Department of Public Works 2012 performance & budget adjustment appropriation

Meeting report

Opening Remarks
The Chairperson noted that department presentations should arrive three days prior the day of presentation, and was not clear if that message had been conveyed to the DPW because he never saw the presentation. But in future that message should be clearly indicated so that if it was not happening they knew people were aware that they should have sent the presentation three days before so that members could look and familiarize themselves with the presentation.

Mr M Swart (DA) interjected that he had gone through the report and had seen the Expanded Public Works Programme (EPWP) which was fine, the Youth Service Programme was also covered but there was no indication of the expenditure of the department in the last six months.

The Chairperson said he was still going to come to that but the main issue they had requested from all departments appearing before the Committee was not just the second quarter expenditure was the challenges of the department. Monitoring the expenditure was to ensure that the department spent within the parameters of the budget, that there was not too much under-spending or over-spending. What they requested of the department’s set targets, was where it had not performed to those targets.

The Chairperson said that the shifting of funds was a big issue and they were aware that it would happen but it was important that the department ensured when funds were shifted that process happened in a reasonable way. Shifting funds was worrying to the Committee.

Ms Mandisa Fatyela-Lindie, DPW Acting Director-General, said that she had taken note of the request for the six month’s expenditure report and it was ready and would be emailed to the Chairperson. On the shifting of funds the DG said that in terms of budget they would be able to have a fruitful discussion with the Committee on the reasons for the shifting of the funds and it was not a thing they took lightly. It was an issue that needed a focused discussion which related to the budget presentation.

The DG said currently they were in Phase 2 of EPWP but the Committee should note that DPW was gearing up for Phase 3 given that this was the fourth year of Phase 2. Gearing up for Phase 3 called upon DPW to think very seriously about sustaining the EPWP and ensure that the EPWP did not appear before Parliament dealing only with target numbers because the EPWP was broader than that. They should also ensure that they reported on issues of training, learnerships and their relationship with the Construction SETA. DPW needed to ensure that the EPWP was improved on. They had to ensure that it did respond adequately to the needs of this developmental state. When discussing the budget, they had to look at how the EPWP was benefiting from DPW’s Maintenance Capital Works Programme. They were responsible for the budget supporting the achievement of targets for the EPWP in the current financial period.

The DG said that the infrastructure sector was key and should be the one leading the realization of EPWP targets or exceeding targets given the public investment the country had made in infrastructure. As a department they had to ensure they increase skills beyond the targets so that the infrastructure sector could deal with unemployment in the country.

The DG said that it was known that the country had a very sound rail state sector. The focus of DPW in Phase 2 included rail and they would be looking at how they were going to upscale that.

The DG said that going forward with the implementation of the EPWP, the Committee needed to look at the optimal functionality of local government. There were 278 municipalities and of these, 204 municipalities had reported on EPWP targets. There were major successes around the achievement of targets by municipalities. This was 84 more than the target of 120 for 1^st Quarter 2012. They had got to support the local government sphere to be able to perform.

Expanded Public Works Programme Briefing
Mr Stanley Henderson, DPW Deputy Director General: EPWP, said he would provide information on Expanded Public Works Programme in terms of job opportunities created, the job opportunities achievement by the provinces, the number of youth participating in the National Youth Service programme, under spending of R212 million declared as savings, and the number of municipalities reporting on EPWP.
           
In terms of the EPWP work opportunities Mr Henderson said the overall target for the five-year Phase 2 EPWP starting April 2009 was 4 920 000 work opportunities cumulatively. EPWP work opportunities created since April 2009 was 2 462 502 (50.05%). The work opportunities target for 2012/13 was 1 210 000 and in the 1^st Quarter it obtained 29% of this. The programme was on track in achieving its set target of creating 4 920 000 million work opportunities during the five years 2009/10 – 2013/14.

Mr Henderson said the targeted sectors included Infrastructure at 45% of budget, Environment at 40%, Social at 73%, Non-State: Non-Profit Organizations 38%, and Non-State: Community Works at 50%.

Mr Henderson said from April 2009 (beginning of Phase 2) to June 2012 (end of 1^st Quarter 2012/13) the EPWP programme was supposed to achieve a target of 2 362 500 work opportunities. The EPWP had achieved 104% of this set target. He told the Committee that the programme was on track in achieving its set target pf creating 4 920 000 work opportunities.

Mr Henderson said that the DPW Annual Performance Plan (APP) included indicators for the EPWP:
▪ the total number of work opportunities created through EPWP;
▪ the total number of EPWP opportunities created on provincial access roads;
▪ the number of youth participating in the NYS;
▪ the number of municipalities reporting on the EPWP targets.
 
Work opportunities for April-June 2012 was 350,068 work opportunities which was 116% of the Quarter 1 target and 29% of the annual target of 1 210 000 work opportunities.

Mr Henderson said that the annual target for the EPWP work opportunities created on provincial access roads was 130 000. The Quarter 1 target for 2012/13 for the provincial access road programme was 32 500 work opportunities. In reality, the programme created 78 130 (240% of the quarterly target and 60% of the annual target of 130 000 work opportunities).

He spoke about the participation of municipalities reporting on EPWP targets. The total number of municipalities in South Africa was 278. The target for municipalities reporting on EPWP targets was 260 municipalities by 2013/14. In Quarter 1, 120 municipalities were expected to report on the EPWP targets. Instead, a total of 204 municipalities reported on EPWP targets.

Mr Henderson said that in relation to the National Youth Service (NYS), the annual target for number of youth participating in the NYS was 3 500. In Quarter 1, a target of 1 200 youth participating in the NYS was set. The programme did not achieve its target. A total of 660 youth participated in the NYS programme. This was due to the delay in awarding infrastructure projects. The programme had continued in engaging with projects to ensure that projects were awarded on time.

Mr Aaron Mazibuko, DPW Director: Finance Unit, said that the original infrastructure budget allocation amounted to R1.4b which was reduced to R999m with a difference of R485m and R273m was reprioritized.

The reprioritization for the current financial year was to the effect of R375m from different sub-programmes. Funds have been identified in various programmes which would not be spent during 2012/13. This was due to the current capacity problems faced by DPW as well as projects not spending as expected. It was in the best interest of DPW to reprioritise funding to build capacity and resources to effectively implement the Turnaround strategy.

Mr Mazibuko said that Home Affairs Capital Infrastructure projects were not identified and agreed to in time to spend funds before the end of the financial year. This amount was ring-fenced and could not be reprioritised, but would be given back to National Treasury.

Discussion
Mr Swart (DA) asked where exactly the money had gone because what it seemed the R273m that was reprioritized was a capital item which was shifted to non-capital items That was a transgression of section 43 of the Public Finance Management Act (PFMA).

Ms A Mfulo (ANC) asked DPW to clarify what it meant by savings because DPW had underspent the money yet it called it savings.

Ms R Mashigo asked DPW to clarify the R273m which had been reprioritized bearing in mind what the PFMA was saying.

The Chairperson said that National Treasury gave DPW the authority for reprioritization of that R273m despite what the PFMA was prescribing because the Act prescribed not more than 8% in shifted funds. The PFMA provided that no money could be taken or shifted which was meant for capital expenditure although the Act gave Treasury the authority to prescribe as it deems necessary. Therefore, the Committee needed to have a workshop with the Treasury to iron out these issues.

Ms L Yengeni said that DPW needed to confirm when did it reprioritize and shift the money and, specify from which programme the money was taken.

Mr George Tembo, Director: Public Finance, National Treasury said that there were certain things that National Treasury was allowed to do within the law and there were certain things only Parliament could allow. National Treasury had allowed money from the capital budget to be used for current payments. Section 5(1)(b) of the Appropriations Act stated that National Treasury, in order to execute service delivery, may approve the utilization of a saving in an amount appropriated for capital assets if the expenditure was utilized in the same vote for other categories of expenditure – other than for the compensation of employees.

The Chairperson interjected that section 43 of the PFMA did not authorize the utilization of a saving appropriated from capital expenditure for current expenditure.

Ms Mfulo said that DPW and Treasury was talking about savings. Treasury should clarify what it meant about savings because DPW simply did not spend that money – but they both called it savings.

Ms Mashigo said clarity was needed on the R273m and the basis used to reprioritize that money.

The Chairperson noted that Mr Tembo said Parliament had passed the Appropriations Bill at the beginning of the year and clause 5 of the Appropriations Bill had given Treasury the powers to authorize shifting of funds. If Members could remember when they had passed that Bill they had flagged “that authority” and a discussion was needed with Treasury about those contradictions.

Mr Swart said there was a problem with budgeting in DPW because within the first few months, R212m that was not spend and was called a saving, was allowed by Treasury to be shifted - despite the PFMA. He asked what the purpose of Parliament, where they rubber stamping what Treasury allowed. It was not acceptable that Parliament rubber stamped what Treasury was doing and they needed to deal with that because it was not the fault of DPW, but of Treasury.

Mr L Ramatlakane (COPE) said he agreed with Mr Swart because the gripping problem was the PFMA itself. The PFMA gave Treasury the right to make these decisions so the real problem was the powers given to Treasury by the PFMA. Parliament thought it had powers but the powers were actually given to Treasury through the PFMA. Therefore, Parliament needed to cut Treasury’s powers conferred on it by the PFMA.

He requested DPW give information on municipalities that would not be part of its programmes. He asked what the measurable objective of DPW was in terms of the work opportunities it needed to create.

Ms Yengeni asked what the figure of expenditure was for the Deputy Minister, how much was taken and from which programme. She also asked how much was budgeted for and spent on state funerals.

The Chairperson said DPW should explain the 78 000 work opportunities for the access road programme.

Mr Mazibuko responded that the budget was R29m and the expenditure was R17m and the balance was for other state functions like goods and services.

Mr Henderson responded that in the current financial year they had targeted 260 municipalities reporting to DPW because there was very slow reporting in the first quarter - this was why they had set a target of 260.

Mr Henderson said that the monitoring and evaluation framework of DPW was very clear and targets had been set with clear indicators. One of those indicators was the number of work opportunities but there were many other indicators in that framework. They measure the Full Time Equivalents (FTEs) because many work opportunities were short and others were longer in duration. So the FTEs allowed DPW to have a common measure to compare across programmes. Therefore, in terms of its indicators DPW measured work opportunities as well as FTEs.

Mr Henderson said he did not have the breakdown of the 78 000 work opportunities for the access road programme but would make it available to the Committee by next week.

Mr Henderson said as a department it did not intend to mislead Parliament in its budget expenditure. The overall aggregate target across all sectors came to 4.9 million and that amount matched the earlier slide which gave the annual breakdown.

The Chairperson interjected that the President’s 2009 State of the Nation Address said 500 000 jobs should be created. DPW had aggregated that number to 4.9 million and currently in year 4 of implementation they were at 50%. He asked how DPW would achieve a 100% target when it was still at 50% of implementation with one year left.

Mr Henderson replied that the way the targets had been set was that achievement would be made in year 4 and year 5, there were no targets from year 1 – 3. They were on track in terms of the planning and that meant for the last 2 years of the term, results would be achieved.

The Chairperson said that it was impossible to achieve another 50% when they were left with one year. Experience had revealed how DPW operated and it was not possible that they could spend that money. Funds were being thrown away and they would just add numbers in the last quarter to up the graph. DPW should not say it was on track when they knew they were not on track. They should rather ensure how they achieved that target because it was not possible that it could achieve 100% in the final year.

Mr Henderson said they did not take that target lightly because DPW had planned and engaged with public bodies and that was how they had committed themselves. They would give an honest progress report on those figures up to the fourth quarter of year 4.

The Chairperson said he took note of Mr Henderson’s commitment and would hold him to that because there was a gap which was obvious in the planning of DPW. There were figures that were missing and needed to be revealed. If DPW was not telling the Committee what the position was, how was the Committee going to exercise its oversight function over DPW. The original projected DPW budget was meant to grow in order to achieve 5 million jobs but currently it was declining. A budget could only decline when people were not spending it. Looking at budget expenditure, one could tell if they were on track whereas they underspend. The Committee were not that naïve that it did not see the budget was declining. The programme of job creation was a national programme and it was important, and Treasury would not allow money to sit where it was not utilized. However, the Committee could not assist DPW when figures were hidden.

The Chairperson said that DPW had a sense of undermining the Committee and certain information was not provided to the Committee. The Committee would make a follow up on these issues and DPW had promised that it would report back on certain items that were not answered in the meeting.

The DG said they would submit the budget, the immovable asset register presentation and the presentation on the turnaround programme. DPW was also committed to providing the Committee with the report on municipalities.

The Chairperson said they would invite DPW to speak on the issue DG had raised.

The meeting was adjourned.