National Government interventions in Gauteng, Free State and Limpopo: Ministerial briefings

NCOP Finance

09 February 2012
Chairperson: Mr C de Beer (ANC)
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Meeting Summary

The Minister and Deputy Minister of Finance, Higher Education, Basic Education, Transport, Public Service and Administration, and Health participated in a briefing to a joint sitting of the Select Committees on Finance, Public Services, Education, Appropriations and Social Services on interventions that national government had resolved upon in December 2011, into the provinces of Free State, Gauteng and Limpopo The reasons for those interventions were set out. Interventions in Gauteng were taken in terms of section 6 of the Public Finance Management Act, to stabilise the provincial health department, strengthen Provincial Treasury, disestablish the Gauteng Shared Services Centre (GSSC), revisit the financing and procurement model for Kopanyang Government Precinct and discontinue growth funds that had not been established in terms of the PFMA. The main problems in the provincial health department were around accruals and accumulated debt, and emergency measures were put in place by the intervention teams to ensure that there would be no interruptions of supply. Supply chain management inefficiencies were apparent in the Gauteng Shared Service Centre and Kopanong project. The actions taken to date included signature of Memoranda of Understanding with the Gauteng Premier, and regularisation of payments. In Free State, the intervention was taken in terms of section 100(1)(a) of the Constitution, in order to strengthen the provincial treasury, which had various capacity and administrative problems, as well as to stabilise the Provincial Department of Police, Roads and Transport, which showed failures in supply chain procedures and poor performance. The various irregularities and weaknesses were outlined, and it was reported that the Premier had indicated willingness to lead the implementation. Technical support had been deployed by National Treasury to the provincial departments and the financing arrangements were being assessed. The intervention in Limpopo was done in terms of section 100(1)(b) of the Constitution. This was based largely on the fact that the province did not have the cash to meet its financial obligations, particularly the payment of various civil servants, including doctors, teachers and nurses. The intervention was directed towards the Provincial Treasury, and the provincial departments of Education, Health, Roads and Transport and Public Works. The province had a large accumulated unauthorised expenditure, which grew from R1.5 billion in 2009 to R2.7 billion in 2011. The practice of not paying invoices on time was widespread and there were accruals of R500 million in unpaid invoices by March 2011. Provincial treasury had largely collapsed, and budget and payment systems were dysfunctional. The various problems in each of these departments were outlined, which included accumulation of debt, unauthorised expenditure, lack of tender procedures, poor asset management, irregular expenditure, and projected overspending. Teams had been appointed from each of the national departments to assist, and immediate steps taken included stabilisation of provincial finances, ensuring that legitimate creditor claims were paid and preparation of a credible budget for 2012/13. All claims by creditors were being verified before payment, steps had been taken to ensure security of supplies and essential services, and expenditure was being trimmed wherever possible. Each of the Ministers then briefly expanded on the particular findings within their provincial departments.

Members discussed the responsibilities of the NCOP in relation to these matters, and in particular identified the need not only to give input to the Ministers, but also to consider the role of the provincial legislatures, particularly the Public Accounts Committees, as well as to exercise specific oversight over the affected departments, and in particular the appointment processes, since it was clear that in some cases inefficient managers were in place. It was suggested that the nine provincial treasuries should be called in, and investigations done as to whether conditional grants were being correctly used. Members also questioned what measures were put in place prior to, and during the interventions, to ensure that the public would not be adversely affected, how the over-expenditure would be dealt with, how it would be prevented, and how the future budgets would address the problems. It was highlighted, during the responses, that although systems may well in place, they must be properly monitored and operated to ensure that they actually produced the expected results, and that another important aspect of payments was the need to ensure that services were not overpriced and that value for money was indeed obtained. Members also asked what action would be taken against those involved in corrupt activities. The need for greater respect for the legislation and the work of provincial treasuries was also highlighted. 

Meeting report

Intervention of National Government in Gauteng, Free State and Limpopo:
Chairperson’s opening remarks
The Chairperson welcomed the Minister and Deputy Minister of Finance, as well as Ministers of Basic Education, Higher Education, Public Works, Public Service and Administration, Health and Transport.

He noted that the Constitution set out that when a province failed to fulfil its executive obligations, either legislative or constitutional, the national executives was empowered to intervene and take appropriate steps that would ensure the fulfilment of these obligations, including assuming responsibility for the province. He noted that a letter recording the Cabinet’s decision to make interventions was sent to the Select Committee on Finance on 13 December, after it had been referred to the Chairperson of the National Council of Provinces (NCOP) on 7 December 2011. This was the reason for this meeting.

The Chairperson stressed that a main theme of the Fourth Parliament was achieving good governance and ensuring value for money spent by the State. It was thus important to ensure that every department and province undertook proper financial management and delivery of services, at good value, and where this did not happen, corrective steps would have to be taken. Accountability by accounting officers was dealt with in the Public Finance Management Act (PFMA), which also dealt with the roles of Parliament and oversight.

Ministerial briefing
Hon Pravin Gordhan, Minister of Finance, led the briefing on why Cabinet took the decision, in December 2011, to intervene in the provinces of Free State, Limpopo and Gauteng. He noted that section 100(1) of the Constitution noted that when a province could not or did not fulfil an executive obligation (including financial management) the national executive may intervene and take appropriate steps. Section 100 (1)(b) noted that this may include assuming responsibility for the provinces’ affairs. In terms of section 100(2), a written notice of intervention was submitted to the NCOP. The intervention would continue for 180 days, and it must be reviewed regularly, with any appropriate recommendations being made to the national executive.

A joint Press statement was made by relevant ministers on 19 January 2012, which simply stated the facts that obtained then, and although there had been some improvements in the meantime, the basis for the intervention remained.

The interventions in Gauteng were taken in terms of section 6(2)(f) to (g) of the Public Finance Management Act. Those in Free State were taken in terms of section 100(1)(a) of the Constitution. In relation to Limpopo, he noted that on 22 November 2011 it became clear that Limpopo province would be unable to pay several public sector employees. National Treasury (NT) had already cautioned the Provincial Treasury (PT) that the province would not have sufficient cash. The province had been spending beyond its means. It currently faced a potential shortfall of R2 billion and so National Treasury would have to restructure to find this money. The Limpopo PT had a R757 million overdraft as at November 2011, but wanted to increase this by R1 billion. The province had requested a R500 million facility from a commercial bank, which had been refused. National Treasury came to the conclusion that the province could not return to a sound financial footing without a section 100(1)(b) intervention, and if this intervention was not made, there was likely to be a serious failure in public services.

Minister Gordhan then amplified on the interventions in the three provinces. The interventions in Gauteng were taken to stabilise the provincial health department, strengthen Provincial Treasury, disestablish the Gauteng Shared Services Centre (GSSC), revisit the financing and procurement model for Kopanyang Government Precinct and discontinue growth funds that had not been established in terms of the PFMA

The Gauteng provincial health department had accruals of R2.1 billion that were unpaid at the end of the year, which were older than 30 days. Special efforts would have to be made to pay them off. The Minister of Health had met with the Gauteng Premier to assist in finding the money and paying off these accruals, and it was hoped that this would be achieved by the end of the financial year. R1.6 billion accumulated debt was owed to this department, including payments from the Road Accident Fund, and there was also accumulated unauthorised expenditure of R4.7 billion. There were challenges in paying service providers. Emergency measures were put in place to ensure that a payment plan was developed with major suppliers, to ensure that their supplies to hospitals would continue, whilst plans were put in place to pay off their debt. The accumulated unauthorised expenditure would need to be sorted out with the provincial legislature. There was a possibility of R1 billion overspending by this department and this too would need to be regularised.

The GSSC had various inefficiencies, including supply chain leakages and confusion around payments The Kopanong administration building project showed lack of transparency in procurement and there were questions around the financing model and value for money achieved.

Since the start of the intervention on 5 December 2011, Memoranda of Understanding had been signed between the Ministers of Finance, Health and Gauteng Premier. In the provincial department of health, there were various actions to place the department on the right path, including the acceleration of payment of outstanding creditors of R2.2 billion, cash being made available by PT to fast-track payment of outstanding creditors, and steps to control personnel expenditure. The 2012 Medium Term Expenditure Framework (MTEF) budget was to be reworked to ensure sustainability, with reprioritisations both within the health sector and the entire provincial budget, to stabilise health. The agreements were being implemented. A report on the disestablishment of the GSSC had been submitted to NT for assessment, and work was being done on the Kopanong project.

The situation in Free State was that on 5 December 2011, Cabinet agreed to an intervention in terms of section 100(1)(a) of the Constitution, in order to strengthen the provincial treasury, including the filling of critical posts, ensuring compliance with the PFMA and Borrowing Powers of Provincial Governments Act, as well as to stabilise the Provincial Department of Police, Roads and Transport, which showed failures in supply chain procedures and poor performance. The various irregularities and weaknesses in that provincial department were fully outlined (see attached presentation, slide 10), including awarding of 23 road contracts within proper tender processes, road costs being double the contract value, weaknesses in asset management, inadequate management oversight and internal controls, and a projected overspending of R447.9 million by the end of the financial year. The Provincial Treasury had been unable to implement strong financial management and fiscal discipline in departments. There was disregard for legislative and fiscal procedures, and delays in infrastructure delivery resulting in slow expenditure. There was a risk that the financial management system may collapse. Certain departments showed poor performance and application of procurement procedures.

The section 100 directive had been issued and the Premier had indicated willingness to lead the implementation. NT had deployed technical support to the provincial department, and an assessment had been done of the capacity needs in the provincial treasury, who would now initiate the filling of vacant posts. The Province was currently assessing all financing arrangements.

In relation to Limpopo, Minister Gordhan reiterated that the decision to make a section 100(1)(b) intervention was based largely on the fact that the province did not have the cash to meet its financial obligations, particularly the payment of various civil servants, including doctors, teachers and nurses. The intervention was directed towards the Provincial Treasury, and the provincial departments of Education, Health, Roads and Transport and Public Works. The province had a large accumulated unauthorised expenditure, which grew from R1.5 billion in 2009 to R2.7 billion in 2011. The practice of not paying invoices on time was widespread and there were accruals of R500 million in unpaid invoices by March 2011.

It was noted that Provincial Treasury had largely collapsed. There was no proper cash management system in place, and payments were made too frequently, without checking that cash was actually available. There were no departmental controls in place to avoid overdrawing the bank account. There was ineffective expenditure management, with reporting not being credible. Supply chain management processes were not in line with legal prescripts and Exco endorsed illegal procurement processes. There was some indication of illegal payments. The budget section was dysfunctional.

The Department of Education did not have a credible budget, and personnel costs were not fully funded. The accumulated unauthorised expenditure of this department was R2.2 billion. There were 2 400 excess teachers but 200 “ghost” teachers. The Department had no supply chain management capacity, Learner and Teacher Support Material (LTSM) was not ordered on time, and invoices were not paid on time, with R190 million unpaid accruals. The infrastructure planning, execution and oversight was weak.

The provincial Department of Health showed poor asset management, irregular expenditure of R400 million, which was also not included in the financial statements submitted to the Auditor-General (AG) in the previous year, and R427 million of assets were not supported by documentation. There were R138 million of accruals. This department projected an overspending on the budget.

The provincial Department of Public Works had no asset management system in place, and there were various supply chain management violations, including awarding of tenders without proper bidding processes, modification of existing contracts to increase tender values and no proper safeguards. The provincial Department of Transport had no contract management system in place, and internal controls were weak, including lack of oversight over the Limpopo Roads Agency.

Since the start of the intervention teams had been appointed from the national departments involved, and sent to provincial departments. Immediate steps had been taken to try to stabilise provincial finances, including putting proper cash management practices in place, ensuring that enough cash was made available to meet expenditure obligations, ensuring that legitimate creditor claims were paid, and preparing a credible budget for 2012/13. All illegal supply chain management processes were to be revoked. In the medium term, the capacity of the affected departments would be improved, and critical posts would be filled with competent people. There were steps taken to stabilise the provincial bank account. The cash position was now normalising and cash was accumulating in the bank. Creditors whose claims could be proven legitimate were being paid, within 30 days wherever possible and control measures were in place.

The provincial Department of Higher Education faced challenges of management at the Further Education and Training Colleges (FET), and three colleges had had only Acting Managers for some time. The Minister was considering placing two colleges under administration. A verification process of college grants, and transfers to the provincial Department of Education was being conducted, to check whether funds had actually reached the colleges. At Waterberg, incorrect upgrading of personnel had been found. The vacant college management posts were being filled as a matter of urgency and other problems of mismanagement were being addressed.

Minister Gordhan concluded that good progress had been made since the start of the interventions. The financial situation was being stabilised. The various ministers were attending to the priorities identified in respect of their provincial departments.

The Chairperson thanked the Minister for this introduction. He noted that the Committee Researcher had distributed an analysis of the affected departments. The Auditor-General had been requested to submit a report on the affected departments in Limpopo, and this document would be used during the discussions. He noted that page 5 of the AG report noted that the province’s Standing Committee on Public Accounts had a backlog of over two years reports and the provincial portfolio committees in that province also had serious backlogs. This Select Committee would need to consider its own oversight function to deal with this problem and to fulfil its own mandate. Page 23 of the AG’s report also noted that irregular expenditure ran to billions of rand, with 96% of that irregular expenditure occurring in the provincial Departments of Education and Health.

Hon Angie Motshekga, Minister of Basic Education, agreed with Minister Gordhan that progress was being made. She commented that there had been serious problems with the provision of LTSM, and it had been a priority to ensure that the material was made available to avoid disruptions in teaching, but the procurement could only be done once the schools had opened. Other urgent matters included ensuring that scholar transport was in place, and service providers had credible and proper contracts. Some children had not been getting the benefit of scholar transport for over five months. Her Ministry was attempting to deal with the most urgent matters first, whilst also addressing problems that affected children most. The basis of the problem had lain with human resource management, including poor management of post establishment, and in this regard she noted that warnings had already been issued to the province, but that the national department was not empowered to do more than warn until a formal intervention action was taken. Now that this was in place, more could be done to actually regularise the position.

Hon Aaron Motsoaledi, Minister of Health, wished to add a few comments to clarify points raised by the media. He gave the assurance that every attempt had been made to avoid stoppages in health services. The national Department of Health had been making payments to health services providers from December 2011, but it was necessary, before making payments, to verify the claims of creditors. It had already been found that out of R108 million of claims submitted, only R67 million was actually verifiable against proper invoices and proof of supply, and these amounts, after verification, were paid. The claims that no amounts were paid were not true. On 10 January, further amounts, again those which had been able to be verified as due and payable, were paid. Other services that had to be verified included catering and cleaning services, and payments were made to these contractors also in December and January. Although there were some shortages reported in some hospitals, this resulted not from lack of payment to suppliers, but to suppliers’ unwillingness to continue supplying. At present, the situation was under control, supplies were available in hospitals, and the verification exercise would continue.

Hon  Sibusiso Ndebele, Minister of Transport, reported that there were a number of issues affecting the provincial Department of Roads and Transport. The national Department had instituted a team, led by a Deputy Director General and comprising five specialists in supply chain management and administration budgeting, payments, income and expenditure, internal controls and compliance, which was working in Limpopo in conjunction with provincial officials. A full analysis had been done, and reported to NT. A team of forensic investigators had been deployed who would report shortly. All invoices were being checked for authenticity, attachments, paper trail, and reports on services rendered and supply chain management compliance. The provincial Department was being assisted to build capacity in contracts management, verification of value for money received, verification of services rendered, and quality assessment, as well as routes assessment, passenger accounts and strategic planning and management. A turnaround strategy and organisational redesign was being put in place. Specific weaknesses in financial systems related mostly to internal controls and lack of oversight over the Limpopo Roads Agency. There had been spikes in expenditure, but by November 2011 there was a shortage of cash, which the provincial Department claimed was not of its own making, but reflected the general cash shortfall in the province. Transversal policies, internal controls and outsourced services were all being addressed. 

Hon Nxesi Thulas, Minister of Public Works, noted that the problems in relation to the Department of Public Works largely related to violations of supply chain management procedures. The national Department of Public Works had also put in place a team to assist with the systems in the provincial department, and this team was also working with National Treasury. Human resources problems, including appointments of those who were unable to deal with matters properly, had been largely responsible for the situation.

Mr Roy Padayachee, Minister for the Public Service and Administration, said that his Ministry had established an interdisciplinary task team, including legal and HR personnel, and those focused on service delivery improvement, to ensure that during the period of intervention, the sustainability of basic services was guaranteed, which would, of necessity, require the continued cooperation of the civil service. The national Department of Public Service and Administration was therefore engaging with all civil service employees to ensure that a rigorous integrity management framework was applied and that any civil servants guilty of wrongdoing would face consequences.

Hon Blade Nzimande, Minister of Higher Education, noted that in future the national Department of Higher Education would assume sole responsibility of the FET colleges, but in this financial year they had been a joint responsibility of provincial and national government. The FET colleges presented the ideal opportunity for many school-leavers to pursue higher education, particularly in rural provinces such as Limpopo. A team was engaging with the college issues on the ground. The Department of Higher Education had met with all seven FET colleges in Limpopo, and a number of problems had been identified. There had been no implementation of pay progression for college lecturers, in line with the agreed dispensation. There had also been challenges in relation to management, with none of the colleges having even one of the three deputy principals that they should have in place. Two colleges only had an Acting Principal, one of whom had been acting for seven years. Two colleges were dysfunctional and needed to be placed under administration. In relation to conditions of service, about R7.4 million was needed to improve conditions of service, but only about R1.5 million had been allocated to this. Investigations were under way into the use to which conditional grants had been put, as it seemed that there might be variations of R56.5 million. The vacant college management posts were being addressed urgently, and turnaround strategies would be formulated by teams comprising both departmental and outside experts.

The Chairperson noted a recurring theme of non-compliance, including non-compliance with the PFMA. He noted that several sections of the PFMA dealt with responsibilities of accounting officers, including budget and financial management controls and financial misconduct. It seemed clear that some people had not been working correctly, and this begged the question whether those appointed were qualified for the positions. This not only applied to Limpopo. He agreed with the comment from Mr T Chaane, Chairperson of the Standing Committee on Appropriations, that all nine provincial treasuries should be called to Parliament, and the quarterly reports must be analysed to check that money had been used for its intended purpose. He was worried that provinces had been using grant funding for operational costs, and failed to comply also with the Division of Revenue Act. He added that the Select Committee had called upon the Northern Cape recently to put measures in place, within the next six months, in terms of section 32 of the Municipal Finance Management Act, to address irregular, fruitless and wasteful expenditure. He emphasised that the roles of Members of the NCOP must be borne in mind and they should be visiting hospitals, schools and other public service providers, to investigate whether the most basic services were working.

Mr M Makhubela (Limpopo, COPE) asked whether the intervention team had put measures in place when planning the interventions to ensure that suppliers continued to supply hospitals, in particular, and to avoid any interventions being haphazard in nature.

Minister Thulas assured Mr Makhubela that the first step, when entering Limpopo, was to diagnose the specifics of the problem, which of necessity involved National Treasury investigations also into the figures. As these investigations proceeded, he had no doubt that more problems would surface, and plans would then be formulated to deal with them. However, in the short term, the priority had been to deal with the immediate issues. Other matters necessitated a longer-term approach. Specifically in relation to the provincial Department of Public Works, it had been found that there was no database of costs and no standard format of estimates. Costings were submitted only after the fact, meaning that the efficiency of costs and bids could not be determined. That was the reason for sending people with specialist skills.

Minister Motsoaledi commented that many of the questions were cross-cutting across different sectors. There were indeed plans already in place in the province, but when it became clear that those plans were not working as they should, the decision had to be taken to intervene. Problems of accruals had been ongoing for some years, even as far back as 2009, but whereas some provinces had managed to sort them out, others had not.

Mr Makhubela asked if the figure of 200 “ghost” teachers had only come to light after the intervention, or whether it was suspected before.

Mr Makhubela enquired what plans were in place to avoid disturbing the education of students at the FET colleges.

Ms R Rasmeni, Chairperson of Select Committee on Social Services, (North West, ANC) welcomed the decision by the Department to put the two poorly-performing FET colleges under administration, as well as the turnaround strategy. She too was concerned as to how the learning at the colleges would be conducted in the meantime. 

Minister Nzimande said that since inception of the Department of Higher Education there had been attempts to contact all FET colleges and three summits had been held. He had met with the principals of all colleges and clear plans had been articulated. The Department had visited over 50 FET colleges and was fully aware of the situation, including making investigations into governance and audits of all colleges. The FET colleges were in transit but had signed Memoranda of Understanding as to what needed to be done, how the colleges would be managed and how to prepare for transition. There were constraints in colleges across all provinces. However, there were concrete plans in place, and these included raising the quality of all colleges, and moving colleges closer to employers. More specifics could be outlined at a meeting with the Select Committee on Education. In answer specifically to Ms Rasmeni, he noted that the decision to place colleges under administration was taken in view of the state of dysfunction of those colleges, and government, management and quality control partnerships would be considered, similar to the Eastern Cape.

Mr Makhubela questioned what would be involved in the stabilisation of the banking accounts.

Minister Gordhan clarified that this essentially meant that it must be ensured that enough money was available in the banking accounts to cover the debt.

Mr Makhubela asked what PT and NT had been doing about the apparent long-standing matter of non-payment of invoices.

Mr Makhubela asked the Minister of Public Works to comment as to what was to be done around lease management. In this regard, he thought that interventions were needed in other provinces also.

Mr T Mashamaite, Member of Select Committee on Education, (Limpopo, ANC) asked the Minister of Health to elaborate what exactly the problems were with the provincial health information system, which had apparently not been working properly since its inception in 2006.

Minister Motsoaledi responded that the health information systems were being investigated by the Special Investigating Unit, and their report was needed before he could comment fully.

Mr Mashamaite asked the Minister of Public Works to advise how many tenders, and to what amount, had been awarded without proper bidding processes being followed.

Mr M Sibande, Chairperson, Select Committee on Public Services (Mpumulanga, ANC) stressed that the presentations had made it clear that the decision to take the interventions had been quite correct, not least because of the various contraventions of the PFMA, and the lack of accountability. It was vital that government must intervene where necessary to ensure proper functioning. Departments would need to explain why their risk management systems had not highlighted the onset and likelihood of problems. He felt that the lack of synergy across departments often did not highlight common issues of concern.

Mr Sibande asked how the National Treasury planned to finance the over-expenditure projected, and what was in place to ensure that this would not continue.

Minister Gordhan responded that having a theoretical plan or setting out risks to be managed, and actually monitoring those risks by management were two very different things. Although plans may well be in place, it was more important to assess whether the plans were having a practical effect, and whether there was also enough monitoring by the NCOP to ensure that the systems were working. The way to prevent over-expenditure in future would be to ensure that those responsible for monitoring expenditure were doing their jobs properly. Accruals should not be allowed to accumulate as they had in the past. He added that it was also necessary to ensure that the right price was charged. There was much anecdotal evidence of overpricing by the business community. The ethics of the business sector, who might be charging vastly more than the product or service was worth, must be questioned and this practice should be seen as unacceptable. He suggested that perhaps Parliament could consider calling in service providers and questioning the costs, particularly where it became apparent that, for instance, three schools could be built for the current cost of one school. He also noted that it was completely unacceptable that the LTSM bill in one province had risen by about R400 million, but this was not questioned by the head of department; only the Minister had highlighted this issue when refusing to authorise payment.

Minister Motsoaledi added that if it was found that invoices were presented for more than was correct, then these would be regularised. However, section 100 interventions were not only about making payments, although this was one very important aspect.

Minister Ndebele agreed that one of the key elements of the intervention was to verify the commitments made by the province. In the case of the provincial department of roads and transport, every invoice would be checked, to verify the source, correctness and the fact that the work was done. This exercise went to the legitimacy of the awards, and analysed what internal controls were employed, in order to then close any gaps that might have been identified, and enabled an alignment of budgets with strategic plans and value for money analyses in future. This was one of the reasons why it was necessary to put senior level teams in place. The internal arrangements would also be checked including proper oversight over spending.

Mr B Mashile (Mpumalanga, ANC) commended the teams who were attending to the issues. He agreed with other comments that this illustrated poor capacity on the part of officials appointed, but also questioned whether they had been acting with the integrity expected of them. He also noted that this situation necessitated a closer examination of the oversight structures and internal controls, including internal audit. Questions must also be asked as to whether the provincial legislatures’ Public Accounts Committees were functioning well enough, and he thought that they would need to be asked what resolutions they had taken in the past, and whether resolutions and recommendations had been followed by the departments. He also highlighted that this was an administrative intervention, which must not be addressed in a politicised manner.

Minister Gordhan agreed with Mr Mashile’s point that this was not to be seen as a political issue. The purpose of the intervention was to fix the system and leave behind a sustainable system with competent people in place and ensure that provinces would be able to work. Provinces absorbed 44% of total expenditure (R900 billion) in this current year. There was now an added responsibility to monitor the spending of that money. If this was not spent wisely, ensuing that the correct controls were in place, then government would be letting down its people.

Mr Mashile asked when the budget for the province was to be completed, whilst reconciliations into the shortfall must continue. He asked whether all backlogs of payments to creditors had been corrected.

Mr J Bekker (Western Cape, DA) said that responsibility must be accepted for the poor administration, including political responsibility.

Minister Gordhan also assured Mr Bekker that all Ministers took responsibility, both individually and as a collective, for these matters. The intervention had been done in recognition of that responsibility.

The Chairperson noted that every Cabinet Minister had, in their Press statement, accepted that responsibility, and their credibility was not in doubt.

Ms B Mncube (Gauteng, ANC) asked if there was an inter-Ministerial committee dealing with these matters, and what the role of the Committee would be, to avoid any blurring of the boundaries. It was necessary to ensure that capacity was built at the necessary levels during the intervention.

The Chairperson reminded her that notice of Cabinet’s decision to take the intervention was referred to the Select Committee on Finance on 13 December 2011, which must, in terms of Rule 105, consult with other select committees, which was the reason for the convening of the current joint meeting. The Select Committee on Finance must report back to the House, and other committees could also give separate reports. There was also nothing to prevent this Committee from consulting with any other National Assembly committee.

Minister Padayachee also responded to the questions around the role of the NCOP. He reiterated that the national executive was empowered by the Constitution to make the intervention, but must give written notice to the NCOP and to keep the NCOP briefed to ensure that there was concurrence on the strategic objectives that the intervention sought to address. It was clear that there was a proper basis for the intervention. Had government not decided to act, the situation would have worsened. As the intervention deepened, other aspects became apparent. The first principle that would always be adhered to was that any person, no matter how senior, who was involved in irregularity, must face the consequences of his or her wrongdoing, and there would be no protection offered to a person who had compromised the integrity of the State or affected services to the citizens. Parliamentary legislation and regulations must clearly be applied more strenuously if the developmental state was to address the problems of the people, and government should act in a way that would guarantee that basic services to people were protected and sustained. It was also clear that something had gone very wrong in the ethos of the public service, and this required speedy attention. He hastened to assure Members that whilst he was not suggesting that this was true of the whole public service, problems must be rooted out wherever they were found. Both the executive and NCOP must therefore be seized with the operation, and be continuously informed, and he would welcome any recommendations on how to improve on the interventions made so far.

Minister Gordhan added that all ministries would work closely with the NCOP to coordinate efforts.

Ms Mncube noted that in the Eastern Cape, 4 000 teachers were returned into the teaching field, after some problems with placements.

Minister Motshekga responded that she was aware of the situation in Eastern Cape. The provinces were monitored monthly, but she reminded Members that although the provinces interacted with the national departments, the Minister could not monitor directly, but could only issue directives, such as the need to cut down on budgets, or monitor expenditure more closely. The MEC had already been warned that the budgeting for the provincial department was problematic, but the MEC, who was aware that the budget was being exceeded, apparently hoped to be bailed out by the provincial treasury. She also noted that similar external factors, such as growing urbanisation and parents moving their children to other schools, existed across all provinces, making it even more difficult to budget. However, it was true that some of the provinces took far too long to deal with management problems, and insufficient or excess teachers. Specifically in the Eastern Cape, there had been interventions in March 2011 to put more teachers in place, and this recovery programme resulted in the pass rate at least being sustained, although it did not improve. Scoping exercises were done, and the situation was stabilised, after the problem had been ongoing for many years without being property addressed. Temporal teachers were not as much of a problem as the permanent teachers. Teams would be sent to deal with problems in other provinces too. 

Ms Rasmeni asked what plans were in place from the side of NT to ensure that the problems would not recur in future.

Minister Motsoaledi assured Ms Rasmeni that the reason for the teams being put in place was to ensure that they did develop capacity and resolve the situation before they moved out. They were dealing with both systems and personnel.

Mr Gordhan added that the repair job could not be done overnight. The intervention was only a start and more was needed to get these institutions on to the right track.

Mr D Bloem (Free State, COPE) expressed this concern that “crooks” appeared to have been appointed, or at the best, those with the wrong credentials to undertake the jobs. A number of projects had been standing still without progress for a number of years.

Minister Gordhan took issue with the suggestion that “crooks” were widespread in the system, saying that although some may be dishonest, the majority of public service officials were likely to be honest and have a good work ethic. The dishonest or inefficient minority must be identified, and replaced, in order to create an environment where they could not intimidate other employees. He conceded that currently there was not sufficient protection afforded to whistleblowers. Senior management did not always act stringently enough in relation to wrongdoers, and that was insidious to the whole system.

Mr Bloem asked if it was only the departments mentioned who were affected by the problems cited.

Minister Gordhan advised Mr Bloem that these were not the only departments with problems, but it was necessary to start somewhere. There was a good commitment from the Premiers in Limpopo, Free State and Gauteng to put matters right, and this augured well for the future.

Mr M Jacobs, Member of Select Committee on Public Services and Select Committee on Appropriations (Free State, ANC) noted that there had been mention that anyone found involved in corrupt activities would be referred for a hearing before special courts. He asked if there were any further reports on this, and how far this initiative had gone.

Minister Gordhan noted that the Department of Justice and Constitutional Development would take responsibility for coordinating law enforcement agencies, who were currently meeting with representatives of all departments in Polokwane. If any maladministration was found, this would be referred to the Department of Public Service and Administration, so that disciplinary steps could be taken, and, if necessary, to the relevant law enforcement authorities for civil or criminal action. He assured Members that systems were in place and appropriate actions would be taken.

In general response to questions around budgeting for 2012/13, and future steps, Mr Lungisa Fuzile, Director General, National Treasury, said that the 2012 budget of the affected provinces must ensure not only the continuity of the services in those province, but also seek to address the debts of the past, which would not simply disappear overnight. This required that a delicate balance be achieved. It was important that support be given by all national departments and the provinces. So far, there had been a fully inclusive process followed, and favourable support had been received from the executive in the provinces, including the Premiers. A lekgotla would be held to discuss budgetary and financial management issues in the provinces. The leader of the intervention team had been invited by the Premier of Limpopo to present the budget, and it would be tabled on time, within two weeks of the tabling of the national budget.

In regard to the shortfall, he conceded that this was still a moving target, because where there were accruals, unrecorded, or unanticipated invoices, might still surface, but National Treasury estimated that the maximum amount it was likely to be was R2 billion. There had already been processes instituted to reduce this, and it was currently standing at about R1 billion, with the hope that it could be trimmed down even further. It was essential to ensure that the province had cash to meet its most crucial commitments. For this reason, it was not possible simply to pay out the shortfall, but to ensure that there was proper prioritisation, and strict parameters and requirements, including that cash must be proven available before payments were made. Certain suppliers and providers must be paid to ensure continuance of supplies such as pharmaceuticals to hospitals, transport and education service providers. Critical services must remain in place, whilst dealing with backlogs and shortfalls. In making payments, departments must also be urged to try to comply fully with the legal requirements, both in relation to the budget, and the PFMA. Obviously, payments could not always be done within the requisite 30 days, but as far as possible, this should be adhered to, whilst proper systems for the future must be put in place.

Minister Gordhan stressed that, as outlined by Mr Fuzile, money could only be spent if it was actually available. In order to tackle the accruals and backlogs, all unnecessary expenditure must be cut. He pointed out that every budget built in some “fat” and this would be reduced. In relation to officials, he agreed that there was work to be done in building capacity. South Africa was a relatively capable state already, but needed to develop still further. He stressed again that the main reason for the intervention was to ensure that services in the provinces were not interrupted and this presented also an ideal opportunity to actually improve the quality of services being offered. The appropriate levels of controls, as well as respect for and adherence to those controls was needed, to ensure that whatever controls were created actually worked. Both political and administrative leaders needed to exercise a higher level of accountability for the public money, and that implied a greater respect for provincial treasuries and MECs for Finance. Generally, there had been a decline in proper adherence to the PFMA, procurement laws and the requirements that departments not spend beyond their means. He suggested that the NCOP needed to look into whether provincial treasuries were strong enough, had the right competencies, and whether there was sufficient respect for their work.

Minister Gordhan concluded that he believed that government had intervened at the right time, and if the right levels of integrity and leadership were maintained, with input from all, the provinces should be on a better footing within the next six months.

Minister Nzimande wanted to add that it was necessary, as well as looking at provincial treasuries’ roles, to look at the role of provincial legislatures. It had been national government who had picked up on the issues. That was surely something that the NCOP must address.

The Chairperson agreed strongly. He noted that the Committee had just visited one province, where it was clear that the legislature would have to play a far more active role. National Treasury, and not provincial treasuries, was intervening in municipalities, because the provincial treasuries had for some years now lacked the necessary capacity. He agreed that the role of the provincial legislatures and their committees would need to be examined, and the Chairperson of the NCOP and Speaker of the Provincial Legislature must address the issue. He noted that a couple of years back, this Committee had managed to establish connections between provincial legislatures and the Financial and Fiscal Commission.

Ms M Makgate, Chairperson of Select Committee on Education, (North West, ANC) said that her committee would perform its oversight with a view to ensuring delivery of services.

Ms Rasmeni assured all ministers that her Committee would work in conjunction with all other committees in reaching consensus on these issues

Mr Sibande thanked all the ministers for their transparent and informative presentation.

The Chairperson noted that Minister Padayachee had made some very important points about work ethics, and said people should be encouraged to perform even better than expected of them by their job descriptions. Problems of capacity had been constantly raised by departments. He thought that, as in other countries, schools leavers should be actively recruited to study project and financial management, and then work for government. Serious attention needed to be paid to better enforcement of the PFMA. Proper oversight, involving not only taking resolutions, but also following up on their implementation, was vital. Annual performance plans and budgets of departments should be compared to the previous years, to isolate any trends and address them. In conclusion, he too thanked all ministers for their participation and leadership

The meeting was adjourned.



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