Department of Public Works on 4th Quarter Performance for 2014/2015

Public Works and Infrastructure

02 June 2015
Chairperson: Mr B Martins (ANC)
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Meeting Summary

The Department of Public Works (DPW) presented the fourth quarter 2014/15 report to the Committee. The Department highlighted the purpose of the report, the five-year strategic goals and outcomes, the adopted methodology in the treatment of quarterly performance information, the programme performances of the five initiated programmes and the performance challenges. Substantial details of the programmes, including the budgets, and a short description of what the programmes and sub-programmes covered, were presented, the Committee was advised that the Administration programme showed several examples of performance above target, particularly for reduction of irregular expenditure and compliant invoice payments. Another notable achievement was the skills development programmes which saw the participation of 776 beneficiaries in DPW skills programmes. Programme 2: Immovable Asset Management, reflected a major achievement of 2 750 vested land parcels, completion of the Inner-City Regeneration accommodation solution for Polokwane, and a submission of eight service level agreements to identified User Departments. The Expanded Public Works Programme created a total of 990 920 work opportunities through the labour intensive approach aligned to its business plan. The Department actively participated in Parliamentary processes towards the enactment of Agrément South Africa (ASA) Bill and the enactment of Expropriation Bill was under way. The Auxiliary and Associated services provided infrastructural support for six Prestige events. However, some performance challenges were highlighted, including the appointment of service providers in areas requiring scarce skills, and delays in planning initiated by under performance in projects

A detailed financial report was presented. The final amount appropriated was R6.1 billion. In the current year, expenditure had increased to 98.4%, but there were still instances of both over and under expenditure detailed. Under-expenditure was attributed to delays in filling vacant posts, the EPWP, and compensation of employees and administration. The average salary increase was 6% and employees, office accommodation and municipal services had increased. Decrease in spending were shown on some goods and services, including the fact that some of the turnaround projects had come to an end, and on grants, because payments to two Limpopo Provincial Government departments had been withheld. There were also decreases in allocations to the Independent Development Trust. Underspending was further attributed to late receipt of invoices, although accruals from the year raised the figures for machinery and assets.

The budget of the Property Management Trading Entity, which had to collect rentals and charge client departments for the offices and accommodation allocated to them, showed both under-expenditure and payments in line with targets. The spending had increased to 98%, compared to the previous year's 91%. The line item split was noted. The Department was presently undergoing an audit.

Members were divided in their reaction to the report. Some commented that there had been improvements from the previous year but others felt that perhaps the targets were set too low in the first place, perhaps to deliberately suggest a boost in performance. Some Members felt that more detailed and accurate reports with figures, rather than "statistics" only should be provided. They asked for an indication of how many small businesses were entering the sector, and wondered if the DPW could mandate a partnering of large and small enterprises to make the latter more viable. Members asked for lists of scarce skills and one offered to provide a listing of professional associations who could be approached. Members asked about the financial consequences of project delays and wondered when the integrated business model would be available,and whether the Department could not do more to assist small businesses to submit invoices earlier. Another Member called for a definition of "decent employment" and asked whether contractors had been able to move up the ladder. The Department was asked to provide details on the land assets, was asked for further details on placement of trained beneficiaries of programmes, and the impact of withholding funding from contractors. Questions were also asked about the leases regularisation, and the irregular expenditure. Members held differing views on whether the turnaround should be presented before or after the budget. They suggested that detailed reports from EPWP were necessary, and asked that the DPW must prioritise disabled access to buildings.  

Meeting report

Department of Public Works: Fourth Quarter Performance for 2014/15: Briefing

Mr Mziwonke Dlabantu, Director General, Department of Public Works apologised on behalf of the Minister of Public Works, who was not able to be present at the meeting.

He noted that a performance report had been presented to Cabinet, detailing the purpose of the presentation, which highlighted the objective of the Portfolio Committee on Public Works, and methodology of assessing the quarterly reports with an emphasis on the key focus of quarterly reports. There were Five year strategic goals and outcomes with a vision as developing a service oriented  Department of Public Works (DPW or the Department), delivering value and contribution to the national agenda for social and economic development.

Programme 1: Administration aimed to provide strategic leadership and support services, inclusive of the accommodation needs and overall management of the Department of Public Works. This programme encapsulated six sub-programmes: namely Internal Audit and investigation services, Strategic Management Unit, Monitoring and Evaluation, Intergovernmental Relations, Finance and Supply Chain Management and Corporate Services. Programme 1 achievements included a Tabling of the Annual Performance Plan and Strategic Plan which served to guide the deliverables of the Department and spelled out the strategic and operational objectives of the Department. Updated Risk Registers were created, and progress was made on the implementation of action plans in the risk registers which detailed all the risks, corrective actions and the extent to which risks were mitigated in the Department. Governance Arrangements were another significant achievement of this programme. Inter-governmental relations had improved, inclusive of meetings and discussions at NEDLAC, of Public Works related matters, as well as discussion of the quarterly performance of the entities reporting to the Minister, to reflect on the contributions to the mandate of the Department. Other achievements included a reduction in irregular expenditure, in which 9% reduction was realized against a 5% target. Payment of invoices in 30 days achieved 87% compliant invoices settled within 30 days, for the DPW, and 63% for Property Management Trading Entity (PMTE). Skills Development programmes ensured the participation of 776 beneficiaries, involving 150 young professionals, 350 interns, 69 learners (Schools Programme), 157 bursary holders and 50 management trainees. An approved HR Plan which sought to address the HR-related issues affecting the Department was also highlighted as an achievement.

Programme 2 (Immovable Asset Management) was the largest and core programme of the Department, it appropriated a large percentage of the Departmental budget and aimed at providing management for government’s immovable property portfolio in support of government social, economic, functional and political objectives. Sub-programmes included Strategic Asset Investment Analysis, Project and Professional Services, Inner-city Regeneration, Operations Management, Key Accounts management and Prestige Management. Vesting of 2 750 land parcels was a highlighted achievement of this programme despite the odds of the DPW not being in possession of significant number of title deeds and Surveyor General diagrams for vesting of properties. Another achievement of this programme was the Inner-city Regeneration (ICR) solution which saw the completion of the Polokwane urban centre that was initiated to provide accommodation solutions for project implementation in other metros and district municipalities (outside Tshwane). Service level agreements were another achievement of this programme as eight service level agreements were submitted to identified user Departments (see attached presentation).

Programme 3: Expanded Public Works Programme (EPWP) was to cater for the policy and coordinating function with the rest of the government, while identifying challenges. These included timeous and accurate data and information as common elements. Achievements identified were the creation of Work Opportunities (WO) with statistics indicating 990 920 work opportunities created through the labour-intensive approach aligned to the EPWP business plan. Another 594 552 work opportunities were created by municipalities. Training of beneficiaries was also depicted as an achievement, since a total of 1 273 learners were trained through the National Skills Fund.

Under Programme 4, Property and Construction Industry Policy Regulations had aimed to promote growth and transformation of the construction and property industries, as well as uniformity and best practice in construction and immovable asset management in the public sector, to ensure economic growth and development. The programme was a dependent one, largely termed as a process or chain-event driven in nature. Challenges experienced by this programme had been noted as delays in stakeholder feedback on a particular policy and political considerations. It was also dependent on the Parliamentary programme and huge impacts were made in the transformation of the built environment through its function. Achievements included participation in Parliamentary processes towards the enactment of Agrément South Africa (ASA) Bill, and in addition, participation towards enactment of Expropriation Bill was under way.                                    

Programme 5 was identified as Auxiliary and Associated Services, and the purpose of its inception was to provide for various services, inclusive of compensation for losses on the Government-assisted housing scheme, offer assistance to organisations for the preservation of national memorials, and to meet the protocol responsibilities for state functions. The highlighted achievement was infrastructure support provided to six Prestige Events (against a target of two Prestige Events) which was termed a significant over-achievement.

The performance challenges faced by the Department included the appointment of service providers in areas where certain scarce skills were required, which had contributed to delays in achieving the set targets, or under-performance. Delays or non cooperation were identified as another challenge in areas where there were dependencies from external stakeholders or departments. Examples had been mentioned as immovable asset management and also Policy and EPWP.

Delays during the planning stage brought about extensions of contract duration, and had resulted in under-performance in projects. Performance had also been hindered in some areas where capacity and budget constraints had been noticed.

Another mentioned challenge was that of the current business model or value chain, which required a review of individual units’ value chains, and the need to craft an integrated business model that would be saddled with the responsibility of addressing fragmentation and duplications. The value chain was also expected to assist in addressing the difference between core and support areas. This process was said to be under way through the development of a service delivery model, as well as the implementation of the Infrastructure Delivery Management System (IDMS).

While acknowledging the challenges posed to the Department, Mr Dlabantu mentioned that there had been some improvement in other programmes and the Department had taken into consideration the recommendations made regarding the quality of reports by the Portfolio Committee on Public works. He added that the Department was continually improving in areas of concern, and effectively contributed to service delivery.

Mr Cox Mokgoro, Chief Financial Officer, DPW, ave a detailed financial performance of the Department. Out of the R6.121 billion allocated, R6.022 billion was spent, indicating a 98.4% spending, as against a 97.5% in the previous year. While making comparisons with the previous year, he stated that R22 million was under-spent, due to vacant positions that were only filled towards the latter part of the financial year. The EPWP had underspent by R17 million, R3.6 million was underspent on Administration (compensation of employees) as well as R1 million for the Property and Construction Industry. The average salary increase was 6%, and the average  number of employees increased from 5 710 (March 2014) to 5 775 (March 2015). An increase was spotted in office accommodation expenditure, which was due to annual inflationary increases in leases and in municipal services. Other goods and services decreased on expenditure, due to exited and reduced commitments on expenditure on some of the turnaround projects, as compared to the previous financial year. In relation to transfers and subsidies, there was an under spending of R1.2 million under provinces and municipalities for EPWP-Integrated Grant for Provinces. Payments to two Limpopo Provincial Government departments were withheld, because of non-compliance to the Division of Revenue Act (DORA). There was other over-spend, under Non-profit institutions, in relation to Agrément SA and the said funds were allocated under goods and services whilst expenditure was accounted for under transfers. These had in turn initiated a decrease on expenditure due to reduced allocation to Independent Development Trust (IDT). R50 million was transferred in the current year, compared to R100 million in the previous year.

Budget was under spent under buildings and other fixed structures. This was initiated by late receipt of invoices. Compared to the previous financial year, there had been a decrease in the current year due to maintenance and repairs expenditure, reclassified to current expenditure under goods and services. On the other hand, a significant increase in machinery and equipment expenditure was highlighted, as a result of payments of prior year accruals on IT infrastructure.

Out of the total budget allocation, Administration was provided with 19%, 46% for Immovable asset management, 32% for EPWP, 1% for Property and Construction Industry policy regulations and 2% for Auxiliary and associated services.

Mr Mokgoro then presented the budget and expenditure report for the Property Management Training Entity (PMTE). Its role is to collect rentals and charge client departments for the offices and accommodation allocated to them. Revenue sources included State and private accommodation charges, municipal management fees and augmentation. Forms of expenditure had been highlighted as Cleaning and Gardening (2% of total) which was lower than expected at the end of the fourth quarter, Private Leases (45% of total) which was fully spent, Property Rates (11% of total), in which under-expenditure was highlighted, Municipal Services in Arrears (2% of total) as well as Rehab (12% of total), Repair and Maintenance (14% of total) which saw an increase in expenditure. In terms of revenue, 100% had been received and paid.  When making comparisons with the previous financial year, percentage expenditure was shown to have increased ( 98% this year and 91% last year). From the total R8.36 billion allocated, 77% were current payments, 12% were Capital payments and the remaining 11% was for Transfer payments. According to the debt and Revenue management Report, the total debt was noticed to have increased by 16% compared to the previous year. At the end of his presentation, he affirmed that the Department was undergoing an audit and that actual figures would be confirmed later in the year.             

Ms N Sonti (EFF) claimed there were indeed improvements from the previous year. With regards to the skills development programmes, she inquired about the fields in which beneficiaries were trained and also suggested that the Minister of Public Works should meet in person with the candidates to motivate them. She further suggested that the Department should provide accurate reports, rather than mere statistics, and also recommended an active monitoring of ongoing projects. A request was made about the statistics of small businesses that have entered the property and construction sector, since the President was very much concerned with a transformation of the sector. She also inquired if the Department could mandate big contractors to partner with small businesses to make them self-reliant. From the performance challenges faced by service providers in areas with scarce skills, she advised the Department to be more specific and list the so-called "scarce skills" required by contractors in the affected areas. She went further to ask about the financial indications and consequences of project delays and also asked when the integrated business model being crafted would be made available. While giving kudos to the Department for increased financial performance in certain areas, she sought to know why the Department failed to fill the vacant posts highlighted in the report, despite the high unemployment rates in the country. As it had been mentioned in the report that the vacant posts were filled later in the year, she inquired about the number of positions that were later filled. Finally, she asked how the Department intended assisting small businesses to submit their invoices early to facilitate prompt payment.

Mr M Filtane (UDM) stated that there was no basis for justification of expenditures, until there was a clear indication of how people’s lives had improved. He then sought clarification on the Department’s definition of "decent employment" and asked about the statistics of contractors who had moved up the ladder across levels as there were no indications in the report. With regards to land assets, he asked about the location of the assets and the development plan for the assets ,as the country was said to have 27 million hectares of unproductive land. While addressing the skills development programmes, he questioned the Department on how it intended to ensure the placement of trained beneficiaries in suitable positions and how many of them had been successfully placed in the past. He finally enquired about the socio-economic impacts of withholding funds from contractors, and if R22 million was the amount provided for IDT to retain these jobs.

Ms E Masehela (ANC) voiced her worries about irregular expenditures referring to them as totally unacceptable. She buttressed her concern with the 5% irregular expenditure highlighted, when ideally there should have been none. She further expressed her dissatisfaction with the two targets set by the Department and the six targets achieved, stating that it was possible that it might have deliberately set low targets to boost its apparent performance. She enquired about the lease normalisation process, and asked when  the last financial transfers were made and if they were prompt. As a suggestion, she advised the Department to facilitate prompt payment of contractors, and help in the effective creation of employment.

Ms P Adams (ANC) questioned whether second and third quarter reports had been drawn and presented.  She then asked about the turnaround strategy after the report, and why there was not an indication of the financial year end. A question was also asked why the available land assets were not utilised by the DPW and why there was no delegate from DPW who liaised with the Department of Rural Development and Land Reform. She questioned the apparently low targets that the DPW had set. She asked if the 1 273 learners trained by the Skills Development programme had been incorporated. Ms Adams further expressed her dissatisfaction regarding the report presented, and she inquired about the percentage completion of ongoing targets if any.

Mr K Mubu (DA) said the turnaround procedure should be clearly stated before the passage of the Budget and not afterwards.

Ms L Mjobo (ANC) claimed there had been a request for a comprehensive list of the public assets in previous meetings and said those requests had not been addressed or honoured. She offered to assist the Department with information regarding list of professional bodies of scarce skills.

The Chairperson asked Ms Mjobo to kindly furnish the whole Committee with the list of the relevant professional bodies .

Mr Mokgoro responded to the financial questions. He confirmed that there had been an improvement in payment rates when compared to previous years. He added that some of the delays that still occurred were as a result of a change in the payment system, as contractors needed to update banking details and some other relevant information. He further explained that the irregular expenditure questioned by Ms Adams amounted to R35 billion, spread out over 3 900 transactions; and he highlighted the procedures in place to correct the irregularities as carrying out investigations, charging the contractors and then reclaiming funds. He noted  that 41 investigation criteria were created through a rigorous process and 10% of the irregularities had been investigated so far, and the rest would be addressed with time. He also revealed the constraints associated with the investigation which might come in the form of having to appoint a service provider to carry out the investigations.

Mr Imtiaz Fazel, Deputy Director General, DPW, addressed concerns raised by Ms Sonti regarding the realisation of the integrated business models, and mentioned that the infrastructure would be the focus of business models in the next twelve months. He answered Mr Filtane's question on IDT by saying that the DPW had been helping the IDT to develop a case and also aimed to work out a formal protocol and wean it over from its dependence on National Treasury. He lastly stated that impact studies would be carried out to measure the effectiveness of projects.   

Mr Clive Mtshisa, Deputy Director General: Corporate Services, DPW addressed Ms Sonti’s question on the posts. Between January and March 2015, 86 posts were advertised and 65 of them were filled. He then added that the advertised fields ranged across public works, finance, HR, property management, supply chain, security management and legal services.  He further stated that the Skills Development Programme initiated a Young Professional Programme which placed an emphasis on mathematics and science in secondary schools and higher institutions of learning. He mentioned that learners in secondary schools in Limpopo, KwaZulu Natal, Northern Cape and higher institutions such as University of Johannesburg, University of KwaZulu-Natal, Cape Peninsula University of Technology, and TVET colleges have benefited from the programme.

In response to the question asked by Ms Sonti, he said the Department had successfully trained learners across fields such as engineering (mechanical, civil, structural, and electrical), quantity and quality surveying, architectural studies and consulting firms. He also mentioned that the qualifications in which learners were trained were directly linked with the Department’s requirements and as a result, vacancies could not be filled against the positions being created by the Department. Statistics had shown that 350 interns had been placed across the Department and 50 management trainees had been deployed.

Mr Nkosi Vilakazi, Acting DDG: Projects, DPW said in terms of internal capacity, offices in the Eastern Cape and Limpopo provinces had been unable to secure the services of professional engineers, but the Department had made contact with relevant professional bodies such as ECSA to help with outsourcing. He said there had also been contacts initiated with retired professionals in this regard. He then spoke to the planning challenges of projects and mentioned that the Department had engaged in 3 500 projects spread across the country and architects had to be sourced to design the said projects. In relation to project delays, he noted that the withheld funds were penalties imposed on service providers as a result of non-performance or non-compliance with agreements.

Mr Butcher Matutle, Deputy Director General, DPW said that in regard to the lease renewals, effective measures were in place to ensure a smooth flow of the procedures.    

Ms Joy Abrahams, Chief Director:EPWP,  DPW gave an elaborate explanation regarding the processes involved in project site visits, and how painstaking they could be. In response to Ms Sonti’s suggestion about an active monitoring of ongoing projects, she commented that 595 project visits had  been carried out so far; site reports were compiled, and sent to programme managers who surveyed for non-compliance. She further added that data capturing workshops had been organised to ascertain the correct capturing of data, as any wrongly captured data could be capable of breaking a Department. She highlighted prior skills training and on the job training as a solution to the high cost of learnerships.

In response to Mr Filtane’s inquiry about "decent employment", she stated that there had been requirements for public bodies to provide UIF and point of sale information and that the essence of these requirements was to ensure decent working conditions. She claimed there had been an increase in compliance regarding the payment of employee wages by service providers. She said that excellent relationships had been created with manufacturing industries, and added that 89 learners were trained in the previous year, through the National Youth Service, and 221 more artisans were expected to be trained in spray-painting this year. She presented a labour market survey which showed that seven out of ten EPWP learners found employment after training. While responding to different queries regarding the vacant positions, she confirmed that many of the advertisements had been placed since January 2014 and were only filled lately, and the first finalised appointees would commence in August 2015. She lastly added that the biggest challenge so far had been getting value for money, and security issues, as some site visits required travelling late at night or early hours of the morning.

Mr Vinodh Becksi, Assistant Chief Director, DPW said the 2 750 land parcels were a mixture of vacant and lands with properties on them.

Mr Mokgoro mentioned that all transfers were made in accordance with agreements made with service providers.

Mr Dlabantu said that the DPW had indeed budgeted for the State of the Nation Address. However, the unexpected funeral costs of the late Collins Chabane could not have been foreseen.

In response to Ms Mjobo’s inquiry about the list of assets, he stated that the assets register was a very detailed large document, and was not easy to publish. He suggested that specific inquiries be made to the Department regarding the properties.

Mr Filtane suggested the employment of social facilitators. He was not in agreement with Mr Mubu on the need to clearly state procedures before the enactment of the budget. He highlighted that the current procedure was a step in the right direction.

Mr Mubu suggested to the Department that getting detailed reports from the EPWP would further assist in realisation of goals.

Ms Adams agreed on that point.

Ms Mahesela asked why the vacancies were not advertised earlier, rather than waiting until the last quarter.

Mr Filtane appealed to the DPW to prioritise the access of disabled persons to  buildings, noting a number of complaints about no access.

Mr Dlabantu confirmed that the building standards were under review, and disabled persons were being consulted on their concerns and requirements.

The Chairperson advised the DPW to provide detailed reports rather than summaries, so that Committee Members could more actively engage. He thanked the delegation.

The meeting was adjourned.

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