National Treasury briefing; Overview by Departments of Public Works and Health; Reports on Hospital Revitalisation Grant Expenditure for the First Quarter by the Northern Cape, Western Cape, Eastern Cape & Free State Provinces

NCOP Appropriations

19 October 2010
Chairperson: Mr T Chaane (ANC, North West)
Share this page:

Meeting Summary

The Chairperson reminded members that the meeting was a follow-up on the meeting of 04 May 2010.

The
Director: Provincial Budget Analysis of the National Treasury briefed the Committee on the Hospital Revitalisation Grant expenditure trends since the second quarter of 2009/10. The total budget for the Hospital Revitalisation Grant for 2010/11 was R4 billion.  At the end of June 2010, the provinces had spent R835 million (20% of total budget). At the end of August 2010, the provinces had spent R1.2 billion (30% of budget).  The total health budget for the provinces was R98.3 billion, of which 39% had been spent.  The provinces projected over-expenditure of R4 billion on health services. The projected under-spending on infrastructure was R660 million.  At the end of August 2010, the projected under-spending on the Hospital Revitalisation Grant was R444 million. The Free State and KwaZulu Natal accounted for the bulk of the under-spending (R300 million). The reasons for the under-spending included poor management, poor planning, a lack of coordination and poor contractor performance.

The Director-General and
Head of Infrastructure of the Department of Health advised that there were 419 Hospital Revitalisation projects out of a total of 2191 infrastructure projects. The total budget for the 2191 infrastructure projects was R8.9 billion and the budget for the Hospital Revitalisation project was R4 billion. The expenditure trends did not correlate with the budget allocations. Under-spending had doubled over the previous five years and the Department was critical of the National Treasury for allowing increased allocations to provinces that had under-spent. The key problems highlighted by the Department were monitoring, poor coordination between the Departments of Health and Public Works, a lack of capacity and contractor inadequacies. The Department was developing norms and standards for the design of buildings and was investigating a project management information system.  The Department advocated the employ of construction professionals by the provincial Departments of Health but this proposal was criticised by the Acting Executive Manager of the Western Cape Department of Transport and Public Works.

Members of the Committee requested details of a building reportedly completed in 2006 without any provision for electricity.  Members felt that the Department appeared to be shifting the blame to the National Treasury and questioned the assumption that certain provinces would be unable to spend the allocated funds.

The Northern Cape Department of Health and Department of Roads and Public Works presented an overview of the Hospital Revitalisation projects in the province.  The major challenge was the completion of the mental health hospital, which was commenced in 2004 but was yet to be completed.  Costs had escalated from R360 million to R740 million.  The contractor appointed had defaulted and had been liquidated.  The province had instituted court proceedings against the contractor.  The other projects in the province were progressing well because of the good coordination and working relations established between the two provincial Departments.

The Western Cape Departments of Health and of Transport and Public Works presented an overview of the progress made on the Hospital Revitalisation projects in the province.  In general, good progress was being made but the province reported certain challenges with joint venture contractors.  The value of joint ventures to achieve transformation in the construction industry was however acknowledged.

The Free State Departments of Health and of Public Works and Rural Development mainly reported challenges with the Hospital Revitalisation projects in the province. The province projected under-spending to the value of R105 million on the programme.

Members of the Committee were highly critical of the attitude displayed by the officials of the Free State province, the lack of progress and the tendency of certain small contractors to focus on getting rich rather than on delivering quality work.

The Eastern Cape Departments of Health and of Transport and Public Works presented a litany of challenges faced by the province.  The problems experienced included allegations of corruption and collusion on a large scale, a lack of capacity, the extensive use made by external service providers and the withholding of information and expertise, the frequency of funding provided by the National Treasury as well as the poor performance of contractors.  There were two implementing agents in the province, i.e. the Department of Public Works and the Coega Development Corporation. 
The turn-around strategy included developing internal capacity, overhauling the system of programme management by the implementing agents and reviewing the payment system.  The provincial Department of Public Works reported that projects were halted by the provincial Department of Health in June 2010, citing a lack of funds.  The stopped projects were the projects funded by the equitable share, which had a budget deficit of R1.6 billion. The Hospital Revitalisation projects were not stopped. Public Works suggested that the client Departments took responsibility for the legal action taken against the province by contractors.

Members of the Committee remarked on the apparent lack of collaboration between the two departments.

The National Department of Health called for the urgent establishment of a Joint Implementation Committee in the Free State and suggested that a turn-around strategy was put in place as soon as possible. The Department felt that the province needed strong political intervention and support.


The Chairperson recommended that both Ministers promoted the idea of a joint MINMEC forum to address some of the challenges that had been highlighted in the briefing.


Meeting report

The Chairperson reminded Members that the meeting was a follow-up of the meeting held on 4 May 2010. The meeting would focus on the Hospital Revitalisation Grant spending for the first quarter of 2010/2011. A number of challenges regarding delays arose during the meeting held on 4 May 2010. For that reason, the Committee had invited the Departments of Public Works of the respective provinces to shed further light on the delays experienced.  The National Treasury and the national Departments of Health and Public Works were invited to provide a national overview of spending patterns.

Presentation by the National Treasury
Mr Edgar Sishi, Director: Provincial Budget Analysis, National Treasury presented the report, which covered the period from the second quarter of 2009/10 to the first quarter of 2010/11. Out of a total budget of R3.2 billion for the Hospital Revitalisation Grant (HRG), the provinces had spent R1.135 billion by the end of September 2009 (42% of the budget). At the time, the provinces were projecting a, aggregate over-spend of the HRG, influenced almost entirely by Mpumalanga to the tune of R157 million. Three provinces projected underspending by a total of R86 million. At the end of the third quarter of 2009/10, the picture had changed dramatically. Total spending amounted to R1.99 billion (57% of the budget). Six provinces projected underspending. The reports for that quarter reflected a dramatic slowdown in spending. In the final quarter, underspending increased dramatically by almost R1 billion. He cautioned that the information provided were the pre-audited figures and that slight differences could appear after the final audits were completed.

At the end of the first quarter of 2010/11 (i.e. 30 June 2010) the provinces had spent R835 million, or 20% of the HRG budget of R4 billion. Significantly, three provinces were already projecting underspending to the tune of R133 million. The total budget for health for all the provinces was R98.3 billion of which, on aggregate, 39% had already been spent. This clearly placed pressure on the provinces with the result that the majority of provinces were projecting a total over-expenditure of R4 billion. This pressure stemmed mostly from the health personnel side. On infrastructure spending, the Free State had only spent 10% of the budget for capital assets. Provinces were projecting aggregate underspending of R660 million on infrastructure projects, with three provinces projecting overspending. At the end of August 2010, provinces had only spent 30% or R1.2 billion of the total HRG budget of R4 billion. At the end of August 2010, the projected underspending on the HRG was R444 million. The slowest provinces appeared to be the Free State and KwaZulu Natal, which had only spent 10.7% and 16.9% of the HRG budget respectively. These two provinces were accountable for the majority of the projected combined underspending to the tune of R300 million.

Mr Sishi concluded the presentation with a summary of the key reasons for the spending trends. The quarterly reports required by the Division of Revenue Act (DORA) were not adequate and lacked specific details. Key problem areas included delays, poor planning, poor performance by contractors and poor planning by the Departments. There was a need for the national Department to enhance its monitoring and evaluation practices.

Discussion
There were no questions from the Members of the Committee.

Presentation by the Department of Health (DoH)
Ms MP Matsoso, Director-General, Department of Health introduced Dr M Shaker, Head: Infrastructure, to the Committee.

Ms Matsoso advised that a total of 2191 projects were underway across all provinces, of which 417 were projects under the Hospital Revitalisation Programme (HRP). The funding for the projects was provided by the HRG and from other sources, such as donor funding. The total budget for all 2191 projects amounted to R8.9 billion. It was important that the Committee understood that the DoH was following a comprehensive strategy in dealing with all these projects and did not only focus on one single component, such as the HRP. Through its
Accelerated Health Infrastructure Delivery Plan, the Department had undertaken to focus on capacity, resources, delivery mechanisms and monitoring. There was a clear misfit between the spending patterns and the funding allocations. The main deficiencies within the Departments of Health and Public Works were highlighted.

Dr Shaker said that the revitalisation of the health infrastructure had been a disaster over the previous 16 years. Under-spending had doubled year-on-year over the previous four to five years. Although it appeared to have been satisfactory until 2007/8, it merely meant that control measures had improved since then. He warned that a substantial amount of under-spending would again be reflected in 2010/11 unless a proper monitoring system was put in place. A major problem was the inappropriate budgetary requests and allocations. He said that certain provinces were actually being “rewarded” by the National Treasury for large amounts of under-spending. He explained this statement by using Mpumalanga and Gauteng as examples and said that despite substantial under-spending in a specific year, these provinces received an increased budget allocation in the following year.

Many of the problems of under-spending related to a clear lack of professional and technical capacity.  He wished to doubly emphasise the point that the quantity of spending did not guarantee the quality of the spending. He used the cost per bed as an example and stated that due to a lack of uniform norms and standards the way that the costs were calculated differed between provinces. The higher costs did not guarantee higher quality.  Mpumalanga and the Western Cape were cited as examples where good spending patterns were clearly reflecting good collaboration between Health and Public Works. It was the responsibility of the health sector to establish norms and standards to guide the Public Works sector.

Dr Shaker shed more light on the State’s Infrastructure Delivery Improvement Programme (IDIP). He explained that on average each project had a four to five year term and that meant that there would be concurrent activities during any single year. He cautioned that failure by Departments to manage these concurrent infrastructure delivery activities would merely perpetuate the chronic problem of rolling over unspent budgets.

Ms Matsoso concluded the briefing by highlighting the key steps that the Department had planned to improve the situation. Amongst those steps was a proposal that the provincial directorates improved coordination and integration and avoided the silo approach. She provided a model that would ensure that integration and coordination occurred. She called for closer working relationships between the various role-players from the DoH, National Treasury and the Department of Public Works (DPW) at the operational, legal and institutional levels. At the higher national level, these relationships were already established but much improvement at provincial levels was necessary. The infrastructural teams or Provincial Project Progress Review Committees (PPPRC’s) should not only focus on the physical nature of projects but also consider financial progress. She called on the National Treasury to provide specific financial support for the implementation of these corrective mechanisms.

Dr Shaker added that the DoH had engaged with the CSIR and with DBSA on the development of mechanisms and tools to improve delivery. The desired system would be a Project Management Information System (PMIS) with various capabilities. Through the PMIS and other mechanisms it was hoped that large-scale improvement would take place in the development of norms and standards, project tracking, project monitoring and evaluation and project costing. Ultimately, the purpose was to support the PPPRC’s in the review function and expedite enhanced infrastructure delivery. 

Discussion
Mr M Makhubela (COPE, Limpopo) suggested that the performance agreements of officials should include the collaborative activities and linking with other departments.

Mr C De Beer (ANC, Northern Cape) asked if any of the provincial Departments of Health had a resident engineer on board. He said that engineering expertise was vital for enhanced delivery. He referred to the building that remained without electricity since it was completed in 2006 and asked where that building was situated.

Ms Matsoso responded that the information regarding the building without electricity was provided by the Auditor-General.  She undertook to provide the Committee with all the details.

The Chairperson said it would appear that the DoH was shifting the blame to the National Treasury when it stated that part of the problem was caused by unfair and inappropriate allocations. He did not understand how it was possible for poor budgetary requests from provinces to have even reached the Treasury when such submissions had to be first inspected by the DoH. He specifically referred to the Eastern Cape and asked what the basis was for the assumption that the provinces would not be able to spend the adjusted budget.

Ms Matsoso said that the Eastern Cape leadership had recently shown new commitment.  She believed that the strong leadership demonstrated over the previous few months would enable the province to meet its target. The Department was not blaming the Treasury for making the poor allocations but was merely attempting to highlight the need for provinces to follow a more realistic approach to budgeting. The ideal method should be according to the IDIP.

Mr Thando Mguli, Acting Executive Manager, Transport and Public Works, Western Cape, said that slide 38 of the presentation document suggested that the responsibility for design had shifted from Public Works to Health. He asked if this was indeed the case as design had always been the domain of Public Works. In slide 9 the implication was made that the State was always the loser when negotiating fees with professional service providers.  He asked how this was possible when it was the fees were gazetted. He asked if it was not the responsibility of the relevant departments to review the gazetted fees and to effect the necessary changes. He said that the delays were often not caused by the service providers but arose because State officials were often very reluctant to decide in favour of the service providers when there was a dispute. He questioned the wisdom espoused by Dr Shaker that the Departments of Health should employ construction professionals. He could not understand the need for this because those skills were already residing within Public Works.

Ms Matsoso responded that the Department could support its stance by citing examples. The Civitas building was an example where Public Works designed and constructed a building without windows, resulting in prohibitive maintenance costs for an air-conditioning system. A further example was the hospital in Limpopo where post-operative patients had to be moved from the theatre to another building in the open. These examples illustrated problems with design which could have been addressed if the DoH had its own team of design professionals. She acknowledged that construction was the responsibility of Public Works and merely wished to emphasise the need for stronger partnerships on these matters. She was able to provide evidence of inflated fees charged despite the gazetted fee structure.

Dr Shaker added that the ideal situation would be for both Departments to provide input at the design level, especially with regard to clinical matters. In certain provinces there was no collaboration on the design of structures. This situation could not be allowed to continue because there could be disastrous consequences. He pointed out that the Gazette referred to “recommended” fees, which meant that the fees could be negotiated in favour of Government, although this seldom happened. He emphasised that the delays in producing the final accounts for contractors were not necessarily caused by Government but rather by the suppliers’ delay in completing the snag list. Too often the contractor was let off the hook when Government failed to enforce the snag list requirements. The DoH recognised the vital role played by the DPW in infrastructure developments. The Department did not wish to undermine the DPW but was merely promoting a spirit of collaboration to efficiently utilise the large budget of R4 billion for HRP and a further R8.9 billion for other infrastructure projects.

Presentation by the Northern Cape Department of Health and Department of Roads and Public Works
Mr Mxolisi Sokatsha, MEC for Health, Northern Cape, said that the reports of the province’s Departments of Health and Roads and Public Works would reflect a number of challenges as well as successes.

Dr Dion Theys, Acting Head: Northern Cape Department of Health presented an overview of the salient issues in the province.  The main concern was the completion of the mental health hospital, which was started in 2004 but had not been completed. The completion date was originally 2008 and the estimated cost was R290 million. The total expenditure was R360 million to date and the estimated cost for completion had escalated to R780 million. The main reason for the delay was the slow progress of the contractor. More information on the court case involving the contractor could be provided by the provincial Department of Roads and Public Works.

The Upington project was progressing very well. The De Aar project could be regarded as a flagship project that demonstrated the fruits of a close collaboration between Health and Public Works. Other projects under way were in Kuruman, Kimberley and Postmasburg.

Dr Theys said that monitoring and evaluation were done jointly by the two provincial Departments and regular progress reports were issued. Progress reviews were not only done by the technical teams but also by the joint committee established by the Departments. The province was committed to work within the framework laid down by the National Treasury for the spending of grants. Underperformance by consultants and contractors led to under-spending whilst poor coordination between the contractors and the implementing agent caused further delays. The lack of capacity to monitor progress had led to the mental health hospital. The province recommended the early termination of contractor agreements when inadequacies were identified, regular and comprehensive monitoring and obtaining value for money.

Mr Denver Van Heerden, Head: Northern Cape Department of Roads and Public Works, welcomed the proposals made by the DoH. The province believed that better planning was needed and he welcomed the DoH’s input into the design and the proposed peer review processes. He called for these proposals and the norms and standards to be implemented as soon as possible.

With regard to the delay in completing the mental health hospital, Mr Van Heerden reported that the province had applied to the High Court for an eviction order against the contractor. The date for the hearing had been set for 12 November 2010. The contractor had already been liquidated and negotiations with the liquidators were in progress. The aim was to ensure that the settlement with the liquidators became part of the court order. Due to structural shortcomings with the building, additional remedial work was needed and resulted in the escalation in the cost to complete the building. The provincial Department had consulted with the national DPW on the matter.

Discussion
Mr Makhubela remarked that the officials present at the meeting should not take things personally but had to do their utmost to implement recommendations in order to address the challenges. He asked if the province was imposing penalties on defaulting contractors.

Mr De Beer repeated his earlier question if any of the provincial Departments of Health had a resident engineer in place. He encouraged the provinces to be more rigorous in their scrutiny of the track records of contractors. He commended the spirit of cooperation between the two Departments in the Northern Cape.

The Chairperson wanted to know why it was necessary to obtain an eviction order against the contractor. He failed to understand why underperforming contractors remained on board for a lengthy period of time. He asked if the failure to adequately monitor contractors was due to a lack of capacity in the Department. He felt that the role of consultants and other external stakeholders was often unclear and contributed greatly to delays and underperformance at the expense of the tax payer.

Mr Sokatsha replied that the Department was finding it difficult to attract a resident engineer.  The DoH had given the assurance that additional assistance would be provided in the following financial year.

Mr Dawid Rooi, MEC of Roads and Public Works, Northern Cape, agreed with Dr Shaker that the first step to improvement was to acknowledge the problems. This had been done in the province and had resulted in the establishment of the structures mentioned in the briefing. He said that the lack of capacity was a major problem and resulted in a reliance on external consultants. The province had called for a MINMEC on Health to discuss the issue of capacity. He felt that personnel spending should be much higher because of the technical expertise required of the staff. Half of the work that was being outsourced was previously performed by Public Works. Part of the problem with underperforming contractors was the eagerness to empower previously disadvantaged contractors. Procurement committees were not always aware of the full extent of the contractors’ capabilities. Another factor was the meddling of politicians and Government officials in the awarding of tenders. He said that there was no need to look for scapegoats but rather to confront the problems head-on and to become smarter in the scrutiny of prospective contractors.

Mr Van Heerden said that a forensic auditing firm had been appointed to investigate alleged irregularities. The Department had also considered ways to recover some of the additional costs resulting from the delays and attempted to collect the penalties imposed. He said that it was standard practice to impose penalties for late delivery of projects. A big problem for the province was the scarcity of contractors with the appropriate CIDB grading. The success of the new approach was evident in the De Aar project, where delivery was on time and where things moved along smoothly. The Department was investigating the establishment of a dedicated contract management unit, where the client Department would be part of the specification committee. It was envisaged that the work of the new unit would not end with the hand-over of the project. In future, a company would be appointed to manage the project as the principal, unlike the situation in the past where only an architect was appointed.

The Chairperson suggested that provinces consulted with local universities to identify suitable engineers. He hoped that the DoH would be able to provide assistance as well.

Presentation by the Western Cape Department of Health and Department of Transport and Public Works
Dr LA Du Toit, Chief Director: Infrastructure Management, Western Cape Department of Health had a doctorate in civil engineering and was a registered architect.

Dr Du Toit said that the provision of infrastructure was a very complex area. Many stakeholders were involved and the success of a project depended on many factors other than the technical issues. There were serious problems with joint venture (JV) contractors. One JV contractor could have a very high CIDB grading whilst the other partner had a very low grading. Problems occurred when the lower-rated contractor was left to do most of the work.  The Department had approached the CIDB to resolve the difficulties with JVs.

Several projects were well under way, including those in George, Khayelitsha, Mitchell’s Plain, Paarl, Tygerberg, Valkenberg, Vredenburg and Worcester. In certain cases the contractors had projected early delivery of the buildings. Other projects experienced slight delays, mostly because of the location. Another challenge was the provision of modern technology at the sites because of a lack of funding. A Facility Project Manager was appointed for the HRP project at the Mitchell’s Plain hospital.  The appointment had resulted in a significant positive impact. Monitoring was taking place to ensure that all projects were done in accordance with the HRP and DORA guidelines. The projects were aligned with the strategy of the DoH. The HRP projects were a success due to the high degree of coordination.

The relationship between the two Departments was sound and regular contact was kept at both the high level as well as on the ground. The two Departments worked strictly in accordance with a signed service delivery agreement. The Infrastructure Management division was recently established and was making good progress despite a high staff vacancy rate.

Mr Mguli represented the provincial Department of Transport and Public Works.  He said that the contractors were performing well because quality assurance checks were constantly carried out. The JV projects were a matter for concern but the contractors involved were generally well-managed. He complemented the contractors appointed by the province and said that they were very competent.

Discussion
Mr Makhubela asked how the JV contractors were managed. He remarked that the other provinces could learn from the Western Cape. He wanted to know if the province only appointed JV contractors. He asked what the plan was for the provision of technical equipment. He asked if the contractors had provided written advice that the projects would be completed before the due date. He asked what would happen if the province could not find a site for the Helderberg project.

Dr Du Toit explained that the CIDB legislation allowed JV contractors to submit tenders.  The Department considered the appointment of JV contractors only after conducting a thorough analysis. The CIDB provided a practice note to give guidance on the evaluation of a JV. The intention of the JV arrangement was good but was sadly subject to abuse. A site for the Helderberg project had found been found but the owner of the property demanded a price of R45 million, which was exorbitant. The Department was considering other sites and was discussing suitable alternatives with the municipality. It was standard practice to negotiate contractual deviations when contractors indicated an early completion date and to reduce it to a written agreement.

Ms Manini Dumane, Acting Chief Director: Key Accounts, Asset Investment Branch, Department of Public Works provided clarity on the issues concerning the CIDB and the approach to joint ventures. The use of JV contractors was an effective method to advance transformation in the construction industry. A small contractor needed to be exposed to projects of greater magnitude in order to improve its grading and the only way to achieve this was through a JV partnership.

Presentation by the Free State Department of Health and Department of Public Works and Rural Development
Dr
Sipho Kabane, Head of Department, Department of Health, Free State, presented an overview of the HRP projects that were either completed or in progress. The key issues and challenges faced by the Department were summarised. He reported that the former contractor for the Boitumelo Hospital (Contract 10) was terminated due to poor performance and the contractor had declared a dispute. Advertisements for a new contractor to complete the project had been placed. The provision of health technology was being fast tracked. The key issues at the Pelonomi Hospital were the slow progress of the contractor appointed to complete the intensive care unit (ICU) and delays caused by poor planning and ‘decanting’. There were challenges with four other projects in the province, which were at various stages in the planning phase and aggravated the under-spending to the value of R105 million. The monitoring and evaluation of projects were done in accordance with the guidelines and a recovery plan was in place to accelerate completion of the projects. A lack of capacity had resulted in poor planning and delays in bid evaluations and adjudications. Other problems were poor contract management, delayed decision making and ‘decanting’.

The Department had formulated key turn-around interventions, including the appointment of a chief engineer and a managerial accountant; the review of staffing structures and joint planning with Public Works.  The Department had approached the DoH to provide assistance.

Mr Butcher Matutle, Deputy Director-General, Department of Public Works and Rural Development, agreed that the joint ventures between contractors were an important method to achieve transformation in the construction industry. Many of the challenges with the smaller contractors only surfaced after the contract was awarded and the work had begun. Another problem was that certain contractors inexplicably failed to deliver on larger projects after being upgraded. Other contractors delivered well on certain projects but then faltered on different projects of similar value and magnitude. The province faced severe capacity problems and he hoped that the pressure could soon be alleviated. He supported the plan to standardise processes, such as design and saw no reason why Government should spend millions of Rands on appointing external consultants to design new buildings.


Discussion

The Chairperson was of the opinion that the Free State had regressed rather than making progress.  He noted that there were serious problems in the province despite the continuous planning and negotiating taking place. The Committee found the state of affairs in the province unacceptable.  He felt that the province was not taking the matter seriously enough and remarked on the failure of the MEC to provide an apology for his absence at the briefing. The matter needed to be raised with the Premier of the Free State. He urged the Director-General of the DoH to take action to bring about changes in the province. It was unacceptable that all the other provinces had reported progress whilst the Free State raised exactly the same problems that were raised in May 2010.

Mr De Beer asked what assistance could be provided to the province by the national Departments. As far as planning was concerned, he suggested that the province requested help from Professor Sindane at the University of the Free State. He suggested that the post-graduate students from the University of Technology could assist with resolving the capacity problems. It would appear that the provision of hospitals in the rural areas was a major problem. He asked if the province had a resident engineer in place.

Mr Makhubela said that the proposed spending on providing mobile health care facilities would not address the need for proper hospitals. He asked how the province was going to spend the budget for IT infrastructure before the year-end. He agreed with the sentiments expressed by the Chairperson and Mr De Beer and reminded the province that the Government was making a lot of money available for service delivery. He said that it was sad that Government officials were not loyal to the Government and that they were an embarrassment.

The Chairperson invited the representatives of the Free State to respond to the comments made by the Members.  He requested the DoH to respond after the last presentation had been made to the Committee. He said that the Committee would be monitoring the Free State very closely and that the province would be called to appear before the Committee in the next Parliamentary term. He hoped that the Free State was not advocating the use of small contractors under the guise of social programmes, knowing that such contractors were unable to deliver on large projects. The country cannot afford to compromise on the quality of work for the sake of social responsibility programmes. Small contractors should rather be given ample opportunity to grow. The mentality of getting rich quickly was counter-productive.  The current crop of large companies operating in the sector had existed for many years and had grown over a period of time.  There was a tendency for previously disadvantaged contractors to focus on becoming millionaires with high visibility.  These contractors were prepared to compromise on the quality of the work because they shared some of the money with certain Government officials. These realities had to be considered. He was aware that the bigger partners in the joint ventures often left the smaller partner alone at the site and only surfaced once the certificate for payment was issued.

Presentation by the Eastern Cape Departments of Health and Roads and Public Works
Dr Siva Pillay, Head of Department of Health, Eastern Cape, took the Committee through the key issues and challenges highlighted in the report produced by the province.  The four key issues were the infrastructure turnaround programme, the mid-year expenditure performance of the HRP grant, the challenges experienced by the province and the corrective action taken to mitigate the challenges.

Dr Pillay explained the reasons for the turn-around plan.  There two implementing agents in the province – the provincial Department of Public Works and the Coega Development Corporation. The appointment of Coega was approved by Government. The province was plagued by allegations of corruption. The Chief Director had been suspended and charged with a criminal offence.  The Department had not followed proper supply-chain management procedures and there was collusion on a large scale. Another problem was the provision of year-on-year funding versus multi-year funding from the National Treasury. The province had a lack of capacity, which was further diminished by the outsourcing of work to external consultants. The consultants were appointed for a fixed term and tended to leave with all the information and expertise at the end of the project.  The consultants held the department to ransom by withholding the information, which resulted in agreements being perpetuated. It some point the “umbilical cord” had to be cut. The performance of contractors in the province had been poor.

The turn-around strategies adopted included developing internal capacity, overhauling the system of programme management by the implementing agents and reviewing the payment system.

Mr Francis Pama, Senior Manager: Health Portfolio, Department of Roads and Public Works gave some reasons for under-spending by the province. He said that the provincial Department of Health had stopped projects in June 2010, citing budgetary constraints. The practice of making late payments to contractors had a knock-on effect and resulted in certain contractors terminating their contracts earlier whilst others instituted legal action against the Department. Coordination between the Departments worked well and regular monitoring took place. Not all contractors were performing well and underperforming contractors were terminated. The retention of technical staff was a major problem and the staff turnover rate was greater than the rate of recruitment.

The key challenges included the late submission of project lists by the client Departments. The Department of Health also transferred funds from infrastructure projects to other areas.  Procurement processes needed to be revised.  The client Departments had to take some responsibility and accountability in the legal cases, especially where these Departments were the defaulting party. A service delivery agreement between the two Departments needed to be put in place.

Discussion
The Chairperson asked for clarity on the projects that were stopped by the Department of Health.

Mr Pama replied that all the projects that were at the planning and at the tender stages were stopped because of cash flow problems. The Department was waiting for the Auditor-General to give the go-ahead to proceed with the projects.

Dr Pillay said that none of the HRP projects were stopped. The projects funded by the equitable grant were stopped because there was a budget deficit of R1.6 billion.

Mr Makhubela compared the performance of the Eastern Cape to that of the Free State.  He said that it would appear that the Department of Public Works was not providing support to the Department of Health. Coordination between the two Departments appeared to be non-existent. While the Departments were engaged in blaming each other, nothing was being done. He urged the two departments to start working together.

Mr Phumulo Masualle, MEC for Health, Eastern Cape, agreed that there was much room for improvement in the coordination between the Departments. He felt that coordination should be promoted through the ranks, from a high level right through to the operational levels. Plans were afoot to hold bilateral talks in an attempt to streamline matters and to enhance service delivery through better collaboration. He gave the assurance that the province would refine all the systems by the time that the next report to the Committee was presented.

Ms Matsoso urged the establishment of a Joint Implementation Committee in the Free State as a matter of urgency. The province needed to put turn-around strategy in place as soon as possible. Some form of political support was necessary in that province and she suggested that the province adopted the model that was applied in the Northern Cape, where the leaders of the Departments worked closely together. The DoH would continue to provide technical and administrative support. She wished to encourage provinces to utilise tertiary institutions and peripheral health care providers more effectively. She asked the Committee to approve the adjustment of budgets before the budgets were submitted to the National Treasury, in order to have more realistic funding allocations. The health sector needed to develop a pro forma plan of what a clinic should look like. Such a plan would be in line with earlier calls for norms and standards to be established and obviate the need to design every new clinic from scratch. A pro forma approach would reduce the planning time as well.

Ms Dumane said that the briefing had been enlightening and had provided much food for thought.  She felt that she would be able to make a more informed input in future.

The Chairperson recommended that both Ministers promoted the idea of a joint MINMEC forum to address some of the challenges that had been highlighted.

The meeting was adjourned.


Present

  • We don't have attendance info for this committee meeting

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: