Committee Report on Eastern Cape oversight visit, January 2012

Standing Committee on Appropriations

12 March 2012
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Committee adopted minutes of meetings between 23 November 2011 and 7 March 2012. All were adopted, some subject to correction of minor technical errors.

The Committee then considered its draft Report on the oversight visit to the Eastern Cape in January 2012 (the Report). The Chairperson summarised the Report, which highlighted the engagements that had been held with the Department of Basic Education (the Department) in November 2011, around the construction of 50 schools (subsequently reduced to 49) in Eastern Cape. An allocation of R700 million had been given for the eradication of mud and inappropriate schools, but although the construction was initially calculated to cost R400 million, the construction of 28 schools alone was later costed at R711 million. The cost of construction was given as R10 200 per square metre, and this higher-than-expected cost was said to have led to delays in commencement of construction, and the Committee had found that the construction had not started, as promised, in December (despite a specific assurance by the Department that it would). Department of Public Works was not involved, and the Committee also found that furniture and teaching equipment were not budgeted for, but apparently a parallel process was under way for acquisition of this equipment. One contractor was struggling to get guarantees from the bank, and contracts had been awarded without the necessary guarantee. The Committee had specifically requested a detailed project plan, had asked if the construction took adverse weather conditions into account, and the number of jobs to be created, and how the funds would be spent.

Members felt that the draft Report was not yet clear enough, and it was important that consistent figures be obtained. They expressed concern over the escalations, and felt that a breakdown of the tender price per school was needed. A DA Member said that the Committee should specifically call upon the Department to explain why a tender was awarded without the necessary guarantee being provided, should question the costs. Another Member suggested, and the Committee agreed, that the Committee should engage separately with professional bodies in the construction industry to verify the likely costs, as they were worried that there might have been collusion, and that the cost was exorbitant. It was noted that the Report must state unequivocally that the Department had not been truthful about the date on which construction would commence, and should question the professional fees, the process for acquiring furniture and the equipment used for construction, and how the delays in start of the construction had led to cost escalation. A COPE Member suggested that the Report should not attempt to be diplomatic, but state the Committee’s findings up front. The Committee agreed to reconvene and adopt the Report only waiting for the issues that have been raised to be addressed.  

Meeting report

Draft Committee Report on the oversight visit to Eastern Cape Province, January 2012
The Chairperson tabled and briefly read through the Committee’s draft Report on the oversight visit to the Eastern Cape (the Report). This noted that on 25 January the Committee convened at the East London International Convention Centre, where it was to engage with various stakeholders before undertaking site visits. It was noted that while the Committee had the option of putting the Director-General of Basic Education under oath, in terms of Rule 138(a) of the Rules of the National Assembly, it had opted instead to ask for a verbal affirmation that the information to be presented to the Committee would be factual, and that targets could be achieved.

The Department of Basic Education (DBE) reported that, as opposed to the initially planned 50 schools, 49 schools would be built as part of this project. The Committee was informed that the Ntsikayesizwe Primary School was removed from the list because it was one of the schools that the Provincial Department was planning to construct. It was noted that the initial cost of the 50 schools would be R400 million, but that the latest figures revealed that the construction of 28 schools would cost R711 million. The Development Bank of Southern Africa (DBSA) was to be the implementing agent. DBSA indicated that the completion date would be August 2012. The DBE had made a commitment that it would engage further with the DBSA to ascertain whether this latest target for the completion of the schools would be met.

The DBE reported that the cost for construction was R10 200 per m2. It was reported that the higher-than-expected costing for the construction of the schools by the bidders led to a delay in the commencement of construction. The 2012/13 Division of Revenue Bill would soon be allocating more funds to the DBE in respect of this project. However, this Committee was concerned that, given the slow pace in rolling out the project, the DBE may not be ready for further funding. Furthermore, while the Department of Public Works (DPW) had the required capacity to embark on projects of this nature, the DBE had opted not to utilise the DPW services.  

It was also reported that the capacity within the DBE had improved significantly with the establishment of the Programme Support Unit (PSU), which was aimed at providing support and monitoring projects of this nature. The Committee was informed that the awarded contracts did not include furniture and teaching equipment but that a parallel process was under way at the DBE to ensure that, on completion of the buildings, such furniture and equipment would be available. A total number of 49 schools were handed over to contractors.

The DBSA had reported that one contractor was struggling to secure the required guarantee from the bank. It was further explained that this process of requiring guarantees followed the issuing of a letter of intent by the implementing agent. The Committee requested that the DBE submit a detailed project plan for the construction of the 49 schools in order to assist the follow-up on progress. Concerns were expressed that Lusikisiki and Libode areas were prone to tornadoes. It was reported that about 22 000 jobs were projected to be created under the Accelerated Schools Infrastructure Delivery Initiative (ASIDI) programme as a whole.

The DBE responded that about R24 million had been paid on professional fees to date. The total budget for professional fees was R64 million. DBE assured the Committee that the engineering drawings took into consideration the fact that some areas were prone to tornadoes, as well as other weather conditions. The project encompassed both small and medium primary schools.

The Committee requested the National Department of Basic Education to ensure that its provincial counterpart was kept abreast of developments in respect of the project. A follow up meeting between the Committee and DBE was set for 8 February 2012 with the Committee.

The Committee had made certain findings. Despite the commitment made by the DBE in 2011 that the construction of 50 schools would commence during the festive season, the construction of these schools had not commenced by the time of the Committee’s visit. The Committee also noted with concern that at least one tender had been awarded to a contractor, irrespective of the fact that that contractor could not provide the necessary guarantees.

The Committee now recommended that the National Department of Basic Education should submit to Parliament a detailed project plan for the construction of the 49 schools, including specific timeframes and a statement of how the allocated funds would be spent. The DBE was also asked to submit to Parliament a report indicating how many jobs would be created through the Eastern Cape component of the Accelerated Schools Infrastructure Initiative (ASIDI).

Discussion
The Chairperson noted upfront that he was not happy with the recommendations set out in the Oversight Report. The exact amount of money that was to be used in the eradication of inappropriate structures was unclear.

Mr M Mbili (ANC) pointed out that it was R504 million.

The Chairperson pointed out that it was important to get a consistent figure for the cost of the schools construction. 

Mr L Ramatlakane (COPE) noted the escalation of the amount from over 400 million to 700 million. He said it was important to look at the Department of Basic Education’s breakdown to see the price per school.

Mr G Snell (ANC) pointed out that the cost of building the schools was going to escalate to over R1 billion.

The Chairperson alluded to the fact that the project was set to encounter a deficit of over R1.8 billion and that the National DBE was going to seek additional funds from National Treasury. The cost of building schools in Eastern Cape was thought to be much cheaper.

Mr M Swart (DA) asked that the Committee recommendations should also specifically call upon the DBE to give a report on why a tender was awarded, irrespective of the fact that the contractor could not provide the necessary guarantees.  He noted that the building costs were excessively high.

The Chairperson noted that a breakdown of costs was requested from the Department

Mr Mbili said that the Committee could engage with professional bodies from the construction industry on the costs of building the schools. He further stated that there was a possibility of collusion in the construction of these schools, and it was up to the Committee to go the extra mile and investigate the building costs.

Mr Snell noted that the Committee should get the tender prices and the award value for each school, as this information should help the Committee to see if there was any collusion. He also pointed that the figure of R10 200 per m2 was too costly.

Mr Swart agreed with Mr Snell’s proposal.

Mr Ramatlakane noted that the DBE had been economical with the truth in relation to the start of the construction. He said that the Report must affirmatively note this, as the completion was now being pushed into the next financial year.

The Chairperson said that the DBE was not aware of any collusion in this project. He asked Mr Ramatlakane if he wanted the Report to be explicit around the delay in the building of the schools.

Mr M Mbili asked what timeframes were proposed and followed, and said that he felt strongly that these must be determined. He was sure that there were elements of collusion.

The Chairperson, following Mr Snell’s proposal, said that the Committee, for the moment, should insist on getting the reports that were requested during meetings with the Department.

Mr Mbili pointed out some discrepancies in terms of allocations. He said that he was not convinced by the statements around the costs of building infrastructure for schools. The amount was now much higher because of the infrastructure requirements.

Mr Snell suggested that the Report should not be adopted for the moment, and the Committee must do some further questioning. He also asked how the parallel process of furniture acquisition was being conducted. He questioned the amount of money set aside for professional fees. He agreed with what Mr Mbili said about the infrastructure of the schools.

Mr J Gelderblom (ANC) also thought that there was a need to question the equipment used for construction.

Mr Swart agreed that the DBE must be interrogated further. He wanted to re-emphasise that it must give an answer on the point about the tender awarded despite the lack of guarantee.

Mr Ramatlakane said that it was possible that there had been inflation of prices, and he thought that this point must be noted, as he felt there was “something fishy”. The price per square metre was controversial. The Provincial Department misled the Committee and the Minister as to the timeframes for the start of the project. He felt that this Report did not have to be diplomatic and that it should state the facts very clearly.

Mr Snell said that another of the specific questions to the Department should ask how the delay in the start of the construction project had led to the escalation of the costs.

The Chairperson said that his understanding, from the presentation given, was that the infrastructure costs also included other schools beside the new schools. He agreed that the Committee would get the breakdown of costs and critically analyse them. For this reason, he agreed that the Report not be adopted today.

Adoption of Minutes
The Chairperson asked Members to consider the adoption of draft Minutes between 23 November 2011 and 7 March 2012.

23 November 2011
Members proposed corrections to the section dealing with the Second Quarter Report. These were accepted, and the Minutes were then adopted, with the corrections.

14 February 2012
Mr Snell proposed that the Expanded Works Programme Incentive Model that was presented in the previous year should be compared to the current year’s incentive model.

The minutes were adopted.

15 February 2012
The minutes were adopted, without amendments.

23 February 2012
The minutes were adopted, subject to the correction of spelling mistakes.

28 February 2012
The minutes were adopted.

29 February 2012
Mr Ramatlakane noted some contradictions that needed to be corrected, in regard to the section dealing with the briefing by Department of Basic Education.

A debate ensued on the number of schools under construction in the Eastern Cape.

Mr Mbili noted that the appropriation of money was to 49 schools and not 50. He quipped that a politician’s job was to debate, and asked the Committee to thoroughly debate the matter. 

Mr Swart highlighted the high prices in building the schools and questioned the manner in which the tenders were awarded.

Mr Ramatlakane said that one of the 50 schools was being built by the Provincial Department of Education, and that the appropriation of R700 million related to 50, and not 49, schools.

Ms R Mashigo (ANC) pointed out that the number of schools could be settled by making reference to the Oversight Report of the Committee’s visit to Eastern Cape, and noted that this Report noted the number as 49.

The Chairperson said the Report on the Division of Revenue Bill indicated that 49 schools were under construction. To prevent contradictions, it was important to be consistent and to refer to 40 schools.

The minutes were adopted.

1 and 6 March 2012
The minutes of both meetings were adopted, subject to correction of minor technical errors.

7 March 2012
The minutes were adopted.

The meeting was adjourned.

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