Review of Limpopo intervention in terms of section 100 (2) (c) of Constitution: input by Administrators (day 2)

NCOP Finance

16 October 2013
Chairperson: Mr C De Beer (ANC; Northern Cape)
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Meeting Summary

Following a financial collapse, Cabinet resolved to intervene in Limpopo Province using the most extreme legal tool available, section 100 (1) (b). This was the second day of the progress reports from Departments of the Limpopo administration.  Five Departments had been put under administration and those Departments presented their progress reports to the Select Committee on Finance.

Progress Report on the Section 100 (1) (b) intervention – Limpopo Department of Education

The most important issues were the procurement and delivery of Learner Teacher Support Materials (LTSMs) and the compensation of employees.  LDOE had the biggest budget in province but 83% of the budget was allocated to compensation of employees, conditional grants excluded. In 2012, Curriculum Assessment Policy Statements (CAPS)-aligned textbooks were procured for the Foundation Phase (grades 1-3) and Grade 10 and top-ups for Grades 11 and 12 –covering more than 26 000 Grade 11, and more than 15 500 Grade 12 learners. Since there was no budget allocated for the 2012 academic year, a decision was taken, with the support of the National and Provincial Treasuries to use the R249 million allocated for the procurement of textbooks for the 2013 academic year.  During the 2012/13 budget adjustment process, the National and Provincial Treasuries made available an additional R510 million for the procurement of CAPS-aligned textbooks for the Intermediated Phase (Grades 4-6), Grade 11 and stationery for Grades R-12.  To ensure on time delivery, LDOE used a letter from Treasury that guaranteed the payment of the R510 million to start procurement and 113 825 Grade 4, 118 067 Grade 5 and 172 398 Grade 6 received workbooks and CAPS-aligned textbooks, plus 172 398 Grade 11 learners received CAPS-aligned textbooks and that constituted 100% coverage.  Stationery was supplied to all 1.66 million Grades R-12 learners. 

A budget allocation of R620 million had been made available for the 2014 LTSM procurement, with R145 million earmarked for stationery and R475 million for CAPS-aligned textbooks for Grades 7-9 and Grade 12, which were the last grades in which the CAPS were implemented. More than 6 million CAPS-aligned textbooks had been ordered for Grades 7-9 and Grade 12 while stationer had been ordered for more than 1.66 million learners. CAPS-aligned textbooks would be received by 120 994 Grade 7 learners, 122 547 Grade 8 learners, 184 532 Grade 9 learners and 82 983 Grade 12 learners.  The Department was doing a study to determine what the reasons were that almost half the learners did not make it to Grade 12, which was a national phenomenon.  The first batch of textbooks had been delivered and the completion date was set at mid-November 2013.  A phenomenon that was discovered was that the province paid its teachers on all post levels more than anyone else in the country at a ratio of 1:1.5.  Interventions included the absorption of 2 489 of the 2 544 temporary educators in substantive posts, leaving a surplus of 55 temporary educators at the end of August 2013 and the HR interventions implemented, enabled the savings of R327 million (99.4% of the total compensation of employees savings in the province).  Age profiles showed 26 366 of the educators in the province were between the ages of 45 and 55 and 7 782 educators were between 55 and 65 years old and support staff showed the same trend, and to address this trend required a strategic approach.  Office-based educators showed that the bulk between the ages of 45 and 59 with almost none in the 20 to 34 age group, and based on these statistics it showed that these specialised services could only be sufficiently maintained for the next 20 years.

The presentation showed 96.3% (1.6 million) of learners was in “no fee” schools and less than 4% of the learner population had the capacity to pay fees, and comparatively the province had the highest number of learners that benefited from the “No Fee” policy.  Several schools in the province owed Eskom and the municipalities large amounts of monies, the matter was tabled at the EXCO Lekgotla and decided that the Department would settle the municipal and Eskom debts, exempted from interests if paid within one month of being invoiced to avoid suspension of services to the schools which would negatively impact the learners.  I

The National Senior Certificate (NSC) results from 1996 until 2012 and the trend appeared to show a dip in the pass percentages when there were curriculum changes, but the pass rate had been steadily increasing since 2009.  The 2012 NSC examination results showed Limpopo remained the top province in producing passes at Bachelor level, no district in the province achieved a less than 60% pass rate, the top performing candidate came from a Quintile 3 school in the province and 14 of the best performing candidates in a variety of subjects came from Limpopo.  LDOE achieved a disclaimed audit opinion due to of an inaccurate asset register where the coordinates of the school did not respond to the actual location of the school, misclassification of projects, commitments not completed, outstanding receivables and pedestrian HR matters.  These issues were addressed, an action plan had been developed and quality assured by PwC-Rakoma.

Committee Members discussed the following issues: the compensation of employees budget and the higher salaries earned by educators in Limpopo; the merger of 308 schools in the province; the age profiles of educators and the challenges of an aging profession; the success of the central procurement strategy employed by the Department; and successes of the 2012 NSC examination

Progress Report on the Section 100 (1) (b) intervention – Limpopo Department of Public Works

An infrastructure capacitation funding plan had been developed and approved.  The first area of the intervention was the Immovable Asset Register Plan.  The Auditor-General qualified the LDPW on the state of its immovable asset register, because there were just more than 900 vested assets in its register and according to the National Department of Public Works there should have been at least 12 000 assets in its register.  He gave an overview of phase 1 of the immovable asset register and said the risk and mitigation factors were a delay in the issuing of a letter from the Treasury and that would be mitigated by discussions with treasury. Phase 2 of the project showed there was a lack of a system and controls to sustain, maintain and manage additions and amendments. These issued could be mitigated by consolidating the register, as well as building internal capacity to manage the register.

The lease review project would result in a substantial reduction in the office rental cost for the province from the R200 million paid per annum on lease buildings and the project would be concluded on 30 October 2013.

The Department developed a turnaround plan which made provision for alternative infrastructure delivery systems.  The Department appointed the Independent Development Trust (IDT) as the preferred implementing agent to augment the current internal capacity in delivering infrastructure. In addressing the existing capacity constraints, the LDPW had transferred an amount of R412 Million out of R632m worth of projects to be implemented by the IDT. While the AG finding had remained a disclaimer, the number of AG findings per the management letter had reduced from 162 in the 2011/12 financial year end to 131 in the 2012/13 financial year end. In response, a comprehensive AG action plan had been developed with the PwC – Rakoma consortium appointed by the Provincial Treasury. The Department was aiming for an improved audit outcome for 2013/14.

The Committee discussed the following issues: the role of the Independent Development Trust (IDT) as an implementing agent for LDPW; the audit findings and the way forward; the asset management register and the lease review project; and infrastructure and best practices.

Progress Report on the Section 100 (1) (b) intervention – Limpopo Department of Roads and Transport

Commendable progress had been achieved, mainly in the Department, whereas some work still needed to be done at the Roads Agency Limpopo (RAL) and the Gateway Airports Authority Limited (GAAL). Challenges at the two agencies ranged from legislative, governance and resources management. It was still relevant to pursue the investigation on the appropriate model to deliver roads infrastructure in the province. The Department and the two agencies all reflected positive cash balances with no danger of over-spending and/or huge over commitments. Since the intervention there had never been a single payment run that was missed and the Department and GAAL were at 95% compliance. The remaining 5% was due to protracted disputes over invoice or payment certificate information, especially in the case of infrastructure projects and the latter also applied to RAL

The Department was able to realise a saving of R11.642 million as a result of cost containment mainly on goods and services, non-core items as well as R47.813 million on machinery and equipment compared to the 2011/12 financial year.  The Department remained one of the top contributors to the provincial revenue. In 2012/13 it collected R301.568 million against the budget of R292.439 million and the projection for 2013/14 was R356.456 million.  The Department increased compensation of employees by R26 million in the current financial year to address job evaluations backlog and all top positions in the Department had been filled. The Department got an unqualified audit opinion while RAL and GAAL got qualified opinions. 

As at 30 September the expenditure of the Department was at 29%, that of RAL at 13% and that of GAAL at 59%. While there was no danger of overspending there was a need to guard against under- expenditure. This will be monitored carefully to ensure that service delivery was not hindered. Infrastructure delivery plans of both the Department and RAL had been developed.  There had never been a change of an Administrator for Roads and Transport since the start of the intervention. The Minister of Transport recently approved delegations of authority to the provincial MEC for Roads and Transport. Infrastructure delivery acceleration plans for both the Department and RAL had been developed to ensure that both do not again under-spend on conditional grants.  The investigation on the appropriate model to deliver on specialized services that was focused on RAL had been expanded to include GAAL and should pronounce on the future thereof.   The CEO was suspended by the previous Board that was itself dissolved by the former MEC. That Board contested their dissolution and a legal opinion confirmed that it was irregularly dissolved; however by the time legal clarity on the matter was obtained the Board’s term of office had naturally expired and the CEO had since returned to his position. An Infrastructure Service Delivery Plan had been developed and delivered to Parliament.

The Committee discussed the following issues: the Department’s low expenditure; the future of RAL and GAAL; the airport lounge; and the officials implicated in disciplinary cases
 

Meeting report

The Chairperson for this section of the meeting, Ms M Makgate (ANC) welcomed everyone to the meeting and gave over for the presentation. 

Progress Report on the Section 100 (1) (b) intervention – Limpopo Department of Education

Mr Matthews Mzwandile, Administrator of the Limpopo Department of Education (LDOE), gave an outline of the presentation and stated the presentation would focus on the most pertinent issues from the diagnostic analysis and would give a summary at the end of the presentation of all other issues that were covered.  The most important issues were the procurement and delivery of Learner Teacher Support Materials (LTSMs) and the compensation of employees.  LDOE had the biggest budget in the province but 83% of the budget was allocated to compensation of employees, conditional grants excluded. A provincial strategy for the procurement and delivery of LTSMs had been developed and was implemented and would be constantly improved. In 2012, Curriculum Assessment Policy Statements (CAPS)-aligned textbooks were procured for the Foundation Phase (grades 1-3) and Grade 10, and top-ups for Grades 11 and 12 – covering more than 26 000 Grade 11, and more than 15 500 Grade 12 learners. Since there was no budget allocated for the 2012 academic year, a decision was taken, with the support of the National and Provincial Treasuries, to use the R249 million allocated for the procurement of textbooks for the 2013 academic year.

During the 2012/13 budget adjustment process, the National and Provincial Treasuries made available an additional R510 million for the procurement of CAPS-aligned textbooks for the Intermediated Phase (Grades 4-6), Grade 11 and stationery for Grades R-12.  To ensure on time delivery, LDOE used a letter from Treasury that guaranteed the payment of the R510 million to start procurement and 113 825 Grade 4, 118 067 Grade 5 and 172 398 Grade 6 received workbooks and CAPS-aligned textbooks, plus 172 398 Grade 11 learners received CAPS-aligned textbooks and that constituted 100% coverage.  Stationery was supplied to all 1.66 million Grades R-12 learners.  The central procurement model for LTSM procurement for Grades 4-6 and Grade 11 was successful, because it resulted in savings of 38.2% and the stationery directly procured from manufacturers resulted in savings of 50.2% based on the stationery costs of 2012.

A budget allocation of R620 million had been made available for the 2014 LTSM procurement, with R145 million earmarked for stationery and R475 million for CAPS-aligned textbooks for Grades 7-9 and Grade 12, which were the last grades in which the CAPS were implemented.  Savings realised would be used for requested top-ups as well as special learning devices for special needs learners, especially blind learners.  More than 6 million CAPS-aligned textbooks had been ordered for Grades 7-9 and Grade 12 while stationery had been ordered for more than 1.66 million learners. CAPS-aligned textbooks would be received by 120 994 Grade 7 learners, 122 547 Grade 8 learners, 184 532 Grade 9 learners and 82 983 Grade 12 learners.  The Department was doing a study to determine what the reasons were that almost half the learners did not make it to Grade 12, which was a national phenomenon.  The first batch of textbooks had been delivered and the completion date was set at mid-November 2013.

Some of the challenges included logistical challenges such as late delivery and delivery of wrong titles or quantities, retrieval of textbooks at the end of an academic year, the shelf life of text books and escalating costs of text books.  Interventions were early procurement of LTSMs and contractual agreements between LDOE and manufacturers and publishers, constant monitoring of logistical processes, enforcing a textbook retrieval policy and continuation of the central procurement and delivery of text books. Mr Matthews asked the Committee to consider establishment of a government printing and production firm, specialising in the production and printing of textbooks.

Slides 12-17 gave an overview of permanent staff of LDOE and showed the trend from 2009 until 2013. The total permanent educators in public ordinary schools as of March 2013 were 52 071 and the total support staff were 1 924.  The total permanent educators in special schools were 647, the support staff were 653, and professional support staff were 20.  The total support staff at head office, districts and circuits were 2 580. The compensation of employees’ budget allocated for 2010/11 was R15.2 billion but the actual cost was R15.8 billion, the budget for 2011/12 was R17.1 billion but the actual cost was R17.2 billion and for 2012/13 the allocated budget was R18.5 billion but the actual cost was R18.5 billion.  The R327 million saved by LDE at the end of 2012/13 was as a result of the austerity measures put in place by the Human Resources (HR) Department, but some districts were seriously affected by vacant posts that should be filled.

A phenomenon that was discovered was that the province paid its teachers on all post levels more than anyone else in the country at a ratio of 1:1.5.  Interventions included the absorption of 2 489 of the 2 544 temporary educators in substantive posts, leaving a surplus of 55 temporary educators at the end of August 2013 and the HR interventions implemented, enabled the savings of R327 million (99.4% of the total compensation of employees savings in the province).  HR challenges included the pressure on the compensation of employees’ budget due to the reinstatement of the rural allowance, an aging workforce, shortage of teachers and curriculum advisors, lack of professional leadership and management skills and the lack of an integrated and comprehensive HR development strategy that would focus on demand, supply and utilisation of professionals with scarce skills.  The 2014 post provisioned baskets would go a long way in addressing some of these HR challenges.

Age profiles showed 26 366 of the educators in the province were between the ages of 45 and 55 and 7 782 educators were between 55 and 65 years old and support staff showed the same trend, and to address this trend required a strategic approach.  Office-based educators showed that the bulk between the ages of 45 and 59 with almost none in the 20 to 34 age group, and based on these statistics it showed that these specialised services could only be sufficiently maintained for the next 20 years.

Slide 24 showed 96.3% (1.6 million) of learners were in “No Fee” schools and less than 4% of the learner population had the capacity to pay fees, and comparatively the province had the highest number of learners that benefited from the “No Fee” policy.  As at 30 September 2013, 75% of the norms per capita funds had been transferred to the schools and the remaining 25% would be transferred in November.  The Council of Education Ministers had resolved that the “No Fee” schools should be funded at R 1 010 per learner (inclusive of the LTSMs and running costs).

Several schools in the province owed Eskom and municipalities large amounts of monies, and one fee paying school in Limpopo owed the municipality more than R1 million.  The matter was tabled at the EXCO Lekgotla and decided that the Department would settle the municipal and Eskom debts, exempted from interests if paid within one month of being invoiced to avoid suspension of services to the schools which would negatively impact the learners.  It was recommended that municipalities should consider cheaper rates for schools and that the electricity grades of the schools which in some cases were of an industrial nature, should be downgraded to minimise costs.

More than 1.6 million learners in the “No Fee” schools participated in the National School Nutritional Programme (NSNP) and it guaranteed a nutritional meal to every learner every day and 2014 was the last year in which the CAPS were implemented.  The 2011 and 2012 Annual National Assessment (ANA) results were showed on slide 29 and during the 2012/13 financial year a total of 956 269 learners in the province in Grades 1-6 and Grade 9 wrote the Annual National Assessment (ANA) tests and the results showed learners still performed below the expected levels.

Slide 30 showed the National Senior Certificate (NSC) results from 1996 until 2012 and the trend appeared to show a dip in the pass percentages when there were curriculum changes, but the pass rate had been steadily increasing since 2009.  The 2012 NSC examination results showed Limpopo remained the top province in producing passes at Bachelor level, no district in the province achieved a less than 60% pass rate, the top performing candidate came from a Quintile 3 school in the province and 14 of the best performing candidates in a variety of subjects came from Limpopo.

Mr Matthews stated that the LDOE achieved a disclaimed audit opinion due to of an inaccurate asset register where the coordinates of the school did not respond to the actual location of the school, misclassification of projects, commitments not completed, outstanding receivables and pedestrian HR matters.  These issues were addressed, an action plan had been developed and quality assured by PwC-Rakoma.  Slides 34-35 gave an overview of the other successes achieved by the Department  and showed 20 736 learners benefited from the scholar transport programme in 2012/13 and 308 schools were in the process of being merged because these schools were not educationally and economically viable because of skewed learner-educator ratios and multi-grade and multi-subject teaching.

Ms Makgate asked the Member of Executive Council (MEC), Ms Dikeledi Magadzi, and the Acting Head of Department (HOD), Ms Onika Dederen, of LDOE to add to the presentation.

The MEC said she hoped that LDOE would be able to show what the objective of the Department was and that LDOE wanted to exceed the expectations of the people of Limpopo.

Ms Makgate thanked the MEC and congratulated the MEC on the 2012 National Senior Certificate (NSC) examination result. 

The HOD said Mr Matthews had covered what needed to be said. They worked closely together and she knew the presentation by heart and was mainly there to offer support.

Ms Makgate gave over to the Committee Members for the discussion.

Discussion
Mr A Lees (DA; KwaZulu Natal) thanked the Administrator and his team for putting LDOE in a much better position and asked what the percentage of compensation of employees was.  He asked what kind of work was being done about the manufacturers and losses incurred in the past procurement processes.  He disagreed with the presentation, arguing that the bell curve depicting the age of specialists was spot on because specialists should not be in the 20 to 30 year old age group. The bell curve depicting overall professionals was worrisome, but it was national phenomenon.  He did not agree that LDOE was overpaying its educators, but rather that other provinces were paying educators too little.  He congratulated the learners of the province for their achievements and said the multi-grade or multi-subject system or resources should not be the focus, but rather the quality of educators and education.  He noted to Mr Matthews that no Independent Examinations Board (IEB) statistics were offered and said he would support the merger of the schools if it proved 100% beneficial to the learners and said there were visible merits in the work that had been done.

Mr Matthews said the percentage allocated to compensation of employees sat at 83% and the norms were 80:20, which translated into R19 billion of the R23 billion, including conditional grants being spent on compensation of employees.  He understood the age group of the specialist group, because people grew into those positions, but the focus was on the link between the educators and the curriculum advisory group and said educators got stuck in their positions and there were no growth into the advisory profession. The inflated salaries was a phenomenon related to HR and would be investigated. The IEB was specific to private school learners and comparisons were done across the board.  The public school learners did not partake in those examinations, but Mr Matthews said he suspected that the public school learners would not perform well if they undertook those examinations due to a variety of factors.  He agreed that multi-grade and multi-subject teachers were not necessarily bad teachers, but often well-equipped and versatile, but the issue addressed the other part which were the infrastructure where the teacher-learner ratio was 1:1 and should be at the very least 1:35 or 1:40 and the costs of keeping these schools running were astronomical and made no feasible sense.

Mr Matthews asked to address the merger issue and said the processes was embedded in law that had to be followed.  The MEC had to announce the intention, which was done and a three month consultation period followed that arose from the Government Gazette and that could not be circumvented.  The merger was in its consultation phase and the MEC had various meetings with the revenant stakeholders, which included teacher unions, communities, and others.

Mr M De Villiers (DA; Western Cape) [not on PMG lists for this Committee] asked with regards to the HR development strategy if such a plan was being developed, when it would be implemented and who was responsible for such a plan.  The training of teachers was the responsibility of the higher educational authorities because the age profile suggested a ‘brain drain’ situation in the coming decades. What programme or assistance was in place so the situation could be resolved?  The 308 schools to be merged would have a big impact on communities and he asked if the affected communities had been consulted and were they made aware of the impact it would have. It was understood that the payments to the municipalities would be reimbursed and asked if the reimbursement would come from future budget allocations.

The HR development strategy dealt with a wide area in the province and because it was a transversal function, it was strongly suggested the strategy should revert to the Premier’s office to make it uniform to the province.  There was no concrete plan at the moment and every Department was doing their own thing. The municipality expenditure formed part of the norm transferred to the schools.  The Department could pay the debt and write it off, or pay the debt and deduct from the norms.  If it was deducted from the norms, it meant taking from learners that should be benefiting from these monies, and most of the schools owed substantial amounts which meant they would be paying for life.  This issue would be addressed administratively.  There was no active solution to the ‘brain drain’ possibility except for the prioritising of training of Foundation Phase teachers which the Department had prioritised.

Mr D Joseph (DA) asked what the percentage of trainee teachers were, national or provincial, because the concern seemed to be focussed on how many left the profession rather than how many came into the profession.  He agreed that the specialist age group should be as depicted, and said the merger of schools did not only depended on the learners or communities, but also on the educators and the concerns they may have regarding the future of their careers.  He thanked the Department for the initiative taken with regards to the payment of municipalities.

Mr Matthews said he did not have the percentage of trainee teachers and that was where the Department was really vulnerable because there were no deliberate training programmes that the Department was engaged in. The MEC was engaging with all relevant stakeholders regarding the merger, including educators.

Mr P Sibande (ANC; Mpumalanga) said he wished the Premier was present so that a strategy could be discussed to deal with those responsible for the negative and destructive comments in the press prior to the release of the 2012 NSC examination results, as well as the steps that should be taken against those that leaked backward information from inside the Department.  The correlating information between Mr Tom’s presentation and that of Mr Matthews spoke of effective collaboration and cooperation.  He referred to the past negative reports about textbooks found in rivers and said the names of those manufacturers should be made public so that they could not be awarded anymore tenders by the government.  Limpopo province was surrounded by training institutions and he enquired about the relationship LDOE had those institutions to address the issue of ageing educators and said he was overall happy with the presentation.

Mr Matthews replied and said it seemed that those previously not on board with the intervention were now ‘singing from the same hymn sheet’, and said the textbooks that were dumped was a court case and the case had been postponed now for the third time and remained sub judice

Mr C De Beer (ANC; Northern Cape) said the Department deserved the accolades for what was achieved since March 2012 and the inflated payment of teachers in Limpopo would be tabled at a meeting the Committee had the Minister of Finance the following week.  He referred to a meeting during October 2012 and said it was reported than that there were 27 vacancies for Circuit Managers and in April 2013 it was reported that those vacancies were to be filled and asked for a status report on the vacancies.

Mr Matthews said circuit managers were appointed where they were needed, and in the past three months four circuit managers were appointed.  He did not know if it addressed the 27 vacancies, or if it was new posts, but in 12 of those posts substantive complaints based in law had been laid and the MEC and the legal Department were currently busy with that issue, but would provide the Committee with definitive statistics surrounding the vacancies.

Ms R Rasmeni (ANC; Limpopo) said she fully supported the government becoming an agent in the manufacturing and printing of textbooks and asked how the central procurement approach would be maintained.  The Department dealt with the ghost workers through the head count and wanted to know if there was a plan to prevent those ghost workers from finding their way back into the system.  She asked what was done to prevent schools from owing the municipalities again in the future, how the disclaimed audit opinion would be turned around and asked if the MEC could detail how the merger of schools would unfold, especially regarding infrastructure.

The MEC said 308 schools would be merged, and effectively four of those schools had already been merged into one school.  Most of the schools were around the Waterberg and Soutpansberg areas where some had only five learners.  Through communications with the communities, about 70 schools seemed committed to the merger but some challenges identified already were educators wanting remuneration for the move and traditional healers citing the cultural significance of the schools. The negotiations were ongoing and the MEC in addition the College of Education was being revitalised as a boarding school for learners.

Mr Matthews said the head count not only dealt with ghost workers, it also cleaned up the PERSAL, the question had been put to Treasury to determine whether money had been spent on ghost workers and the Department would address the issue then.  The Department did not have the resource at this point to monitor whether schools paid their municipal bills.

Ms B Mncube (ANC; Guateng) referred to the diagnostic analysis and asked: how could the noncompliance with regard to contractual stipulations in the infrastructure programme be addressed; what were the issues that were hampering the training of educators for the roll-out of CAPS; the status of the questionable data integrity; why the 2010/11 and 2011/12 adverse audit opinions were not adequately addressed and the plan going forward.

The inflated compensation of employees’ budget and the continued overspending of the Department’s personal budget correlated, in her opinion, with the higher salaries of educators compared to other provinces and asked if the Department had any findings that spoke to the reasons for the higher salaries.

She referred to the shortages of teachers in the gateway subjects and asked if a HR strategy had been developed to address this issue.  Factors such as the closing of colleges and needs of specific teachers for specific subjects and redeployment negatively affected the teaching profession and the question of learners’ careers should be addressed as early as Grade 10 and she asked what strategies were in place to attract the younger generation to teaching.  Educators reported when someone died, either an educator or support staff, those people were not replaced and inflated the administrative burden of the profession – what strategies would address the high vacancy rate.  Schools reported that they only received their allocated monies in August and could not pay their bills and she asked were there reasons given why the schools could not pay their municipal bills.  The intention to merge the schools should be gazetted and teacher unions should be consulted to address concerns of the educators and she asked Mr Matthews to address the merger would affect the distance of the schools and the scholar transport system. 

The Auditor-General had confirmed that the Department had moved leaps and bounds, and seriously understood the root causes and the audit had become a project in itself.  Non-compliance was addressed through the sustainability project through infrastructure and supply chain matters and the HR misstatements that were minimal. There was not a single contributing factor the Department could offer at this point to the issue of the higher salaries would clarify that and the Committee would be informed once there were answers.  CAPS training happened at different levels, and in an ideal situation groups of educators would be able to the training at once, but the system was at the moment what was termed as “microwave training”.  The MEC had proposed that an institute should be turned into a CAPS training institute where training on gateway subjects could also take place.  The closing of schools were not dependent on whether educators taught or not, but the numbers had to be addressed and redeployment should be stopped.  The reasons behind schools ranged, because some took advantage of the financial position the province was in, some stopped paying when the norms decreased in 2011 and others decided it was a ‘government owing government’ situation and took themselves out of the equation.

Mr B Mashile (ANC; Mpumalanga) said he had a problem with the decision taken that municipalities should not charge interest since the municipalities delivered services.  He referred to the Educators at universities who received salaries but were not contractually obligated to teach after completion of their studies and asked where those teachers were now.  The numbers of educators in 2009 decreased by about 900 during the following two years and he asked if there were any reasons for that.  He asked clarification surrounding the spending of the conditional grants.

Mr Matthews replied that the municipality agreed to the request to not pay interest and the debt would come to the Department as a first invoice and only on the condition that the debt was settled within 30 days would the Department be exempted from paying the interest. The conditional grants were not at the level the Department wanted it to be but did not want to encourage careless spending.  Mr Matthews said neither he nor the HOD signed off on the grants if it did not meet the terms of the conditional grants framework or the procurement plan.  The educators went to university to get the skill on the condition that they should come back and teach and those conditions were non-negotiable.

Mr M Jacobs (ANC; Free State) said it was a good presentation and asked what the cost of the vacancies were, because the money saved by the Department could only be assessed once the vacancies had been filled.  He said teacher salaries should be standardised without fear and the rural allowance seemed to be unique to Limpopo.  He was not surprised the age profile since educators occupied posts for a long time and younger teachers may not get the advancement opportunities they deserved and left the profession subsequently.  He asked if it was actually ascertained if the schools mentioned qualified to be “No Fee” schools and payment of the municipalities should be enforced through stipulations of the budget.  Negotiations with Eskom for special rates should be started and he wished the HOD had done the presentation, and although she was only the Acting HOD, it would address the sustainability of the improvements once new people stepped into positions.

The MEC met with Eskom and agreed on specialised rates and Eskom also alerted the MEC to the electricity grade system that was costing the Department so much money and should be investigated. Once Treasury was done with their investigation into the educator salaries, the Department would make an informed decision of the way forward.

Ms L Mabija (ANC; Limpopo) asked the Administrator to address the sustainability of the strategies put in place.  She offered her support to the merger of the schools but asked that the Department collaborated with the Roads and Transport and Public Works Departments, and implement the scholar transport system effectively so that learners were not put at risk with regards to social issues such as violence and sexual abuse.

Mr Matthews replied that the diagnostic analysis and all the strategies that were developed were developed as a team with Executive Management and that spoke to the sustainability of the processes, because of the involvement of the whole Department.  He said 12 senior officials were engaged in project based learning and internal training was done by PwC-Rakoma that focused on change management.  The cooperation sought from the Department of Roads and Transport was assistance with compliance with regards to vehicles and drivers, because LDOE was managing the scholar transport system.  Road infrastructure was important, because sometimes roads were closed and Mr Matthews accepted the point that learner safety should be the primary consideration.

Ms Rasmeni referred to the diagnostic analysis and asked how the lack of professional leadership and management skills would be addressed and asked clarification on the transfer of teachers to schools.

Mr Matthews referred to the project based learning that senior officials were undertaking as well as in service training.

Ms Makgate asked for an explanation of the rationale behind the 7 000 beneficiaries of the rural allowance.

The response was that the rural allowance was a national policy that was introduced by Minister Pandor when she was still the Minister of Education as an incentive to encourage teachers to teach in rural areas.  The criteria for qualification for the allowance were clearly defined and were dependent on the qualifications of the teachers. The focus of the criteria had since then shifted where distance became the main criteria, and no longer gateway subjects as was intended.  The HOD of Provincial Treasury raised the issue of the rural allowance, because effective there was no budget allocation for the rural allowance and it was discontinued for some time, but reinstated after a directive.

Mr Matthews said that all unanswered questions were noted and would be forwarded to the Committee.

Ms Rennie, Administrator of Limpopo Health Department asked to address two question posed by the Committee the previous day.  She addressed the issue of the development of an audit support unit and said the Health Department had a centralised audit committee and a centralised internal audit committee and there were huge gaps and weaknesses and the audit support team would have day today engagements with the Auditor. The HOD had addressed the question of a tracking unit that proactively responded to issues and said it was part of the leadership gap that was identified and it spoke to the manner in which communication was structured, especially with regards to the media and complaints that were lodged, which usually took a long time to be addressed.  There was a Departmental strategy, and the focus extended to the district that would guide how to deal with adverse events.

The Chairperson for the following section of the presentation was Mr P Sibande (ANC).

Progress Report on the Section 100 (1) (b) intervention – Limpopo Department of Public Works

Mr Mbuyi Dondashe, Administrator of the Limpopo Department of Public Works (LDPW) said that he had circulated a report earlier, and based on the previous’ day presentations made some changes to the presentation and circulated another document.  An infrastructure capacitation funding plan had been developed and approved.  The first area of the intervention was the Immovable Asset Register Plan.  The Auditor-General qualified the LDPW on the state of its immovable asset register, because there were just more than 900 vested assets in its register and according to the National Department of Public Works there should have been at least 12 000 assets in its register.  He gave an overview of phase 1 of the immovable asset register and said the risk and mitigation factors were a delay in the issuing of a letter from the Treasury and that would be mitigated by discussions with treasury. Phase 2 of the project showed there was a lack of a system and controls to sustain, maintain and manage additions and amendments. These issued could be mitigated by consolidating the register, as well as building internal capacity to manage the register.

The lease review project would result in a substantial reduction in the office rental cost for the province from the R200 million paid per annum on lease buildings and the project would be concluded on 30 October 2013.

Infrastructure delivery aimed to build enough capacity to deliver quality, cost effective schools and hospitals within the planned time.  The Department developed a turnaround plan which made provision for alternative infrastructure delivery systems.  The Department appointed the Independent Development Trust (IDT) as the preferred implementing agent to augment the current internal capacity in delivering infrastructure. In addressing the existing capacity constraints, the LDPW haD transferred an amount of R412 million out of R632 million worth of projects to be implemented by the IDT.

The process of completing an organisational structure that will serve as a benchmark for all other Public Works Departments as infrastructure delivery Departments in the country was scheduled for presentation to the Executive Authority by the 30th of October 2013.  While the AG finding had remained a disclaimer, the number of AG findings per the management letter had reduced from 162 in the 2011/12 financial year end to 131 in the 2012/13 financial year end. In response, a comprehensive AG action plan had been developed with the PwC-Rakoma consortium appointed by the Provincial Treasury. The Department was aiming for an improved audit outcome for 2013/14.

The MEC, Mr D Masemola, LDPW, echoed Mr Dondashe and said it was a collective achievement and the Department had been working very hard to consolidate the recovery. 

Discussion
Mr Lees referred to the lease review project and asked if there was a report produced by the project, if the Committee could get a copy of the report and if Mr Dondashe could speak to the report and the implementation thereof.  He said Mr Dondashe seemed positive of the ability of the Department as a result of action taken to meet the planned capital expenditure. Would IDT ensure that the budgets for 2013 and 2014 would be 100% spent?  He asked if IDT had the capacity to do the job the Department wanted them to do and asked how many of the 302 disciplinary cases discussed by the ACTT were from the LDPW and what was the impact on the Department.  LDPW refused to pay rent on communal land but once you have committed to building a school or hospital on that land, rent must be paid so Mr Lees asked who built the buildings. 

Mr Dondashe said the report would be made available to the Committee.  LDPW’s methods of infrastructure delivery had let the people of Limpopo down and believed IDT had the capacity to spend and would be managed in partnership with the HOD and this was time-based measure until the Department could grow its own capacity.  The focus was not entirely on the spending but spending that would yield the desired results, and this would be closely measured. 

Mr De Beer referred to page three of the slide presentation and asked what the outcomes of the discussions held with Treasury were.  He referred to page 9 and clarify the senior positions discussed.  Slide 18 showed 8 million and asked what was missing after the ‘m’.  He asked if Mr Dondashe could list the best practices that were rolled out and implemented in the Department.

Mr Dondashe said Treasury had committed to the letter and would be made available to LDPW.  The slide was supposed to read 8 million hectares.  The best practices could be to learn why the Western Cape was doing so much better than anyone else.  LDPW had a structure of 1 200, but the Western Cape had a structure of 400.

Ms Mncube thanked Mr Dondashe for the presentation and said the involvement of IDT seemed like the best solution and asked if other Departments were buying into the Department’s mandate and if the attitude of the officials had changed in light of the relatively negative legacy of the LDPW.  The Department identified officials and service providers found with their ‘hands in the till ‘and the possible impact on the Department.  She asked if the matter had been raised to the Minister with the aim of having it raised within Cabinet.  How was the performance management managed with regards to bonuses issued to undeserving officials?

Mr Dondashe replied that there were areas that were resistant to change.

Ms Mabija asked clarification on the Department’s lack of capacity to deliver infrastructure and the alternative methods of delivery.

Mr Dondashe replied that the diagnostic report picked up the Department’s lack of capacity to deliver infrastructure and the Department appointed qualified professionals to do the work.

Mr Jacobs said he was not sure why the document was changed because it seemed the initial document was more detailed and he referred to the second document as ‘glossy’. He was concerned that the LDPW still had not finalised their organisational structure.  The fact that the Department did not have the technical capacity meant there were not people employed and the audit findings that were reduced from 160 to 130 were not significant enough to illustrate changes made in the Department.  The first report had information that was not covered by the presentation and he asked why the document was marked as “confidential”.

Mr Dondashe explained that it was not his intention to cause confusion with the two documents, and the document was not confidential.  The organisational structure would be finalised by the end of October 2013 and the Department understood what needed to be done to address the audit findings.  The implementation of the asset register would account for a huge amount of the findings and the accruals and the rentals would cover the rest.

Ms M Themba (ANC; Mpumalanga) asked if the Administrator had the exit strategy that the Department needed to survive after the implementation of the intervention strategies.

The HOD said a blueprint of the exit strategy and the MEC engaged with DPSA to use their offices to roll out change management processes. As of May 2013 eleven officials have been enrolled on the Project Based Learning (PBL) at NQF level 9. This was a highly intensive executive leadership course targeted at Masters Level. Three withdrew due to medical reasons. The duration of the course was 18 months.  A further ten (10) officials have been enrolled on the AAT – Public Sector (Advanced) Accounting Certificate targeted at NQF level 4 and 3. The duration of this course was 18 months.

Ms Mncube referred to the document and the section number 7.1.1 and 7.1.3 on the issue of the service provider that charged R14 million for implantation of an asset register but the cost escalated to R58 million, as well as the over payment of leases.

Mr Dondashe replied that a service provider, Nhlovukho, was appointed to develop an asset register for the Department.  The initial tender documents had a complex pricing structure and there was confusion on the price from the start and the amount escalated from R14 million to R58 million.  Nhlovukho had since demanded another R13 million for services offered and when the Department refused, the case went before arbitration.  An independent expert was called in an assessed that there was no basis for the extra R13 million and Mr Dondashe would let the Committee know the outcome of the ruling.

The Chairperson asked who was inflating the rates and what was being done.  He said yesterday Mr Tom referred to the R500 million that remained unapproved and asked if the Department was affected.  He asked if the Public Finance Management Act (PFMA) were incorporated into the organisational structure and referred to page 7 of the document and said the due date for the finalisation were 30 July 2013 and asked what the challenges were.  On page 15 he asked that the statement about security companies that were appointed without following tender procedures be identified.

Mr Dondashe replied that LDPW was now visiting the offices and rates were assessed either by square meter or the grade of the property based on legal guidelines.  The Department was not affected by the R500 million and the Department incurred no over expenditure.  The new deadline was 30 October 2013 and he explained that Department officials that had since been implicated by the Department of Public Service and Administration (DPSA) were involved in the fraudulent awarding of tenders to undeserving service providers.  The formulation of the structure addressed the constitutional mandate of the Public Works Department and was informed by organisational design principles.  The development of the structure was led by National Treasury and DPSA teams. 

Ms Mabija said she was not happy with what was presented and said time constraints were not an issue and the document initially circulated should have been the document that was dealt with in the meeting.

Mr Dondashe apologised for the confusion and asked Members to consider both the reports.

Ms Mncube referred to the bridges the Committee went to view in Limpopo and there were nothing to view and asked about the cases with the Special Investigating Unit (SIU) and asked clarification.

Mr Dondashe replied that LDPW could not comment on bridges as it was a Roads and Transport issue referred to page 14-15 of the document that gave an overview of the cases.  The cases with SIU and Anti-Corruption Task Team (ACTT) were reconciled and the document gave an overview of the cases.  Some cases were prioritised by ACTT and SIU as cases that would be difficult to prove criminally and those were referred to the DPSA.  Those were nine cases that included the Nhlovukho asset register tender, the security company tender, and the inflation of the leases, where all the actions were authorised by the HOD.  The HOD confirmed one official had been suspended, the other eight were still in the Department and there cases were under review.

Progress Report on the Section 100 (1) (b) intervention – Limpopo Department of Roads and Transport

Mr Mathabatha Mokonyama, Administrator of the Limpopo Department of Roads and Transport, said that commendable progress had been achieved, mainly in the Department whereas some work still needed to be done at the Roads Agency Limpopo (RAL) and the Gateway Airports Authority Limited (GAAL). Challenges at the two agencies ranged from legislative, governance and resources management. It was still relevant to pursue the investigation on the appropriate model to deliver roads infrastructure in the province. The team had entered a final phase focusing on a handing over process in the Department while setting up appropriate systems and turnaround plans for RAL and GAAL to ensure sustainability of the recovery path.  The Department and the two agencies all reflected positive cash balances with no danger of over-spending and/or huge over commitments. Since the intervention there had never been a single payment run that was missed and the Department and GAAL were at 95% compliance. The remaining 5% was due to protracted disputes over invoice or payment certificate information, especially in the case of infrastructure projects and the latter also applied to RAL

The Department was able to realize a saving of R11.642 million as a result of cost containment mainly on goods and services, non-core items as well as R47.813 million on machinery and equipment compared to the 2011/12 financial year.  The Department remained one of the top contributors to the provincial revenue. In 2012/13 it collected R301.568 million against the budget of R292.439 million and the projection for 2013/14 was R356.456 million.  The Department increased compensation of employees by R26 million in the current financial year to address job evaluations backlog and all top positions in the Department had been filled. The Board of Directors of RAL had been disbanded after three members resigned and there were only two left and as such it could no longer quorate for meeting and able to form sub-committees. Nominations for the new Board would be called in October 2013. The positions of CEO, CFO, Executive Managers Engineering and Corporate Affairs have been advertised and should be appointed before year end. The investigation on the appropriate model to deliver on specialized services that was focused on RAL had been expanded to include GAAL and should pronounce on the future thereof. The CEO of GAAL was also back from suspension and the (interim) Board would also be appointed before year end.

The Department got an unqualified audit opinion while RAL and GAAL got qualified opinions.  As at 30 September the expenditure of the Department was at 29%, that of RAL at 13% and that of GAAL at 59%. While there was no danger of overspending there was a need to guard against under- expenditure. This will be monitored carefully to ensure that service delivery was not hindered. Infrastructure delivery plans of both the Department and RAL had been developed.  The Board of Directors of RAL had been disbanded after three members resigned and there were only two left; as such it could no longer quorate for meeting and able to form sub-committees. Nominations for the new Board will be called in October 2013. The positions of CEO, CFO, Executive Managers Engineering and Corporate Affairs have been advertised and should be appointed before year end. The investigation on the appropriate model to deliver on specialized services that was focused on RAL had been expanded to include GAAL and should pronounce on the future thereof. The CEO of GAAL was also back from suspension and the (interim) Board would also be appointed before year end.

There had never been a change of an Administrator for Roads and Transport since the start of the intervention. The Minister of Transport recently approved delegations of authority to the provincial MEC for Roads and Transport. Infrastructure delivery acceleration plans for both the Department and RAL had been developed to ensure that both do not again under-spend on conditional grants.  The investigation on the appropriate model to deliver on specialized services that was focused on RAL had been expanded to include GAAL and should pronounce on the future thereof.   The CEO was suspended by the previous Board that was itself dissolved by the former MEC. That Board contested their dissolution and a legal opinion confirmed that it was irregularly dissolved; however by the time legal clarity on the matter was obtained the Board’s term of office had naturally expired and the CEO had since returned to his position. An Infrastructure Service Delivery Plan had been developed and delivered to Parliament.

Discussion
Mr De Villiers referred to point 4.1 asked what the amount of cash flow was, what top positions were referred to under 4.8 and why the spending was do low as stated under 4.12.

Mr Mokonyama replied that he could not recall the exact amount, but he would make it available to Committee members.

Mr Joseph asked for clarification on why the CEO of GAAL was reinstated.  With regards to RAL and GAAL he wanted an outline of the initial problem, the turnaround strategy and the outcomes.

Mr Mokonyama replied that the CEO of GAAL had not been accused of any wrong doing, but stated that the MEC GAAL investigated.

Mr De Beer referred to point 4.4 and asked to clarify the audit opinions for RAL and GAAL and he asked that the Administrator explain the monitoring systems mentioned when the way forward was presented.

Mr Mokonyama replied that the Department achieved an unqualified audit opinion and RAL and GAAL received qualified audit opinions.  Mr Mokonyama said that the shareholders would serve as monitoring systems to the Board.

Ms Rasmeni referred to slide 6 and asked that the nature of the public prosecutor’s recommendations be discussed and the 30 conflict of interest cases be elaborated on.

Mr Mokonyama said at the previous National Council of Provinces (NCOP) meeting in Limpopo the prosecutor’s recommendations had been discussed at length.

Ms Mncube said the presenter mentioned GAAL and the absence of legislature surrounding the issue, but it was not mentioned in the plans going forward.  She referred to point 4.12 and asked how he Department could only have spent 29% of its budget by 30 September and what the implication was for the Department.  She asked at what percentage the Administrator was at addressing issues that led to the intervention.

Mr Mokonyama sighted the high vacancy rate that plagued the Department for the biggest part of the year as the cause of the low expenditure rate.

Ms Mabija referred to point 10.14 and asked where the Infrastructure Service Delivery Plan was that was delivered to Parliament.  She referred to the statement that nominations for the new RAL Board would be called in October 2013 and the (interim) Board would be appointed before year end and asked the status on the nominations and that the dates should be specific. Referred to the accompanying documentation where the actual numbers were excluded and asked why.

Mr Mokonyama said the document handed out to the Committee members was not updated yet and the Administrator promised to give members an updated version before the meeting was over. The advertisements for the Board should be out by the coming weekend.

Mr Jacobs said the premier positions had not yet been filled and the exit strategy was already discussed.  Most of the problems emanated from RAL and GAAL, with most of the cases from the SIU involved RAL and GAAL and yet they were still maintained and how would anything improve if the CEO of CAAL had been reinstated.  He referred to the fact that the Minister of Transport who recently approved delegations of authority to the provincial MEC for Roads and Transport and asked if it was in line with section 100 (1) (b).

Mr Mokonyama said those positions would filled.

Mr Sibande said the Administrator had not really touched on the important issues like the 30 cases of conflict of interest and the RAL and GAAL officials and management that had been implicated.  He asked explanation of the ‘low morale’ of staff and asked when the pub at the airport lounge would be addressed, since it was now established that it was run by  Alfie White and what was the status on the case.  He referred to the oversight visit to bridges that were paid for and not built as promised and asked that the issue be addressed.

Mr Mokonyama said the bridge that the Department was contracted to build was completed, and that was the third bridge that was contracted. The former CEO of RAL, a senior official and the service provider was arrested for irregularities surrounding the awarding of the tender and allegations of inflating the amount with Treasury’s approval for another bridge in Limpopo. Alfie White and GAAL were having this matter before court because Ms White refused to sign a lease, and alleged that there was a profit sharing agreement in place and 30 cases were cases where officials did not declare, and the ‘low morale’ of staff had to do with those conflict of interest cases as well as the instability of RAL and GAAL.

The Chairperson it had become clear to the Committee that there were a more positive attitude towards the intervention and thanked everyone.

The meeting was closed.

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