Transformation of the IDT: DPWI briefing with Deputy Minister

Public Works and Infrastructure

30 October 2019
Chairperson: Ms N Ntobongwana (ANC)
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Meeting Summary

The presentation made by the Department of Public Works and Infrastructure (DPWI) focused on the issues affecting the functioning of the Independent Development Trust (IDT) which had not yet been resolved. The Department acknowledged there had been delays, but emphasised the lengthy administrative processes which had hindered the necessary actions to accomplish the objective of transforming this government entity.

The Department explained that the IDT had been established as a trust to service civil society and unlock the potential of communities, supported by a R2 billion grant, which was to be invested and the returns used to fund it. However, a decision had been made to refocus the IDT from being a development finance institution (DFI) into a social delivery institution for the government, which meant that the received grant saw no returns, but was used to sustain the organisation. To counteract this, the IDT began to introduce cost cutting mechanisms by charging for offered services. This strategy was unsuccessful and did not yield results, as organisations and government departments were unable to pay for the received services, and this further worsened the economic state of the company. As a long-term plan, there was a need to develop a business case that spoke to the financial sustainability of the IDT.

The IDT was established as a trust to service civil society and unlock the potential of communities. This initiative had been supported with a R2 billion grant, which was to be invested and the returns used in funding the entity. However, a decision had been made to refocus the IDT from being a development finance institution (DFI) into a social delivery institution for the government, which meant that the received grant saw no returns, but was used to sustain the organisation. To counteract this, the IDT began to introduce cost cutting mechanisms by charging for offered services. This strategy was unsuccessful and did not yield results, as organisations and government departments were unable to pay for the received services, and this further worsened the economic state of the company. As a long-term plan, there was a need to develop a business case that spoke to the financial sustainability of IDT.

Members were concerned that closure of the IDT would lead to job losses, and suggested alternatives such as transferring its functions to a suitable entity, or combining them with other entities involved in infrastructure development. The Deputy Minister stressed that closing the IDT was not an option. Members were disappointed that the briefing itself had offered no solutions, and merely repeated the challenges of which the Committee was well aware. The Department was urged to treat the matter with urgency.

Meeting report

Independent Development Trust (IDT): DPWI Briefing

Ms Noxolo Kiviet, Deputy Minister: Department of Public Works and Infrastructure (DPWI), apologised for the absence of the Minister, who was attending a Cabinet meeting. The opportunity given to report on the Independent Development Trust (IDT) allowed the Department to clarify issues for the Committee, as the Department was expected to abide by the laws. She raised concerns on how sensitive reports and issues, such as the performance of organisations, should be handled by the House. It was insensitive for a Member of the Committee to state in Parliament that the IDT should be closed. This raised anxiety among the workers in the entity, and as Members they should take caution not to speak of matters which were still under review by the Committee.

Adv Sam Vukela, Director-General (DG): DPWI, said that the issues involving the IDT were vast, and the presentation handed to the Members may not cover everything. However, there was a soft copy supporting document which could not be sent to Members in due time because of administrative setbacks. This document was later circulated.

He said the Department was also engaging with National Treasury to solve the issues which were negatively impacting the IDT, as this department played a role in the financial resources of the entity. The Department was still to hear from National Treasury on a way forward.

Mr Devan Pillay, Chief Director: Expanded Public Works Programme (EPWP), Sustainable Livelihood, Convergence and Compliance, DPWI, said the IDT was established as a trust to service civil society and unlock the potential of communities. This initiative had been supported with a R2 billion grant, which was to be invested and the returns used in funding the entity. However, a decision had been made to refocus the IDT from being a development finance institution (DFI) into a social delivery institution for the government, which meant that the received grant saw no returns, but was used to sustain the organisation. To counteract this, the IDT began to introduce cost cutting mechanisms by charging for offered services. This strategy was unsuccessful and did not yield results, as organisations and government departments were unable to pay for the received services, and this further worsened the economic state of the company. As a long-term plan, there was a need to develop a business case that spoke to the financial sustainability of IDT.

This process started in 2012, but was reinvigorated after certain issues were not endorsed by National Treasury, and this led to extensive consultations. The key problems were the erosion of the capital base and the change in mandate, which played a significant role in the state of the organisation. As a schedule 2 entity, the IDT should have been self-sustaining, but this was not effectively the situation because of the relationships with government and the need to meet social infrastructure demands.

Mr Pillay said there had been minimal progress with the implementation of the 2018 turnaround plans, but the current focus was on finding means of aligning the IDT mandate with that of the Expanded Public Works Programme.

Adv Vukela emphasised that the IDT was under financial stress as a result of non-payments by departments. The DPWI had sent letters to all client departments which had been serviced by the IDT, to appeal that outstanding funds should be paid.

Discussion

Mr W Thring (ACDP) responded to the statement made by the Deputy Minister on the confidentiality of Committee discussions. As a disciplined member of the ACDP, he would never take confidential information to Parliament had he known that it was to be kept within the Committee. He suggested that information which should remain within the Committee should be highlighted as such, so that Members were made aware.

He said the IDT should not necessarily be closed, but its functions could be taken over by a suitable entity. Key questions to consider in trying to find the means to mitigate the present challenges were whether there was a duplication of the IDT functions, and if there could be an amalgamation of the entities without employees losing jobs.

With the information given, it seemed that the IDT had been set up for failure, especially considering the challenge of non-payment which was prevalent in government. This issue needed to be dealt with more strictly.

Ms A Siwisa (EFF) commented that since 2011, the IDT had been financially rescued, and she worried about what the future would be. The EFF supported the concept of a state-owned construction company. This did not mean that there would be job losses, but rather more stable employment. Government entities could work together to avoid the apparent struggles such as those seen within the IDT. The IDT and other entities should be joined together into a state-owned company to alleviate unemployment. As it stood, the IDT was losing employees because it was dysfunctional.

She pointed out that the DPWI should have requested a report from National Treasury to inquire if the IDT had previously complied with the necessary conditions when funded by Treasury. It was unacceptable for the Committee to receive comments from the Department stating that they could not produce important feedback on such crucial matters.  

Ms S Graham (DA) said she had not learnt anything new from what had been presented. There was potential within the IDT, but the issue was the lack of focus within the organisation. It should aim to become a centre of excellence, and the only entity that government departments would approach for construction work.

She asked what “GTAC” meant and what it stands for.

She commented that the report mentioned an ongoing seven-year restructuring plan which was yet to produce results. There was need to have policies in place and a clear course of direction that would inform the way forward. She agreed with Ms Siwisa on the subject of joint entities, which would avoid duplication of work and establish specific functions to be carried out. She was unaware that the IDT was running EPWP projects through non-governmental organisations (NGOs), and did not think that this was part of the work it should be involved in. The EPWP needed to be specialised on its own, as it was not being properly managed.

It was concerning that there was no proper mandate in place, as this was making it impossible for the organisation to move forward. There was a need to focus on where the mandate came from, and what the policies and legislation were from which a decision could be taken to pave a way forward. She added that the construction industry was at its lowest point, meaning that the government was not building, and called for means to stimulate growth within the industry.

Mr T Mashele (ANC) complained that he had received the presentation document a day before the Committee meeting, and was concerned as to whether the individual who prepared the information took the Committee seriously. The Committee had not been given clear information on what the issues were, and what progress had been established within the IDT.

Ms L Mjobo (ANC) agreed with Mr Mashele that there should be clear progress within the organisation. The Committee had been presented with the issues within the IDT, but without any resolutions. She questioned whether the memorandum to be submitted to Cabinet had any timeframe, as there was a need for accountability. On the issue of non-payments, she asked whether IDT had a due date for submission of payments or not. She urged the Department to take initiative and evaluate the work on the ground.

Ms S van Schalkwyk (ANC) said an instruction had been issued by National Treasury for the 2014/15 financial year which referred to the outstanding fees which had to be paid by different departments to the IDT. She asked if this had not been implemented properly, and what measures had been put in place to ensure that payments were made. If the IDT had received any payments based on those instructions, how many departments had paid? If not, what measures had been put in place to enforce payment of the outstanding fees?

She asked the Department to indicate what the current state of affairs looked like in terms of the staff establishment, staff turnover and available vacancies, and to highlight the critical vacant positions within the organisation.

The Chairperson directed her comments to the Deputy Minister and the DG, and said she agreed with Mr Mashele that the Department had been asked to appear before the Committee to present on the progress made towards transforming IDT, and not on the issues faced by the organisation, as these were already known.

Department’s response

Adv Vukela accepted the concerns raised, and agreed that the presentation had not responded to the questions forwarded by the Members. He said there were a lot of administrative processes that had taken place between the Department, National Treasury and the IDT. However, although work had been done, this had delayed tangible outcomes that could be presented.

He explained that the Government Technical Advisory Centre (GTAC) was a government technical assistant unit which assisted organisations in various areas.

The intention to submit a mandate to Cabinet was based on the investigation sanctioned by the Deputy Minister -- the Department should engage with the IDT to develop a status report that would reflect the current situation. The Cabinet was to assist in planning how the current administration of the IDT should look.

Mr Molatelo Mohwasa, Acting Inter-Governmental Coordination: DPWI, responded to two issues raised by the Members. He said the IDT was managed by the Department, and this was done through regular engagements. To mitigate the issues faced by the IDT, the Department had engaged with National Treasury appealing that the technical task team (GTAC) be made available to the entity. This task team would focus on the status of the IDT with a view to providing a financial and human resources (HR) model reflecting the end state of the organisation. This exercise had been meant to start at the beginning of the 2019 financial year, but due to changes this could not be done and therefore no tangible results could be presented.

On 7 August, the IDT had briefed the Deputy Minister about the challenges encountered when trying to collect payments from clients. Upon obtaining client information from the IDT, the Department had established communication with the clients and there had been some responses in terms of engaging the IDT with the intention of paying outstanding fees.

Mr Coceko Pakade, Chief Executive Officer (CEO): IDT, said the organisation had finalised its turnaround plan and made presentations to the DPWI and National Treasury, with which it had ongoing engagements. With any organisational restructuring, effective management was essential to minimise the negative impacts on the employees, and this involved wider consultation and a reduced delay time.  

When the IDT finalised its organisation development (OD) plan, the board had embarked on a process to approve the proposed new structure. This had involved pulling in more technical skills, rather the previous surplus of administrative and support staff, and this had required a reduction in the work force. In the process, there was a comprehensive plan on how to migrate employees to the new structure and how the new positions were going to be sourced. Through this period of transitioning, the organisation had to consult with labour unions to ensure that proper channels had been put in place. One strategy was the introduction of exit packages, which resulted in 45 officials leaving the organisation.

The current issue faced by IDT was the difficulty in skills intake, as those who were highly marketable had left the organisation as a result of uncertainties. Due to the current transition, only temporary contracts had been offered to prospective employees. This had resulted in sub-standard skill sets, as individuals were likely to opt for the private sector and other government entities which offered permanent contracts.

The pending challenge was to replace the needed skills with competent individuals. The IDT had been in talks with National Treasury to ask for assistance in acquiring these critical skills but without success, as Treasury currently did not have the capacity to provide departments and entities with such assistance. They had therefore looked at other options, such as consulting relevant industry players to see if partnerships could be initiated.

Adv Vukela said that the EPWP work had been assigned to the IDT because it was a programme under the DWPI, and involved diverse organisations, both government and non-government.

Mr Pakade added that the EPWP focused on job creation, an area that required wide consultation with community stakeholders. In this respect, the IDT was involved as it had experience in working with institutions at ground level, especially NGOs, and this had exceeded the specified targets. He clarified that in the initial stages, the IDT had not been recovering the full costs, but was assisting from the perspective of being a development agency and on delivering a public benefit. It was only two years ago that they had approached the Department and Treasury for a reasonable fee to be able to sustain the organisation.

Ms Kiviet accepted the criticism of the sub-standard quality of the presentation, and apologised to the Committee. She said the outcome of the meeting served as a lesson -- to focus on what the Committee was expecting and had demanded from the Department.

The Deputy Minister explained how the resolutions discussed at the previous meeting could not be implemented within the time period which had passed. There had been a legal opinion which the Department had to seek, and this had not been received timeously. The legal opinion was to assist with decision-making, and without it no conclusion could be made. At the same time, the Department had needed to look into the introduction of a new mandate, which included infrastructure. She had mentioned at a prior meeting that there was need to re-look at entities that supported the DPWI whose roles were primarily in infrastructure. All these matters had been handled slowly.

Ms Kiviet said the IDT was a priority. It was in trouble and could not be sustained. One of the hindrances in dealing with this issue was the lack of urgency within the Department in handling this matter. She said that as Deputy Minister, together with the Minister, the DG and DDGs within the DPWI, they had engaged to discuss how to improve its current state, and the pitfalls affecting progress could not be blamed on the IDT. There was need to combine all the entities involved in infrastructure under one roof, and a review of the mandates of all these entities needed to be considered.  

She added that the IDT had been created through a Cabinet decision, and if decisions had to be made which would affect or change the original stance of the organisation, there needed to be consultation with the body that founded it. There was consultation process to get a memorandum to Cabinet, so that process had begun. She emphasized that closing the IDT was not an option.

The Chairperson commented that the Committee did not support closure of the IDT, but there needed to be transformation.

Further discussion

Mr Thring said that the role of Members of Parliament (MPs) was to give oversight and hold entities to account. The Auditor General’s (AG’s) report was concerning when it came to the IDT, and therefore there was reason for the organisation receiving unpleasant feedback. As MPs, they had a responsibility to ensure that taxpayers’ money was used judiciously and efficiently, and this had not been accomplished by the entity. That was why there might be a view to close the organisation.  

He pointed out the differences between a schedule two and schedule three public entity, and questioned why the IDT had reviewed its initial suggestion that it should be rescheduled. He questioned whether this was a decision taken because the organisation wanted to remain autonomous and unaccountable. He added that rescheduling the IDT should not be a decision to be avoided.

Ms Siwisa referred to the EPWP, and said workers were being exploited and something should be done to clearly determine what the purpose of the programme was -- which was job creation. To her knowledge, the programme should be involved in skills development, but there was not a single individual she was aware of who had benefited from this, unless it was someone who already had a qualification. She asked for more clarity about the EPWP in the upcoming presentation, which should also indicate how much an unskilled worker should be paid.

Ms L Shabalala (ANC) said she looked forward to seeing that the issues which had been raised, had been dealt with. She also suggested that in a case where an entity was called to account by the Committee but was not ready, the Committee should be alerted.

Ms P Kopane (DA) sought clarity from the IDT as to whether they would work with municipalities regarding the EPWP, and what the cost implications were. She added that the proposed turnaround strategy was supposed to have been implemented since 2018, but seemingly there had not been any progress so far. She asked how much the budget was, and how much had been used to date.

Ms Kopane said that at a meeting on 6 November 2018, the IDT had been given about R111 million, and conditions had been attached to the funding:

  • The organisation had been required to hand in monthly revenue and expenditure reports to the National Treasury within 15 days following the end of each month. Had any progress been made? If this was done correctly, the Committee would be able to track the performance.
  • The organisation had to submit a final OD review report to the National Treasury. Had this been accomplished?  

She added that Mr Pakade had made mention of 45 employees who had left the organisation, and she wanted to know the overall number of individuals who had left as a result of uncertainties in the company.

Mr Mashele suggested that upon receiving an invitation to appear before the Committee, the DG should have responded with self-explanatory documents, indicating clear time lines and in a timely manner. The Committee wanted to see the progress achieved, but that If the status quo was accepted, no progress would be seen. It was not acceptable that the meeting had no direction and planned issues were not discussed.

The Chairperson said that it seemed as though the Committee was faced with a task to remind the Department about why they called specific meetings, although the requirements were clearly mentioned in the communiques sent out. All that had been presented included nothing new, and as a result the Committee would be strict in dealing with the Department. It was not right that it was nearly the end of a term and no transformation had taken place within the IDT. The Committee would set up another meeting.

Adv Vukela said that the IDT implemented the function of the EPWP as one of the implementing bodies, such as the municipalities. The CEO would clarify the cost matters regarding the programme.

He added that at the next meeting, they would specify which parts of the functions of the Department may be relevant for the IDT to do, in light of the reconfiguration that was taking place.

Mr Pakade asked to be allowed to submit the information requested by Members in writing, to ensure it was accurate.

Deputy Minister’s concluding remarks

Ms Kiviet commented that the EPWP was more of a poverty alleviation mechanism, and if one interacted with communities they would gain an understanding that people wanted to be involved in the programme. She pointed out that it should not be a job creation strategy, but rather a poverty alleviation strategy. The programme had received an award from other countries which had joined the Inter-Parliamentary Union (IPU), the United Nations Development Programme (UNDP), the International Labour Organisation (ILO) and other international foundations. She emphasised that the programme mitigates and does not solve poverty, and acknowledged that its management needed to be up to standard.

She added that it was important that accurate reports be produced by the Department so that adequate measures could be implemented to establish whether there was any exploitation within the structure, or poverty mitigation was being achieved. The Department had taken note that reports should be send on time so that Members were able to apply their minds to the information provided.

The Chairperson appreciated the contributions made by the Members, The Department had not provided what was required, and the Committee agreed that the Department was moving a slow pace. She appealed to the Deputy Minister and the DG to treat the matter with urgency.

She added that when the Committee next dealt with matters concerning the IDT, the Department should present, not the IDT.

The meeting was adjourned.

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