Expropriation Bill [B4B-15]: adoption; Department of Public Works on its 2nd & 3rd Quarter 2015 performance

Meeting report

Ms A Dreyer (DA) complained that Members were given the latest amended version of the Bill only as they were walking into the meeting. This denied everyone an opportunity to scrutinise the drafting of the latest amendments beforehand. She suggested that the meeting should rather be adjourned to allow Members more time to go through the Bill and then reconvene the next day.

The Chairperson clarified that there was no need for the meeting to be adjourned as the Parliamentary Legal Adviser would still highlight all the latest amendments made to the Bill. The priority of the Committee was to reach finality on the Bill in order to focus on other important matters.

Ms C Madlopha (ANC) agreed that the meeting needed to continue as the Parliamentary Legal Adviser would highlight all the latest amendments effected in the Bill.

Mr M Filtane (UDM) said that substantial changes had not be effected by Members in the previous meeting and therefore it would be important for the Committee to continue with the finalisation of the Bill. Members were already given an opportunity to make a written submission elaborating the reasons for opposing certain clauses of the Bill.

Mr K Sithole (IFP) suggested that the Parliamentary Legal Adviser should specifically focus on the latest amendments that had been made since the last engagement, rather than going through the Bill in its entirety.

Ms Vuyokazi Ngcobozi, Parliamentary Legal Adviser, indicated that the Department had deleted “if applicable” in clause 8(4)(d). There was an addition of “email address” in clause 14(1)(e). There was an insertion of “human life” in clause 22(2)(ii) as suggested by Mr Filtane.

Adoption of the Bill
The Chairperson suggested that the Committee would now need to adopt the Bill with all the latest changes that had been effected by the Department.

The Bill was adopted by the African National Congress and was opposed by the Democratic Alliance, Economic Freedom Fighters and United Democratic Movement. The Inkatha Freedom Party abstained from voting.

Adoption of Committee Report on the Bill
Ms Dreyer once again complained that Members only received the Committee Report which expressed the views of the minority this morning. This once again denied parties an opportunity to see if all the points made in their written submissions were captured correctly and accurately. The Democratic Alliance was strongly opposed to the current definitions of “expropriation” and “property” claiming that these definitions still required further clarification. The Department needed to provide a definition of “property” as what was to be expropriated as property and the Committee had not been provided with this. The limit of what was to be expropriated should be provided in the definition of “property”. It was unclear whether items of property such as pension funds, inheritance and investments could also be included. The definition of “expropriation” should also be defined as in Section 25(2) and (3) of the Constitution.

Mr Filtane also expressed concern that the Department had not been able to provide a definition of “property” as this was one of the key terms in the Bill. It was unclear what was causing the Department to avoid providing a definition for “property”. It must be pointed out that section 25 of the Constitution does not refer to an “unregistered interest in property“ and section 25(7) only referred to property that was acquired after 19 June 1913, essentially ignoring property that had been acquired before this time. It was unclear if the Department would not expropriate property acquired before 19 June 1913. It would be the biggest loophole for the Department to define “property” as “contemplated in section 25 of the Constitution” as there are people in the country that had been holding property prior to 1913. The Department should provide the definition of “property” in the context of the Bill.

The Chairperson stated that the Economic Freedom Fighters party had tendered its apology but it had managed to make a written submission on the Bill. The party had already made it very clear that it was strongly opposed to the entire Chapter 5: Determination of compensation, as the party believed in the principle of “expropriation without compensation”. 

Mr Sithole pointed out that the views of the IFP were correctly captured in the Committee Report.

Mr Filtane indicated that the Committee Report must state very clearly that the UDM was in opposition to the Bill as it lacked constitutional compliance.

Ms E Masehela (ANC) wanted to know if it was correct that both the DA and EFF were opposed to Chapter 5 of the Bill.

Ms Dreyer corrected that the DA was in favour of compensation for expropriation but was opposed to the determination method for compensation.

The Committee Report was adopted with amendments.

The Chairperson explained that the Bill would be tabled in the National Assembly, together with the Committee Report which outlined the views of the minority parties.

Department of Public Works on its 2nd and 3rd Quarter 2015/16 Performance
Mr Paul Serote, Head: Property Management Trading Entity (PMTE) indicated that the Minister’s Policy Statement identified five strategic priorities for the five years period of this Administration by creating six million work opportunities through the Expanded Public Works Programme (EPWP). The operationalisation of the PMTE to manage the core business of Public Works and the Governance Risk and Compliance Branch so as to fight against fraud and corruption. The Department was also focused on the transformation of the built environment so that ownership, control and the composition of the professions better reflects the demographic of South Africa. The Department comprised of six programmes and these included Programme 1: Administration, Programme 2: Real Estate Investment, Programme 3: Construction Project Management, Programme 4: Real Estate Management, Programme 5: Real Estate Information and Registry and Programme 6: Facilities Management. The performance of DPW and PMTE has slightly improved, although there is a slight decline in DPW. The reason for the decline in performance was mainly due to challenges in procurement processes. The average combined performance of Department and PMTE is 46% in Q1 and 46% in Q2. The Department was performing slightly above average at 52% in Q3 despite the challenges experienced.

Mr Serote took the Committee through the performance challenges experienced by DPW:
- Delays in appointment of service providers to improve service in areas where scarce skills are required.
- Delays in areas where there are dependencies on external factors or client departments. These delays or non cooperation is often a challenge resulting in non-achievements of targets.
- Capacity and budget constraints in some areas continue to be a hindrance to performance, especially in facilities management contracts.
- Energy and water efficiencies and waste management efforts are being made to reach the set goals across government as part of the Green Building Programme.

Mr Cox Mokgoro, DPW Chief Financial Officer, said that DPW was allocated a total of R6.3 billion and the expenditure as at 31 December 2014 was R4.4 billion. The Department managed to award 14 (19%) out of 74 bids that were awarded within the 56 working days after closure of tender in Q2. The reason for the small number of bids awarded was because the Supply Chain Management (SCM) process is dependent on internal and external stakeholders and their availability and time constraints impact directly on the achievement of this target. A total of 31% (2 782) of Real Estate Assets were verified in Q2 out of the total of 36%. The target was not achieved as physical verification was not conducted for three weeks due to the unavailability of the network. A total of 1 250 work opportunities were created through maintenance programme for EPWP in Q2 out of the targeted 972. The target was achieved as the rollout of term contracts increased the work opportunities.

The actual expenditure of annual appropriation was sitting at 71% although it should be sitting at 75% by the end of Q3. Transfers and subsidies make up 86% of the total DPW budget. There was no over spending projected at financial year end for Employee Compensation and the expenditure variance between current year spending and 2014/15 is due to transfer of function to the PMTE. The budget allocated for employee compensation in the current financial year was sitting at R457 million compared to R1.7 billion in 2014/15. The expenditure for Goods And Services also decreased compared to the previous year due to transfer of function to PMTE. A total budget of R516 million for Office Accommodation was also transferred to PMTE.

There was an increased expenditure under Transfers and Subsidies related to the transfer of function from DPW to PMTE. The PMTE budget allocation increased from R673 million from 2014/15 to R3.6 billion in 2015/16. Expenditure for Machinery and Equipment was still in line with the drawing and guidelines, as no over expenditure is projected. The bulk of the revenue from PMTE came from state accommodation charges (R2.9 billion), private accommodation charges (R2.9 billion), management fees for municipalities (R145 million) and augmentation (R2.8 billion). The overall expenditure of PMTE was still in line with Q3 expectations of 75%. The expenditure for cleaning and gardening was slightly lower than expected at the end of Q3 and this was due to some contracts being awarded later than originally planned. The Department has put special projects in place with the assistance of the EPWP Branch to increase the spending and service delivery on this budget.

Mr Mokgoro clarified that the Capital budget of DPW has been transferred to PMTE as a result of the transfer of function. The overall expenditure is very low at 56% with expenditure of only R397.3 million out of R713 million. The expenditure against Department and Prestige will increase significantly during the last quarter when strategic acquisitions are finalised. An amount of R60 million has been identified against the Land Port of Entry budget which will not be spent by DPW. An agreement has been reached between the Department of Home Affairs (DHA) and National Treasury that this amount will be spent by the Border Management Agency and claimed from DPW. The full expenditure on budget is dependent on the claims to be submitted.

Mr Serote concluded that the operating model utilised by the PMTE dictates that the entity should be operating an approved overdraft of at least R800 million. In essence, the PMTE is providing interest free bridging finance to clients. Clients have reported a number of reasons for not paying their dues and these included disputes about occupation periods, unavailability of funds for previous years’ claims, lack of supporting documents (lease agreements) and amounts paid to landlords is not in line with lease agreements.The following interventions have been implemented by the Department:
- Meetings with clients departments have been held to follow up on outstanding debt
- Letters of demand are written to clients
- National Treasury intervention
- Cleaned lease database
- Complete the physical verification, confirm occupation with clients and update the system
- Provide copies of lease agreements to clients
- Billing of clients in advance.

Discussion
The Chairperson expressed concern about the ineffectiveness of the Governance Risk Compliance Branch on how it deals with fraud and corruption. It was also disappointing to hear that DPW had been pumping money into various programmes such as EPWP without relevant data on the number of people employed. It would be difficult for the Committee to make a conclusion on whether DPW needed to disburse more funds to programmes that seemed to be ineffective in addressing the scourge of unemployment and poverty.

Mr Imtiaz Fazel, DPW Deputy Director-General (DDG): Governance Risk Compliance, responded that the EPWP Branch was reporting on all the jobs created but not all those implementing bodies were receiving funds from EPWP. There are no funds disbursed to EPWP except for the incentive grant which was introduced in Phase 2 of the EPWP to reward local governments for implementing labour intensive methods, using their existing capital budgets to increase the labour content of their infrastructure delivery. The Department was engaging Treasury as well as PMTE in order to get clarity on the reporting requirement of the implementing bodies. These implementing bodies are found in the private non-governmental organisations (NGOs) and all three spheres of government, and they all report on EPWP jobs created. There is a stipulated time-line (15 January 2016) in which all the implementing bodies must report on the jobs that had been created. The internal audit is required to audit all the data provided by the implementing bodies on EPWP jobs created.

The Chairperson maintained that the main concern of the Committee was on the veracity of the data provided on number of EPWP jobs created. The number of jobs created should be able to be supported by the body of evidence.

Mr Fazel responded that DPW would be engaging with the implementing bodies with the aim of improving  reliability of the data on number of jobs created by the EPWP.

Ms Madlopha said that DPW was at the centre of EPWP and therefore should the one responsible for ensuring that municipalities are able to provide all the relevant data on this. DPW had promised the Committee in 2012 that municipalities would be required to provide reliable data on the number of EPWP-created jobs before receiving the incentive grant. The challenge highlighted then was on the data capture of the relevant information. It would be important for the Committee to get more information on whether there were funds allocated to EPWP. It was also unclear which municipalities were still failing to provide the relevant data on EPWP jobs created. The priority of the EPWP was to create 6 million jobs and the Committee would need to get reliable data on whether this target was being met.

The Chairperson indicated that DPW needed to ensure that there was consistency of the reporting style being used for quarterly performance reports so as to provide relevant information. The Committee would be reluctant to recommend allocation of more funds to a programme where there is no credible data about its impact on the people.

Mr Sithole agreed that the DPW reporting style is not consistent and this is a main issue that needed to be addressed. The Committee would need to set aside EPWP data known to be underreported by the implementing bodies on DPW should focus on this.

The Chairperson agreed with the suggestion to have a meeting that would specifically deal with the EPWP underreporting as this would allow DPW to brief the Committee on the main challenges and the proposed solutions going forward. It was also the remit of the Committee to provide assistance on ways to ensure that the EPWP was able to expand its footprint. The Committee was happy with certain aspects of information provided by DPW but there are also aspects where the information was either unreliable or absent.

Mr Filtane expressed dismay that DPW had been complaining about the perennial programme of lack of capacity in key strategic positions, without offering a specific time-line for addressing this matter. The EPWP was an important programme that needed to be expanded as it had the potential to employ young people and those who are less educated.

Mr Serote responded that there is a concerted effort to deal with capacity within DPW so as to perform optimally in key areas. It must be noted that there had been an improvement in the number of public bodies submitting signed off data reports. The improvement is a result of the number of public bodies signing off the data on the EPWP reporting system.

Ms Madlopha once again requested DPW to provide a break-down of all the municipalities that had been battling to provide a reliable data on the number of people that had been employed in the EPWP-as this would assist when the Committee is performing oversight work. There was also lack of information on the kind of technical support provided to the 278 municipalities. It was pleasing to hear that DPW had allocated R1.6 billion to municipalities for incentive grants and these funds needed to be accounted for.

Mr Fazel responded that DPW had witnessed an enormous increase in EPWP uptake after the provision of the technical support to the 278 municipalities. DPW was concerned that the reporting standard for the municipalities had not been made uniform to create a standardised version of reporting. There are young people incorporated into the EPWP to allow them to gain relevant skills and experience. The Department had an action plan to deal with all the issues that had been flagged in the Auditor-General report. It would be important to recommend that municipalities need to report on the number of people absorbed by the EPWP and this was once again an attempt to improve the reliability of information. It would be impossible for DPW to keep files of about 20 000 projects under EPWP. This is where the implementing bodies would need to come to the rescue. The Committee would be provided with a breakdown of all the municipalities battling to provide reliable and relevant data on the number of people employed by the EPWP.

Ms S Kopane (DA) asked if there was a specific reason that there had been a lack of EPWP spending as the Committee had already been told a lot of funds had been allocated to the programme.

Mr Sithole requested more information on the operationalisation of the PMTE to manage the core business of the Department. It was also unclear if DPW was able to deal successfully with lack of transformation in the built environment. It was disappointing to observe that DPW had been lacking in the maintenance of facilities of government departments and accommodation as most of them are debilitated. What is the current status of the money transferred to Agreement South Africa (ASA)?

Ms P Adams (ANC) indicated that there was a need for DPW to deal with internal control to improve the effectiveness, efficiency of operation and the reliability of financial reporting. Why had there been a decline in DPW overall performance? What had been done to deal with the delays in the appointment process of service providers? It was unclear what was causing a decline of 9% in Q3 in DPW expenditure compared to the previous financial year. It was disappointing that DPW performance on transfer and subsidies in Q3 had declined by 18% compared to 2013/14. The challenges experienced by DPW about the implementing agencies pointed to the failure of the programme of intergovernmental coordination. The Committee should be provided with specific time-frames for implementation of interventions by DPW. In conclusion, she expressed dismay that the Department senior management including PMTE was mainly dominated by men.

Mr Filtane appreciated that there was an attempt by DPW to correct the lack of reliable information on the number of people employed in the EPWP. He asked if DPW had reliable data on the number of jobs created from its procurement process. This was excluding the staff of the Department and the EPWP. Was there a follow up done by DPW after a tender had been issued to a specific company? To what extent was the policy of the Department influenced by localisation of procurement.

Ms Madlopha commended the turnaround strategy implemented by DPW as it was starting to yield the desired results. What are the main challenges of DPW around procurement? The Department had indicated that one of its main challenges in its failure to achieve some of the targets was budget constraints. However, this pointed to poor planning as the Annual Performance Plan (APP) allowed government departments to set the targets that are based on the allocated budget. What is the plan to deal with the perennial problem of underperformance? Did DPW still have a number of lease contracts without an occupation period that could still be disputed. What had been done by DPW to deal with the leasing disputes with rental companies?

Ms Kopane asked about specific timeframes for implementation of interventions to resolve the challenges experienced by DPW. The Department was particularly silent on the challenges in procurement and contract management. The Committee should be provided with more information on the current situation of the approved overdraft of R800 million from the PMTE account. The Committee was also not provided with adequate information on the turnaround strategy that had been implemented by DPW to prevent this overdraft. The Auditor-General audit report highlighted that DPW needed to take disciplinary measures against officials who were responsible for financial misconduct such as irregular and unauthorised expenditure. How far was the Department in implementing this?

Ms Masehela appreciated that DPW was likely to avoid the possibility of fiscal dumping, considering that the actual expenditure in Q3 was 71%. How far was the Department and municipalities on the asset register? Was there a plan in place for DPW to assist the municipalities that had been unable to make tangible claims because of failure to pay property rates?

Mr Serote responded that the Committee would be provided with a detailed report on the PMTE operationalisation to manage the core business of the Department. PMTE was able to produce its own APP and Strategic Plan in the current financial year and this once again showed the separation of functions from DPW. The next priority of PMTE was to capacitate its structure by appointing competent individuals that would take the entity forward. The key positions that still need to be filled included Head of Finance and Supply Chain Management and Investment Services. The Department would need to review the property charges imposed on municipalities to improve compliance.

The programmes rolled out by DPW and PMTE are all aimed at addressing the main challenge of unemployment in the country. In essence, the focus would now not only be on the expansion of the footprint of the programmes but also to monitor the impact of these programmes in the communities. The Department wants to ensure that the programmes are structured in a way that they are able to fast-track skills development of young people and those without education. There is a continual review of DPW programmes and this once again ensures that the programmes are able to respond to the needs on the ground. DPW already has an Enterprise Resource Planning (ERP) system implementation system in place which is a vital organisational tool as it integrates varied organisational systems. The allocation set aside for leasing was around R4 billion. The localisation of procurement process was critically important for the empowerment of small businesses. DPW has been engaging the Department of Trade and Industry (dti) to assist in ensuring that the procurement strategy was able to be localised.

Mr Serote responded that DPW was committed to the bursary programme particularly aimed at students in critical skills such as engineering, property management and investment services. The focus in 2017 would be on having a young graduate programme aimed at the capacitation of young graduates gained from experience in critical skills that are in demand by DPW. The Department had also approached various tertiary institutions in the country with an attempt to assist in the sourcing of critical skills. The PMTE operationalisation was for the programmes of the entity to be able to respond to the needs of DPW.

Mr Mokgoro replied about the funds transferred to ASA, noting that ASA was not an independent entity as its budget was found under Goods and Services of the Department. DPW was introducing a local content requirement for any tender advertised to the general public. This localisation of the procurement process was intended for the specific location where the project was taking place, aimed at prioritising the needs of local people. The Department was dealing internally with the officials implicated in irregular and fruitless expenditure. This was done as recommended in the AG report. Remedial actions recommended in the AG report were part and parcel of DPW’s action plan with clear timelines.

The operating model utilised by the PMTE dictates that the entity should be operating an approved overdraft of at least R800 million. In essence the PMTE is providing interest free bridging finance to clients. There are a number of reasons that had been cited by the clients about lack of payment and these included disputes on occupation periods , lack of supporting documents (lease agreements) and sometimes the amounts paid to landlords is not in line with the lease agreements. He assured the Committee that there would be no possibility of fiscal dumping as DPW was complying with the schedule to be followed in the distribution of funds. The Department had embarked on an intergovernmental programme to deal with the failure of municipalities to pay property rates and this involved the Department of Cooperative and Traditional Affairs, DPW and various implementing bodies.

Mr Fazel responded that the decline in DPW performance was mainly caused by underreporting on the EPWP and the lack of reliable data on the people employed in the programme. There was also a number of targets in the audit branch that were not met, resulting in the overall decline in the performance of DPW in Q3 compared to Q2. The Department should meet with the Committee to discuss the consistent reporting standard that was to be used in reporting quarterly performance. DPW was also equally concerned about lack of transformation in the built environment as the entity that deals with transformation had noted that the built environment sector did not reflect the demographics of the country. DPW was planning to have a transformation summit in March 2016 and this would involve all stakeholders within DPW, public entities and those in the built environment. The summit will also coincide with the national stakeholder forum for the construction industry.

DPW has developed the service delivery model framework of the Department of Public Service Administration (DPSA) to deal with the perennial problem of underperformance. This was also to assist DPW on its turnaround plan as its premise is based on the enhancement of service delivery. DPW has been dealing with about 330 cases of fraud, corruption and irregular expenditure in the last four years and 214 of these cases have been concluded while 20 cases are still in the reporting stage. A total of 196 disciplinary actions have been recommended and 103 cases have been finalised, resulting in 24 final written warnings. There are 35 cases of criminal investigations that are still underway and four proclamations for the Special Investigating Unit (SIU). Most these cases involve irregular expenditure.

The meeting was adjourned.