Agrément SA on its 2015/16 Annual Report; Committee Report on Mpumalanga oversight visit

Meeting report

Agrément South Africa presentation
Mr Jeffrey Mahachi, Chairperson of the Technical Committee Agrément South Africa (ASA), said the Department of Public Works and the Board of ASA continued to play an oversight role over the entity. The Bill was signed on 13 December 2015. The ASA Act 11 of 2015 followed the prescribed parliamentary process. ASA was in a process where there was a transitional task team in place. All processes which were coordinated by the Council for Scientific and Innovative Research (CSIR) on ASA’s behalf would transfer to ASA.

Mr Mahachi said the Minister of Public Works had noted that some of the innovative constructing technologies played a role in fast-tracking much needed infrastructure development in rural areas. The President said the Department of Science and Technology (DST) would finalise the sovereign innovation fund, a public-private funding partnership aimed at commercialising innovations that were from ideas in the public and private sector. ASA rigorous assessment systems facilitated the export of South African innovative products.

There were a number of products which were not innovative from a world-view perspective but were new to South Africa. These products were innovative in South Africa.  The board ensured that financial statements were correct and that the entity had a clean audit. There were about 15 to 20 entities similar to ASA around the world.

On the Product Development Cycle (PDC), at conceptualisation this was where research institutions were needed. In technology development ASA came in. Once technology had been developed ASA moved in to test product performance. With time, when one started to understand the product, the product moved from innovative to standard. Standardisation was done by the South African Bureau of Standards (SABS).  ASA was working in the domain of the unknown and gave out authoritative certificates; SABS were working in the domain of the known.

ASA developed performance criteria, suitable test methods, measured actual performance and judged the acceptability of a product. ASA evaluated several things: structural and stability, water penetration and rising dampness, thermal and energy performance, performance in fire, quality management systems, conformity to national building regulations, condensation, acoustic performance, accuracy in building and durability.

With the limited funds ASA had done a lot. ASA wanted to make sure that it influenced policy. ASA went to the SABS and sat in its committees and contributed to national building regulations. There were a number of products which it certified and approved.

Pertaining to technical outputs of certificates approved, ASA received 28 applications in 2015/2016 year. 22 evaluation offers were made for which 38 evaluation offers were accepted. Some had spilled over from previous financial year. After acceptance of offer rigorous tests and assessments were made. There were about 70 building products that were active.53 products building systems 24 road projects active.

On Financial Performance, total income was R13 883 126 in 2015/2016. The Grant received was R10 268 368. Contract income was from the private, public and international sector. In Total this was R3 600 093. Overall expenses were R13 519 369. ASA had improved its margin from last year. The Margin now was R363 757.

Discussion
The Chairperson said when ASA started it stated a number of absence apologies which was concerning. The Chief Executive Officer (CEO), who was at management level of the organisation, was responsible for the day-to-day operations of ASA. The report was good, but it was from the perspective of a board member. There was a lack of reporting from day-to-day management. With regard to apologies, the Chairperson said he did not receive a written apology. It was not good enough to receive just a spoken apology.

Mr Jeremy Cronin, Deputy Minister of Public Works, said the Chair of the board, Mr Pepi Silinga, had not attended a single board meeting and this was concerning.

Ms E Masehela (ANC) commented that in most cases ASA products were difficult to find in retail shops, how were ASA products accessed? She congratulated the entity on a clean audit. Before the life-span, had not the entity gained knowledge of where products collapsed? On the eco-bond, there was a serious problem with the re-tarring of roads. How durable was the eco-bond, and could it be used in rural area? Did ASA check its products on how they compared with other products? With regard to the presentation, it would have been easier if percentages were used. Employee remuneration was above 50%, was this not too high?

Mr K Sithole (IFP) welcomed the report regardless of the fact that management showed no respect to the Committee. He asked whether the grant was received from government or the CSIR. On the clean audit, was this audit based on findings of the CSIR or ASA. There was no auditing with regard to ASA. On innovative methods, had the life-cycle been tested? On promotion and system, was there any system that allowed people to know that ASA had tested a particular product. Had ASA tried to test innovation in informal settlements?

Ms P Adams (ANC) referred to the technical layout of the presentation, was this a cut and paste job as slides did not number properly and dates were incorrect. Comparison on actual annual performance and remuneration, when one moved from 2014/2015 to 2015/2016 there was a huge increase in remuneration that had not been experienced within the entity in the past; why was this so? Pertaining to margin of the year, what expenses did the ASA incur? The section which read “other income” looked dodgy, what was the “other income” speaking to? How far had the organisation gone in educating the public on innovative new materials? This spoke to the social methods of providing houses. Out of all the technology was there a way of knowing how many imported innovative products found adequate application in the South African context?

Ms Adams asked for clarification on slide 9. ASA had presented a graph; why did this graph not include 2015/2016 as this was the main agenda of the day? Was ASA telling the Committee that it was not advanced enough to portray what the graph was meant to say? How many systems were implemented within the work of the Department?

Ms C Madlopha (ANC) welcomed the report and clean audit findings. She asked what the duration of the task teams’ term was. On external expertise reliance, did ASA want to insource most of its workers. Were the staff at ASA relevant to the mandate of the entity? Could ASA indicate the actual roles of the staff? She was concerned with the attendance of some board members as some had only been present at board meetings once. The cut and paste method of preparing slides needed to be corrected.

Mr M Filtane (UDM) was seriously disappointed with the lack of respect ASA showed the Committee. There was no need to accept and welcome this report. What the Committee should have done, the moment it received verbal apologies from senior management was to send the presenters home. The report was untidy work. This was reason to not take the report seriously. No one from the board had looked at this report. He asked ASA to verify this before proceeding.

The Chairperson said he had raised such issues with ASA at the start. Management was supposed to report to the Committee. The Chairperson had looked at the aspect of wasteful expenditure as ASA members had flown in to present and thus asked that the Committee to contribute so that the speakers could report back to management.

Mr Filtane said Mr Silinga was overloaded with being Chair of a lot of entities. The man was brilliant but he was rather overloaded. He asked what percentage of public infrastructure used ASA innovative methods He had asked this question last time ASA met with the Committee but did not receive a proper answer. Was the extension provided for in the recently signed legislation; was the extension legal and which legislation spoke to this? How many times and how many different conditions was a product tested on.  On foundation systems, how many days did ASA allow it to stabilise before one started to build and how many storeys could it tolerate. With regard to waterproofing innovations, on what type of roofing could it be used or was it compatible with any type of roof?

Ms D Kohler-Barnard (DA) said Mr Silinga was invisible. This interim phase was going to be in place for how many years. Their transitional team was unknown and the process had no end date. Who was in this transitional team? This needed to be sorted out. Did Mr Silinga really write the CEO forward in the Annual Report or was this done by Mr Mahachi, she suspected that the forward was written by Mr Mahachi and stated that this was ethically wrong. How could one grant 38 certificates from 28 applications. There was no reference to universities, was there any such agreements to ensure the flow of expertise into the entity.

Ms S Kopane (DA) said the absence of the chairperson was a problem. Did he ever see the ASA presentation? With regard to external technical experts, how much out to the budget were ASA using for this. What was the future plan to address this issue? On clean audit findings, did a clean audit translate and really make a difference in the lives of the people on the ground. Pertaining to board meetings, there were no dates to indicate when meetings were held. On technical outputs, there were 38 certificates which had been carried over from previous years, where did these come from? The table was worrying because it showed decline and not any growth, why was there so much decline?

Mr F Adams (ANC) thanked the presenter. With regards to Board Meeting, Ms Ntebo Ngcobo’s travel expenses were really high compared with others; why was this the case?  Dr Jeffery Mahachi had not attended a single technical meeting, why was this the case? Four meetings were listed and only three were scheduled. The performance of the board was worrying. The manner in which it met and scheduled meetings was worrying. ASA should have played a better role in green innovation within the country.

Mr Mahachi said that technology misled the ASA. In converting PowerPoint to PDF the report and presentation incurred errors. ASA took full responsibility for this.

 In response to board meetings, Ms Ngcobo used about R500 per trip which was about R4 per KM. This was rather acceptable. He agreed that ASA should have extended its graphs to include 2015/2016 results. On the benefits of ASA, the graph showed what happened between current technology and when new technology was needed. When a technology matured another technology needed to be introduced.

28 applications were received and 38 certified. On the process of certification and assessment, an application which was coming today was probably finished in April. One could not read 28 applications with 38 certified in 2015/2016 together. Some applications had spilled over from the previous financial year. There were historical applications coming through. On 70 building products, in some products there was the renewal of licenses. When business interests rose people wanted to renew licences. This explained the drop.

On the financials, the grant received was R10 million and was received from the Department of Public Works and not CSIR. The clean audit was not only ASA or CSIR but the whole value chain. The R1.2 million was used for human resources. The experts were not covered by the grant. Some of these experts were not used on a day to day basis. There was no point for ASA to have experts permanently. There were a number of interns in ASA. The technical staff prepared documentation. Some processes could be done internally by staff and some needed outsourcing. The expert costs came under operational costs. On employee remuneration, this was not an increase in terms of salaries but an increase with regard to human capital.

Mr Khathu Madzivha, Representative of the Chief Financial Officer at ASA, spoke to percentages, the total income increased by 19.9%. Total expenses increased to 18%. This was because of extra employees. Grant received by 6.2%. 81.5% had increased which correlated with technical expertise. This was the reason why remuneration was high. On other income, ASA gained income from non-operating income.

Mr Mahachi responded on the use of products in high scale, looking at the broader industry ASA were not marketing very well. Innovative Building Technologies (IBT) was used in commercial building and companies such as McDonalds. It was hard to market such places however. If IBT was used in clinics and schools first it was then easier for it to be accepted in housing. The problem was that when one started in housing, if one mistake was made the likelihood was that all similar houses were wrong. Failure was attributed to design, material and/or workmanship. Workmanship related issues were where most failures were recorded. On durability, some products had been tested internationally but ASA were sure that some products would be used in South Africa. ASA was to look at how to promote social infrastructure and a lot had been scheduled to happen.

People were getting frustrated in the implementation and promotion of products. This spoke to the life-cycle test. There was a problem when people looked at construction costs only. One needed to look at costs in relation to time. This was a mindset of looking at costs.

On informal settlements, ASA had created a number of hubs. There were 22 building systems since 2005. ASA knew which products were good and which were not good. Although there were theoretical tests these were now practical real life examples. There were houses built in the Western Cape and all over where ASA could see how house products coped in certain climate and conditions.

On public education, there were a number of workshops. Last week ASA and associated entities had a conference at the Nelson Mandela Metropolitan University (NMMU) where the attendance was good. Workshops were continuous. With regards to” outside national standards”, ASA only dealt with things outside the national standards developed by SABS. Pertaining to the innovative building foundation and its use, where foundations had been in place walls and roofs could be placed in 2 hours. It was easy and a very quick process.

Mr Filtane said that his question was misunderstood. With the kind of innovative foundations how many storeys could be built.

Mr Mahachi responded that when one applied to ASA one stipulated the number of storeys that a product could build. Fire rules became more stringent if the product built double stories. Products were tested once but afterwards the ASA followed up each year and went to manufacturing plants to check for compliance as stipulated in the product certificate. Failure to comply led to certificate withdrawals. Any active certificate could be checked on the ASA website.

On waterproofing, he could not give this answer offhand. All these were stipulated in the certificate. Certificates were not single pages but thick documents which stipulated on what conditions products could be used and could not be used. On the issue of vacancies, he said that because ASA had been moving to a legal person status a Chief Financial Officer (CFO) and Human Resource (HR) division were not mandatory prescriptions. The new entity needed to have at minimum 35 personnel. ASA was looking at how this could be accomplished.

The Deputy Minister thanked Mr Mahachi. The Committee should not have unrealistic expectations of ASA. ASA had a specific task and mandate. It was for the rest of government and the private sector to market and sort out related issues. The Department and Independent Development Trust (IDT) needed to be active in using innovative building technologies.

The legislation in question was promulgated by the President and was not proclaimed as yet. The Department was looking if legislation was ready to be proclaimed. There was no existing legislation of ASA. The task team was busy with this. The target was set for 1 April 2017 so that it hit the new financial year. The transitional team included the Department of Public Works and associated entities, CSIR, the Department of Science and Technology (DST), ASA and National Treasury. Transition looked easy in theory but was much harder in practice. In this case there was increased budget flow. This was a slightly awkward transition.

Ms D Kohler-Barnard asked if there was not a chicken and egg situation complex at hand. One needed a budget to appoint personnel and personnel to determine a budget.

The Deputy Minister responded that that was why National Treasury was in the task team.

The Chairperson asked if it was profitable to work with National Treasury.

The Deputy Minister said that it was not profitable but also not non-profitable either. The Department was not able to provide a confident list to the Committee at this stage. The appropriation bill would probably be sent back to the Committee. The Department was convinced that the substance of the bill was sound. The Committee had done very well. This was indicated to the presidency. The President needed to reassure itself with the National Council of Provinces. It was advisable for the process to give itself more time.

Furthermore, effective regulation with regard to public interests was needed. The fatalities in construction sector needed to be looked at. The Department asked if it was effective in public interest regulation and if the legislation was helpful with regard to effective regulation. There were a lot of vested interests in this regard. The Department would continue to report to the Committee and would like the Committee to assist it.

The Chairperson thanked ASA.

Report on Oversight visit to Mpumalanga
A few language changes were made to the oversight report on the oversight visit to Mpumalanga 18-23 September 2016 and it was adopted.

The meeting was adjourned.