National Treasury began the presentation discussing the Education Infrastructure Grant and School Infrastructure Backlogs Grant. There had been a significant improvement in spending on the Infrastructure Backlogs Grant. In the current year 2015/2016, provinces had become heavily dependent on grants for infrastructure and were contributing little from their own fiscus. An increasing amount of their budgets were moving away from infrastructure and into wages with higher wage bills, this can have serious negative consequences going forward.
The main challenges facing provinces was delays in projects and poor project performances, whilst Free State was in serious trouble with the Provincial Department under administration and 558 projects still in the design phase. The Province had put in a strategic plan to turn the province around and authority had been transferred to the Provincial Treasury.
SA had 12,300 school projects undergo, 81 on hold and 5,000 completed. There was around R5 billion in unpaid bills last year and they were mainly related to goods and services not infrastructure though. The Department took over and presented on the provinces stating that there was a delay in moving projects down from project initiation to construction and completion. The Department has a Professional Services Unit to monitor project delivery for high value and important/delayed projects. The number of monitored projects to date was 70 with a total value of R2.9 billion. The total school target was 96 for 2014/2015 with a completed amount of 121. The target for 2015-2019 was to build 544 new and replacement schools with 105 the target for 2015/2016. For every 35 projects dealt with, a project manager is appointed. The ASIDI looked at implementing basic levels of water, sanitation and electricity. The water baseline was 1,120 projects with 1,006 completed. The sanitations baseline was 741 projects with 538 completed. There was a strict set of accountability around costs where construction companies had to stick to their budgets. The Department spent 100% of their budget of R2.5 billion. The Department was becoming more efficient by running two payment cycles but it will require around R1.5 billion in the future to meet project demands.
During the discussions which followed the presentation, Members enquired about the technical schools and asked for clarity on what they were for. The number of completed projects is just over 10%, why is it so low? A Member of the Democratic Alliance asked why there were no challenges for Limpopo and what was happening with the mobile schools?
The Committee asked what the norm for salaries and wages was. Were people following due processes with so many contractual issues? Why was the conversion rate of projects so low? What was happening on the maintenance front?
Appointment of Acting Chairpersons
Ms N Mokoto (ANC) was appointed Acting Chairperson of the PC on Basic Education and Mr C De Beer (ANC) was appointed Acting Chairperson of the Select Committee on Appropriations.
Presentation by National Treasury
Mr Edgar Sishi, Chief Director for Provincial Budget Analysis, National Treasury, began the presentation by discussing the education infrastructure grant. There were two provinces that reflected an over spending on infrastructure; namely the Western Cape (WC) and Northern Cape (NC). On the education grant, Limpopo overspent for the year 2014/2015, while Free State (FS) and Eastern Cape (EC) were under spending. There had been a significant improvement in spending on the school infrastructure backlogs grant. In the current year 2015/2016, provinces have become heavily dependent on grants for infrastructure and are contributing little from their own fiscus. The wage bill tends to fall more heavily on provinces and hence with wage increases, they are moving money from infrastructure to cover these expenses. A big chunk of the spending is on improving and building schools. The slides on page 8 and 9 are reflected over multiple years, from 2011 up until today.
The challenges facing the provinces were surmountable. The following challenges were identified in the various Provinces:
- Coega Development had delays in procurement
- Replacement of terminated contracts was taking time
- Provincial department was under administration and was struggling.
- There were cash flow issues
- Large pipeline of projects still in design phase (558)
- Protests had caused delays on two projects
- Late appointment of contractors
- Transferring projects to public works had delayed delivery
- Poor performance in department
- Quality and timing of planning had delayed projects
- Poor performance by contractors had delayed projects.
National Treasury had tried to gather information not just on financial but also on what was happening behind the scenes.
Presentation by the Department of Basic Education (DBE)
Mr Ramasedi Mafoko, DBE Director for Planning, stated that the Coega project had led to under spending whilst the North West Province had some delays due to supply chain issues. There was a delay in moving projects down from project initiation to construction and completion.
- EC had 1,000 projects finished out of 270 in Q4 of 2014/2015
- FS had 558 in design, over 30 in construction and 0 finished in Q4 of 2014/2015
- Gauteng has around 156 completed out of 911 in Q4 of 2014/2015
- KZN has over 1,500 projects completed out of 4,000 with a large number under construction in Q4 of 2014/2015
- Limpopo had over 1,500 projects completed out of 2,000 in Q4 of 2014/2015
- There were only 192 projects in the WC completed in Q4 of 2014/2015
The Department had a Professional Services Unit or PSU to monitor project delivery. They monitor projects that have been implemented but not completed over a long period of time between 12-18 months, projects with high monetary values, special schools, no progress projects and projects with cost variations. The number of monitored projects was 70 with a total value of R2.9 billion.
The total schools targeted were 96 for 2014/2015 with a completed amount of 121. The target for 2015-2019 is to build 544 new and replacement schools with 105 the target for 2015/2016. Furniture is part of infrastructure.
Mr Paddy Padayachee, DBE Acting DG, stated that the ASIDI looked at implementing basic levels of water, sanitation and electricity. The water baseline was 1,120 projects with 1,006 completed. The sanitations baseline was 741 projects with 538 completed.
R2.4 billion had been set aside for inappropriate structures. Under this topic, 109 schools had been fixed to date.
Mr Thembi Matunda, a Project Manager for ASIDI, said the EC had the largest number of projects. In the EC, there are 89 completed inappropriate structures, 201 complete water projects, 157 completed sanitation projects. For every 35 projects dealt with, a project manager is appointed. On the CSIR projects in the EC, they have been handed back to the Department.
Ms Mosebala Lipholo, a Project Manager for ASIDI, ran through the water, electricity and sanitation review for the other Provinces.
- 86 projects completed for KZN
- 12 projects for the North West
- 45 for the Northern Cape
- 16 for Gauteng
- 166 for Limpopo
The capital expenditure for ASIDI was R5.6 billion and other expenditure was R2.5 billion (100% of budget). The majority of expenditure was in the EC, while there is R408 million in accruals. The Department is becoming more efficient by running two payment cycles but it will require around R1.5 billion in the future to meet project demands.
Mr L Ntshayisa (AIC) remarked that treasury stated that a large amount of money was going to salaries for teachers and requested that they reconcile this issue with infrastructure spending.
Ms A Lovemore (DA) queried about the technical schools and asked for clarity on what they are for. The number of completed projects is just over 10%, why is it so low?
Ms D Van Der Walt (DA) asked why there were no challenges for Limpopo. What was happening with the mobile schools?
Ms H Boshoff (DA) asked what the norm for salaries and wages was. Were people following due processes with so many contractual issues? Why was the conversion rate of projects so low? What was happening on maintenance?
Mr L Gaehler (UDM) stated that clustering had failed in the EC. The Portfolio Committee of Basic Education had stated that they were not paying their suppliers. Why was this happening?
Ms L Zwane (ANC) asked if there was no way Treasury could insist that provinces spend their infrastructure budget on infrastructure? Was Coega the sole cause for delays in Eastern Cape? What were the repercussions for underperformance? If there were delays, what could be done?
Ms E van Lingen (DA; EC) asked how many of the delayed and terminated projects were in the Free State and EC.
Mr De Beer commented that visiting provinces was crucial to make sure projects were happening. Contractor’s prior history needed to be evaluated to see if they were reliable.
Mr V Mtileni (EFF; Limpopo) asked what was happening within the colleges, especially around student accommodation. The chair stated that this should be dealt with under Higher Education.
Mr Sishi replied that in an ideal world where there was no infrastructure backlog and all the schools were built, all the money could go to teachers only. Most of the money has to be spent on teachers still. Around 80% of budget goes to salaries normally. There is a technical schools grant that deals with the issue of technical schools. The Education Infrastructure Grant, School Backlog Grant and Grant/Equitable Share are the three grants available. The National Department and Provincial Department need to work together to ensure there is no duplication of tasks for these three grants. IDT has not been thrown out completely as some provinces are still implementing it. There are major capacity constraints in provinces, so a percentage of grants were allocated to project managers and personnel. The large number of non-paying provinces to service providers is being addressed. On Free State, there have been significant management problems. They have put in a strategic plan to turn the province around and authority has been transferred to the Provincial Treasury. SA has 12,300 projects undergo, 81 on hold. This is a low percentage. There are delays in removing contractors and appointing new ones. It is getting better though. Often contractors will bite off more than they can chew, under quote or lack track record. There was around R5 billion in unpaid bills last year, they are mainly related to goods and services not infrastructure. Final completion relates to paperwork completion and it needs to be added to the practical completion number. This totals around 5,000 projects. 10% of a capital cost for infrastructure needs to be set aside for maintenance, but it is not being done at present.
Mr Mtileni asked how much of the budget went to consultants. He felt that individual companies were being marginalised.
Ms Van der Walt asked for an update on the 202 mobile schools.
Mr Gaehler complimented the Department on the presentation. He stated that the Department of Public Works needs to be present at these meetings. They are also responsible for infrastructure. There are some late payments that need to be discussed one on one with the Department. There are alternative technologies, are they being used?
Ms Boshoff asked what the equitable share for furniture was. Do they use the furniture from closed down schools to fill other schools? What are the cancelled projects in Mpumalanga for and why are they no inappropriate structures?
Ms Zwane stated that if people are not expediting the process they should be removed. The numerous stakeholders need to be consulted more often in this process.
Ms Lovemore asked why the EC project initiation was zero. She stated that it is all good and well to spend 100% of the budget but what was the percentage of the target reached? New schools are required in the WC and Gauteng.
Ms J Basson (DA) stated that the MECs for the Provinces should be brought into these meetings to account for the progress or lack thereof.
Mr Padayachee responded to these queries. He replied that a number of contractors go belly up due to under quoting, poor build quality or delays. The Department is there to make sure that every child has a school. They are responsible for demographics and sector planning. There is a strict set of accountability around costs where construction companies have to stick to their budgets. The backlog in payments is being dealt with. Alternative technologies are used based on what the communities’ request. The Department is in the furniture business which is included in the budget for schools. The rest of the questions would be responded to in writing based on time constraints.
Mr S Mohai (ANC; Free State) closed off the meeting.
The meeting was adjourned.
Mohai, Mr S
Basson, Ms J
Boshoff, Ms H
Chetty, Mr M
De Beer, Mr CJ
Gaehler, Mr LB
Khosa, Mr DH
Khoza, Mr T
Lovemore, Ms AT
Mnguni, Mr D
Mokoto, Ms N
Motara, Ms T
Mtileni, Mr V
Ntshayisa, Mr LM
Van Der Walt, Ms D
Van Lingen, Ms EC
Zondi, Ms W