Department of Public Works briefing on its oversight role over Independent Development Trust (IDT); IDT role in school infrastructure delivery; with Deputy Minister

NCOP Public Services

24 February 2014
Chairperson: Mr M Sibande (ANC)(Mpumalanga)
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Meeting Summary

The Committee met with the Department of Public Works (DPW) and the Independent Development Trust (IDT) to discuss their respective oversight and infrastructure delivery roles.

The Deputy Minister of Public Works, made a note that the IDT funds reduced from its investment account following the recession. The IDT found itself in a position whereby it had to compete within the Public Works space for contracts. The IDT therefore competed with other Public Works departments (provincial and national) as well as other entities for projects. Since the money from its investment account had drastically reduced the IDT found itself in a position where it had to charge management fees for services rendered to client departments, as advised by National Treasury. Mr Cronin also noted that the IDT does social facilitation, which is an aspect that is sorely lacking from other implementers of Government projects. He expanded on this by stating that building schools was not simply building the structure.If the community and local businesses were not involved and giving approval for these initiatives, they would fail and be nothing more than an empty building – which defeated the purpose of development. The goal of the IDT was to do these projects in a consultative, developmental way.

The Deputy Minister said there is an ongoing debate about the future of the IDT, especially given its financial situation and the questions about its business case, issues which the national Department of Public Works is currently dealing with. The Deputy Minister did suggest that the name may have to be changed, because Cabinet had taken a decision in 1997 that IDT should no longer be independent, but be more aligned to Government so it can be used to execute Government programmes. Thus IDT would lose the ‘independent’ and the ‘trust’ from its name since it cannot be a trust if it is a fully fledged Government entity. The DPW is in a process of converting IDT into a Schedule 3 entity, and therefore the relationship between the department and the entity should be defined more clearly.

The Select Committee raised concerns about IDT playing the part of a “middle man”, as they believed this drained State resources. The Committee raised a concern about IDT’s programme management function and feared that project monitoring was somehow inadequate. Members said passing the responsibility for contracted construction projects to consultants could not work. The IDT explained that just like the government departments, they do not execute projects directly. Work is outsourced to service providers. The difference with the IDT is that they manage the entire project without the bureaucracy that plagues Government departments, meaning IDT is able to deliver projects more quickly and more cost effectively.

A DA member criticised the IDT for not creating jobs, something the current government had promised. This accusation was countered by the Deputy Minister,, by stating the DA’s manifesto is saying that the private sector should be responsible for job creation, not the public sector. He raised the question as to why the DA would make such a statement when  it was not even in favour of such policies. It made little sense for the DA to say the IDT should be providing jobs when the DA was against the public sector providing jobs. The Deputy Minister made an example of the Western Cape, where IDT was not getting contracts from the provincial government.

The issue of long-term employment arose, and it was answered that the nature of construction jobs was project-based, so short-term employment was inevitable, with projects having to be completed as quickly as possible.
 

Meeting report

The Chairperson opened the meeting by asking the Department of Public Works (DPW) to give its presentation.

Briefing by Department of Public Works (DPW)
Mr Cox Mokgoro, Chief Financial Officer, DPW, apologised for the absence of the Director-General, Mr Mziwonke Dlabantu. He proceeded to give the background of the Independent Development Trust (IDT) and then went through their presentation, reading each slide verbatim.(The PowerPoint document is attached above, and is available on the PMG website.)

Ms Thembi Nwedamutswu, Chief Executive Officer, IDT, went through the IDT’s presentation, reading slide-by-slide, verbatim. (The PowerPoint document is attached above, and is available on the PMG website.)

Mr Ian Ellis, Chief Financial Officer of IDT, presented the financial overview portion of the IDT’s presentation, reading it slide-by-slide, verbatim. (The PowerPoint document is attached above, and is available on the PMG website.)

The Chairperson asked the Committee Members if they had a copy of Mr Ellis’s presentation printout.

Mr Ellis answered that there were no printouts made. The presentation was comprised of only four slides, and was only on the computer.

The Chairperson asked if anyone had questions and emphasized the point that the Select Committee should not be disadvantaged by not being furnished with the full information, as it would be difficult to engage with the new information, because the Select Committee had not seen it prior to the meeting.

Mr Jeremy Cronin, Deputy Minister of the DPW, was thankful that Mr Ellis had presented the financial figures, as he thought the presentation was incomplete without it. He then discussed how the origin of the IDT, presented during the meeting, was not complete and that he wanted to go over the “sanitized version”. He said that the title, “IDT”, was inaccurate and misleading. “Development” was a good word, but “Trust” was no longer appropriate. The Schedule 2 entity was not receiving budget allocations, and originally provided its services at no cost, using the interest from the IDT’s trust funds. When the financial crisis had hit, the finances of the IDT reduced drastically, as it was no longer enjoying the benefit of high interest rates from its investment account. In lieu of the looming financial situation IDT approached National Treasury with a view to getting an allocation like other Government entities. But, IDT was advised by the National Treasury that is had to charge management fees on services rendered. National Treasury had placed a fee structure on the majority of government entities rendering services to third parties. Thus, the IDT found itself in a position whereby it had to compete for contracts with the DPW. The DPW received priority, because they were a part of the government. Other entities were competing for the construction contracts to build schools. Mr Cronin referred to the “Infrastructure Orientated Model”, on slide four of the IDT’s presentation, to show how complicated the process was. He mentioned in particular the aspect of social mobilization, built into the IDT’s work. Mr Cronin pointed out that building schools was not simply about building a structure. He noted that if the community and local businesses were not involved and giving approval for these initiatives, they would probably fail and be nothing more than an empty building – which defeated the purpose of development. The goal of the IDT was to do these projects in a consultative, developmental way.

Mr Cronin highlighted the debate on the future of the IDT, and whether it should exist or not, and stressed that the name needed to be changed. “Social facilitation” was the phrase he used to describe what was needed in respect of the work being done by IDT, and that being in the field was vital for any project to succeed. Financial concerns had surfaced, challenging the question as to how these projects and the IDT would be funded. Mr Cronin mentioned that IDT needed to be converted into A Schedule 3 entity, which would align it with the DPW and the relationship between the two should be defined more clearly. As a Schedule 3 entity, IDT would be able to receive budget allocations from Government that would enable it to do the social facilitation work, which sets IDT apart from other entities.

He closed his self-acknowledged “long statement” by stating that although the challenges were difficult, they had to be dealt with, otherwise Government would be in position whereby it is allocating “R50 million, after R50 million,” which may” lead to waste if not properly dealt with.

Discussion
The Chairperson commented that the Select Committee is not in a position to oversee IDT on a regular basis. IDT provides quarterly reports to and is an entity of the Department of Public Works, thus the department is better placed to play the oversight role over IDT.

Mr M Jacobs (ANC, Free State) said that the Committee had only one month left in office to address its concerns. With regard to the restructuring of the IDT, it was an implementing agent and his concern was for which department they would be implementing. The IDT did not get its budget from the DPW -- the IDT said it gets its funding from the provinces. He criticised the IDT for contracting and hiring agents to implement projects, which was the major function of the IDT itself. It meant that the IDT had others do their work for them. Furthermore, technical skilled positions were being done by consultants. He closed his remarks by challenging what the IDT actually did, and stated that the next parliament would have to deal with these challenges.

Ms M Themba (ANC, Mpumalanga) said that the Committee wanted to know what was going on in the provinces. She referred to slide three, titled “History of IDT’s participation in the Delivery of School Infrastructure”, and asked where these projects were going to take place. She asked what was being fixed, where was it being fixed and if the IDT was doing it. She asked for this information, because as she stated, as a Member of Parliament she had a duty to inform the communities what was going on and who was doing what. She emphasised the importance of communicating this information -- the statistics -- from both the IDT and DPW.

Mr Z Mlenzana (COPE, Eastern Cape) claimed that the report and presentations were unfortunately skewed, and that they had provided peripheral information. He emphasized that the focus of the Select Committee was on the oversight role played by DPW over the IDT. He expressed his displeasure, because this was not the first time it had happened, in his experience. He praised the Deputy Minister of Public Works, Mr Cronin, for being critical of both the DPW and IDT, conceding that it was difficult to be critical about these issues for a person in that position. Addressing the lack of ability, or negligence, of the IDT to plan, he said this should not be completely ignored because the DPW was able and responsible for planning. He added that incidents of miscommunication had caused the Department of Education to be unhappy.

Mr H Groenewald (DA, North West) agreed that the title “IDT” was inappropriate. He then critically probed the IDT on various issues, starting with how they had generated their income from 1999 to currently. He was confused as to whether the DPW had funded the IDT and “kept them alive”. He wanted to know where the IDT offices were in each province, how many people were employed and what their budget was. Schools, especially mud schools in the Eastern Cape, were of great concern. He noticed the media’s representation of the state of schools in South Africa did not correspond with the IDT’s presentation on their projects. Promises had been made that mud schools would be removed or replaced. He was concerned with where the IDT’s money was coming from. The jobs generated from these initiatives were, in his opinion, temporary, and the government should be doing something about generating long-term employment. He asked what kind of training the IDT personnel received. On slide six, “Work Opportunities - Schools Infrastructure 2012/13,” the Western Cape Province was missing -- why there was no data for it? He asked as to why was the replacement, sanitation provision and renovation of schools happening only in select provinces? He asked what measures were put in place to keep corruption low in the IDT, and made a remark that “all departments are corrupt and we know it”.

Prince M Zulu (IFP, KwaZulu-Natal) asked for an explanation of what “sanitation” meant, and what the IDT’s role was regarding it. He remarked that there was no water in many schools.

The Chairperson said he was displeased at how the IDT had redirected their responsibilities and powers to agents, and asked the DPW if they had been overseeing the IDT redirecting their powers to auxiliary agents, and whether there was a Director-General or some other authoritative person monitoring and communicating with them. He stressed the lack of monitoring several times. He referred to the DPW’s presentation, on slide five, stating that the DPW seemingly interacted with IDT only when there was a challenge or problem. He asked how the DPW monitored the IDT. He suggested that the provinces that needed the most help should receive the most spending, but noted these reports/presentations did not reflect that. The Chairperson asked why was this so? He asked for clarification on the way in which energy and environmental concerns were taken into account, as some schools were being built with asbestos.

Ms Themba agreed that the Committee needed reports on these issues.

The Chairperson asked that Mr Groenewald’s question regarding job opportunities should be answered. He added that the President had said that jobs would be created.

Dr Somadoda Fikeni, Chairperson of the board, IDT, stated that IDT was in the process of reviewing its operations in order to include more detailed reports. One such aspect of the review would be the tightening of relationships and reporting, as well as monitoring. He stated that the changes in the DPW top management over the years had posed a challenge of consistency. He reassured the Committee that it would not take “even a day” to get the IDT’s project information, such as that on hospitals and schools. He justified the use of consultants by stating that the IDT needed resources to reach the highest capacity possible. He also agreed that monitoring was needed.

Dr Fikeni continued to emphasize the importance of consulting the communities by stating that sometimes communities wanted water, but they got a school instead. Explaining the mode of operation of the IDT dealt, he pointed out that the IDT was a project taker, not an initiator. It was for this reason that some provinces involved the DPW, whereas others chose IDT.“Fine tuning” would fix the issue of inconsistency across the provinces -- but he did not provide any information to describe what that meant. He suggested there should be legislation requiring prerequisites for projects done by the IDT to avoid the issue of large project variances. The IDT had a “footprint” in all provinces, but some provinces might have more of a presence than others, he said. The IDT had scheduled visits to projects a week after this meeting, and they invited the Committee members to join them. He said would not apologize for IDT, as the work of the “IDT speaks for itself.”It was not perfect, but it had done its very best with its limited resources.

Ms Nwedamutswu said that job creation was the responsibility of the project management, as they were the ones who set the targets. Those targets had been reached every year. Work opportunity was based on what the work and labour intensity demand was for a particular project. The IDT was not a contractor, and agent outsourcing was not contracting. The country’s issues were not with construction, but with project management. Quality control would need some kind of standardized criteria implemented. There were already standards in place regarding the choosing of consultants. The IDT did not play a role in sanitation, she said.IDT delegated work to others, and its management managed the construction and the agents of construction. This meant that water issues were still the responsibility of the Department of Water Affairs. The extent of corruption was unknown to her, but “collusion” and “price fixing” was an issue. Community solutions and outreach included involving the community in building their own projects. Regarding short-term, temporary employment, she said that the IDT’s projects were short-term – to be completed as quickly as possible. The IDT had a presence in every province. She said that the Western Cape has turned IDT away and that they did meet the appropriate capacity.

Ms Themba wanted specific statistics for each province, not general figures. She said she wanted more information so she could have a more interactive discussion.

Mr Jacobs stated that Ms Nwedamutswu did not need to defend the IDT. He thought the IDT needed to be strengthened. He said that the Committee was not happy with the IDT in its current form and therefore it needed to be restructured. He said the use of consultants does not inspire confidence in the ability of Government to deliver and ended off by saying that if they were that vital, they would have been a formal part of the organisation.

Mr Groenewald agreed with Mr Jacobs regarding consultants. He noted that the IDT had said they were not responsible for generating jobs, but that the government was. He however, pointed out that the IDT was “government” – it was their responsibility, as a government entity, to do these things.

Mr Mokgoro said that according to the Constitution Public Works is a concurrent function. Therefore, the national department cannot instruct provincial departments. He mentioned that the DPW was working with the IDT and the latter had a presence at both the national and provincial levels. He continued to say that oversight and monitoring of projects was also the responsibility of contracting departments. He however, noted that DPW was getting quarterly reports and was conducting oversight in terms of the PFMA, but there were limitations, because as a Schedule 2 entity, IDT was not bound by some of the provisions of the PFMA. The DPW needed to be strategic and determine which course of action to take, although it was uncertain to him or the Committee what the expectations were. He concluded by stating that the DPW accepted the concerns that had been raised, and that they would be addressed.

Trustee Ms Thoko Mpumlwama of the IDT pointed out that DPW had a representative in the Trust Board of the IDT and a representative from the Department of Education. She pointed out that the Executive Authority is well aware of IDT matters and had been very supportive. She ended off by stating that the value-add of the social facilitation work of the IDT was something that could not be quantified, as there is no standard measure to do so.

 

The Deputy Minister, Mr Cronin stated that although the Committee would not be around, it was not too late to take action. This meeting had allowed the Committee to understand the issues much more clearly and that would benefit both the current Committee and the one that would come in. He stressed the need to understand the relationship between the DPW and IDT, and the oversight that was taking place. He said that slide five of the DPW presentation had attempted to explain it, but conceded that the presentation had done nothing other than to state that there were protocols.

Mr Cronin continued to state that the issue of financial sustainability was real. The IDT was an entity which had had an ambiguous grounding, and while the projects were brilliant, however the linkages between IDT and DPW were not clear in terms of the structural relationship. He asked Mr Groenewald if he was a member of the DA – a question which elicited laughter from Members and observers - and pointed out that the DA’s manifesto stated that it was the private sector that should provide jobs - something Mr Groenewald had criticised the current government for not doing. Mr Cronin challenged the DA’s manifesto, saying that although the private sector was primarily responsible for creating jobs, the public sector had a major role to play in the creation of jobs. He iterated that nowhere had President Zuma said he was going to create five million jobs; he had said the President talked about the broadening of the Expanded Public Works Programme (EPWP). He added that Phase 3 of the EPWP would provide six million job opportunities. The jobs being discussed would indeed be temporary, particularly in the construction sector. He was however more confident of job opportunities created by the non-State Sector, which are also of a longer term. Mr Cronin suggested that the current thinking was that focus should be on maintenance, as it provides longer term jobs and the IDT should be a part of that, he said. The Deputy Minister also suggested that there was a need to build capacity in the public sector, but that would be a process. He said the IDT cannot do all the work by itself, and noted that there was a weakness in Government’s developmental capacity. He continued to say that successful projects needed to have good programme management. He closed by saying that he looked forward to the document from the IDT on the Waterberg Early Childhood Development (ECD) centre.

The Chairperson wanted to know which departments were affected by the current budget and spending, and what their capacities were.

Mr Groenewald interjected.

The Chairperson cut him off, and told him he would get his turn.

Mr Groenewald told the Chairperson that he had been ignored before.

The Chairperson ignored Mr Groenewald and proceeded to talk to Dr Fikeni, stating that there had been presentations but no proposals, specifically regarding Mr Groenewald’s concerns. He suggested that DPW should centralize its Monitoring and Evaluation Unit, which would report to the Minister and top management on all the work of the entities. He also suggested that there was a need to strengthen the work of the professional councils. He stated that DPW must provide the Select Committee with an outline of its oversight structure. The Chairperson also suggested that DPW should also expose corruption so it could be dealt with fairly. The DPW needed to provide an outline for a course of action following on what had been discussed.

He thanked the IDT for its presentation, and the meeting was adjourned.

 

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