Working on Fire Project finances and operations

Environment, Forestry and Fisheries

26 February 2019
Chairperson: Mr M Mapulane (ANC)
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Meeting Summary

The Portfolio Committee on Environmental Affairs was briefed by the Department of Environmental Affairs (DEA), and the team from Working on Fire (WOF).

Highlights of the brief by WOF included the scope and extent of the work of WOF, its key focus areas and contract schedules from the key focus areas. It also outlined its finances for 2015/16, 2016/17, 2017/18 and 2019 year to date; progress on its audit findings; the gains of the drought response program; demographic statistics on staff in WOF; progress on fire awareness and education; and the cumulative performance of the EPWP in 2015/16, 2016/17, 2017/18 and 2019 year to date.

The Committee asked questions on the contract with related parties; the arrangements made on its fleet; aviation firefighting activities at WOF; the third party revenue; and the funds allocated to the Expanded Public Works Program (EPWP) on natural resources management and infrastructure.

Members said that the essence of this meeting was for the Committee to find out if the government was getting value for the money allocated to WOF. He expressed concern that WOF had not presented the Committee with details on its finances. Members also noted that the bulk of the funds allocated to the EPWP in 2017/18 had been allocated to a contractor and this did not follow the conditions of the EPWP. Hence he remarked that WOF’s model needed to be reviewed as it does not add value to government in the area of infrastructure gains.

One of the Members expressed an opinion contrary to the Chairpersons’ opinion that WOF did not add any value to government by saying that WOF had strengthened the Northwest Province rural areas with infrastructure such as fire trucks And also the service that WOF gave to the country needs to be commended. The Chairperson differed in that he felt  that this was the view of the Member but in his own opinion the country was spending significant amounts of funds which were going to the contractors. He added that he knew the service was visible in the Western Cape but remarked that there was a need to review the model used by WOF presently.

The Committee agreed that since the present contract with the related party would end in 2021 not much could be done. They noted further that there was a need to review the model because of the money government spends on the project. There was also a need to review the contract with the related party to ensure that the benefit of firefighting spreads to other parts of the country. The Committee mandated the DEA to review the model to ensure that government would get better value for its people.

Meeting report

The Chairperson welcomed all Members and the team from the Department of Environmental Affairs (DEA), and the team from Working on Fire (WOF), led by the Director-General (DG) Ms Nosipho Ngcaba , DEA. He noted that the WOF CFO was not in attendance and asked if the meeting should be postponed because most of the information needed was on finance. He invited the DG DEA to comment.

Ms Ngcaba said that although the finance officials were not in attendance, the Chief Director National Resource Management and the Managing Director WOF would brief the Committee. Electronic versions of the documents have been submitted to each Member and the breakdown on financial information is available to the Committee.

Dr Christo Marais, Chief Director: National Resource Management, DEA, introduced his team but said that most of the officials from finance were not available.

The DG said that there was a meeting with National Treasury (NT) to discuss the funding challenges of WOF. The CFO is with the NT but the officials present would be able to address all issues.

The Chairperson asked if there was any official with financial knowledge in attendance.

Dr Marais said that the Managing Director WOF Mr Trevor Abrahams would answer questions on finance. He said the presentation would give more information on the areas the Committee had asked questions about.

The Chairperson said that the Committee should have been notified that the finance officials would not be able to attend the meeting. The Committee needs experts to answer questions since it would require detailed information.

The DG assured the Committee that the WOF team was capable of answering questions in detail.

Briefing by Working on Fire (WOF)

Based on the requirements of the Committee Dr Marais, highlighted the scope and extent of the work of WOF, its key focus areas and contract schedules from the key focus areas. WOF identified a need for an integrated approach to implement firefighting services across the country. During the bidding process related parties submitted Standard Bidding Procurement (SBD4) documents.

The DG said that the SBD4 documents were needed to ensure that the fire services across the country were integrated.

Dr Marais said in the definition of related parties that the entities and the implementing agents were members of the same group.

The Chairperson asked WOF to state why a contract with related parties was required.

Dr Marais said it was required because the closely related parties supplied specific services.

The DG said the related parties were determined upfront and the services they would provide were also identified. This ensures that there would be no other need for any other supply chain management (SCM) process as they have been approved initially. However some services have been captured by the Auditor General that need to be provided and this would need to go through the SCM process. The process is sealed, National Treasury was involved and it determined the associated costs.

Dr Marais said the Managing Director, Mr Abrahams, would discuss the detailed finances of WOF.

 

Mr Abrahams said that the January 2019 expenditure to date was around R599 Million and depicted the data with a pie chart. It consists of 36% on wages; 15% on salaries; 2% on other benefits; 2% on Personnel Protective Clothing (PPC) and Personnel Protective Equipment (PPE); & 7% on training; 12% on transport; 1% on FPA support; 7% on aviation and a management fee of 9.6%. The Chairperson asked him to state how many officials were on wages.

Mr Abrahams said WOF had about 4300 officials on wages.

The Chairperson asked if there were any salary increases.

Mr Abrahams said there were salary increases and the WOF had a 7% Overall Variable Cost (OVC). In 2019, 55% of expenditure was on personnel and it is the highest percentage in an expanded public works program (EPWP). This included 1% on medical expenses; 12% on workman’s compensation; 15% on funeral accidental cover; 4% on management training; 59% on participants training; 8% on PPC; 10% on PPE and 4% on UIF. The spouse receives income for life on the workman’s compensation while children are catered for until the age of 18. The funds for participants training is not a transferred payment to Kishugu Holdings PTY LTD but is paid for a daily training program. The amount for PPC would increase this year while the funds for PPE varies based on the supplier. The 2019 OVC includes 19% on property rental; 15%on telecoms, internet and courier services; 18% on travel and accommodation; 7% on depreciation; 7% on professional fees; 7% on IT; 4% on fire awareness, communications and Azishe games; 6% on office equipment spares and 17% on research, operational supplies and sundry materials. He outlined the WOF aerial firefighting resources for command and control aircraft (Spotter); UH-1H Huey helicopter with Bambi bucket and AT 802F Fixed-Wing Water Bomber. The hours flown was 1269 for the helicopter, 1053 for the Spotter and 386 for the Bomber. The 2018/19 budget WOF aviation standing and flying revenues was 38% for the DEA and 62% for third parties. The firefighting season has changed due to climate change. He drew the Committees’ attention to the fact that the Knysna fire had happened in June.

The Chairperson asked Mr Abrahams if WOF had another document to depict the financials because the pie chart did not provide enough details.

The Chairperson said that a copy of the audited finances was in the document pack given to Members. Mr Abrahams outlined the actual expenditure, expenditure on personnel, OVCs, for 2017/18 and 2016/17.

The Chairperson asked Mr Abrahams to expound on what WOF used the funds on research for.

Mr  Abrahams said that the funds expended on research, operational supplies and sundry materials was used to do research on various aspects of firefighting, feeding firemen deployed to attend to fires and education on work done on fires. The actual expenditure, expenditure on personnel, OVCs, for 2015/16 and 2014/15 are depicted in the same manner as 2019 year to date.

The Chairperson asked him to go to the summary.

Mr Abrahams outlined the revenue generated from the aviation holding company and gave an overview of the performance of WOF. He recalled that the Committee had raised issues on the Kishugu Holdings PTY LTD shareholding.

The Chairperson asked him to ensure that Members were carried along.

Mr Abrahams outlined the financial summary of Kishugu Holdings PTY LTD for 2015,2016, 2017, 2018 and 2019. The third party resources for 2015, 2016, 2017, 2018 and 2019 showed a rising trend for external clients but dips were noticed in 2016 and 2018. The variable cost recovery showed a rising rend from 2015 to 2019.

Progress on WOF audit findings of 2016/17

Mr Abrahams also outlined the progress on the audit findings of 2016/17. The conflict of interest of related parties’ issues raised by the AG is being addressed. The fleet vehicles are leased to WOF with a full maintenance lease using the DEA Memorandum of Association. Ownership would be transferred to the DEA or its nominee at the end of the lease period when the residual amount is settled.

The Chairperson asked WOF to state the arrangements made on the fleet.

Dr Marais said it was an arrangement made between Kishugu Holdings PTY LTD and ABSA.

The Chairperson asked WOF to state how the arrangement worked.

Dr Marais said Kishugu Holdings PTY LTD provided the fleet while ABSA provided the finances.

The DG said that Dr Marais was saying that with the current arrangement, WOF did not need to worry about the financing based on the contract.

The Chairperson asked WOF why it needed to go through a third party when it could get a direct contract with ABSA.

Mr Abrahams said that apart from providing the fleet, Kishugu Holdings PTY LTD provided fleet management services.

Dr Marais said the fruitless and wasteful expenditure that was picked up by the Auditor General which was not recorded in the financial statements of the DEA were for traffic fines. WOF does not have the final say on whether VAT should be paid on its services and the asset control deficiencies have been amended.

Progress on DEA audit findings of 2016/17

Dr Marais said it was concluded that there was no duplication on the Directors’ remuneration. The draft addendums are currently with legal services for vetting before it would be submitted to the DG. Kishugu clothing has ceased to operate because it was not disclosed initially as a related party. The concerns on poor quality of PPE and not having value for money have been addressed by the PPE committee. WOF and the DEA legal services are having on-going consultations to rectify problems on the fleet lease agreement.

Progress on the AG audit findings of 2017/18

Dr  Marais said WOF now reports on implementing entity fees. It is now included as a requirement for invoicing by all service providers that implement EPWP projects. The splitting of expenditure into capital and current expenditure is being done through an on-going process which addresses fleet management in WOF and is part of the 2021 exit strategy. The DEA is in consultation with the office of the Accountant General on how to record the revenue and other income earned on the project for future contracts; and amendments would be made on existing ones. He invited Mr  Abrahams to address the key performance indicators for 2019.

Mr Abrahams said one of the key performance indicators for the EPWP as of January 2019 was the person days achieved; and he reported that WOF had achieved 97% of its target. Some of the other achievements include full time equivalents on jobs 97%; youth employed 105%; females 104%; persons with disability 145% and teams dispatched 113%. The accredited training target was 79% achieved because the training targeted was refresher courses. The target for fires attended (88%) was partially achieved because WOF only attends to fires when called. The helicopter (127%), Spotter (147%) and Bomber (100%) days available had over achieved targets because WOF has been proactive and also the transformation score was over achieved by 118%.

Dr Marais outlined the gains of the drought response program. He said the program had resulted in clearing 3600Ha of land; the average person days were 91; and the project employed 360 people with 350 non-management staff.

Mr Abrahams outlined demographic statistics on management and participant representation in WOF. The fire awareness and education has impacted 1,392 schools, about 100 thousand learners, 1787 communities and about 105 thousand people. WOF communication products are on Twitter, Facebook and on the WOF website, and it also produces 12 newsletters.

Dr Marais gave the cumulative performance of the EPWP in 2015/16, 2016/17, 2017/18 and 2019 year to date. He said the WOF program consistently performed beyond the baseline and incentive funds allocated over the past four years, and the program recorded an average growth of 33%.

The Chairperson invited Members to interrogate the report.

Discussion:

Mr R Purdon (DA) asked for clarity on aviation fire activities at WOF. He asked for more information on the third party revenue as it was actually high.

The Chairperson noted that the EPWP was divided into the natural resources management and infrastructure programs. Hence he asked the DG to state how much had been allocated to the EPWP on natural resources management and infrastructure.

Dr Marais said he would confirm the amounts.

The Chairperson said WOF could answer the other questions and get back to the funds allocated.

Mr Abrahams said WOF received requests on aviation from third parties. These third parties bore the costs on hourly basis. People choose to stand-by because of the costs. WOF now charges based on handling rates and the aviation fire service is a User-pay service. The users could be land owners or the Municipality hence WOF has been called to put out large fires at the request of the district Municipality. In the Western Cape the Province pays for the first hour and the landowners are required to pay subsequently. This has helped to tackle the fire easily because waiting allows the fire to spread and it takes many days to put out.

The DG asked Mr Abrahams to explicitly state the users of the aviation fire service.

Mr Abrahams said that users could be conservation agents; Cape Nature (wilderness areas), SANParks (Table Mountain), some properties fall under Municipalities; land owners which fall under fire protection organisations and government departments.

The DG said the users were from the Department of Agriculture Forestry and Fisheries (DAFF); COGTA; certain Municipalities, conservation agents; private land owners; and conservation agents. When the DEA reports to cabinet it reports these activities based on the different categories and the state of its readiness to combat fires. She stated that the budget allocated to the two EPWP programs were for the financial periods considered.

The Chairperson asked if Mr Purdon had any follow-up questions.

Mr Purdon asked WOF to state the party that authorised the aviation arm of WOF to go and put out fires. He asked for clarity on whether WOF seats back and waits for the Municipality to give the go-ahead to put out fires. He asked for more information on aviation revenue for Rhino poaching generated by WOF. Please confirm the authority that makes the call to assist KwaZulu-Natal on Rhino poaching fires?

Mr Abrahams said WOF was not the first response entity on putting out fires as it works in collaboration with its partners. WOF works on this basis with its partners such as Municipalities, conservation agents, land owners and government departments. WOF does not go to put out fires without being invited by the land owner, for instance when the newspapers alerted the nation of the worst storm in 30 years at Knysna, WOF got prepared. WOF only goes out to put out fires when it received a request because it is not the land owner. WOF avails the parties of its service but it reaches an agreement on areas that it could go to. Rhino poaching is independent of WOF; all entities have training assets that have businesses beyond WOF.

The DG reminded the Committee that disaster management was under COGTA hence the DEA participated in the structure as a team member. The Departments have the ability to communicate and the DEA now provides the service through WOF resources.

The Chairperson recalled that the WOF program was conceived to work on fires and the DEA only inherited it from DAFF and Department of Water and Sanitation (DWS), and the agreement was that DEA would service DAFF and DWS. The essence of this meeting was for the Committee to find out if the government was getting value on the money allocated to WOF. He expressed concerns that despite the fact that the Committee asked for details on its finance WOF presented pie charts. He noted that out of the actual expenses of R678 million in 2016/17, only 36% was expended on the poorest of the poor. The rest of the funds were paid to related parties (Kishugu Holdings PTY LTD) even if WOF argues that the funds were allocated to training which would benefit the workers. The fact remains that the bulk of the funds goes to contractors which is not where it is supposed to go according to the conditions of the EPWP. The question of what funds were allocated to the EPWP infrastructure projects was to establish what the benefits of the R678 million was but answers by WOF show that the poor only received a benefit of 36%. WOF must be able to answer the question on if the bulk of the money allocated is adding value to government or not. Although WOF would inherit the fleet at the end of the day it has no direct benefits. Also, even though WOF builds capacity to attend to fires it does not get any infrastructure accruing to it. Hence the WOFs model needs to be reviewed as it does not add value to government.

Ms J Steenkamp (DA, Alt) said she was originally from the Northwest Province where a lot of fires occurred. She expressed opinions contrary to the Chairpersons’ opinion that WOF did not add any value to government by saying that WOF had strengthened the Northwest Province rural areas with infrastructure such as fire trucks. Also, the service that WOF gave to the country needs to be commended.

The Chairperson noted that this was the view of Ms Steenkamp but in his own opinion the country was spending significant amounts of funds which were going to the contractors. He added that he knew the service was visible in Western Cape but remarked that there was a need to review the model used by WOF presently.

Mr Purdon noted that although Members had different views on the WOF model the contract was until 2021. Hence the contract could only be reviewed in 2021.

The Chairperson agreed that the contract would end in 2021 but remarked that there was a need to review the model because of the money that government spends on the project. He said there was a need to review the contract to ensure that the benefit spreads to other parts of the country. Also there is only one related party that is a partner to WOF and the company has a few shareholders. It does not follow the principle of EPWP. Hence the DEA should go back to review the model to ensure that government would get better value for its people.

Mr Abrahams said WOF would like to extend an invitation for the Committee to visit the WOF headquarters.

The DG said the actual headquarters of WOF was at Mpumalanga and WOF was extending an invitation to the Committee to view its operations.

The Chairperson said presently the Committee had only three weeks before rising and would visit WOF headquarters based on its schedules.

The meeting was adjourned.

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