Agrèment South Africa Bill: Departmental briefing, with Minister and Deputy Minister

Meeting report

Chairperson’s welcome
The Chairperson welcomed the Minister of Public Works, Mr Thulas Nxesi, and the Deputy Minister, Mr Jeremy Cronin, Members and delegates to the meeting. He announced apologies that had been received.

Minister’s ntroductory remarks
The Minister said that the Department took its engagements with the Committee very seriously, mindful of the role of the Committee to hold the executive and other government officials to account. This process was at the heart of the democratic process and a key driver of improved service delivery. The Deputy Minister steered the policy and legislation, together with the Deputy Director of Policy, who would be making the presentation on the Agrèment South Africa Bill.

In terms of their strategic view as to where the Department was headed, and the progress on the turnaround, they had decided that this year they would have five key priorities. Firstly, they regarded as paramount the creation of six million employment opportunities, particularly for the poor and unemployed. Through this, they were facilitating community participation. When they came to present on the Expanded Public Works Programme (EPWP), they would make the Committee aware that they were no longer focusing only on creating jobs, but on creating quality jobs.  

The second key priority was the operationalisation of the Property Management Trading Entity (PMTE) and the transformation of the core property business, including construction management. This was very important, because it was about rebuilding technical and professional capacity -- the core capacities of the Department. He said that the Department would have liked to present on the operationalisation of the PMTE so that the Committee could understand where they were going with this matter, as they had made huge announcements following a number of decisions made by the Cabinet.

The third priority concerned the operationalisation of government’s risk and compliance branch. The branch would serve to drive the anti-corruption campaign. It was spearheading that phase of the turnaround, enhancing efficiency by way of planning, monitoring, evaluation and risk management tools, leading to significant improvement, even with their annual, performance plans (APPs). The Department wanted the leaders of the branches to engage with the various officials, because they were demanding greater accountability from them.

Fourthly, in consultation with all stake holders, involving public works in the provinces, they were looking to a policy review which would culminate in a Public Works Act. There was currently no Act governing Public Works and their relationship with the various provinces, but the nature of the work -- as emphasised by Cabinet -- was the type that required a link between national and provincial government. There was growing need for a regularised relationship between the two. For example, when discussing the asset register, it would never be completed if the provincial and local authorities were not on board, so it was very important that during this administration this issue was addressed. The expropriation bill was becoming increasingly urgent in light of the huge infrastructure developments.

Finally, in partnership with the Department’s entities, the charter councils and the relevant stakeholders, there was a renewed and sustained programme of action to transform the built environment, the construction and the property sectors, as part of the second and more radical phase of the transition. He said the Department would return to discuss the regulations, and one of the issues putting them under pressure was what the implications would be of empowering those who were disadvantaged in light of the decisions made by government, and the 30% set aside for the disadvantaged.

The Minister said the Department was dealing with many issues, but would be addressing only one today, and he would like the Committee to just take into consideration all the issues that he had mentioned. He thanked the Committee, and handed over to the Deputy Minister.

The Deputy Minister said the presentation on the Agrèment Bill would led by Ms Mandisa Fatyela-Lindie, the Deputy Director General of Policy at the Department of Public Works.

Briefing on Agrèment South Africa Bill
Ms Fatyela-Lindie began by outlining the needs that had established Agrèment as an entity. The Minister had alluded to the context of the Bill and the purpose of the establishment of Agrèment in terms of the medium term strategic framework with respect to the policy priorities of the country. The establishment of Agrement was viewed within those policy priorities, especially those that were captured in the Minister’s policy statement or the declaration for the administration.

Agrèment was established in 1969 to promote the process of integrated socio-economic development in South Africa as it related to the construction industry by facilitating the introduction, application and utilisation of satisfactory innovation and technology development, and in so doing establish Agrèment as a global player, ensuring the assessment and certification of innovative non-standardised construction products and the like, and fully engage with those that fell outside the South African Bureau of Standard.

In terms of the value chain, the Council for Scientific and Industrial Research -- where Agrèment was located -- did the research and development and Agrement approved innovations. The South African Bureau of Standards focused on standardised products. Each played a critical role in the value chain of innovation, as all the bodies collaborated in developing standards and assessment criteria. Agrèment’s current objectives included working with the construction sector to facilitate the introduction of cost effective, innovative and non-standardised products. It had become clear that the position of Agrèment had to be improved, especially as this had been raised by Members of Parliament, and it was unclear how the organisation related to the Department of Human Settlements and other organisations of state linked to the construction industry.

In 2005, some of Agrèment South Africa’s products had been adapted and introduced for use in India. This had been an eye opener for the institution, as not many South African’s themselves were aware of these products. However, this revelation made them aware of their potential and the need to establish Agrèment as an entity. The institution lacked legal status, and was geographically located within the Council for Scientific and Industrial Research (CSIR) to fulfil its administrative requirements and to manage its technical agency. They had therefore been reporting to the Department of Public Works and the Department of Science and Technology. The Auditor General had had issues in this regard, and transfers that had been made to Agrèment were classified as irregular expenditure until Agrèment was legally re-constituted as an entity on its own, eliminating the need for dual reporting of accounting to the Department of Public Works.

The objects of the Bill were, among others and most importantly, to minimise and eradicate the possibility of inferior products infiltrating the country. These would be products that had not been certified by the relevant body or had not gone through the product development entities, which were Agrèment, the CSIR and the South African Bureau of Standards (SABS). The duties of the Bill were, among others, to develop any rules, processes, procedures, criteria or guidelines necessary to achieve the objects of Agrèment and the execution of its duties. It would eliminate the need for duplicate audit queries and encourage research and development of non-standardised construction related products or systems. Agrèment was part of a global society of like-minded organisations and it was, as far as was known by the Department, the only African organisation that was part of that society. Agrèment may therefore under this bill acquire or dispose of property or a right in respect thereof, and invest its funds which were not immediately required. By imposing certification rights upon Agrèment, it must make rules to determine processes and procedures with regard to issuing, amending, suspending, reinstating, withdrawing and renewing of certificates. Previously, Members of Parliament had pushed the Department to pay attention to cement imports that were lacking in quality, and it was with issues like these that Agrèment could play a role.

The Board of Agrèment would be the accounting authority appointed by the Minister, constituting a minimum of seven members and a maximum of 11, with the chairperson being appointed by the Minister. Due to the highly technical nature of Agrèment’s function, Board members would be required to have experience in construction as well as in other fields, such as business management or law. They would also be required to have specialist knowledge relating to the construction industry, such as the organs of state regulating the construction industry and relevant technical, scientific and professional institutions and associations. Board members would be required to be South African citizens ordinarily resident in the republic, and may not have been employed by Agrèment South Africa as a consultant in the past three financial years. The Minister may terminate membership of a board member if, among other reasons, the member failed to perform his or her functions as a member of the board. The Minister may dissolve the board if the board fails to perform its obligations under the Act or the Public Finance Management Act (PFMA), or if following an investigation a wrong doing was found. A member of the board may not have a conflict of interest with Agrèment and may not directly or indirectly enter into a contractual relationship with Agrèment for the supply of any goods or services during or following a period of two years following the lapse or termination of their term of office. The Board shall appoint its own chief executive officer (CEO), who may hold office for a period of five years, subject to reappointment. The CEO may, after consultation with the Board, appoint staff to enable Agrèment to execute its functions effectively. Both the CEO and the Board may delegate any of their powers in terms of the Act subject to, with respect to the Board, the power to make rules under section 27.

In terms of this Act, Agrèment would be able to act independently. The Department of Public Works would enhance its oversight role through the Board, and compliance with the PFMA and Treasury regulations. Agrèment would be accountable only to the Department of Public Works, and no longer to the CSIR and Department of Science and Technology.

Discussion
The Chairperson asked if the Department had calculated the costs of this exercise. What would the implications of implementing the Act be as regard the relocation of the staff, the possible need for additional staff and how the administration would be handled?

Deputy Minister Cronin said that, subject to correction by the Deputy Director, Agrèment South Africa was an entity that already existed, but did not have legislative status, so they did not envisage any extra costs being incurred. Currently funds were transferred to Agrèment by way of the Public Works budget, but the lack of legal status was problematic and the Auditor-General had taken issue with these transfers. They aim was to regularise the relationship and expand Agrèment’s capacity and profile.

The Department felt that Agrèment was unknown in South Africa, so they were looking to expand its activities and to expand the value provided to the construction sector in South Africa. The expansion would allow it to draw fees from the work that it did. What was envisaged in the legislation and what was the current practice was, and this was not a compulsory but a voluntary process. Developers of innovative products, assumed fit for purpose, would be assessed by Agrèment and if fit for purpose, certificated. This would help Agrèment to promote and sell the product. It differed from SABS, which was not a voluntary process, and was not concerned with innovative products. SABS sets compulsory standards.

The Chairperson thanked the Deputy Minister for his response.

Ms P Adams (ANC) asked how one could ensure that the current Agrèment,  which was set up in 1969 with delegated authority, supported a transforming, democratic and non-racial South Africa?

 The Deputy Minister responded that Agrèment should not be exaggerated for more than what it was -- a small technical entity. However, innovation was a critical component of the development required in South Africa. At the presentation last year, Agrèment had provided samples of some of the work they did and much of the construction materials developed were dedicated towards low-cost housing, ensuring these homes were equipped with the necessary facilities such as insulation, cheaply and effectively. Much of the innovation was directed, the Department believed, to the needs and requirements of a developing South Africa. It was a question that must continuously be posed to Agrèment as they moved forward -- how they contributed, and whether they were making themselves, their products and the services they offer known to the general public. Indigenous knowledge was very important. It was expected of Government to build houses for its population, but for tens of thousands of years people had been building their own homes, making use of indigenous knowledge and materials, and there was a huge space for innovative growth in these areas. It had already been seen with Agrèment products being used in conjunction with these indigenous ideas and materials, to develop building materials. It was, however, up to the Members of Parliament to push the country, innovators and Agrèment to work in these spaces.

With respect to the irregular expenditures noted by the Auditor-General, the transfers had always been completely transparent and reported in all of their budgets. It was a technical, as opposed to a corruption, issue. It was a technical error due to Agrèment’s lack of a legal status. Portfolio committees had never taken issue with the way funds had been spent and there had been no problems from the Auditor-General in terms of the funds transferred -- it was merely a technical issue that they were trying to address by way of the Bill. They were trying to make it clear to whom Agrèment was answerable, as there had been some confusion in that regard mainly because it was located in the CSIR and relied on it for some of its administrative overheads and the like. For this reason, it had also been reporting to the Department of Science and Technology. They did not want to collapse it under the CSIR because while it was performing some of the same functions, the certifying body should be held separate.

Ms Fatyela-Lindie added that most of the products in South Africa were standardised and the Department was looking to monitor and possibly certificate non-standardised products. It had worked very closely with the Department of Human Settlements because even informal house building had to be monitored to ensure the quality of the products used. A previous Member of the Committee had asked Agrèment why hemp as not used and it was these sorts of things that Agrèment had to look into.

Mr F Adams (ANC) jokingly noted that Agrèment should not look into using hemp as the houses would not last long, as they would be smoked up. He asked how Agrement’s formalisation would affect their relationship with the CSIR, whether it would still be based on the CSIR campus, and what the costs would be -- monetary and otherwise -- to complete this process.

The Deputy Minister responded that while Agrèment was on the CSIR campus, all their staff were on the books of Agrèment. The Department was not entirely sure what would happen, but anticipated that the relationship would continue, and there might be some costs involved. For the purposes of the legislation, these were details that could be looked at.  An effect on the relationship between the CSIR and Agrèment was not anticipated. He added that hemp was not all smokable and was widely used for production purposes, but he was unaware that Agrèment had had to consider a hemp application.

Ms Adams asked what deadlines had been set for the process.

The Deputy Minister responded that this was up to the Committee. The Bill had been tabled and directed to the portfolio committee. The Department felt it was a simple Bill, supported by the fact that there had not been many questions. The Department hoped that they could regularise the issue as soon as possible. It was entirely up to the Committee’s schedule. There was a budget process coming up and the slightly more complicated matter of the Expropriation Bill still had to be addressed.

The Chairperson said that the Committee secretary and staff were scheduling a proposed time to deal with the Agrèment Bill. The hope was that there were no controversial aspects to this. As they proceeded, they would start on the Expropriation Bill so that there was sufficient time for adverts and public hearings in Parliament and ideally provincial hearings as well, so that those who could not find their way to Parliament could be heard. The schedule would be shared with all Members, but the hope was that the Agrèment Bill would be dealt with soon.

Ms Adams asked what process would be used for the selection of the Board members, and why provision was made for seven to 11 members.

The Chairperson responded that he was sure that there were standard procedures for advertising for the positions on the Board, so that people in all provinces could respond, using major newspapers and other avenues of advertising in order to draw the broadest possible net of adequately qualified individuals

Mr Mziwonke Dlabantu, Director-General of Public Works, said that the normal procedures were to advertise, looking at a number of transformational issues such as representation and geographic demographics, as well as the necessary skills. The Bill proposed the kinds of skills they were looking for, as well as the skills for good governance, such as getting people with a finance background to assist in enhancing the governance of the entity. The Minister would put together a selection committee, there would be interviews and the selected persons would be processed through Cabinet, who would then endorse it.

The Deputy Minister clarified that the question had also asked why the Department specified between a minimum of seven and a maximum of 11 Board members, and why there was not a specific number. He responded that this was common practice. It was important to ensure that there was a minimum, partly because boards typically formed sub-committees and a lot of work gets done in this way. There needed to be at least seven people to accomplish this, but at the same time, one did not want too many members because of the costs. They had decided to keep it flexible because sometimes members resigned, or there may be a death in office, and if there was a fixed number the board may battle to get a quorum. Therefore it was good to have flexibility, and this was standard practice for boards of public entities. Furthermore, when there were hearings and someone might ask if that was an appropriate size for Agrèment, the Department would be able to show that they had applied their minds to the matter.

The Chairperson thanked the delegation, saying that the programme would be distributed soon.

The meeting was adjourned.