Minister and Department of Public Works: 1st quarter 2011 performance report

Public Works and Infrastructure

27 June 2011
Chairperson: Ms M Mabuza (ANC)
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Meeting Summary

The Committee, at the outset, expressed its concern that the figures tabled for the first quarter of 2011 by the Department of Public Works (DPW) appeared to indicate a decline in service delivery across all five programmes. However, the Department pointed out that not only had a number of programmes been cancelled in the middle of the previous year, but that it was not unusual that capital projects showed little spending in the first quarter, with momentum being gathered on them only in the second and third quarters. In addition, not all the figures for the full quarter had been included, as it was usually only in mid-August that the figures from municipalities and provinces were incorporated. Only 10% of the R1,4 billion infrastructure budget had been spent, against the 25% benchmark for the quarter, there was offtake of only 9% of the Expanded Public Works Programme (EPWP), including the incentive grants, and transfers and subsidies had reached only 17% of budget, whilst asset management was also at 8% of budget. R18,5 million (6%) of earmarked EPWP incentives had been paid to provinces, and R20,8 million (3%) to municipalities in the first quarter so far. Nothing had been spent on energy efficiency projects or updating the immovable asset register.

Members were still concerned about the lack of spending, despite the explanations, particularly in regard to the EPWP incentive grant funds, and lack of expenditure in key areas such as infrastructure development, energy efficiency projects and the immovable asset register. Members pointed out that the EPWP model, and the way it had been modified, seemed to be retarding the pace of job creation, and it was agreed that a top-level workshop should be organised to consider possible improvements to the programme. Members also pointed out, and the Minister agreed, that there was a need to address the filling of the vacancies. Members were not happy with the money allocated to the Independent Development Trust, and were not sure that adequate benefits, particularly in mud schools replacement projects, were derived. The Minister agreed also that energy saving was urgent and suggested that perhaps Parliament could be used as a pilot project. Members also noted that capacity at municipal level was still a problem, questioned the rates of pay on the EPWP, and the monitoring of progress. The Department responded that if the implementing bodies did not report, there would be little progress in job creation, and requested the Committee for assistance in resolving the issue. The Chairperson agreed that there should be a workshop, involving other Portfolio and Select committees also, to discuss the EPWP issues in depth.

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed the Minister of Public Works, Ms Gwen Mahlangu-Nkabinde, and noted her concerns that the presentation documents indicated a decline in service delivery across all five programmes run by the Department .This was not a satisfactory state of affairs, and she expected honest answers on why objectives were not being achieved. If the problem was a shortage of capacity within the Department, then the staffing gaps needed to be filled and the necessary action taken.

Department of Public Works First Quarter 2011 performance report
Mr Sam Vukela, Acting Director General, Department of Public Works, said the Department of Public Works (DPW or the Department) considered that it was achieving quite well, particularly in the last quarter of the previous (2010/11) financial year. He reminded the Committee that during the second quarter of that year, from July to September 2010, a decision had been taken that the Department should not proceed with certain projects. This had resulted in a huge budget excess at the end of the 2010/11 period. A major intervention had led to the DPW catching up on outstanding projects, to the extent that it managed to use nearly 90% of its budget, which he regarded as a reasonable performance.

Mr Vukela added that in the first quarter of the 2011 financial year, up to June 2011, he also thought that the performance was reasonable. He handed over to the Chief Financial Officer to brief the Committee further.

Ms Cathy Motsisi, Chief Financial Officer, Department of Public Works, noted that the perceived decline in service delivery was primarily due to the reports not reflecting actual performance up to the end of the quarter, at 30 June 2011. She said that the presentation was intended more to give an indication of how the Department had performed in comparison with the same period in the last financial year, and to illustrate what had been achieved in April and May.

Ms Motsisi then gave a detailed breakdown of expenditure against budget, and highlighted some key areas. She noted that only 10% of the R1,4 billion infrastructure budget had been spent, against the 25% benchmark for the quarter .However, this could be explained by the fact that capital projects tended to start slowly and accelerate in the second and third quarters, so this performance was understandable.

In respect of the Expanded Public Works Programme (EPWP), there had been an offtake of only 9%, including the incentive grants, as the DPW was still finalising payments for the previous quarter.

She noted that transfers and subsidies had reached only 17% of budget, compared to 34% for the first quarter last year. In the area of capital payments, and spending on goods and services, most programmes were well below the 25% linear benchmark, with both asset management and the EPWP standing at 8% of budget .The DPW was, however, not worried about this,since reduced expenditure on goods and services related to improved efficiencies. She agreed that reductions should not be at the expense of service delivery.

Only R18,5 million (6%) of earmarked EPWP incentives had been paid to provinces, and R20,8 million (3%) to municipalities in the first quarter so far. The R70 million budgeted for energy efficiency projects had not yet been touched. There had been no expenditure to date from the R30 million budget for updating the immovable asset register.

Discussion
The Chairperson expressed her disappointment that while declines in performance had been documented, reasons had not always been given. The DPW should, in particular, have clarified the situation with EPWP, in particular, because it was a driver of job creation. No explanation had been given for the three-month deferment of programmes last year.

Mr Vukela said there were still many invoices to be processed by the end of the quarter, and this would change the picture .As far as the EPWP was concerned, reporting was still being received from the last financial year, which meant that a period of consolidation was required to capture the required information.

The Chairperson suggested that if the data capturing for the last quarter had not yet been done, this surely indicated that the Department was lacking in capacity, and that it needed urgently to fill its vacant posts.

Mr Stanley Henderson, Deputy Director General, EPWP, Department of Public Works, said data was consolidated through reports submitted to Treasury up to 30 days after the close of a quarter .This meant that final figures were available only six weeks later, and the case of the first quarter, this would be about mid-August. This was so that figures from national and provincial departments, as well as municipalities, could be included.

Ms C Madlopha (ANC) asked whether, in the light of the EPWP performance, the Department was confident that the programme, in its current form, could achieve its job creation and service delivery targets.

Ms N Ngcengwane (ANC) supported her, saying Members had offered to assist by visiting problem municipalities, identifying challenges and helping to correct them.

Ms N November (ANC) said capacity at grass roots level seemed to be a stumbling block, and the weaker municipalities would be able to support job creation projects only if they were assisted by provincial and national departments.

The Chairperson said the Portfolio Committee had been told in the previous week that the EPWP had nine directors and 60 data capturers and, if this were the case, information should be received on time .She was worried that there was insufficient monitoring of the process.

Mr M Rabotapi (DA) inquired about the accuracy of the data provided in the reports from the municipalities and provincial departments.

Mr N Magubane (ANC) expressed concern that the incentives paid to municipalities were open to abuse, owing to a lack of monitoring.

The Chairperson said R90 million had been allocated to the Independent Development Trust (IDT) for administration, and she was not happy with money being used to pay for salaries, rather than fulfilling the EPWP’s mandate to create jobs.

Mr Vukela said the EPWP issues raised by Members had already been discussed within the DPW .He felt that incentive grants would continue to be a challenge, as the funding was supposed to be handled by the National Treasury. Athough the allocation of the funds was made to the DPW, it was merely a conduit for the spending in the provinces and municipalities, which were the implementing bodies. However, most municipalities did not have the resources to implement projects, and could therefore not access incentive grants, which were paid retrospectively after certain baseline requirements had been met. In other words, the Department did not have direct control over the allocation of the incentive grants. He suggested that it would be preferable for its funds to be directed to poorer municipalities to drive projects such as road-building or pothole repairing .Capacity-building at municipal level involved recruiting staff, and that too required funds, which were in short supply .In the circumstances, the DPW wanted to review the EPWP model. So long as the implementing bodies did not report, there would be little progress in job creation .He hoped the Committee would help to resolve this issue.

Ms Ngcengwane drew attention to the fact that nothing had yet been spent on updating the immovable asset register and this was a problem which had resulted in the Department receiving a qualified audit.

Ms Madlopha asked why none of the R7 million allocated to boundary fencing had yet been spent.

Ms Motsisi said the DPW was invoiced by the Department of Agriculture, Forestry and Fisheries, when this work was done, but so far no invoices had been received.

Ms Ngcengwane said the promotion of energy efficiency had been targeted as a key job creation area, but so far there had been no expenditure.

The Minister agreed that energy-saving was an urgent matter, and the DPW, as custodians of the government’s properties, should be setting an example .Parliament could be used as a pilot project so that MPs could monitor the progress of the initiative.

Ms Madlopha asked why the EPWP model had been changed to incorporate the incentive grant, as it seemed to have worked better without it in the past.

Mr Henderson said the original intention was that the government could create job opportunities by putting out tenders for implementing bodies who focused on labour intensivity .In Phase 2, the incentive grant was introduced to accelerate the process, and the non-State sector, such as NGOs, became involved .This meant Treasury would allocate funds on the basis of job opportunities created, which required data collection and reporting.

The Chairperson said EPWP beneficiaries were receiving varying rates of pay, with those in rural areas receiving the minimum and those in the major centres receiving more, which was unfair.

Mr Henderson said the rates of pay varied from R60 to R150, and were based on a special Ministerial determination .The DPW could not intervene, and different rates were usually based on the different nature of the jobs performed.

The Minister then addressed the meeting on most of the issues raised by Members.

She said the quality of DPW presentations worried her, and suggested that the frequency of meetings should be reduced to enable proper preparation .She agreed that it was a waste of time for the DPW to report on a quarter’s performance before the quarterly figures had been completed. A number of serious decisions about the future of the DPW needed to be taken, and the Committee was to be commended for highlighting problems early, through its prompt interation with the Department, and for setting tight deadlines and raising important issues.

The whole EPWP issue needed to be thoroughly discussed, and she proposed that the DPW should organise a workshop involving the Portfolio Committees on Cooperative Governance and Traditional Affairs, the Select Committee on Public Works, and the Finance committees.

She said she was not happy with the IDT, as she had yet to be convinced that the Department derived an adequate benefit from the funds allocated to it, in the form of job creation,.She referred to problems with the mud schools replacement project, adding that the National Treasury was aware of the need for funds to be made available for the DPW to complete what needed to be done.

The Minister also agreed that funded posts should be filled as soon as possible.

The Chairperson supported the proposed EPWP workshop, and looked forward to participation by the the Committee.

The meeting was adjourned.

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