Agrément South Africa [B3B-2015]: briefing by Department of Public Works

Meeting report

Agrément South Africa [B3B – 2015] Bill
The Department of Public Works (DPW) briefed the Committee on the Agrément South Africa Bill. The delegation comprised of Mr Devan Pillay Chief Director: Construction Policy, Mr Amukelani Maluleke Deputy Director: Construction Policy, Mr Welcome Mokoena Deputy Director and Mr Mpho Mashaba Parliamentary Liasson Officer. Mr Joe Odhiambo Chief Executive Officer: Agrément South Africa (ASA) was also in attendance.

Mr Devan Pillay, Chief Director of Construction Policy, DPW, briefed the Department on the Agrément South Africa (ASA) Bill. The ASA was established in 1969 by the Minister of Public Works through a delegated authority. The role of the ASA was to develop standards for a new product. The ASA would test whether a product or a system was fit for its specific use. The South African Bureau of Standards (SABS), on the other hand, developed standards for at least two to three products that were the same.

The objectives of the ASA were elaborated upon. One objective was to work with the construction sector to facilitate the introduction of cost effective innovative, non-standardised construction technology. The problem that the ASA faced was that it lacked legal status. The ASA Bill sought to rectify the situation. At present the ASA was dependant on the Council for Scientific & Industrial Research (CSIR) to fulfil its administrative requirements and to manage its technical agency. There was also dual reporting to the DPW and the Department of Science and Technology (DST). The ASA was funded by the DPW but funds could not be transferred directly to it. The funds had to be transferred to the CSIR. The Public Finance Management Act (PFMA) did not allow funds to be transferred directly to the ASA as it was not a legal entity. The transfer of funds by the DPW to the ASA was regarded as an irregular expenditure by the Auditor General’s Office.

A business case for the ASA had also been developed some years back to give direction to the form that the ASA should take. In the development of the business case consultation with stakeholders like the Department of Trade and Industry (DTI), the South African Local Government Association (SALGA) and the Council for the Built Environment had taken place. The stakeholders concurred that there was a need for the ASA to retain its mandate and to continue to exist as a separate independent organisation. There was also the possibility that the ASA could in the future have a regulatory function. As an entity in its own right the ASA would be able to more effectively promote value of certification of non-standard construction materials and systems which would help to promote innovation, local manufacturing and job creation.

Various options such as privatisation of services or a public-private partnership were considered for the ASA but it was evident that becoming a public entity was the preferred option. Absorbing the ASA into another entity was also not a viable option. Detail on the ASA Bill itself followed. The Committee was provided with background on the development of the ASA Bill. It was reiterated that the ASA Bill would give the ASA legal status. The ASA Bill set out the objects of the ASA, its powers and functions, the certification and renewal of the certification process, the keeping of a register and various aspects relating to the board of ASA. Some detail was provided on the aforementioned contents of the ASA Bill.

Once the ASA Bill became an Act, the ASA would be able to act independently as it would be legislatively empowered to enforce its mandate and conclude agreements on its own. It would also be easy for the ASA to introduce its envisaged regulation of providing ongoing quality assurance of a product, material and system in the construction industry for which a standard did not exist. The DPW would additionally be able to enhance its oversight role through the board and compliance with the PFMA and National Treasury Regulations. Lastly, the ASA would be only accountable to the DPW and no longer to the DST/CSIR.

Discussion
Mr W Faber (DA, Northern Cape) asked for an explanation of why funding could not be transferred to the ASA directly due to it not being a legal entity. He asked why the ASA could not be absorbed into other regulatory bodies like the SABS, the NRCS and the NHBRC. He felt that South Africa had too many entities already. It would have been better to have one huge entity to manage the entire system.

Mr Pillay confirmed that at present the ASA was not a legal entity. A public entity was defined by the PFMA. The ASA did not meet the requirements of a public entity. The Public Service Act did not have a definition for delegated authority like the ASA. There was therefore a need for the ASA to become a legal entity. Fitting the ASA into other entities had been considered by the DPW, as initially the idea was not to create a new entity. All the entities had specific mandates and could not do what the ASA did. If the ASA function was located within another entity the possibility existed that over time the function could be lost. The intention was for the ASA to regulate the use of construction material. If there was no SABS certificate issued then there should be an ASA certificate.  All scenarios had been considered to incorporate the ASA into other entities. In the end it was clear that the ASA could not be incorporated into another entity. There was however a strong synergy amongst the entities.

Mr B Nthebe (ANC, North West) asked about the possibility of the ASA being absorbed into another entity. If the Bill was approved and ASA became a legal entity it would be able to undertake its own litigation. Had the ASA had to deal with litigation in its past, and if it did how had it dealt with it? In the past the funding of the ASA had been considered wasteful expenditure by the Auditor-General’s Office, with ASA becoming a legal entity would this no longer be the case?

Mr Pillay said that thus far the ASA had not been involved in any litigation. However, in the future more products would come into play and the possibility of litigation had to be considered. At present the ASA could not act on its own legally. For example, if a product was used for something other than what it was intended for then the ASA would be required to take action. He clarified that there was no wasteful expenditure but rather that the expenditure was irregular. If the ASA became a legal entity then its funding would be transferred directly to it and the expenditure would be regular.

The Acting Chairperson referred to slide 9 of the presentation which spoke about the protection of home buyers. He was concerned about the quality of construction of the Reconstruction and Development Plan (RDP) houses. The presentation said that the SALGA had been consulted on the Bill, but the SALGA had always complained that they were never privy to this type of engagement. Slide 19 spoke about the ASA keeping a register of applications rejected and certificates issued and that such information must be made available on the ASA website. He asked why the information should be on the ASA website. Would it not be better to state that the information should be “accessible to the public”? He was concerned about people who did not have access to the internet. He also referred to slide 20 which dealt with members of the ASA Board and that there should not be a conflict of interest. Members of the board could not within two years of the expiry of his or her term of office enter into a contractual relationship with ASA. There was a feeling that board members were offering their services to improve the capacity of ASA and were then afterwards penalised for a period of two years from making a living in the industry. Was the matter discussed with the State Law Advisers Office? Were opportunities for employment of board members being inhibited?

Mr Pillay responded that the RDP houses were a tricky issue. Problems arose when the correct products were not used and when there was no compliance with building regulations. It was municipalities which assessed all building processes. However, when huge projects like the RDP developments took place then municipalities appointed engineers to sign off on building processes. A common practise that was found was that not all houses in a development were inspected by the engineers and in many instances sign off was taking place in offices. However, the issue was partly being addressed. He confirmed that the SALGA had been consulted. The SALGA had been consulted in 2010 when the business case for the ASA was developed. He stated that at present the information regarding the keeping of a register was available of the ASA’s website. The internet was the most accessible medium. The clause in the Bill about the conflicts of interest of board members had been looked at by the State Law Adviser’s Office and the Parliamentary Legal Advisers and both were comfortable with its contents. The clause was inserted to prevent board members from exerting undue influence. The issue was about individuals compromising the ASA.

Mr Welcome Mokoena, Deputy Director, DPW, added that the clause on conflicts of interest of board members did not restrict board members from working in the industry. Board members could continue with their day-to-day business but could not have a contractual relationship with the ASA whilst being a board member or within two years thereafter.

Mr Odhiambo stated that the ASA’s board members were professionals. At every board meeting members signed a no conflict undertaking. If there was conflict then the board member would recuse themselves. The ASA undertook to test products that had not been tested before and were unknown. The ASA developed criteria to test a new product. The Bill had the aim of creating a legal entity. There was no issue of increased funding for the ASA.

Mr Faber responded that he understood the new product testing that the ASA undertook. He however asked whether the product after it had been tested by the ASA was then passed on to the SABS. Why could the SABS not develop the new standard of testing?  In years gone by the SABS had done testing of new products. So why could they not do it at present. 

Mr Pillay explained that standards were only developed by the SABS when there were two to three of the same products. It was not for a new product. The ASA developed criteria for assessment of a product. Once there was more than one product then it moved over to the SABS for standards.

Mr Nthebe said that the ASA had elaborated on how its function differed from that of other entities. Was there a possibility that there could be an overlapping of jurisdictions amongst the various entities? Duplication should be prevented.

Mr J Londt (DA, Western Cape) pointed out that most of the comments made on the Bill during consultation had been addressed but there were some that had not been addressed. One of the issues not sufficiently addressed was about the cost of doing the testing of new products and funding of ASA. It was apparently the ASA Board that would determine the cost. He felt it to be very vague and unclear. The charge for testing a product was unclear. There needed to be checks and balances on the cost of conducting testing.

Mr Pillay stated that when the business case for the ASA was done around 2009/2011 it was not envisaged that there would be a spike in the funding for its operational requirements.

Mr Odhiambo said that there were new products all the time. One example was that plastic pipes had replaced copper plumbing pipes. He added that the ASA developed its own criteria for test methods. The ASA charged for the test method. There was no one size fits all cost for products. The test costing was on an individual basis. Charges were for cost recovery. The ASA used accredited laboratories.

Mr Faber pointed out that a great deal of products came from overseas. These countries had their own standards for the products. Did the ASA check if the products met those standards?  

Mr Joe Odhiambo, Chief Executive Officer (CEO), Agrément South Africa, said that the ASA did take into consideration the standards of foreign countries where they were applicable. The ASA had test criteria for SA’s own conditions. In SA ultraviolet levels were much higher and temperatures were also higher than in Europe. Once criteria were developed then industry standards were set. The ASA played an important role in the testing of products that came into SA.

Mr Nthebe understood that the ASA was dealing with the delivery of public goods. Means and ways had to be found to make the processes more inclusive. There would be those individuals that would not be able to afford to pay for product testing.

The Acting Chairperson had seen on a visit to a poor municipality that pipes being used by the municipality were produced in Italy. Why were expensive products being imported from abroad? Products needed to be localised.

Mr Pillay accepted that there were products that were imported into SA but there were also products that were produced locally. The thinking behind the Bill was that over time there would be a move towards the industrialisation of construction. There were innovations in construction that allowed for an entire building to be constructed in a factory and to be assembled on site. This would make the construction industry more formalised. He stated that fees for the testing of products could be waivered where there was a lack of capital to pay for it. Once a product was tested by the ASA then the product entered into the market place. The charges for testing were cost recovery and were not to make a profit.

The meeting was adjourned.