Poor Performance of Grants: briefing by National Treasury

Standing Committee on Appropriations

26 July 2011
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The National Treasury briefed the Committee on the poor performance of grants in provinces. The presentation spoke specifically to the Infrastructure Grants to Provinces and the Neighbourhood Development Partnership Grant (NDPG). The National Treasury explained that the NDPG existed to increase the quality of life in townships and that thorough planning was the cornerstone of the NDPG. The presentation spoke to what Treasury was doing to address challenges experienced with the NDPG. The National Treasury further explained that the IGP was a conditional grant that supplemented the existing infrastructure budgets of the provincial departments of education, health and roads and transport. An analysis showed the performance of provinces in terms of infrastructure budgets and expenditure trends for education infrastructure, health infrastructure and roads infrastructure for 2011/11. The presentation also spoke to the reasons given by provinces for their poor performance and why the National Treasury withheld funds from them. Measures to improve the performance of provinces included implementing an Infrastructure Delivery Management System as well as a Human Resources Strategy.

The National Treasury explained
that the IGP had been discontinued and new sector grants were established for education, health and roads. Sector specific grants were geared towards giving sectors more control to set sector-specific norms and standards, key performance indicators and to improve planning in line with policy priorities.

Members asked how long the NT's plan to visit municipalities had been in place, if there were monthly consultations with provinces to see evaluate what they were doing, what the NT doing on a practical level to help the provinces with their planning initiatives, how the National Treasury was going to ensure that there was better planning of capital projects in the future, and what steps the National Treasury was taking to address the concern that certain provinces had severe needs as some members of the Provincial Treasury departments told the Committee that there was a lack of dialogue between first tier and third tier government. The Committee wondered why the NDPG could not work in all the provinces, if the IGP/Sector grant matter still had to be resolved, if all the money allocated to the IGP was being allocated proportionally to sectors within the country, and what systems the National Treasury put in place to monitor municipalities on a monthly basis to ensure compliance with funding requirements. Members thought it had been difficult to follow the National Treasury’s challenges and failures from the presentation. They wanted to know what achievements and failures the National Treasury had made in each province, and what problems provinces experienced in terms of spending their funds.

The Committee needed more information on the NDPG, as the public was unsure of the grant and what they could do with it. They wondered why such an important grant was not performing and had difficulty understanding what the objective of the grant was. They also needed more clarity on what the National Treasury meant when they said the NDPG increased the quality of life in townships. Members questioned the quality of facilities and roads in townships. The National Treasury clarified that it was important for the Committee to understand that the NDPG would not solve all the problems of the entire country; it was a catalyst for investment within a particular locality. This did not sit well with the Committee. They said that it did not matter whether the grant worked or not, but the National Treasury had to account for it. Members understood that the NDPG would not solve all of South Africa's problems, but he did not think the National Treasury’s statement was very appropriate, as all grants had to complement one another. There was still a great need for the grant even if it did not solve each and every issue in the country.

The Committee and the various provincial government representatives present at the meeting thought it was important that the National Treasury clarified the role of the Provincial Treasuries in terms of the projects supported by the NDPG. They asked if provincial treasuries also expected to monitor the projects. Members noted that the National Treasury had limited capacity and the provincial treasuries could help them. The Committee told the National Treasury they needed more clarity on the new sector grants. The presentation did not clarify what was happening with the IGP and what happened to the un-spent money of the IGP after it was being discontinued. Members were concerned about the level of spending on the IGP, as it was too low.

The Chairperson gave the provinces an opportunity to talk to the issues and the challenges they experienced with the grants. The Committee was concerned that there provinces would not be able to move forward with their projects because they lacked capacity. Members thought it was important that the Committee had further engagements on the subject of poor planning, as it had ramifications on expenditure. They also wanted more information from the National Treasury on the projects that they were involved in and the 57 municipalities that they were working with.

Meeting report

Opening Statements
The Chairperson clarified that the meeting was called with the National Treasury (NT) because the Committee was concerned that conditional grants were being spent too slowly, particularly the Infrastructure Grants to Provinces (IGP) and the Neighbourhood Development Partnership Grant (NDPG). He explained that provinces had to spend their money in order to improve the country’s conditions. There was a lot of money within the Division of Revenue (DoR) that had to be spent. The President said that that this was the year of job creation; therefore, it was important that the funds were spent properly. He also wanted to call on the provinces later in the meeting to talk to the challenges they were experiencing in terms of spending their grants.

National Treasury Briefing: Performance of Grants for 2010/11
Mr Kenneth Brown, Head: Intergovernmental Relations, NT, said that the presentation spoke to the IGP and the NDGP. The IGP was a schedule 4 grant that was introduced a few years ago because the budget for provincial spending on infrastructure was very small at the time. Currently, provinces were spending approximately R41 billion on infrastructure for health, education and overall growth purposes. The NT had seen strong growth in the IGP budget. With some provinces, the growth of their infrastructure budgets had exceeded 10%. In other provinces, the growth of infrastructure budgets had been 15%. With this in mind, Cabinet took a decision to split the IGP into three grants. The rationale for this decision was to give national departments ownership on how to manage and monitor an infrastructure grant. The IGP was divided into grants for health, education and roads infrastructure.

Mr David van Niekerk, Head: Neighbourhood Development Partnership Grant (NDPG) in the NT, informed the Committee that the NDPG existed to increase the quality of life in townships. The aim was to create sustainable communities in provinces by providing townships with transport and connectivity services, governance, a full range of appropriate and accessible services, environmentally friendly conditions, a flourishing and diverse local economy, a quality built environment and, social and cultural activities. However, the NT was aware that capital projects did not necessarily increase the quality of life for communities if proper planning was not conducted and if plans were wrongly executed.

The NT understood that quality of life was achieved via meaningful township regeneration. The key requirements for meaningful regeneration included thorough planning, having investment partners and proper catalytic investments. Thorough planning was the cornerstone of the NDPG and there was a long term planning horizon of twenty years. The NDPG was not like any other conditional grant, as leveraging of the grant was important for the sustainable development of communities. The NT wanted to attract private sector investment into townships that would create economic growth, job creation and skills development. It also created ongoing investment potential in townships over the long term. So far, R5 billion had been leveraged into townships by the NDPG. Funds from the NDPG were transferred from the NT to councillors, municipal staff, consultants and contractors.

In order for beneficiaries to receive the funds certain conditions had to be met, cash flow projections had to be given to the NT, the proper procurement processes had to be in place, and the NT had to receive monthly reports on the progress of the project. In order to address challenges that were experienced, the NT had provided training on the Township Renewal Initiative (TRI) as well as on Management Information Systems (MIS). The NT was also creating a model to assist with severe capacity needs. In line with this it created a NDPG operations manual and guidance notes, it performed grant framework evaluations and improvements, and it did daily and monthly monitoring of projects. The NT planned further initiatives that included identifying municipalities with severe needs, doing a mid-term review of the NDPG and implementing phase 2 of the MIS.

Statistics showed that there was a consistent increase in year on year spends of the NDPG. Even though the NT experienced serious challenges with the NDPG, they managed to spend 80% of the grant. There were external challenges experienced with municipalities, but these were being addressed. The NT firmly believed that the township residents were benefiting from the grant.

Mr Lindsay Martin, Head: Infrastructure Grant to Provinces in the NT, stated that the IGP was a conditional grant that supplemented the existing infrastructure budgets of the provincial departments of education, health and roads and transport. The funds were released based on performance and conditions being met. The total IGP budget for the 2010/11 financial year amounted to approximately R11.3 billion. However, an amount of R2.47 billion was not transferred due to poor spending performance and non-adherence to the conditions of the Division of Revenue Act (DoRA) of 2010.

A study on the overall provincial infrastructure budgets and expenditure trends for 2010/11 showed that the Eastern Cape spent 58.3% of its IGP budget, the Free State spent 86.8% of its IGP budget, Gauteng spent 64.1%, KZN spent 96.5%, Limpopo spent 94.4%, Mpumalanga spent 88.9%, Northern Cape spent 71.3%, North West spent 88.1%, and Western Cape spent 96.2% of its infrastructure budget.

An analysis was also conducted on each provinces infrastructure budgets and expenditure trends for education, health, roads and transport infrastructure for 2010/11. Each analysis showed what percentage of the budgets provinces actually spent in terms of what they were allocated for education, health and, roads and transport infrastructure. The analysis showed that:
•The Eastern Cape spent 42.8% of its allocated budget on education infrastructure, 60.3% of its allocated budget for health infrastructure, and 106.2% of its allocated budget on roads infrastructure
•The Free State spent 73.1% of its allocated budget for education infrastructure, 55% of its allocated budget for health infrastructure, and 95.5%% of its allocated budget on roads infrastructure
•Gauteng spent 52.2% of its allocated budget for education infrastructure, 58.5% of its allocated budget for health infrastructure, and 85.3% of its allocated budget on roads infrastructure
•KZN spent 98.9% of its allocated budget for education infrastructure, 74.2% of its allocated budget for health infrastructure, and 104% of its allocated budget on roads infrastructure
•Limpopo spent 103.1% of its allocated budget for education infrastructure, 90.4% of its allocated budget for health infrastructure, and 94.1% of its allocated budget on roads infrastructure
•Mpumalanga spent 84.4% of its allocated budget for education infrastructure, 73.8% of its allocated budget for health infrastructure, and 95.4% of its allocated budget on roads infrastructure
•The Northern Cape spent 94.7% of its allocated budget for education infrastructure, 72.7% of its allocated budget for health infrastructure, and 73.4% of its allocated budget on roads infrastructure
•The North West spent 76.6% of its allocated budget for education infrastructure, 93.4% of its allocated budget for health infrastructure, and 105.1% of its allocated budget on roads infrastructure
•The Western Cape spent 101.4% of its allocated budget for education infrastructure, 97.9% of its allocated budget for health infrastructure, and 94.6% of its allocated budget on roads infrastructure

Due to the poor spending performance of provinces an amount of R1.8 billion was initially withheld as a part of the fourth instalment of the IGP. However, due to persistent poor performance, the cumulative amount of R3 billion was withheld from the fifth instalment of the IGP in terms of section 16 of the DoRA. Based on responses received from provinces, an amount of R536 million was subsequently transferred to provinces.

Reasons given for the poor performance by provinces, according to the NT:
Eastern Cape: Poor spending in education was due to the withholding of R438 million by the Provincial Treasury. Poor performance was also affected by the province running a deficit, which meant that capital budgets from the equitable share would be cut. Health was under-spending on both its equitable share and the Hospital Revitalisation Grant (HRG).

Free State:
Poor performance was due to the late appointment of service providers by Public Works. The province had also overcommitted its budgets to the Roads sector, which negatively affected performance in the other two sectors.

Mpumalanga: under-spending in Education was due to delays by the implementing agent (Department of Public Works) in awarding tenders for Grade R, inclusive schools and the Eradication of Mud & Inappropriate Structures Programme.  The Roads & Transport Department projected to spend R377.7 million or 40.4% of its R934.9 million budget in the last quarter of 2010/11.The Health motivation was also not substantive enough except to mention that the problems were not in IGP, but in the Hospital Revitalisation Grant.

Northern Cape: Poor performance in Education was due to delays in the Supply Chain Management (SCM) process within Public Works. Under-spending in health was due to delays in the implementation of two major hospital projects. Under-expenditure in roads was due to the delays in SCM which resulted in projects starting late.

Gauteng: The province acknowledges that there has been poor performance this year. Concerns were raised about the capacity of sector departments and Department of Infrastructure Development which has an over-reliance on external service providers.

Limpopo: Performance in education has been affected by poor payment processes (after the appointment of a new CFO) and unclear roles and responsibilities. Under-spending in Roads & Transport was due to, among other reasons, late planning and implementation of projects in 2010/11, shortage of asphalt material and cancellation of projects due to cash flow problems and poor performance of contractors.

North West: The Provincial Education Department indicated that it had brought forward projects from 2011/12 and handed them over to the Independent Development Trust (IDT), however that did not guarantee that spending would occur. The province also indicated that the senior managers (Chief Director and Director in education) were placed on precautionary suspension.

Western Cape: This province reflected poor spending for Roads (60%). Poor performance was due to delays in the commencement of projects due to EIA process. There were also challenges associated with the supply of materials (bitumen) to complete projects. There were however commitments on maintenance projects. Under-spending was however anticipated on the Disaster Management Grant.
A logical framework that was developed identified five outputs that the Infrastructure Delivery Improvement Programme (IDIP) sought to achieve. This included the effective functioning of the institutional arrangements and enabling environment for infrastructure delivery, improved infrastructure planning and budgeting, improved infrastructure procurement systems and practices, improved infrastructure delivery skills, and effective management of the IDIP itself. The implementation of the Infrastructure Delivery Management System (IDMS) and the roll out of the Human Resource Strategy were key to supporting the institutionalisation of best practices and being able to leverage significant change in the management of infrastructure delivery. In terms of the implementation of the IDMS, provincial treasuries would need to identify areas of support within their provinces and support the coordination of infrastructure planning. The HR strategy was developed to support the implementation of the IDMS. A specialist worked with the Western Cape to develop and test the HR strategy as a pilot, which identified critical skills needed to support the IDMS. To support the process, Treasuries needed to play a strategic role in partnership with stakeholders. Political leadership was required to resolve the issues of the infrastructure delivery model in provinces, and the roles and responsibilities between public works and client departments. This was important for building sustainable capacity to deliver infrastructure as it brings certainty in the system.

The IGP was discontinued and new sector grants were established for education, health and roads. Sector specific grants were geared towards giving sectors more control to set sector-specific norms and standards, key performance indicators and to improve planning in line with policy priorities. National departments would be able to better support the implementation of school infrastructure norms and standards, cost models and develop performance indicators as requirements for grant frameworks. The Development Bank of South Africa (DBSA) was being brought in as implementing agents of national departments for education and health to accelerate delivery in provinces that failing while capacity is being built, a move that required grants to be converted into schedule 7.


Discussion
Dr P Rabie (DA) asked how long the NT's plan to visit municipalities had been in place. He asked this because the performance of some of the provinces was not good. In addition, he asked if there were monthly consultations with provinces to see what they were doing. One of the reasons for poor performance was bad planning. What was the NT doing on a practical level to help the provinces? How was the NT going to ensure that there was better planning of capital projects in the future? He addressed the NDPG. He referred the Committee to page 9 of the presentation, which said that the NT identified municipalities that had severe needs. He asked what steps the NT was taking to address the matter as some members of the Provincial Treasury department told him that there was a lack of dialogue between first tier and third tier government. The sooner communication between entities improved the better. There was lack of planning and inadequate spending, but it was heartening to hear that the NDPG worked in all the provinces. However, he wanted to know why the NDPG could not work in all the provinces.

Ms R Mashigo (ANC) noted that some new structures had been put in place and the IGP was being discontinued and replaced. She wanted to know if all the money allocated to the IGP was being allocated proportionally to sectors within the country. She asked if the IGP/Sector grant matter still had to be resolved. The Committee had problems with it, as it was a failure. What systems did the NT use to monitor municipalities on a monthly basis to ensure compliance with funding requirements? 

Mr L Ramatlakane (COPE) noted that the NT's plan to have sustainable communities was a good plan. He asked if the NT had a “map of development”. He asked if the NT had built-in, focused capacity plans to overcome particular challenges. He wanted to know if phase 2 of the MIS was functional, as the Committee wanted to know how it was going to help municipalities. He noted that the NT said that some of the provinces had “overcommitted” their budgets. He asked them to clarify what this meant. 

Ms L Yengeni (ANC) noted that the NT said that the NDPG existed to improve the quality of life within townships. It was difficult for her to follow the NT's challenges and failures from the presentation. She wanted to know what achievements and failures the NT had made in each province. This would help her to understand why certain funds had been allocated to each province. Just because provinces spent their capital did not mean they satisfied the needs of the people. There were certain guidelines that the NT had to follow before they could allocate the funds to the provinces. What were the problems that provinces were experiencing in terms of spending their funds? The NT had to tell the Committee what led to the collapse of projects in the townships and how they were identified. What happened to the people that identified the projects for funding in the first place? The Committee had to see that the grants were doing what they were meant to do.

The Chairperson said that the reason the Committee had invited the NT to Parliament was so that it could expand on the grants, which were very complicated. From the Members' side, they had witnessed slow spending. They needed more information on the NDPG. People were unsure of the NDPG and what they could do with it. Clearly, there were complications with the grant. Why was it that such an important grant was not performing? He asked what the provinces' role was with the NDPG. It was the Committee's duty to evaluate the weaknesses of the NDPG in order to see what could be done about it. He asked if small municipalities had access to or benefited from the grant. He still had difficulty understanding what the objective of the grant was.

Mr Brown replied that the presentation tried to address the concerns about why there was a slow performance of grants and what the NT was doing to support provinces. Slides 13-16 addressed the challenges that were experienced and the work the NT was doing. He understood what the Committee was concerned about but thought, perhaps, Members needed to understand what the projects in townships were about. There were approximately 185 projects in the NDPG running all over the country. It would be useful for Members to be given a breakdown of the projects in each township or municipality. It was important for the Committee to see that even though spending was slow, the grant was not defective. Slide 18 of the presentation showed that the NDPG was improving, and would improve even further in the future.

Mr van Niekerk clarified that the NDPG was about increasing quality of life. It had to do with sustainable communities and quality of life. For instance, the NDPG did not have a project on “economy” or “services” or “governance”, it was an area-based initiative that was only used in townships. Planning was different in every single township, as one township might need economic intervention while another township could need social intervention. The NDPG was a whole, integrated package. It was important that the Members understood that the NDPG was not a project-based grant; it was a township-based grant.

Ms Yengeni said that she did not understand what the delegate was saying about improving the quality of life in townships. The Committee wanted to know specifics, such as how many roads they had created in each township. If the NT was going to talk about the quality of life in townships then the Committee was going to question the quality of roads and other facilities in the townships. The NT had to explain exactly what they were referring to when they spoke about increasing the quality of life in townships.

Dr Rabie said that it would be useful if the Committee received a list of projects that were underway in each township so it could understand what the NT was talking about. Members would have more insight into what the NT was talking about if they actually went to the areas that the projects were taking place in.

Mr Brown referred the Committee to slide 3 of the presentation that said the NDGP existed to increase the quality of life in townships. It was important for the NT to clarify that the NDPG would not solve all the problems of the entire country. It was a catalyst for investment within a particular locality. This had to be taken into account in relation to all other government programmes. He thought it was important that the NT and the Committee had a session to discuss the projects in townships per province. Once this was done, the picture would be clearer. 

Ms Yengeni noted that the statement Mr Brown made, which said that the grant would not solve all the country's problems, did not go down well with the Committee. The Committee had a responsibility to know what the funding was doing for the country. It did not matter whether the grant worked or not, but the NT had to account for it.

Ms Moruakgomo Mabe, MEC: Finance in the North West Provincial Government, said that the NT had to use the pictures in slides 4-7 to explain what they meant by capital projects in townships. It was important for everyone to understand how the grant worked. The pictures in these slides showed that capital projects did not necessarily increase the quality of life of people.

The Chairperson stated that he understood that the NDPG would not solve all of South Africa's problems, but he did not think Mr Brown's statement was very appropriate. All the grants had to complement one another. They would not solve all the problems, but they would contribute to some of the solutions. There was still a great need for the grant even if they did not solve each and every issue in the country.

Mr Brown replied that he had been referring to a specific slide (slide 2 of the presentation). The NT would forward the Committee a list of the projects in each township. There were different projects in each township that contributed to that specific locality.

Mr van Niekerk clarified that slide 2 of the presentation was like a menu. The NT worked with communities in townships and did planning with them. Communities then selected certain interventions or services from the menu that they needed. For example, the Khayelitsha community identified the need to resolve crime. There was a township in Nelson Mandela Bay that identified the need for a museum, a digital library and an art gallery. This brought people and tourists into the township. There was also a township in Limpopo that identified the need for their township to receive greening. The NDPG consisted of integrated planning; it was not about doing one type of project at a time.

Mr van Niekerk clarified that the pictures in slides 4-7 were not part of the NDPG projects. These were just examples the NT found of capital projects that had gone wrong. He had no idea who designed the projects. The pictures were taken when they had a tour to a few townships.

Ms Yengeni said that she understood what the NT was saying but she did not understand why the NT had not done anything about these abandoned projects. She wondered why they were not interested in fixing these mistakes or using the abandoned buildings in the townships from projects that had not succeeded.

The Chairperson noted that it was clear that there were challenges. He did not want people to say that the government was building useless structures in townships. This would not happen in the future if there was more coordination between government structures.

Ms Mabe said that she thought it was important that the NT clarified the role of the Provincial Treasury in regard to these projects in the NDPG. Were provincial treasuries also expected to monitor the projects?

Mr van Niekerk responded that the NT was constantly looking at the NDPG framework to see where they could make improvements. He said the projects were directly between the NT and the municipalities. The NT would re-evaluate the framework to see if there was a role for provinces. They would come back to the provinces and the Committee on this matter.

The Chairperson noted that the NT had limited capacity and the provincial treasuries could help them.

Ms Mashigo said she knew that the provinces had under-spent on their IGPs and it was being replaced by the sector grants. She asked what happened to the money that was not spent in terms of the IGP. The Committee needed more clarity on the sector grant.

The Chairperson clarified that this was one of the reasons the Committee invited the NT to the Committee. The presentation did not clarify what was happening with the IGP and what happened to the un-spent money of the IGP after it was being discontinued.

Mr Brown explained that the R2.4 billion that was under-spent was the amount of money that was withheld from the provinces by the NT.

The Chairperson said that his worry was the level of spending when it came to the IGP, as it was too low. This also begged the question of what the role of the provincial treasury was.

Mr Brown replied that R2.4 billion of the IGP was withheld from the provinces by the NT. The money would be subject to the roll-over process pending the decision from the President in the NT. The NT did not reduce the future allocations of the IGP to provinces. The IGP was a grant that impacted on the provinces. The money was physically withheld from the provinces and they had to motivate why the funds had to be released. Because it was national money, the money had to be motivated to be rolled over for the next financial year. Provinces had provided the NT with vital information about the projects they were involved in. The NT's roll-over committee would decide whether the money would be rolled over or not. The final decision would be made by the NT committee that was chaired by the President. The IGP had been discontinued and there were now three different grants.

Mr Brown said there was a matter that had to be addressed by government, which was the expectation that the national and provincial treasuries had to support municipalities. This had to be done, but on the other hand, the failures of departments also had to be addressed. This was the balance that had to be achieved while the government tried to improve their systems. He asked Mr Martin and Mr Klaas Langenhoven, Head: Infrastructure Delivery in the Western Cape Provincial Treasury, to talk to the IDIP strategy that was being rolled out in the Western Cape.

Mr Lindsay Martin, Head of IGP in the NT, explained that the IDIP was initiated in 2004 as a pilot. The initial pilot was in the education sector, which moved into the implementation phase in 2006. The project then moved into the health sector a year later in 2007. The second phase continued from 2006 to 2009. There were annual independent reviews throughout the entire programme, which formed the basis for the structure of the programme in each financial year. Based on the review of phase 2 of the IDIP, it was found that the programme had an impact on improving performance; however, there were certain things missing in some provinces, particularly around capacity. The core focus of the programme initially was to put technical assistance in the affected departments, which were education, health, public works and now, provincial treasuries. It was found that the ability of the technical assistant to transfer skills to people within the departments was limited. When phase three of the programme was structures and implemented in the last year, it was decided that a specific output was needed. This was indicated on slide 32 of the presentation. It was decided that improvement was needed in planning and budgeting of procurement, and the Human Resource (HR) aspect of the programme also had to be supported. Structures had to be put in place to support human capital, which supported delivery beyond the programme. The first pilot was in the Western Cape, but it was going to be applied to all provinces. The Department of Public Service and Administration (DPSA) would support this process because they played a key role in capacitating the public sector.

Mr Langenhoven added that extensive work was done on the HR strategy thanks to the NT's assistance. The intention was to gain an understanding of all the legal mandates of the entire delivery chain for infrastructure. Provinces had to ensure that planning capacity existed in the relevant client departments, particularly in the health and education departments. They also wanted to ensure that there was a capable Public Works Department (DPW) for the country. The programme looked at what competencies the people in these structures should have. He hoped that once this was in place there would not be any excuses for non-delivery. However, this would not happen overnight.

The Chairperson said that it would be great if the delegate could talk to some of the local projects that the province was involved in.

Mr Langenhoven replied that there were a number of projects that the province was involved in. The biggest ones were probably the building of the Khayelitsha Hospital and the Mitchell's Plain Hospital. Excellent progress was being made with both hospitals and the province was also involved in building additional classrooms for certain schools. Clinics were also being looked at.

The Chairperson said that the provinces should be allowed to talk to their issues and the challenges they experienced with the grants. The Committee was concerned that the provinces would not be able to move forward with their projects because they lacked capacity.

Mr Seiso Mohai, MEC: Provincial Treasury in the Free State provincial Government, said that he agreed with the spirit of the report presented by the NT. The Free State also performed poorly in the last financial year in terms of spending their IGP. He was happy with the issues Mr Brown raised during the discussion. This financial year seemed to be more successful in terms of grants that were being spent. He believed that it was going to be a different year for the province, specifically for health and education infrastructure, which was very important for improving the conditions for communities. It was time to institutionalise the infrastructure delivery cycle for the better because the IDIP had helped to improve provincial infrastructure planning. He said that once grants were structured, they limited provinces flexibility.

Ms Mabe said that the Committee had to ask why the technical capacity in the Western Cape exceeded the technical capacity in all other provinces. NT should also tell the Committee why public works departments in other provinces found it difficult to deliver to their clients. Most provincial departments under-spent on their grants because there were serious problems with their “implementation agents”. She also indicated that some of the funds that were transferred to provinces for projects had to be transferred to municipalities. The North West Provincial Government made a decision that some of the functions had to be withdrawn from municipalities because most of them did not spend the funds on what they were allocated for. It was decided that some of these functions would be done at provincial level. Municipalities were becoming a big problem.

Mr Brown replied that he did not think it was a case of over-concentration of technical capacity in the Western Cape. Most provinces had to address their employment practices. Sometimes the provinces employed the wrong people for a variety of reasons, which resulted in skills being “chased away”. This was a major flaw. However, in order to address this problem, the NT was looking at internship programmes and placement programmes for engineers. Provinces were encouraged to contract the skills in the mean time. This was a problem that the education system had to resolve. The NT could not do it on its own.

Mr Sello Mokoko, Head: Provincial Treasury in the Eastern Cape Provincial Government, stated that until such time that the province was able to deal with certain matters regarding infrastructure delivery, it would not be able to reach the desired objectives. The first matter was the type of organisational structure that had to be developed for departments for infrastructure delivery, and the kind of HR skills that were required. The second matter was the issue around the lack of forward planning in provinces, despite having technical assistance. The last issue was the lack of supply chain management planning for projects. Most of the time junior officials were left with procurement responsibilities, which were never really completed.

Mr Mncedisi Vilakazi, Chief Director: Public Finance in the Gauteng Provincial Government, said that the province was also affected by a lack of expertise and capacity. There was a time when the public works department relied a lot on the services of private companies. However, the province had taken ownership of the matter and problems were addressed in the past financial year. Plenty of oversight was done on the province over the last year. In the current financial year, the MEC was able to put funds aside for capacity building in education. In particular, it was for appointing people with the correct set of skills. The province also focused on bringing down the cost of building schools. This was achieved through a new costing model that was created by the provincial government. The provincial government has also started working very closely with the Gauteng Planning Commission. The province met with the NT to discuss the capacity framework. A meeting was held with Heads of Departments (HoDs) to discuss infrastructure issues so they could deal with matters of capacity building.

The representative from Limpopo Provincial Government stated that the province's main challenge was in the health sector on the Hospital Revitalisation Project (HRP). The province was required to set up a provincial review committee to look at the planning of the project. This was a serious problem in the province. There was a problem with the HRP and the Service Level Agreements (SLAs) with implementing agents whose contracts were going to expire in the middle of the financial year. The SLAs were revised to extend the contracts. In the future, the contract periods would be aligned with the Medium Term Expenditure Framework (MTEF) period. The province also had school maintenance issues that related to the Education Infrastructure Grant. Minor maintenance had to be done by governing bodies in schools. Guidelines were sent to the schools; however, most governing bodies did not have the know how to acquire whatever they needed. Training was going to be conducted with all schools to show them certain maintenance skills. The province performed well in terms of roads and transport but their planning for projects has been very poor. Overall, the province's performance has improved; however, they felt that there were still many areas they could improve upon. He said the province was ready to implement the new sector specific grants.

Mr Ramatlakane said it was useful to listen to what the provincial representatives had to say. It was important that the Committee had further engagements on the subject of poor planning, as it had ramifications on expenditure. He wanted more information from the NT on the projects that they were involved in and the 57 municipalities that they were working with.

Mr Brown replied that the DoRA had been adjusted to say that it was a requirement that all the projects had to be listed and gazetted. All education related projects, even for municipalities were listed on the education website. This served as a “mapping” of sorts. The same would be done for health and roads projects so there was a sense of all the projects the provinces were involved in. The NT was also involved in ensuring there was proper planning in place for projects. In terms of roads, one of the requirements was that provinces should have a proper road asset management process in place so they had a sense of their entire road network. The NT interacted with SALGA on this project. One of the challenges was that there were too many trucks in the country that travelled long distances with heavy freight. The NT was looking to interact with provinces and Transnet to see how they could invest more into freight so traffic could move from the roads to freight.

The Chairperson concluded that the Committee, the NT and the provinces should agree that there were certain issues that had to be taken forward. The NT had to play a major role in resolving many of the issues that provinces experienced. From the Committee's side, the issue of the NDPG was very important. The Committee had to go out to the townships and see the projects for itself. Members agreed that there has been an improvement in grant spending, but there was still a lot of work that had to be done. He noted that a lot had been mentioned by provinces about planning regarding the IGP, which was now discontinued. Someone was supposed to monitor this grant. The NT had to strengthen its own monitoring mechanisms. The MTEF was supposed to assist departments with planning. However, there was a challenge with the implementation of plans. This was difficult to understand. Somewhere, somehow, the government was not getting it right. There were definite issues with lack of capacity in provinces, which also resulted in provinces being unable to spend their funds. The NT had to look at the role it played and whether it was enough for the country.

The meeting was adjourned.

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