Taking Parliament to the People: Committee Researcher's Analysis; Follow up on Western Cape financial issues considered during earlier oversight: Provincial Treasury briefing

NCOP Finance

04 November 2015
Chairperson: Mr C De Beer (ANC, Northern Cape)
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Meeting Summary

The Select Committee on Finance noted that the MEC for Finance, Western Cape, had responded to concerns that were discussed previously, and had submitted a full response to the House Chairperson. Fourteen matters of concern were addressed in that letter. It was noted that the Select Committee on Finance, together with other Select Committees, would shortly be going to Northern Cape in a Taking Parliament to the People exercise and that some of the issues would be raised there. The Committee discussed the logistics and agreed that reports would be ready for tabling. It would then travel to Oudtshoorn to follow up on issues raised there. There was some overlap of mandates in respect of the issues raised, but it was confirmed that as far as possible the same groups who had visited areas during previous oversight visits would again attend to those issues to achieve better continuity. Reports would be presented to the people in the Eden District with feedback, if necessary, from the Executive regarding the completion of any outstanding projects. Although some issues had been referred to other committees, the fact that they had financial implications meant that they should also be considered by this Committee.

The Committee Researcher and the Western Cape Provincial Treasury took the reports on previous oversight visits and isolated the issues raised that were still to be fully addressed. . 

Thereafter, the Committee Researcher and a Director for Infrastructure of the Western Cape Provincial Treasury presented their analysis to the Committee of the main areas that needed to be considered, as extracted from the TPTTP reports. They noted that the main matters of contention related to housing, education and health infrastructures, with much interest being shown by the public on municipal housing lists and alleged misappropriation of funds.  Transport infrastructure projects were centred on road rehabilitation and road building, with the total expenditure expected at R88 million. The officials suggested that the Committee needed to ask the MEC for Finance in the Western Cape to provide a document with clear timelines, indicating dates of contractor appointment, dates for project commencement and planned finish date. It was stressed that when interrogating these projects, the Select Committee would need to work also with other sector-specific Committees, but its input would give clarity on the financial side.

The Deputy Minister for Finance had also commented on the analysis, and agree that housing and related infrastructure remained of concern in Hessequa, Oudtshoorn and Kannaland projects, as listed .A formal written response was not included in the pack for Members but would be made available later in the day. Provincial Treasury noted that all departments should be aligned to the Infrastructure Delivery Management System. The progress of various school infrastructure projects was noted – both for new and upgraded school infrastructure. Members questioned money spent for the Thembalethu Senior Secondary School, and asked why the acquisition processes for the land had not been completed, although the actual planning of the structure was already at an advanced stage. They asked for definitive reports on the challenges, and what corrective measures were in place, and suggested that full reports on time lines, delays and other details were required. Members asked how the processes worked, why letters of intent were not obtained, and Members also wanted an indication of all projects in future as to the stage of the tender, what each stage comprised, the expenditure and updated information.  At this stage, it was assured that a letter was secured from the tender and that building on the site could proceed on site as later specified.

The Transport Infrastructure financial information and description of projects was given, with an indication of spending, and also an indication of where very little had progressed. Members had asked if a tender has been already awarded regarding the road infrastructure in Stillbaai, and asked Provincial Treasury to follow up on any delayed matters. Members also noted that generally, this province had a higher proportion of engineers on projects, and  asked if some good projects could provide a blueprint to others. They wanted to know more about the contractors employed, their backgrounds and demographics, and how the local people were benefiting. The Health Financial Information was also presented, and it was noted that certain information was yet to be verified.  Updated figures regarding the informal settlements projects, such as Hessequa, Knysna and Oudtshoorn, would be submitted later. Members said that they would have expected the information to be immediately available, but pressing other issues and the short notice of the meeting were explained. Members questioned to what extent local municipalities were participating, and the way in which there was cross-referencing and collaboration and involvement was explained. Members finally discussed the logistics of the TPTTP arrangements. The Division of Revenue Amendment Bill was set to be deliberated and adopted on 19 November in Oudtshoorn, and briefings would be given by National Treasury on tax amendment laws.

 

Meeting report

Chairperson's opening remarks
The Chairperson welcomed the appointments of Mr L Nzimande (ANC, KwaZulu Natal) and Mr O Terblanche (DA, Western Cape) Province to the Select Committee on Finance. He noted that Ms W Zondi (ANC, KwaZulu Natal had resigned from the Committee, due to ill health.

He noted the apology extended by the Provincial MEC for Finance, who was attending a meeting between departmental leaders and Cabinet.

Responses by MEC Finance, Western Cape to queries raised by Committee
The Chairperson noted that the MEC of Finance for the Western Cape Province had replied to concerns raised, to Ms T Modise, the Chairperson of the NCOP, who had passed on a letter citing fourteen matters of concern.

Advocate Modibedi Phindela, Secretary of the National Council of Provinces, confirmed that many of the issues referred to had also been reported to other committees, but the nature of the issues referred and the financial implications made them particularly significant to the Select Committee on Finance. He had asked that the claims made in the response should be verified.

The Chairperson noted that the Committee had received a response by the Western Cape MEC for  This meeting would follow up on questions preceding the Committee’s oversight from 16 November in Oudtshoorn.

The Chairperson noted that the roles overlapped between committees and asked what role the Select Committee on Finance was expected to play.

Advocate Phindela agreed that this was slightly problematic as the Members of this Committee also served on the Select Committee on Appropriations.  Members of the Select Committee on Finance would fly out of Cape Town on the Wednesday to join the other delegates in Oudtshoorn on Thursday, to deliberate the Division of Revenue Amendment Bill and for the debate on the report back. The NCOP expected that the groups of delegates who had previously visited Oudtshoorn should go back in their same groups, rather than splitting by Committee. Before their return the matters highlighted should have been reported back and verified with the people in the Eden District, and there should be a progress report and feedback, if necessary, from the Executive regarding the completion of any outstanding projects.

Advocate Phindela was uncertain if the upcoming meeting “Taking Parliament to the People” (TPTTP) was within the original budget or was an appropriation from the budget of the Province. If it was provincial, then the Select Committee should verify whether it was tabled in the Provincial Legislature and if the budget had been spent correctly – for instance, topics to do with roads should be dealt with by the committees dealing with public works, but the Select Committee must verify whether the funding was available to commence the roadworks in the first place. He was unsure if the topics under review constituted part of the Appropriation Bill or Adjusted Appropriation Bill, and that would have to be clarified at Oudtshoorn.

The Chairperson responded that the current meeting was the start of the verification process.

He asked Ms T Motara (ANC, Gauteng) to update the Committee on the decisions taken at a meeting that she had attended on the previous day.

Ms Motara agreed that the Advocate Phindela was correct about the Committee’s responsibility to verify the budgets, and this would require collaboration with the research unit. This Committee, and the Select Committee on Appropriations would assist other select committees through this verification exercise.

The meeting she had attended noted that the original Committee programme was adopted, but the TPTTP programme was not finalised. Both the Select Committee on Finance and on Appropriations needed to attend the Adoption and Consideration of the Final Mandates on Wednesday 18 November, because the deliberations on the Division of Revenue Amendment Bill would proceed at 18:00 in Oudtshoorn on Thursday 19 November. Those meetings remained unchanged. The deliberations on the Tax Law Amendment Bill and the Tax Administration Law Amendment Bill would also commence on Wednesday at 18:00 but it had been agreed to move the briefing by National Treasury on the new legislation to the following Wednesday, 24 November.

Advocate Phindela requested confirmation on the travel times of Committee Members.

Ms Motara confirmed that the Finance members would be travelling with others in other committees, except it had requested accommodation for a meeting at 18:00; if the adoptions of mandates did not go through then it would have had to meet on Wednesday in Parliament and then immediately travel to Oudtshoorn.

Advocate Phindela then asked that the report must be ready for circulating at the meeting at 18:00, as there was no time have it included in the ATC.

The Chairperson assured the Secretary of the NCOP that all documentation would be ready in advance, and Ms Motara also confirmed that the Committee Secretary, Zolani Rento, had given an assurance that the Committee reports would be ready for incorporation in the ATC.

Other logistics were briefly discussed.

Analysis of Taking Parliament to the People Programme: Committee Researcher's analysis
Ms Fundisiwe Cwele, Researcher: Select Committee on Finance, said she had been asked to analyse the Taking Parliament to the People  (TPTTP) programme to pick out any matters relevant to the Select Committee on Finance – and other researchers in other committees were running similar exercises for their committees. This was aimed at identifying gaps for intervention and to propose short and longer term oversight measures.

Ms Cwele noted that she had seen the letters from the NCOP Chairperson and MEC for Finance of the Western Cape. These listed various governmental projects undertaken and served as the basis for the matters under review. Responses given during and after the TPTTP were also considered.

One of the main issues concerned the infrastructure budget. During the public hearings, no key service delivery issues that had affected the Committee’s work were raised, even after the undertakings by the Western Cape MEC for Finance. Issues of contention were housing, education and health infrastructure. The public had also disputed matters to do with municipal housing and alleged misappropriation of funds. The transport infrastructure had projects for road rehabilitation and road building, estimated to cost R88 million. She suggested that the MEC should provide a document with clear timelines, indicating dates of contractor appointment, date for project commencement and planned finish date. The cut off date was supposed to be July, but an extension was granted. This Committee would have to work with other committees to ensure  effective execution of the projects  - for instance, road building matters would require collaboration with the committees responsible for public works.

She highlighted that matters of education involved infrastructure of six schools; three new and three restructured. The Select Committee on Finance. as well as the committees responsible for education and appropriation would supply oversight in those projects. Similar interventions and collaboration also applied the health financial information. She suggested that projects could be extracted from the TPTTP programme and the Committee could implement oversight independently from the TPTTP programme. The Western Cape Provincial Treasury could supply further details of progress from February 2015 to date.

Discussion
Mr S Mohai (ANC, Free State) expressed appreciation for the input of the Researcher, and so did Mr Terblanche.

The Chairperson agreed; the Committee received vast amounts of information on a daily basis and an analysis and identification of relevant points by the Researchers was most appreciated.

The Chairperson added that the Deputy Minister of Finance had also sent a response to the Committee in September. Housing and related Infrastructure was highlighted as a matter of concern, specifically the Hessequa Implementation of an Integrated Residential Development (IRDP) for Kwanokuthula and Heidelberg, the Oudtshoorn IRDP and upgrading of informal settlements and the Kannaland IRDP and disaster relief projects. He asked the Western Cape Provincial Treasury to give input.

Mr Shane Chandaka, Director: Infrastructure, Western Cape Provincial Treasury, responded that a formal written response reflecting updated feedback from the Deputy Minister would be made available by the end of the day, extracted from presentations given to date. He noted that the Infrastructure Delivery Management System provided a gateway and  all of the departments must align with this.

He spoke to the educational matters, noting that Thembalethu Senior Secondary School was currently at stage 6, draft documentation had been completed and site hand-over was awaited. Completion was expected early next April, but the Department still had to finalise the land management issues. To date R2.9 million had been spent on a new school project, with the project at proposal, or gate zero stage. The third . stage was expected in 2017/18. It has been shifted out to the outer financial years.  For Pacaltsdorp Secondary School, an existing school with upgrading of inappropriate structures, the budgeted R1 million may have derived from planning fees. The Rhenendal Primary School project was at stage 7 and was expected to complete by 15 January 2016. Actual expenditure to date amounted to R4.06 million. The Concordia Secondary School was currently under construction, with phase 1 expected to complete by January 2016. Phase 2, sports fields, was expected to complete by 22 April 2016. Concordia Primary School was at Stage 5, of design and development and documents were needed from the Western Cape Education Department before going to tender in Stage 6. Site hand over was anticipated at end of August 2016. The current spend on the Concordia Primary School was R517 000. The Diaz Primary School project was at stage 5.

Mr Chandaka then moved on to speak to the transport Infrastructure financial information. The road infrastructure in the Stillbaai area, project C989 of the Western Cape Provincial Treasury, was a rehabilitation of the road linking the town with the N2. To date, R30 million of the allocated R40 million was spent, but there was no further progress. A contractor was yet to be appointed. The reason for the delay was that the Department of Road Works had reviewed its entire portfolio and brought about changes during the year, by delaying some projects and introducing others which were better, ready and packaged for implementation. The Department dealing with roads had been working successfully and had taken into account information gathered from projects, on-site managers, community members and studies on readiness and budgets. Although no contractor was yet appointed, Provincial Treasury had not seen any problems.

Project C823 was the rehabilitation and resealing of the Blanco road, and since the time of the last report, when it was noted that R19.6 million was spent, expenditure had grown to R27 million. The project was currently in its final stage and working on close out.

The Glentana Road rehabilitation and upgrade, Project C822, was allocated R26 million. At the last report-back, R23 million of the allocated R26 million was spent, but now this had risen to R33.7 million, with completion expected in 9 October 2016.

Mr Chandaka said, in regard to the health financial information, that the final account would be processed for the project at the George Regional Hospital. There was no further expenditure on record for the Mossel Bay District Hospital, but that would be verified, and the Department would be asked for more feedback. The Oudtshoorn District Hospital project specifications had been completed. An appointment of the ward was expected for the New Eden Nursing College project in George.

Mr Chandaka  assured Members that the updated figures regarding the informal settlements projects, such as Hessequa, Knysna and Oudtshoorn, would be submitted by the end of the day.

The Chairperson asked that  the Committee should also receive updated information on amounts that were reflected as zero in some columns.

Discussion
Mr Terblanche  asked if the site has been procured for the Pacaltsdorp Secondary School project, and said that surely by now the environmental impact assessment must have been done.

Mr Chandaka explained that the Department of Education had responded  that planning would commence in 2017/18. Currently the project was at the design stage. Provincial Treasury would undertake to acquire in-depth information regarding why the project had been delayed. The Department dealing with roads had responded to delays with mitigatory measures and re-aligned plans. Provincial Treasury would make sure that a formal response was given.

Mr Terblanche asked if a tender had been  awarded already for the road works in Stillbaai?

Mr Chandaka confirmed that no contractor was appointed for the road infrastructure in Stillbaai, and Provincial Treasury would have to follow up on this information. The relevant department would normally proceed with ready projects, and it would need to find out why there were delays. This information would be fed back to the Committee.

Mr F Essack (DA, Mpumalanga) questioned the funds spent on the Thembalethu Senior Secondary School. A total of R1.4 million was spent on land that was yet to be procured, and he thought that this was rather vague. He called for confirmation that at stage 7 the programme would fully commence, so how come the land ownership was still uncertain at stage 6?

The Chairperson emphasised that Mr Essack had made a valuable point. He noted that strong reports had been submitted to the Committee on KwaZulu Natal and Limpopo projects, but a very different picture was seen on the ground during oversight. For each development it was vital to list the actual amounts spent to date and the progress still required, with its anticipated expenditure. This would present a more comprehensive picture.

Mr T Motlashuping (ANC, North West) seconded the concerns about the money spent already despite no certainty on the land, and asked for clarity on the challenges around acquisition, and what corrective measures had been put in place to overcome them.

Mr Chandaka responded that the provincial Department had pursued the Thembalethu Senior Secondary School project with the land processes,  encompassing the entire process. It was anticipated that the ownership would have been sorted out, and should ownership be agreed then the Project Managers would receive feedback by means of a letter of intent, which would specify if access to the site, for building purposes, would be granted, whilst land ownership processes continued. If not, then this would inevitably cause delay. National Treasury needed to confirm the particulars, as the project could not proceed without the design presentation. If a letter was secured, then building could continue.

Mr Terblanche recognised that land issues could be lengthy but a request for permission to proceed could have been sought.

Mr Motlashuping said the impression was created that there was sole coordination by provincial government and asked if the local municipalities were not involved.

Mr Chandaka explained that the Provincial Treasury had realised that the local municipality was the level of entry for any project or programme. If the Provincial Treasury had any queries, they were directed to the  Municipality’s designated project manager, who would then also liaise with the relevant department. For instance, if the matter related to road infrastructure, Provincial Treasury would  liaise with the Project Manager responsible for the project initially, who would then make enquiries with the department responsible for roads. The local municipality had always been involved, and would be present at progress meetings, which were usually held in the municipal offices.

Mr L Gaehler (UDM, Eastern Cape) advised that when completing the report, Western Cape Provincial Treasury should have submitted a report of the stages, as referred to in the verbal presentation, which would help to avoid confusion.

Mr Chandaka took the point and said this would be included, together with project expenditure to date, in all future reports.

Mr Mohai said that previous reports had indicated that the Western Cape had enjoyed high levels of engineering capacity. He asked if there was evidence of under-spending, and what were innovations on delivery of construction and whether this was done on time.

Mr Chandaka acknowledged that the Western Cape province did have a relatively large engineering capacity, but there were still major issues around delivery. Provincial Treasury was trying to get expedited delivery on projects and programmes. It was looking at innovative measures of working with contractors, who were working well, and if, for example, if Eskom had a good contractor that worked well, other departments might want to use that firm in future. That would promote standardisation. The relationship between the Departments of Public Works and Education had also been harmonious, because the Department of Education has a management contractor on its books who was working for both. In this week, the Department of Health had also requested standardisation of design for its clinics and hospitals, which would prove quicker and easier; this was something that the Department of Education had done. 

Mr Motlashuping enquired to what extent the Small and Medium Enterprises (SME) were benefitting. He also wanted an indication of whether the contractors and subcontractors were previously disadvantaged, and what labour benefits were offered.

Mr Essack questioned the credibility of the report  noting the lack of progress between September and November and questioning what was so complex that it could have caused delay; two months had passed since the concerns were noted and by now the Committee would have expected a better report rather than figures still needing to be presented.

Mr Chandaka explained that there had been other pressing issues in the previous week, which caused Provincial Treasury to work through weekends. The notification of this meeting was received late and although Provincial Treasury did ask the departments to respond, not all had done so yet.

Other Committee Business

The Chairperson said that the Parliamentary Research Unit had been asked to assist with research and getting documentation from the Parliamentary Budget Office for the upcoming amendments to the tax laws. SA Revenue Services and National Treasury would be briefing the Committee on 10 November.

Ms Motara reiterated that briefings to the provincial legislatures would start on 12 November in the provinces. The Committee had to report back to Parliament on the following day, and negotiating mandates would be presented on 13 November. In the following week, TPTTP would happen in Oudtshoorn. The Division of Revenue Amendment Bill would be adopted and voted on during the sitting at Oudtshoorn on 19 November 2015. The meeting with National Treasury on new Bills would be on 24 November 2015.

The Chairperson concluded that the management team of the Committee would do the necessary follow ups with the Western Cape Provincial Treasury for the information promised.

The meeting was adjourned.

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