Public Service Commission Vacancies; 30 day payment of invoices: Department of Planning, Monitoring and Evaluation briefing

Meeting report

The Committee confirmed that Ms R Lesoma (ANC) would be the Acting Chairperson.

Public Service Commission Filling of Vacancies

The Acting Chairperson reminded Members that on 30 August 2016 the Committee had requested to see the amended version of the advertisement and the road map for filling of vacancies in the Public Service Commission (PSC). She asked the Committee Researcher to take the Committee through the amended version of the advert and the programme.

The Committee Researcher said that the new advertisement had been distributed. The “requirements” section had been altered and Parliamentary Legal Services had provided advice on not needing to specify the different fields or profession of the commissioners, because the Constitution itself does not specify who is fit and proper to be in the Public Service Commission. An opinion had been requested also from Legal Services on what “fit and proper” means in the context of the PSC. It was noted that no specific requirements of the PSC need be included, They also requested the legal services to clarify what does “fit and proper” mean within the context of the Public Service Commission. The Researcher's Manager had also specifically requested that the Committee give approval to the advertisement going out in the name of the Acting Chairperson, since all advertisements for Parliamentary posts would go out under the name of the sitting Chairperson.

Discussion
Ms Z Dlamini-Dubazana (ANC) said that the Committee had no problem with the latter request. She asked how long the advertisement would run; each political party had still to nominate a Member to be on the short-listing panel.

The Committee Researcher said that a programme had been drawn up and distributed as a roadmap. The advert will run for two weeks from 15 September to 30 September 2016, which complies with the legal framework. Shortlisting should start on 5 October, during the recess period. Names of members to sit on the shortlisting panel would be needed by that date. Between 5 and 14 October security checks and verification of qualifications would be done. which is a process external to Parliament. The Committee would receive that report on the checks on 26 October and would deliberate on the name to be submitted on 27 October.

The Acting Chairperson asked that all Members familiarise themselves with all the legal requirements of the short-listing and interview process and ensure that the names of the Members of the panel are forwarded to the Committee Researcher as soon as possible.

A Member asked the Secretary of the Committee to check the dates; she thought that recess would end on 11 October 2016.

Ms Dlamini-Dubazana agreed with the date of 5 October, although this was in recess, pointing out that there were time constraints and vetting took some time. She asked to what extent the media would be apprised of the process.

Mr S Motau (DA) pointed out that it was not possible to restrict the media from any open space, and if short listing was done in an open forum the media had the right to be present.

Mr M Ntombela (ANC) said that the media should be allowed only at the actual interviews so that the prior tasks of short-listing could be disclosed at the interview process.

Ms Dlamini-Dubazana insisted that the Committee must take a decision now as to when the media would be invited to the process.

Mr Motau cautioned that the Committee could not take a decision as to when the media could be allowed to the Committee discussions.

The Committee Researcher said that all the meetings of the Portfolio Committee were open to the members of the public, and even at shortlisting stage the process would have to be communicated to the public.

Mr M Dirks (ANC) said that an impression should not be created that the ANC is opposed to the media. He noted that the media had hitherto been invited to all the deliberations.

The Acting Chairperson said that the media would be allowed into the short-listing and interview process. She reminded Members again to nominate members to the panel to conduct the short-listing and interviews.

The Committee Researcher said that the composition of the short-listing panel will be as follows: ANC 5 members; DA one member; EFF one member; IFP one member, and NFP one member.

Mr A van der Westhuizen (DA) said that he would be representing the DA in the short-listing and interview process, and Mr Motau will be his alternate Member.

Mr Ntombela said that Ms Lesoma, Ms Dlamini-Dubazana, Mr M Booi; Ms Niewhoudt-Druchen and himself will represent the ANC in the panel.

The Acting Chairperson said that the members of the EFF, IFP and NFP were not present in the meeting but will be informed that they should forward the names to be included in the panel as soon as possible.

Payment of Invoices by government within stipulated 30 days: Department of Planning, Performance Monitoring and Evaluation (DPME) briefing

Ms Irene Mathenjwa, Outcome Facilitator, DPME, said that the purpose of the briefing is to present an analysis of the payment of suppliers by government within 30 days from receipt of a legitimate invoice. She would provide a progress report, highlight the impact of non-payment of invoices on small business and set out some challenges experienced in the payment of suppliers.

Ms Mathenjwa said that Section 38(1)(f) of the Public Finance Management Act (PFMA) required that “Accounting Officers are required to settle all contractual obligations and pay all money owing, including inter-governmental claims, within the prescribed or agreed period”. Treasury Regulation 8.2.3 prescribes the period for settlement of contractual obligation and other payments, as 30 days from receipt of an invoice. Instruction Note No. 34 requires national departments to submit exception reports on the 7th day of each month and Provincial Treasuries on the 15th of each month to National Treasury. Furthermore, a series of legislative frameworks and Cabinet directives have been issued to enforce the payment of suppliers within this time frame.. 

The National Development Plan (NDP) envisaged reducing unemployment through creating of 11 million jobs by 2030. Of the 2.15million Small and Medium Enterprises (SMEs), 150 000 are medium-sized businesses, 450   000 are small businesses and 1.3 million are micro enterprises. In addition, some 250 000 new businesses are registered every year. The SMEs employ 7.3 million people (47% of the workforce) and contribute 42% to the country's GDP. However, entrepreneurial participation rates remain low and South Africa’s entrepreneurial environment under-performs when compared to other countries. Small business is not realising its potential contribution to growth and employment. Non-payment of invoices within the stipulated period is one of the contributing factors to the lack of sustainability in the small businesses environment. 

Ms Mathenjwa repeated that in terms of Instruction Note 34, national departments are required to submit their exception reports to National Treasury by the 7th day of each month. During June 2016, 84% of national departments submitted their exceptions reports timeously to the National Treasury, compared to 70% in June 2015. This represents an improvement of 14% in the compliance of departments with this requirement. Generally, for the past twelve months, the submission rate has improved from month to month compared to the same period last year. Late and/or non-submission of exception reports adversely affects the completeness of data. 

Ms Mathenjwa then moved on to specify the numbers of invoices paid after 30 days by national departments. During April, May and June 2016, national departments paid 11 375 invoices, 20 948 invoices and 17 668 invoices respectively, after 30 days from the date of receipt. This represented a regression of 9 573 invoices from April to May 2016, and then a slight improvement of 3 280 invoices from May to June 2016. The average number of invoices paid after 30 days for the period from April to June 2016 was 16 664, which indicates a regression of 4 334 invoices in comparison to the average number of invoices (12 330) that were paid after 30 days during the same period last year (2015).

Ms Mathenjwa said that the rand value of invoices paid after 30 days from receipt during the months of April, May and June 2016 amounted to R327 million, R305 million and R340 million, respectively. This represented an improvement of R22 million from April to May 2016 and a regression of R35 million from May to June 2016. The average rand value of invoices paid after  30 days  for the period April  2016 to June 2016 amounted to R324 million, which indicated a regression of R87 million, when compared to the average of R237 million during the same period last year (2015).

The number of invoices older than 30 days, but still not paid during the months of April, May and June 2016 amounted to 9 881 invoices, 12 780 invoices and 12 870 invoices, respectively. This represented a regression of 2 899 invoices from April 2016 to May 2016, and a slight improvement of 90 invoices from May to June 2016. The average number of invoices older than 30 days and not paid for the period April to June 2016 amounted to 11 844, which indicates a regression of 7 544 invoices when compared to the average number of invoices of (4   300) that were paid after 30 days during the same period last year (2015).

The rand value of national departments' invoices older than 30 days and not paid during the months of April 2016, May 2016 and June 2016 amounted to R499 million, R55 million and R62 million, respectively. This represented an overwhelming improvement of R444 million from April to May 2016 but a regression of R7 million from May to June 2016. The average rand value of invoices older than 30 days and not paid for the period April to June 2016 amounted to R205 million, compared to the average of R285 million for the corresponding period in 2015, thereby representing a an improvement of R80 million.

Ms Mathenjwa commented on the overall assessment of performance of departments. She stressed that concerted effort would still be required to arrive at an acceptable level of performance on the payment of invoices. However, out of the 40 national departments, 23 departments have demonstrated an improvement pattern in the payment of invoices, while 17 have shown a downward trend. The Department of Defence was the main transgressor with 10 719 invoices, followed by Departments of Public Works/Property Management Trading Entity (PMTE) (1 601), Home Affairs (963), Water and Sanitation (784), Rural Development (667), the Independent Police Investigative Directorate IPID (606) and the Office of the Chief Justice and Judicial Administration (517). These departments have significantly contributed to the 17 668 invoices that was mentioned at the outset.

She then spoke to the performance on invoices that were older than 30 days and not paid: Of the 40 departments, 33 have demonstrated an improvement in eradicating invoices that are older than 30 days and not paid. Of the 33 departments, 26 of them did not have any invoices older than 30 days that remained unpaid, thus complying with the 30-day payment rule.  However, seven departments have shown a downward trend and these were the Departments of Public Works, with 10 757 invoices, this contributing significantly to the 12 870 figure overall – followed by Justice and Constitutional Development (1 088), Home Affairs (375), Presidency (331) and Water and Sanitation (151).

Ms Mathenjwa reminded the Committee that exception reports by provincial departments must, in terms of Instruction Note 34, be submitted to National Treasury by the 15th day of each month. During June 2016, 89% of provincial departments submitted their exception reports timeously to the National Treasury, compared to 67% in June 2015. This represented an improvement of 22% in the compliance of provincial departments with this requirement. On average, for the past twelve months, the submission rate of provincial departments has improved compared to the same period last year. Late and/or non-submission of exception reports adversely affects the completeness of data. 

On the number of invoices paid after 30 days Ms Mathenjwa said that during the months of April, May and June 2016, provincial departments paid 38 238 invoices, 34 613 invoices and 29 306 invoices after 30 days from the date of receipt, respectively. This represents an improvement of 3 625 invoices from April to May 2016 and another improvement of 5 307 invoices from May to June 2016. The average number of invoices paid after 30 days for the period from April to June 2016 was 34 052, which indicates a regression when compared to the average number of invoices (29 837) that were paid after 30 days during same period last year (2015).

The rand value of invoices paid after 30 days from receipt during the months of April, May and June 2016 amounted to R2.0 billion, R1.8 billion and R1,8 billion,  respectively. This represents an improvement of R200 million both from April to May and from May to June 2016. The average rand value of invoices paid after 30 days  for the period April 2016 to June 2016 amounted to R1,9 billion, which indicates an improvement of  R1.3 billion when compared to the average of R3.2 billion during the same period last year.

The number of invoices older than 30 days and not paid by provincial departments during the months of April, May and June 2016 amounted to 50 460 invoices, 43 423 invoices and 39 833 invoices, respectively. This represents an improvement of 7 037 invoices from April 2016 to May 2016, and a further improvement of 3 590 invoices from May to June 2016. The average number of invoices older than 30 days and not paid for the period April to June 2016 amounted to 44 572 invoices, which indicates a regression of 7 673 invoices when compared to the average number of invoices (36 899) that were paid after 30 days during the same period last year (2015).

The rand value of provincial departments' invoices older than 30 days and not paid during the months of April 2016, May 2016 and June 2016 amounted to R3.8 billion, R3.5 billion and R3.3 billion, respectively. This represents an improvement of R300 million from April to May 2016 and a further improvement of R200 million from May to June 2016. The average rand value of invoices older than 30 days not paid for the period April to June 2016 amounted to R3.5 billion compared to the average of R2.9 billion for the corresponding period in 2015, thereby representing a regression of R600 million.

Ms Mathenjwa said that the overall assessment of performance concluded that provincial departments remain with the highest number of invoices and rand values that were not paid within the 30 days: The performances of Eastern Cape (7   979), Gauteng (6   949), KwaZulu-Natal (3   460) and Northern Cape (2   216) provinces are worrisome, as these provinces have contributed the most to the 29   306 invoices paid after 30 days.

Speaking to invoices that were older than 30 days and still not paid, she noted that Gauteng province accounted for almost 50% of the invoices at provincial government, with R2.2 billion of the R3.33 billion owed to suppliers by the same provincial government. The major non-compliance with regards to the non-payment of invoices was found with the provincial departments of Health and Education. In particular, both departments had, during April to June 2016, contributed 91%, 90% and 90%, respectively to the transgressions in relation to the late payment of invoices.

Ms Mathenjwa said that the impact of non-payment of small business was significant and included:
- The cash flow positions of SMMEs are severely compromised
- Suppliers are forced to borrow money to meet contractual obligations. This comes with a baggage of having to pay interest.
- Retrenchments and forced closures occur due to constrained cash flow positions. That situation is counterproductive with the government mandate to create sustainable jobs and promote SMMEs
- Service delivery is compromised.
- There is reputational risk to government as this worsens the perception of corruption in the Public Service and government.

Ms Mathenjwa said that the DPME 30 days Payment Unit was established in April 2015 and works in a trilateral cooperation with the Department of Public Service and Administration (DPSA) and National Treasury (NT). The unit reports regularly to the Forum of South African Directors-General (FOSAD) on the timeous payment of invoices. The 30 day payment of invoices is also one of the impact indicators of the Outcome 12 Chapter of the 2014-2019 Medium Term Strategic Framework (MTSF). The unit monitors the performance of departments and therefore engages with Chief Financial Officers (CFOs) and Provincial Advisory Groups (PAGs) regularly and in particular, alerts them where performance is poor. Concerted effort is being made to visit departments and provinces whose performance is poor to investigate the root causes and provide support, and this targeted support will include the Departments of Defence, Home Affairs, Water and Sanitation, and the provinces of Northern Cape, KwaZulu-Natal, North West and Gauteng. Other visits will take place later in the year.

However, the Unit is faced with a number of challenges in conducting its work. These include cases that have already reached the courts, and reluctance of service providers to provide information. Some challenges associated with non-payment of invoices as seen by the Unit include: Systemic challenges of IT, financial delegations, capacity constraints; non- adherence to supply chain management processes; lack of documented processes such as Standard Operating Procedures. There are also often instances of poor financial management; contractual disagreements; a generally bad culture in the public service; and issues related to sub-contracting.

Discussion
Mr van der Westhuizen asked at what stage the invoices are entered into the computer once they have been signed off by the person confirming that work has been done. He wondered if there was any way the DPME could monitor that process, up to that point where invoices had been submitted for it might happen that the department returned the invoices saying it needed another signature on the invoices so it could process the invoice.

Mr van der Westhuizen said that he was glad that this issue of late invoices was finally receiving attention from government. The costs of late payment were huge, not only to the economy, but more especially to the small suppliers, because they cannot survive unless they have cash flow. He wondered why service providers were reluctant to raise issues of late payment from government departments.

Mr van der Westhuizen asked how, when invoices were registered, the system would pick up the invoice that was submitted after the month in which it arose. He asked if it was true that the Basic Accounting System (BAS) of government needed to be reviewed, and asked what the main IT challenges were in this regard.

Mr Motau asked what has been done by the DPME to ensure that small business people are aware of the Unit so that they need not to go to court. He said that this was a good intervention made by government, but its effectiveness would depend on what impact it was having.

Mr Motau asked, with regard to the “bad culture” that had been referenced, whether the DPME collaborated with the Department of Public Service and Administration and the Public Service Commission (PSC), to eradicate this kind of bad behaviour, which is where the problem emanates.

Mr Ntombela asked what disciplinary measures have been taken against serial offenders, what has been the outcome thereof, and for how long they had been serial offenders.

Mr Ntombela asked if there were any protective measures that had been put in place for whistle blowers, and whether there was any method of protection for small service providers.

Mr Ntombela asked what were the causes of poor management in some of the departments, and whether it was known whether the main problems arose through lack of  qualifications or capacity issues. Mr Ntombela asked how much expenditure government incurred in terms of litigation, because obviously government is dealing with lot of cases.

Ms W Niewhoudt-Druchen (ANC)  asked why there were so many signatures required before invoices were approved and payment is made.

Ms Mathenjwa said that the invoice would be regarded as legitimate when the right processes had taken place before the supplier submitted the invoice. This would involve confirmation that the services had been done in a right way, the order number was issued, and services were delivered. The invoice itself contained the information that is critical for the payment, and is in line with the order number. After everything has been done the invoice is captured in the system, then finally the payment is made. However, the DPME was finding, when it went out to the departments, that it was needing to emphasise to project managers that they should not sit with invoices but should have a central point where these were being submitted. Departments should also advise service providers that when they submitted invoices, they should submit them at the right point, and the departments should educate the suppliers where their invoices should be submitted.

Ms Mathenjwa commented on some of the cases. One lady came to the DPME complaining that she had not been paid, but that her matter was in court but was simply not progressing because of numerous postponements. The DPMW informed the lady that it could not assist her because the matter was in court, but if she was prepared to withdraw the case the Department will be able to investigate and assist her. The DPME investigated and met with the officials of the municipality, and in a period of a month her money was paid by the municipality, whose officials had been very cooperative once the DPME impressed upon them what the lady had gone through in trying to get her money.

Ms Mathenjwa said that not everyone who had come to the public hearings had complaints; some had brought suggestions. However, four suppliers were paid and the other two were reluctant to provide relevant information. It was quite a difficult matter when service providers were worried to raise their complaints. If they came to the DPME they would need to have proof and a copy of the invoice because the DPME cannot investigate without relevant information. DPME was pleading with suppliers to come forward and not to be scared about raising complaints. The DPME also stressed that if the suppliers felt they had been victimised in this whole process they should let the DPME know, so that they could investigate such victimisation.

Ms Mathenjwa agreed that while BAS is a problem in some of the departments, the DPME encouraged all departments to try to pay even before the 30-day period.  As already indicated in the presentation, there are departments that had paid within 10 days, even though their BAS system was down for two days. As long as the department concerns was satisfied that its finance system is in order, they will be able to pay.

Ms Mathenjwa apologised for the comment made about the email and confirmed that the DPME would ensure that the information was put up on the website.

Ms Mathenjwa said that, in relation to the court cases, it must be remembered that the Unit was established in 2015, and the DPME was still dealing with cases dating as far back as 2006, when the Unit was not yet established, although it would in all cases still try to assist those service providers. One of the issues that was frustrating the Department was the Prescription Act which stated that if the service provider did not follow up on a particular matter within three years, then it effectively dropped off the system. There had been a trend where departments were trying to hide behind these provisions, but the DPME was quite rigid on this, and was trying to assist the service providers, and therefore asked departments what they had done to try to make follow ups with service providers in order to effect payments to them. Departments were not permitted to simply keep quiet and attempt to hide behind the Prescription Act.

Ms Mathenjwa said that in relation to the bad culture point, the DPME had been  trying to work with the DPSA and National Treasury since the Unit was first established. However, over and above that it was also working with the Department of Small Business Development, because this affected small businesses and Small Enterprise Finance Agency, within that sector. The DPME had picked up on one issue in particular, which it stressed repeatedly to CEOs and CFOs, that supply chain management is not a back office exercise but rather a frontline office exercise, because the departments were dealing with their clients. The very same principles of Batho Pele had to be exercised in relation to suppliers. If departments received invoices they should acknowledge those invoices and if there were challenges in regard to payment they should communicate with the service providers on how payment will be made, to avoid leaving people frustrated.

Ms Mathenjwa said that steps would be monitored in relation to the “serial offenders” in the provinces, and that the Departments of Health and Education in the provinces would be overseen. DPME was quite humbled by the fact that the departments were being asked to appear before the Committee and DPME will join the engagement with the departments.

Ms Mathenjwa admitted that management of finances was a problem, particularly when it came to budgeting because sometimes departments procured things which were not in their procurement plan, and then could not pay service providers when it came time to pay. This was all to do with how budgets were set and monitored. Departments in general needed to tighten their systems so that they would not procure things that were outside the procurement budget, because the reality was that they will not be able to pay service providers.

Ms Mathenjwa said that they did not have information at the moment on the issue of litigation but will forward that information to the Committee at a later stage and it would set out what expenditure had been incurred.

Ms Mathenjwa commented on the questions around processes before payments were made and assured the Committee that the requisite number of signatures was needed, as one of the checks and balances, and in order that the invoices could be verified by the project manager. Also in the Supply Chain Management process there would have to be a check and confirmation that the invoices had been received and verified properly.

Ms Mathenjwa said that the DPME was aware that warning letters were issued to officials who transgressed. Specifically in the DPME, the CFO was particularly strict and if any payment was not made on time, the CFO would issue a warning immediately, and everybody in the SCM would be alerted to that fact.

The Acting Chairperson thanked all speakers and Members for their interest and response.

The meeting was adjourned.