Agrément SA & IDT 2017/18 Annual Reports; with Minister and Deputy Minister

Public Works

11 October 2018
Chairperson: Mr H Mmemezi (ANC)
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Meeting Summary

Annual Reports 2017/18 

The Committee received briefings by Independent Development Trust (IDT) and Agrément South Africa (ASA) on their annual reports for 2017/18.

The IDT said it had achieved 50% of its targets, given the constraint of failing to realise its budgets. Its expenditure had been R4.3 billion against the annual target of R6.8 billion. This had been influenced by two significant target areas – its expenditure on youth and women contractors, and the Contractors Development Programme (CDP). Delays in payments from client departments had contributed to the failure to meet targets. The entity had had a target of creating 50 000 Expanded Public Works Programme (EPWP) non-state sector (NSS) work opportunities, and had managed to create 57 112.

The IDT had obtained a disclaimed audit opinion. Reasons stated by the Auditor General (AG) included the expenditure programme cut off, the NSS programme expenditure, and interest on late payments. It had been unable to estimate the stage of completion of projects reliably as at the end of the financial year due to insufficient technical input, where progress certificates overlapped between financial years. It indicated that it would focus on financial sustainability, the implementation of the forensic audit report, and claiming the money owed to it by client departments. The lack of technical capacity was a major challenge, but there was an action plan in place to build capacity through the organisation development exercise which had been developed by the interim board, together with management. The AG’s report had highlighted this as a crucial task that the IDT needed to undertake.

Members were disappointed by the failure of the IDT to meet its target for youth and women contractors. This area was important for job creation and business opportunities, and the IDT should engage other entities that had mechanisms for increased youth and women’s participation. The Committee expressed concern about the state of governance and operational challenges facing the IDT, and called on management and the interim board to act quickly to address them. There was a strong sentiment that the presentation did not cover the links between outputs and baselines on the performance indicators. The achieved targets were soft targets, the Committee noted. There was a major concern about the constant changes in the board and management. Members indicated that the presentation had not covered the performance to budget.

The Committee asked the Department of Public Works (DPW) and the IDT to work together and engage client departments in order to address the continued problem relating to the lack of payment. There were issues that the IDT needed to reflect on from the previous performance targets against the 2017/ 18 report. The IDT was called on to prove why it was existing, taking into account its historical establishment as a job creator for South Africa. It needed to do away with governance battles and focus on its constitutionally mandated tasks.

Agrément South Africa said it was now operating independently. This had happened in April 2018, after it had moved from the Council for Scientific and Industrial Research (CSIR), and for the first time it had been audited by the AG as an independent body. It was happy to report an unqualified audit opinion. On programme performance, ASA had awarded 31 certificates during the year, and there were now 215 active certificates and 60 that were inactive. ASA had had a slim budget in 2017/18 since its shift away from the CSIR, but it had continued to use the CSIR as a base in order to cut costs. It requested the Committee to endorse its 2017/ 18 annual report.

The Committee commended Agrément South Africa on its unqualified audit report, but reminded it of the huge challenges ahead as it was now independent of the CSIR.

Meeting report

The Chairperson welcomed the presence of the Minister of Public Works, Mr Thulas Nxesi, and Deputy Minister, Mr Jeremy Cronin, commenting that the Department had always attended the Portfolio Committee meetings.  He also welcomed Mr Coceko Phakade, Chief Executive Officer (CEO) of the Independent Development Trust (IDT), and Mr Joe Adhiambo, CEO of Agrément South Africa (ASA). He said they held important roles within the work of the Department of Public Works (DPW), and it was their role to address challenges that were currently facing the entities within the DPW portfolio. He made an example of how entities like Eskom and Transnet, as well as the IDT, were not in a good space in terms of performance and governance. They required more work and attention from their senior officials.

Minister’s opening remarks

Minister Nxesi pointed out that the IDT and ASA were two entities falling under his Department, and they had to account to the ministry. The IDT had had a very difficult year and this was reflected in its audit outcomes and the disclaimer findings. This was not the first time the entity was going through a phase of this nature. He reminded the Committee about the concerns he had raised in his briefing back in April 2018. The 2017 removal of the IDT board chairperson, Professor Somadoda Fiken and deputy chairperson, Ms Nomvula Rakolote, had left the entity in disarray. After his reappointment as Minister of Public Works, he had been concerned about media reports on corruption allegations which were uncovered from forensic reports undertaken by National Treasury. Updating the Committee on progress made since April 2018, he said the CEO of the IDT had been reappointed and an interim board had been elected. The Departments of Basic Education, Health and Justice had been consulted in the process of appointing the new permanent board. The aim was for these departments to have an insight into the IDT and monitor how their projects were managed. It was also to rebuild trust, because these departments were the IDT’s biggest clients. National Treasury was part of this engagement as well.

The IDT was currently facing hard times in its governance and operational structures. He had asked National Treasury (NT) to provide expertise on sustainable business models and options for the IDT moving forward. The boards that undermined their principals must be given attention by government and Parliament. There was a growing trend that whenever tenders were involved, there was a huge amount of corruption in government entities. The IDT was important for government social infrastructure development, and this was more critical in the poor areas. This was where the proposal for a sustainable business model, in order to have an effective and efficient IDT, became important. Losing government entities like the IDT would compromise the social infrastructure of the state. Schools, clinics and community halls depended a lot on it. A technically capable and efficient IDT was important to maintain these government infrastructures. The Minister highlighted that 2017 events had disrupted the IDT’s attempt to turnaround its fortunes. It was the responsibility of the new management, led by Mr Phakade and the board, to work hard to get it back on track. They had to focus on service delivery to the client and collect the money owed to the entity by client departments.

Currently, R200 million was owed to the IDT by government departments, especially provincial government departments. The National Treasury’s forensic report remained unimplemented. Government Risk and Compliance (GRC) was capable of overseeing the process of implementing Treasury’s forensic report on the IDT. The Minister said he had instructed the CEO to talk to the interim board to implement that forensic audit report. The IDT was now working with the office of the Auditor General (AG) to implement the AG’s findings. The focus was on the financial sustainability of the IDT, the implementation of the forensic audit, and claiming the money owed to it. He wanted to move away from the issue of an ‘interim board,’ and wanted to have a permanent board. That process depended on the engagement with NT and the government as a whole. The DPW, the board and the current management of IDT accepted the criticism levelled against its performance. The key now was to move forward and correct the wrongs that had been done at the IDT.

Board member’s comments

Ms Mandisa Fatyela-Lindie, interim board member, IDT, said that the board had taken note of the outcomes of the audit, the disclaimer and the three critical matters that were pointed out in the AG’s report. The interim board had already worked on a structural strategy. Currently it had noted a lack of technical capacity as a major challenge facing the IDT. There was an action plan in place to build technical capacity through the organisational development exercise that had been developed by the interim board and management. The interim board had made an analysis which indicated that although the IDT had 44 professionals, only 12 were qualified professionals and the rest were candidates. The IDT was currently working with the Council for the Build Environment (CBE) to help in phasing in professionals within the DPW in order to capacitate its entities.

IDT performance report

Mr Phakade expanded on the inputs from the Minister of Public Works. He said that the aim of his presentation was to brief the portfolio Committee on the performance of IDT for the 2017/18 financial year. The focus was on the performance and financial outcomes.

Currently, its focus was on the Social Infrastructure Management Programme as its main source of business. The revenue that sustained the IDT came from charging a management fee for these infrastructures for government departments. The challenges currently faced by IDT had had a major impact on its business as an entity. There had been a decline in the business portfolio, and this had resulted in a decline in revenue streams.

The IDT had taken a decision to work on mechanism to turn around this situation. The aim was to deal with operational and financial challenges effectively to avoid a bail-out from National Treasury. In terms of contextualising IDT programmes, government had given a constitutional responsibility to the DPW to manage public assets. As an entity of the DPW, the IDT consulted with it on its work performance. It had identified local government as a strategic area where it should expand its work. In terms of the value chain, the entity provided programme management services to client departments, through project initiation, planning, development of designs and procurement of various service providers for professional construction and consulting. In terms of performance in these areas, it was currently facing enormous challenges due to capacity constraints at the technical capacity level, as the interim board had indicated. There were systemic challenges within the operational framework as well.

Due to an outdated organisation structure, the entity continued to face challenges when it came to new innovative opportunities. There was a focus to improve Information Technology (IT) systems in order to address these performance challenges. Attention had been given to developing a built environmental skill strategy. In its turnaround strategy, the IDT wanted to have more core people than non-core people. This would be achieved through a renewed organisational design process. This turnaround process was already unfolding.

The board and the executive had noted that the IDT’s challenges were resource related, and would require certain investments to be made in order to tackle them. On current contextual issues, there had been discussion around transformation. In the past, funds had been earmarked for this initiative, yet there had been a lack of implementation and driving the process forward. This time around, the  IDT was confident that it had sufficient plans in place to embark on this process. Through the new organisational framework, the IDT would recruit people with the necessary skills in order to achieve its technical capacity performance targets.

On internal restructuring, it was in charge of procuring social infrastructure for government to the value of R6 billion. This made it important for it to have systems that were capable of managing such enormous amounts of work. In attempting to innovate, the IDT would be seeking to digitise its internal systems and integrate the financial management system as well. Improving the monitoring and evaluation system would be essential. The new structure had identified corporate monitoring and evaluation at the head office level as central to the turnaround strategy of the IDT. This strategy focused on a sustainable, financially viable and profitable organisation in the long run.

It was important to note that the IDT was suffering from cash flow challenges. In an attempt to address this problem, it had embarked on an effort to claim the money owed by different government departments that were central to the entity’s business. The Department of Basic Education in Limpopo had promised it an amount of R1 billion, and the entity aimed to visit more provinces to claim its money. It was important for it to improve its immediate cash flow through revenue collection, and the AG report had highlighted this as a crucial task that it needed to undertake. Mr Phakade promised to take the initiative and contact all accounting officers and Heads of Departments (HODs) in the different provinces and remind them to pay the IDT. There had been an engagement with the Director General of the National Treasury on mechanisms to assist it in revenue collection. There were plans in place for the IDT to meet its immediate obligations, such as paying salaries and suppliers.

Mr Phakade indicated there was a problem of capital budgeting for the entity. There had been poor integrated planning between the infrastructure planning and budgeting. Most multi-year projects were reflected as annual plans in terms of budgeting, and this resulted into huge debts being carried by departments from previous years into the next financial year. There needed to be an improvement in terms of planning and addressing the problem of over-commitments by government departments. Due to the fact that the IDT depended mostly on revenues from the work it did for departments, the entity must prioritise getting its money from these departments urgently, otherwise it would have to close its doors.

The IDT had already noted three areas that needed attention:

  • Improved revenue management initiatives
  • Increased market share
  • Infrastructure planning.

 

The IDT was looking at working with the Geographic Information System (GIS) to assist in integrated infrastructure planning. The Built Environment Professional Services (BEPS) would generate additional resources for the IDT, through developing an in-house capacity. The new proposed value chain focused on infrastructure planning; infrastructure procurement; Built Environment Professional Consulting Services; and a continuation with programme management. Through programme management, the IDT wanted to improve on quality, cost cutting and timeframes for projects. This had been influenced by the lessons learnt from building two high courts buildings, which it had built within the acceptable costs and timeframe.

The turnaround plan for the IDT had been revised and submitted to the DPW in November 2017. The key component of this was the organisational development process. This would look at reorganising and restructuring IDT operations and capacity building. Through a skills audit, it had emerged that some people were not contributing value to the work of the IDT. The organisation development programme (ODP) would help in recruiting the necessary skills for the entity. Those individuals who were found to have made a minimum contribution to the IDT’s work had taken voluntary severance packages. There were a few IDT officials who were challenging their audit outcomes, and the entity aimed to engage with them.

Mr Phakade stated that the transitional challenges that had taken place at the IDT over the past decade had impacted negatively on its operational performance, financial viability and audit outcomes. During the year under review, the implementation of the IDT’s turnaround strategy had developed some traction. The changes in management during this period had had negative effects on the operations of Ithe DT, and currently only the CEO was in a permanent executive position.

Regarding the 2017/ 18 audit outcomes, he touched on the influence of the 2014/15 and 2015/16 audits, and argued that there were three elements that had influenced the performance of 2017/ 18 audit outcomes. The programmes initiated in previous years had influenced the latest audit; the late payments of invoices had led to interest increases, and that had affected programme expenditure; and controls had been identified as weak. This was reflected in the monitoring and evaluation processes between the IDT and non-profit organisations (NPOs), and Mr Phakade proposed that the IDT auditors may need to do regular audits on these NPO programmes. There could also be a need for regular site visits.

Mr Phakade said the IDT had taken a step to develop a proper project management method to address the existing challenges on project management. Measures had been taken to address the root causes of the audit outcomes. The currently initiatives in place to get IDT back on track were promising. They involved many aspects that have impeded the IDT’s performance functions and governance. He had met with the senior managers and regional managers to inform them of these root cause as picked up by the management, and they would now seek ways to tackle them.

Mr Christopher Mulaudzi, Head of Strategy, IDT, gave the presentation on the performance targets at the IDT for the 2017/ 18 financial year.

Performance was at 50%, given the constraint of failing to realise the budgets for the year. Expenditure had been R4.313 billion against the annual target of R6.8 billion. The entity had met 50% of its target. This was influenced by two significant target areas -- spending on youth and women contractors, and the Contractors Development Programme (CDP). The call for the intake of new CDP participants had been cancelled due to the fact that the tender did not comply fully with all the requirements. The programme would be re-launched in the new financial year. The entity had hoped to have an unqualified audit opinion on both performance and financials, but that did not happen. As a result of this, the entity had achieved a zero variance on this aspect. There had been a positive on the registration of professionals. 90% of professionals were registered as built environment professionals by the IDT. The entity had a target of creating 50 000 Expanded Public Works Programme (EPWP) non-state sector (NSS) work opportunities, and had managed to create 57 112.

The IDT reported that some of the causes of previous year’s disclaimers, such as take-on balances; reconciliation on programme expenditure; accruals of management fees on retention balances; and provision for impairment on receivables, had been successfully addressed. It pointed out that for the 2017/18 financial year, its inability to estimate the stage of completion reliably as at 31 March was due to the insufficient technical input on projects where progress certificates overlapped between financial years, and interest paid on late payments had resulted in another disclaimer. It further pointed out that EPWP NSS expenditure supporting information, which could not be completely and accurately tested, had contributed to the disclaimers. Management fee collection was largely dependent on the transfer of funds from client departments. During 2017/ 18, as was the case in previous financial years, the delay in funds transfers from client departments had adversely affected its performance against targets.

Mr Phakade reported that there was a shortfall in total management fees. On the revenue information, the entity had collected R201 million, while the total operating expenditure had been R370 million. This showed that the rate of collection compared to operation costs required assistance from others to cover the difference. This was why the turnaround process had put emphasis on the collection of revenue generated. The management fee was controversial, and Treasury had given guidelines to IDT on management fees moving forward.

It had not spent much on capital expenditure because of budget cuts. The cash flow crisis had put constraints on capital expenditure. Currently there was R95.422 million, and 12% of this amount was within the 30-day acceptable collection period. The IDT was facing a high risk of litigation due to the delay in transferring money to service providers. The operating model and the turnaround plan would be able to address these challenges. National Treasury had shown interest in sending a technical task team to assist on these items listed as challenges in relation to revenue collection.

Discussion

Ms L Mjobo (ANC) raised concerns regarding the conduct of some Directors General (DGs), who seemed to undermine the work of Portfolio Committees. This was due to the absence of the DG for Public Works without an explanation. She said the DG was often late for Portfolio Committee meetings, and the Committee should look into why this was the case. She referred to the IDT’s failure to meet its youth and women’s programme targets, saying these were important areas that needed job creation and business opportunities. The DPW and IDT should provide clarity on why there was a lack of initiatives to address this problem on women and youth.

Ms E Masehela (ANC) said that the Committee was encouraged by knowing where the problems were, and what the IDT was planning to do in order to address these challenges. The aspect of women and youth targets for opportunities was a big concern, because the statistics out there showed a great need by women and young people for these opportunities. The IDT had to pay special attention to these targets. There were projects that it had done which were important for the government. They should be the face of the IDT in its aim to market itself as an effective entity. As the core work of the IDT was construction, it needed people with technical expertise to get things right. How was the entity planning to turn around its fortunes on this aspect? She indicated a concern on the performance of the entity. She recalled a period when the Committee had visited an IDT construction site for a traffic officers’ college in Mpumalanga. The work done by the IDT in the construction of that college had been impressive,  and could showcase how it did its work. As it depends on the work it does for other government departments, its work should be of a high standard in order to bring in more business. She asked if the 5.5% charged by the IDT for project management was market related? What was it doing about evaluating its project management fee against the market value? It could be the fee difference that contributed a lot towards the current revenue constraints that the entity was facing, if the entity failed to match the market value.

Mr D Ryder (DA) was not happy with the presentation. The IDT’s brief kept going off topic, providing too much irrelevant information, lacked a coherent flow and failed to include key information for the Committee. A presentation of this nature was concerning, since the AG’s briefing earlier in the week had given a background on the state of affairs at the IDT. The AG report had brought forward a great deal of concern about the state of senior management at the IDT to the Committee. It was sitting with a situation where there worrying issues at the IDT. There was a history of bad performance at the entity. The Minister’s remarks regarding changes at the IDT and their effects on the turnaround strategy were understandable, but that did not detract from the fact that it had had an experience of bad performance in previous years. The Committee should look at what to do going forward regarding this continued bad performance. He asked the IDT to provide clarity on the actions it was taking to address the current issues at the entity. Was it being honest and open in accepting the problems it was facing?

The fact that the presentation did not have the information from the AG’s report was a poor reflection on the IDT. Providing incorrect information to the Committee showed disrespect from IDT. The 4.7% on performance against the 5.5% on targets could not be interpreted as good performance. The same regress happened in the last financial year. The baseline was 4.8% and went backwards to 4.7%. The IDT had been aiming at a 5.5% performance target, so the 4.7% achieved meant it was not performing better. The IDT’s presentation had a number of deficiencies. There was no indication on the performance to budget, and no indication of the expenditure in terms of the budget. He urged the Committee Members to look at the annual report for 2017/18, as that was where the necessary information on IDT’s performance could be found. Some of the areas where the IDT showed 100% achievement were soft areas. An example was the indication of how well NPOs were involved with the EPWP, where the target was set below the baseline.

Looking at the annual report, the IDT had left out a lot of information for the Committee to reflect on, and that was problematic. He picked on the contingent liabilities (page 110 of the annual report), which showed they were at R116.85 million for legal processes that were under way. This could explain why, on expenditure, it had high legal fees at R12.5 million. This related to cases involving a lack of payment, and translated to why the IDT was not performing in other areas. It was sitting with a problem of not paying contractors, and this had created huge unhappiness about its business. Projects got stalled due to the non-payment of contractors and sub-contractors. Whether this was due to the IDT or its department clients, some serious work needed to happen in order to address these problems. It should work with National Treasury and try to look into have recourse if departments failed to make payments on time.

Mr Ryder referred to the irregular expenditure at the IDT, and said he hoped there were no corrupt acts behind these. From the AG report, there was a concern about irregular expenditure which had increased by an additional R86 million in the financial year under review. Regarding the CEO’s remarks on developing a GIS system for the IDT, the entity could use other government GIS systems to avoid duplication.

He urged Members to look at the annual report against the presentation and reflect on the performance against the baselines. From the 2016/ 17 briefing, the IDT had promised to build 20 schools, and 100% of the budget had been spent but only five schools were built. In the presentation, there was no indication of what had happened to that project. It would have been useful to have an insight into the projects that the IDT had achieved, as this would also have helped the Committee to compare and contrast this briefing against the 2016/17 report.

The Minister should look again at the targets in programme 1. On the youth and women targets, the IDT should work with Construction Industry Development Board (CIDB), as they had programmes in place in these categories. The vision and mission of the IDT should be the guiding principle of its approach to doing business. It had not been an effective social infrastructure development entity in its performance. In order to attract business, it had to perform well and have good governance standards. Unless it marketed itself as an effective government entity, investors would be reluctant to engage with the entity. Without good governance, clients would run away with their business and projects. The Minister and his deputy should reflect on the roles and responsibility of the IDT towards improving the lives of South Africans in their White Paper engagements. In its current state, was it capable of achieving the government mandate of improving the lives of South Africans and addressing the injustices of the past?

Mr F Adams (ANC) commented on the IDT management, and pointed out that the entity always recycled its leadership in management. He welcomed back the CEO of the entity, and said that the IDT had been created to contribute towards job creation. He recalled making a statement in previous IDT and AG briefings that the instability created in top management filtered down. Due to this instability, the IDT had seen a lot of changes in a short space of time. Mr Phakade was coming back now, together with the Minister, which meant that this report could not be regarded as their report entirely, but they had tried their best to deliver it.

The Committee must instruct the Minister and the IDT to protect their entities. The IDT had got into trouble because of the departments that had failed to make their payments on the work done for them. If the client departments paid up, the IDT could have been in a better position. The Minister should talk to his colleagues in Cabinet from the Finance Committee and ask how to get IDT’s money from client departments. There should be ways in which the Committee could instruct Treasury to pay this money straight into national DPW if these departments continued to fail in making payments.

Mr Adams made reference to an incident where the Department of Health in Gauteng had failed to make its payment, and the contractor had blamed the IDT. The culprit here was Health, by making the payment only before the Portfolio Committee visited the provincial Department of Health. Why was it the case that this happened only when a Portfolio Committee was visiting? The Committee had to find ways in which it could give directives so that Treasury could monitor and penalise government departments that failed to pay these entities like the IDT. If it continued to operate in this way, it would suffer. The Committee needed to find ways to help it.

The work of the IDT in rural areas was important for emerging contractors who were seeking assistance. If need be, the Committee should call the Finance Minister or even the DGs from these departments so that they could account. They needed to answer why so many payments had not been made to the IDT or the DPW. There was money in the budgets of these departments, but they spent it on other areas. For the Committee to be fair, it must call these departments to account.

The Chairperson said that through the recommendations to IDT and the DPW, the Committee would make these points from Members clearer. It was important for entities like the IDT and the government departments to reflect on the inputs of the Portfolio Committees, as they represented the views of Parliament. The Committee spent time reflecting on the presentations, reports and inputs from the entities, and made recommendations.

The continued failures at the IDT were proof that these entities and government departments ignore the recommendations of Parliamentary Portfolio Committees. Government entities have become so used to these detailed reports from the Committees that they ignore them. They were not implementing the Committee’s recommendations. The good thing about recycled people was that they knew what to do in order to address these problems, but they ignored them. It was important for those who occupy senior positions in these entities to work hard in trying to deal with the challenges emanating from within the government entities. It would be wrong for the Portfolio Committee to be sympathetic towards government entities who continued to fail in their mandates. For the IDT to have four years with a disclaimer opinion was not a good thing. Therefore, the Portfolio Committee on Public Works would write a detailed report on the briefing.

The AG had written his report on the IDT and for the Committee, and this would not be the first or the last time. Government entities must prove why they exist and be accountable to the people of this country. There should be a system in place for the IDT to use when they were claiming their money from different government departments that owed them.

The Chairperson said that at the last presentation, the IDT management had promised the Committee that it would turn things around at the entity. The problem with the lack proper systems in place was a serious matter. It contributed to the loss of revenue. Having a system in place would help the IDT follow its money from government departments. It was time for it to be accountable -- past experiences should not be used to try to deflect current problems. The Portfolio Committee was here to help the DPW and its entities to do its job, but both the IDT and the Department should prove that they had taken the necessary steps to deal with these problems. He called on the head of strategy at the IDT to prove that there were strategies in place for it to perform better. Systems were pivotal for performing good governance. It was important to learn from other best performing entities and understand how they were doing things. While the AG’s report was important, it was a sample of what was taking place at the IDT, and it was important to have internal mechanisms to evaluate performances. The Committee had raised concerns regarding retrenchment as a diagnosis for any budget or performance failures. It was concerned about the IDT taking a retrenchment approach in trying to fix the existing problems -- the entity should look at other means. People must be trained to do other functions in order to absorb them within the entity. Good planning was always important. The issue of having many ‘acting’ positions had been raised as a concern by the Committee. The DPW was urged to quickly appoint people on a permanent basis so that the already planned turnaround initiatives could be implemented.

Deputy Minister’s comments

Deputy Minister Cronin said that the AG report was helpful in terms of assisting the IDT to get a better understanding of the challenges it faced. The Department was looking forward to the Committee’s report, which had to be of a critical nature and take into consideration the background and the context of the IDT’s current challenges.

During the democratic transition, the IDT’s objective had been to create a black middle class to accommodate the initiative for a rainbow nation. At the time, it had a R2 billion trust to support its work. In 1997 it changed and became a trust in charge of public sector job creation. The problem in moving the IDT from a trust to an implementer of social infrastructure development was that insufficient attention was given to the model it would have, in order to carry out its work. It was anticipated that by 2012/13, the Trust would be gone. The anticipation was that there would be serious financial issues with the IDT. From 2012, there had been a cash injection of around R100 million, but at the time there was a lot of corruption. The AG did not pick this up until later on. In 2012 and 2013 there were serious acts of corruption in the board of the entity. This was the historical background, and was one of the core challenges in relation to IDT’s business model problems. Furthermore, the profile of the staff at the IDT had put constraints on the necessary business model needed for the IDT to deliver on its public mandates. The DPW had taken the initiative to address these historic challenges, keeping in mind the unemployment problem facing South Africa at the moment. The initiative to professionalise the IDT was facing other contradictions in finding an ad hoc mechanism to tackle the existing challenges for operations.

On the question posed by the Committee on whether the IDT should exist, Mr Cronin argued that the entity should exist. Its future lay in the wider discussion that Cabinet was having on reconfiguring the state entities to be effective and function properly. Under the leadership of Minister Nxesi, the IDT was beginning to operate in a new way, modelled through the new operation management framework, as stated by the CEO. The existing contextual problems could not be the only basis for the bad performance of the IDT, yet they provided a different outlook on the methods that should be adopted in addressing the already mentioned challenges from the presentation. The infrastructure and construction sector businesses had dropped massively. This was due to global economic realities and this had resulted in difficulties in doing business for entities like the IDT.

It was important for the DPW and IDT to learn a lesson, and do away with setting soft targets. While the current climate puts pressure on business operations, the IDT should reflect on its baselines in order to provide proper targets. He pointed out that in the AG’s report, the declaimers had not been on the same items. The foundation of the disclaimers in the financial year under review was a cut-off date, the interest payments and non-payment on EPWP reporting issues. It was frustrating that the IDT had received disclaimers for the fourth time in a row, but the good news was that all these things could be corrected. It was important that the IDT had picked up the problem with the EPWP reporting, as this came up a lot in Parliament on recruitment guidelines. Parliament was monitoring the role of NPOs in the EPWP and always asked what action had been taken against NPOs that failed to deliver on targets and reporting. The IDT and the DPW must show determination to deal with this problem

Minister Nxesi answered a question raised by Ms Mjobo on the absence of Department officials at Portfolio Committee meetings. The previous day had been a Cabinet meeting day and the President had requested all Ministers to attend. If this was a challenge, a discussion could be held at the political meetings to make sure that there were no clashes between Cabinet day and Parliamentary meetings. He did not understand why, when a critical meeting was happening, the DG did not show up. The Deputy Minister was always attending Committee meetings, but officials were not coming to them. The Committee should find ways to deal with that problem.

There were clear issues relating to expenditure management and revenue management. The IDT should not get into ambitious projects when there was no money. The DPW should cover its entities. The legal fees had been a waste of money for the IDT. Procurement mismanagement was another of its problem, and this was linked to a lack of consequences for management. Parliament should reflect on this, because it contributes to many of the challenges faced by government entities. The people who assume that they are untouchable in government must be dealt with by the Committees. Minister Nxesi promised to push the CEO and the interim board to deal with the forensic reports. In the following financial year, the IDT should bring a better audit report to the Committee, and this also applied to the DPW and all its entities. Even the Department was not performing well.

The questions and inputs from Committee Members reflected the areas where the IDT was failing to performing. The inputs were asking it to be responsible and apply their minds in seeking mechanisms to address the challenges.

IDT’s response

Mr Phakade said the IDT took note of the concerns raised by the Committee. The turnaround of the IDT should be as promised and reflect the necessary areas identified as problematic. He had noted the view that the presentation should focus on the outputs of performance. It should also be consistent, especially on the points of departure from the baseline. This would help to measure progress for the IDT. The strong sentiments from the Committee on the importance of ethical and effective leadership at IDT, was also acknowledged. The inputs from the Committee and the AG should appear in the next annual report as items that had been addressed. This would show seriousness on the part of the IDT towards the Committee and the AG. He promised the Committee that there would be consequences for those who failed to deliver on the mandates given by the Committee. He welcomed the recommendations and guidelines given by the Committee towards its attempt to regain its credibility and accountability. The entity had taken note already of the irregular expenditure from the report, and had measures in place to deal with them. Officials had faced the music already through disciplinary processes.

Mr Phakade said the IDT would revise its operation model, working together with the DPW and other partnersThere was a new thinking at IDT -- a new vision to be better and do better. He promised to take a tough stance on the collection of money owed to the IDT by government departments.

Ms Nomvula Rakolote, Board of Trustees, IDT, commented that all the entities under the DPW should understand their work and responsibilities. The issue of many acting positions was critical in an attempt to get the IDT going. This item, together with claiming the money from departments, was important and was at the top of the agenda for the interim board. Capacity building should be driven in order for the IDT to acquire the necessary people for positions, people who would drive the turnaround agenda. The interim board was committed to come back to the Committee with a better annual report.

Chairperson reiterated the Committee’s promise to the IDT to correspond on their briefing through a detailed report. He wished the Minister, the IDT management and the board well as they started this important journey of making the IDT an effective government entity. He said the Committee was available to assist the Ministry of Public Works and all entities that fell under it to achieve their objectives of contributing towards the improvement of the lives of South Africans.

Agrément South Africa (ASA): Annual report

Dr Jeffrey Mahachi, Acting Chairperson, ASA said that ASA was a technical agency. It was established in 1969 and had been legislated, and was now operating independently. This had happened in April 2018, after it had moved from the Council for Scientific and Industrial Research (CSIR). The transition period had been critical for the operation and administration of ASA. The focus for the financial year 2017/18 was to set up governance systems and processes. Prior to the split, the ASA had depended more on CSIR systems. For the first time in this financial year, ASA had been audited by the AG as an independent body. It was happy to report an unqualified audit opinion. As a technical agency, ASA assessed and certified products and systems that did not have South African national standards. It had eight board members, but this had dropped to six after two had resigned in this financial year. 

Mr Adhiambo said that the work of the ASA covered innovative construction technologies and was vital in improving the performance of existing products. They also contributed to accelerated infrastructure development. The certificates of ASA were tested by independent experts to ensure they were fit for purpose. ASA dealt with emerging technologies through receiving applications for certification from the public, innovative construction systems and products. It carried out tests and assessments of products which did not have national standards or a code of practice to examine and evaluate sustainability.

ASA measured its performance based on outputs against targets as informed by the National Building Regulations. In this financial year, ASA had awarded 31 certificates. There were 215 active certificates and 60 that were inactive. The 60 inactive certificates were due to business volition. ASA had received an increase in applications for certification, which showed growth in the agency’s work.

Ms Inge Vieira, Chief Financial Officer, ASA, said most of the financial expenditure in 2017/18 had been under the CSIR. ASA had had a slim budget in 2017/18, since there was a shift away from CSIR. There were no comparative figures for the current financial year. The entity had received a grant of R29 million and had spent R20 million. This expenditure had emanated from establishing ASA as a separate entity. 50% of the expenditure went to employee remuneration. The increase from the 2016/17 financial report to the 2017/18 report was due the appointment of six additional members to the Executive Committee. ASA had received an unqualified audit report from the AG. It requested the Portfolio Committee to endorse its 2017/ 18 annual report.

Discussion

Mr Ryder congratulated ASA on their clean audit. The entity needed to reflect on its mission and vision. The vision and mission of ASA was a reflection of inward looking as compared to inclusivity, and this was in line with reflecting on its vision as a South African agency. The mission of ASA should be looking at improving the lives of South Africans. He did not like the fact that the mission was reflecting on ASA more than all South Africans. The vision and mission of ASA could reflect more adequately on what the entity was doing. What was the motivation for the split from the CSIR? Why did the split happen? The entity had incurred an additional cost of R20 million, and only 10% of the funding was internally generated by ASA. Would the R20 million be continued going forward, or would ASA require additional funding? He questioned whether the money absorbed from the split was going to be regenerated by ASA?

Ms Mjobo welcomed their ASA’s annual report and clean audit, as well as the gender balance on the remaining board. She asked how the ASA board was now set up, since it had decreased from eight to six members.

Mr Adams reflected on the entity’s affiliation with the CSRI and pointed out that ASA had now grown. The split was a reflection that ASA was growing on its own merits. It was good that the AG could not find fault in ASA’s financial report. The failure of an entity provided a platform for learning, and it was through consistency that an entity enhanced its performance. ASA had been providing a high performance in its interaction with the Committee. He reminded it of the huge challenges ahead as it was now independent of the CSIR.

The Chairperson said that it was important for ASA to be a representative of South Africa as a whole in its mission statement. The conduct of ASA had been impressive in that it had made itself known through its work. He wished ASA luck in their new era of independence from CSIR.

ASA’s response

Mr Mahachi said the split from CSIR came from the improvement of the ASA. This was translated into the work of the entity in issuing certificates. The split was due to Agrément’s move to independence under the new Act of Parliament which came into effect in 2017. It now operated independently in terms of the extended mandate provided in the recent Act. The new provision allows ASA to function as a South African certifying agency, which made it important for it to revisits its vision and mission statement.

There were six board members currently, but there should be 11 members. There was a process under way and the Minister would soon elect a new board that would comprise of 11 members. The responsibility rested with the Minister to a ensure gender balance in that incoming board. ASA was still operating on the CSIR campus, but it had its own space. Due to entity’s need for resources and technical infrastructure, it had maintained the CSIR as its base. This would also assist in cutting costs.  

Ms Vieira said that the R20 million had been taken from funds given to ASA by National Treasury. The cost increase at the moment was limited to the budgeted 5.5% that Treasury had promised to ASA. The staff of ASA had been transferred from the CSIR, and the cost of operation had been borne by the CSIR.

Mr Butcher Matutle, Deputy Director General (DDG): DPW, said the input from the Committee would contribute towards the work of the Department in trying to turn around matters in all the entities that fell under the DPW. They would help the Department to focus better moving forward. The DPW would also engage with Treasury on issues relating to the IDT and would advise the Committee on any developments

The Chairperson highlighted the fact that the mandate for Members was to hold the Department and its entities accountable to deliver on the constitutional directives of the government. The Committee would discuss ways of moving forward for these entities in its report.

The meeting was adjourned

 

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