Department of Public Works & Property Management Trading Entity on their 2015/16 Annual Report, with Minister in attendance

Meeting report

Opening remarks by Minister
Mr Thulas Nxesi, Minister of Public Works, assured the Committee that he and the DPW took their engagements very seriously. He said that he would provide a strategic overview of where the DPW was headed. The DPW team would speak to performance. The DPW had a turnaround plan in place which was started in 2012. The plan was founded on two pillars. The first was to have zero tolerance for corruption and the second was to improve the manner in which the DPW did business. The DPW had also endeavoured to implement the recommendations of the Public Protector. The DPW was rebuilding its capacity. He pointed out that Ministers come and go but the departments remained. There thus had to be continuity with regards to the work of the DPW. It was a mistake that many regarded the DPW as a general department. The truth of the matter was that the DPW was a very technical department in nature. Attempts were being made to rebuild the technical support capability of the DPW. This included the hiring of engineers etc. The DPW had awarded bursaries to students in fields that the DPW required skills. Hence many students after graduating joined the DPW. He reiterated that the DPW was taking a tough stand on corruption. Investigations were done where corruption occurred. The DPW worked in cooperation with the Special Investigations Unit (SIU) as well as with the South African Police Services (SAPS). Currently the SIU was investigating 4 450 allegations pertaining to conflict of interest. He did however concede that the DPW needed better finance and management. The DPW also needed a new structure with new skills. Previously 90% of the DPW’s staff used to be general workers. There was a huge need for build professionals and property professionals. Efforts were being made to turn the DPW around. It was a huge task as the DPW had the largest property portfolio in SA. The reality was that the DPW did not know its own properties. Work on the DPW’s asset register had been done and it had been finalised. The DPW used to lease properties from the private sector but attempts were being made to end the practise in order to save costs. The DPW had a vision to build government precincts in towns. These precincts would house three to four government departments. The DPW was also reclaiming state properties that were illegally occupied. Some of the buildings were occupied by government officials themselves. The DPW was committed to getting its house in order. Improvements in cost cutting measures and income generation were taking place. Transformation was a big issue. The property sector was still very much an old boys club. This was the case even in the construction sector. The DPW had come a long way but still had some way to go. The DPW was not ashamed to admit its shortcomings. There was under reporting on the Expanded Public Works Programme (EPWP) across government.

The Chairperson in the interests of time asked the Department of Public Works (DPW) to limit its briefing to performance information.

Briefing on Department of Public Works Annual Performance Report 2015/16
The Committee was provided with an apology from the Director General of the DPW, Mr Mziwonke Dlabantu, for not being able to attend the meeting. The delegation amongst others comprised of Mr Paul Serote, Head of PMTE, Mr Cox Mokgoro, Chief Financial Officer: DPW, Mr Clive Mtshisa, Deputy Director General: Corporate Services, DPW, Mr Ignatius Arivo, Chief Director: EPWP Infrastructure Sector, DPW, and Mr Lwazi Mahlangu, Chief Director: Monitoring and Evaluation, DPW.

Mr Serote kicked off the briefing duly assisted by his colleagues. The Committee was provided with an overview of the performance of the DPW as per Programme:

Programme 1: Management and Administration
On fraud and awareness there was a 38% reduction in fraud and corruption risk. The target had been 50%. On finance and supply chain management there was 75% achievement on invoices being settled within 30 working days. The target set was 100%.

Programme 2: Inter-Governmental Coordination
A total of 14 intergovernmental forums had been convened against a target of 12. A diagnostic report of the 2014/15 sector performance had been developed.

Programme 3: Expanded Public Works Programme (EPWP)
A total of 741 540 opportunities had been created through the EPWP Phase 3. The planned target was 1 127 186. In addition a total of 695 203 work opportunities had been created in rural municipalities, the target being 700 000.

Programme 4: Property and Construction Industry Policy and Research
On performance the DPW was in the process of putting a team in place to develop the White Paper on Public Works. 

Programme 5: Prestige Policy
Draft Prestige Norms and Standards for category 3 clients had been developed and been completed but had not yet been approved by parliament. With the target sitting at 15, 17 state events had been supported with movable structures. Additionally 39 requests had been received and 8 of them had been delivered within 60 days. A total of 4 quarterly reports on infrastructure had been completed.

No time was wasted as the briefing continued with an overview of the performance of the PMTE as per Programme:

Briefing on Property Management Trading Entity’s (PMTE’s) Annual Performance Report 2015/16
Programme 1: Management
100% of ICT service level agreement commitments had been achieved. A total of 1 294 beneficiaries had participated in DPW skills development against a target of 1 067. The target had been set to reduce the vacancy rate to 25%, the actual achievement sat at 15.32%. 

Programme 2: Real Estate Investment Management
There was a 12% increase in the value of the immovable asset portfolio with the target having been set at 12%. There were 100% preliminary investment decisions that had been approved within prescribed periods. A total of 100 vacant freehold properties had been identified for redevelopment by Broad-Based Black Economic Empowerment (B-BBEE) developers. The target was set at 80-100.

Programme 3: Construction Project Management
A total of 11 126 work opportunities had been created through construction projects. The target had been set at 15 000. In addition 125 projects were completed within the agreed construction period with the target having been set at 62.

Programme 4: Real Estate Management
With the target set at 100 a total of 849 vacant land parcels had been secured for letting out purposes towards economic development initiatives. A total of 646 lease agreements were reviewed according to the rental rate per square metre and escalations.

Programme 5: Real Estate Information and Registry
99.32% of identified real estate assets had been verified against a target of 100%. A total of 8 159 real estate assets had been verified. Performance was thus 91% against a target of 100%.

Programme 6: Facilities Management
With the target set at 300 a total of 718 buildings with facilities management contracts had been identified.  82% of facilities management contracts had been allocated towards BBBEE with the target being set at 65%.

In conclusion the Committee was also provided with insight into the financials of both the DPW and the PMTE.

Discussion
The Chairperson instructed the DPW that it should in its briefings on annual reports set out how many targets it had and how many were achieved for each of its programmes. He noted that slide 34 did not give members an indication that there was an Annual Performance Plan (APP) and targets. No indication was given that targets had not been met. He noted that the White Paper was a performance target. In total there were seven targets that had not been met. The briefing should speak to what targets had been met and had not been met. Furthermore members should be given an indication of what vacancies and filled posts there were in its programmes.

Mr W Faber (DA, Northern Cape) said that he liked Minister Nxesi’s no nonsense attitude. On assets of the DPW he pointed out that at Hartswater in the Jan Kemp area there were South African Police Services (SAPS) houses that were in a dilapidated state. He asked the DPW how it determined the value of property. On the asset register of the DPW he would have like to see a provincial overview of assets. He was aware that the DPW was a national department but the Committee nevertheless needed provincial information. He would have also liked detail on rental agreements in Programme 4 of the PMTE.

Mr L Magwebu (DA, Eastern Cape) referred to slide 26 which spoke about a 38% reduction in fraud and corruption. He asked why the figure was so low and what were the challenges encountered. What remedial action had been taken? On financial management actual achievement sat at 75% with the target being100%. What remedial action was taken to see to it that invoices were paid within 30 days? On slide 27 of the seven cases four were finalised and three were pending. He asked if the DPW could place a monetary value on the four cases that had been resolved. How had the cases been resolved and were there any persecutions? He asked what the outcomes of investigations were. Were there disciplinary cases and were funds recovered? On the cases that were pending he asked what progress had been made. He was glad to see that the DPW was making strides on the Expanded Public Works Programme (EPWP) especially in the Eastern Cape Province. He asked whether programmes were done in a fair and transparent manner. Did everyone get an equal opportunity in relation to EPWP opportunities? How did the DPW ensure that things were fair and transparent?

Mr Mokgoro, on the 30 day payment issue, said that 25% of targets were not achieved. These were in relation to travel and communications. On the PMTE, 15% of targets had not been achieved in relation to the 30 day payment issue. The problem was around contractors. The PMTE was complex and very difficult. He noted that slide 75 spoke to the matter of under expenditure. The DPW was managing the compensation of employees. The DPW was a difficult department and staff was being supported. A new structure was in place and the need to recruit would emerge soon.

Mr Mtshisa pointed out that the figures on fraud and corruption was about fraud and corruption risk. The DPW was trying to reduce risk. It was a concern that targets had not been reached. An Information Communication Technology (ICT) system was being put in place. The DPW was in the process of implementation. Previously, implementation had been delayed. The DPW was going online on 31 March 2017. He explained that on misconduct cases there was no monetary value to it. He provided examples of firstly where there had been an illegal use of petrol and secondly where an official had registered a company in his mother’s name in order to be able to tender. In the second example the official was involved in the procurement process and a tender was in the end awarded to the company that was in his mother’s name. The official’s mother had been unaware of the company being registered in her name. He said that in both instances there had not been monetary loss to the DPW. The cases were concluded and the respective officials had been dismissed.  

Mr Magwebu was not happy with the response given by the DPW. The petrol that had been used was done so fraudulently. There needed to be criminal prosecutions. The matter of the official’s company getting the tender was serious procurement fraud. These individuals should go through processes in the criminal justice system. Criminal cases needed to be opened. The dismissal of these individuals was not good enough. The DPW needed to take action. The Committee should be provided with detail on the cases.

The Chairperson asked the DPW to provide the Committee with the required detail within seven days. 

Mr Mtshisa said that members were correct. The DPW had referred cases to the Special Investigations Unit (SIU). Cases would be investigated. The cases highlighted had been dealt with internally.

Mr Serate assured the Committee that a report would be provided to the Committee.

Mr B Nthebe (ANC, North West) agreed with the Chairperson’s sentiments. He asked why 19m was not spent on vacant posts. On the implementation of the EPWP he asked why R10m had been under spent. Why was there an under spending of R5.4m in Programme 4. On goods and services why was R6.5m under spent? He noted that the Committee had since 2014 been given figures of 99%, 95% etc on the asset register of the DPW. Had the DPW completed its asset register?

Mr Arivo, on the EPWP, said that the recruitment of participants had to be fair and transparent. There were recruitment guidelines in place. On the provision of skills, training was very important when it came to the EPWP. The DPW did have a Memorandum of Understanding (MOU) in place with the Department of Higher Education and Training. The DPW on its skills programme had trained 19 000 persons against a target of 22 000. The DPW worked with the National Skills Fund and different public bodies. Training was strongly advocated. 

Mr E Makue (ANC, Gauteng) agreed that the EPWP could be improved upon especially in the provision of skills to young people to service employment opportunities. In Gauteng the EPWP was used in this way to empower the youth. There was great potential to utilise properties in a manner to contribute towards economic growth. The difficulty was identifying to whom properties belonged to. The Gauteng Province had done well on its provincial asset register. Municipalities within Gauteng were however still grappling with it. The DPW was asked how it could cooperate with provincial departments to better equip municipalities.

Mr J Londt (DA, Western Cape) asked why the Committee could not have a look at the DPW’s asset register as it was now. A working document would be good enough for members to peruse. The Committee together with counterparts in the National Assembly and the DPW had met in 2016 to discuss issues on the Expropriation Bill. A few concerns had been raised on the Bill but the Bill had been bulldozed through. Now the Bill was referred back to Parliament.

Mr Makue stated that the DPW had shared it asset register with members in 2016. He had received it via email.

Mr Londt responded that he had not received the DPW’s asset register as Mr Makue did.

Mr Serote said that the asset register had been completed on 31 March 2016. The DPW was in the process of a new audit cycle. There would therefore be an updated asset register. It would be finalised by 31 March 2017. The DPW physically verified all its properties. The properties were evaluated as well. He noted that the example given by Mr Faber of the dilapidated SAPS properties was a good one. He explained that when departments no longer used DPW’s properties they did not make the effort to inform the DPW. Hence the DPW remained under the impression that departments were still utilising the properties.

Minister Nxesi pointed out that the main departments who were culprits in this regard were Defence, SAPS and Justice & Constitutional Development. He noted that the DPW was trying to correct the matter.

Mr Serote felt that it would be better if the DPW briefed the Committee on its asset register. He said that the DPW had a year ago launched its research unit which was made up of experts like actuaries etc. The DPW tried to apply data to its portfolio. A report had been completed on the state of properties in Pretoria. The exercise had also been conducted in other centres like Johannesburg and Durban. He pointed out that the manner in which one procured infrastructure ie leasing was different from occupying say something for example like desks. The DPW had decided to fast track a framework for the procurement of leases and was working with National Treasury. The advertisement had gone out in November 2016. The sector of landlords had not been ready as yet. The DPW’s Information Communication Technology (ICT) had developed a system internally to manage the system. Any new leases would depend upon what the market informed the DPW. The DPW was looking at the condition of facilities as well. The DPW was a long way from implementation.

The Chairperson, on the Expropriation Bill, explained that President Zuma had written to the National Assembly and the National Council of Provinces on the matter of the Bill. The Bill would be going through processes as was required. There was a general phenomenon where people simply chose to build their houses on public land. Municipalities refused in many instances to take action as they said the land belonged to the DPW. In most instances the DPW would simply donate the land to municipalities. This was taking place in the Eastern Cape Province near East London around the R63. He was not sure whether the DPW had already donated the land to the affected municipality. He asked on the Administration Programme why on fraud and corruption only 38% had been achieved when the target was 50%. Why had the target not been met? He pointed out that the Committee had the previous week had a meeting with the Department of Small Business and Development (DSBD) where the issue of payment within 30 days had been raised. He asked what the DPW was doing for small business. How was the DPW dealing with the 30 day payment issue? The DPW had a target of 100% and had only achieved 75%. He was disappointed that on Programme 4 none of the targets had been met. On the separation of the PMTE from the DPW he asked whether the DPW would have still managed to obtain an unqualified audit opinion if the PMTE was still part of it. The PMTE after all had not obtained an unqualified audit opinion. The assumption could be that the DPW separated the PMTE from it in order to obtain an unqualified audit opinion.

Minister Nxesi stated that the assumption would be wrong. The separation of the PMTE and the DPW was a long standing discussion of cabinet dating back to 2006. The reasoning was that the huge property portfolio of the DPW could not be dealt with in terms of ordinary processes. The property portfolio was huge and specialised people were required to deal with it. The DPW did not have the necessary skills. Until the structure of the DPW was finalised posts could not yet be advertised. Once the structure was finalised and posts were advertised a special dispensation would be required for the salary structure as experts needed to be hired. Property lawyers, chartered accountants and engineers etc would be required to manage the property portfolio. A debate had taken place on whether the PMTE should be classified as an entity of the DPW. The decision was taken against making the PMTE an entity. The decision was taken to rather ring fence the PMTE. Issues that had arisen on the financial performance of
the DPW and the PMTE was decreasing. On the payment of service providers within 30 days he said that there were instances where the DPW was guilty of not making payment timeously as well as instances where the DPW was not guilty. There were instances where service providers had not provided correct invoices. He noted that the land issue was a complex one. Government had large parcels of land that was occupied by people. It was not that simple just to evict people off the land. He had seen the open parcels of land that had been occupied near East London. Some of these occupancies were well orchestrated schemes by public officials themselves. The officials wished to evade the paying of rates etc. Part of the problem was buildings of the DPW that was standing empty. It was perhaps worth considering disposing of these buildings. He appreciated that the Gauteng Province had a good model. On the land issue the DPW needed to work in cooperation with provinces and municipalities. He said that there were many loopholes with municipalities. Even when attempts were made to advise municipalities they had a tendency to resist. Cooperation between the three spheres of government had to be encouraged. On the Expropriation Bill the issues and objections raised were process issues and were not substantive issues. The issue was around consultation with provinces.  

Mr Mokgoro on the separation of the PMTE from the DPW emphasised that the PMTE dealt with property management and it was a complex business. There was highly intensive procurement activity and complex supply chain processes. Things were being improved. Attaining a clean audit was a journey. 

Mr Serate thanked the Committee for opportunity to brief the Committee.

The Chairperson thanked the DPW in return and hoped that the DPW and the PMTE obtained a clean audit in the near future.

Committee Minutes
Committee Minutes for meetings held in the morning and in the afternoon of 31 January 2017 was adopted. The morning session minutes’ was adopted as amended and the afternoon session minutes’ was adopted unamended. Committee Minutes dated 14 February 2017 was also adopted unamended.

The meeting was adjourned