Government procurement system progress report; Integrated Financial Management System: Finance Deputy Minister & National Treasury briefing

Public Service and Administration, Performance Monitoring and Evaluation

29 May 2013
Chairperson: Ms J Moloi-Moropa (ANC)
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Meeting Summary

The Deputy Minister of Finance and National Treasury gave a progress report on the review of the entire procurement system of Government. They gave an overview of supply chain management, explained implications of the current status of supply chain management, strategic approach, procurement transformation initiative, and estimated milestones. National Treasury noted high senior management vacancy rates and a high turnover of staff - especially at senior management service (SMS) level. An institution's management should be able to know the demand for critical items, plan for procurement, budget for requirements, know the schedule of supplies, know the number and quality of items received, monitor supplier performance, and monitor utilisation. It should have the management and governance framework to manage these, and it should have available human resources, procedures, data and information management system, a system to monitor utilisation of items, and an audit and enforcement framework to deliver them. South African institutions were weak in these capabilities as reflected in the findings of the Auditor-General of South Africa. Lack of the management and operational systems led to slow service delivery with high levels of underspending, poor quality service delivery, inefficiencies such as wasteful expenditure and shortages, and corruption. The Chief Procurement Office at National Treasury had been established and ratified by the Department of Public Service and Administration. A generic supply chain management operations framework for institutions had been drafted together with a procurement manual and set of procedures. A generic supply chain management human resources operational framework had been developed. Effectiveness improvement projects were ready to be implemented in six provincial departments.


ANC Members asked if there was a mechanism for the larger tenders to ensure skills transfer, in such fields as contract and project management. Government often bought from people who had skills and ended up with a product, but with no skills transfer. To build a developmental state, skills transfer was a necessity. They noted that unsecured financial systems would lead to massive corruption. Was National Treasury going to take over the procurement system of large tenders? DA Members asked about the saving on personnel and human resources through technology and automation, the saving as a percentage of the current cost of procurement in real terms, and the cost of implementation over five years. When would one see a return on one's investment? As to the 'milestones', when was year one? To what extent would the rollouts be transferred into action plans and implementation? It was shocking that there were not proper financial control systems in place. National Treasury was the best-organised department. Was this problem at National Treasury in terms of rolling out the system or was it in the provinces? The basics of any business were to understand supply chain management. Why was there such a high turnover of heads of department? How could one recruit people to such high positions without knowing the basics of doing business? The Chairperson asked if capacity was being transferred to black economic empowerment (BEE) enterprises. She doubted whether government used its buying power sufficiently. It was necessary to transform the banks.
 
The Deputy Minister of Finance and National Treasury briefed Members on its role in the Integrated Financial Management System in the Public Service. National Treasury explained the background, scope, modules, benefits, product development status, lead site implementation status, and brief status per module. National Treasury then explained supply chain management status – procurement management, scope, status – catalogue management, item and service master and asset management, inventory management, and key challenges and lessons learnt; human resource management scope, status, and key development activities; and the way forward.

The Chairperson appreciated National Treasury's honesty in giving the true picture as a basis for discussion. She emphasised the importance of the synergy between the State Information Technology Agency and the Department of Public Service and Administration with National Treasury driving the programme. ANC Members welcomed National Treasury's awareness of the importance of monitoring, and commended standardisation and measures to stop corruption. However, the current extent of corruption was not necessarily related to lack of capacity. There was need for skills auditing and realignment. To try to capacitate someone who was in the wrong job would not work. Many CFOs, especially in the municipalities, were trained, but left as soon as they had been trained, only to be replaced by newcomers who needed training. Sometimes payment was made for an unfinished project, mainly in the municipalities. Members asked if the Department of Public Service and Administration was preparing public servants to use the Integrated Financial Management System. If it would take a long time to implement the system, then problems would remain until the system was implemented. The pace of implementation might be slowed by the introduction of new developments in information and communications technology. The Committee should hear from the State Information Technology Agency how to manage such developments and integrate them into the Integrated Financial Management System. DA Members said that hacking was a serious problem that needed to be addressed and were concerned at possible political dispute around oversight. National Treasury had an enormous challenge on its hands. It would be wrong to change a huge system to accommodate Limpopo's preference for bar code identification of vehicles. For implementation it was vital to have skilled and capable people. Without them, how could one achieve results? How did National Treasury plan to ensure the availability of the required skills? Surely the process before awarding tenders must be included in the Integrated Financial Management System? If non-compliance carried no risks, how could National Treasury expect people to comply? Many procurement issues were specific to municipalities. National Treasury might be engulfed by so many of these procurement matters that could have been delegated to the municipal level.

Meeting report

Introduction
The Committee had not been satisfied with its previous enquires on the Government Procurement System and Integrated Financial Management System (IFMS). Hence it was keen to engage with National Treasury, the Department of Public Service and Administration (DPSA), and also with the State Information Technology Agency (SITA). It had not seen enough synergy between the departments concerned. However, it expected a fruitful meeting. The apologies of Minister of Finance, Hon. Pravin Gordhan, and the Deputy Minister for Public Service and Administration, Ayanda Dlodlo were noted.

Government procurement system review progress report: National Treasury briefing
The Deputy Minister of Finance, Nhlanhla Nene, and the National Treasury briefed Members on its progress report on the review of the entire procurement system of Government. They gave an overview of supply chain management (SCM), explained implications of the current status of supply chain management, strategic approach, procurement transformation initiative, and estimated milestones.

The Deputy Minister said that procurement constituted an important part of government, but which had challenges that required the coordinated effort of all. The establishment of the Office of the Chief Procurement Officer was part of the overhaul of the entire procurement system. The integrated financial management system (IFMS) had been a long time in coming. One acknowledged that there had been problems, but one now though that a point had been reached where it would be possible to take the process forward.
 
The Deputy Minister said that behind every system was the human element, and the most precious component was integrity.

1 Supply chain management (SCM) overview
Mr Kenneth Brown, Chief Procurement Officer, said that SCM had been managed by the financial norm of budget versus expenditure. It had focused mainly on the tendering process and exceptions. The current problem could be defined as an operations management and administration problem rather than a procurement problem. There were high senior management vacancy rates and a high turnover of staff (especially at senior management service (SMS) level. SCM was an essential service, but underestimated.

An institution's management should be able to know the demand for critical items, plan for procurement, budget for requirements, know the schedule of supplies, know the number and quality of items received, monitor supplier performance, and monitor utilisation. It should have the management and governance framework to manage the above.

An institution should have the following capability to deliver the above – human resources, procedures, data and information management system, a system to monitor utilisation of items, and an audit and enforcement framework. South African institutions were weak in these capabilities as reflected in the findings of the Auditor-General of South Africa (AGSA). (slides 3-5)

2 Implications of current SCM status
Lack of the management and operational systems led to slow service delivery with high levels of underspending, poor quality service delivery, inefficiencies such as wasteful expenditure and shortages, and corruption. (slide 6)

3 Strategic approach
The following would be achieved through a procurement transformation initiative (PTI) over a period of five to seven years: designing the overall SCM architecture; creating a capability at National Treasury that would be able to design and help implement SCM operational systems at institutions and monitor the SCM performance; reduce the complexity in the current system by standardisation, aggregation, and data alignment; enforce compliance through strong administrative actions; and build SCM capacity in specific functions at all institutions. (slide 7)

4.1 Procurement transformation initiative (PTI) plan
The initiative would adopt a project approach with the following streams: create capability to manage critical items (with price indexing, aggregation of demand and procurement at institutional level, and standardisation), improve effectiveness at pilot sites, create sector specific standard procedures, establish an SCM human resources (HR) framework, establish an integrated data framework, and establish a compliance management framework. The programme was to be reviewed and revised annually. (slide 8)

4.2 PTI progress to date
The Chief Procurement Office at National Treasury had been established and ratified by the DPSA. A generic SCM operations framework for institutions had been drafted together with a procurement manual and set of procedures. A generic SCM HR operational framework had been developed. Effectiveness improvement projects were ready to be implemented in six provincial departments. (slide 9)

5.1 Estimated milestones – year 1
Procurement effectiveness improvement at five provincial departments in Limpopo; procurement management capability at Limpopo Provincial Treasury; Procurement effectiveness improvement at a provincial health department (other than Limpopo) and at Public Works; pilot SCM operational system at a national department; price indexing for select items; and at National Treasury Office of the Chief Procurement Officer to establish the following – data analysis and monitoring, client support to implement operational systems at the institutions, training for accounting officers, CFOs and SCM heads in SCM capability building, and role specific training for SCM practitioners and line managers. (slide 10)

5.2 Estimated milestones – year 2
Rollout of SCM capability model for national and provincial departments, and reporting and review framework for national and provincial departments; pilot SCM capability model at municipalities; strengthen capability to manage critical items at national level; and full integration of procurement data between manual and various technology systems. (slide 11)

5.3 Estimated milestones – year 3
Rollout SCM capabilities at municipalities; pilot SCM capability model at State Owned Companies (SOCs); rollout sector specific SCM operating manuals; conclude SCM architecture for business and in technology; modernisation and automation plan; and capability to manage procurement for strategic programmes, for example, infrastructure. (slide 12)

5.4 Estimated milestones – year 4/5
Rollout of modernisation and automation plan; rollout of SCM operating model for all public sector entities; and rollout of SCM HR capability model. (slide 13)

Discussion
Mr A Williams (ANC) asked if there was a mechanism for the larger tenders to ensure skills transfer, in such fields as contract and project management. Government often bought from people who had skills and ended up with a product, but with no skills transfer. To build a developmental state, skills transfer was a necessity.

Mr Williams asked about the automated system for procurement. 81% of departments lacked secure financial systems. 83% of entities lacked reliable backups. Would National Treasury resolve this problem first before venturing into the information technology (IT) part of the project? Unsecured financial systems would lead to massive corruption, if they had not caused corruption already.

Mr Williams asked about the Department of Labour's procurement of a Siemens system. There had been many problems. Was National Treasury going to take over the procurement system of large tenders? Was there a method to prevent the Siemens situation from happening in other departments?

Mr D du Toit (DA) asked about the saving on personnel and human resources through technology and automation, and the saving as a percentage of the current cost of procurement in real terms.

Mr Du Toit asked about the cost of implementation over five years. When would one see a return on one's investment?

Mr J Marais (DA) asked about the 'milestones'. When was year one?

Mr Marais asked about rollouts. To what extent would the rollouts be transferred into action plans and implementation? There were many policies and models, but the problem was implementation.

Mr Marais was shocked that it appeared that there were not proper financial control systems in place. National Treasury was the best-organised department. Was this problem at National Treasury in terms of rolling out the system or was it in the provinces? The basics of any business were to understand supply chain management.

Mr Marais asked why there was a high turnover of heads of department (HoDs). Was it because of the appointment system? How on earth could one recruit people to such high positions without knowing the basics of doing business?

Mr Marais said, with reference to the National Development Plan (NDP) that there was a shortage of human skills and capabilities. How do we remedy that?

Mr Marais said that corruption began in the process of awarding a tender. There was a reluctance to pinpoint the real problem. It was necessary to treat the cause, not the symptoms. What was the action plan to treat the cause?

Mr Marais asked how one should approach the problem of government employees or their family members doing business with the state?

The Chairperson asked Mr Marais to focus on his questions, rather than making a speech.

Mr Marais asked if his questions were too sensitive.

The Chairperson said that it was fine to ask sensitive questions, as the delegates were here to answer questions. It was more a matter of timekeeping.

Mr Marais observed that SITA was present. However, SITA was not the procurement office for information and communications technology (ICT). Why were there still problems?

Mr Marais said that it was necessary to do the correct things first.

Responses
The Deputy Minister replied that the issue of the wage bill was a major concern for government, but as a percentage of its total expenditure. However, it was not the ever-increasing wage bill, but if the wage bill increased without commensurate increase in productivity that was a problem. If the right skills were attracted, and the right salaries were paid for the right skills, that would not be a problem. However, productivity was not increasing because of the problems and the challenges that one was raising in relation to issues of procurement and systems that were not efficient enough to ensure that government got value for its expenditure.

The Deputy Minister replied that costing was done as developing and implementing the system progressed. It was not possible to give a cost to the totality of the implementation.

The Deputy Minister replied that the biggest return on this investment would be if government was able to cap corruption that arose out of a system that was not able to detect some of these issues. A second big return would be economies of scale from integrated systems.

The Deputy Minister replied that the IFMS would address lack of financial controls.

The Deputy Minister replied that Mr Brown had indicated that if in provinces there was a plethora of cost centres, that alone left space for poor financial management and inefficiencies in spending.

The Deputy Minister said that government was a major procurer of goods and services but did not negotiate the price, whereas a private procurer determined the price it was going to pay in the market.

The Deputy Minister said that National Treasury was not centralising but putting systems in place to enable obtaining the benefit that any sensible procurer would want to obtain.

The Deputy Minister did not want to contemplate what government would spend if it had kept the system that it inherited in 1994.

The Deputy Minister said that we had reached the current point by confronting the challenges of the past and learning lessons from them. He appreciated the Committee's counsel. He assured Mr Marais that the symptoms were just a manifestation of the root problem. Rollout was, in fact, implementation. The phase of piloting would have been long past when years three, four and five were reached. The real problem was now being addressed, not just the symptoms. He repeated that symptoms were only the manifestation. The findings of the Auditor-General of South Africa (AGSA) should also be taken on board, in order to prevent the failings that resulted in poor audit outcomes and to ensure a fit public service. Lessons had been learnt from the Section 100 interventions.

Supply chain
Transfer of skills

Mr Brown replied that it was necessary to achieve a balance between obtaining the service and setting objectives. In an effort to transfer skills, one should not lose sight of the primary aim of obtaining delivery of the service. Once one put multiple objectives in a procurement system, one added to its costs. However, in certain large procurement systems, one also sought to use the procurement system to build skills.

Automation
Mr Brown replied that it was necessary to test an automated system before rolling it out. Part of testing was to examine backup protocols and security.

Tenders
It was not the intention of the National Treasury, or the Chief Procurement Officer, to take over large tenders. What was key was the roles that the Chief Procurement Officer put in place to make sure that large tenders were managed efficiently. There was need for considerable clarification of roles in information and communications technology (ICT). There was in the Department of Public Service and Administration (DPSA) the capability to oversee the government's entire landscape of ICT. However, there was also need for specialists chief information officers in departments, who would be linked to the entire procurement system. National Treasury would have to build specific capability to budget for it and manage expenditure in line with the principles of efficiency and cost saving.

Rollout
The Deputy Minister had spoken of the savings and the milestones. Rollout had already started, and many things would run in parallel. Although Mr Brown had indicated a five to seven year horizon, National Treasury would move as quickly as possible.

Capacity
National Treasury was also building capacity so as to rely less and less on consultants. It was necessary to have a proper environment for SCM to function.

Other questions
These would be dealt with after the second presentation.

Chairperson's comments and questions
The Chairperson did not expect responses at this stage. The Public Service Act would be undergoing amendments with the aim of tightening it. It would also be necessary to tighten legislation for local government. The single or integrated public service concept would enable much better working with local government. The Public Service Commission (PSC) was amending its founding legislation to extend its role from national and provincial to local government. It had to be asked how to accommodate the integrated development plans (IDPs) of local government. She was concerned that small, medium and micro enterprises (SMMEs) were not really working well in relation to local government in so far as procurement was not working well. This also related to Mr Williams' issue of the bigger, tender process – how did one follow it through? Did we see capacity being transferred to black economic empowerment (BEE) enterprises? Also one had to think of cooperatives which were not necessarily functioning properly. She doubted whether government used its buying power sufficiently. It was necessary to transform the banks. She gave, as an example, housing.
 
Integrated Financial Management System (IFMS) in the Public Service: National Treasury role
The Deputy Minister and National Treasury briefed Members on its role on the Integrated Financial Management System (IFMS) in the Public Service. National Treasury explained the IFMS background, scope, modules, benefits, product development status, lead site implementation status, and brief status per module. National Treasury then explained supply chain management (SCM) status – procurement management, SCM scope, SCM status – catalogue management, item and service master and asset management, SCM inventory management, and SCM key challenges and lessons learnt; human resource management scope, status, and key development activities; and integrated financial management conclusion and way forward.

IFMS background
Mr Michael Sass, Deputy Accountant-General, said that the IFMS project aimed to replace ageing and fragmented financial, including payroll systems, ageing supply chain and human resource management systems, and associated ageing technologies, across national and provincial departments. The project was approved by Cabinet in September 2005. Phase 1 culminated in a submission to Cabinet in 2005 (Cabinet Memorandum 16 of 2005) to obtain approval of the continuation of the IFMS. Cabinet took a number of decisions, including: all financial management including payroll, supply chain management and human resource systems should be provided centrally; all related independent systems renewal initiatives at national and provincial departments must be suspended; the independent systems used in North West, Gauteng, and Limpopo, the Department of Defence, and the South African Police Service, should be migrated to a new central solution, the IFMS; the new financial management integrated SCM (with the exception of the procurement management module) and payroll systems should be developed and managed by SITA; and the new HR and procurement management system should be acquired and managed by SITA as commercial off the shelf (COTS) systems. (slide 2)

IFMS scope: modules
(See diagram, slide 3)

IFMS benefits
Benefits included the automation of business processes to ensure greater efficiencies in process execution and improved quality and access to data. Benefits also included supporting the implementation of the Public Finance Management Act, the Pubic Service Act, and other relevant legislation, greatly improving the general control environment, reducing fraud, and minimising corruption. It would result in developing ICT skills in the country. (See slide 4)

IFMS product development status
(See table, slide 5)

IFMS lead site implementation status
(See table, slide 6)

IFMS brief status per module
(See slides 7-8)

SCM status: procurement management [1]
(See slide 9)

Supply chain management
SCM scope

The SCM system would enable departments to generate demand forecasts, plan and execute procurement processes, effectively manage assets, and balance inventory across the supply chain. It consisted of catalogue management, item and service master, asset management, procurement management, and inventory management. (See slide 11)

SCM status: catalogue management, item and service master and asset management
(See slide 12)

SCM status: procurement management [2]
(See slides 13-14)

SCM status: inventory management
Development (excluding integration into other IFMS modules) of agreed upon scope had been completed. Software integration testing was in process. Product user acceptance testing and lead site implementation was being planned for. Delays in development were experienced primarily due to lack of resources in SITA.
(slide 15)

SCM key challenges
Key challenges were organisational readiness to adopt and operate SCM modules; constraints and SITA capacitor to acquire, develop, enhance and integrate, inclusive of enhancing transversal contracts functionality to meet business requirements; unsigned key documentation; availability of users to conduct product user acceptance testing; delay in identifying ownership of master data and establishment of a master data governance office; and no agreement by Service Level Agreement (SLA) committee on operationalisation costs. (See slide 16)

SCM lessons learnt
SCM programme proved far more complex than originally envisaged. Time frames were restricted, and there were governance issues. Other lessons were the longer than planned procurement and contract negotiation processes, lack of sufficient capacity in key stakeholders, mutual understanding between different stakeholders of respective limitations and requirements, and readiness and change management issues in lead sites. (slide 17)

Human resource management
Human resource management scope

(See slide 19)

HRM status
(See slide 20)

HRM status: key development activities
(See slide 21)

IFMD conclusion and way forward
Execute various audits to establish accurate status quo and identify project risks; establish a project management office within National Treasury; review and update all user requirements (including infrastructure); evaluate and decide on the appropriateness of the solutions acquired; determine new and realistic time lines for deliverables and implementation (rollout strategy); review the concept of lead site testing; and 'quick wins' on the legacy system.
(slide 22)

Mr Sass commented that it was clear that one had underestimated the complexity of what a system such as IFMS entailed. There were many systems that needed to be integrated into one another. However, these issues had been considered and one now thought it possible to move forward.

Discussion
The Chairperson appreciated National Treasury's honesty in giving the true picture as a basis for discussion.

Mr Du Toit was worried about identity numbers and double identities. He asked if National Treasury had considered fingerprints and DNA as a means of identification to prevent determined people from circumventing the system.

Mr Du Toit said that hacking was a serious problem that needed to be addressed.

Mr Du Toit referred to slides 19 and following, on human resources. Would this be done on a single level? It would be complex to manage it from the top. It was necessary to be clear on how it would be done.

Mr Du Toit referred to 'suspended' slide 1. How would this be done? He looked at the oversight role. This Committee was at the national level of oversight. There were also provincial and local levels of oversight. He did not think oversight was being done properly at the local level. The central system of procurement might suggest a choice that would be called into question at the level of local government. This might be because the local government level was not on the same level of thought. Or it could be that the local government level had a real problem with the outcome. He suggested that in the new system, corruption did slip in and someone at local level or provincial level picked it up. Then there was a dispute and it became a political football – a political dispute around oversight.

Mr Marais said that the presentation had confirmed his concerns. National Treasury had an enormous challenge on its hands.

Mr Marais, from his perspective of having studied transport economics, asked if there was a fleet management system. Limpopo should not dictate to National Treasury that it did not want to use the vehicle identification number (VIN) system, as a bar code label could easily fall off or be removed. On the other hand the VIN number was specific to one engine. It would be wrong to change a huge system to accommodate a very doubtful province.

Mr Marais asked what the readiness was of the organisations to which he had referred to start with the implementation. Mr Brown, in his time lines, had indicated that 'next year' the system must be rolled out to provinces. Currently National Treasury had mentioned only Limpopo as a place for pilot projects, besides National Treasury itself. How ready were the provinces?

Mr Marais said that for implementation it was vital to have skilled and capable people. Without them how on earth could one achieve results? How did National Treasury plan to ensure the availability of the required skills.

Mr Marais had not detected anything about the process before awarding tenders. Mr Brown had mentioned problems that arose after tenders had been awarded. Surely the process before awarding tenders must be included in the IFMS, as this process was at the root of many problems.

Mr Marais had also not detected anything about the consequences of non-compliance. If non-compliance carried no risks, how could National Treasury expect people to comply?

Ms M Mohale (ANC) asked around the issue of the time that it would take to implement the system. If it would take a long time to implement the system, then problems would remain until the system was implemented.

Ms Mohale said that even if National Treasury had said nothing about human resources, she thought that IFMS would assist in the management of records. However, if implementation would take time, then there would be problems.

Ms Mohale asked about training of supply chain officials. How was National Treasury going to assess the impact? Although there was already training, it seemed as if there was no improvement.

Ms Mohale asked about the IDPs of municipalities and their budgets. It was only at the end of the financial year that advertisements for projects would appear. Meanwhile, within the financial year, the municipality had not been able to do what it had promised to do. How would this supply chain office assist municipalities to give effect to their plans?

Ms Mohale thought that the pace of implementation might be slowed by the introduction of new developments in ICT. The State Information Technology Agency (SITA) would have to tell Members how to manage such developments and integrate them into the IFMS.

Mr D Ximbi (ANC) found that Members had anticipated many of his questions. He observed that the two presentations were well interrelated. He welcomed National Treasury's awareness of the importance of monitoring. Standardisation was good. He commended fighting corruption. Capacitating the officials was also good. However, he did not see that the current extent of corruption was related to lack of capacity. He agreed with Mr Marais that realignment was needed. For example, in other provinces and municipalities there was an office of CFO. This CFO was surrounded by deputies and by officials. However, one found that the CFOs outsourced their duties to KPMG and others instead of doing what they were supposed to do. It was not that these people were unqualified, but they did not know what to do, and were in the wrong offices. There was need for skills auditing and realignment. Thence it would be possible to capacitate those people. To try to capacitate someone who was in the wrong job would not work.

Ms D Boshigo (ANC) spoke about the CFOs, especially in the municipalities. Many were trained, but left as soon as they had been trained, only to be replaced by newcomers who needed training.

Ms Boshigo commented on the lack of monitoring of the projects. Sometimes payment was made for an unfinished project. This was mainly in the municipalities, of which she had experience.

The Chairperson said that it was an advantage to have a Member who also served on the Portfolio Committee on Cooperative Governance and Traditional Affairs. It was important to retain CFOs.

Ms Mohale asked if the DPSA was preparing public servants to use the IFMS.

Mr Du Toit said that many procurement issues were specific to municipalities. He feared that National Treasury would be engulfed by so many of these procurement matters that could have been delegated to the municipal level.

Mr Du Toit asked if the personnel human resources management component of the IFMS was going to replace the current recruitment at municipal and provincial levels.

The Chairperson emphasised the importance of the synergy between SITA and CPSI and DPSA with National Treasury driving the programme.

The Chairperson understood the issue of the transversal contract management and the responsibility that National Treasury indicated that it had. She noted (slide 11) that only National Treasury would utilise transversal contract management. She was aware that it was Oracle that had been procured and that was why National Treasury had encountered all those obstacles and learnt those lessons over the years. This demonstrated the impact of something going wrong in the public service. It was a major problem. She referred to the SITA Act and the binding role of public administration. She needed to be clear, especially on synergy.

Responses
The Deputy Minister did not want to pretend to have conclusive answers to all Members questions. In fact the process itself was trying to find answers to the questions that Members were asking. This was just an indication of why one should have the process. He agreed with Mr Marais that there was an enormous challenge, but challenges were there to be confronted. This was the process in which to confront the challenges. Parliament had a role to play in terms of oversight. All the other political structures, including those at sub-national level, such as provincial legislatures and municipal councils, had a role to play. If capacity were not built at provincial and municipal level, then one would not expect to see progress. If enormous challenges were to be left unchallenged, then apartheid would not have been challenged. All of us now had a duty to make sure South Africa worked, not only for the present, but also for future generations.

The outcome of the coordination and cooperation between the South African Revenue Service (SARS, National Treasury, and the Department of Home Affairs, had actually put South Africa where it was with regard to the systems that were beginning to work at the Department of Home Affairs. There was a state that was in the making, and it was making progress. One would be unfair to oneself if one denied that one had made progress. However, there was still much to be done. People no longer had to submit certificates that they were alive to the pension administration. Now systems were interrelated, and when a person died, his or her name was automatically removed from the pension register. This was the benefit of a well-functioning integrated system. When government systems were interrelated, it removed some of the inefficiencies that might have resulted in much wastage in the past.

Mr Marais's suggestions about fleet management systems and the readiness of departments – this was why when he received the invitation he impressed on the officials that the notice was very clear that National Treasury needed to brief the Committee on its role in the IFMS. There were a number of players. The DPSA was responsible for the human resources side. National Treasury was working with DPSA but would not attempt to account on its behalf. National Treasury sought a coordinated approach with DPSA. SITA was responsible for the ICT systems. The IFMS Steering Committee was composed of members from National Treasury, from SITA, from the DPSA, and ad hoc user representatives from the Department of Defence and the South African Police Service (SAPS), which were the pilot departments at present. Out of that process one would be able to produce a product that at the time of the ultimate rollout or implementation, would have been thoroughly tested. So the capacity about which one was talking was the capacity with which everyone was seized in building. At the same time one needed a coordinated approach between National Treasury, DPSA, and SITA, which itself also reported to the DPSA.

Filtering it down to municipalities was actually key. He did not want to venture into what DPSA was working on – namely the single public service. In the end, if one wanted standardised systems, one wanted equal capabilities to be able to drive the processes.

CFOs were a very special human resource. Most of them were accountants. However, some of the positions in local municipalities did not require a chartered accountant. Nevertheless, for such positions, matric alone was insufficient, and some accounting qualifications were required.

A skills audit had been tabled to Cabinet. It would come to Parliament also. It focuses on the skills for financial management. In oversight it was important that people with the right skills were deployed in positions.

National Treasury's role was to put systems in place and to establish the legislative framework, and to ensure that there were people to take the actions to which Mr Marais referred. He agreed with Mr Marais that there must be consequences for non-compliance. However, that was not the National Treasury's role. People found guilty of financial misconduct must be charged under the PFMA. National Treasury would work with all stakeholders to ensure that systems were in place and to ensure that all checks and balances established and that where there were weaknesses to work to close those weaknesses, alerted by Parliament's, National Treasury's, and the AGSA's findings.

Mr Brown emphasised the importance of the Public Service Act and the PFMA. The former assigned responsibilities to heads of department. The PFMA assigned responsibilities to accounting officers. They complemented each other. The ultimate responsibility to make sure that a system functioned basically resided with the head of department and the accounting officer. National Treasury came in with answering the question of how to provide support. It was important to obtain stability at management level.

With his background as a former school principal, he gave the example of the Department of Basic Education which one would expect to have a component to deal with data management itself. On the basis of this data, the Department would know where to build schools, where to place teachers, and how to distribute supplies. This was what in procurement was called 'demand management'.

Having decided to procure, one came to the tender process. Based on understanding demand, it was necessary to draw up procurement plans.

He responded to Ms Mohale on the 'March spike', when tenders were issued for fear of losing the money. This indicated a lack of alignment of procurement plans to the demand. This was linked to the IDPs. Under the legislation and regulations, those procurement plans must be sent to National Treasury. National Treasury's responsibility was to ensure that the scheduling happened, and would alert departments. It would tell them that they had said that they were going to put something out to tender at a certain time, but as yet it had seen nothing from them. It was necessary to determine how to build this capability within National Treasury.

After the procurement plan, it was necessary to issue the tender. Once the tender was issued, it was necessary to ensure that the goods were delivered. Here logistics management came into the picture. Was there an oversight mechanism in the department to ensure that contractors were adhering to the specifications given in the tender? Having obtained delivery, it was necessary to maintain, for example, the school, over its life cycle.

He hoped that National Treasury was not creating the impression that there was no system in place. What it wanted to do was to fix any existing inefficiency.

The other element of thinking differently was that government should stop operating as if there was no private sector that was also procuring. The private sector also bought goods and services. A private hospital did the same as a public hospital. It had to be asked what the private sector could learn from government and vice versa. He gave the example of schools built privately in as little as seven months, from foundation to roof. These were exciting times.

The Chairperson felt that the Committee had not exhausted the subject and that there should be a further meeting.

Mr Kenny Govender, DPSA DDG: Human Resources Management and Development, said that much of the discussion had covered issues that he would want to have raised. For anything to work in government, there were three key elements. It was necessary to create an environment for that to happen. The second thing to do was put in place the systems and institutions to support implementation. Thirdly, there would always be individuals who did not do what they were supposed to do, so it was necessary to build in sanctions. Government had approached this in an integrated manner. DPSA, National Treasury, and other institutions had worked very closely. All of these elements, including supply chain management, were part of Outcome 12. The enabling environment – PFMA, the Public Service Act, and regulations – were in place, although there were gaps. The Minister for the Public Service and Administration had clearly stated in the budget vote speech that there was need to amend the Public Service Act to address those gaps. The DPSA and National Treasury had developed human resource and financial delegations to support the implementation. The DPSA had established institutions such as the Anti-corruption Bureau to deal with sanctions, and the Office of Standards and Compliance, to monitor the effectiveness and efficiency to deal with all these things. National Treasury on the other hand in relation to supply chain management was establishing the Office of the Chief Procurement Officer. The IFMS was one of the systems to support implementation. E-disclosure would come into effect on 01 April 2014, and would also deal with procurement and the participation of public servants in tendering. The key element was training and development. It had to be asked whether the public service had the capacity to give effect to all these things. The answer at this stage was not an absolute 'no'. However, there were gaps. At the same time, he assured the Committee, that as part of the IFMS rollout, the DPSA had a strategy on change management and on training and development. So before any rollout took place, there was a process to train, capacitate and ensure that people were ready to use the system when it was ready for rollout.

The Chairperson asked about the School of Government. She thanked the Deputy Minister, National Treasury and DPSA. The Committee would continue its discussions on the subject in the third term.

The meeting was adjourned.


 

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