Department of Public Works on its 2015/6 Annual Performance & Strategic Plans

Meeting report

Mr Imtiaz Fazel, DPW Deputy Director-General: Governance, Risk and Compliance, centred his presentation on the three outcomes of the Department, planned policy initiatives, strategic overview, organisational environment and programmes and budget.

The outcomes were explained as follows:
Outcome 4 - Its objective is to create decent employment through inclusive economic growth. Phase 3 of the Extended Public Works Programme (EPWP)  which covers the period 2014/15 to 2018/19 aims to create six million work opportunities. The medium-term budget allocation for EPWP including compensation of employees, goods and services is R6, 8 billion.

Outcome 5 - Its aim is to produce a skilled and capable workforce to support an inclusive growth path. The Department has a combination of development programmes that provide valuable on-the-job experience. It has also taken a comprehensive approach to promote sustainable growth of the Built Environment Professionals through the Council for the Built Environment (CBE). The CBE has initiated a Skills Development Programme to support learners undertaking Mathematics and Science at school level to be able to pursue a career in the built environment.

Outcome 13 - Its primary aim is to provide the unemployed with an opportunity to work and to empower communities. The medium-term budget allocation for EPWP Social Sector Grant is R985 million.

The Department intends to develop and review the following policies and legislation:
▪ Review the White Paper of the Department: Public Works towards the 21st Century, 1997; and Creating an Enabling Environment for Reconstruction, Growth and Development in the Construction Industry, 1999” towards the development of an enabling legislation
▪ Establish Agrement South Africa (ASA) as a public entity mandated to assess non-standardised and unconventional construction products, materials and systems fit for purpose
▪ Develop a draft Built Environment Professions (BEP) Policy towards possible amendments to the legislative framework governing the BEPs
▪ Develop legislation to establish the Independent Development Trust (IDT) to support the State in the delivery of social infrastructure
▪ Develop a Green Building Policy and Strategy for the Department in order to give effect to the green economy initiatives of the government.

Strategic Overview (External Environment)
The current trends in the property sector offer some relief to the escalations in leasing costs to the Property Management Trading Entity (PMTE). The challenges encountered by the PMTE include the backlog of maintenance on state-owned accommodation and this results in the over-reliance on leased accommodation. A coordinated approach in the management of its immovable assets would be undertaken to create a better balance between private leases and utilisation of existing stock of state-owned accommodation.

The building and construction sector is expected to grow at an average of 4,6%. The ability of the government to roll out its infrastructure programme has been criticized in the past few years. As a result, the Department has put in place various key interventions to build capacity so as to spend its infrastructure budget and to address fraud and corruption in the sector.

The domestic drivers of politics for the next five years would include issues of governance. To complement the drive for good governance, the Department has put into place processes to strengthen the previously weak Supply Chain Management operating model, procedures and processes.

Strategic Overview (Internal Environment)
The following are the key policy priorities:
- The creation of six million work opportunities for poor and unemployed people through the labour-intensive delivery of public services and infrastructure
- The operationalisation of PMTE and the transformation of the core property business
- The operationalisation of the Governance, Risk and Compliance Branch to drive anti-corruption and to spearhead the second phase of the Turnaround Strategy
- A policy review which would culminate in a Public Works Act
- A renewed and sustained Programme of Action to transform the built environment and the construction and property sectors as part of the second more radical phase of transition to democracy

It was also noted that the Stabilisation Phase of the Turnaround Strategy has achieved critical and foundational milestones although there are still various stabilisation projects that are continuing into the next phase. The following successes are noted:
- Improved internal efficiencies within the Prestige portfolio have been realised by centralising this function in the Office of the Director-General
- Substantial improvements by the Department were made as is evidenced by progression from disclaimers in 2010/11 and 2011/12 to a qualification in 2012/13 and an unqualified audit outcome in 2013/14.
- A comprehensive audit of 2 161 leased properties was completed and this included the physical verification of 2 143 leased properties
- Developing a complete and credible Real Estate Asset Register under the custodianship of the Department in terms of which registered and unregistered land parcels were reconciled against the deeds records and other National and Provincial immovable asset registers.
- The operationalisation of the PMTE to oversee the asset investment of the State, property and facilities management functions in line with Generally Recognised Accounting Practice (GRAP).

The Efficiency Enhancement Phase of the Turnaround Strategy started on 1 April 2014. Ten projects were prioritised to drive this phase of the strategy. These projects include, among others:
- The Service Delivery Improvement Plan and Macro Service Delivery Model are in place
- Supply Chain Management is being restructured to meet the business requirements
Developing an Information Technology strategy, architecture and platform as a key enabler has been prioritised for immediate implementation
- Combating fraud and corruption within the Department as well as in the construction and property sectors
- An effective Change Management Strategy has been initiated in an effort to restore a performance management culture in the Department.

While operationalising the PMTE, the Department is going to place greater emphasis on developing the best practice within the sector; managing the transformation and growth of the construction and property sector; drafting legislation and undertaking regulatory functions; formulating policies and implementation guidelines for the sector; and setting norms and standards for the Public Works Sector.

In the absence of the Public Works Act, the MinMec has provided the basis for oversight and coordination of the concurrent functions. The Policy Review including the appraisal of the White Papers and the broad consultation with the wider Public Works community would provide a solid foundation for the Public Works Act. This process aligns with the third phase of the Turnaround Strategy.

A closer look at the organisational environment indicates the Department has reviewed the organisational structure for DPW and PMTE which would be approved and implemented over the MTEF. The Department has refined its role to give effect to improved oversight practices to ensure the coordinated and integrated delivery of services through policy formulation and determining regulatory prescripts including setting the norms and standards, and overseeing the implementation of these functions.

An integrated Human Resource Plan has been developed to respond to the priorities of the government and to align the workforce of the Department with the mission, vision, strategic goals and financial resources of the Department. The PMTE is being operationalised to undertake the immovable asset management functions across the asset lifecycles.

Programmes of the Department included:
- Administration
The cost drivers for this programme are compensation of employees and goods and services. The budget allocated for 2015/167 is R475 million. The reduction in the budget of this programme is due to the budget for the provision of office accommodation for Public Works being moved to PMTE. Corporate Service Plans have been developed to resource the DPW and PMTE. Over this MTEF period, the Department targets to achieve an unqualified audit outcome.

- Intergovernmental Coordination
The programme aims to achieve 100% compliance of management practices as per the Management Performance Assessment Tool (MPAT). Its budget is expected to increase over the MTEF as the functions are properly established and personnel appointed. The bulk of spending would be on providing sound sectoral intergovernmental relations and strategic monitoring and evaluation. The budget allocation for 2015/16 is R47 million.

- Expanded Public Works Programme
Its target over this MTEF period is to create six million work opportunities and it would be aligned to the Phase 11 Business Plan. The budget allocated for this programme is R1,9 billion. The spending focus for EPWP would remain on the payment of performance-bases incentives to eligible provinces, municipalities and non-profit organisations for the creation of jobs having labour intensity.

- Property and Construction Industry Policy and Research
This programme aims to have the Public Works Act promulgated over this MTEF period and to introduce new legislative and policy frameworks to govern the immovable assets under the custodianship of the Department. The budget allocation for this programme is standing at R3,8 billion. The bulk would be transferred to the PMTE. The spending focus for this programme would be on promoting the growth and transformation of the property and construction sector.

- Prestige Policy
This programme targets to have seven approved policy frameworks for prestige over this MTEF period. Movable assets would be provided to Prestige clients within 60 days of receipt of request. The bulk of spending over the medium term would be on the development of norms and standards for Prestige accommodation, the provision of movable assets and meeting protocol responsibilities for State functions. The allocated budget amounts to R92 million.

The Service Delivery Improvement Plan (SDIP) is targeting to improve delivery in critical services over the next three years. Through a scientific situational analysis process, it has identified three areas for improvement:
- provisioning of accommodation through construction
- provisioning of accommodation through private leases
- customer relationship management.

The Strategic Risk Plan has identified where specific attention and resources will be focused including:
- fraud and corruption arising from failure to comply with legislative prescripts
- inability to implement the proposed structure
- insufficient technical capacity to support PMTE
- lack of integrated business systems
- loss of state of funds due to breach of contracts by non-performing contractors.

The budget of the Department over the medium-term is R20, 7 billion. The budget of R6, 4 billion is projected to increase to R6, 9 billion in 2016/17 and R7, 4 billion in the 2017/18 financial years. The devolution of the budget allocation of approximately R11, 2 billion to the PMTE has resulted in the decrease in the Departmental budget allocations over the medium-term. The budget allocation for the devolved funds has been reclassified as transfers and subsidies to the PMTE within Programme 4. (Tables and graphs were shown to illustrate budget breakdown)

Discussion
Mr B Nthebe (ANC) wanted to know why the grant allocation to the Northern Cape is very small yet the Department wants to create six million jobs for poor and unemployed people. He suggested DPW should consider allocations for the green economy in the Northern Cape. He enquired about the state of readiness of the Department's immovable property register. He indicated that during the oversight visit of the Committee to Port Elizabeth many state buildings were found to be in a state of neglect.

Mr Mziwonke Dlabantu, Director-General: DPW, stated that the Northern Cape has a small population size although the poverty rate is very high. Population size is one of the things that informs the budget allocation. The set-up of the environment and culture of the province would determine the allocation for the green economy.

The Chairperson said that the engagement the Committee has with the DPW's entities always gives the Committee an informed view of how allocations are made.

Mr Dhaya Govender, PMTE Acting Head: DPW, suggested that the Department should reply in writing to the Committee on how the allocations for Expanded Public Works Programme are done, especially for the Northern Cape.

The Chairperson agreed and suggested DPW should come in mid-June 2015 to give a presentation on how the allocations for Expanded Public Works Programme are done.

On the immovable property register, the Director-General reported that they have verified 91,1% of asset registers that national departments own. The provincial assets have been looked at and were reported to the Minister. He noted that some immovable assets such as buildings may stay unoccupied because some state departments and entities are going to use them in the future. Other assets are rented out to the private sector or organisations for business purposes. Currently, there are investigations that are undertaken to uncover state buildings that have been sold in a fraudulent manner.

Ms E van Lingen (DA) wanted to find out what the property maintenance programme of the Department is. She suggested the Department should investigate how many properties in Port Elizabeth fall under the Department or are in its custody.

The Director-General stated that there are three programmes – DPW Capital, Client Capital and Planned Maintenance. During the financial year of 2014/15, 98% of the budget was spent on these programmes.

Dr Y Vawda (EFF) asked what the Department is doing to make sure its provincial departments are getting clean audits. How is the Department planning to control fraud? He asked what the status is of the Public Works Act.

The Director-General replied, with regard to clean audits, that MinMec has been strengthened and all the CFOs and CEOs of the national and provincial departments were work-shopped to assist each other in achieving clean audits, and the asset register was circulated to all nine provinces. On fraud and corruption, he indicated there is a fraud and corruption strategy in place. The Department is working on tightening internal controls. He said 200 cases are under investigation. All provincial departments are developing mitigation plans. The approach of the Department is holistic.

Pertaining to the Public Works Act, he reported the matter has been identified as part of the turnaround strategy. It was discovered that provinces were developing their own policies. Now the Act is aimed at aligning matters: it has to highlight the role of the National Department and provincial departments, and develop norms and standards. The provinces would be allowed to develop their own legislation but they have to be aligned with the objectives of the National Department. The Act is also going to focus on the role of the Minister when a provincial department is collapsing. At this stage the Department is reviewing the current White Paper.

Meeting was adjourned.