Independent Development Trust, Agrèment South Africa, Council for Built Environment, Construction Industry Development Board 2011 Strategic Plans

Meeting report

The Chairperson introduced a “concerned group” from Manenberg, who alleged that the Independent Development Trust (IDT) had given approximately R50 000, intended to be used by a non-governmental organisation (NGO) for development in the area, to a particular individual to use for electoral campaigning. The Chairperson drew the IDT delegation's attention to four outstanding issues:

- A report on “mud schools” and the relationship between the IDT and the Eastern Cape Department of Education
- A report on client departments that are not paying timeously
- A report on the recapitalisation and rescheduling of the IDT
- Remuneration of board members and executive salaries.

IDT Presentation
Before beginning IDT's prepared presentation, Ms Thembi Nwedamutswu (Chief Executive Officer, IDT) said that IDT was not funding any NGO in Manenberg in the current financial year. She divided the IDT's presentation into four parts: A) Executive Summary. B) Strategic Overview. C) Strategic Plan 2011-14. D) Links to Other Plans. She noted that the strategic focus of the IDT had undergone a shift from being primarily a provider of physical infrastructure, toward being a facilitator of sustainable development. IDT reported to the Minister of Public Works. IDT used a PESTEL system to analyse the macro-environment. The Department of Public Works (DPW) 2010 medium-term budget policy statement, which set out the department's key spending priorities (improving the quality of basic education, enhancing the overall health of the population, community safety, rural development, creating jobs, and investing in local government and human settlements), would continue to guide IDT in 2011/12. Rural poverty was a stubborn problem, though.

The government's programme of action was strongly people-centred, with emphases also on sustainable and rural development, social cohesion and poverty eradication. The IDT's approach to development was therefore anchored in the delivery of social infrastructure, which was defined so as to include not only “brick-and-mortar” infrastructure, but whatever else was needed to ensure that communities were able to receive, participate in and sustain the benefits that the IDT offered. The strategic goals of the IDT were sustainable development of marginalised and impoverished communities. The IDT's programmes incorporated Government strategic imperatives such as job creation, economic empowerment and skills development.

Positive attributes (“enablers”) of the IDT were its empowered employee culture, its leadership stability, its healthy relationship with the DPW, and a range of labour-saving devices. Negative attributes (“inhibitors”) were organisational insecurity, the large difference in the pace of the public planning policy cycle and that of community development (which is hard to quantify). The IDT's reputation also suffered from conflicted clientele interests, and planning deficiencies and budget deficits among clients.
 
Ms Nwedamutswu said that until the previous financial year, the IDT had been wholly funded by the R2 billion endowment it had received when it was founded in 1990. A short-term funding bid amounting to R150 million had been approved by the National Treasury in 2010/11. The basic premise of the IDT's financial strategy was to minimise overheads and to increase revenue generated by social infrastructure programmes. However, the IDT would need additional funds in the long-to-medium term if it was to continue to fulfil its responsibilities towards the communities it served. The corporate plan of the IDT was linked to a risk management plan, a fraud prevention plan, human resource and environmental plans.

Discussion
The Chairperson reiterated IDT's response to the concerned group from Manenberg, assuring them that an investigation would be carried out. A date, 7 June, was set for the IDT to present the outcome of its investigation.

Ms C Madlopha (ANC) asked for clarification of the meaning of the “organisational insecurity” mentioned in the presentation.

Ms Nwedamutswu replied that it referred to the erosion of the capital base and the long-term sustainability of the IDT.

Ms N November (ANC) asked the Chairperson if the Committee could organise a visit to the Ngcobo Local Municipality, so that the IDT's claims about its effects in that area could be verified.

Ms Nwedamutswu encouraged committee members to visit Ngcobo.

Mr N Magubane (ANC) said that poverty alleviation funds from the IDT were often misused by “crooks” in the municipalities. There was a need for monitors to be put in place to ensure the correct use of such funds. The monitors would also need to be monitored, he added, to much amusement.

The Chairperson asked if Mr Magubane could use “unreliable” in place of “crooks.” The suggestion was met with knowing laughter.

In response to Mr Magubane, Ms Nwedamutswu agreed that poverty alleviation funds were often misused. The reason for this, she said, was that there was no mechanism in place to ensure that these funds reached the poor. Part of IDT's strategy was to create such a mechanism. The IDT did not fund municipalities directly, though.

Mr K Sithole (IFP) said that communication between the IDT and municipalities was often poor, resulting in projects being delayed or undertaken without a municipality's knowledge.

An IDT delegate admitted that the member was correct. They were working with the DPW to improve communication.

Ms P Ngwenya-Mabila (ANC) asked the IDT to clarify precisely what the R150 million short-term funding would be used for. She wanted to know how the R4.5 million allocated to 'transformation' would be used.

Mr Ian Ellis (Chief Financial Officer, IDT) said that the R4.5 million allocated to transformation would come out of the R150 million short-term funding. A description of precisely how it would be used could be found in the Corporate Plan. The remainder of the R150 million would be used to support the IDT's operational costs and ensure that it avoided a 'going concern' qualification from the Auditor-General.

Ms Ngwenya-Mabila requested more precise details.

Mr Ellis referred her to the IDT's Corporate Plan which had been circulated amongst the committee members.

Ms Ngwenya-Mabila (ANC) wanted to know how the IDT was planning to respond to the President's State of the Nation Address that 2011/12 was the year for job creation.

Ms Nwedamutswu said that the IDT's job creation strategy was “externally focussed.”

Ms Ngwenya-Mabila asked if the DPW was aware of the IDT's challenges. She also wanted to hear about any of its success stories.

Ms Ngwenya-Mabila asked if the board was able to sit, and wanted to know what challenges they were facing.

Ms Nwedamutswu said that the IDT had never had a situation in which the board was unable to meet, for whatever reason. Every year, one if its major challenges was to ensure its own sustainability.

The Chairperson drew attention to the fact that at a meeting held on 22 March, IDT had confirmed that they considered themselves to be an extension of government. The issue of the IDT salaries had also been raised at that meeting. However, until the Committee had scrutinised those salaries, and until the IDT provided more accurate details of their expenditure plans, it could not expect to receive the additional funds it claimed it needed.

Dr Mvuyo Tom, Deputy Chair of IDT, said that it was unrealistic to expect a non-profit organisation like the IDT not to have eroded its initial capital, especially after twenty-one years of operation.

Ms Nwedamutswu added that interest rate drops and changes in the IDT's mandate had also contributed to the erosion of the capital base.

Ms Madlopha said that she had been expecting the IDT to provide achievement results for the previous year in order to give the Committee a frame of reference in which to assess the plans for 2011/12.

Prof Edith de Vries (IDT Executive in the Office of the CEO) pointed out that the IDT's Corporate Plan did include baseline performance data.

Ms Nwedamutswu said that the presentation had been about future plans of the IDT; it was not a report on past achievements. A full report on past achievements would be presented to the Committee once the Auditor-General had completed an audit of the IDT.

Ms Madlopha asked what the IDT was doing about so-called “mud schools,” especially in the Eastern Cape. Mr M Rabotapi (DA) repeated her concern.

An IDT delegate said that the Department of Education (DoE) had recently been allocated R8.2 billion for the period 2011-2014, of which R700 million would be available for 2011/12. IDT would be helping the Department to spend this money. The problems reported in the media had been addressed to a large extent by the DoE, with the assistance of the IDT.

Mr Magubane asked for more precise figures. How many mud schools was IDT dealing with?

An IDT delegate replied that this information would be part of the IDT's Performance Report, to be presented at a future meeting.

Ms N Madlala (ANC) asked the IDT to provide a provincial breakdown of the figures they gave of, for instance, number of classrooms built, number of female contractors, and number of jobs created.

Mr P Mnguni (COPE) asked how the IDT planned to address its major inhibitors. Were the problems mentioned particular to the previous year, or where they recurring problems?

Ms Nwedamutswu replied that the short-term funding it had recently received had been used partly to address these. This would be described in detail to the Committee once the Auditor-General had completed his audit.

The Chairperson confirmed that the IDT would present to the Committee on 7 June.

Moving on to the ASA briefing, the Chairperson drew attention to the outstanding Agrèment South Africa (ASA) Bill.

Agrèment South Africa (ASA) briefing
Mr J Odhiambo (ASA Chief Executive Officer) introduced the delegation, noting that as ASA was in the process of appointing a new board, no board members were present. He said that a DPW representative would be better placed to comment on the progress of the ASA Bill.

The mandate of ASA was to assess the fitness-for-purpose of non-standard or innovative construction products; that is, products for which no official standards existed. A number of roads-related products (such as a thin asphalt road bitumenous surfacing system) had recently come to the attention of ASA, which could potentially speed up the provision of roads.

The technical agency of ASA was part of the Council for Scientific and Industrial Research (CSIR). Currently, ASA reported to both the CSIR and the Department of Science and Technology (DST). Since ASA was an agency of the DPW, the ASA Bill would hopefully clarify its reporting structure once and for all.

ASA had exceeded all its performance targets in the 2010/11 financial year, and hoped to do so again in the coming year, Mr Odhiambo said.

Describing the benefits of ASA certification, Mr Odhiambo said that ASA was a “conduit” through which people could demonstrate new construction products. Through them, more time- and cost-effective infrastructure development techniques could be standardised. New techniques could potentially help reduce the housing backlog.

The new Bill would give ASA a legal mandate to criminalise building regulation defaulters. ASA was also eagerly awaiting a new environmental sustainability and energy efficiency regulation that was being drawn up by the South African Bureau of Standards (SABS). At present, ASA was able to assess the fitness-for-purpose of building technologies and regulations, but was unable to enforce adherence to building regulations or the use of certain technologies, since this was the responsibility of local governments. Mr Odhiambo hoped that the new Bill would give ASA greater power in this area.

The new board had been established and was awaiting induction by the Minister, after which time it could have a strategic meeting. Its areas of focus were to raise standards of construction in industry, and to develop new quality objectives for construction systems. The budget of ASA for 2011/12, was about R9.4 million, minus 14% VAT. The projected total running costs of ASA for 2011/2 would be R10.35 million. Of this 50% was allocated to human capital, 29% for technical operations, marketing and research, 11% for indirect running costs, and 10% for finance, human resources and administration. The projected running costs for the years 2012-13 and 2013-14 were R11.24 million and R12.12 million respectively, and the breakdown was similar. The increase of approximately 7% was to compensate for inflation – operations would remain unchanged.

Mr Odhiambo said that ASA was aware that it was not very well known, but that it was doing what it could to make itself visible within its financial constraints.

Discussion
Ms November asked if local authorities knew about ASA.

Mr Odhiambo replied that ASA issued newsletters to local authorities regularly, and gave presentations to gatherings of local authorities in the larger urban centres, to inform them about new construction products. Its Annual Report, which included a list of products approved during the year, was distributed to all building control officials.

Ms Madlala asked about the roads-related products. The Department of Transport was repairing potholes across the country. Was ASA involved in this?

Mr Odhiambo replied that ASA was not directly involved in pothole repair products – its role was different. It had, however, developed technical assessment criteria for pothole repair products, and had approved some products for use.

Ms Madlala asked when ASA expected to table the Amendment Bill in Parliament.

A representative from the DPW said that he did not have details of the progress of the legislation with him. He would take the matter back to the department.

Mr Sithole asked how ASA would help to address the housing backlog.

Mr Odhiambo reiterated that ASA did not get involved in actual construction projects. It could help to address the housing backlog by allowing the standardisation of improved construction methods and technologies.

Mr Mnguni expressed concern at the large percentage of ASA's budget that had been allocated to human capital costs.

Mr Odhiambo acknowledged that ASA's human capital costs were quite high. However, this was to be expected because it was a “thinking organisation.”

Ms Ngwenya-Mabila reminded the ASA delegation that the term of the previous board expired in October 2010. Although appointing the board was not strictly the responsibility of ASA, but rather that of the DPW, she wanted to know who had been in charge between October 2010 and the present.

Mr Odhiambo replied that ASA had continued to operate with the old board members, in their capacities as technical experts.

Ms Ngwenya-Mabila said that the broadness of ASA's operational plan would make it difficult for the Committee to hold it accountable. When it undertook oversight visits, the Committee needed to know in more detail what the ASA planned to achieve in each quarter, in order to assess its success.

Mr Odhiambo replied that it was difficult to give a quarterly breakdown of ASA's plans, because these were partly dependent on, for example, how many product applications they received, which was outside their control.

Ms Ngwenya-Mabila asked what ASA did during periods when few or no applications were received.

Mr Odhiambo replied that in such periods, ASA carried out research, undertook quality surveillance of ASA certificate holders, and developed assessment criteria

Mr Rabotapi pointed out that one of the board members appearing in ASA's report was a former Deputy Director General in the DPW. He wondered whether this was permissible.

The DPW representative said that this individual was the DPW representative on the ASA board. As far as he was aware, a new board had been named in September 2010, and he did not know why it should not have been operating since then. This matter would have to be taken up between the PDW and ASA outside the meeting.

Mr Sithole criticised ASA for presenting a document which did not accurately reflect the status of their organisation.

Ms Ngwenya-Mabila said that the different accounts given by ASA and the DPW of the status of the board was evidence of faulty communication between those two entities.

The Chairperson asked the DPW representative if the Committee had been informed of the appointment of the new board in September 2010, and if not, why not.

Ms Madlala added that it seemed that ASA had not prepared adequately for this meeting. They said that the legislative framework was the responsibility of the chairperson of the board; but they did not seem to be sure who the chairperson of the board was.

Ms Ngwenya-Mabila suggested that the issues which had emerged should be dealt with and presented to the Committee on 7 June.

The Chairperson asked if the relationship of ASA's activities with other organisations could be clarified. She said that as she understood it, ASA's function was to approve products for the construction industry, and she confessed to confusion when she heard people talking about them building houses; she thought that building houses was the responsibility of the Council for the Built Environment (CBE), and was concerned that a duplication of activities was taking place.

Mr Odhiambo assured the Chairperson that ASA was a technical assessment agency, and as such did not undertake construction projects.

The Chairperson asked if ASA made sure that contractors were educated in the use of special building technologies. She gave the example of potholes, which often had to be re-repaired every three to six months because contractors did not follow the directions for use of a solution, resulting in a huge waste of resources.

Mr Odhiambo agreed that if potholes were badly repaired, they may as well not have been repaired at all. Together with the CSIR, it had been educating contractors in the use of the products it had approved.

Moving on to the CBE briefing, the Chairperson said that there were “blockages” in the built environment professions which were preventing women and young professionals from gaining employment in the field.

Council for the Built Environment (CBE) presentation
Ms Portia Tau-Sekati (CBE Chairperson) explained that the role of the CBE was to regulate the professionals within the six professions in the built environment: quantity surveyors, engineers, construction and project managers, valuers, architects, and landscape architects. She spoke about two critical issues that Committee members had raised in previous meetings; the first regarding the accreditation of the built environment programme, and the second regarding a memorandum of agreement (MoA) between the professional councils and the CBE. Accreditation, she said, was an instrument which would enable the CBE to register professionals. The creation of a memorandum of agreement for the professional councils of the six professions was intended to regularise the institutional relationships between them and CBE. Only two had signed the MoA, although all six had agreed with it in principle.

Ms Tau-Sekati said that the CBE insisted that the professions develop “conceptually labour-intensive techniques,” in response to the President's call for job creation in 2011/12.

Mr Bheki Zulu (CBE Chief Executive Officer) said that the CBE was aware of the apparently slow pace of transformation in the built environment professions. The problem of blockages mentioned by the Chairperson was the result of difficulties in the process of professional registration. For example, until two years ago there were only six universities whose quantity surveying degrees were accredited. Graduates from these universities could register immediately after gaining the required amount of experience, whereas graduates from unaccredited universities had to sit two further exams. The pass rate in those exams was 23-30%. Since then, more universities had become accredited, and the exam was being phased out.

Mr Zulu said that the key challenges of the CBE fell into three areas: transformation (slow pace), skills development (low throughput at universities), and delivery (absence of costing of the mandates of the CBE and the professional councils).

The demographic statistics of the built environment profession confirmed the Chairperson's worries. They indicated that African, coloured and Indian professionals made up just 30% of the professions, and women made up just 12%. Traditionally, the built environment professions had been detached from the work of government. It was part of the mandate of the CBE to ensure that they began to play a part in helping government to address national priorities.

The operations of the CBE could be broken down into four programmes: Administration, the Built Environment Academy Programme, the Centre For Innovation and Integrated Planning Programme, and the Public Interest Programme. The first of these would deal with the running of the CBE itself. The second would try to ensure that qualified built environment graduates were able to register professionally, offer bursaries for undergraduates, and facilitate skills development in the professions. Mr Zulu drew attention to the situation in the health and legal professions, in which the passage from graduation to professional registration was much more structured. The third programme would help administer the relationships between the CBE and the professional councils and other local and international partners, especially in the Southern African Development Community (SADC). As part of this programme, the CBE would be setting up an “information and data centre” to provide a point of access to built environment research, which currently took place in a disjointed fashion. The fourth programme was intended to ensure that the CBE's tribunal and appeal processes functioned efficiently. Mr Zulu drew attention to a breakdown of the financial figures for each programme given in the presentation document. However, a comparison of the R27.1 million allocated to the CBE in the 2011/12 Medium-Term Expenditure Framework (MTEF) with the budget as it was outlined, revealed a shortfall of R14 million.

One of the operational focusses of the CBE for the year 2011/12 would be to ensure that the standards-generating function of the professional councils was efficient.

Discussion
Ms Madlala asked which professional councils had not signed the MoA. If they agreed with it in principle, why were they delaying?

Mr Sithole asked what the CBE was doing to speed up transformation, especially with regard to the poor representation of women in the professions.

Mr Zulu said that the CBE would aim to ensure that transformation goals were met in the professional registration process. The panels that assessed applications for professional registration would be forced to apply recognised standards. Transformation could also be sped up by improving the throughput at universities.

Mr Sithole asked which were the universities whose built environment programmes had been accredited.

Mr Zulu said that the accredited universities were the “traditionally white” universities. There had been progress, and almost all universities had now had their quantity surveying programmes accredited.

Mr Sithole was concerned about the fact that the mandates of the CBE and the professional councils had never been fully costed.

Mr Zulu explained that when the CBE was set up, it was believed that it would be able to support itself by registration fees alone, but this had proved to be unrealistic.

Ms Ngwenya-Mabila asked how many students the CBE would be able to assist with bursaries.

Mr Zulu said that about 45 students were being supported by the CBE. He acknowledged that this was “not even a drop in the ocean.”

Ms Ngwenya-Mabila noted that R200 000 had been allocated to the CBE Indaba. She wanted to know when the Indaba would take place, and what the CBE hoped to achieve through it.

Mr Zulu said that the CBE Act required the CBE to provide a forum for the whole built environment industry, including professional councils and relevant government departments, to discuss their issues. The Indaba would provide the platform for these discussions. In future it would be held annually.

Mr Mnguni expressed frustration at the slow pace of transformation. He asked if it was the sole prerogative of the Minister to appoint the CBE board. Was there not a way in which the Minister could be persuaded to appoint a candidate who would support the government's transformational goals? He did not seem to think that the Minister could be relied upon in this respect. He believed that the access to accreditation was being controlled by “previously advantaged” individuals.

The Chairperson agreed.

Mr Mnguni predicted that the situation would not have changed noticeably within one year.

The Chairperson reiterated that the gender and racial profile of the built environment profession was “unappetising.”

Construction Industry Development Board presentation
Mr Ronnie Khoza (CIDB Chief Executive Officer) said he would present a five-year strategic plan and the annual performance plan for 2011/12, and budgets for both. He drew attention to the fact that in some documents the strategic plan was referred to as the 'corporate plan,' and the annual performance plan was referred to as a 'business plan.' The CIDB had just appointed a new board which would meet for the first time on 30 June 2011. The CIDB had recently changed its focus from being an “enabling” and “developing” agency, to becoming a “regulating” and “enforcing” agency.” Mr Khoza claimed that the timeous delivery of 2010 Soccer World Cup stadiums was the result of the regulatory environment in the country that the CIDB had created.

Mr Khoza showed some worrying statistics which suggested that over the past few years, clients had been paying construction contractors later and later. Late payments had an especially heavy impact on Small, Medium and Micro Enterprises (SMMEs), whom the CIDB was particularly concerned to help. He also expressed concern about the slow pace of transformation in the industry.

Mr Khoza chose two of the CIDB's four core programmes to serve as illustration. The first programme was the Construction Industry Performance (CIP) programme which focused on improving the industry's performance. Two “Best Practice” schemes would be developed in 2011/12, related to contractors and project assessment respectively. These schemes were currently at pilot stage. The second programme was the Construction Register Service (CRS) programme. The Register of Contractors (RoC) currently had over 110 000 registrations. This was a large number. Registrations had not been expected to exceed 100 000, and the fact that they had meant that CIDB had had to begin the development of a more flexible registration software. The Electronic Document Management System (EDMS) was one of the largest of CIDB's projects. It would improve efficiency and quality, and mitigate fraud and corruption. The Register of Projects (RoP) was also being improved and brought up to date. Mr Khoza displayed some figures of the number of companies, as well as the number of projects, registered by the CIDB. 70 053 Grade 1 companies had registered 99 064 Grade 1 projects, and 9 491 Grade 2-9 companies had registered 12 339 Grade 2-9 projects. Further statistics showed that the rate at which new companies and projects were being registered was beginning to level off.

As a knowledge-based organisation, Mr Khoza said, the CIDB did employ many external experts. It was trying to lessen its reliance on these by employing its own, but this process was slow, because new employees unavoidably lacked the experience available from external experts, some of whom had up to twenty years of experience in their field.

Moving on to the annual performance plan, Mr Khoza described the Research and Development (R&D) and Academic Capacity agendas. “Centres of Excellence” had been appointed at the University of the Witwatersrand (Wits) and the Nelson Mandela Metropolitan University (NMMU). It was hoped that these would encourage postgraduate research. The piloting of the Best Practice schemes would continue throughout 2011/12. The CIDB would place special emphasis on enforcing compliance with CIDB regulations, including those related to climate change. It would also focus on reducing fraud and corruption. A Register of Professional Service Providers (RoPSP) would also be piloted in 2011/12. More detailed annual performance plans for the CIP and CRS programmes were contained in the documents.

The budget of the CIDB for the years 2011-2016 was given. The budget for 2011/12 was R109.8 million, of which R41.2 (38%) million was expected to come from registers and other income, R66 million (60%) was expected to come from the DPW, and R2.6 million (2%) was conservatively expected from interest. Expenditure was distributed to Personnel Expenditure (R54.2 million, 49%), Administrative Expenditure (R27.6 million, 25%), Capital Expenditure (R0.5 million, 0%), and Professional & Specialist Services (R27.6 million, 25%). The breakdown by programme was R40 million (36%) to the CEO's office and Corporate Services, R25 million (23%) to the Growth and Contractor Development (GCD) programme, R11 million (10) to the CIP programme, R12.4 million (11%) to the Procurement Delivery Management (PDM) programme, and R21,6 (20%) to the CRS programme. Only minor variation from these percentages was expected over the next five years.

Ms Inba Thumbiran (CIDB Procurement and Delivery Management programme manager) admitted that the procurement management in the public sector was a huge problem, with many different sets of regulations existing, some inappropriate to the procurement of large construction projects. The CIDB was working with universities to develop courses focussed on large-scale project procurement.

Discussion
Ms Ngwenya-Mabila pointed out some inconsistencies between figures given in the presentation and in the other distributed documents. Which ones were the Committee being asked to approve?

Mr Peter Mongwenyana (Chief Financial Officer, CIDB) replied that the figures on the presentation slides were the latest revisions.

Ms Ngwenya-Mabila and the Chairperson expressed concern that incorrect figures could appear in what would become a public document.

Ms Madlala was worried about the late payments, especially to SMMEs. She asked for clarity on the causes of late payments.

Mr Zulu said that the situation was complex and that there were many different causes.

Ms Thumbiran said that the CIDB had been doing research into the problem. Countries such as the United Kingdom, Singapore and Australia had taken a legislative approach to ensuring timely payment. In the long term, South Africa would probably also take this approach, but the CIDB was still looking at other short-term solutions.

Ms Madlala asked for figures of the representation of women and people with disabilities in the construction industry.

Mr Zulu said that the CIDB co-ordinated “Women in Construction Excellence Awards” every year. Statistics were available, although he did not have them at hand. The representation of people with disabilities in the industry was a controversial issue, however. He believed that people with disabilities should not be exposed to construction sites, for reasons of health and safety. People with disabilities should still be encouraged to study, so they were able to obtain office positions.

Mr Sithole asked why only 82 Grade 9 construction companies had been registered by the CIBD.

Mr Zulu said that Grade 9 companies were very large companies listed on the Johannesburg Stock Exchange (JSE).

Mr Zulu said that the impact of Memorandums of Understanding (MoUs) between the CIDB and the four major South African banks (First National Bank, Standard Bank, ABSA and Nedbank) was currently under review.

Mr Mnguni asked about the up- and downgrading of contractors. He described a situation in which a company tendered for a project for which it did not qualify, in terms of its Grade. These companies sometimes embarked on joint ventures with a company that did qualify. According to his information, the current electronic system would automatically downgrade the higher Grade company. This was a serious problem. He asked why the grading system looked only at a company's capital assets, and ignored, for instance, its bank balance.

Mr Zulu said that the grading system looked at the capability of a company. Financial capability, not necessarily simply the bank balance, was one of the criteria that was assessed. He said that there seemed to be some misunderstanding occurring.

Ms Thumbiran said that the grading system did have some automatic mechanisms in place to detect situations in which companies were misrepresenting their capability.

The Chairperson announced a meeting on 31 May 2011, at which the Committee would adopt its Report on the Department's Strategic Plan, and the report of the current meeting. She thanked CIDB for their presentation, and declared the meeting closed.