Termination of Section 100 Limpopo intervention, with Limpopo Premier & Minister of Finance

NCOP Finance

30 July 2014
Chairperson: Mr C De Beer (ANC)
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Meeting Summary

The meeting brought the various Select Committees for the provincial departments affected by the section 100(1)(b) Limpopo intervention invoked in December 2011 when National Treasury took over the administration of the Departments of Health, Education, Roads and Transport, Public Works, and the Provincial Treasury.

The Limpopo Premier stated that corporate governance had been on the verge of collapse before the intervention. There had been insufficient cash management, and a failure to pay employees and service providers. Limpopo was currently better off than before the intervention. There was oversight by the Inter-Ministerial Committee of Cabinet, and the Finance Select Committee. The National Treasury had looked into and confirmed improved spending, and there was firm action against corrupt officials.

The Limpopo Provincial Treasury stated that there were service delivery challenges, but the high level financial position was strong. Reckless overspending was curbed, and unauthorised expenditure was eliminated. There was a spending challenge for employee compensation as this stood at 70%, with the national average being 60%. There was an improvement of financial management skills. Integrated electronic accounting systems were installed. There was improved infrastructure delivery.

The Provincial Department of Health had to deal with the challenge of employee compensation. Overtime expenditure had to be reduced. There was progress with health financial management, infrastructure building and pharmaceutical and surgical supplies. A challenge was that staff members who had transgressed against policy and procedure still occupied their positions due to ongoing investigations.

In discussion, there were questions about the filling of crucial posts, disciplinary measures and lack of internal capacity. There was general concern about transgressors either remaining in the system, or leaving it without consequences for them. Was the R4 billion in the bank related to underspending, and would the money be spent wisely? There was a question about the technical ability of the state, and whether the civil service was competent to drive policy direction. Lessons had to be learnt from the intervention. Disregard for legislation to do with the supply chain process was commented on. There were questions about the state of readiness for provincial takeover, and the planning for this takeover. There was concern about sustainability. There were comments on the lack of integrated accounting systems, especially the inability to keep an accurate asset register.

Afternoon session
The three provincial Departments of Education, Public Works and Roads and Transport briefed the NCOP committees on the readiness of the Limpopo province to take back the administration of its departments. The presentations gave details of the status quo in each department, the intervention methods, the turnaround strategy and the strategies moving forward to ensure that the province was well prepared and ready to function.

The Committee was impressed that there were detailed strategies in place for the handover and there would in fact be a transition period. There needed to be sustainability and a long term plan so that there was no repeat of the collapse of the departments. Oversight within the provinces was key, even oversight over municipalities. A complete collapse of systems meant that citizens were left disadvantaged during the rebuilding.

The Minister of Finance said that Limpopo was a learning curve for South Africa and would be used as a reference point for government. The collapse of an administration was new to the democratic South Africa but how National Treasury had responded and turned the situation around was applauded. Though it might have seemed like a hostile takeover of a province, it was necessary and, due to the willingness of the province, now they were ready to govern once again. Now that National Treasury was leaving Limpopo, the Premier should let it be known to his officials that the Heads of Departments inherit the liability and responsibility of what happened during the course of administration under Section 100(1)(b). It should be on a rare basis that such an intervention was implemented.

Minister of Finance, Nhlanhla Nene, stepped by the meeting to give thanks to the political leadership, legislature and the officials of Limpopo and their cooperation in the duration of the process. He also thanked the national treasury delegation that was sent to province for their hard work.

Meeting report

Introduction by Chairperson
The Chairperson said that this engagement with Limpopo had started when the intervention was invoked. The primary purpose of the intervention was to uphold the Constitution. There were laws that prescribed how to deal with State money. There had to be clean governance. Efficient service delivery had to be costed. There was a constitutional obligation to protect South Africa and promote economic stability. However, it would not do merely to point fingers and accuse. The Inter-Ministerial Committee under the Minister of Finance, had visited Limpopo four times as from 9 February 2014. The Finance Select Committee recommended to the national executive in November 2013 that the intervention be lifted in March 2014, on the condition that there be sustainability. The province could not stay in ICU forever. There was a R4 billion cash surplus in the bank. There had been a meeting with the Anti-corruption Task Team (ACTT) and a visit to Limpopo.

Comment by the Limpopo Premier
Mr Stanley Mathabhata, Limpopo Premier, remarked that the Finance Select Committee had a pivotal role to play in the intervention. Corporate governance had been on the verge of collapse before the intervention. There was insufficient cash management, and a failure to pay employees and providers. There was executive neglect in managing taxpayers' money. Limpopo was currently better off than in December 2011, when an intervention team was deployed to deal with the challenges. There was oversight by the Inter-Ministerial Committee of Cabinet, and the Finance Select Committee. Financial management had improved, and there was an electronic accounting system in the provincial treasury. The Provincial Treasury was aligned with National Treasury to look at solvency and budgeting. There was control over the movement of cash transfers, and stringent financial controls. A R1.7 billion overdraft was eliminated.

Attention was paid to procurement strategy, provincial infrastructure development, and planning development. The National Treasury looked into improved spending. There was firm action against corrupt officials. Unintended consequences had been material underexpenditure, and a lack of clear guidelines. There were delays with finalising disciplinary cases. A team of finance officers were appointed. The administration team could assume full executive and accounting responsibilities, and deal with systemic challenges.

Limpopo Provincial Treasury briefing
Mr Monde Tom, Administrator, referred to the observations and recommendations of the Finance Select Committee. There was a high level of service delivery challenges. A memorandum of understanding (MOU) was signed with the Premier. The intervention team had allowed the new Premier and executive to take over. There was slow progress by the Department of Public Service and Administration (DPSA) to deal with disciplinary cases. Five departments had not complied with legislation. The process had to be fast tracked. The high level financial position was strong. There was a R4 billion cash surplus by June. The surplus was not due to non-payment of suppliers. In June there had been the lowest number of unpaid invoices ever. There was no longer reckless overspending. The budget for employee compensation had been unstable, which hampered service delivery.

The number of unplaced temporal educators was reduced from 2 500 to six. There were challenges around textbooks. The Department currently had a system in a number of schools. The problem of expiry of medical stock was addressed. A pilot was undertaken to deliver medicine directly to hospitals. It would be rolled out to all hospitals. 37 CEOs were appointed to manage hospital administration. 8 road projects were undertaken. There was a new external body to coordinate disciplinary actions. There were 40 dismissals. Four cases were senior managers. Areas of concern were about competence of staff in CFO offices. A skills audit was undertaken of CFO office staff, also in the Treasury.

Mr Gavin Pratt, Head of Department at Limpopo Provincial Treasury, noted that at the end of March 2014, budget spending stood at 96.6%. It had been 95% in the previous year. Capital expenditure was low at 86%. Corrective measures included elimination of unauthorised expenditure. There was some unauthorised expenditure, especially in education, still . There were stringent cash flow management controls. CFO office skills was promoted through project based learning. Compensation of employee spending was a challenge. It stood at 70%, with the national average being 60%. There was a new banker for transversal contracts. No overdraft was needed. An austerity circular was aimed at reducing travel expenses.

Progress made by the Limpopo Provincial Treasury included improvement of financial management skills and capacity and the provincial cash position; expenditure management and spending trends and accruals; payment of suppliers; revenue enhancement; and infrastructure delivery. Integrated electronic accounting systems were installed. There was improved audit assistance and data integrity.

Mr Tom added that oversight was stabilised. The national executive and the Premier concluded disciplinary cases and appointed key staff, like the Chief Procurement Officer. The Head of Department had to be strengthened with competent people. Departments were not yet organisationally effective. A high level workshop on the handover from the intervention team would be held on 7 August.

The Chairperson remarked that there had to be a zooming in on a pool of expertise that was lying in wait in all provinces. The day’s session had to concentrate on intergovernmental relations, and the fiscal role of NCOP committees, as well as that of the provincial legislature. The NCOP had to oversee quarterly performance and control.

Provincial Department of Health briefing
Ms Tiny Rennie, Health Administrator, noted that the percentage for compensation of employees was a challenge. There had to be reduction of overtime expenditure, plus the implementation of an exit strategy. Currently the intervention was limited to oversight. Availability of medicines had to be improved. The high profile disciplinary case of the current CFO’s position was in the process of being resolved. Progress made included financial management; health infrastructure and pharmaceutical and surgical supplies. Challenges identified were the fact that the Administrator had only been available on a part-time basis with a negative impact on decision making; and that staff members implicated in transgression of departmental policies still occupied their positions due to outstanding investigations (see document for details).

Deliberations
The Chairperson underlined the importance of the Department of Public Service and Administration in the process.

Mr T Motlashuping (ANC, North West) remarked that the ruling party had intervened decisively in Limpopo. The Committee had noted that there were departments that had not complied with directives for the transition from section 100(1)(b) to 100(1)(a). Five departments had to move from an unqualified to a clean audit.

Mr Motlashuping said that there had to be improvement in the filling of vacancies. Administrators had been found guilty and dismissed. He asked about measures to expedite the process. He asked if critical posts were being filled.

Mr Motlashuping asked how lack of internal capacity challenges could be overcome.

Mr V Mtileni (EFF, Limpopo) asked if those guilty of maladministration had been removed from the system.

The Chairperson told Mr Mtileni that cleaning up the system was an integral part of the intervention.

Ms E van Lingen, DA NCOP Member, remarked that of staff who had resigned or were dismissed, only one had been prosecuted. In all likelihood the transgressors would remain in the system.

Mr M Kawuhla (ANC, KZN) referred to page 10 of the document. There were five affected departments. Accounting Officers had to be part of the disciplinary process. Officials who had resigned, still had to account for their actions as citizens.

Mr Kawuhla noted that the report on health had referred to a lack of policies. He asked if policies were currently in place.

Ms van Lingen remarked that it was not enough to have money in the bank. It had to be spent wisely. She asked if administrators could manage the money. There had been non-compliance with the Public Finance Management Act (PFMA). She asked how the capacity to do what needed to be done, would be addressed.

Mr Edgar Shisi, Administrator: Provincial Treasury, replied that there were currently tighter payment rounds. Money could be followed from procurement to delivery to payment. Reduction of the number of payment rounds cut out opportunity for abuse.

Ms van Lingen remarked that 18 out of 42 hospitals assessed were not yet adequate (page 42).

Mr Jimmy Ledwaba, Acting HoD, Health, replied that the target had been to do all by the end of July, when a report would be drafted for the premier. Figures were changing from day to day.

The Chairperson said that there was still much to be done in each province. 100% compliance was not possible. The Committee would engage with the Auditor-General.

Mr S Mohai (ANC, Free State) referred to political leadership. The National Development Plan was linked to the technical ability of the State. The question was if the civil service was competent to drive policy direction. It was important to take note of lessons learnt during the intervention.

The Limpopo Premier, Mr Mathabatha, replied that the technical ability of the State was indeed critical. He agreed that it was not possible to say if the State was developmental or not. With operational efficiency, programmes would be rolled out according to policy. To a large extent it had been technical capacity on the ground that had made change possible. Administrators were capable of giving directives. No government department had absolute technical capacity. Government had to compete with the private sector for the best skills. Lessons learnt from the intervention were that there had been absolute disregard of laws in Limpopo. Specific systems were needed to run the province.

Mr Rudolph Phala, MEC: Provincial Treasury, added that it was the first time since 1994 that the national executive had intervened on such a large scale. The lesson learnt was that there was a need for legislation, as section 100 stated that national legislation had to govern intervention. Yet there had been no enabling legislation since 1996.

Ms Malatsheng, NCOP Member, said that Members were concerned about sustainability. People who had made the system collapse were still in place. There was concern over skill and capacity. Disciplinary cases who had left government had to be followed through. Criminals could not be allowed to escape. She asked about management skills. There had to be new leadership committed to clean governance, which could put Limpopo ahead.

Mr Shishi replied that criminal cases would be handled by the ACTT. Problems in Limpopo were not unique. It was also in national departments.

The Chairperson noted that the Treasury was represented in the Anti Corruption task Team.

Mr Tom added that the province had improved. The period of recovery was related to the period of decline. Problems had taken time to develop. Not all fraud and corruption cases had been reported. The Treasury had to oversee and intervene. Delays with remaining cases was acknowledged, The initiators had to be government officials. There had been collusion with people charged. The process had been undermined. The system could deal with all cases, but people had a right to defend themselves, and that would take time. Provinces would be asked to ring fence funds.

Ms Dlamini, Chairperson: Social Services Select Committee, interjected that national departments should not be drawn into the discussion. The focus had to remain on Limpopo.

The Chairperson said that the Public Service Select Committee could look into the matter of legislation.

Mr F Mdaka, Chief Whip of the Limpopo legislature, said that the time was right to grant powers to the province. There was readiness for oversight by an independent legislature. The situation had calmed down. The provincial legislature had seen the intervention coming, and could currently see that leadership was ready. There was authority to see that challenges were dealt with.

Mr Mohai remarked that disregard for legislation was the chief shortcoming of supply chain management. He asked about progress with the memoranda of understanding to manage the transitional period.

The Limpopo Premier, Mr Mathabatha, replied that a memorandum of agreement would be signed in the course of that week.

The Chairperson asked about data integrity, and why Statistics South Africa could not release information.

Mr Tom replied that their own legislation did not allow details about individuals to be released.

Ms Dlamini asked about the role of monitoring and evaluation on the way forward. She asked if the large sum of money in the bank was related to underspending. Government was not a business. Underspending was evident in the Department of Health. There was too much surplus. There had to be a tracking system to check if money was being paid to the correct projects.

Mr Shishi replied that it was to some extent true that money in the bank was related to underspending. The Head of Department and the Premier had pointed out that spending was slow. Petty cash management was important. There was a lack of an integrated account system for the asset register.

Ms Rennie added that financial management in Health had improved. Only receivables had received a qualified audit. There were problems with the collection of patient fees. The old system had to be reviewed. The Chief Director of Supply Chain Management had been suspended. Financial management capacity was adequate, but supply chain management had to be addressed. There were standard operational procedures, and a checklist for accounting officers, for step by step guidance.

Mr Ledwaba added that the policy was to look at a long term health plan. There would be a Health summit that year. There was a technically sound long term plan, with agreement between national and the province. It would be run by technical work teams.

Ms Dlamini asked about the state of readiness for takeover. There had to be clear takeover plans.

Ms Tswane said that officials who had taken money from government had to pay it back. Taxpayer money had been siphoned from government coffers. She asked if a parliamentary oversight visit to Limpopo would find things to be as they are said to be. She asked if the province had employed competent officials.

Mr E Von Brandis (DA, Western Cape) pointed to the lack of an integrated account system for the asset register. Disclaimers and qualified opinions were due to an inability to maintain an accurate asset register. He asked if a three year project would be phased into all departments. He asked about the rollout of LOGIS to the Provincial Treasury.

Mr Shishi replied that the administration and the State Information Technology Agency (SITA) had a plan to implement LOGIS.

The Chairperson noted that if the province failed to manage the transition to section 100(1)(a), the national executive could intervene through directives to the provincial executive. Steps required to meet obligations, had to be stated.

Mr Tom replied that health had not received a clean audit due to systemic structural problems. The current system had to be replaced or an alternative had to be found.

Afternoon session
Section 100(1)(b) Intervention – Limpopo Department of Education
Mr Mzwandile Matthews, Administrator of the Limpopo Department of Education, led the presentation on the intervention process in Limpopo.

Diagnostic analysis; Scope of the intervention; and Measurable benefits
There was an inability by the provincial education department to fund key strategic educational priorities, thus resulting in essential national standards or the established minimum standards for the provisioning of quality basic education in Limpopo not being met. 

The existing system of financial, supply chain, contract, asset, records and cash flow management and controls was not effective, efficient and accountable to an extent that –
2010/11 & 2011/12 adverse audit opinions were not adequately addressed;
the Department continually overspent on its personnel budget between the 2007/08 and 2012/13 financial years. Funds allocated for priority education programmes were moved to augment the CoE budget; and
cashflow management challenges led to the delayed payment of invoices, thus creating huge accruals.

The Compensation of Employees (CoE) budget was bloated.  Therefore an effective and sound human resource management strategy must be developed and implemented.  The focus areas of the strategy should include, but not limited to –
applying the post provisioning norms;
PERSAL clean-up;
aligning the PERSAL delegations with human resource delegations;
aligning the organisational structure with the sector generic structure approved by the CEM; and
addressing the high vacancy rates of support staff at schools, districts and head office.

The scope of the intervention was geared to achieving the outcomes envisaged by Cabinet.  These were;
normality and stability in the delivery of improved quality education in all its material facets;
addressing decisively the operational, management, administrative and systemic challenges facing the Limpopo Department of Education in the provisioning of quality education; and
ensuring that measures implemented during this intervention, guarantee the sustainable provisioning of quality basic education in schools after the intervention.

The measurable benefits for the intervention in the Limpopo Department of Education, include -
compensation of employees budget would be under control;
schools would be functional, safe environments conducive to effective learning and teaching;
Department would practise Batho Pele principles, sound human resource planning and management, financial management, control, accountability, supply chain and contract management, and will comply will legal prescripts and strategic planning processes and cycles.

Budget allocation & analysis
The CoE had been increasing at a higher rate than the budget for “service delivery” budget items.
The CoE had been increasing despite “constant” employee numbers (no substantial number of new posts filled – all unfunded posts on PERSAL have been abolished).
The unstable CoE could be attributed to (a) less than the approved 6.5% CPI was provided; (b) the reinstatement of the rural allowance; etc.
The “service delivery” budget was still lower than the 2010/2011 budget.
The trend was still continuing, though there was a slight upward gradient in the service delivery budget emerging between 2012/13 to 2014/15 financial year.

CoE vs service delivery budget allocations
The objective over the past three financial years, was to fully fund the allocations for the CoE, national and provincial priorities, examination projects, contractual obligations, and CAPS training.
The ideal ratio of the CoE was to the “service delivery” budget items was 80:20.  However, for the 2014/15, this ratio stood at 82:18
Since the CoE and the Conditional Grant allocations are “ring-fenced” and could not be tampered with, any budget shortfall could only be funded from the “service delivery” budget items.
The LPT could consider incentivising Departments that realise savings from their equitable share budget allocations.  The effective implementation of austerity measures, results in savings.  These savings could be returned to Departments that realised such savings.

Responses to the recommendations of the Joint Select Committees (13 November 2013)
Recommendation 4.2:

The DPSA and the LDoE should review the salary scales paid to educators in relation to other provinces.

Effects and possible solutionsThe CoE would continue to be bloated for as long as these educators were in the system. Reversing the decisions already implemented would result in a stream of litigation for unfair labour practices.  The educators where placed in these higher scales by the Department.  It was the Department’s decisions that resulted in the State being committed financially.  Where practicably possible there needed to be;
investigations, followed by disciplinary action;
stringent systemic control measures must be implemented;
a national policy framework must be developed as a matter of extreme urgency to decisively deal with the exit and re-entry of educators in the system; in most cases, without following due process;
directives must be communicated to schools about learner enrolments schools are allowed to admit annually.  Unavoidable deviations to prescribed learner enrolments, must be first approved by the relevant authority; and
no school should be allowed to introduce subject streams, especially Grades 10-12, without prior approval by the relevant authority.  Accountability must be made a norm right through the system.

Recommendations 4.3:
The DPSA should ensure the disciplinary processes were fast-tracked so as to ensure that all those implicated should have been removed from the PERSAL system by the time the intervention exited –
7 RWOPS cases had been finalised, though the sanctions by the chairperson are dissatisfactory; and
14 alleged fraud and corruption cases are lagging behind.  For the majority of the cases, chairpersons and initiators had not been appointed.  Solutions, would be the same as in other Departments;
Recommendations 4.4 & 4.5:
The next four months should be treated as a transition phase to implement the exit strategy; & the 5 systemic challenges should be prioritised and remedies implemented within the next four months –
The focus in the last four months of the 2013/14 financial year, was on implementing departmental and intervention programmes, including the implementation of sustainability projects, preparations for the 2013/14 Annual Financial Statements and audit processes and so forth.
Recommendation 4.6:
The ACTT should fast-track the processing of fraud and corruption cases –
Similarly to DC processes, dealing with alleged fraud and corruption cases had been slow; and
The Department was in the process of defending itself against companies which believe they had been unfairly treated; and

Recommendation 4.7:
The Limpopo Provincial Administration should ensure compliance with the PFMA, No. 01 of 1999 –
With the assistance of the National and Provincial Treasuries, the DBE and committed officials in the Department, compliance and accountability are becoming a norm; and
The tight monitoring by Treasuries and the DBE was bearing fruit.

Observations 3.7 & 3.9 –
3.7 – DPSA was assisting in finalisation of the realigned organisational structure;
Back-office services pertaining to HR and financial management, were considered to respond to the AGSA queries endemic at the District level; and
3.9 – The consolidation of the physical headcount conducted by StatsSA, with the education management information systems (EMIS, SA-SAMS, LURITS – for learners) and PERSAL (specifically for educators) was being finalised.

Achievements
Budget (especially for the CoE) had been stabilized.  There was no overspending at the end of 2013/14; and substantial savings were realised, mainly arising from austerity measures
Funding of schools in terms of the National Norms and Standards for the Funding of Schools has been improved from 62% in 2012 to 90% in 2014.
The organisational structure had been realigned, but was currently being refined to meet the directives from the DPSA in relation to the education sector generic structure.
As at present, only 6 out of 2 544 temporary educators yet to be fully placed permanently.
An audit rectification project team has been appointed by the Treasury, and deployed to the Limpopo Departments of Education and Health.
20 736 learners were beneficiaries of the scholar transport programme; and 1.6 million learners receiving meals daily through the NSNP. 

Risks and challenges
Potential relapse, if interventions are not sustained. 
No consequences for wrong-doing; and ineffective disciplinary processes.
Contract and record management.
Skills profiles for specialised line functions, especially in the CFO’s Branch.
Performance management and development. 
Ownership of sustainability projects, especially those dealing with AGSA audit queries.
Learner data (though there was noted marked improvement of the EMIS processes).
Irregular appointment of educators by schools, and well as the unstructured changes of subject streams without following due processes and priori approvals by relevant authorities.
Failure by schools to retrieve CAPS-aligned textbooks at the end of the school calendar year; and report textbook shortages timeously.
The salary scales paid to educators when compared with the other provinces.
A new phenomenon (nationally) where educators resign or take severance packages from the department, and later re-enter the system at higher salary scales as per PSCBC agreements.
Schools enrolling higher learner numbers than the school‘s capacity in order to be classified differently, resulting in a higher salaries for principals, additional promotional posts, and additional educators required.
Ineffective merging and closure of small schools not educationally and/or economically viable.

Mitigation / Way forward
A focused approach / strategy for HR management and development were unavoidable.  The realignment of the organisational structure of the Department should be finalised.  Appointments should be skills and competency-based. The skills audit being undertaken to focus on essential requisite skills, particularly in the CFO’s Branch, should be accelerated and outcomes be implemented.

Finalisation of the electronic verification counts of the departmental movable asset register using the BAUD electronic system; as well as the immovable asset register under the leadership of the LDPW.
Adherence to the CPO guidelines in the procurement processes, especially the finalisation of the NSNP costing model and implementation of the costing model for the scholar transport programme.
Consolidation of the EMIS database (for learners) and the PERSAL system (specifically educators) with the outcome of the 2013 physical headcount conducted by Stats-SA.

Conclusion – What can be done?
We still have to move from point A to point B. The critical issue was “how”
Non-“business critical” issues must be trimmed.
The Provincial Treasury Instruction Note No. 01 of 2012, & the National Treasury Instruction Note No. 01 of 2013/14 are non-negotiables.
We need to think of ways to improve productivity.

Address by the Minister of Finance
Mr Nhlanhla Nene, Minister of Finance, was given an opportunity to address the Committee. The Minister said they (with the Premier) were in the process of producing a memorandum of agreement (MOA) to regularise the process. The Minister thanked everyone involved in the process and the cooperation of the officials in Limpopo. Although the process was painful, it was also necessary. There were still more legislated processes in place that would give direction as to how things proceeded from this point on.
The Minister turned to his officials that were in the province, saying they had work to do. He was grateful to them for the diligent work they had done and not only in working to get out of the situation, but also ensuring that there were no relapses going forward. The process was a learning curve, not only for Limpopo but for other provinces as well. Other provinces had requested similar interventions on smaller scale.
The Minister thanked the Chairperson for allowing him to express his gratitude and appreciation about the process and its outcomes.

The Chairperson thanked the Minister for honouring the meeting and taking time to address the Committee.

Section 100(1)(B) Intervention –Department of Public Works
Mr Mbuyi Dondashe, the Public Works Administrator, noted that previously the NCOP had recommended that a gradual process of handover commence.

Progress and Way Forward
Diagnosis 1: The LDPW lacked the necessary technical skills in the core business. The outcome was that ttechnical positions were occupied by properly qualified staff.  A skills gap assessment report identifies the mismatch between existing skills and skills required by the position occupied.

Diagnosis 2: The Limpopo Province was paying close to R200m in leases to private leasers. It would be ideal for the province moves into owned buildings to reduce the lease cost. Land had already been identified to build a government precinct.

Diagnosis 3: LDPW did not have an immovable asset register as defined. The AG continued to disclaim the LDPW on the IAR. There had since been an IAR in place that informs the infrastructure planning process of the Province.

Diagnosis 4: The LDPW was unable to recruit the necessary technical skill. The process of appointing professional staff was long and cumbersome. Vacant positions had since been filled with appropriately qualified staff. All other departments in infrastructure delivery had access to the necessary technical capacity for project identification, feasibility studies and planning.

Diagnosis 5: The LDPW did not have the necessary capacity to deliver on infrastructure. As a result, there was a prevalence of Project Management Units (PMU) at a huge cost to the fiscus. However the Public partnerships and PPP’s exist to supplement existing capacity.

Diagnosis 6: The LDPW did not have a project management system from project conceptualisation to project delivery. The result was that project documentation was untraceable resulting in AG findings. In place now was a project management system that allowed for monitoring and archiving of projects using technology.

Diagnosis 7: The organizational structure did not address the infrastructure role of the LDPW. Now, the LDPW was delivering optimally on its mandate and was guided by an organizational structure that was infrastructure focused in line with the LDPW’s role as defined in the Infrastructure Delivery Management System (IDMS).

Diagnosis 8: The office of the CFO did not have the requisite capacity to manage the budget process, supply chain management (SCM) and general financial management. The result was that the AG continued to issue disclaimer opinions.  Now, there existed a department that operates at level 5 of the Financial Maturity Capability Model as designed by the National Treasury.

Diagnosis 9: There were no consequences for officials who continuously breach PFMA and other laws of the country. In place now was a performance management system that was managed, applied consistently to improve performance at all levels of management.

Diagnosis 10: The office of the CFO did not have the capacity to manage the financial management process. The system did not exist for asset management and SCM. The work was done on excel and this increased the risk of human error. Outcome: There were systems that support financial management of the Department in place. (See document for further details)

Section 100(1)(B) Intervention – (Former) Department of Roads and Transport in Limpopo
Mr Mathabatha Mokonyana, the Roads and Transport Administrator, made the presentation.

 Responses to the previous NCOP recommendations
NCOP recommendation 4.1:  The Department of Roads and Transport should fill the key vacant posts at RAL within the next four months.
Response:  The Board was appointed in April 2014 and had already conducted interviews for the positions of CEO and CFO.
NCOP recommendation 4.4:  The next four months should be a transition to implement the exit strategy
Response: Procurement delegations were delegated to the HOD in February 2014
NCOP recommendation 4.5:  The five systemic challenges should be prioritized and remedies implemented within the next four months
NCOP recommendation 4.7:  The Limpopo Provincial Administration should ensure compliance with the PFMA, 1999

Progress to date
The rationale for the intervention was that within the Department there was:
- No contract management
- Weak internal controls
- No oversight over agencies
- Over commitments
- Irregular tender awards.

The majority of the issues raised by National Treasury and AG were confirmed. There were inadequate SCM policies in place. There was poor financial management at both the Roads Agency Limpopo (RAL) and the Gateway Airports Authority Limited (GAAL), institutions displayed week corporate governance, there were vacancies at key positions and there were no Shareholders Compact signed at RAL. There was no proper verification of payments; there were backlogs in payments to service providers especially at RAL. There were weak quality assurance checks, wrong application of sub-contracting and ceding and database (panel) policies. There was also a probe by the Public Protector on the irregular award of a tender.

Turnaround
Developed a Turnaround/Recovery Plan. Received a team from National Treasury (PWC) to address 2012 / audit queries. The Department obtained an unqualified audit opinion in 2013/14.
Developed a Turnaround/Recovery Plan. Records management improved
Reviewed SCM policies, financial delegations, and reconstituted bid committees.
Seconded a DOT official to act as interim CEO at RAL. Reinstated the CEO of GAAL. Facilitated the appointments of new Boards of Directors for RAL and GAAL. Approved Shareholders Compact.
Cleared payments backlogs at Department and the agencies. Strengthened internal controls  (checklist)
Provided technical and legal support. Supported forensic, criminal and DC investigations. Closed gaps. Developed an action plan to implement the Public Protector’s recommendations

More progress
The Department had not overspent on the 2012/13 current budget.
Paid all outstanding invoices with 99% currently being paid within the required 30 days. Implementing cost containment measures.
Introduced internal control with regard to payments in the Department. From December 2011 to date a total 23 912 invoices to the value of R5 246 330 700-48 were verified and processed for payment.
Brought additional capacity from DOT to do quality checks and invoice verification with regard to two main cost drivers, namely; roads infrastructure and bus contracts.
Brought additional capacity from DOT to improve financial management and SCM at both RAL and GAAL.
Reviewed 11 and approved 7 policies at RAL.
Reviewed and amended 13 policies at GAAL.
Implemented the Public Protector’s recommendations to an extent they are the responsibility of the  Department. Outstanding issues are related to either legal or criminal processes underway.
Cleared the payments backlog especially at RAL.
Stopped the usage of hand written cheques at GAAL.

Infrastructure delivery:
8 new roads projects (upgrade) were re-started after being discontinued because of lack of funds (over-commitments), 5 new roads projects were started. 3 roads rehabilitation projects were started, 3 bridge construction projects have started, 3 flood damaged projects are being undertaken, 36 preventative road maintenance projects commenced, 49 EPWP projects of various types were commissioned, and new and replacement road signs have been acquired and are being installed.

Criminal cases:
5 cases have been registered with the police as a result of the forensic investigation. 30 cases of conflict of interest were investigates and 27 withdrawn. The former CEO of RAL has been arrested on fraud and corruption charges. One employee, one ex- employee of the department as well as 9 contractors were arrested in relation to the patching of potholes project (all but 4 where withdrawn). A former employee of GAAL was successfully convicted on cheque fraud.

DC cases:
Department: 7 cases on pothole patching project.
RAL: 2 cases of insubordination and neglect of duties. The case of former CEO for constructive dismissal was arbitration at the CCMA
GAAL: 4 cases of mismanagement and financial misconduct. A former employee of GAAL was successfully convicted on fraud (cheque fraud) charges.
Former CEO and an official of RAL as well as a private service provider have been arrested on fraud and corruption charges.

Way forward
The Department of Transport contributed to the MOA and issues specific for Roads and Transport that need closer cooperation in the spirit of Section 100(1)(a) include the following:
Outstanding DC cases.
Finalisation of the study to the appropriate models to deliver infrastructure and management of the airports in the province
Provision of support on criminal and related investigations.
Provision of support to the numerous litigation cases; especially at RAL.
Support in the filling of key positions
Support in the SCM practises for high value contracts.

Discussion
Mr T Matlashuphing (ANC, North West) was grateful that the presentations gave a status update of where things were, where they are now and the systems in place going forward. The intervention team had indeed done a good job. It was clear from the presentation that there were strict systems in place to enhance good governance. He was impressed that in 2011 the province received a qualified audit but by 2013 they received an unqualified audit.

Ms T Motara (ANC, Gauteng) said the Committee received the presentations only the day before the meeting and Members were having to reading it during the plenary session. Going forward, there had to be a balance between political will and administrative capacity, both of these went hand in hand. The capacity for the acting staff came from the national staff sent into the province. Government should be able to say what was going to happen when that capacity left the province. The greater lessons learnt were about intergovernmental relations and respect for the law.

To be realistic clean audits were not achievable in the short to medium term; they were a long term goal that could be realized as long as the Auditor General findings were addressed. The Fourth Parliament Committee had made recommendations on the interventions, the new Committee should not go back on that. It was also key to have continual oversight. Oversight was not an event. It was also a learning curve in Limpopo that the provincial legislature had to have oversight over the executive.  This would ensure that things were attended to early and there were no blurred lines between the legislature and executive, so that there was no army from national that came in as though it was a hostile takeover.

Mr M Khawula (IFP, KwaZulu Natal) said the Committee was getting these continual images of what was going on and developments talking place but it would be conducive if at some point the province could quantify the damage caused by the maladministration and fruitless expenditure per department and the entire province.

The Chairperson referred Mr Khawula to the report of October 2012 where Mr Monde Tom did a diagnostic analysis for the Committee.

Mr S Thobejane (ANC, Limpopo) said he was from Limpopo and had vested interests in the province on whether things were bad or good. When the saga started, he had the benefit of being in the Standing Committee on Public Accounts and received detailed briefings at to what was going on. It was great to sit in this meeting and see and hear a different picture.

In the last two years of the intervention there were prominent incidents of the (Acting) Heads of Department and the Administrator working in parallel to each other and not together. He warned that when the administrators and the rest of the intervention team left the province; the same tendencies should be paid the attention to. He gave the example of a Head of Department (HOD) being called to account and instead the HOD refers these questions to the Administrator knowing that the Administrator is no longer in the province.

Mr Thobejane said officials could make government succeed, but just as they could be responsible for its success they could also be responsible for the destruction of government. The Premier of Limpopo needed to take a stern stand with his officials and hold them accountable.

The Administrator for Roads and Transport said that at the beginning relations were difficult but there was great cooperation between the Administrators and HODs. There had never been any real tension between the two parties.

Mr Mtileni (EFF) said he had always wondered how much Public Works was spending on accommodating the departments and was glad to finally hear from Public Works during the meeting. Also it was great to finally hear how much of a mess the matter had been, so much money was spent on offices rather than on service delivery. He asked if the Department was contracted to the same landlords or do they change from time to time. It was good that the departments were working on the recommendations of the Public Protector and respected the findings, especially the criminal ones.

Mr Tom said there were 94 leases that amount to R200 million; they were made up of 10 year, month to month, and three-month leases. The Department had applied to National Treasury for a different dispensation of funds in order to have longer lease agreements with the landlords.

Mr Von Brandis thanked National Treasury for all their hard work over the last two years to assist the province. Limpopo had vast rural areas and the roll out of the scholar transport programme was important, currently what was the status of that? 

Mr Matthews, Administrator of the Limpopo Department of Education, said the tender process for the scholar transport programme was being finalised and was in fact near to being concluded.

Ms L Dlamini (ANC, Mpumalanga) said that they were meeting the Limpopo team as Select Committees. The questions that were being asked in the Committee now could be answered at departmental level where the respective committees could engage with their specific department. The meeting was about how ready the province was to take over. She appreciated the leadership of the Premier during the process as it could not had been pleasant to be a Premier where five departments that he was supposed to be accountable for, were not under his control. The work of the Administrators was also to be appreciated. She pleaded that there be a clean audit for the Department of Health. It would be phenomenal to use the Department of Health as a pilot for other departments.

Ms E van Lingen (DA, Eastern Cape) said that throughout the departments it was obvious that there was a need for support. In the Department of Roads and Transport the logistics were mind boggling. In one financial year, 23 912 invoices were processed for R5.2 billion, that would come down to 400 invoices a day – without factoring weekends in, public holidays or leave. In Education, the report stated that 90% of schools received their funding. However there were still schools that claimed they had not received their funding. There was also the placement of 2 500 temporary teachers – there were five regions; could there be clarity as to how many of the teachers were allocated per region.

Mr Matthews said the 90% transfer statement might have been misunderstood. There was improvement from 62% to 90% in the transfer to schools in norms and standards. He asked that the Member bring the schools that she had referred to, to his attention. He was unable to answer the question on the placement of the temporary teachers; teachers were placed based on their profile and the vacant posts available. The teachers were in fact permanently absorbed as permanent teachers.

The Administrator for Roads and Transport said there were actually more invoices that had been looked at. The 23 000 were the ones that had been verified and paid. Even with such high volumes there were payments to suppliers that were late or missed.

Mr S Mohai (ANC, Free State) agreed with Ms Dlamini that the reports had shed light on a number of things. The interventions had laid a firm basis for the transition, and also the province had processes in place to ensure continuity. Having these in place also gave the Select Committees direction on how to conduct their oversight work and the measures for accountability.

Ms W Zondi (ANC, KwaZulu Natal) said a lot was done by the NCOP of the Fourth Parliament. The current NCOP was joining the process at the end. The role of the new Select Committees was now to do intensive oversight work with a view to assisting the province to sustain the corrective measures.

Mr Mtileni said it was uncalled for that the Chairperson only took the views of two Members of the majority party and then decided to close the meeting. Since the morning session questions were asked and answered in all earnest why things were suddenly different.

Ms Zondi called Mr Mtileni to order. She said the Member had been given a chance to express his views.

Ms T Wana (ANC, Eastern Cape) said the collective had pointed out the meeting could not drag on longer discussing the nitty-gritty. What happened in Limpopo was a learning curve for everyone. In the new democracy, there had not been this kind of intervention. The meeting should be closed and then the NCOP would assist where possible.

Closing Remarks
The Premier of Limpopo said they had heard what the Members of the Select Committees had to say and they were taking the advice given to them. He appreciated the inputs of the Committees and assured them that they would not end up where they started. The country had a system of cooperative governance where there were lines for provincial government to get assistance from national government, and for local government to be assisted by provincial government.

The Chairperson said there was a constitutional obligation to protect South Africa’s economic stability and governance, with sound financial management and value for money. Prominent in the engagements of the meeting was the intergovernmental framework that needed to be supported and enhanced. Problems needed to be picked up as early as possible. The Committee acknowledged the progress made in Limpopo since Section 100(1)(b) was invoked. He thanked the leadership of tomorrow for showing true leadership. Moving forward a Committee Report would be compiled on termination of the intervention for adoption by the House.

The meeting was adjourned.

Appendix
National intervention in provincial administration

[Heading amended by s. 2(a) the Constitution Eleventh Amendment Act of 2003.]
100.
(1) When a province cannot or does not fulfil an executive obligation in terms of the
Constitution or legislation, the national executive may intervene by taking any
appropriate steps to ensure fulfilment of that obligation, including—
(a) issuing a directive to the provincial executive, describing the extent of the
failure to fulfil its obligations and stating any steps required to meet its
obligations; and
(b) assuming responsibility for the relevant obligation in that province to the
extent necessary to—
(i) maintain essential national standards or meet established minimum
standards for the rendering of a service;
(ii) maintain economic unity;
(iii) maintain national security; or
(iv) prevent that province from taking unreasonable action that is prejudicial
to the interests of another province or to the country as a whole.
[Sub-s. (1) amended by s. 2(b) of the Constitution Eleventh Amendment Act of 2003.]

(2) If the national executive intervenes in a province in terms of subsection (1)(b)—
(a) it must submit a written notice of the intervention to the National Council of
Provinces within 14 days after the intervention began;
(b) the intervention must end if the Council disapproves the intervention within
180 days after the intervention began or by the end of that period has not
approved the intervention; and
(c) the Council must, while the intervention continues, review the intervention
regularly and may make any appropriate recommendations to the national
executive.
[Sub-s. (2) substituted by s. 2(c) of the Constitution Eleventh Amendment Act of 2003.]

(3) National legislation may regulate the process established by this section.
[S. 100 amended by s. 2 of the Constitution Eleventh Amendment Act of 2003.]

 

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