The previous day's hearings continued, with the day's focus, in the presence of the Deputy-Minister of Health, Department of Health, Members of the Executive Councils, provincial departments of health, Members of the Portfolio Committee on Health, members of provincial legislatures, the Deputy Auditor-General, and National Treasury, on the infrastructure delivery process at the provincial departments of health.
Members' questions had a particular focus on the Auditor-General's recommendations, the national Department's responses which were vague, the failure of provinces to comply both with legislative and regulatory requirements and to act on the Auditor-General's recommendations. Why had provinces broken the law by failing to register successful bidders? Members insisted that they were examining a principle. One contravention was one contravention too many. In seven provinces, the bid evaluation committees had not consulted the Construction Industry Development Board register to confirm the registration and grading of the bidders during the evaluation process. Members observed that this day's meeting was like the previous day's: there was a general passing of responsibility to the relevant provincial department of Public Works. Two projects had been cancelled because of lack of progress. Had there been any attempt to recover the money?
Gauteng was asked to explain the increase in the budgeted cost of the Zola Hospital complex which increased 144% due apparently to the increase in bed space from 250 beds to 300. The increase in the number of beds was no more than 50, but the increase in costs was almost 150%. Gauteng, Limpopo, and North West had 53% of projects in which such legislation or regulations were contravened. Why did this happen? Had the provinces investigated, as requested by the Auditor-General, and what did they find?
Did the provinces discover fraud, and what had they done? How many people were in jail? A Member of the KwaZulu-Natal provincial legislature observed that the KwaZulu-Natal Department of Health must do the monitoring of projects by itself. The problem of provincial under-spending meant that there would be instances in which money would have to be returned to the National Treasury. The implementing agent was a problem across all the provinces. The provincial department of Public Works was not holding construction companies to account. It was employing construction companies that could not do the work. The Member disagreed with the Eastern Cape's assertion that there was not an appropriate legal process. KwaZulu-Natal had created a special investigative task team in the Office of the Premier and was dealing with it directly. Gauteng was asked why contracts were awarded to contractors, in spite of their having outstanding tax certificates? Why did Gauteng choose Ilima?
Questions were raised about possible collusion in infrastructure. Members observed that engineers were not sufficient to deal with costing. Members' questions also had a focus on the limits of scope of the Auditor-General's Report. The Report was very good but the projects investigated could be only the tip of the iceberg. Members were concerned at the failure of concerned parties to submit documents on projects selected for auditing. Members observed with dismay that all the project failures were affecting not only the officials and the politicians but also the public directly. Members also asked about acquisition management in North West, Limpopo, Gauteng, and Free State and why legislation, regulations and practice notes had been contravened in more than 40% of projects, and asked if action had been taken against anyone. In the Northern Cape procurement documentation requested by the auditors could not be submitted for auditing. This was a very serious matter.
National Treasury was asked if there was any regulation, prescript or statutory requirement that departments like Education and Health had to use the Department of Public Works in infrastructure projects. There were serious challenges with the Department of Public Works in the provinces.
The Deputy Auditor-General said that it was clear that delays had resulted in additional budgetary constraints for the future. The portion of irregular expenditure attributable to the Health sector was about R5.7 billion out of R21 billion – a significant portion of which was for infrastructure. Having engaged with the leadership in the national Department of Health, the Auditor-General of South Africa had witnessed that there were no doubt encouraging signs. The tone and the seriousness with which the Department of Health was addressing the matters raised in this Report were very positive.
The national Department of Health responded that it had recognised the need for routine and preventive maintenance, to address the backlog in maintenance, and to apply norms and standards, specifically for project management systems and for costing, across the provinces. For the incomplete projects, the Department needed a dedicated team, and it had contracted with the Council for Scientific and Industrial Research and with the Development Bank of Southern Africa. It now had programme and project management units in each of the provinces and sought to ensure that it had resident engineers. The Department had developed an implementation protocol which must be signed between the Director-General and a head of provincial health department.
The Deputy-Minister appreciated the Office of the Auditor-General's professional and constructive manner in which it had dealt with these matters while refusing to compromise professional integrity. The way the Office of the Auditor-General had dealt with the matters enabled the Department of Health to move forward. She also appreciated the approach of the provinces. This Report from the Office of the Auditor-General had confirmed the Department of Health's earlier findings. However, these issues had been raised before at a provincial level. It was necessary to ask how one could institutionalise what had been established, in order to avoid a repeat of these problems, and to institutionalise the best practices so that they became the ways of doing business. Internal audit must pick up discrepancies, and should be able to identify the risks to assist the department concerned even before external audits were done, both at the provincial and national level. The Ministry and the National Health Council had agreed that it was correct that the budgets for infrastructure went to the provincial departments of health and that these provincial departments must take responsibility and be held accountable. Also there should be options in using service providers who would assist the health departments to fulfil their mandates. The Deputy-Minister also agreed that the national Department of Health should also be held accountable and take responsibility for the national conditional grants, though in a collaborative manner with the provincial departments who carried out the implementation. The Deputy Minister agreed that infrastructure was a highly technical area that required professionals who could be held accountable for delivery.
The Co-Chairpersons were perturbed that South Africa's health indicators were unsatisfactory to which inadequate health infrastructure was a contributing factor, were concerned about South Africa's health indicators, and observed that, at the level of implementation, it was necessary to have in place people who were honest enough to stop the rot when they saw it. The Standing Committee on Public Accounts would engage the Department of Public Works, and the national Department of Health on other matters.
Co-Chairperson Godi welcomed the Deputy Minister of Health, the Members of the Executive Councils (MECs), the National Department of Health, the provincial departments of health, Members of the Portfolio Committee on Health, members of provincial legislatures, the Deputy Auditor-General, and National Treasury.
Co-Chairperson Goqwana said that the Health Portfolio Committee had been searching for answers on the health indicators of South Africa which were not particularly good. A contributing factor was that South Africa's health infrastructure was not up to standard.
Auditor-General's recommendations and national Department's response
Mr R Ainslie (ANC) was very disappointed at the national Department of Health's vague responses, which lacked detail, and its ignoring some of the Auditor-General's key recommendations (Auditor-General of South Africa Report on a performance audit of the infrastructure delivery process at the provincial departments of education and health (the Report), paragraphs 3 and 5, pages 16-19).
The Construction Industry Development Board (CIDB) register (Report, paragraph 3.2.7, page 18), should be consulted to determine the contractor's capacity before bids were awarded. Contractors who were not performed satisfactorily should be reported to the Board.
Seven provinces had failed to comply (Report, table 5, page 57). Moreover, compliance was not voluntary. This was a contravention of the legislation which underlay this register. Why had those provinces broken the law? He asked the Department and provincial departments to remember, as Mr P Pretorius (DA) had pointed out the previous day, that the meeting was dealing with a simple audit. It was the principle of non-compliance that was important, rather than particular instances of non-compliance.
Mr Ainslie expected answers at least from KwaZulu-Natal and Mpumalanga.
Mr Ainslie asked KwaZulu-Natal for details of three projects where the successful bidders had not been registered at all. He asked why the province had not registered them, and why it had allowed the contraventions to take place.
Mr Ainslie asked Mpumalanga why it had not registered four successful bidders, and why it had allowed the contraventions to take place.
Co-Chairperson Godi asked all present to ensure that cell phones were switched off, not merely put on silent, to avoid erasing the sound recording. He had to repeat this request several times in the meeting. Compliance was less than 100%.
Co-Chairperson Godi asked the same questions to the Eastern Cape.
Dr Siva Pillay, Head of Department (HoD), Eastern Cape Department of Health, replied that, in the Eastern Cape, there was only one project in which the bidder was given a task that was higher than his rating.
Mr Ainslie objected: the Committees were examining a principle. 'Let us not say only one.' This was a sample audit. One contravention was one contravention too many.
Dr Pillay replied that the Eastern Cape Department of Health rarely involved itself in the process of procurement. The provincial department of Public Works did the procurement. In addition, there was another structure in the province called IPEC on which the National Treasury sat. At the same time the Eastern Cape Department of Health had had a problem with the Construction Industry Development Board (CIDB). Its registration was for a limited period of time.
Co-Chairperson Goqwana asked respondents not to use abbreviations or acronyms.
Co-Chairperson Godi elucidated the abbreviation CIDB for the benefit of all present.
Mr Pillay said that at the time of applying for a tender, a contractor might be registered. At the time of adjudication, the contractor might 'have just gone below', or might not be registered. At the time of awarding the tender, or after awarding it, the contractor might not be compliant. After the matter was referred to the IPEC, the contractor might be registered again retrospectively. The CIDB registration itself was not an absolute science. The second issue with CIDB was how complaints were managed. It took two years to obtain a hearing. Thirdly, the CIDB website was 'frightfully' out-of-date'.
Mr Ainslie asked if the Eastern Cape had informed the Auditor-General of its issues with the CIDB. However, the comments on the CIDB were very useful. The Standing Committee on Public Accounts (Scopa) would take this into account when it made its resolutions and perhaps have an engagement with the CIDB.
Mr Ainslie objected that the Eastern Cape Department of Health could not simply pass the buck to the provincial department of Public Works. It was the Eastern Cape Department of Health's budget and its project. It had an oversight responsibility. Nonetheless, this day's meeting was like the previous day's: there was a general passing of responsibility to the relevant provincial department of Public Works.
Major-General Dr Mokgethi Radebe, HoD, North West Department of Health and Social Development, acknowledged the Auditor-General's findings and noted that in the North West Department of Health and Social Development these projects had been managed by the provincial department of Public Works. He admitted that these checks had not been carried out. However, the North West Department of Health and Social Development could not change what had happened in the past. Henceforth, there was a plan in place to prevent recurrences.
Co-Chairperson Godi pointed out, by way of the analogy of a post-mortem examination, that the Standing Committee on Public Accounts (Scopa) dealt with the past. He asked why those things had happened in spite of the law's having been explicit.
Major-General Dr Radebe agreed. Indeed, it was important to learn from the past so as not to repeat the same mistakes. He repeated that these matters had been handled by the provincial department of Public Works previously.
Mr Ainslie refused Major-General Dr Radebe's explanation. It was the responsibility of the North West Department of Health and Social Development to exercise oversight, and not absolve itself of responsibility by passing its responsibility to the provincial department of Public Works.
Major-General Dr Radebe agreed, but he could not turn the clock back.
Mr Ainslie observed that a very big amount was in question. He asked for an analysis by project. He asked for an explanation of the figure of R655 million for the North West's four projects for which the successful bidders were not registered (Report, table 5, page 57). Who were these bidders?
Co-Chairperson Godi asked for that information.
Major-General Dr Radebe agreed to give the list of bidders to the Committees.
Dr Sibongile Zungu, HoD, KwaZulu-Natal Department of Health, said that there had been many changes in management at that time, and infrastructure management in particular was quite depleted. Even with the staff that were present there were capacity problems. So issues of oversight were a problem, together with the issues of the CIDB. These problems had a spill-over in the years that had followed. The KwaZulu-Natal Department of Health had had its own challenges with the provincial department of Public Works. It had tried to invoke penalties, but without success, as there were disputes with the provincial department of Public Works. The KwaZulu-Natal Department of Health had not had the capacity to perform oversight on the projects at that time, but had since developed the capacity.
Mr Ainslie observed that two projects had been cancelled because of lack of progress or quality considerations (Report, table 5, page 57). Had it made any attempt to recoup the money from the wastage on those projects cancelled because of non-compliance?
Dr Zungu could not give the Committees the number of the projects cancelled.
Mr Ainslie reiterated that two projects had been cancelled. Had the KwaZulu-Natal Department of Health made any attempt to follow-up?
Dr Zungu would reply in writing because more than two projects were cancelled and the department was trying to recover the costs.
Co-Chairperson Godi asked if the reply could be sent to by the next week.
Dr Zungu agreed.
The Mpumalanga Department of Public Works, Roads and Transport replied that the CIDB was in place during the period under review, and the department had confirmed that the projects were done in about 2005. However, in 2006, there was a standardisation process carried out by the CIDB with visits to provinces.
Mr Ainslie asked why the Mpumalanga Department of Health and Social Development was not responding.
Co-Chairperson Godi wanted to allow the Mpumalanga Department of Public Works, Roads and Transport to respond.
Mr Ainslie observed that this was an instance of how far departments had gone in abdicating their responsibilities. It was now an almost total handover to another department. 'But let him carry on.'
The Mpumalanga Department of Public Works, Roads and Transport said that the CIDB's implementation on grading came after that standardisation exercise.
Chairperson Godi inferred that these four projects were given at a time when there was a temporary withdrawal of registration.
The Mpumalanga Department of Public Works, Roads and Transport replied that this was not so. The projects were awarded at a time when the CIDB was in place already.
Co-Chairperson Godi clarified that the question was why these four tenders awarded when the contractors were not registered with the CIDB. How had this happened?
Mr Ainslie asked who, in the Mpumalanga Department of Public Works, Roads and Transport, was responsible, and what action had been taken against that person.
The Mpumalanga Department of Public Works, Roads and Transport did not have the names of the responsible officials. The department was finalising a report on the basis of which it would take disciplinary action.
Co-Chairperson Godi confirmed that the four tenders had been awarded by the Mpumalanga Department of Public Works, Roads and Transport.
Ms Daisy Mafubelu, HoD, Limpopo Department of Health and Social Development, replied that in Limpopo there had been two cases (Report, table 5, page 57). In one case a tender had been awarded to a contractor who had a CIDB rating of five, when the required rating would have been six. The second had a CIDB rating of six, when the required rating was seven. The reason for this was that the CIDB had a provision for awarding tenders to emerging contractors with a lower grading, provided that grading was only one point lower than the required grading.
Mr Ainslie asked if Limpopo was simply relying on the Auditor-General's findings.
Ms Mafubelu replied that the department had continued to investigate such matters in order to implement corrective measures. However, it had not found any more such cases. If it found such cases it would inform the Committees.
Mr Ainslie found that information a little hard to believe. He would wait for the next performance report.
Dr Nomonde Xundu, HoD, Gauteng Department of Health and Social Development, replied that the province's Department of Health and Social Development relied on the province's Department of Infrastructure Development (DID) to manage these kinds of projects. At that time this had included the acquisition management of these projects. This was because of the province's policy and because of capacity issues in the province's Department of Health and Social Development, which was now working to correct that anomaly.
Mr Keith Househam, HoD, Western Cape Department of Health, said that its case was similar to that of Limpopo. The department was within the law to award the tender to a contractor who was within one grade point of the grade required. There was an obligation on the part of the provincial Department of Transport and Public Works, as the implementing agent, to provide support and capacity and this was done in terms of promoting Black Economic Empowerment (BEE). This was the situation in the case reported here. At the time this audit was undertaken, as in other provinces, the Western Cape Department of Health was not then involved in the awarding of tenders. That situation had changed, but the department was now represented on the bidding committee. He, as HoD and accounting officer, had the authority to block the awarding of a contract if he was not satisfied with its terms. At the time that this audit was conducted, that had not been the case.
Mr Ainslie was relieved that the HoD, Western Cape, provincial department of health, was allowed to exercise oversight.
Mr Ainslie noted the recommendation for the formal prioritisation model (Report, paragraph 3.1.1 (c ), page 16), and that the Free State Department of Health could not provide a list of priorities with regard to infrastructure projects at a strategic level (Report, paragraph 1.1.3, pages 52-53. The Service Transformation Plan was drafted in 2005 with the aim of addressing the prioritisation of needs and projects, but during the time of the audit, it had still not been approved. Why had that plan not been approved?
Co-Chairperson Godi asked the Free State how it was attempting to provide infrastructure in the absence of a guiding plan.
Dr Sipho Kabane, HoD, Free State Department of Health replied that the Free State did have a provincially based infrastructure master plan, which was outside the service transformation plan, which looked at broader issues than infrastructure, and which had been submitted to the national Department of Health.
Co-Chairperson Goqwana asked the Free State what had happened to its health indicators.
Dr Kabane replied that the Free State was not doing well in terms of the Millennium Development Goals as regards maternal mortality, infant mortality and under-fives mortality. There was a multitude of reasons, besides infrastructure planning, including the prevalence of HIV and Aids, and the shortage of personnel was one of the factors.
Mr Ainslie asked Gauteng about the budgeted cost of the Zola Hospital complex (Report, paragraph 1.1.1 (b), page 50), which increased 144% due in large measure to the increase in bed space from 250 beds to 300. How could the Gauteng provincial department of health explain the massive increase in costs? The increase in the number of beds was no more than 50, but the increase in costs was almost 150%. It did not make sense. Why? Also, to date, the hospital had not been completed.
Dr Xundu replied that the increase in the number of beds was not envisaged at the beginning of the project because of non-involvement of service users. However, the department was examining the costing of that particular project. She asked for permission to reply in detail in writing.
Mr Ainslie said that this was not good enough. The department should have anticipated this question.
Dr Xundu replied that elements, such as the pharmacy and additional operating theatres, were not included in the original costs. The original plan changed.
Mr Ainslie retorted that this showed absolutely bad planning.
Mr Ainslie referred to paragraph 2.2.3 (a), table of % of projects in which procurement legislation and/or regulations were contravened.
Gauteng, Limpopo, and North West had 53% of projects in which such legislation or regulations were contravened.
Why did this happen?
Had the provinces investigated, as requested by the Auditor-General, and what did they find?
Did the provinces discover fraud, and what had they done? How many people were in jail?
The Chief Director: Department of Infrastructure Development, Gauteng, said that, as highlighted before, the Department of Infrastructure Development, Gauteng, was the department responsible. There had been attempts on the part of the department of health to ensure follow up in the matter of the Zola hospital complex. The matter was sub judice between the Department of Infrastructure Development, Gauteng and the contractor. Therefore in terms of the investigation, he asked the Members to bear with him and give him the chance to respond in writing.
Mr Ainslie observed again that people had not bothered to read the Auditor-General's Report. They were not taking it seriously.
Dr Xundu apologised if the impression had been given that the report had not been read. It had been read. The challenge lay with the responsibility (not the oversight) being given to another department. The investigations were currently underway. The Gauteng Department of Health and Social Development would reply later.
Mr Friday Mushwana, Chief Financial Officer (CFO), Limpopo Department of Health, replied that the matter related to the contractors who had been disqualified based on predetermined prices. Now the province used other norms such as the CIDB rating to determine exactly who qualified.
Co-Chairperson Godi asked if the contraventions, therefore, were of a technical nature.
Mr Mushwana replied that in Limpopo the majority of the 53% were as a result of that disqualification.
Major-General Dr Radebe replied that the North West Department of Health and Social Development had instituted a forensic audit and was digging deeper into the processes of awarding these contracts.
Mr Ainslie acknowledged that at least this was something. However, there were multiple contracts, all terminated. Questions remained to be asked and answers about the new mental health facility in Kimberley.
Mr Pillay said that the Eastern Cape Department of Health's own findings were worse than those of the Auditor-General's Report. An amount of almost R120 million fraud had been uncovered. However, R94 million had been recovered already. He wanted that put on record. It was almost impossible to put somebody in jail for fraud because of the shortcomings in the criminal justice system. His department had referred the matter to the Hawks. The department had dismissed its head of infrastructure. Other people, when confronted, had resigned. This was a new trend, which precluded disciplinary action and the department had to await court proceedings. The department had given the dossiers to the police, who had promised the MEC that arrests would be made, but 'the next week' when arrests were promised had never arrived.
The Eastern Cape Department of Health now had recourse to negotiated settlements. The department had cancelled contracts and a whole process of litigation followed. Here the department needed the help of Members. Even when the department could prove that a contract had been signed under fraudulent circumstances, the courts still considered the contract valid. The department sought to prove that the signature of the person purporting to represent the department was in those circumstances invalid. The department was taking such a case on review. The department was not dealing with an easy industry [construction]. The law of contracts was not consistent with the law on corruption.
Co-Chairperson Goqwana asked what the impact of not having a district hospital in Gauteng, other than the Chris Hani hospital, was. Why was the project taking so many years? What was the whole impact of that lack of infrastructure. Many people were dying because of the poor referral system. He feared an impact on attainment of the millennium development goals.
Ms Belinda Scott, Chairperson, Standing Committee on Public Accounts, KwaZulu-Natal provincial legislature, observed that there was a general problem. The KwaZulu-Natal provincial department of health needed qualified technical personnel to monitor. It was not possible to leave the matter to the Department of Public Works. The KwaZulu-Natal provincial department of health must do the monitoring by itself. The problem of provincial under-spending meant that there would be instances in which money would have to be returned to the National Treasury because the provincial department had not been able to spend the money. The implementing agent was a problem across all the provinces. There were other implementing agencies like the Independent Development Trust (IDT). The Department of Public Works was not holding construction companies to account. It was not monitoring, nor was it imposing penalties. It was employing construction companies that could not do the work. Ms Scott disagreed with the Eastern Cape's assertion that there was not an appropriate legal process. KwaZulu-Natal had created a special investigative task team in the Office of the Premier and was dealing with it directly. The provincial departments did not have the necessary technical expertise. Erring service delivery people in the companies were not blacklisted, and they stole money in one project and then went to work on another project. It was outrageous. There were construction companies which moved from province to province.
Ms A Dreyer (DA) asked Gauteng about the Zola Hospital complex. How were contracts awarded to contractors, in spite of their having outstanding tax certificates? Multiple contracts were awarded. Once again this was Ilima Projects, which did not finish any of their contracts successfully. Why did Gauteng choose Ilima? She requested three good reasons.
Ms T Chiloane (ANC) had a comment on the audit. The projects were not properly coordinated or monitored. She wanted to speak to those issues, specifically about the North West. The cost of the contracts had escalated. Her home province, Mpumalanga, had responded that it did not know what had arisen in those tenders. Who constituted the bid committee between the provincial department of health and the provincial department of Public Works. Who monitored the provincial department of Public Works?
Mr Haniff Hoosen (ID) appreciated the chance to interact with the officials. His Chairperson would tell him that this Report was a horror movie. The buck was being passed. In seven provinces, the bid evaluation committees had not consulted the CIDB register to confirm the registration and grading of the bidders during the evaluation process (Report, paragraph 2.1.3, page 57). Why had the departments concerned not consulted the CIDB during the process?
Mr Hoosen asked secondly how tenders could be awarded without competitive bids.
Mr N Singh (IFP) complained that Members of Scopa had not had enough chance to ask their questions. The previous day, Members had spoken about possible collusion in infrastructure as it affected the basic education sector, and he asked the provinces to comment on the possibility of collusion between contractors. In the Western Cape (Report, paragraph 1.1.1 (a), page 50) the costs of completion had increased by as much as 260%. How had it happened?
Mr Singh asked KwaZulu-Natal about capacity (paragraph 1.1.2 (a). KwaZulu-Natal had been talking about it for ten years. When would the province have sufficient capacity? These were conditional grants. The previous day, the National Assembly had approved an additional R85 million to provinces for hospital revitalisation. The Minister in response to a question had replied that the Department had dealt with the problem by appointing an engineer. However, Mr Singh argued that engineers were not going to solve the problem. Engineers were not sufficient to deal with costing and the lack of capacity.
Mr Singh asked KwaZulu-Natal about a progress payments dispute (Report, paragraph 3.1.5 (b), page 68. There were disputes of about R10 million. Was it the provincial department of Public Works that had caused these problems, or was it the provincial department of health that was not fulfilling its monitoring responsibilities? There were other questions, related to Mr Pretorius's questions, that he would ask after Mr Pretorius had finished.
Dr Xundu replied, to Co-Chairperson Goqwana's question on the impact of not having a district hospital in a huge geographical area such as Soweto. Gauteng had decided to build that hospital complex in that area. As to how the lack of provision had contributed to mortality in the province, there would be need for an evaluation to assess how much one could attribute that problem to not having a district hospital in that area. Gauteng indeed did have about 14 district hospitals in the province, but perhaps not enough to assist the Chris Hani Hospital, which the province agreed was overstretched. The province appreciated that this overloading did affect the quality of health care and therefore the health outcomes. By February 2012 the Zola hospital complex, despite all the problems that the Committees were discussing should be completed and ready for use. Chris Hani Hospital was offering level one services which should be offered at the Zola hospital complex. As to acquisition and the other problems related to the project, the chief financial officer might assist in the response. However, she wished to point out that the Gauteng Department of Health had recently appointed the chief director for infrastructure development, a civil engineer, and an architect in the unit that was responsible for infrastructure development in the Gauteng Department of Health, which also had an infrastructure planning committee that was not chaired by the department of infrastructure development but by the MEC for Health and which met on a weekly basis to review progress and examine all these challenges. She was pleased to say that the MEC for Finance, Gauteng, who was a member of that committee, was also at today's meeting.
Co-Chairperson Goqwana asked if Dr Xundu was new to her job.
Dr Xundu replied that she was only two weeks into her new position.
The Chief Financial Officer (CFO), Gauteng Department of Health and Social Development, replied that the HoD had acknowledged that previously all the projects for the Department of Health and Social Development were managed by the implementing agency, th Department of Infrastructure Development (DID). This agency used to the the planning, the monitoring, the procurement, the implementation, the supervision, the completion and the handover. At that time the Department of Health and Social Development was not involved even in the process of the bids evaluation committee or the drafting of the tender specification. The Department of Health and Social Development realised that there were many challenges around the planning of the hospital, for example, the pharmacy's not being included in the plans, together with the failure to include the nurses' accommodation. Thus the project was implemented without the knowledge of the Department of Health and Social Development. Many tenders had been awarded by DID without following a competitive bid. The DID had acknowledged the Auditor-General's findings and had assisted the Department of Health and Social Development to respond concerning the Zola hospital complex.
Ms Dreyer asked if anyone from the DID or the provincial department of Public Works, Gauteng, was present to answer those questions. She asked specifically about the Ilima contractor and why it had won the bid despite having outstanding tax returns.
Co-Chairperson Godi regretted that those officials from Gauteng were not present.
Ms Dreyer asked if the Department of Health and Social Development could not provide those answers. It was the Department of Health and Social Development's project and its budget. She asked if the Deputy Minister could provide the answers since she was the MEC for Health, Gauteng, at that time, 2003.
Co-Chairperson Godi understood that the DID was the department which had awarded the tenders. So it was that department from which specific answers might be obtained as to why Ilima received the tender.
The Hon. Dr Gwen Ramokgopa, the Deputy-Minister of Health, appreciated Ms Dreyer's interest in her, the Deputy-Minister's, career. From 1999 to 2006 there had been challenges but there had been acknowledgement of the accountability of the provincial department of health. Instruments had been put in place, including a formal signed agreement between the HoDs. It had been agreed between the MECs for Health and Public Works that no payments should be made if there was no progress on project milestones. If there were systems, even if things went wrong, the systems helped early detection of errors and intervention. During that time there were great improvements in terms of controls, accountability, and expenditures. She acknowledged that some of those systems had almost collapsed, not only at Gauteng, but at national level where there were challenges to sustaining systems. The national Department of Health was going to share with the Members the interventions that it had put in place. She acknowledged these challenges and apologised that she could not give specifics.
Mpumalanga Department of Health and Social Development replied that it was not part of the bidding process; it was left entirely to the Department of Public Works, Roads and Transport. The province had now rectified the matter.
Mpumalanga Department of Health and Social Development began to reply that capacity was a challenge to participating in the bidding process.
Co-Chairperson Godi asked what capacity was required to attend meetings.
Mpumalanga Department of Health and Social Development replied that it was lack of personnel in the infrastructure unit. Members could perhaps help, as Mpumalanga was the least funded province in terms of the equitable share, hence critical posts in the province remained unfilled. However, the province was busy addressing that situation and hoped to have a better picture in the next audit.
Dr Kabane replied on the non-compliance in the adjudicating of bids. The Free State's department of Health was not part of the adjudicating and evaluation committees. The province had since rectified that position by appointing engineers who sat on those committees. There were also questions on the recommendations of the bid adjudicating and evaluation committees and the deviations of these recommendations by the head of the provincial department of public works. This was noted in the Report and had happened in the past. Currently the province had changed the situation, since the department's technical people sat on these committees and reported to him if there were any deviations. These would be taken up by the respective head of department. Disputes would be settled in discussions involving the province's treasury. The resolutions would be included in a service level agreement. There was close interaction between the technical personnel and the service delivery personnel to ensure good design of hospitals and prevent an operating theatre being located far from the intensive care unit (ICU) or the location of a kitchen next to an ablution facility. Such considerations were captured under the user asset management plan. Business cases were built in planning.
Dr Kabane replied on the poor quality of projects even when they had been completed. This was also the product of non-technical people being involved in infrastructure projects where they did not exercise the necessary oversight and they failed to perform contract management, and failed to make the necessary inputs into the project process. The province had corrected this by the appointing of three engineers in the Free State province's department of health.
Major-General Dr Radebe said that the question of capacity applied equally to the North West where infrastructure had been managed by one person who was an architect. It had been the understanding that the provincial department of public works should hire engineers and technical people. Now the provincial department of health had now engaged engineers and quantity surveyors.
Co-Chairperson Goqwana asked if perhaps the province's department of health had not made its needs clear, because it did not fully understand its needs itself, and did not give sufficient direction to technical specialists.
Major-General Dr Radebe agreed. This was why the department had hired engineers and quantity surveyors.
Major-General Dr Radebe replied to a specific question involving Ilima and a local joint venture. When Ilima had collapsed, the provincial department of Public Works had given the contract to the lowest bidder in the regional bidding process. The local partner did did not have the CIDB certification of nine which was needed for that hospital project but was kept on site. When the new contractor took over, the provincial department of Public Works submitted to the provincial department of Health a bill from the bidder who was refused for want of a CIDB rating. The department had refused to pay that account.
Co-Chairperson Godi would have preferred to have some of those contractors present so as to question them.
Dr Zungu explained why the KwaZulu-Natal Department of Health had transferred to Itala, which had limited capacity at the time. In KwaZulu-Natal at that time there had been delays and under-spending in the infrastructure budget. The department and the provincial treasury had to look at alternatives in infrastructure delivery. There was then a project to assist departments to consider alternative implementing agents. In the case of health and education some of the projects went to Itala and some to the Independent Development Trust (IDT). The issue that was linked was the funds paid to the extent of almost R10 million. At that time the arrangement was that the funds would be paid in tranches, so there would be a payment of R25 million per quarter paid to Itala for the project. However, the staging of the projects or the montoring of the work done prior to the payment was something that was not happening at that time. As the monies were being paid, there came a time to audit the work done, and it was discovered that there were gross delays, yet payment had been made. Then there was a stand-off between the province's department of Health and department of Public Works. The implementing agent, Itala, felt that because payment was now being withheld, it should stop the work. In the end the blame for delaying the projects was transferred back to the provincial department of health.
Thereafter the province did not award any new contracts to Itala. By November 2011 all projects that had been awarded to Itala were to be completed. A couple had been completed and some had been handed over, while some were in the process of being handed over to the KwaZulu-Natal Department of Health.
As to planning not linked to the budget, the KwaZulu-Natal Department of Health had had challenges to the budget, whilst there was an under-spending in infrastructure there was a general overspending of the budget. In such cases the under-spend on infrastructure would balance the overall budget of the department. In some cases the projects would be put on hold because of the lack of funding for those projects.
However, the KwaZulu-Natal Department of Health did have a meeting in Parliament the previous year with all the departments of health and with the Department of Public Works,and there were agreements to which the KwaZulu-Natal Department of Health had agreed to. The KwaZulu-Natal Department of Health now followed the IDP model for the infrastructure delivery programme with the assistance of the provincial treasury, and the pattern of spending had improved.
On the issues of capacity, at this point, the KwaZulu-Natal Department of Health had appointed two engineers and three architects, and three quantity surveyors.
The KwaZulu-Natal Department of Health had also addressed the challenge of health technology and it had now appointed a health technology manager. In the past, it was spending on infrastructure but could not show completed infrastructure on the ground. Now the department had improved spending and one could see projects. This was the progress made.
Ms Mafubelu responded (Report, page 58) on contracts that the Limpopo Department of Health and Social Development had allegedly awarded to contractors other than those recommended by the bid evaluation committee and bid adjudication committee. The department had been unable to find any instances of this. For Limpopo the Report's findings related only to the appointment of contractors without advertising for a minimum of 21 days. The reason for this was a provincial treasury note that allowed advertising for a minimum of two weeks. However, in the light of the Report, the department had revised its practice.
She replied that the Limpopo Department of Health and Social Development had augmented the infrastructure unit (Report, paragraph 1.1.5, page 53).The revised structure had just been approved by the Department of Public Service and Administration. The Limpopo Department of Health and Social Development was also in the process of employing engineers.
Limpopo Department of Health and Social Development had not had cases of collusion in infrastructure but it had found them via a forensic audit in other areas of procurement of services and goods.
Mr Househam replied on the Western Cape Department of Health's four projects where the total cost of completion had increased by 260% (Report, paragraph 1.1.1 (a), page 50). These were the four hospitals at Vredendaal, Worcester, George and Vredenberg, which were in a transitional phase when the hospital revitalisation programme had been introduced. The initial briefs were less than the final briefs. Hospital revitalisation meant a complete rebuild of the hospital. Thus there was an increase in the scope of the projects.
As in other provinces, there was a capacity issue in health. There had been a view that health's role was a technical health description of the requirements of the facility. However, this could not be achieved without technical capacity in the built environment. The Western Cape Department of Health had recognised that in recent years and taken appropriate action.
These hospitals had been refurbished in phases, and this contributed to the escalation to which the Auditor-General had referred.
These were not greenfield sites but existing hospitals, and this was the reason for carrying out the projects in phases, which resulted in a difficulty in estimating the final cost. All the projects had been effectively implemented. Construction had proceeded.
The Auditor-General had commented on the planning of the Khayelitsha and Mitchell's Plain hospitals. These were greenfield projects and the first new hospitals in the Western Cape in decades. There was debate as to whether there should be one or two hospitals. This debate had delayed the process and the successive processes. The Western Cape provincial department of health now had two hospitals with a combined value of R1.2 billion with 600 beds. It had been a prolonged planning process, but the results justified this. Khayelitsha was ready and Mitchell's Plain would be ready in a year's time. The contracts and costs were well within the budget, and the contractors had performed well.
Ms Dreyer would not leave the subject of the Ilima projects alone until there were answers. Ilima was a favoured contractor despite a poor record and even though it did not qualify for bids because it had outstanding tax returns. She not received any good reasons for the award of the contract, let alone three good reasons. So there were no good reasons. She smelt a big, fat rat.
Co-Chairperson Godi had asked the Speaker's Office for permission to summon the contractors, and had sought an appointment to discuss the matter further.
Mr P Pretorius (DA) said that Members had a duty to explore further.
Mr M Waters (DA), from the Portfolio Committee on Health, complained that Members of the Health Portfolio Committee had been informed that it was to be a joint meeting, and felt that the Members had not had enough chance to ask their questions.
A Member of a the Northern Cape provincial public accounts committee said that it was a disastrous situation as all the projects in this Report had not been completed. The departments had not done their work on the projects. Moreover, it had to be asked if the departments had seen this Report before coming to Parliament. All efforts for 17 years to encourage corrective action seemed to be in vain. The HoDs, the chief financial officers, and the Department of Public Works, despite Parliament's allocating the money, seemed not to be interested. Were these officials not eager enough to check that the projects were completed? None of the departments in the meeting were assisting legislators. So Members of the public accounts committees must compile a report to Parliament, but she did not know how they would do that.
A Member of the KwaZulu-Natal provincial legislature asked if it was not possible to blacklist, across all Government departments, individuals rather than the companies.
The limits of scope of the Auditor-General's Report
Mr Pretorius said that the budget for health over the period of thre years was in the region of R16 billion. 114 projects were selected for the Report, with a total value of about R4.8 billion, which translated to about 30% in monetary terms of the total projects. This meant that 70% of projects were not examined. He emphasised that Auditor-General's Report was a very good report, but there were holes in it based on the fact that the vast majority of projects were not investigated and audited. This could be the tip of the iceberg. He read from the Report. What was happening in practice was much worse than what was in the Report. He quoted, word for word, paragraph 1.4, the Report, page 7, with emphasis on the failure of concerned parties to submit documents on projects selected for auditing.
Mr Pretorius quoted paragraph 3.2.1, the Report, page 17, to the effect that the document management system should be strengthened.
Mr Pretorius quoted paragraph 6.1 (g), the Report, page 20, to the effect that the accounting officers of the provincial departments concurred with the finding of lost documents and would ensure that record management would be strengthened.
Mr Pretorius said that the important omission was that there was no reference to what the departmental heads would do as to disciplinary action.
Mr Pretorius referred back to the Report, page 7, and questioned Free State and Mpumalanga.
Did the Free State accept the findings of the Auditor-General?
Dr Kabane replied in the affirmative.
Mr Pretorius asked if the Free State Department of Health accepted the second part of the Auditor-General's findings, that disciplinary action should be taken.
Dr Kabane replied in the affirmative.
Mr Pretorius asked what disciplinary action had the Free State taken since the Report's publication.
Dr Kabane replied that, even prior to the Report, the Free State Department of health had conducted, between November 2010 and March 2011, a forensic investigation into its infrastructure unit. Out of the findings of that forensic investigation, one of which was poor contract management and insubordination and that the people who were involved did not provide sufficient information, disciplinary action had been taken against them and would be completed in the next month or so.
Mr Pretorius asked if staff members were suspended.
Dr Kabane replied in the affirmative. The disciplinary processes were not yet complete, so no one had as yet been dismissed.
Mr Pretorius asked what had been done to improve the Free State's record-keeping system?.
Dr Kabane replied that the system was different now, because the Free State Department of Health had appointed engineers who were busy implementing these record-keeping systems.
Co-Chairperson Godi asked if engineers were required to keep records.
Dr Kabane replied that it was because it was their area of jurisdiction. The engineers had produced proposals for managing records better. In the past, all the records of contract management had resided in Public Works. The engineers had gone out and collected all those records and stored them appropriately. As a result, all the records of contracts would now be available at the the Free State Department of Health, rather than looking elsewhere.
Mr Pretorius was expecting that kind of answer, and was not convinced that things had really changed.
Mr Pretorius referred to the table on page 7, and asked Mpumalanga why it did not have a proper system of record management.
Mpumalanga Department of Health and Social Development replied that, as previously indicated, the bidding process had been conducted by the Mpumalanga Department of Public Works, Roads and Transport. However, efforts had been made to obtain those documents. Hence Mpumalanga concurred with the Auditor-General's findings.
Co-Chairperson Godi asked Mpumlanga if it fully appreciated the implication of not having those documents.
Mpumalanga Department of Health and Social Development replied in the affirmative. What happened thereafter was that the provincial government had instituted a forensic audit, since it regarded this as a serious matter, and the then HoD of the Mpumalanga Department of Public Works, Roads and Transport had been dismissed on the basis of those findings. Some of the officials were still undergoing disciplinary process. This was one of the matters that the forensic report had found. That HoD of the Mpumalanga Department of Public Works, Roads and Transport had been dismissed, in part for not doing his job in keeping records, but there were many other charges against him.
Mr Pretorius asked a similar question to the Eastern Cape.
Mr Pillay replied that the Eastern Cape Department of Health had recognised, contrary to popular opinion, that there was a need for qualified people to keep records. The department had decided to do a full audit of each and every project. There had been 256 projects started but not finished. Most of those had now been completed. The department was now coming back to a realistic budget. There had been a project management team contracted by the provincial department of Public Works which was supposed to keep all this documentation and give monthly progress reports. The department had received nothing from this team. So the province had not renewed the contract with this project management team, which was from a private outside consultant. The department had now built up its own in-house capacity and it had instituted a reporting mechanism. Now every project was matched by documentation electronically stored. His department had 13 qualifications to its audit opinion. One of the qualifications had been on the basis of six projects for which it could not produce contracts for which it had been making payments. This had been because it had relied on the provincial department of Public Works. So now, even though records were kept at Public Works, the department was duplicating all records. There was not a certification committee which sat once a month and collected invoices from all concerned. All invoices must be certified to say that work had been satisfactorily completed, before loading into the system. This gave the department the ability to report. Now, if asked about a project, the department had a dashboard from which it could report on the progress and status of that project.
Mr Pretorius was impressed and commended the Eastern Cape. The other provinces could learn from this example. Maybe the Auditor-General should check that those systems actually worked.
Mr Pretorius asked what disciplinary action had been taken against staff who did not do their jobs at the time of the Report.
Mr Pillay replied that he thought that he had asnwered that question. His head of infrastructure had had 23 charges laid against him. The Eastern Cape Department of Health had gone for the bigger charges. The department had a multi-agency working group (MAWG) from the National Treasury, the provincial treasury, the Asset Forfeiture Unit, the Hawks, and the South African Revenue Service (SARS). SARS had been the biggest help because it was very quick to obtain answers and was well-connected The MAWG was doing an experiment with procurement in the Eastern Cape Department of health to restructure and build a whole new supply chain management system from beginning to end. The department had ceded its whole supply chain management to the MAWG. By implementing supply chain processes the department had come from a R2.8 billion budget deficit to a deficit of around R780 million. In the supply chain about R280 million savings were expected. The system was from National Treasury and was on loan to the Eastern Cape Department of Health.
Co-Chairperson Goqwana asked if the MAWG could help in the Eastern Cape Department of Health's matters with the criminal justice system.
Mr Pillay replied that one could make arrests, but the time taken to bring offenders to court took an astronomical amount of time. The Hawks worked closely with the National Prosecuting Agency (NPA) but every time matters were referred to the NPA, the NPA required more facts.
Co-Chairperson Godi wanted to take outstanding questions and follow-ups from other Members.
Ms T Chiloane (ANC) referred to the Report, paragraph 1.1.1 (a), page 50, and asked why the Western Cape had not included needs in initial planning which resulted in scope changes and higher project costs.
Ms Chiloane referred to the Report, paragraph 1.1.2 (a), page 51, and asked KwaZulu-Natal why money was transferred to projects which had already been delayed.
Ms Chiloane referred to the Report, paragraph 1.1.4 (b), page 53, and asked Gauteng why it had taken 30 months to invite bids for the construction of two new wards at the Sterkfontein Hospital.
Ms Chiloane referred to the Report, paragraph 1.1.6 (a), page 54, and asked North West why it had not included all its stakeholders in consultations.
Ms Chiloane referred to the Report, paragraph 1.1.3, table 4, page 52, and asked the Free State what the current status was of the tenders that were awarded 13 years after the needs were identified.
Ms Chiloane asked Eastern Cape, Gauteng, North West, and Western Cape why they bought costly machinery to the value of approximately R12.5 million before completion of projects and then left some of this equipment in the open air to deteriorate to the extent that it was unusable by the time the project was complete (Report, paragraph 4.1.2, pages 70-71).
Ms Chiloane thought that movement was backwards rather than forwards.
Mr Househam replied that there had been a problem with the synchronisation of the purchase of equipment and the construction process in the Western Cape. None of that equipment was not utilised effectively ultimately, but there was a disjuncture between the purchase and use of that equipment. George Hospital was a challenge for the Western Cape Department of Health. When one made a design, it had to be asked if one designed for the future or for the present. This project was designed for a future vision, but the department had lacked the operating budget to commission certain parts of the hospital immediately. Those components of the hospital had subsequently been commissioned. In the design of the Khayelitsha and Mitchell's Plain hospitals the department had adopted a different approach. The current construction of the hospitals was for 260 beds, but in fact the department had the outward infrastructure for an additional 40 beds, which infrastructure had not yet been completed. As this was taken into service the department would finish the construction. However, better coordination between the acquisition and construction processes was giving a better project management approach.
A Member of the Gauteng provincial legislature referred to the Report, paragraph 1.1.2 (b), page 51, and asked the Western Cape what progress had been made to rectify the shortage of architects, engineers, quantity surveyors and technicians which prolonged the design phase of projects.
She concurred with the Member from the Northern Cape provincial committee on public accounts that this was a failure to the members of the public, who were expecting a better life as promised to them. All the failures were affecting not only the officials and the politicians but also the public directly.
Acquisition management in North West, Limpopo, Gauteng, and Free State
Mr N Singh (IFP) asked why North West, Limpopo, Gauteng, and Free State had contravened legislation, regulations and practice notes in projects to the extent of more than 40% of projects, and asked if action had been taken against anybody for contraventions. More importantly, the Northern Cape was excluded from graph 5 as the procurement documentation requested by the auditors could not be submitted for auditing. This was a very serious matter. Northern Cape needed to explain why it failed to submit documentation.
Mr Singh asked the National Treasury if there was any regulation, prescript or statutory requirement that departments like Education and Health had to use the Department of Public Works in infrastructure projects. There were serious challenges with the Department of Public Works in the provinces.
National Treasury replied that previously provincial departments of Public Works had been in charge of the budgets for infrastructure. However, commissioning departments were now expected to be well-informed clients so that they could exercise oversight over anyone who implemented projects on their behalf. National Treasury now aimed to equip provincial departments to be more accountable for their budgets.
Co-Chairperson Godi asked members of provincial legislatures to note issues and follow them up in their provincial legislatures.
Dr Dion Theys, Acting HoD, Northern Cape Department of Health replied that the hospital was not yet complete. It was at 70% completion rate. It was one of the biggest projects in the province, was started in 2005 with the hope of being completed two years later. It was supposed to be in two phases. Phase one was the main hospital and reservoir. Phase two was the staff accommodation and internal roads. The initial costing for phase one was around R290 million. However, the department was sitting with a 'ballooned' amount of around R420 million, R320 million of which went to the actual construction, and the difference to professional fees. Almost a year into the project, the province had raised its concerns with the provincial department of Public Works on account of the constant delays and unsatisfactory workmanship. Relations with the contractor were acrimonious from the start. This culminated in the termination of the contract in 2009 primarily because the department refused to pay for the certificates and what the contractor deemed to be penalties, because the department could not accept the contractor's reasons for the delay. The contractor took the department, through Public Works, to court. The matter was settled in the province's favour in September 2011. Public Works was currently adjudicating on another contractor with the condition that the site would be handed over by the end of February. 36 months after the handover of the site the hospital should be complete, and the final amount for phase two would be an additional R350 million with an additional R150 million added for phase two. The additional R350 million was because the work that encompassed the 70% had to be done over again. The building had gone into a state of complete disrepair (in six years). The province had learned very hard lessons. At that time the province had not had the capacity in-house.
Co-Chairperson Godi said that the provincial department of Public Works was part of the same government of which the Northern Cape Department of Health was a member.
Dr Theys replied that the Northern Cape's troubles were similar to those of other provinces. However, the department was now actively engaged with Public Works in all phases of infrastructure. It had also engaged the Independent Development Trust (IDT) and the project was progressing.
Mr Waters asked if the contractor for the initial project was Ilima.
Dr Theys replied that the contractor was not Ilima. There was an issue of limitation of scope, and the department had been qualified by the Auditor-General for a number of years because these documents were in the possession of the provincial department of Public Works as the implementing agent. When this audit was done, the court case was active.
The Deputy Auditor-General's response
Mr Kimi Makwetu, Deputy Auditor-General, affirmed that all that the Auditor-General of South Africa (AGSA)had to say was contained in the Report. He was glad that what he had said in his concluding remarks the previous day about the fact that when some of these cycles of supply chain in contracting for infrastructure were not observed the costs tended to follow those concerned. What the Acting HoD from the Northern Cape had said about the mental hospital confirmed what he, the Deputy Auditor-General, had said the previous day. It was clear that delays had resulted in additional budgetary constraints for the future. There were significant issues reflected in the Report. When the AGSA had reviewed its analysis in the Public Finance Management Act (PFMA) reports for the year ending March 2011, Members would recall a number that the AGSA had reported in total in respect of the extent of the total irregular expenditures across the system. in that regard in that financial year [2010/11] was at about R21 billion for the entire system. The portion attributable to the Health sector was about R5.7 billion out of R21 billion – a significant portion of which was for infrastructure. This was about the extent of the big picture. It was close to 20%, which was R5.7 billion as a percentage of R21 billion. A large proportion was attributable to infrastructure. This had given rise to issues of irregular expenditure in the regularity annual audit. This was an audit which the AGSA did from time to time but might not come back to for five, ten or 15 years, depending on what the new priorities were in Government's auditing. However, it gave one a sense of something in the annual oversight that ought to happen to reverse what the AGSA already knew. Having engaged with the leadership in the national Department of Health, since the AGSA had finalised this Report, the AGSA had witnessed that there were no doubt encouraging signs. The tone and the seriousness with which the Department of Health was addressing the matters raised in this Report were very positive and the AGSA would continue to work with the national Department of Health in following up on the very firm steps that the Department had already taken in response to some of the issues in this Report. So this report was obviously finalised and signed by the Auditor-General in August 2011. Now in November 2011 the AGSA saw that there were encouraging signs. The AGSA would obviously reflect on those while exercising the AGSA's mandate.
Co-Chairperson Godi invited the Department of Health's comments. The Committee had already received copies of the Department's presentation.
The national Department of Health's response
Ms Malebona Matsoso, Director-General, Department of Health, said that the Department had identified
four streams of work that needed to be followed as a response strategy. The Report had reflected what had happened with 114 Health projects but the Department had 634 incomplete projects dating back to 2006, and firstly wished to dedicate its efforts, in collaboration with the provinces, to complete these 634 projects. Secondly the Department had identified two streams of work. One of these was the need for routine and preventive maintenance, which was another cause for further work which required that the Department made investments in infrastructure. The second was the backlog in maintenance. So what the Department had done was to categorise these new projects, so that as it allocated resources they must be allocated in accordance with these four streams of work that it would like to see implemented in each province in accordance with the norms and standards specifically for project management systems and secondly for costing, because the Department had seen what could happen with the manner in which costs were determined. The Department had brought these norms and standards and would leave copies with the Members, because the Department had started a process, and each province had a copy. The Department also wished to share these norms and standards with the Department of Public Works, especially for those provinces which would be using specific implementing agents. The second was about the oversight role to reduce risks and improve the delivery of the projects as well as ensure proper costing. What the Department had done was to say that, for the incomplete projects, the Department needed a dedicated team, and it had contracted with the Council for Scientific and Industrial Research (CSIR) and with the Development Bank of Southern Africa (DBSA). Now it had all these programme and project management units in each of the provinces. As part of that, the Department would like, as part of the preventive maintenance and backlog in maintenance, to ensure that it had resident engineers because, for its major hospitals, there was no reason why the Department could not have full-time engineers who could deal with the problems. The Department submitted that most of the provinces – five out of nine – had already moved in that direction. However, the Department would like to decentralise that approach to the hospitals. The next stream was intended to address the audit findings and the problems of the incomplete projects, and the backlog in maintenance; this was something that the Department had introduced recently, and with which the Department was in negotiations recently. Each accounting officer in a province and the Director-General, national Department of Health, had developed an implementation protocol which must be signed between the Director-General and an HoD of a provincial health department. According to this implementation protocol, there were expectations from both sides as to what the Director-General must do and what the HoD must do. It was only fair to say that it was necessary to comply with the protocol and ensure that the Department could implement fully and deliver on all these issues. The Department could share some of the drafts with the Members. The implementation protocol said exactly what must be done with regard to procurement – what kind of things must be established. However, there was also a principle of alternative contracting options. It was also necessary to invest in the Department's staff and train them. It was not possible that they would just suddenly comply. The Department committed itself to the obligation of training them and introducing a risk strategy to minimise all these escalating costs. The Department needed those funds, for treatment, for example, not just to pay for interest or incomplete projects. There was some compliance and corrective action that would form part of the implementation protocols that the Director-General was signing with her provincial counterparts.
Co-Chairperson Godi was painfully aware of the amount of information that the Department of Health would love to share with the Members. The Standing Committee on Public Accounts had had skirmishes in the past with the Department of Health on conditional grants, to the extent that Members had heard that if the Department gave money to the provinces, the provinces must account. Thus he was happy that the Department's approach was proactive.
Mr Mxolisi Sokatsha, MEC of Health, Northern Cape, reported progress. The Northern Cape had established a steering technical committee led by the Northern Cape provincial treasury to examine some of the issues concerning health services in the province. The Northern Cape had requested the help of National Treasury, particularly for technical assistance in Public Works. The indications were that the province would receive that kind of assistance. The MEC of Health, the MEC of Public Works and the MEC of Treasury had regular meetings to oversee progress of the steering committees, and the MECs then reported directly to the executive committee (Exco). The MEC was confident that in the next cycle there would be a big improvement, since the Northern Cape was taking health as a provincial priority, because, if it did not, it would affect the rest of the province's finances. The MEC was confident that there would be improvement with the level of assistance that the province was receiving and the Exco's commitment.
Ms Fezi Ngubentombi, MEC for Health, Free State, said, in tune with the Chairperson's remarks, when he indicated that health indicators were not looking good because of infrastructure, that she believed that the Chairperson's statement was a fair statement. Everyone was present to point to all the gaps. Obviously, the province had all the strategies that needed to be implemented. The Director-General, national Department of Health, had said, and the Western Cape had concurred, that the project management approach, which the national Department of Health had introduced, was going to be of assistance. This was why she had decided to bring with her the engineers that the Free State had appointed, so that they heard from themselves - three of the engineers, the chief engineer and the other two, were present with her, so when they all went back they would all know what their tasks were. Again the Free State had made a submission to Exco that all the projects that were R10 million less or less than R10 million should be executed by the Free State provincial department of health on its own. From this the Free State had learned much.
Mr Sicelo Gqobana, MEC for Health, Eastern Cape, was grateful for the invitation to attend and had learned many lessons from the interaction. These would serve as guiding points moving forward. The Eastern Cape Department of Health always believed that doing it was the best way of saying it. This was why he felt, as Members had been expressing themselves, that unless one strove for good governance and proper management of the department, there would be all these other issues to which Members were alluding. This was now the focus of the Eastern Cape Department of Health. Inherent was the issue of accountability, which Members had strongly stressed. There was the issue of ensuring that people explained why they had done things in a certain way or not done them in a particular way. In this regard the Eastern Cape Department of health had learnt some lessons from this exercise. The other issue with which the Eastern Cape Department of health was grappling was its ability to spend conditional grants. From time to time the provincial departments was convening all the directorates affected to examine why, every time at an Exco meeting, there was a report from National Treasury that the provincial department of health was likely to under-spend on a particular item. People must be accountable. He was happy that he heard that message coming across at this session.
Mr Mandla Nkomfe, MEC for Finance, Gauteng, said that the Auditor-General had come to the province, even before this report, to address a structure that was coordinating infrastructure delivery in the province. The MEC chaired the executive infrastructure management committee that his colleague in the National Treasury was talking about. This structure, which was addressed by the Auditor-General, was basically examining issues of fast-tracking service delivery in the province. It not only looked at health but at education, housing, and everything else, and the whole procurement process and the funding. This committee had been tracking all the issues that colleagues had been talking about in this meeting. The committee had been seized with that observation on Zola Clinic. His colleagues had estimated that it should be completed by February. There was a progress to that extent. However, the committee had moved beyond that and had met with the departments – health, education, finance and department of infrastructure on their own matters. The Director-General had raised the issue of engineers. The committee had met with even the big hospitals – the four main hospitals in Gauteng, to deal with infrastructure capacity in those hospitals. The MEC thought that Gauteng could turn the situation around. The issue of project management skills and contract management skills were very important in the system as a whole. For the MEC it did not matter whether it was Public Works or the relevant department, the issue was that the relevant skills and working together were needed. The MEC pleaded for alignment with the national Department of Health as well as with National Treasury, since National Treasury was also convening these infrastructure committees in all the provinces. Gauteng had examined the demand planning and was fairly satisfied. Perhaps it would have been raised the previous day. Gauteng had developed a unit cost model, mainly for schools, because there were varying degrees of costs on schools. This unit could be applied to hospitals, and the colleagues might have spoken about it. Gauteng had done much work on the registration of projects with the CIDB. The MEC was confident that Gauteng could turn things around and, having reviewed what had happened in the past, obtain value for money in future. The MEC said that his department had good cooperation between the two departments of health and education. However, there should be a specific focus on Public Works, which was not doing good work for client departments.
The Deputy-Minister thought that the issues had really been covered. She appreciated the Office of the Auditor-General's professional work and its professional and constructive manner in which it had dealt with these matters while refusing to compromise professional integrity. The way the Office of the Auditor-General had dealt with the matters enabled the Department of Health to move forward. She also appreciated the approach of the provinces. This Report from the Office of the Auditor-General had confirmed the Department of Health's earlier findings. At the National Health Council the Department had been seized with looking at this area, and with the leadership and the passion of the Minister and the MECs the audit was done and now the Department had even more information beyond what this audit report had produced. This was how the Department had been enabled to recognise the challenges and take measures to respond to them. Prior to 1994 there had been no systems of integrity, no accountability, especially to the public, and no transparency, but since 1994 systems were put in place, like the PFMA, the CIDB frameworks, and the procurement management system were put in place. This discussion had been déjà vue. It was not the first time. One could go into the records of the previous meetings of Scopa. Also these issues had been raised before at a provincial level. So as a country it was necessary to ask what stage had been reached, and how one could institutionalise what had been established, in order to avoid a repeat of these problems. Some of these problems had been resolved in the past – from both the Office of the Auditor-General and from the National Treasury. Indeed, some of the interventions and tools that National Treasury had put in place could have helped to avert these problems. So it had to be asked what else one had to do to institutionalise the best practices so that they became the ways of doing business. The Deputy-Minister also wanted to suggest that, when considering audits, that there was an examination of the effectiveness of the internal audit systems. Internal audit must pick up discrepancies, and should be able to identify the risks and establish its audit plan to assist the department concerned even before external audits were done, both at the provincial and national level. The performance management system should also be able to incorporate, with managers, from the HoD to the facility managers, oversight on projects and curb escalations of costs. She thought that if one beefed up the systems that had been built up over the years, the national Department and the provincial departments would be able to deal with these challenges effectively. The Deputy Minister, the Minister, and the National Health Council had agreed that it was correct that the budgets for infrastructure went to the provincial departments of health and that these provincial departments must take responsibility and be held accountable. So the systems that were put in place should be enabling in that regard. Also there should be options in using service providers who would assist the health departments to fulfil their mandates. The interventions and initiatives of various provinces showed that where these initiatives had been taken one could already see greater accountability of the departments of health and more progress in the projects. This included reducing delays. In some provinces, for example, the North West, there were tensions between the health departments and public works departments. However, the tensions were around the question of whether progress could be achieved, whether it was possible to deal with the controls, and whether it was possible to achieve accountability from the contractors. These were what might be referred to as dialectical tensions – necessary tensions to ensure accountability to the public. The Deputy-Minister also agreed that the national Department of Health should also be held accountable and take responsibility for the national conditional grants, though in a collaborative manner with the provincial departments who carried out the implementation. The national Department had beefed up its capacity in terms of implementing agents, in particular, the involvement of the DBSA, and, in the planning stages, the involvement of the CSIR as well. The audit Report had dealt only in a cursory manner with fraud and corruption. People who wanted to defraud a system would not do it in an open manner. Sometimes it took a forensic audit, whistle blowers, risk management systems, or effective internal audit systems to pick up such fraudulent activities which compromised the ability to deliver to the people. Without controls there was no possibility of detecting fraud early. So it would be important for the Office of the Auditor-General, if it had time, to use its dedicated unit on health to audit controls and their effectiveness. Fraud and corruption needed to be fought passionately. The Deputy Minister agreed with colleagues that, just as when one wanted to deal with illnesses of children, one employed paediatricians, who were trained professionals, who even had a professional body to which they accounted for the practice of their profession, infrastructure was also a highly technical area that required professionals. In this regard there was progress. This area, along with capacity, had been picked up here. The need to professionalise the approach to infrastructure had been recognised, so that one could also hold the professionals accountable for delivery. The Deputy Minister appreciated the invitation and assured Members and colleagues of her commitment in executing her responsibilities in working with the provinces to resolve these challenges.
Co-Chairpersons' closing remarks
Co-Chairperson Goqwana said that the Health Portfolio Committee would call a follow-up meeting with all the affected provincial departments. This meeting would take place early in 2012. Everyone agreed on the need for the universal availability of health care for everybody in South Africa, so that the health indicators could improve. However, in the light of the discussion, it had to be asked if everyone present had the same understanding on that note – that it was about the health indicators – even the health infrastructure under discussion. He was concerned that some participants were just shifting the blame and protecting their egos. He was happy that there were engineers and that there was an effort to increase capacity, but one did not want a situation where there would be a shift away from the work of the Department of Health, which was about health indicators, towards leaving it to the engineers. 'The engineers must be dancing to the music of the person who is leading health.' They must know that, when we say that people are dying of infection, we must be able to tell them what was actually happening. It seemed that we did not do our monitoring properly. Sometimes one found that people did not even know what was happening in their provinces, and that one waited until the Auditor-General told one that there was a problem. It was necessary that Members and the Department of Health made sure that they were the ones who knew what was going on. Hence one could see the important of the internal audit that the Deputy Minister had referred to. He thanked the Standing Committee on Public Accounts for alerting him and the Members of the Health Portfolio Committee to these issues of infrastructure and other matters.
Co-Chairperson Godi thanked the Deputy Minister, the MECs, the Office of the Auditor-General, the National Treasury, officials, and the comrades from the provinces, to whom the baton was now being handed. The issue on which the Deputy Minister had spoken – internal controls – raised the question of whether there were robust systems able to detect problems. If the internal systems were not in place, little could be achieved. Critically, at the level of implementation, it was necessary to have in place people who were honest enough to stop the rot when they saw it. Scopa would engage the Department of Public Works, and he was sure that the Committee would be engaging with the national Department of Health on other matters.
The meeting was adjourned.
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