The Committee had a meeting with the Department of the Premier of the Western Cape to discuss the Adjustments to the Appropriation Bill 2019. The Chairperson officially congratulated the new Director-General on his appointment.
The Director-General addressed the overall adjustment of R11.674 million and explained the reasons for the adjustment were for the R50 million VAT on the procurement of software licences and the R9 million for three roll-overs allocated to the E-Innovation Centre, to fulfill its information and communications technology (ICT) infrastructural requirements.
Members raised concerns about the shifting of funds from other departments to the Department of the Premier as well as labour matters such as vacant posts and new appointments due to re-allocation of funds to the Provincial Revenue Fund, how many posts were not being filled. Members spoke about the exorbitant costs paid to Microsoft and asked if the Department was considering alternative cost-cutting measures. The Chairperson asked about contract work delays such as CCTV installations. The Committee was informed that the ITC infrastructure expenses could be attributed to the need to strengthen the Department’s firewall against cyber-attacks.
The Chairperson said that the purpose of the meeting was to deliberate on the adjustments to the Appropriation Budget for the Department of the Premier. The Chairperson asked Mr Alan Winde, Premier of the Western Cape, and the new Director-General to say a few words before continuing with proceedings.
Mr Winde replied that he did not have any comments at that stage.
Department of the Premier of the Western Cape: adjustments to Appropriation Budget
Mr Harry Malila, Director-General, noted that the Department of the Premier had an overall adjustment of R11.674 million. The reasons were two-tier: 1) the allocation of approximately R50 million for Value Added Tax (VAT) on the procurement of software licences. VAT on software licenses was formally not a requirement and as a result, the budget was initially tabled to exclude the VAT amount. The second reason was the adjustment of approximately R9 million for three roll-overs allocated to the E-Innovation Centre, to fulfil its information and communications technology (ICT) infrastructural requirements.
He referred to the downward adjustment on the People Management programme and advised that R34 million allocated to People Management has been re-allocated to the Provincial Revenue Fund. He referred to the Minister of Finance speech on the initiatives surrounding early retirement and the call from National Government to reduce budgets especially pertaining to staff costs. Mr Malila said that the Department’s plan to ensure a sustainable budget included careful deliberation of positions before advertising them.
Mr C Dugmore (ANC) raised a concern about the discrepancy between the R34 million mentioned by Mr Malila and the R39 million on page 3 of the Adjustment Appropriation Bill. In light of the national call to reduce the cost of the wage bill, more details were required. In the current financial year, how many positions were vacant? How many positions were actually filled? By re-allocating the money to the Provincial Revenue Fund, how many positions are not being filled as a result? What is the major impact on service delivery within the Department of the Premier? Where do most of the positions come from?
Mr Dugmore asked the Department of the Premier to confirm the amount paid to Microsoft which covered the Province’s licensing fees. He asked if they were bound by the Licensing Agreement with Microsoft or if there was a more cost-effective alternative. He asked that the Department provides a breakdown of the R5 million adjustment that had been allocated to Non Profit Institutions on page 5. He referred to the shifting of funds from other departments back to the Department of the Premier and asked for an explanation of the R3 million from the Education vote. He asked what necessitated this action for ICT activities in the Operational Plan and if it was anticipated. He requested a breakdown of the R10 million from Cultural Affairs Department that had been allocated to Sport and Recreation. He referred to the transfer of R2.5 million from Community Safety to the Department of the Premier and asked for an explanation for the additional expenditure.
The discrepancy between the R39 million and R34 million had been explained. The R1.840 million shift was allocated to Forensic Resources. If an employee resigns and the position is not filled, the money is shifted from Personnel expenses to Household expenses. Each position that becomes vacant is brought before the relevant Department committee for deliberation as approximately 40% of Personnel are permanent. The R5 million allocated to Non Profit Organisations was spent on maintenance and support costs for the existing 70 Library Business Corners. There was no alternative for the Microsoft Licensing Agreement as the software fulfilled all the requirements for an organization of its magnitude. The Department negotiates a lower rate with Microsoft every three years in a bid to save costs. The ITC infrastructural expenses could be attributed to the need to strengthen the Department’s firewalls against cyber-attacks. The transfer of funds from other Departments, namely Community Safety and Education, is a system where the Department of the Premier pays for a project and the other department makes a financial contribution. The allocation of R4million was for Change Management, over and above that, R6.2 million was allocated for Centre of E-Innovation (CEI) to fund resources for project implementation, new capabilities on behalf of the Department and to cover the costs for the hiring of business analysts.
Follow up Questions
The Chairperson asked if the origin of the VAT applied to Software Licensing was the Auditor General. On page 4 he asked for reasons for the delays on contract installations of the CCTV cameras. He asked for the reasons provided by the Department of Public Works and Transport for the delay of that particular project.
Mr Dugmore asked for clarity on the amount retained to fill positions and which positions were being filled. He asked if the amount paid to Microsoft was calculated according to the number of users and if so, how many users were included?
Mr Dugmore asked Mr Malila if he had received the indications for the budget allocations from Provincial Treasury for the new financial year.
The Department had an adjusted R630 million budget and has spent R302 million to date on Personnel. It has a list of appointees for the remainder of the financial year; the list clearly indicates which posts had become vacant and which posts had been approved for new appointments.
The Auditor-General had not implemented VAT but the South African Revenue Service (SARS) had issued a tax directive for the Software Licensing. The Microsoft Model was very complex: there were 24 500 workstations across the Department and approximately 28 500 users. The Department paid for two elements: 1) Microsoft Suite, such as Word, Excel, etc and 2) Development languages and platforms. If the Department had to purchase pieces of the programmes from different organisations, it would not be feasible as the cost would increase.
The delays at the Department of Public Works and Transport were due to project execution which included specific reasons such as construction delays, as a result the cabling job could not commence and the Department in turn could not spend the allocated funds. The delays in contract installations were as a result of security mismanagement which necessitated the appointment of a new contractor to execute the task.
Mr Malila replied that the initial budget indications from National Government were 5 to 7% reductions and the Department planned according to those guidelines. The Department had to consider which programmes were to be maintained or which programmes were to be discontinued. In addition, it also required thinking innovatively on achieving more on a lower budget.
The Chairperson officially congratulated Mr Malila on his appointment as Director-General. He also thanked the Department for their cooperation and assistance and wished them well for the festive season.
Voting on Western Cape Adjustments Appropriation Bill
The Chairperson asked if the Committee was in support of the Bill and its adjustments to Vote 1: Department of the Premier.
Members indicated that they were in support. However, Mr Dugmore objected to the Bill due to the reduction in compensation of employees and the requirement to fill positions.
Ms Waseemah Achmat, Committee Secretary, read out the Resolution: Mr Dugmore requested a detailed Budgeted Project Plan for the following shifting of funds: R1 million from Education for the Project Management resource; R2 million from Vote 5; R3 million from Vote 5 and R10 million from Vote 13.
The Committee adopted the Minutes of the 30 October and 5, 6, 7, 8 November 2019 meetings.
The meeting was adjourned
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