Agrément South Africa & Construction Industry Development Board (CIDB) 2012 Strategic Plans

Meeting report

Agrément South Africa 2012 Strategic Plan Presentation
Mr Joe Odhiambo, Chief Executive Officer (CEO), Agrément South Africa, highlighted that its mission was to promote the Government’s objectives of economic development, good governance and raising living standards and prosperity by undertaking technical assessment and certification of non-standard construction products in South Africa.  Agrément South Africa could achieve its mandate by providing assurance of fitness-for-purpose of such technologies which could optimise resource utilisation and realise cost savings within the industry.

Agrément’s major achievements included its exceeding all projections of programme outputs to date. In addition, it had successfully aligned its Strategic Plan to support key priority areas of Government and the Department of Public Works (DPW), which included incentives to address unemployment, poverty and inequality.

In terms of the Mid-Term Review from 2009 to date, Agrément had made major headways in numerous areas highlighted in the State of the Nation address (SONA) such as Health, Education, Crime Fighting, Human Settlements Energy and Water Provision. Furthermore, it initiated programmes to target rural development through the creation of jobs and the promotion of youth skills development through the creation of bursary schemes.

Agrément therefore aligned its mandates to the National Development Plan 2030 and SONA, which both placed an emphasis on addressing issues of poverty and inequality while also promoting prosperity and equity.

The Agency was participating in various initiatives to contribute to the commitments made by the President in his SONA. For example, it was collaborating with DPW in the expansion of infrastructure in order to create the 11 million jobs by 2030. It was also contributing to the goal of speeding up and expanding renewable energy and waste recycling by ensuring that buildings met the energy-efficiency standards. The goal of transforming urban and rural spaces would be achieved through the shifting of resources to the upgrading informal settlements and construction of settlements on suitable sites that were located near industry.

Slides of a project initiated in Gombani, Venda which used a sustainable technology of compacting bricks were shown. The slides were used to illustrate how the project was helping in the transformation of rural settlements and creation of entrepreneurs.

The organisational structure of Agrément was then outlined.

Key achievements in governance included that Agrément had tabled its Annual report 2011 to Parliament on 20 October 2011, while the Strategic and Annual Performance Plan 2012-16 had been delivered to the Parliamentary Stores on 07 March 2012 for tabling. The Minister of Public Works had duly appointed the Chairperson and the Board of Agrément. In addition, Agrément had made a great contribution in the safe introduction of innovative technologies.

A summary of Agrément’s core values and Board composition was outlined.

The key highlights in performance included its enhancement of technical competence of specialists used in certification thus improving the quality of technical outputs. In addition, it was involved in enhancing its technical skills in order to ensure competence in handling complex technical assessments. Agrément also ensured quality through its utilisation of in-house specialist laboratory testing equipment.

With regard to its transformation agenda, it reported that the percentage of black women was 25% while the total number of blacks was 92%. A review of the employee qualifications demonstrated high levels of competence, with the majority of staff members being holders of university degrees.

A significant increase was reported in terms of the total number of certificates approved from the years 2007-2009. In the last financial year, Agrément exceeded its target of 12 certificates and had issued out 20 certificates of which one of the certificate was suspended.

A breakdown of the financial performance from 2009-2012 was then outlined. The agency in 2011 utilised R8.4 million of its allocated budget of R8.7 million. In 2012 it utilised R9.6 million of its R 9.7 million allocated budget (slide 28). It reported a 5% increase in the Medium Term Expenditure Framework (MTEF) from 2011/12. A total of R 10.3 million in 2012 was transferred as compared to the R9 million in 2011 (slide 37).

In its financial statements it was noted that Agrément operated under ministerial delegation of authority from the Minister of Public Works. The grant funding for Agrément was channeled from the Department of Public Works (DPW) to the Council for Scientific and Industrial Research (CSIR). Consequently the funds were ring- fenced within the CSIR Built Environment Unit in a separate Competence Area.  Agrément’s transactions were subject to the policies, procedures and governance processes of the CSIR. Agrément was audited as part of the CSIR Built Environment Unit, which received an unqualified audit report from the office of the Auditor General.

Agrément was the only African agency to be a member of the World Federation of Technical Assessment Organisations. Some opportunities of being a member included integration with wider industry experts, strict enforcement of building control legislation, and enhanced capacity to create decent jobs and employment.

Discussion
Mr M Swathe (DA) asked for the number of beneficiaries of the youth development bursaries.

Mr Odhiambo replied that an in-house bursary was awarded to one staff member yearly.  In terms of bursaries issued to youth, Agrément was working in partnership with CSIR in funding youths in various local schools to pursue their tertiary education.

Mr Swathe and Mr K Sithole (IFP) inquired the extent to which Agrément was involved in the upgrading of informal settlements and asked for details where this process had occurred.

Mr Odhiambo replied that Agrément was a technical improvement agent and not an implementing agent. Therefore, it did not get involved in the actual construction of buildings, funding or approval of contractors or upgrading informal settlements. It only undertook the testing of these structures in the laboratories.

Mr K Sithole (IFP) and Ms N Madlala (ANC) asked for statistics with regard to the number of jobs created so far.

Mr Odhiambo replied that its mandate was not directly to create jobs; however, the products that Agrément certified had the potential to create jobs. For example the technologies used in the Eastern Cape schools development project were labour intensive and had the potential to create jobs for the local communities.

Mr Swathe asked for more information regarding new product certification.

Mr Sithole expressed disappointment at the fact that Agrément had not made headways in increasing the numbers of people with disabilities in its staff complement.

Mr Odhiambo admitted that Agrément had shortcomings in this regard; however, it was largely related to their small staff complement. Nevertheless the issue was listed a major priority which hopefully could be addressed in the immediate future.

Mr Sithole and Ms A Dreyer (ANC) asked for an explanation for the increase in the executive levies.

Mr Pat Ncube, Financial Management Accountant, Agrément South Africa, replied that the issue of the executive levies was to be evaluated in conjunction with the overhead costs. What transpired was that there was a reclassification of costs of a certain portfolio under over head costs that was transferred to executive levies resulting in overhead costs decreasing in direct proportion to the increase in executive levies. Hence the net effect was zero.

Members were not satisfied with the explanation given.

Mr L Gaehler (UDM) inquired if the new materials and technologies used in the Eastern Cape had been certified and found to be satisfactory.

Mr Odhiambo replied that the agency had undertaken comprehensive labs tests which were in-line with global and international best practice for testing standards. In addition, CSIR had carried out an independent report which assessed the benefits and the disadvantages of using the materials and technologies. The report had been presented to Independent Development Trust (IDT).

Mr Mnguni asked for clarification as to who was certifying the products used at Willowvale in the Eastern Cape school development project to avoid the repetition of prior incidences in the past in which materials used in construction while having been certified proved to be unsatisfactory when in use resulting in some of the structures being demolished.

The Chairperson reiterated the question asked by Mr Mnguni by asking the sustainability and life span of the materials used in building of schools.

Mr Pepi Silinga, Chairman of the Board, Agrément South Africa, replied that in some instance the challenge was not in the quality of assessment of the product but the quality of the assembly of the product.

Mr Odhiambo replied that one of the product vale steel was an Agrément certified product. The other products were being evaluated by regulatory boards such as the South African Bureau of Standards.

The Chairperson asked more clarification on the advantages and disadvantages of materials and technologies used in the Eastern Cape.

Mr Odhiambo replied that the advantages included cost saving, time saving and durability. The disadvantages included that the structures took a short period to erect and therefore jobs were available for a short while. In addition the highly skilled personal were obtained from outside the community and this was a shortcoming in that there was a lack of transfer of skills.

Mr Silinga reiterated that trade offs existed between fast construction and job creation. In addition, because the major skills were brought in from outside, when maintenance needs developed, delays should be expected. Furthermore in such cases usually the critical local stakeholders such as the contractors were excluded; therefore, instead of the process ultimately being seen as beneficial to the communities. the final product might be seen as a divisive element and not a solution. Therefore, in the long term in order to promote a cohesive community, if these technologies were adopted, efforts should be made to improve the local manufacturing sector and provide it with these emerging economic opportunities.

Mr Gaehler asked where the compacted bricks project had been used.

Mr Odhiambo replied that it had been used in Gombani Venda.

Mr N Magubane (ANC) asked for measures put in place to fight crime.

Mr Magubane asked how Agrément was assisting communities with water provision.

Mr Magubane inquired on how Agrément was addressing the issue of corruption.

Mr Odhiambo replied that Agrément was not an implementing agent and therefore was not directly involved in fighting crime and providing water.

Ms A Dreyer (DA) complimented Agrément on their competent staff.

Ms Dreyer asked Agrément to share its success secrets.

Mr Odhiambo replied that its success was anchored on it values.

Mr P Mnguni (COPE) asked for the reasons for the suspended certificates.

Mr Odhiambo replied that the complaints were minor in nature and usually as a result of the inability by the certificate holder to compile with the standards of the certificate. In the event that the certificate was suspended, the holder had to fix the anomalies. The anomalies were minor and held no direct health and safety threat to the users.

Mr Realeboga Mahapa, Technical Assessor, Agrément, replied that the suspended certificate involved a product of window frames which was not made to the required specifications. Agrément had made on site audit and discovered that the manufacturer had contravened the standards by using steel reinforcements instead of fibre. Consequentially its licence was suspended and it was removed from the Agrément list.

Mr Mnguni asked if Agrément conducted continuous assessments of the products it certified or only waited to respond once a problem was raised.

Mr Odhiambo replied that it conducted on-going continuous assessments of the products it certified.

Mr Mnguni and Mr Sithole expressed dissatisfaction at the response.

Construction Industry Development Board (CIDB) 2012 Strategic Plan presentation
Ms Ursula Ntsabane, Chief Executive Officer (CEO), Construction Industry Development Board (CIDB), outlined the mission and mandate of CIDB. Its mandate included providing strategic leadership to construction industry stakeholders and promoting sustainable growth, reform and improvement of the construction sector. In addition, it promoted the improvement of performance and best practice of public and private sector clients, contractors and other participants in the construction delivery process. Furthermore it ensured the monitoring and regulation of the performance of the construction industry and its stakeholders, including the registration of projects and contractors.

An outline was then made of the organisational structure.

The strategic outcome oriented goals of CIDB was then outlined along with how it was aligned with Government Development Priorities and the Budget Speech.

A total of R26 million was allocated to strategic goal one listed as provision of leadership and support in the development of the emerging sector. This goal was aligned to Government’s outcome five which stated a focus on a skilled and capable workforce which could support inclusive growth.

CIDB allocated R21.1 million to its strategic goal number two outlined as improving and maintaining an efficient registration service. This goal was in alignment to Government’s Outcome 12 which emphasised an efficient, effective and development oriented public service which supported empowerment and inclusive citizenship.

Strategic goal three listed as enforcing and monitoring industry compliance with the CIDB regulations and combating fraud and corruption in the construction industry was allocated R5.1 million.

Strategic goal four listed as promoting performance improvement of organs of state through improved legislation was allocated R 5.1 million. This goal was aligned to Government’s outcome six which emphasised the need for efficient, competitive, responsive economic infrastructure network.

A total of R6.1 million was allocated to strategic goal five listed as performance improvement through supporting contractor development and value to clients. This goal was made in alignment with the SONA commitment to improving infrastructure procurement and delivery capability.

Strategic goal six listed as improving the infrastructure delivery skills and management practices in the construction industry was allocated R1.5 million. This goal corresponded to Governments’ outcome five which prioritised the creation of a skilled and capable workforce to support an inclusive growth path.

Strategic goal seven outlined as building, strengthening and maintaining relationships with stakeholders supported by comprehensive communication strategy was allocated R2.2 million.

A summary of CIDB core programmes was listed as follows.

Programme 1: Growth and Contractor Development focused on the promotion of enterprise development, investment and spending as the basis for a stable, developing industry and the participation of the emerging sector.

Programme 2: Construction Industry Performance focused on improved performance and best practice for an industry that delivered reliable value to clients, investors and end-users, information on construction industry indicators to inform CIDB strategy, policy makers and stakeholders.

Programme 3: Procurement and Delivery Management focused on enhanced public sector construction procurement and infrastructure delivery management capability of public sector clients enabling efficient and effective delivery of quality infrastructure to the public.

Programme 4: Construction Registers Service focused on the registration of contractors in both public and private sector projects.

Key performance indicators for each strategic goal were highlighted for each quarter from April-June 2012 till the fourth quarter January 2013 – March 2013.

CDIB reported that three vacant positions were required to be filled, which could result in an increase of the staff complement to a total of 202.

Discussion
Ms Dreyer asked what actions were taken on contractors implicated in fraud charges.

Ms Ntsubane replied that a report of those prosecuted was published in quarterly reports.

Mr Mnguni asked about the deregistration process of emerging entrepreneurs who did not comply.

Ms Ntsubane replied that CIDB was conducting an audit blitz to determine the number of companies which were not complying and those that were complying. Most of the major contractors were non-compliant. She added that a deadline would be set after which legal action would be taken on contractors who failed to comply.

Ms Lindiwe Myataza, Deputy Chairperson of the Board, CIDB, noted that the findings of the audit blitz revealed that 70% of the non complying agents were Government departments and municipalities. Therefore, CIDB had communicated to these entities that the deadline for making the adjustments was till June 2012; thereafter it could take stern measures against the offenders. CIDB was also collaborating with other enforcement agents to ensure that ultimately all contractors complied.

Mr Gaehler asked for the reasons which accounted for the decrease in the MTEF budget for 2012/13 in the construction industry performance programme and an increase in the corporate services of the same financial year.

Mr Peter Mongwenyana, Chief Financial Officer, CIDB replied that the increase and decrease in the budget of line items in the construction industry was as a result of reprioritisation of matters to be dealt with in this financial year. The areas could be recapacitated in the event that funds were made available during a rollover at the end of the financial year.

Dr Rodney Milford, Programme Manager: Industry Performance, CIDB reiterated that the comment by the CFO was stated  in detail on page 15 of the Annual Strategic Performance Report Plan.

Mr Swathe with regard to information on the registration of contractors asked if CIDB kept details of the companies' past history.

Mr Swathe inquired whether companies which did not comply were downgraded or blacklisted.

Dr Milford replied that one of its aim of the strategic plan was to finalise indicators for the Construction Industry Performance Programme. The intention was to finalise the development of performance reports for contractors which could be used as a means of tracking poor performing contractors.

Ms Madlala asked for an analysis in the staff complement of the numbers for black females and people with disabilities.

Ms Madlala asked if the Construction Contact Centres (CCCs) had also been established in other Provinces either than the Gauteng Province. She further expressed disappointment at the quality of service offered at the CCC in Gauteng.

Mr Gerard Naidoo, Programme Manager Growth and Contractor Development, CIDB, replied that the CCCs created in partnership with the National Department of Public Works were currently operational in all provinces. The details of the CCC were available on CIDBs website. With regard to the centre in Gauteng, CIDB distanced itself from the centre as it was not part of the Onsite Construction Contact Centres which were an initiative of the Department of Infrastructure Development in Gauteng. The Department had established small and medium enterprise (SME) contact centres in the province. This posed a problem, as it was difficult at times to distinguish differences between the two centres.

Ms Madlopha asked for the numbers which had benefited from the skills development programme.

Dr Milford replied that CIDB did monitor the state of employment skills development within the industry and one of its performance indicator was standardisation of the construction skills development. In the event that plan was approved and successful it could be next four to five years of its roll out the creation of about 3 000 learning opportunities for unemployed learners per year on Government projects. The intention was to make it a requirement for individuals with further education and training (FET) qualifications and needing the experiential learning to get this learning on Government projects and to facilitate the development of artisans on Government projects.

Ms Madlopha asked for statistics which indicated that transformation was taking place in the construction industry to support emerging contractors.

Dr Milford replied that the information was available from the register of contractors. In addition, CIDB was involved in the creation of the standardisation for enterprise development which was still awaiting Board and the Ministers’ approval. The intention of this initiative was to regulate Government projects grade seven and above to ensure that 5% of the project value was spent on developmental outcomes which in time could result in the development of over R4.6 billion of developmental opportunities per year. Therefore, the assessment of CIDH in its impact on job creation should be viewed in terms of these long term initiatives which were currently on the table.

Mr Naidoo reiterated that transformation was taking place at higher levels with various incentives being put in place to increase rapid transformation. Contractor development at grade one had increased by 2% percentage which could translated to more than 2 000 contractors being upgraded.

Mr Bafana Ndendwa, Chairperson of the Board, CIDB, commented that the lack of transformation of the emerging black contractors was worrisome as they were continually being marginalised.  He illustrated the case of the delivery of schools in the Eastern Cape and Gauteng Province where he noted a lack of sensitivity on the part of the client bodies when it came to using emerging contractors. Given the magnitude of the programmes a number of contractors could have been developed using management methods which could allow different contractors to work together.

The Chairperson expressed dissatisfaction at the fact that CIDB has not dealt with the issue of the proper grading of small emerging contractors. She added that the Portfolio Committee had been held hostage by contractors who had demanded explanations why the issues they raised had since not been addressed. She anticipated that the Members could encounter the same problems during their oversight visit to Limpopo.

Mr Ndendwa replied that CIDB was reviewing the current grading system.

Mr Sithole asked for the figures of the contractors implicated in fraud.

Mr Ebrahim Moola, Programme Manager: Construction Registers Service, CIDB, commented on the amendments made to the regulations. These included the removal of the requirement to have registered professionals employed in the companies as a CIDB registration requirement. In addition, the annual turnover requirement was reduced and the tender value the contractors could operate in was to be adjusted periodically. Furthermore, there was a slight reduction in the record of accomplishment requirement for contractors. These amendments were to be published soon by the Minister of Public Works for public comment.

The meeting was adjourned.