Working for Tourism Programme: briefing on assessment by Government Technical Advisory Centre

Meeting report

Opening statement by National Department of Tourism
Mr Victor Tharage, Director General, National Department of Tourism, stated that the briefing was a culmination of processes that had started a while back. Inputs were taken from reports of the Auditor General of SA (AGSA), internal auditors, forensic audits, site visits by members and from discussions in Committee meetings. The NDT had reported on what had come out of the forensic audit of projects. The Government Technical Advisory Centre had subsequently been taken on board. In the short term an economic and technical assessment of projects was done. A long term assessment was done on the review of processes and systems and on how they could be strengthened. The Committee would be presented with an assessment of 31 of the 32 projects. The Dinosaur Project in the Free State Province was excluded as it was European Union (EU) funded and followed different processes. Members could rest assured that the Project was in good hands and was implemented in partnership with SanParks. He did point out that there were instances where the NDT did not agree with the recommendations made by the Government Technical Advisory Centre (GTAC).

Briefing on the assessment of Working for Tourism projects by GTAC
Ms Shamilla Chettiar, Deputy Director General: Destination Development, NDT, kicked off the briefing by speaking to project specific assessment outcomes and recommendations. In total 32 projects had been assessed and categorised in terms of stalled projects, those that requested additional funding, projects at planning stage and finally projects at a pre-feasibility stage. The NDT had considered the recommendations that the GTAC had made on each individual project. The NDT had disagreed with GTAC’s recommendations on eight projects. On the rest there had been agreement. Some of the projects assessed were:

Western Tembuland (Eastern Cape) Project
The Project had been stalled. The GTAC recommended that the NDT continue with the Project at an estimated cost of R7.6m, subject to conditions of a feasibility assessment. The NDT decided to complete outstanding elements of the feasibility assessment in order to proceed with the Project.

Kiwane Campsite (Eastern Cape) Project
The Project was at its planning stage. GTAC recommended that the NDT not proceed with the concept. A new concept with costing should be done. The structural assessment should also be completed. The NDT’s point of view was that the recommendation had been overtaken by events as the municipality had in fact completed the structural assessment and commenced with completion of the Project. The NDT had transferred full responsibility for the Project to the municipality.

Vredefort Dome (Free State) Project
The Project was at its planning stage. GTAC’s recommendation was for the NDT to proceed with the Project in parallel with completing required elements of the feasibility assessment and operational model. The NDT agreed with the recommendation made.

Phiphidi Waterfall (Limpopo) Project
The Project was at its planning stage. The GTAC recommended that the NDT proceed with the Project and address all conditions of the feasibility study. The NDT accepted the recommendation.

Sekhukhune (Limpopo) Project
The Project was at its planning stage. GTAC made a recommendation that the NDT should not proceed with the Project as it was currently conceptualised. The Project should be reviewed for alternative site use as the financial viability of it was unlikely over the long term and the Project did not present value for money in terms of long term benefits. The NDT decided to the contrary and completed existing building that had been started and negotiated alternative site use with the local authority and handover facility to the owning entity.
Manyane Lodge (North West) Project
The Project had been stalled coupled with a request for additional funds. The recommendation by GTAC was to proceed with the Project in parallel with addressing the sustainability model at an estimated cost of R15.7m. The NDT accepted the recommendation made.

Lobatlane (North West) Project
The Project was at its pre-feasibility stage. GTAC recommended that the NDT proceed with the Project subject to the outcomes of the feasibility study. The NDT and the North West Province had made no commitments on the Project. Further deliberations on the Project with Provincial Authorities would be undertaken in order to determine how to proceed.
Key recommendations by the GTAC
Primarily findings, conclusions and recommendations from the individual project assessments indicated an urgent need for the implementation of a Revised Project Management Model which would firstly be applied to the individual projects as assessed in the short term assignment and then applied to the long time assignment of all future projects. Key elements of the Revised Project Management Model included doing feasibility studies, facilitating private sector and community participation in project operationalisation as well as the use of a conventional project management approach designed to the needs of the NDT. The GTAC also recommended that the NDT strengthen Working for Tourism through improved collaboration with requisite expertise in tourism infrastructure and facilities investment projects and in partnership with experts in the field of financing such as construction and business establishment type of projects. The recommended approach included deliberations with the Public Private Partnership Unit of National Treasury.

The NDT’s view on recommendations
The NDT would fully align with National Treasury’s Standard for Infrastructure Procurement and Delivery Management (SIPDM).

The Committee was provided with a breakdown of implementation timeframes for various actions such as feasibility studies, re-conceptualisation, alternative site studies as well as completion of stalled projects.

Discussion
Mr G Krumbock (DA) asked out of which part of the tourism budget was the projects funded from. If the projects were to be completed roughly a year from the present what would the total cost incurred be. He noted that there were several aspects that he was uncomfortable with. He was concerned that there were many projects that had stalled. How could projects stall if proper planning was done? Some of the projects presented on were started in the early part of the millennium whilst others were started 5-6 years ago. He asked why the projects had not been completed years ago. He referred to key recommendations for the short term (slide 44) and said that feasibility studies, private sector and community participation in project operations etc were things that should have been done at the outset of projects. Were the things now recommended not part of the original planning? By now the long term feasibility of projects should be known. The principles recommended should have been implemented from day one. He was further concerned about a great deal of reconceptualisation that was taking place on projects. Were the original analysis done on projects so bad that projects had to be reconceptualised? Was there no management oversight? It would seem as if the NDT got it wrong from the beginning. He asked why there were projects that would no longer be proceeded with after millions of rands had already been spent on them. Had proper planning not taken place? The briefing had also alluded to the fact that there were buildings in projects found to be structurally unsound. He could understand this happening in the private sector but could not understand how a government department could defy government regulations. There was the National Home Builders Registration Council (NHBRC) which was a regulatory body of the home building industry. If a home had defects the builder was required to fix those defects at their own cost. However there should not be buildings that were not structurally sound. Builders were required to meet building standards. How could government not comply with its own regulations? There were many issues that needed further investigation on the projects presented.

Ms Chettiar on reconceptualisation stated that there were 15 projects affected. Ten of them were where construction had stalled and there were five projects that needed additional funding. There was only one building that was found to be structurally unsound and it was at Tenahead Lodge and Mountain Reserve. Fire damage had affected the structural integrity of the building. There was a report of a qualified structural engineer stating such. Structural assessments had also been done at buildings at Vredefort Dome. These were done in relation to the movement of people ie foot traffic.

Mr Tharage responded that the NHBRC applied strictly to private contractors who built residential properties. The discussion on insurance had taken place. It was decided that it was far too expensive for government to insure properties. In the end one had to take the risk. The NDT looked at recost issues. There was the option of reporting persons to the Engineering Council when there were safety issues regarding work done. He conceded that there were implementers who had taken the NDT for a ride. One such implementer was blacklisted for ten years in his personal capacity. The NDT tried to ensure that there were consequences for wrongdoing. This would not be the end to problems on project management but the NDT was however better equipped. There were problems that went beyond the NDT and could cause projects to stall. Development facilitation was needed. Localisation needed to take place.

Ms P Adams (ANC) pointed out that the GTAC was an entity of National Treasury. What was the cost to the NDT of the GTAC doing the study? Where was it budgeted from? She asked how long the study had taken. She too was concerned about stalled projects. Stalled projects became white elephants. She asked whether a risk analysis had not been done before projects were undertaken. Did the NDT manage to get alternative uses for stalled projects? She said that when the services of an entity like the GTAC was undertaken then one would usually stipulate what your targets were. In this way the entity and in this instance the GTAC could have a targeted approach. She was convinced that GTAC had done good work as National Treasury was highly rated. The NDT was asked why it had not agreed with all the recommendations that the GTAC had made. She was disappointed by some of the projects. She too referred to key recommendations (slide 44). On the revision of the project management model she asked whether it had already been designed and when it would be implemented. She also asked why only now Public Private Partnerships (PPP) was undertaken. It was an old concept that should have been undertaken from the get go. How was skills development ensured? She also referred to implementation timeframes (slide 49) and asked how it was to be monitored. Were the dates set realistic?

Ms Lerato Matlakala, Chief Director: Working for Tourism, NDT, said that the short term assignment cost was R984 000 and the long term assignment cost was R4.6m.

Mr Tharage added that the Expanded Public Works Programme: Goods and Services was the cost centre where funding was obtained from. He added that where a project would not be continued it would be put to alternative use.

Ms Chettiar confirmed that there were sites that would be used for alternative purposes. For example if a building had been used for a visitor information centre and fell into disuse then it could be converted into a community centre. On stalled sites two things were done. The first was that the site was guarded. The second was that the site was cleaned and maintained. No properties were abandoned. She explained that the NDT had only disagreed with eight of the recommendations made by the GTAC. These related to projects where there was construction on the ground. On project management modelling and the work by the GTAC she explained that the NDT was not reinventing the wheel. Tried and tested methods were being used. They were customised to the specific needs of the NDT.

Ms E Masehela (ANC) pointed out that it was evident that some of the projects were not working. On the Qatywa Development Project which had stalled a total of R23m had already been spent. The recommendation by the GTAC was not to continue with the Project. She was disappointed that a great deal of funds had been wasted. The same went for all those projects that had been discontinued, funds had been wasted. She wished the Committee to be provided with an organogram of all the parties involved on the Project. Detail was needed on who did the feasibility studies, who were the project managers etc. There was also the matter of contractors being paid up front before work was done. In many instances these persons did not deliver. What strategy was there to deal with the issue going forward? She asked whether the provision of road infrastructure through Monontsha only involved the building of a road.

Ms Chettiar confirmed that the provision of road infrastructure through Monontsha only related to the building of a road.

Mr Tharage explained that the Expanded Public Works Programme (EPWP) conceptually targeted emerging enterprises. Special provision was made for people to do work on behalf of the NDT. The EPWP required emerging enterprises to receive funds upfront. Emerging enterprises did not have start up capital for projects. He conceded that one inevitably encountered bad apples amongst those that were genuine. Some of the wrongdoers were professionals like doctors. The doctors had however reported to the Health Professionals Council.

Mr S Bekwa (ANC) said that the Committee had on oversight seen how projects were doing. He was satisfied that the findings by the GTAC were an accurate reflection of what was on the ground. He asked that the NDT implement what the GTAC had recommended. There were surely lessons learnt from past mistakes.

The Acting Chairperson asked whether the timeframes set by the NDT for the completion of the multitude of projects were not too ambitious. She could foresee problems emerging. Perhaps the workload should be reduced. She suggested that perhaps a target could be set to complete five projects per financial year.
There were issues around the Cape Agulhas and other projects. She observed that there was no recommendation by the GTAC on PPP. Perhaps if there were private partners on projects then the projects could have succeeded. Private partners could have also assisted with financing.

Ms Chettiar on timeframes that were tight said that the NDT would like to complete the projects. The timeframes might seem ambitious.

Mr Tharage noted that PPP was challenging. One had to have a private sector partner that was willing to share the risk. When private partners came on board they usually came on board with conditionalities .In most instances the private sector partner did not wish to fund the project which meant the NDT was obliged to do so. These were some of the lessons that the NDT had learnt. There was a need for private sector to commit upfront. Some PPP did not necessarily have the benefits one expected. The NDT was pursuing the PPP model but was grappling with issues. The Cape Agulhas Project was at its planning stage. It became a problem when a project needed more funding all the time. The real problems needed to be identified. There were lessons learnt from projects like the one at Cape Agulhas. At Agulhas the NDT had worked with government entities and had looked at concessions. The NDT had gotten technical advisory capacity from day one. When implementers tried to squeeze the NDT, the NDT had been warned about it. On the targets being too ambitious he said that the NDT would have like projects to have been completed already. Yes the targets were ambitious but the NDT did have capacity to assist with feasibility issues. Technical training was needed. Staff had to understand what was needed. External capacity was still needed. The biggest challenge for government was the wage bill. There was no way that the NDT would get additional funding for staff. The only option was for the NDT to get external expertise.
Mr Krumbock stated that he was referring to shoddy workmanship on buildings where there were structural cracks. Why was it that people in government buildings did not have insurance coverage like private home builders? Was the NDT saying that it was using contractors not registered with the NHBRC?
The NDT was asked what it did not insure.

Mr Tharage explained that the NHBRC insurance was for houses built. The NDT did not build houses. The NDT did not qualify to be part of the scheme. The general principle was that government could not insure all the things that it had. When there was wrongdoing by a person the NDT went after the person personally.

Mr Krumbock reacted that he still did not understand the explanation given. How was it cheaper for the NDT to pursue wrongdoers personally than paying 1.3% to the NHBRC? Chalets were after all residential and had to conform to the same standards as houses. He undertook to find out why there was such a distinction. He reiterated his concern about projects taking so long to reach completion. Perhaps projects were taking so long because they were being reconceptualised. Some of the projects were started ten years ago or even longer. Why were projects stalled, reconceptualised, had feasibility studies done and in some instances did not go ahead? He asked what the issue was. What were the challenges encountered? The NDT was asked whether these projects were regarded as being a success if 60% of them had to be reconceptualised,

Mr Tharage responded that the NDT did have valid reasons why projects had stalled. Some of the reasons related to the conduct of implementers. The NDT could not continue with implementation when contractors were doing things that were contrary to their contracts. Projects had to be stopped. Investigations had been undertaken. Investigators had urged the NDT to stop projects which it did. Matters had been reported to the South African Police Services (SAPS). Projects were stalled for different reasons. Even if projects were stalled it did not mean that the NDT’s social contract with a community had ended. The GTAC provided the NDT with guidance on what it should do. The point on insurance was noted as it was a policy issue. Other options besides the NHBRC would be considered. Cost was however still a consideration. He said that it was a huge challenge when government was taken for a ride by unscrupulous operators. It was an issue which needed to be addressed. On reconceptualisation he explained that there were times when the NDT was not too clear about what the original concept of the project was when it was initiated. The social contract that the NDT had with the community was what guided it. He hoped that it explained why reconceptualisation was needed.

Ms Masehela agreed that projects had taken too long to complete. She did add that timeframes needed to be reasonable for project implementation to take place.

The Acting Chairperson commented that what would have been useful to members was if they had the report on the status of all the projects on hand whilst the briefing was done.

Mr Tharage stated that the interaction with members was appreciated.

Committee Minutes
Minutes dated 31 January 2018 was adopted unamended. Minutes dated 28 February 2018 and 7 March 2018 was adopted as amended.

The meeting was adjourned.