Department of Public Works responses to outstanding questions on 2012/13 Annual Report; Budgetary Review and Recommendations Report adoption

Meeting report

Department of Public Works Annual Report 2012/13: Answers to outstanding questions
Mr Mziwonke Dlabantu, Director General, Department of Public Works, said that the Department of Public Works (DPW or the Department) was responding to outstanding questions from the previous engagement with the Committee on the 2012/13 Annual Report. He noted that the DPW disciplinary processes against former officials were taking their course, and that DPW responded to and accounted for any criminal charge in any case.

Ms C Madlopha (ANC) asked if the lack of Supply Chain Management (SCM) planning processes, which was identified as one of the reasons why the targets were not met, was linked to capacity constraints.

Mr Cox Mokgoro, Chief Financial Officer, DPW, replied that the contributors to under-spending were, firstly, the stringent SCM process, which created a fair amount of bureaucracy and red-tape, and secondly the fact that indeed the SCM function capacity needing strengthening. DPW was working tirelessly with its projects division on plans to ensure positioning of future projects. The planning of infrastructure projects generally covered several years, and these required planning one to two years in advance to ensure efficient spending on the projects. A turnaround deliverable included the SCM 4 processes being applied. He noted that procurement of infrastructure was different to that of procurement of goods and services. The Chief Procurement Officer responsible for SCM 4 in the public sector would be working closely with the SCM officials in the DPW, to reform SCM in the Department. By the end of January 2014, the SCM processes would have been reformed and improved.

Ms P Ngwenya-Mabila (ANC) asked what the role was of the Independent Development Trust (IDT) in the implementation of the projects.

Mr Stanley Henderson, Deputy Director General: EPWP, DPW, explained that the IDT had mainly been used to deliver the Expanded Public Works Programme (EPWP) social programmes and Department of Basic Education (DBE) schools programme. The IDT was also contracted to the Departments of Justice and Correctional Services and others to assist with delivery of projects. The DPW was not always the middle man, but was rectifying a situation, in line with the Minister’s instructions, whereby the DPW had to be aware of which Department the IDT was contracting with, as the Minister and Director General tended to be drawn into other projects whenever there were challenges. He noted that the EPWP programme, in the 2012/13 financial year, had created 941 593 work opportunities. This constituted 78% of the targets. Some of the EPWP areas had been briefly covered the previous week, in response to questions on targets not being met. Some of the other key reasons for not reaching full targets included:
a) the fact that the EPWP was based on public works utilising the Equitable Share, the Municipal Infrastructure Grants, and, in the case of infrastructure in provinces, the Provincial Roads Maintenance Grant. There was still a lack of technical capacity in public works bodies to implement projects in a labour-intensive fashion. DPW was continuously taking action to address the capacity issue.
b) Implementing bodies should have the capacity to properly monitor and report as required by the project management mandate, but poor under-reporting by some of the public works bodies persisted.
c) There were numerous delays on implementation of projects due to administrative challenges. In Limpopo, lack of administrative capacity caused all awarded projects to be put on hold. In the Free State, there was no implementation of new projects due to cancellation of contracts awarded in the previous year. Similarly, in the North West, projects were cancelled and work opportunities were also not realised due to SCM and poor performance by contractors. In Gauteng province, procurement delays impacted negatively. Projects existed but could not materialise.
d) In various sectors there were budget cuts in the Non-State, the Environment and Culture sector and the Eastern Cape Sports and Recreation Department.

Officials from the DPW continued to answer on other concerns raised by the Committee with regard to the lack of training and skills of beneficiaries, owing to the lack of a dedicated budget for this. The DPW had secured funding through the Department of Higher Education and Training, for targeted training, in conjunction with the different Sector Education and Training Authorities (SETAs) to ensure that the necessary quality training took place. The amount of funding was R360 billion over the five year period 2011/12 to 2015/16.

Another question related to the lack of proper monitoring and site verification. Projects were recorded on the system, with a unique number for each EPWP sector, were validated and the figures submitted to the DPW were verified. Data quality assessment surveys and site visits per sector were done as a matter of course, across the Infrastructure, Social and Environment Culture and Non-State sectors.

Members had asked questions about uniformity of wages and stipends. DPW answered that different provinces currently had different minimum wages, even though each sector had specific Ministerial determinations that set the overall wage structure. When different public bodies in the same area used a different minimum wage, problems arose at municipal level. This issue was on the agenda of the institutionalised steering committees at provincial, municipal and district level.

Questions had also been asked about recruitment. DPW answered that the current situation with regard to lack of recruitment guidelines across all implementing bodies was that recruitment was governed by the EPWP Ministerial Determination for special DPW programmes, and a Code of Good Practice. This was approved by the current Director-General on 13 September 2013, to ensure uniformity in how all implementing bodies should handle recruitment of EPWP workers. There was also an implementation manual, per sector, setting out how an EPWP project should be implemented in a particular sector, apart from the overall Ministerial determination that set the direction for the entire EPWP.

In answer to Members’ questions on poor data quality, which related to an earlier question on quality assessment, it was noted that the EPWP was currently trying to deploy more young people to strengthen capacity to capture data. There was not enough capacity for the number of implementing bodies. There were 278 municipalities and more than 19 000 EPWP projects in any given year. The major problems lay in the poorer rural municipalities, since capacity was better in the metros.

In answer to questions about the relationship between the EPWP and Community Worker Programme (CWP), the DPW noted that there was a close collaboration with the CWP, a sub-programme of EPWP, and DPW paid attention to strengthening governance and coordination arrangements with regard to the CWP programme, and played a part in the strategic planning sessions with the officers on the steering committees of the CWP.

MPs had questioned the lack of protective clothing in EPWP projects. The DPW said that the EPWP Ministerial Commission required that all workers should be provided with occupational health and safety clothing requirements in the EPWP environment, according to the sector requirements. The DPW continuously engaged with public works bodies to ensure that this was taking place. If it came to the attention of DPW that this clothing was not being issued, the cases were followed up with relevant bodies.

In response to the question on the quality of infrastructure deliverables, DPW answered that the EPWP infrastructure sector was about labour-intensive approaches and methodologies. Research had proved that the same quality product could be delivered to the same standards with labour intensive methodologies, where appropriate, as long as occupational safety and health was not transgressed. If it was brought to the attention of DPW that there were quality issues on completed projects, the DWP certainly followed up on those cases.

Another question had related to the poor performance of KwaZulu Natal (KZN) province, which was previously the best performing province. Staff turnover in some key implementing departments had impacted negatively on the ability to properly coordinate implementing bodies. The Eastern Cape (EC) had overtaken the KZN on EPWP performance. The DPW was focused on the KZN implementing bodies, to return KZN to its true potential to deliver. There was also under-reporting in the social sector in KZN, and so the Special Projects Office in the province, together with the national Department of Social Development, was assessing the situation to improve coordination of the social sector due to management changes.

In regard to the question on continuity of community workers from phase 2 to phase 3, it was noted that the DPW was currently planning to make a formal presentation on the state of phase 3. Many programmes in the EPWP were multi-year projects and therefore it was important to convert good projects into specific programmes, to ensure continuity and proper budgeting over the Medium Term Expenditure Framework period.

Ms Ngwenya-Mabila asked how under-performance could be due to staff turnover, when KZN had been an exemplary province and had come to the Committee to share their successes. The number of municipalities had not changed. She asked if the DPW had monitoring mechanisms for reporting of figures, budgeting and spending on implementing bodies, if there were early-warning systems for anything going wrong, and if the spending was reflected on the quarterly reports to ensure that the implementing bodies were performing.

Mr Henderson said that the DPW was certainly following up with support for performance of the implementing bodies in KZN, at the highest coordinating governance body, and with the Office of the Premier.  

Ms Ngwenya-Mabila said that cancellation of contracts, delay in procurement, under-spending and lack of reporting data due to the number of data capturers per implementing body impacted negatively on job creation and service delivery. It was not clear what strategy was in place to ensure job creation and spending of funds.

Mr Henderson replied that cancellation of contracts slowed down the performance of the EPWP, due to internal procurement cases, but there was a range of issues. Each case that impacted negatively on performance was being followed up by the DPW.

Ms N Ngcengwane (ANC) said that the President had called for accommodation of the youth. The National Youth Service target was 3 500,  but less than 50% of this target had been achieved. She asked what the main reason was for the youth not being employable. She also noted that she did not get the gist of why KZN had fallen in performance. The data capture problem was not clear.

Mr Henderson said that the DPW was in talks with National Treasury to prioritise job creation and youth programmes. During its presentation on phase 3, the DPW would also report on the prioritisation on performance on the National Youth Service. The youth needed exposure to actual projects and often there were not enough projects for training purposes. The emphasis, for EPWP, was collaboration between youth programmes and rural development programmes, to ensure that resources were optimised to improve on data capture and broader coordination issues.

Mr Kenny Govender, Deputy Director-General: Human Resource Management & Development, Department of Public Service and Administration, spoke to the assets. He said that the DPW was on track in terms of the asset register and having a complete immovable assets register. The three major areas were conveyancing, foreign state assets and accountability. He reported how the current approach worked. Firstly, the Office of the State Attorney (OSA) would be used, to ensure that the assets were reflected. There was a backlog in the OSA, of 1 650 title deeds awaiting endorsement. The DPW approach was to deal with this outside of the OSA and put out a tender for conveyancers to expedite the clearing of the backlog and finalise the endorsement of transfer of state assets. This approach should emerge in the new financial year.

The second area related to foreign state property. In 1999, the function of management and maintenance of state owned properties in foreign lands was devolved to the Department of International Relations and Cooperation (DIRCO). This department had its own asset register and, as custodian of the assets, it was required to compile and ensure regular updating and disclosure of state-owned immovable assets abroad. The DPW was satisfied that the DIRCO was complying with this and could now present the national statistics in terms of state assets.

The third area related to DPW’s ability to finalise and conclude on the asset register by the target date of 31 March 2016. One key deliverable had already been met. The completeness of all registered properties was presented by the DPW family, in terms of asset registers declared to the Deputy Director-General as at 31 March 2013. DPW had appointed advisors to physically visit and verify all the state-owned properties and buildings as well as to ensure assessment and calculation for purposes of the Generally Recognised Accounting Practices (GRAP), by 31 March 2014. This would ensure a sufficiently compliant asset register on registered properties. The target date for the first round application of fair value towards the completeness of unregistered and un-surveyed land was 31 March 2014. The complete asset register, with accurate registration of fair values, would only be achieved by 31 March 2015. Finally the government, at least at national level, and with prodding of the provincial departments, would put together a reliable asset register which could be used. DPW was on track in that respect.

Lastly, DPW finally spoke to cancellation of construction contracts, and it was noted that, generally speaking, the DPW was taking a strong position when contractors performed poorly, to the extent that it was litigating and terminating infrastructure contracts.

The Chairperson asked for clarification on whether it was possible to complete the asset register, from national to local government, without implementation of the Government Immovable Asset Management Act (GIAMA) at local level.

Mr Govender said that in the absence of the statutory authority, this could only be done on a cooperative basis, not legally enforced. Establishment of an asset registry, at least with international, national and provincial assets, was sufficient. As far as municipalities were concerned, legislation was required to compel municipalities to comply and declare those assets.

The Chairperson asked if the DPW was confident that the register would be complete by 31 March 2014.

Mr Dlabantu replied that the DPW was comfortable with its milestones for completeness of the asset register.

Ms Madlopha asked why the country’s assets appeared to be fragmented into local, provincial and national spheres and whether it was not necessary to start at local level when trying to understand the country’s assets.

Mr Dlabantu replied that broadly speaking, that was correct. Within the Constitution, there were schedules which defined concurrent functions and allowed for the process of dealing with assignment and delegation of the concurrent functions. GIAMA itself began to partly differentiate the concurrent functions of the national and provincial sphere, and also defined and made provision for exclusion of DPW from other departments which may be custodians of assets. One example of this would be the Department of Defence, which was allowed to have custodianship of assets donated to it in terms of the Endowment Act, when the British left South Africa, and similar situations. The DPW was now custodian of any other assets that were not defined by other departments. DPW had expressed the need to have enabling legislation that would confirm the roles played by the three spheres, and which would also regulate assignment of what needed to be in place to delegate any of these assets to the municipalities. DPW was working on the policy framework to develop that legislation and meet all the requirements.

The Chairperson thanked the DPW officials for their responses.

Draft Budgetary Review and Recommendation Report of the Portfolio Committee on Public Works, dated 22 October 2013
The Committee, with the guidance of the Parliamentary Legal Adviser, deliberated on and amended the Budgetary Review and Recommendation Report (BRRR), going through each page.

The Chairperson recommended that: under the paragraph for ‘Overview and assessment of financial performance’, it should read that “(the Office of the Auditor-General) OAG noted that the Department lacked standard operating procedures…”. The last sentence, under service delivery performance for 2013/14, the phrase “compared to the previous year, expenditure trends were lower…”, should be re-worded. She suggested also that the wording capturing the role of the Minister of Finance and appointment of the Director-General should be changed to read: “the “recommendations by the Portfolio Committee on the appointment of the permanent Director-General had been implemented”. The sentence on comparing expenditures should read: “Expenditure for transfers and subsidies for the end of June was R605 million and expenditure related to funds transferred to: (1)..”

Ms A Dreyer (DA) recommended that under ‘Other service delivery performance findings for EPWP’, the wording for “municipalities failing to employ dedicated EPWP officials”, should be amended. (amendment inaudible).

Ms Ngwenya-Mabila recommended that the wording under ‘Financial performance including funding proposals’: “The Committee welcomed the appointment of the Director-General..” should also include a reference to the Chief Financial Officer (CFO).

Ms Madlopha suggested adding wording to reflect that the Portfolio Committee welcomed the appointment of the Director-General and Chief Financial Officer and noted the great progress in implementation after the appointments and turnaround strategy of the Minister.
 
Ms Ngwenya-Mabila said that the phrase “Under-spending, especially on the EPWP remains a concern…” needed to be re-worded. She also recommended that there should be a reference to “client Departments must sign the Service Level Agreements, complete and forward all User Asset Management Plans, and make submissions on time.”

Ms Dreyer suggested that recommendations from the previous year that had not yet been implemented should be noted as recommendations that had been brought forward to the current year.  She also asked if the second recommendation, “that the national, provincial and municipality Asset Registers should be aligned by the end of the 2014 financial year”, was realistic.

The Chairperson added that the reference should be to the 2014/15 financial year, and there should be a reference to this being in line with GIAMA.

The Chairperson also suggested that under Recommendation 3, a reference to “and the Ministerial Determination” should be added.

Ms N November (ANC) suggested that “and functions” should be added to the Recommendation 4 to read: “That the Minister should ensure that there are policies in the Department of Public Works for State funerals and functions”.

Members deliberated over National Treasury possibly providing additional funding for unforeseen expenditure, such as for state funerals.

Ms Dreyer commented that the Committee need not deliberate on this point in detail. At this stage, the Report was merely asking the Minister to develop a policy for state funerals and functions. Once the policy was submitted to the Committee, Members could then deliberate on the detail of the matters.

Ms Dreyer noted her disagreement, under Recommendation 5, with the DPW regulating fees charged by consultants or professional people. They could charge what they wanted to charge, and the DPW could decide whether to accept the quotation. She recommended deleting the sentence as it was up to the DPW to get value for money.

The Chairperson said that she agreed, and asked how to deal with professionals who overcharged or where there was collusion.

Ms Ngwenya-Mabila suggested that the professional services should be monitored and managed.

Ms Dreyer said that the issue was already addressed in Recommendation 11.

Ms Dreyer recommended expanding on the Recommendation 7 to strengthen the Director-General’s hand with minimum and maximum punishment for misdemeanours and disciplinary hearings. A policy should be developed with clear guidelines to insist on consistency during disciplinary hearings.

Ms Ngwenya-Mabila suggested that on Recommendation 8, the Minister should ensure that the CFO’s financial statements were also submitted to the Committee so that it could monitor spending trends.

Ms Ngwenya-Mabila suggested that Recommendation 10 should include a time frame.

Ms Dreyer said that Recommendation11 should be re-worded so that corruption was not “monitored”, but rather to say that there should be policy to detect early warning signals, to avoid the risk of collusion.

Ms Ngwenya-Mabila suggested adding that SCM policy should be strengthened to be able to do this.

Ms Ngwenya-Mabila suggested that the DPW should fast-track the finalisation of the business case for the Property Management Trading Entity (PMTE); that the i-EWorks system should be implemented; and an accrual based accounting system for PMTE should replace the current basic accounting system.

Ms Ngwenya-Mabila suggested that a recommendation should spell out the need for compliance with the Employment Equity Plan for all DPW programmes and entities.

Ms Madlopha suggested that the DPW must improve on standard operating procedures to accurately record, monitor and report on actual achievements.

Ms Madlala noted that there was outstanding legislation in this term, and said the incoming MPs should know that all legislation should be tabled by 2014.

The Chairperson suggested adding on to Recommendation 10, that outstanding legislation should be tabled in the 2013/14 financial year.

Mr Van der Linde asked if it would be possible to achieve that in this financial year.

The Chairperson added that according to the DPW, the date would be up to the incoming Committee. The new Committee should follow up on the legacy report of this Committee.
 
The Chairperson said that, under the paragraph dealing with “Appreciation”, the wording should reflect that although the Property Management Trading Entity received a disclaimer for three consecutive years, the Committee appreciated the impact of the AGSA intervention. The implementation of the Turnaround Strategy had yielded tangible changes and impacted on the Committee’s oversight.

The Parliamentary Law Advisor highlighted some of the “parked” issues. The Chairperson said that the wording would be polished by the office.

It was noted that:
- the programme underspent by R10.5 million during the first three quarters mainly due to lower than anticipated expenditure on compensation to employees due to non-filling of vacant posts.
- Compared to the previous year, expenditure claims were lower while expenditure against property rates was in line with the first quarter.
- With regard to service delivery performance and EPWP, EPWP training meant training provided to the implementing bodies by the EPWP national office. The reporting mechanisms adopted under EPWP 2 talked to the two reporting systems but would also include branding and issues of health and safety.
- Item 5.4.3 would add extension of GIAMA to local government.
- The DPW should amend its disciplinary policy to include the guidelines to assist the Disciplinary Committee with sanctioning.

Members adopted the draft BRRR, with amendments. The Chairperson thanked Members for their input.

The meeting was adjourned.