Department of Public Works and Infrastructure 2019/20 Annual Performance Plan; with Deputy Minister

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Meeting Summary

The Committee was briefed on the 2019/20 annual performance plans of the Department of Public Works and Infrastructure, and was told that the Minister and Deputy Minister were in the process of listening to branches in the Department in order to make sure that they brought on board the functions that it had inherited from the Economic Development Department (EDD) and the Integrated Environmental Management System (IEMS). The Department had not yet finalised that work – it was still doing the necessary briefings, and had a committee that was dealing with it, with the assistance of the Department of Public Service and Administration (DPSA). In due course, the Minister and the Deputy Minister would be able to expand on these functions.

Members were given a description of the DPW policy-making functions within the construction and property sectors, the expanded public works programme (EPWP) and the extended functions that coordinate the delivery of infrastructure in the country, as well as the arm of the Department which owns more than R100 billion worth of land, buildings and provides accommodation. As a special business, the Department operates in a trading entity called the Property Management Trading Entity (PMTE) where it provides professionalised service delivery and provision of accommodation, raising revenue for the state and achieving cost benefits.

After the DPW and the PMTE had given detailed presentations on their objectives, strategies and programmes, Members asked what the Department was doing about transformation, the immovable asset register, land audits, and DPW buildings that were hijacked -- and what was being done to recover them. There were also questions about the development of artisan skills, abuse of the expanded public works programme (EPWP) for political purposes, measures to combat fraud and corruption, maintenance and renovation at Parliament -- and whether Parliament was going to move Pretoria.

The Deputy Minister said the constitution enjoined the Department in its founding provisions to create an environment which addressed past injustices. The Department therefore did not have a choice but to live up to the expectation of South Africans to realise transformation and social justice. Its programmes were designed to continue to address transformation.

Meeting report

Opening remarks

Ms Noxolo Kiviet, Deputy Minister: Department of Public Works and Infrastructure (DPW), said the DPW was present to indicate the amount of work it was facing. It was doing its best to handle it all, and any Department that required working space should knock on their its doors, as it was the landlord of the state. It had to be on its toes, because it was the DPW’s responsibility to fix things.

Mr Sam Vukela, Director General, said the Department’s presentations would deal with the DPW and the Property Trading Management Entity (PTME). They would refer to the Department without specifically covering the new functions that had been taken over. The Minister and Deputy Minister were in the process of listening to branches in the Department in order to make sure that they brought on board the functions that the DPW had inherited from the Economic Development Department (EDD) and Integrated Environmental Management System (IEMS). The Department had not yet finalised that work – it was still doing the necessary briefings, and had a committee that was dealing with it, with the assistance of the Department of Public Service and Administration (DPSA). In due course, the Minister and the Deputy Minister would be able to expand on these functions.

Department of Public Works: Annual Performance Plan 2019/20

Mr Imtiaz Fazel, Deputy Director General (DDG): Governance, Risk and Compliance, presented the Department’s Annual Performance Plan ( APP). The presentation was conducted in three parts -- the strategic overview on which the Department operates; programme performance indicators; and linkage to long term infrastructure plan.

Departmental structure

He said the DPW was the main department, with the main vote. He described the DPW policy-making functions within the construction and property industries, the expanded public works programme (EPWP) and the extended functions that coordinate the delivery of infrastructure in the country, as well as the arm of the Department which owns more than R100 billion worth of land, buildings and provides accommodation. As a special business, the Department operates in a trading entity called the Property Management Trading Entity (PMTE) where it provides professionalised service delivery and provision of accommodation, raising revenue for the state and achieving cost benefits.

The programme’s budget structure was highlighted, with two separate budget structures that reflect the programme plans. Firstly, there were the DPW programmes which reflect the administration plans, the intergovernmental coordination plan (which include professional services) the EPWP, the property and construction industry policy and research unit, which focuses on policy making, and finally prestige policy, which focuses on prestige clients as well as the organisation of public events.

The delivery value chain through the PMTE, reflects administration, real estate investment services, construction project management, real estate management services, real estate information and registry services, and finally facilities management which deals with the maintenance of state-owned businesses.

The Department highlighted that it continues to improve the quality of its accountability documents, particularly in performance information, aligning it to planning, budgeting, implementation, monitoring and evaluation, and reporting in line with the government-wide monitoring and evaluation framework. The APP had been developed with a clear understanding and acknowledgment of the state of the global and local economy.

Mr Fazel said the Department had reprioritised appropriately to ensure it continued to deliver on its mandate within the budgetary constraints. The priorities that had informed the 2019/20 annual performance plan included:

  • Driving employment to reduce poverty and inequality through the EPWP;
  • Improvement of workplace performance and access to job opportunities through in-service training and the implementation of skills development programmes;
  • Supporting of black industrialists to build a new generation of black and women producers who were able to build enterprises of significant scale and capability;
  • Investing in the incubation of small businesses, co-operatives and township enterprises; as well as
  • The use of entities and the six professional councils as agents for advancing economic and social transformation.

The presentation summarised the APPs for the DPW and PMTE and their Llinks to government-wide plans. The Department had a clear linkage between the performance indicators and the National Development Plan (NDP), as well the Medium Term Strategic Framework (MTSF).

The Department was now closing off the final year of its five-year strategic plan in 2019/20 before going into the next five years. During this period, the Department was aligning with MTSF outcome four, which focused on decent employment through inclusive economic growth, with emphasis on the spatial imbalances in economic opportunities addressed through public employment schemes such as the EPWP. The Department was linked through MTSF outcome five, which called for a skilled and capable work force to support an inclusive growth path, and outcome 13, which promoted an inclusive and responsive social protection system. In this regard, the Department was dealing with sub-outcomes 1 to 3, which dealt with reformed social welfare sector and services, early childhood development (ECD) services and community development interventions. All these outcomes were linked through the MTSF to the APP.

The APPs were also linked to commitments outlined in the plans that arose from the State of the Nation Address (SONA). These were:

a)         Driving employment to reduce poverty and inequality through the EPWP.

As part of expanding the programme, it was identifying new opportunities to expand the jobs created. To further improve governance, the Department was developing an EPWP policy that would clearly define the roles and responsibilities of its implementers and coordinators.

b)         Improving workplace performance and access to job opportunities

 This would be achieved through in-service training and implementation of skills development programmes. The Department had structured capacity building programmes in place, including the candidacy programme, internships, artisan training and placement, as well as technical learnerships, which offer structured skills transfer and mentoring opportunities.

c)         Transformation of the property and construction sectors.

The Department was undertaking a policy review to facilitate socio-economic transformation within the built environment. This included policy reviews of White Papers, the Council for the Built Environment (CBE) and the Construction Industry Development Board (CIDB) Acts. It continues to support the construction sector charter councils to ensure that parameters for transformation in the construction industry were set and measured to determine progress.

d)         Re-industrialising/stimulating manufacturing.

The supply chain management (SCM) policy and internal directives were designed to ensure local beneficiation and enforce mandatory sub-contracting to people within designated groups. The consolidated procurement plan ( CPP) of the Department was being used to leverage the procurement spend to advance the designated groups through targeted procurement/pre-qualification and mandatory sub-contracting.

e)         Supporting black industrialists to build new generation of black and women producers able to build enterprises of significant scale and capability.

The intervention measures identified by the Department to support this priority were related to the full implementation of the Preferential Procurement Regulations (PPR) 2017, largely to effect targeted procurement from designated groups and/or mandatory sub-contracting to designated groups in bids that were above a prescribed threshold.

f)          Investment in small, medium and micro enterprise (SMME) and cooperatives incubation

The intervention by the Department had been specifically to set aside 30% of all procurement to the groups that were designated as small businesses, co-operatives, township and rural enterprises.

g)         Entities and professional councils as agents for advancing economic and social transformation

The Department would give greater attention to improving the governance of its entities to ensure their alignment to Departmental priorities, as well as ongoing monitoring and evaluation of performance.

Mr Fazel highlighted the planned policy initiatives. On 4 September 2018, Parliament had adopted the report on the Expropriation Bill [ B4D-2015], following a motion by the Chief Whip of the majority party. Accordingly, Parliament’s previous decision to pass the Bill had been rescinded, thereby rejecting it in terms of Joint Rule 203(3)(c). The redrafted Expropriation Bill 2019 had been gazetted for public comment on 21 December 2018. The Department was processing the draft Public Works General Laws Amendments and Repeal Bill that had been developed to repeal or amend legislation or provisions in legislation assigned to the Department that were inconsistent with the constitution or were redundant or absolute.

The Department could conduct a review of its White Papers: “Public Works towards the 21st Century, 1997” and “Creating an Enabling Environment for Reconstruction, Growth and Development in the construction Industry, 1999,” towards the development of a new White Paper and ultimately enabling legislation. The Department would review the Council for the Built Environment Act, 2000 (Act No.43 of 2000) to address the various challenges within the regulatory environment that had been experienced within the built environment in the past few years. The review of the CIDB Act would take into consideration the need to strengthen the regulatory and development role of the Board.

The development and finalisation of a business case to ensure the financial stability of the Independent Development Trust (IDT) was under way. A mandate to determine the scope of its services was being drafted and finalised which would be coupled with human resources and finance models towards a comprehensive business case. Upon finalisation, the business case would be submitted to the Joint Evaluation Committee (JEC) of the National Treasury and the Department of Public Service and Administration for approval.

In its APP, the DPW had considered the external environment. The economic overview, which indicated low growth, coupled with unchanged government revenue projections, posed a huge constraint to the already compromised fiscal base. Given the various spending pressures resulting from wage agreements, policy priorities and various funding needs required by state-owned entities (SOEs), government was likely to exceed its expenditure ceiling. These dynamics were expected to continue increasing government debt.

The labour market overview recognised that although employment had increased, the unemployment rate measured 27.1% at the end of the fourth quarter of 2018, which was below the rate of 27.5% seen in the fourth quarter of the prior year. However, the increase in employment over the year was not enough to cater for the overall increase in the economically active population. This increase could lead to an understatement of the unemployment rate, as the discouraged job seekers were regarded as not being economically active even though they would work if given a job, but had given up looking mostly due to a prolonged period of searching.

In the construction sector, South Africa’s overall gross fixed capital formation ( GFCF) had been about 20% of gross domestic product (GDP) over the past five years, which was low given the growth targets desired in the National Development Plan.

There were five external factors influencing service delivery.

There was a need to raise employment levels by providing a support environment for growth and development, while promoting a more labour-absorptive economy. The lack of strong growth had severally limited the capacity of the South African economy to create the jobs needed to address the needs of an increasing working-aged population and the backlog reflected in the unemployment rate. In the above socio-economic context, the EPWP contributed to both short-term social protection and long-term socio-economic development. The programme was therefore a form of non-contributory social assistance focused on providing employment to the under- or unemployed poor. The income transfers alleviate poverty and limit its spread through the work, while infrastructure was also developed and services were delivered to poor communities.

Tansformation within the property and construction sectors was another challenge. The Department drives its transformation agenda through various interventions, including advocacy and awareness programmes, monitoring the implementation of empowerment programmes, as well as initiating training and capacity-building programmes for designated groups. The Department must formulate and oversee the implementation of policy instruments that promote the transformation, growth and effective regulation of the construction and property industries.

Skills need to be developed in the build environment. The key strategy in addressing the skills shortage was to restore the skills pipeline through consolidating and managing the implementation of the black economic empowerment (BEE) skills pipeline strategy throughout the sector. The availability of professional skills within government would minimise over-reliance on consultants and decrease expenditure in this regard.

Promoting good governance with the public works sector was essential. In proposing ways in which accountability might be improved, the Department recognised that extensive accountability already existed in the sector. As it considered ways of improving accountability, it would also need to look at strengthening capacity to support existing and new demands within the sector.

Mr Fazel said that given insufficient economic growth and socio-economic transformation, tight alignment of the NDP and the Budget was required. This meant ensuring that priorities in the plan were adequately funded, funds were reallocated from non-core and non-performing programmes and that the funding was used appropriately for more urgent interventions. The expenditure had been reviewed as per technical guidelines, and all items had already been adjusted in compliance with the cost containment measures and the proposed budget reductions.

Regarding the internal environment, the Department highlighted three sectors dealing with business improvement. It had been granted funding to expand the Young Professionals Programme, and there was the SA Property Owners’ Association (SAPOA) programme which was aimed at professionalism of the PMTE, and the subsequent introduction of the Public Works academy projects, which aimed to rebuild the technical and professional capacity of the state.

Mr Fazel referred to the prevention, detection and investigation of fraud and corruption. Over the years, the focus of the Department had also been on preventing incidents of fraud and corruption through pro-active management of vulnerable areas. Investigations conducted had focused on identifying internal control deficiencies and recommending appropriate mitigating factors to prevent a reoccurrence of fraud and mismanagement in areas identified.

The service delivery improvement programme (SDIP) aimed to provide a focused approach to continuous improvement of key services and products in line with the Batho Pele Principles, which served to ensure effective and efficient service delivery. The next critical step in the project was the development of a service delivery model of how the Department would deliver on the services and products that were identified in the five-year strategic plan.

In line with its internal policies, processes and systems, the Department would introduce the national framework for technical capacity building of the state, which aimed to facilitate, coordinate and monitor capacity-building activities within the built environment, focusing on the state. The skills pipeline for the built environment needed a unique but integrated platform. A professional services system would be developed to support the Department with knowledge and expertise transfer across the state for the built environment.

An integrity management framework (IMF) had been developed in response to the Department’s position of zero tolerance towards fraud and corruption and a commitment to public service delivery. The purpose of the IMF was to drive ethics as a key consideration of the turnaround strategy. Following the approval of the revised Public Service Regulations of 2016, the Department had commenced with the review of all human resources (HR) policies affected by the new regulations

The Department was exploring the development of an Enterprise Resource Planning ( ERP) system for the broader public works sector, to create a single view of the immovable asset register. SAS had been adopted as the business intelligence tool. The strategic management module had been developed and the APP loaded on the SAS tool, and the single asset register views had also been developed.

The lack of a Disaster Recovery Plan (DRP) had been a recurring audit finding. In this regard the Department had finalised and signed off the DRP and was in the process of its implementation. It was currently undertaking an SCM review of standard operating procedures that were aimed at improving efficiencies and turnaround times over and above accommodating changes in the SCM landscape. A draft EPWP policy would be developed by the end of 2018/19 for Cabinet approval in 2019/20.

The current EPWP reporting system would be enhanced to EPWP-RS Version 2 to accommodate the capacity of offline capabilities. In addition to the system enhancements, the EPWP was currently engaging with the Department of Home Affairs (DHA) to request the automatic downloading of original identity document (ID) copies.

The draft CBE Amendment Bill, the six Built Environment Professional Council (BEPC) Amendment Acts and the draft CIDB Amendment Bill do not address all policy-related matters, so the Department had started to undertake further research and review of these pieces of legislation.

The Department had prioritised the development of the IDT business case, the IDT Act and plans to ensure financial sustainability, improve the client base and overall performance. As part of its five-year strategic plan, it had commenced a policy review directed at reviewing the 1997 and 1999 Public Works White Papers. The purpose of the review exercise was to clarify and refresh its mandate and determine whether new legislation and/or amendments or regulations were required; to strengthen the regulatory and developmental role of the Department and the public works sector in its entirety and identify and close policy gaps; to realign policy objectives; and ensure policy coherence.

The presentation summarised the challenges that the performance environment was facing. These included poor and under-reporting of EPWP work opportunities by public bodies; poor record-keeping by public bodies; non-implementation of projects as per the business plans of public bodies; implementation of standard operation procedures to improve audit outcomes; increasing the work opportunity targets;improving intergovernmental  coordination and coherence; accelerating the finalisation of legislation with the Department; improving service delivery to prestige clients, and reducing fraud and corruption.

Mr Fazel elaborated on the demand for built environment skills. The National Scarce Skills List 2015 was of pivotal importance to professional services programme as it captured all built environment occupations with a high vacancy rate in the sector. The chronic shortages experienced by the state were the same throughout the built environment sector. The National Infrastructure Plan had added further pressures on to the demand for technical skills. The list, therefore, enabled the Department to make informed decisions in conceptualising, strengthening and enhancing capacity building programmes, especially in respect of the Young Professionals and Artisan Development programmes.

Despite numerous efforts undertaken by the government, unemployment in South Africa had remained stubbornly high. The on-going global economic downturn had made this even worse and had increased the level of unemployment in South Africa even further. This increased the need for the EPWP even further as it provided a unique policy instrument for the government to create work opportunities and alleviate unemployment.

Regarding the demand for prestige accommodation, the Department had acquired additional office accommodation to reduce the shortage, as well as reduce lease costs. In order to offer a long-term solution to the prestige accommodation requirements, the Department and the secretariat of Parliament were in the process of assessing the increased needs of Parliament with a view to re-visiting the plans to construct additional office accommodation. This would also be integrated within the inner city precinct development plans to create further efficiencies and maximise the utilisation of government land and buildings. A summary of the demand work opportunities and prestige accommodation was highlighted in charts.

A key issue relating to the organisational structure following the conclusion of the matching and placing exercise, had seen the Department deactivate the unfunded positions on the Personnel Administration System (PERSAL) in line with the approved recruitment plan. All positions that became vacant subsequent to this process would either remain vacant on the new streamlined structure or be prioritised for advertisement and filling. This included positions reserved through acting appointments and against which contract appointments were made. The recruitment process had been intensified, as outlined in the human resource plan, in order to fill critical positions, address the high vacancy rate and ensure leadership stability within the Department. Capacitation of functional areas would continue in line with the priority areas as identified in the policy statement.

The focal areas within the business model of the Department were to provide policy leadership to the wider construction and property sectors, oversight of the public works sector, working with entities, BEPCs, Charter Councils etc, in order to regulate and transform the built environment; working with the CBE to open up the skills pipeline for scarce skills in the built environment in a way which better reflects the demographics of the country as well as coordinating, providing implementation support, monitoring and evaluation, and reporting on the EPWP, not only to provide work opportunities. A shared services model had been utilised which was the consolidation of specific business operations that were used by both the Department and the PMTE.

The DPW had a budget of R7.8 billion for 2019/20, the bulk of which was for the EPWP, at R2.5 billion.  R4.2 billion had been allocated for property and construction industry policy and research. EPWP had received transfers and subsidies worth R1.5 billion. The Department agencies and accounts which were transferred from its policy branch was almost R4.2 billion. Most of the budget of the DPW was in the form of transfers to other entities.

Mr Fazel outlined the targets for each of the programmes:

Programme 1: Administration

This programme’s targets were to undertake 36 initiatives to accelerate transformation agenda of the Department; to have a 3.6-4.0 index score for management practices; to initiate all investigations within 30 days in respect of validated allegations; to have two interventions recommended for mitigation of fraud risks within the DPW and PMTE; a 100%reduction in irregular expenditure; to settle all complaint invoices within 30 days; to award 75% of bids within 56 working days of closure of tender advertisements and award 90% of quotations within 30 working days from the requisition date.

Other targets were to have 80% procurement of spent bids awarded to designated groups, in line with preferential procurement regulations 2017; to fill all funded prioritised vacancies within six months from the date of advertisements; to implement one property management module (investment analysis); to have four modules enhanced ( phase 3) -- schedules for maintenance, condition assessment, lease out and construction project management.

The Department aimed to implement Phase 1 of the Enterprise Resource Planning (ERP) system for the public works sector; to have all reported fraud and corruption misconduct cases subjected to disciplinary hearing processes; and to prevent any default judgments against the Department.

The budget for the programme was R500 million.

Programme 2: Intergovernmental Coordination

The Department’s targets were to have two performance review reports for the 2019/20 sector programme of action presented to the technical Ministers and Members of Executive Council (MinMEC); to have 15 agreements signed for joint service delivery with Inter-Governmental Relations

(IGR) partners, with one review conducted on the IGR structures; to have 1 212 beneficiaries participating in the DPW skills development programme. The target to have 165 young professionals, 253 interns, 140 learnerships, 38 management trainees, 420 programme artisans and 196 on the bursary programme.

 

Other targets were to have three provinces with state capacity building programmes in the built environment aligned to the skills pipeline programme; to have 40 schools’ programme participants enrolled for built environment qualification; 40 bursary scheme beneficiaries with completed built environment qualifications; and to launch the Public Works Academy. The academy was being established in response to the decline in both the quality and quantity of built environment skills.

The budget for Programme Two was R61 million.

Programme 3: EPWP

In this programme the targets were to create 991 792 work opportunities reported in the EPWP-RS by public bodies; to have 55% youth, 55% Women and 2% persons with disabilities reported on the EWP-RS by public bodies among the mentioned designated groups; to have two data quality assessment reports produced; to support 350 contracted non-profit organisations (NPOs); to provide support to 290 public bodies with technical support; and to have one framework approved on sector convergence.

The budget for the programme was R2.7 billion, of which the infrastructure operations were taking up the bulk of R1.2 billion each. The transfers from the EPWP to provinces and municipalities in value grants was R1.5 billion, and to NPOs was R720 million. The EPWP budget was providing support to public bodies and conducting a coordination function, and a large part was in the form of incentive grants to various provincial authorities and municipalities.

Programme 4: Property and Construction Industry Policy and Research.

The targets were to draft public works White Papers submitted to the Minister for Parliamentary processes; to submit the Construction Industry Development Board ( CIDB) Amendment bill to the Minister for parliamentary processes; to provide a revised draft of the legislative amendments developed for submission to the Minister; and to submit a revised BEP policy to the Minister for approval. This was a review of all legislation in the Department.

The budget for Programme Four was R4.4 billion. The PMTE had been allocated R4.2 billion from the transfers of the Department.

Programme 5: Prestige Policy

The strategic goals for 2019/20 were to have two prestige policies approved; to have eight planned state events supported with movable structures; to have 85% of movable assets requests provided within 60 days after approval by prestige clients; and to sign off one infrastructure work list  for the prestige portfolio for 2020/21.

The budget for Programme Five was R115 million, which was mostly for accommodation and state functions. R10 million had been transferred to the Parliamentary villages management board.

Mr Fazel outlined the strategic risks for the Department of Public Works and its action plan.

Strategic risk one: Inadequate service delivery leading to the erosion of the Department’s mandate:

The action plan was the in-sourcing of capacity through the filling of funded and critical posts within the new structure; the development of a policy, guidelines/toolkit and implementation plan for business processes and service standards; to finalise the prestige policy; and to monitor adherence to norms and standards for prestige clients.

Strategic risk two: The breach of key legislation prescripts, acts, regulations and policies

The action plan was to implement the governance, compliance and ethics framework; implementation of the fraud prevention framework; and the appointment of an ethics officer.

Strategic risk three: Non-alignment of service delivery imperatives across the public works sector ( including the entities)

The action plan was to finalise shareholder compacts by three schedule 3A public entities -- Agrément South Africa (ASA), the CIDB and the CBE -- to undertake workshops with the intergovernmental structures to promote concurrence; to implement an approved public participation programme involving the executives of the Department; to review and implement the framework for the oversight of public entities; and to monitor the implementation of the programme of action for the sector.

Strategic risk four: Untransformed built environment disciplines, and construction and property industries

The action plan was oversight of the public works bill project, and a review of the CIDB and CBE Acts.

Strategic Risk Five: The credibility of EPWP eroded due to non-adherence to EPWP prescripts

The action plan was to develop a consolidated legislative framework to enforce compliance and determine roles and responsibilities of all stakeholders.

The DPW had four conditional grants:

  • The EPWP Integrated grant for provinces: Its purpose was to incentivise provinces to increase labour intensive employment through programmes that maximise job creation and skills development as encapsulated in the EPWP’s integrated grant manual.
  • The EPWP Integrated grant for municipalities: Its purpose was to incentivise municipalities to increase labour intensive employment through programmes that maximise job creation and skills development as encapsulated in the EPWP’s integrated grant manual.
  • Social Sector EPWP incentive grant for province: Its purpose was to incentivise provincial social sector departments identified in the 2014 social sector EPWP log-frame to increase job creation by focusing on the strengthening and expansion of social service programmes that have employment potential.
  • EPWP incentives: non state sector wage subsidy: Its purpose was to increase job creation through the expansion of non-state sector EPWP programmes.

There were four public entities that reported to the Department. They were the CIDB, the CBE, the IDT and ASA.

There were six Built Environment Professional Councils (BEPCs): the South African Council for the Property Valuers Profession (SACPVP), the Engineering Council of South Africa (ECSA), the South African Council for the Architectural Profession (SACAP), the South African Council for the Quantity Surveying Profession (SACQSP), the South African Landscape Architectural Professions (SACLAP) and the South African Council for Project and Construction Management Profession (SACPCMP).

Property Management Trading Entity: Annual Performance Plan

Mr Jacob Maroga, Acting Head: Property Management Trading Entity, said the PMTE concept dated back to 1997, when a DPW document had addressed the need to separate the policy and operations parts of the Department. It had recognised that the size and complexity of the state’s property portfolio may require a special structure to take care of it, with capacitation and financing, in order to execute the portfolio. In 2006, a trading entity was approved as an interim structure by National Treasury and Cabinet, but was fully initialised only in 2011 to 2012.

The difference between the PMTE and the Department was that the PMTE resided within the Department, but handled the key operations of the Department from a technical perspective. It reported to the same accounting officer and same executive authority.

Firstly, it provides accommodation for the state to do its business -- to deliver services to the citizens. It was in the value chain of the service delivery for government. This was the most important part of public works. Secondly, the new role that had been envisaged within the macro organisation was the issue of recognising infrastructure development as a stimulus for the economy. This required the coordination of infrastructure development, which was a new role. The PMTE was in the process of understanding what this meant, and its impact on the Department.

The operationalisation of the PMTE was at the centre of the business improvement programme to institute efficiencies and cost effectiveness in the provision of professional property management services to the state. The 2019/20 financial year marked the end of Phase II of the seven-year plan.  

Mr Maroga outlined the business improvement intitiatives within the PMTE’s internal environment:

Operation and sustainability. There was a programme addressing all the steps that were required to initialise and bring forth financial sustainable measures for the entity.

Business process reviews. These would focus on the optimisation of processes through best-practice benchmarking, regional and national piloting, as well as alignment with strategy, policy, the PMTE operating model and integration with information communication technology (ICT) systems. This would be followed by the final process design and approval for final implementation.

The user charge model.  PMTE provides accommodation for clients, for which it receives rent. It was now conceptualising a scientific method to calculate the rental that clients should pay. This user charge model would make visible what the real costs of the services were, and ensure it charged clients the right amount for rentals.

Optimised billing. Currently, when PMTE billed clients, the lump sum was not itemised and clients wanted to know what the bill covered. It was starting with few clients, but in future the system would cover all of its clients.

Reduce the bank overdraft. The training entity operates under the rules of the National Treasury, and one of the key rules was that it had to balance the books. Currently it had an overdraft which was hovering at about R2.5 billion, and its reduction was important in terms of compliance with National Treasury regulations.

Audit improvement plan. When the PMTE presents its annual report, including the Auditor General’s (AG’s) report, one would see a difference between the audit outcomes of the main vote, which were separate from the PMTE. The main audit issue was that the highest standard of accounting was required for the entity, and it was dealing with this.

Business system improvement. This was mainly the implementation of automation in the business system, using the IT platform. This was the most critical business improvement initiative around the establishment of PMTE. It was in the process of implementing a property management system and financial management system for the management of its immovable assets throughout the entire asset life cycle.  

Mr Maroga indicated the accommodation needs of the PMTE’s key clientsand the capital and leasing costs involved. Over the three-year medium term expenditure framework (MTEF) period, major government departments would require an additional 171 388 square meters of office space at a cost of R5.1 billion. Another 169 397 square meters of office space would be leased at a cost of just over R193 million.

He gave details of the entity’s individual programmes.

Programme1: Administration

This focused on accounts control management (ACM) and the financial targets. These included the 30-day payment requirement, and the number of new revenue services incubated. It had started to look at new money for the portfolio. Part of the rationale for the PMTE was that it was supposed to look at the business possibilities in the portfolio and enable it to develop income streams.

Programme 2: Real Estate Investment Services 

This highlights every investment that PMTE makes and its disposal. This was the branch that did the analysis of all the investment parameters. It also had to respond to the client user management programme. It dealt with both investments and with the response to clients. Also key to this division, was the issue of responding to land issues -- how it identified land for disposal for socio-economic development, for restitution and for special transformation. This branch also focuses on the identification and the processes to deal with land matter, and at the development of government precincts. It was looking at rural towns to see how it could consolidate accommodation for the state, providing state services located in one area so that citizens can receive services at one place.

Programme 3: Construction Project Management

The goal of this programme was to meet user department accommodation requirements as per the approved Infrastructure Programme Implementation Plan (IPIP). In total, the entity had about 3 000 active projects, with a value of R26 26 billion. An objective was to use infrastructure development for economic stimulus.

Programme 4: Real Estate Management Services

This programme acquires leases from private landlords. Currently, the objective is to reduce what is leased and to increase the government properties that the clients use. The major goal in the current period was the renewal of the current leases, as most of them had lapsed. In the past 12 months there had been a big effort to renew the leases that had lapsed. Leases that do not have valid contracts expose client departments to irregular expenditure -- in some cases, very expensive leases as they were on a short term basis.

Furthermore, there had been a Cabinet decision to reduce leases for security cluster clients, as it was not desirable to have police stations or defence facilities that were leased. Currently there was a lease portfolio in the security cluster which needed to be reduced, and this programme would make a contribution towards that.

Programme 5: Real Estate Information and Registry Services

This programme was responsible for the asset register. The rebuild of the asset register had been on-going for a while. The programme was at a point where significant progress had been made, as now there had been an auditable asset register for the past three years. The programme had been able to put in front of the AG an auditable asset register, and the AG had confirmed many aspects that had been represented. However, the evaluation was a challenge, and a report would be given when the committee met to consider the annual report and annual audit.

Programme 6: Facilities Management 

This was the division that manages the maintenance and operation of the departments’ facilities. When clients have issues, this was normally the area that they came to -- when facilities need repair or when the maintenance response time was wrong. In 2017, the South African Institute of Civil Engineers had done an infrastructure report on public works facilities, and on a scale of A to E, the public works sector was given a D rating, which meant that the facilities were at risk of failing. This was across the provinces, and referred to the state of repair of the assets. In reaction to this, the programme looks at proactive maintenance strategies, and makes sure that the funding requirement for maintenance was visible to the National Treasury.

This programme also looks at resource preservation, focusing on electricity and water reduction.

Mr Maroga concluded by indicating the risks that the Department was managing for the PMTE.

The first risk was inadequate service delivery, leading to the erosion of the Department’s mandate. This was self-explanatory, in terms of the state of repair in the portfolio, and there were a number of serious actions that the Department was undertaking to deal with the situation..

He highlighted the inadequate maintenance and safeguarding of state assets. There were 90 000 facilities which the PMTE was responsible for maintaining, but three years ago a “Top 300” programme had been introduced to identify the top key facilities in terms of service delivery of the state and begin to introduce advance maintenance programmes that dealt with the performance of those facilities. Once this programme has been conceptualised, this would be the basis through which facilities management would be done across the entire portfolio of the state.

There were a series of actions that were being undertaken to deal with inadequate delivery of national government priorities. Among them was the green building policy, which addresses the green issues as the government department responsible for facilities of the state, and as a regulator of the built environment.

Another risk was the weakening financial viability and sustainability of the PMTE. Part of its work was to calculate the true cost of managing state property, and for this it had developed a financial model that would enable the running of the portfolio from the financial point of view. The other dynamics that the Committee should be aware of was the state-to-state business. All of the Department’s business was state business, meaning that the Department got its revenue from other departments. It had been found that the ability or willingness to pay another state department, compared to the state paying a private sector entity, was different. Looking at leases, for instance, there were very few debtors, because if there was a debt with the private sector they would lock the Department out. But when it came to state-to-state, one would find that there was a debt that went on for years, but the DPW did not have the means to lock out another department because it was government-to-government. This created problems in terms of revenue collection.

Discussion

Mr S Mohai (ANC, Free State) said he did not understand what “prestige clients” meant. What was a prestige client and what was a non-prestige client, if all the clients were the state?

Mr Vukela replied that prestige clients were the legislature executives and the judicial executive. The Minister and Deputy Minister had already given instructions to change the name to reflect who the Department was serving properly. 

Mr Mohai said there was always a problem with the AG regarding the assets of departments, particularly to those prior to 1994 and after, when it was found that assets like paintings and buildings no longer existed. He asked if that issue had been resolved, because some the paintings were very expensive.

Mr T Brauteseth (DA, KwaZulu-Natal) said the first thing that occurred to him was the numerous references in both presentations as to how tight the financial environment was. He pointed out that the Department had brought 19 members of their delegation to the meeting. It had been unnecessary to bring 19 people and then complain that the financial environment was tight.

Mr Vukela replied that the delegation could have been bigger, because he had requested that when the Department was in Cape Town, the regional offices should be part of the deliberations. If some of the people of the delegation were in the area for other business, they were normally required to attend the meeting. 

Mr Brauteseth said that during 2014/15, the former Deputy Minister had advised that the DPW had just completed an audit of all immovable property assets of the new entity, and of the DPW as well. He had not received any confirmation that this had been done. In the second presentation, Mr Maroga had used the word “auditable.” Did the Department now know how many properties they had and how they could assign values to them? What did the word auditable mean?

Mr Maroga replied that the situation was that the Department now had an auditable asset register. The only arbiter of whether the asset register audit was credible was the AG, because the Generally Recognises Accounting Practice (GRAP) compels the Department to import their asset register in a way that complies to GRAP, and the AG was the only arbiter. Since 2017, the Department has been obligated to report in terms of GRAP, and there were five areas that the AG looks at in terms of the asset register. Of the five, the AG ticks four off, but the one that the Department was having a challenge with was called “valuation,” which means that one must measure the size of the property and measure its value accurately. It would continue to be a problem, because it requires a country-wide proper measurement of the Department’s assets.

Mr Brauteseth said that it would be very concerning if five years down the line, the Committee was no closer to knowing what the Department owned. Around the same time, the former Deputy Minister had advised that 350 000 instances of irregular expenditure had been discovered in the Department. The Standing Committee on Public Accounts (SCOPA) had asked repeatedly for an updated list as to what had happened to the people involved in these 350 000 incidents -- what had happened to them? There were lofty ideas in the presentation about how the Department was going to cut down and make reductions, but did it have any lofty ideas on how it was going to proceed with the disciplinary processes?

Mr Fazel replied that the Department had not failed to initiate an investigation within 30 days. The challenge, however, was to complete it within a reasonable time. Some of the investigations extend over a long period of time.

Mr Brauteseth asked about the intergovernmental relationship relating to various projects being undertaken around the country, and also about the transformation mandate of the Department. What was the Department going to do about the various user/business forums that emerge around the country? The “mafia groups that pop up” were not on any database and no one has ever heard of them, but they say they are local business forums and were local businesses, and they wanted 10% of the business contracts. This directly affected the work of the DPW. When was the DPW going to take definitive action, in collaboration with the South African Police Service (SAPS) to root this problem out? These mafia groups arrive to stop projects and threaten the contractors on the site. It slowing down the Department’s work around the country. It was also affecting EPWP employees, because they were being chased off site and their lives were being threatened. This was something that had to be taken very seriously.

He commented that in the tight financial environment, Parliament was not being moved to Pretoria. He concluded by asking about the transformation charter and the energy challenge being experienced in South Africa. If the Department was involved in the built environment and the construction industry, did it have any ideas or policy proposals about how it was going to regulate the inclusion of green initiatives in the industry? For instance, every house that got built would have to have solar panels, the right lighting and the ability to harvest water. It would require a standard package when a house was being built to have those additions.

He commented on the gym that was being built, asking if that was the Department’s or Parliament’s job.

Mr Vukela replied that the DPW had fulfilled their infrastructure responsibility by providing a facility, but not the contents inside the infrastructure. It had had a session with the Parliamentary officials to take on the responsibility of ensuring that the gym had got the necessary facilities inside.

Mr M Rayi (ANC, Eastern Cape) said that the select committee had a disadvantage because it dealt with a number of departments, not just one department. It tended to make comparisons as well between what other departments were doing and what the DPW was doing. They understood that there was a framework for all the Departments to follow in their reports, but there were departments which were not reporting on some of the issues. In this case, there was no target regarding the audit under the key performance indicators (KPIs), and this made it difficult to establish the audit outcomes for both the MTE and the DPW. Nothing had been mentioned with regard to the vacancy rate in terms of the KPR, and there was no target for the percentage of women employed in senior management positions or for people with disabilities. The Committee would be unable to conduct oversight in those areas.

He commented on an issue that had been raised in another committee regarding the EPWP in relation to the minimum wage. The national minimum wage commission was going to consider increasing the current minimum wage which was currently R20 and R15 for domestic workers, and R11 for the EPWP. What would the Department’s stance be if the commission raised the R11 minimum -- was it prepared for that in terms of the budget?

He said that during the DPW presentation, every time a section on a programme ended, the budget would then be mentioned.  However, that information was not provided to the Committee. Regarding the EPWP, it was stated that a policy would be developed, although the challenges regarding to the issues of coordination and issues of implementation were not mentioned. Who was responsible for supervision, because when driving around one sees EPWP employees sitting under trees and not working? Would the policy be able to address such things?

Mr Fazel replied that the EPWP was a national programme, and EPWP job creation and work opportunities were funded by the public bodies and not by the Department. For example if there was a problem with the municipalities, the Department would not be able to investigate as such, because it was the public bodies’ budgets and projects. What the Department could do was provide guidance. However where the Department could investigate would be in the area of national coordination. When there was evidence, the Department would approach the public body and conduct an investigation in the interest of the credibility of the EPWP programme. This had been done in the past.

Mr Rayi  said that now the mandate had been extended to include the infrastructure, what did it mean in terms of doing oversight? One could not wait for the processes to be concluded, or go to the Economic Development Department, as it was being phased out. There was no EDD Minister responsible for infrastructure and the coordination of the Presidential Infrastructure Coordinating Council (PICC). What was going to be the situation with regard to holding the Department accountable?

Mr Vukela replied with the regard to the role and responsibility of this Committee in relation to the extended mandate. The Department was in a transitional period, and even though the DDG was no longer there, the function remained and therefore they were working with them. They were not yet incorporated in the DPW, but had been given timelines. The formal implementation of the reconfiguration was that by 1 April 2020 it should be fully implemented. There was a reconfiguration task team which was working with those departments whose responsibilities it was taking over,, ensuring that a working relationship was developed so that when reports were required, they could be provided. There would not be a shortage of reports, even if they were not presented immediately, but there would always be a response if issues were raised.

Mr Rayi commented that when parties were invited to present to the National Council of Provinces (NCOP), their presentation should be different from that given to the National Assembly (NA). The presentation should also address the provinces’ issues individually.

Was there any allocation from the Department to the Built Environment Professional Councils, or were they independent from the Department financially?

Mr Fazel replied that the councils were funded through their own revenue, which was made up of the membership fees of their members, but they did struggle. For example, the land architect profession was so small they were unable to survive, and they had made a request to the Department for support in order to become self-sufficient

Mr Rayi commented on the amount of legislation that the DPW was bringing to Parliament. Normally, departments indicate the list of the bills that they would be bringing to Parliament in their APPs in their first year. For the first three years, nothing happens, and then in the fourth and last year a lot bills come before Parliament and most lapse because there is no time for Parliament to consider all of them..

Mr Fazel agreed that the practice of dumping legislation in the last year of the administration term was not a good practice, and they were avoiding that. The year ahead would see the commencement of the process. He acknowledged that in past years, the Department had not performed well in this area.

Mr Rayi asked for provisional information regarding what was happening to projects that the PMTE highlighted, and wanted to know how many assets the Department owned. On the land issue, he said that next to the East London airport there were shacks being built on one side, and citizens were building nice houses on the other side. The Department had a tendency that once land that belonged to the DPW had been occupied, they would give it to the municipalities as a gift. What was the Department doing with the land that had been occupied? It gave an expectation to the people that had been occupying the land for years that it would be automatically be given to them.

Mr Fazel replied that the Department had an operation that was called “Bring Back.” This was a difficult project. The Department now had a list of 1 500 properties that it owned that had either been hijacked or illegally occupied. The next step was to regulate and regularise the occupation -- taking back the property or selling it. Often the Department found that the properties were occupied by homeless people. This needed to be dealt with in a sensitive manner. He reassured the Committee that Operation Bring Back was there, and would be implemented by Mr Maroga in the next phase, which would deal with the East London airport as well as the abandoned buildings in dilapidated states.

Ms B Mathevula (EFF, Limpopo)  asked about artisan skills, referring to the shortage of artisans in South Africa. How many in the current financial year was the DPW going to train, and how many had been trained in the previous financial year? How many were employed nationally and provincially?

Mr Fazel replied that he would provide a response on the numbers in writing.

Ms Mathevula asked how the Department was going to address the challenge of projects being delivered on time. The construction of schools was taking time for the Department to finish. With regard to transformation, particularly in the building and construction sector, there were a lot of females at the moment.  How was the Department going to make sure that there was a balance?

Mr T Apleni (EFF, Eastern Cape) commented that he could not emphasise enough that there were problems with the EPWP. He was glad that the Department had begun to realise those problems and was zooming in, especially over the issue of hiring. In most cases, most of the projects in the EPWP were used by certain individuals for their political purposes, and it was worrisome to see ward  councils using EPWP projects for political reasons, such as hiring just a certain section of the community. In most cases, it would be found that the programme did not serve any purposes.

Government departments needed to work together to fight fraud and corruption. A war had to be declared on it. It was really compromising the image of South African -- not only nationally, but internationally as well. More measures for fighting fraud and corruption were needed in all Departments.

Mr Fazel replied that there had been a number of Special Investigating Unit (SIU) proclamations in the Department. There was a stand-alone anti-corruption unit. The Department had charged over 150 people on various allegations of fraud and corruption. It had close to R1 billion recovered through the asset forfeiture unit, and was recovering close to R400 million from landlords for space sold to the Department for more than what had been specified in lease agreements. With regard to the investigation of fraud and corruption, the Department was on top of it. It was focusing on prevention, consequence management and accountability.

He commented on the issue of buildings that were collapsing. No one seemed to be doing anything about these buildings. Some were being vandalised, and in other areas buildings were being used as factories. Such buildings should be used, instead of wasting resources.

Regarding transformation, especially in the construction sector, radical intervention was needed as one could not continue renegotiating transformation. At some stage, the government needed to intervene harshly. Black people could not keep on sitting under the table looking for scraps from someone else. Transformation needed to be addressed radically. Some departments kept on talking about 30%, but not clarifying what the 30% was about. This continued to happen, and people were living like foreigners in their own country. It had been 25 years now, approaching 30 years into democracy, and there was nothing tangible to show transformation in the lives of black people. When addressing the issue of equality, it had to be done radically.

He disagreed with Mr Brauteseth regarding the delegation that the Department brought to the meeting. In the long run, the 19 members would have to be reduced, but when starting a new term everyone needed to be on the same page and understand what had happened in order to be able to assist with implementation. If the delegation was left behind in the early stages of planning, they might not understand what the Department was trying to achieve.

Mr E Landsman (ANC, North West) said that the issue of transformation was non-negotiable. Every time the Committee met, the Department must be able to indicate where it stands and where it was going. This Department was key to helping the President create the six million jobs. How did it plan to do that? How did it plan to address the triple challenges of unemployment, inequality and poverty -- not for a certain few, but for the majority?

He said that many buildings had been looted in the provinces and regions. In the North West there were many building taken that belonged to the DPW, and it was not doing anything. He asked if the Department was in collusion with the companies that took the buildings, or if it was simply not aware. Where was the audit of the buildings that had been looted, and where nothing was being done? Inequality could not continue when the Department was the key driver of economic growth and job creation.

The Department of Human Settlements had stated that they were going to take the land, and that they would be the first department to expropriate land. They were saying it openly, and the Minister did not mind it. What was the plan of the Department? The inequality gap was getting wider. People were suffering more, and the rich were getting richer. He asked why the Department was defending white monopoly, because a lot of money had been stolen during the 2010 collusion, and no one was saying anything. The money that was stolen had been from this Department.

He commented that the Committee would support the DPW. He liked the fact that it had brought their delegation, as it showed that they took the Committee seriously as a portfolio. Whether the Department was using a top to bottom, or bottom to top, approach, it must work as an approach that was working was needed. Where was the DDG for Operations, as the Committee was made up of provinces? The DDG was the key person when it came to provincial operations, and the Committee was part of the NCOP. The regional offices fall under the DDG, and apart from having different offices, it was one Department. There was also a regional base in each province, which was called the regional office, unlike other specific departments. The DPW’s report must be more detailed regarding each province. He asked for a land audit and an audit of all buildings looted.

Ms M Moshodi ( ANC, Free State) asked that next time there should be more females that males in the delegation.

Mr Brauteseth, clarifying his earlier question on transformation, asked how the Department was going to balance the needs of transformation with the needs that Mr Landsman had pointed out. How was it going to administer transformation with the requisite skills that were required to get the job done?

The Chairperson asked whether the expropriation was linked to the process that was unfolding under the Constitutional Committee. The bill had been passed and sent to the President, but the President had not signed it. The assumption was he was not signing it because it did not make provision for expropriation without compensation. Were the two process linked or not?

At a previous meeting, one the concerns that had been raised by the Department had been the maintenance and renovations around Parliament. There was a lot of frustration regarding its reluctance to renovate Parliament, and the issue of office space had been raised.

Department’s response

The Deputy Minister replied that Parliament in Cape Town did not have enough space. There had been discussion about moving it to Pretoria. The Department had been tasked to look at the viability. While it was busy with the viability study, the question was whether it should start increasing space in Parliament when there was a discussion about moving. Those were the questions that had arisen, so she implored the Committee to be patient. The Department would try and push for the study to be done quickly in order to finally make the decision as to whether Parliament would be moved or not. Once the decision had been made, then the question whether or not to increase space would be answered.

Mr Vukela replied on the expropriation of land. There were two parallel processes. The constitutional review committee was doing its work, and the Department was dealing with the comments on the bill that had been published for comments. There was an interdepartmental committee that was chaired by the Deputy President, working with on report.

Mr Fazel replied to the issue of employment equity, and said a written report would be provided on the number of senior management service (SMS) level personnel in respect of gender and disabilities. He agreed that the vacancy rates for employment of women and people with disabilities were missing in the Department’s plans, and they realised that when they were next planning, these areas needed to be included. The new MTSF demands the inclusion of these areas, as well as the targets for youth employment and other challenges involving the youth.

Mr Fazel replied to the questions regarding transformation in the construction sector, and said there was a need for an entire briefing on the matter because the Department had not yet achieved its goal. It was developing its new five-year plan and had acknowledged that when it came to transformation it was not simply about numbers, but was also about land and using policy leverage and regulatory intervention to expand the industry in order to give more people an opportunity to spread the work around, to create skills and generally change the entire face of the construction industry, including the property sector. It had taken into consideration balancing the transformation objective to ensure that the job got done. 

Deputy Minister said transformation was not a choice, it was an obligation. The constitution enjoined the Department in its founding provisions to create the environment which addressed past injustices. The Department therefore did not have a choice but to live up to the expectation of South Africans to realise transformation and social justice. Its programmes were designed to continue to address transformation.

Mr Rayi suggested that the Minister and the Deputy Minister visit the Parliamentary villages so that they could see the conditions themselves. He agreed that the term “prestige” should be changed.

The Deputy Minister replied that the Minister had already directed that she visit all the residences of Members, Ministers and Deputy Ministers in order to try deal with all the complaints and deal with the challenges. On 1 August there would be a meeting with the Chairperson of the NCOP and the NA Speaker to address these issues.

The meeting was adjourned.

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