Social Responsibility Implementation report: National Department of Tourism briefing

Meeting report

Social Responsibility Implementation Progress Report
Mr Victor Tharage, Director-General, (DG), read through the presentation with the Committee

EPWP:  Funding criteria
A challenge with the 2% employment target for people with disabilities was that NDT had been unable to meet the target in its infrastructure development projects.

Programme history
Of the 310 files handed over to the National Department of Tourism (NDT) after it had been created; it had been found that 97 contracts were at different phases: in other words, there would a separate contract for a road leading to a lodge that was being completed and the lodge building would have a separate contract and the fencing also would have its own separate contract.  
The 267 remaining contracts had been closed with the assistance of National Treasury (NT) which had brought in a modified cash accounting tool that enabled the NDT to go asset by asset and identify what had been done with the money of Government. Mr Tharage was thankful for that tool as it allowed for the disaggregation of handed over projects from current and unfinished projects by NDT. Handed over projects were where the NDT no longer had a say on how a facility or site was used. However; NDT had been trying to go to all the provinces to go through the NDT register of projects. In the Northern Cape (NC) for example, it was ascertained that a particular site was working and another one was not, where the success rate was over 75% in the NC alone, but the picture was not the same across the country.

Programme Successes – since 2010
NDT had Created 21 933 Full-time equivalent (FTE) jobs; which spoke to being in a job for at least one year excluding holidays and weekends.
  
Corrective measures
The NDT had initially started with financial support in seeing whether the milestone based payment for smaller start-up companies to complete projects would work. Essentially, according to Expanded Public Works Programme (EPWP) NDT had to do advance payment to conclude the planning of a project and then do another advance payment for the completion of phase one of construction, And thereafter phase-by-phase conclusion. In that space, NDT had been trying to ensure that its controls had been strengthened and in that regard the Government Technical Advisory Centre (GTAC) would also go on site visits to see the construction work. The implementer would also submit a report to NDT which would then be tested by NDT officials together with technicians from GTAC to verify whether the report would be talking to observations which would have been made on site by GTAC as well.

There had been a case, included under those that had been forensically investigated, where work had been duly completed where the implementer and the beneficiary had ongoing interactions where the beneficiary kept issuing change of plan instructions with the implementer complying with instruction from the beneficiary without consulting NDT. The implementer only approached NDT when they could not proceed any further and on that basis NDT had sought the assistance of GTAC and external auditors.
 
Projects currently under implementation
Mr Tharage said the GTAC would also be evaluating all the listed projects under planning to strengthen project cases where projects were viable.

The NDT would be unlikely to meet its full time equivalent (FTE) targets for the 2016/17 financial year (FY) because it was in a year of cleaning up its projects register. However; he was confident that in the 2017/18 FY NDT would far exceed its targets as clean up would have been completed.
 

Discussion

Ms P Adams (ANC) noted that the blue flag tourism status involved three provinces whereas four provinces had coastlines in South Africa (SA). Could NDT start promoting the Northern Cape (NC) in that regard as it also had a coastline? She also asked:

• Could the DG further elaborate how the Cradock 4 garden of remembrance would look?
• Were any sister Departments involved in funding the projects listed in the presentation as they seemed very costly?
• Did the EPWP project fund the labour of a project or the establishment of a project?
• Could GTAC also explain its existence and what it had been established to do?
• Did NDT have an external risk and management Committee?
• The NDT to elaborate at what stages the prosecution or forensic investigations were regarding projects that had been mismanaged and what disciplinary actions had been taken since the conclusion of an investigation or prosecution as the presentation had been too vague for Ms Adams in that regard.
• Were the liabilities in the cases under investigation or prosecution shared by the provinces or were they only for the NDT?
• How far was the process of finalizing the four projects which had been referred for forensic Investigation in 2010?
• Who paid for the services of GTAC and were GTAC skills sharing with NDT so that NDT could do the work on its own in future?
• Why were municipalities not included in the sustainability support for projects after handover?
• Who kept the asset register for handed over projects?
• the NDT to further elaborate on the EPWP criteria that projects had to have the ability to generate a labour content of between 25% and 35% for the infrastructure projects and 40% to 60% for the skills development projects and the other employment targets as presented?
• How did NDT go about selecting persons for accredited training during project planning and implementation?
• How would the Programme budget reduction in the MTEF impact NDTs delivery of services and by how much was the reduction in monetary terms?

Ms S Xego (ANC) commended NDTs contribution of 21 933 FTE more jobs to the pool of the employed in the economy.

She said that as part of NDTs funding criteria it had to consider land ownership as some projects had been built on owned land through invasion. There had to be permission to occupy, if land was to host a tourist attraction.

It would also grow NDTs capacity to have engineers and inspectors as part of NDTs establishment because the Kiwane Camp site was not a project under planning as reflected in the presentation because there were already buildings there, simply problems had arisen.

In terms of underutilised handed over projects, her advice was that though municipalities had a tendency to lease such properties the lease agreements often had clauses that could be litigated with. Therefore, NDT had to constantly be in contact with beneficiaries to ensure value for money in the management of a project would be sustainably achieved.

On legacy projects from the Department of Environmental Affairs and Tourism (DEAT), NDT had an obligation to revitalise white elephant properties for better utilisation.

Ms S Makhubele-Mashele (ANC) commended the fact that the NDT was committed to revitalising and rehabilitating some of the SRI projects already handed over.  She also implored NDT to deal with projects that had been usurped by individuals to source benefits for themselves alone and that she would await in future briefings progress reports in that regard.

Ms E Masehela (ANC) also wanted elaboration on the EPWP funding criteria, especially in terms of the percentage targets for skills development and employment targets.

What would the NDT do regarding projects that ran out of funds before completion of infrastructure build?

Did NDT not have its own internal audit capacity to do the work it had sourced external auditors?

How much money had the NDT lost on failed and stall projects? What was the initial total number of projects where 13 had then be referred to forensic investigations?

Mr T Rawula (EFF) asked how compliant had NDT been to its own funding criteria, especially the provisions that its projects had to be co-funded by either local or provincial Government, and commissioning of feasibility studies. Could NDT clarify and elaborate whether municipalities and provincial Governments had come to the party?

He also asked whether stalled or failed projects would be considered wasteful and fruitless expenditure.

The fact that NDT had to date sourced external auditors that implied that the Department acknowledged a lack of capacity within its establishment.    

Mr G Krumbock (DA) said that the presented challenge of meeting the labour intensity benchmarks of 35-60% according to EPWP funding criteria for the NDT projects and the point that it was difficult to do that when the projects were capital intensive: everyone knew that unemployment was a very serious problem. To him NDT was going to struggle to meet its other mandates if it was going to try and do mutually contradictory things. In the Committee’s last oversight in Mpumalanga the Committee had interrogated the management of the project and found out that things were much worse than the Committee had originally thought, since the project management had been including Government grants as income in their accounting standards.   Therefore, the losses of the project which had already been quite big as it was a multiple of three or four times the total cost from the taxpayer, as over R20 million had already been pumped into the project but the loss was continuing. The Committee had also looked at the senior management salaries and the difference there to the very large labour force working the resort. One could understand the sentiment and good intentions of NDT in trying to address the unemployment challenge in Mpumalanga but eventually the entire Committee recognised that the project had been ill-advised as it was unviable at that time, under that current management model.
It was problematic when NDT in trying to tackle unemployment it essentially in that project did a feather bating exercise where the project could not stand on its own.
Would it not be better to have a different relationship, with the EPWP constraints to say it would be better to have four projects which all would at least be breaking even, able to sustain themselves and have people that were actually gainfully employed and were adding value; than one project which was bluntly speaking trying to mop up some of the unemployment challenge in that area. Was there not a better way of doing things?

Mr J Vos (DA) also wanted the total cost of the projects that had stalled as his calculation was approximately R178 million; and also sought clarity about the number of projects included in that amount.

He also proposed that the Committee’s content advisor’s document on possible areas of interaction with NDT be sent to the NDT as they had been quite relevant.

As much as there were shortcomings at provincial and local Government in terms of cooperation and co-funding of the projects, NDT had to stop shifting blame or to want to do away with its responsibility as the allocations for the projects were given to NDT by Government.
Of the almost 700 municipal holiday resorts underutilised due to poor planning and management by municipalities, the Committee had made the point before that some municipalities did not have the capacity to manage the holiday resorts and if there were about 700 of them in the country, clearly that could be a project linked revitalisation of municipalities as many of the locations of the resorts were located in areas that desperately needed a tourism boost.
NDT had to refurbish or build infrastructure in places where it made business sense to do so. The situation in most cases looked like throwing good money after bad decisions as NDT was refurbishing most of the projects and though the hard skills were important the soft skills of managing the projects were also.

The Chairperson asked whether NDT had considered private public partnership (PPP) in terms of funding and managing the projects until skills sharing got to the stage where beneficiaries could sustainably manage projects.

Strategically locating projects had also emerged as a weakness in NDT especially in Bushbuckridge, Mpumalanga, as they were located in places where access was not easy?

There was also the issue of tour operators not being mentioned anywhere in the projects.

Hopefully NDTs establishment would be beefed up such that there would be no need for external capacity to be sourced.

The Chairperson felt that there was no communication in the tourism sector since tourism was a Government wide competence in Government Departments. If there were horizontal and vertical communication she was certain that provincial and local Governments would buy-in.

Mr Tharage replied that the beginning of healing was an acceptance that one was sick. NDT had diagnosed the problem and knew what was wrong and so it helped that NDT knew what it was fixing.  
           
Ms Mmaditonki Setwaba, Legal Services-CD, NDT, said that NDT had conducted two sets of forensic investigations. The first four cases which had been referred in 2010 to NDT had been referred to the relevant law enforcement agencies as a consequence of the recommendations from the forensic investigations. Critical information had been revealed about the SRI projects and their management as a result. Law enforcement agencies had then undertaken their own investigations after having received the referrals from NDT and because the projects had already been running for some time and had accumulated a lot of documentation, the analysis of that paperwork had taken its own time.
Implementers were required to keep records of spending patterns through banking records. However; when such documents had been requested they had not been kept, therefore the South African Police Services (SAPS) had to go to measures like obtaining court orders against banks to be able to access implementers’ bank statements and other financial records. The charges that had been investigated related to fraud, theft, money laundering and all associated charges that could be brought against implementers.

Regarding consequences: the accounting officer had to ensure the SAPS were involved where forensics investigations had been concluded and misconduct found, that disciplinary action would be taken and where loss had been incurred by NDT, to ensure there were processes to recover that loss in terms of the Public Finance Management Act (PFMA).

In all sets of investigations where misconduct had been found disciplinary action had been undertaken against NDT officials as earlier alluded to by Mr Tharage.
NDT had been banking on the criminal investigations in terms of tracking the movement of funds since when issuing of a summons one had to be able to quantify one’s claim. The reason that NDT had instructed the office of the State Attorney to recover the total project amount was that it had taken the criminal investigation quite some time to conclude.  However; depending on the people which were being sued disputing which amounts they had legally earned and those that had been fraudulently charged off SRI the consultations had been concluded with the State Attorney. NDT had to then follow the money in terms of where and how it had been spent and how much had to be returned to NDTs accounts as it would have been spent illegally.

One case was referred for prosecution but because of the processing of case roll, NDT had at some point considered continuing with the case where the project had been meant to be situated so that the beneficiaries could see that NDT was serious about punishing fraudsters. The prosecutors had however felt otherwise, but the case had been proceeding quite well as one of the accused in the case had been trying to plea bargain with the National Prosecuting Authority (NPA). The other cases were still under investigation and NDT was grateful for the efforts of the NPA to date as its officials had been diligent.

Another matter which had emerged from the forensic investigations was the policy for the management of contracts where gaps had been identified. As standard operating procedures, starting from the project manager on site right up to the NDT; what needed to be looked at and who was responsible for reporting a breach when one realised that a wall was not at a stage where it was required to be and what then a project manager could do and most importantly what was required before sign-off on the finances. Consequences had been included in the streamlining of that reporting process to ensure that reporting was done vigilantly so that action could be taken on time.

The Chairperson interjected wanting to know who bore the burden of litigation payments? If it were NDT had that been planned for in its budget?

Mr Tharage said though there was funding for litigation, the NDT had to see all the cases to their conclusion with costs because it was unacceptable that ultimately a person could bargain or ended up going to jail but NDT was responsible for that litigation payment: NDT had to recover that as well. 

Mr Vos interjected whether it would not be useful to refer some of the cases to the Special Investigative Unit (SIU) as it had been set-up to deal with maladministration when there was a financial loss to the State.

Mr Tharage said NDT was acting on recommendations from the forensic audit, one of which was that the cases had to be taken for criminal charges by the SAPS, which NDT had done.  NDT had to, following feedback from the NPA, follow through with the civil route as the NPA had deferred prosecution. The civil route would either produce a result that a particular implementer would pay back the money to the NDT or the implementer would be blacklisted if they were unable to pay back. Essentially NDT would in the latter case want to see a blacklisting of the individual and not a particular company so as to remove the individual from ever doing business with Government.

Mr Ismail Akhalwaya, Senior Manager-Economic Development: Government Technical Advisory Centre (GTAC), NT, said that GTAC had had various interactions with Minister Derek Hanekom and Mr Tharage. Indeed, the leadership of NDT had recognised the challenges that the Committee had identified which was why GTAC had been approached. GTAC had to do two things. It had to review the current roll-out of projects that could not be stopped as they were in process, and how to make the process more efficient and effective going forward.

GTAC had been established under the Public Service Act through a Government gazette proclamation and was a Government entity. GTAC reported to the Minister of Finance and received voted funds from the fiscus. However; its method of operation was that it worked on a cost recovery basis. He was a staff member at GTAC responsible for client interaction and NDT regarding SRI in particular. He was also responsible for contracting the necessary resources that GTAC could manage to ensure that it provided quality inputs in its work.
The uniqueness of GTAC was that since it was not privately owned it did not come into a situation where it wrote a report and disappeared; it worked quite closely with NDT to determine its needs and agreed on deliverables in a project charter. A joint steering Committee monitored the work and the output to ensure the project delivered value for money.

GTAC was there to review the current model of the SRI to see whether it was effective or could be bettered in the long term. The conflict of mandates and whether NDT could inhabit capital intensive projects trying to meet EPWP targets as mentioned by the Committee was a longer-term discussion GTAC was having with NDT. GTAC was hoping to provide some concrete proposals to NDT by 2018 in that regard.
 
GTAC was currently looking into the technical and economic feasibility and viability respectively; of the current SRI projects; whether at process, stalled and under planning phases. And thereafter would be making recommendations on which projects could be proceeded with and which ones had to be abandoned.
Discussions had been around PPPs, who the clients were going to be and whether projects would be feasible or not?

When one was trying to change the way in which a Government programme had been run, there was a need for outside intervention.  Therefore, NDTs capacity building was a core mandate of GTAC
           
Ms Lerato Matlakala, SRI- CD, NDT, said that labour intensity referred to a project where if the total budget was about R100; R35 of that money had to be set aside for wages of the workers employed in the project. Therefore, for NDT infrastructure projects the percentage was up to 35% of the project budget and for non-infrastructure projects the labour intensity had to be about 65% set aside for wages.
Regarding selection for individuals to go for accredited training considering the 5% earmarked for accredited training, skills audits of all workers in a project were done.  Having also pre-identified what skills were needed in a project; the outcome of the skills audit would determine the individuals who would cope with the more technical training required for the project. However; all workers were trained in non-accredited training so that they could do the work they had been employed to do.

Ms Matlakala said to date 14 SRI projects had stalled as presented.

Mr Tharage said the challenge with the total amount for all stalled projects was that the project would have had normal planning, which related to wages that had been paid because workers would have done some work therein and that would have happened within EPWP prescripts. It could also be found that someone had already done an Environmental Impact Assessment (EIA) and there was a record of decision-making.  That entire accounting exercise had to take place so that disaggregation could occur.
For example, at an economically viable site, there had been a project done in Limpopo where flooding had occurred and the foundations were swept away. The implementer went on to replace the foundation afresh with money that would have taken the walls above window level and then came to NDT to report he had run out of funding, when he was supposed to report the sweeping away of the foundation. That would have been signed-off by NDT to say the money could be used to replace the foundation so that a recalculation could be done for the remainder of the project. There had been a time gap there as NDT had then sought engineers and a climatology report to verify whether the report could be evidenced by actual phenomenon having occurred.
After that when NDT was interrogating the cost bill for the remainder of the project a whole host of questions had arisen, typically there had been a swimming pool that was costing NDT more than R1 million. NDT had then halted the project because of such issues. The money already spent in that project was not wasteful because the accounting principles had to be applied. To go back and finish the project would not be wasteful expenditure either, though NDT had stopped the work as it would have cost more to continue. There was however; on the part of the implementer a degree of maladministration in terms of informing NDT of occurrences.
Finally; it would be incorrect for NDT to quantify the total amount of wasteful expenditure as required by Mr Vos as there was no response as of yet in that regard.

Ms Morongoe Ramphele, Domestic Tourism, DDG, NDT, said the beaches in the NC had been excluded from the blue flag programme because NDT had been told that they were too cold for bathing because of the Atlantic sea. The number of FTEs that NDT would derive from the blue flag programme would 229.

The Cradock four memorial project was going to be a visitor’s centre with an amphitheatre where four pillars with a brief biography of the four slain struggle heroes would also be erected. NDT would also be funding the access road to the facility and it would be next to an information centre run by the municipality.  NDT would be solely funding the project though other Departments would be involved in kind.
           
Regarding the Ndlambe projects; they were seaside operations where the municipality in that region had decided to lease the properties. Certainly, NDT would have to get closer to that municipality to understand what had been happening therein as it had met its provincial office recently to see how it could assist the two projects become sustainable.

The Chairperson said the Committee was becoming concerned by the report that because of the cold Atlantic Ocean NC beaches had been excluded from the blue flag programme, because the coastline of SA was extended by those shores: what innovative projects had NDT developed for the utilisation of those shores?

Ms Adams said that very same cold Atlantic bordered Swakopmund and Walvis Bay where tourist flocked for the sea attraction. For example, the town of Port Nolloth was quite scenic and the municipality had a resort already there which was not well maintained; therefore, NDT could step in there to assist.

Mr Tharage said that NDT was involved in the oceans economy Phakisa where there was a proposal for what was termed the Indi-Atlantic Route, which was the entire SA coastline; that included small harbours like that of Port Nolloth. Therefore, NDT was in the NC but that would take form and shape as the oceans Phakisa was being rolled out.

The Government resort in Port Nolloth would have to be engaged with the EPWP methodology. In KwaZulu-Natal (KZN) for example, Ezemvelo owned products across the entire KZN and Ezemvelo was the KZN provincial Department.

Ms Matlakala said the NC was a province that needed quite a lot of intervention and support in terms of the oceans Phakisa compared to the other coastal provinces as that had become clear when NDT was doing coastal and marine tourism lab. The NC provincial tourism Department were finalising its coastal and marine tourism strategy wherein areas with developmental potential had been identified.  Regarding the blue flag programme the three other coastal destinations were a start and upon further roll-out other areas would be prioritised for interventions and the blue flag programme.

Mr Tharage said indeed the water in the NC complemented the weather in that region.

NDT had sufficient internal audit capacity which had a very robust internal audit plan, part of which touched on the forensics observations like specifications Committees and all other things. However; when undertaking specialised work like the forensics, as Mr Akhalwaya had said, there was a need for some outside intervention.

Projects that had been already handed over presented big challenges especially those handed prior the split of DEAT, such as a project completed and handed over in 2001. Going back to those communities to be allowed to have a relook at a project handed over could certainly amount to hijacking as alluded to earlier by Ms Makhubele-Mashele. Going forward indeed NDT would be handing over projects with the proviso that they would not be for sale or for individual benefit.

NDT also had a risk management Committee chaired by someone independent of the NDT and who was a risk management professional. Mr Tharage received reports from the risk management officer of NDT but additionally had scheduled meetings with the Chairperson of NDTs risk management Committee.

The 55/55% would be 55% of young women in terms of the FTE jobs.

Experience and destination enhancement were things which NDT had been discussing in terms of aligning the money with the business case for tourism. NDT also could not walk away from commitments it had made with communities unless there was no justifiable case in remaining with a particular project.

The Chairperson asked whether there would be input from the policy and knowledge unit of NDT.

DG Tharage said that the policy and knowledge unit of NDT were the designers of the future of the SRI programme.

Ms Shamilla Chettiar, Policy and Knowledge Unit, DDG NDT, said that indeed capital intensity would be something that her unit would be looking at in the redesign of the SRI programme. How NDT would still achieve investment into tourism infrastructure and still could be complying with the EPWP model and how to customise the current programme to provide the tourism infrastructure without being restricted in the same way NDT found itself because of being part of the cluster that dealt with the environment.

The Chairperson thanked NDT for the presentation and NDT was excused.

The meeting was then adjourned.