they were welcome to speak during the discussion period.

Mr Themba Dladla, Senior Manager, Department of Cooperative Government and Traditional Affairs (COGTA), said that municipal infrastructure units should be linked to the Municipal Infrastructure Grant (MIG). Reporting should be cross-cutting. He agreed that this needed attention.

The Chairperson said that the Committee understood the COGTA structure.

Mr Dladla said that the MIG should regulate infrastructure projects. The municipalities should indicate those programmes which complied with the EPWG guidelines. They should indicate the employment created by the projects and indicate what their achievements were. A monitoring system was in place. It would help if monthly reports were submitted in a Microsoft Excel format. Some municipalities were struggling with this. Challenges were under reporting and the monitoring of programmes in view of EPWP guidelines. Programmes had to be really labour-intensive. In the current FY there would be a focus on monitoring. Site visits would be part of this process. Municipalities would have to comply with the baselines in the execution of projects.

Ms N Mkiva, Acting Chief Executive Officer, Free State Provincial Treasury, said that the incentive grant was allocated to NDPW.

The Chairperson said that the programme was administered by the NDPW, who applied for the funds. The question to be answered was how these funds were released.

Mr Edgar Sishi, Director, National Treasury, said that National Treasury (NT) was responsible for the release of funds. A budget had already been allocated to NDPW. Transfers to provinces and municipalities were based on performance reports. NT would continue to monitor spending of allocated funds. The role of NT in the future was to have continuous engagement with NDPW regarding the grant.

Mr Sishi said that there were a few issues. These included performance. A related issue was the ability of the public body to draw down funds. Targets were based on past performance. NT was strongly confident that the system would improve. There were still issues of alignment. NT was making recommendations on how the alignment process could be improved. A third issue was the appropriate placing of incentives.

Mr Sishi said that DORA reports were important. Intensive communication was needed with departments and provinces. There was still a lot of misunderstanding. A proper solution would be strongly reliant on good communication. Part of the challenge was due to other inherent problems. On the subject of infrastructure planning there was a need for improvement. These were done on a yearly basis. Bodies should move towards multi-year planning. There was generally little activity in the first and second quarters of the FY. The action only occurred at the end of the FY. He stressed the need for continuous engagement with NDPW.

Ms Mkiva said that the Free State had a department responsible for Public Works and Rural Development. NT had said that money must go to transport and roads projects. Some R23 million had been channelled to this purpose. The Department was reporting that it had R15 million. She had never seen the R12 million indicated by the FFC.

The Chairperson concluded that there was direct interaction between NDPW and the provincial department.

Mr Sello Mokoko, Head, Northern Cape Provincial Treasury (NCPT), said that communication was the biggest challenge. The grant had been introduced without the framework being thought through. The province had received a nominal amount of R500 000 but there was no guidance on how to spend it. The money had been appropriated, but later the province wondered why it had been included in the allocation. He asked how the provinces could plan if they did not know what they would be getting. His province had seen the figures regarding the incentive grant for February 2009. The first payments were only made in October 2009.

The Chairperson said that there was not too much detail. Provinces had been given money, but no role to play.

Ms S Sooklal, Senior General Manager, Limpopo Provincial Treasury, said that Limpopo was experiencing the same problem. Another challenge was the lack of data capturing capacity. The province also suffered from a lack of proper network coverage. Much of the reporting had to be done manually. A lot of time and training was needed.

Mr M Tundzi, Director: Equipment, North West Department of Public Works, Roads and Transport, said that the EPWP had a top-down design. When the province engaged on spending programmes it first looked at using primary funding such as the Municipal Infrastructure Grant (MIG) and the provincial infrastructure grant (IGP). These were primary funding sources for the EPWP.

The Chairperson said that the Department of Public Works had a primary responsibility to monitor projects. Provinces should not just criticise the NDPW. He did not want to see the meeting degenerate into a moaning session.

Mr Tundzi said that there was no framework. North West could come up with options. The role of the provincial public works departments had to be clearly outlined. There was no communication between the NT and the provincial treasury.

Ms S Myburgh, Director, North West Provincial Treasury, said that NT had an infrastructure reporting system which included reports regarding EPWP performance. There were two different versions, and more alignment was needed. She proposed that, if the province was compliant, NT should formally advise the province whether it qualified for the next step. To date North West had received nothing from the NDPW.

Mr M Tusla, Director: Public Finances, Eastern Cape Provincial Treasury, said that the focus was on public works and not on other sectors. There was under reporting. Planning was in the government sphere. Provinces had other priorities to municipalities. Provinces focused on the big projects while municipalities had a focus on projects at a local level. The FFC was quite correct in its remarks on the grant concept. Provinces were not willing to commit themselves to spending if there was no guarantee that they would receive payment. This was why they tended to under spend.

Mr M Vilakazi, Chief Director, Gauteng Department of Finance, said that there was a protocol agreement in place but the province had received nothing to date.

Mr N Madike, General Manager: Budget, Mpumalanga Provincial Treasury, said that the provincial public works department in Mpumalanga received its allocation through the province. Nothing was received from the NDPW. This was why its figures were incorrectly indicating that there was over spending.

Ms N Orlandi, Economist, Western Cape Provincial Treasury, noted that she had seen the allocation for the Western Cape that morning. It was only then that she had realised that the province had been allocated an extra R3 million on the expected R11 million. She would have to confirm if that money had actually been received.

Mr Hassan thanked NDPW on behalf of KZN for the incentive grant which it had received. The majority would not go to public works but to the transport sector. The current Minister of Transport, Mr Spu Ndebele, whilst he had been the Member of the Executive Council (MEC) for Transport in KZN, had initiated programmes designed to get indigent people involved with road works. Provinces had to budget and appropriate with certainty. He asked if the incentive grant could really be regarded as a grant. Performance was based on historical data. He did not believe this should be described as a “grant”. This would mean that government was being incentivised to do its job.

Mr Hassan said that once the money was allocated then the provinces could spend it as they wished. The funds needed for the projects that resulted in the award of the incentive grant had already been spent at the time from the province's budget. At the start of the new FY there should be certainty for the budget process. The extra R500 000 could only be appropriated in the new FY. It should be included in the baseline funding. Then it could be appropriated and spent.

Mr M Swart (DA) indicated that he was now very concerned about this. He pointed out that money was lying idle. Only some municipalities could benefit. The reporting system should be simplified. He was happy with the rural municipalities being given a zero threshold. He stressed that cash should go where it was needed, and should be used for its intended purposes. Maintenance work should also be considered. Poorer municipalities were in overdraft.

Dr P Rabie (DA) said that the system was way too complex, and there was too much red tape involved.

Mr Henderson replied that there was a chain of accountability. Any funds allocated had to be accounted for. This had been agreed with NT.

The Chairperson noted that members were saying that SALGA felt that many municipalities had no capacity to report or claim the grant. He asked where the 90 newly employed data capturers were being utilised. Rural municipalities had no access to the Municipal Systems Improvement funding. There was a problem at the level of provincial treasuries. He wondered how big the problem was at a municipal level. He asked why it took so long for public bodies to be refunded. He foresaw a resulting request for a roll-over.

Mr Swart emphasised that there must be accountability.

The Chairperson said that there was no communication between the provinces and NDPW. Sometimes the NDPW did communicate directly with provincial public works departments.

Mr Henderson noted the concerns of the FFC, SALGA and the provinces. He would call for a meeting of all major stakeholders in the near future. He could not respond to each individual query. He asked how reporting could be simplified.

Ms Cathy Motsisi, Chief Financial Officer, NDPW, said that the NDPW website could be used. Another solution would be improved data capturing.

Mr L Ramatlakane (COPE) asked why it was taking so long to address the problem. He asked why so many problems were being created. There was a turf war and the system seemed to be set up so that it was impossible to reach any resolution. There were no results on the ground. He asked how the situation could be resolved. Four years down the line there were still questions on how the municipalities could get capacity. He had heard lengthy explanations on the problems but none on the solutions. He had his own suspicions about why things were not happening. A complicated process had been introduced.

Mr Ramatlakane was frustrated at having to listen to these tortuous explanations. The money was available, but there were no solutions, and he wished to know why this was so. He asked if there was a team in place to address the problems. The most skilled officials should be in place. The situation could be resolved far more simply.

Ms R Mashigo (ANC) said that the SALGA presentation seemed to be the view of an outsider. Perhaps there should be a workshop to understand its role. SALGA should surely look into the responsibilities of municipalities. The cycle of reporting should be backed up by sensible communication. SALGA must help to accommodate the meeting proposed by Mr Henderson.

Mr J Gelderblom (ANC) said that all provincial treasuries should attend the workshop. SALGA had a role to play in co-coordinating and communicating on behalf of the rural councils. Provinces communicated by means of circulars, which were often incomprehensible to the small municipalities. Simple terms were needed. SALGA had to be more pragmatic.

Ms B Ngcobo (ANC) said that the incentive grant had been introduced some time before. She asked what value for money was being gained. She questioned why this process should continue in the same way as in the past. She shared the other Members' concerns on SALGA. Some municipalities were unable to respond as they did not have internet access. The problems would be brought to NT and NT would give roll-overs.

Mr Kimi Makwetu, Deputy Auditor General, said that it had been an insightful session. The problems were normally only seen after some time.

The Chairperson said that the issues were clear. There was a requirement for the meeting proposed by Mr Henderson. He suggested that the NDPW should try to strengthen its national office. He assumed that there would be provincial and even regional offices. He agreed with his colleagues. He pointed out that the previous meeting had been held at the time of a municipal strike which had diverted attention away from the issues. There was a simple resolution to make the incentive work. The issue of the design of the grant had been discussed at the National Council of Provinces. Only the Auditor-General worked retrospectively. The rest of government had to work ahead. Government had to ensure service delivery.

The Chairperson said that NDPW conceded that there were challenges. The conceptualisation of projects had to be correct. The Committee wanted to see time-frames and feedback mechanisms in place. Municipalities needed to have access to the EPWP MIS. The problems could not be prolonged. Government was putting money aside for job creation. Projects had to be labour intensive. The money was in place and was not the problem. The problem lay in implementation. He could foresee roll-over requests. This could not happen every time. There were a number of grants but they did not seem to yielding fruit.

He said that the Financial Management Grant (FMG) had been in place for years. R200 million was available. He asked why it was not growing. Nothing was given, so many municipalities had no capacity, yet nobody was applying for the grant. The Municipal Systems grant was not being utilised. SALGA should take leadership and responsibility.

The Chairperson said that the Constitution required national government to support municipalities. This was echoed in the Municipal Financial Management Act (MFMA). The municipalities could not wait to be given “manna from heaven” but should apply for the available grants. He asked where the data capturers had been employed. The meeting to be called by the NDPW would have to have clear objectives.

He said that the grant must work. Attention had to be paid to reporting lines and time delays. The presentation made by the FFC had been instructive. He asked what the situation was where people were only employed for one day. Municipalities had to work with the infrastructure. They had to go into the townships. They had R4 billion to spend but the structures were unable to respond to the challenge.

The Chairperson said that government depended on reports, but there should be inspections. Reports issued by the AG showed a lack of evidence of the work being done. The grant must work and could not continue in this way.

Mr Henderson said that the date of the meeting would be communicated. It would be treated as a priority.

The Chairperson was satisfied with that. He asked that the date be set within the forthcoming seven days as Parliament would be rising on 26 or 27 May. He would like to have a date before going on recess.

Ms Motsisi said that there was a MinMEC meeting set for 28 May. The NDPW would use the occasion to meet with the political principals. The meeting would be prioritised on the MinMEC agenda and a date would be set.

The Chairperson wanted to see it work. The meeting must be called soon.

Ms Mahlangu said that she had learned from the process. Workshops had been held and had done something. There was a commitment. The question was how to make Councillors aware of what was available. Service delivery was the issue. SALGA would be part of the NDPW meeting, but would also hold its own meeting on the issue.

The Chairperson understood that the Committee would have a meeting with SALGA. He did not want to pre-empt matters by discussing the nature of the meeting. Officials at the lowest levels should be involved. All had to take responsibility. All over the country many of the non-reporting municipalities were in the rural areas, where the people were totally dependent on the municipality for job opportunities, whereas those in urban areas could acquire job opportunities in other sectors.

The Chairperson also said there had been no discussion over the meaning of the term FTE. He did not understand these issues. Government had to make sure that money was being spent correctly. It was important to simplify issues. There were good practices at work elsewhere, as evidenced by the achievements of KZN. He reiterated that provinces and municipalities had to do the job.

The meeting was adjourned.