The Committee firstly discussed its draft Committee Report on the 2015 Division of Revenue Amendment Bill. It was only four pages long and there were a few minor amendments of a technical nature proposed. The Report was adopted, but the DA asked that it be recorded that it reserved its rights in relation to the adoption of the Bill.
The Department of Public Works (DPW) briefed the Committee on the 2015 Adjustments Appropriation Bill, and the spending of the DPW to date. There was underspending in relation to amounts budgeted for intergovernmental co-ordination the budget for property, policy and research, and the Expanded Public Works Programme (EPWP) which had under spent by R38 million. The integrated grant for provinces falling under EPWP was under spent by R24 million and the social sector incentive grant for provinces was under spent by R14 million. The Department had initially planned to have 1 127 86 work opportunities and a budget of R1.7 billion but had now revised that to 1 126 779 ,with a downward adjustment of R38 million for EPWP. The implications were less skills, job opportunities and service delivery provisions created. DPW was in the process of buying Parliament Towers, which it had rented previously to house several Directors General. So far, expenditure in the year was at 40%, but the pending transfer of functions from the DPW to the Property Management Trading Entity (PMTE) should raise this to 50%. Targets for convening intergovernmental forums, Prestige Project norms and standards were realised, but the DPW fell short on projects completed, completed within budget, work opportunities in general and in rural municipalities. Budget cuts had been based on under spending on two grants during the past financial year, ,but although the money would not be allocated to DPW, it should find its way back into EPWP through the provincial allocations.
Members were concerned about the low performance against targets, particularly the work opportunities. They were interested in what the properly purchase analysis had revealed and why the DPW had not purchased the building some time ago. They questioned the job figures and the impact of under-spending on service, called for more information on the Prestige Policy and asked where the lease costs for other rented projects was budgeted, as well as their maintenance. Members asked who owned Houdspreit Air Base, suggested that DPW needed to give more assistance to municipalities and suggested that it should also be publicising its success stories. Members noted that the bulk of the underspending happened in the provinces and asked how DPW could turn this around. They also wanted more detail on projects involving the youth and the disabled, asked how the expenditure patterns could be stabilised, and asked for figures and rationale behind transfers to be explained. They were worried as to which programmes would be affected by the downscaling and how, in particular, this would affect the EPWP and whether the Department could ascertain the reasons behind the underspending in provinces, and if it had any way of pushing them to do better. The Department emphasised that although the figures had been affected by the holding back on properties and maintenance, it had made strides in efficiency and effectiveness and had improved its audit outcome.
2015 Division of Revenue Amendment Bill: Draft Committee Report
The Chairperson tabled the draft Committee Report (the Report) and asked for input.
Mr M Figg (DA) stated that the amount on page1 needed to be rounded up to 52.8.
Mr A McLaughlin (DA) stated that on page 1 the wording needed to be altered from “downwards” to “upwards”. Towards the end of paragraph 4 on page 3, he pointed out a repetition that must be removed. On the third paragraph, he said that “grants” should be replaced with a reference to the departments or municipalities in two places in the paragraph, as grants could not spend themselves. He asked that the Chairperson should note specifically, in relation to the Division of Revenue Amendment Bill, that the DA was reserving its rights at this stage whether to support the Bill.
The Chairperson stated that nothing needed adjustment on page 2.
On page 4, points 5.1 and 5.2 needed to state “recommendations” in the plural.
He noted that there would not be debate on the Division of Revenue Bill, but there would be declarations. There would be debates on the adjustments.
The Chairperson asked whether the full name needed to be inserted but the Committee resolved to pass this as the title of the Bill.
The Report was adopted, with the reservation of rights by the DA noted.
2015 Adjustments Appropriation Bill: Department of Public Works (DPW) briefing
Mr Paul Serote, Head of Property Management Trading Entity, Department of Public Works, started by explaining slide 4. He noted that the amounts budgeted for intergovernmental co-ordination had been under spent by R1.5 million. Budget for property, policy and research was under spent by R60 million. .The Expanded Public Works Programme(EPWP) had under spent by R38 million. The integrated grant for provinces falling under EPWP was under spent by R24 million and the social sector incentive grant for provinces was under spent by R14 million.
He noted that 1 127 186 work opportunities were planned for 2015/16 with a total budget allocation of R1.7 billion. The revised target was 1 126 779 ,with the downward adjustment of R38 million for EPWP. The implications were less skills, job opportunities and service delivery provisions created.
The DPW was currently in the process of acquiring Parliament Towers, which would save R12 million annually in leasing costs. It was in close proximity to Parliament and housed the offices of Director Generals (DGs). The purchase would happen in the next financial year.
He noted the financial performance on slide 11, saying that expenditure so far was at 40% for the current financial year. There would be a transfer of functions from the DPW to the Property Management Trading Entity (PMTE). The transfer was for R700 million and would lead to a 50% transfer rate if reflected correctly. Seven intergovernmental forums had been convened and the target had been achieved. The development of Prestige norms and standards was in process. The number of projects completed within the agreed construction period was 48, out of a target of 62. The number of projects completed within the approved budget was 47 out of 77. The number of work opportunities reported for the half year were 318 108 out of an annual target of 1 127 186. 269 844 work opportunities were created in rural municipalities for the half year, out of an annual target of 700,000.
Mr George Tembo, Director, National Treasury, stated that the budget cut was based on the under spending on the two grants during the past financial year. There was an agreement that the job targets need not change. The money was being taken out of the national budget, but it would be put back into EPWP through the provinces.
Mr Cox Mokgoro, Chief Financial Officer, Department of Public Works, stated that the provinces and municipalities were the actual implementers of the EPWP, so the actual spending was at these levels.
Mr Figg referred to slide 8, and expressed his concern that the rural and work opportunities were so low when compared to the targets. He asked what the analysis of the property purchase had revealed and who were the current owners, as also what the costs were of the lease and purchase. He questioned why, on slide 14, the figures were different for rural and work opportunities. He commented that the DPW was not even making 50% of the targets at the half way mark in the year, and this was concerning.
Mr McLaughlin commented on slide 8, and asked if it was really true that R38 million equated to 407 jobs. What was the impact of under spending on service? How long had the DGs occupied the building of Parliament Towers, and how much rent had been spent, and what was the change that now led to the building being purchased. Referring to slide 11, he asked what the core business was of the DPW. He asked why the DPW had fallen behind on property and construction research? He wanted more information on the Prestige Policy. He noted that 2 500 properties were being rented and asked if the leasing costs came out of the DPW budget? He also questioned where the maintenance for those properties was reflected?
Ms S Shope-Sithole (ANC) asked about the land in Houdspreit, including the Air Force base, and who owned it, Transnet or DPW – she noted that she would be happy to receive this answer in writing. She wondered why the DPW was not “claiming victories” from its projects and publicising. She thought that in relation to the provinces and municipalities, the DPW should use the legislation around municipalities to help them to spend. The working hours for EPWP could be adjusted so that those employed were actually spending the day working rather than relaxing under trees, as she had seen.
Mr N Gcwabaza (ANC) stated that the under spending overall was largely due to under spending in the provinces, and asked how the DPW was going to turn around the situation so that provinces were not under spending? He wanted more details on the property on slide 9, and asked if the DPW was buying out the lease? What did the DPW mean by intangible assets on slide 12? Looking at slide 14, he suggested that the targets for youth would improve once the projects had been awarded, but wanted to know what was the monetary value and timeline of those projects. He asked what plans the DPW had to stabilise the expenditure patterns. He asked, in relation to slide 5 and the R1.3 million transfer, who authorised the DPW to transfer these funds?
Ms R Nyalungu (ANC) commented on slide 11, and asked the DPW to unpack the property research actual expenditure of 32% . How could the DPW be sure that provinces are spending and doing what they are meant to be doing? She also questioned how many were full-time workers, out of the women, youth and disabled work opportunities?
The Chairperson wanted to know why the DPW budget had been down-scaled. The concern from the Committee related to which programmes would be affected by this, and the EPWP looked like it would be affected by the decrease in the allocation. He asked if the DPW had any ideas on how to mitigate the problem of provinces not spending the grants for EPWP and said that the Committee wanted to know the detailed reasons why provinces were not spending their money. That meant that in future the Committee would expect the DPW to provide detailed reports to the Committee. Rural areas needed to be focused upon.
Mr Serote replied that the migration of functions from the DPW to PMTE was under way. The consistency of expenditure had been affected by this. DPW would like to “clean out” and verify its asset register. The DPW was looking at property as an investment. The analysis of Parliament Towers had been done, and revealed that R12 million would be saved in rent. Circumstances affected the timing of the purchase as there may not previously have been funding available. He noted that the PMTE was still coming on line. The lease period was normally 9 years and 11 months. The DPW was nearing the end of verifying over 100 000 properties and portfolios. The maintenance budget was R3.1 billion. A maintenance programme accompanied this budget. He agreed that the success story of the DPW needed to be broadcast. Weather stations were another area where DPW worked on an international scale, yet this too was not advertised.
Mr Mokgoro stated that there was a great issue between what was being reported and what should be reported. The DPW had a new reporting system. The actual information was captured by the implementing agencies, like e-filing at SARS. There was an under-reporting, due to this change-over, and it was this that accounted for the discrepancies of numbers. The lower numbers of jobs, at 407, with a R38 million adjustment, was due to better ways of executing projects in a more efficient and more effective manner. The DPW believed that it would reach the prescribed targets. There should be a refocus within the DPW. The only way to do this was to move the properties to another entity and separate the managing functions of this property from the DPW. DPW was left with policy formation, Prestige Services and intergovernmental co-ordination, monitoring and evaluation.
In respect of provinces, Mr Mokgoro noted that whilst the DPW would like to provide oversight, legally it was unable to punish or reward provinces. The new Public Works Act would provide more “teeth” for oversight. He explained that Prestige Services run parliamentary and governmental events. The intangible assets included software and intellectual property.
Answering the question why only 32% had been spent on property and the construction industry, Mr Mokgoro explained that this amount related to the transfers to the Property Management Trading Entity. The transfer amount held back was R700 million. When this was taken into account, it would push the expenditure above 50%. This was essentially a cash flow exercise. The turnaround within the DPW was starting to bear fruit. The audit outcome had moved from a disclaimer to a qualification, and in 2014/15, the DPW had now moved to an unqualified outcome, and it had reduced the number of material misstatements. The reporting from EPWP would be the area of concern in the future. He asserted that DPW was moving in the right direction. The ratio of one project manager managing 25 projects had been reduced. The R1.3 million transfer had complied with the law and had been granted by National Treasury. The PMTE held the leases of R4 billion for the DPW. The total spend on office accommodation, as a Department, was R420 million. This amount would sit under PMTE, under administration. Often, he noted that 100% was transferred to EPWP. The maintenance budget was around R3.1 billion and the DPW was working on a programme to use it as a development tool. It too sat under the PMTE.
Mr Stan Henderson, Deputy Director General: EPWP, DPW, stated that the success stories from EPWP, with the DPW co-ordinating, should be amplified. The DPW expected the municipalities and provinces to maximise their allocated amounts. The DPW could withhold transfers and provide technical support to municipalities and provinces. The main aim was to ensure that labour-intensive methods were implemented instead of machines, in businesses and organisations. He gave the Committee the assurance that the DPW was looking at the detailed spending per province and municipality. The youth programmes were monitored closely. The monetary value and timeline of the youth programmes would be provided in writing
The meeting was adjourned