DPWI & PMTE on 2019/20 Quarter 1 & 2 performance; with Deputy Minister

Public Works and Infrastructure

27 November 2019
Chairperson: Ms L Mjobo (ANC) (Acting)
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Meeting Summary

The Department of Public Works and Infrastructure (DPWI) reported that it had achieved a 75% overall performance in the first quarter, while the Property Trading Management Entity (PTME) had achieved 50%. In the second quarter, the DPWI had achieved an overall performance of 53.6%, and the PTME had achieved 56.3%. The Department’s total expenditure for the six months ended 30 September had been R3.8 billion, which was 48% of the total adjusted budget allocation of R7.9 billion. The PTME had a R17.164 billion revised budget, and the expenditure up to the end of September was R6.801 billion, or 40% of the total.

Among the challenges faced by the Department were insufficient responses from the market for procurement spending on bids awarded to designated groups, and low participation by designated groups such as youth and women and delays in the finalisation of the legal verification processes resulting in the Expanded Public Works Programme (EPWP) target not being achieved. The Academy programme had been halted because of funding problems.

Regarding misbehaviour, fraud and corruption, the Department was going to engage the Committee in a full session. It had been in collaboration with the Special Investigating Unit (SIU). About 3 000 investigations had taken place, and there was a huge story to tell about what had been found. Several people had been disciplined, and 100 referrals had been made to the National Prosecuting Authority (NPA). There were about 50 cases with the police for investigation.

Members were critical of the under-spending by the Department, and also raised questions about the filling of vacancies, how it was mitigating the risks it had identified, and what steps it had taken to prevent mismanagement and corruption in the Department.

Meeting report

DPWI and DPME: First and Second Quarter Performance

Mr Imtiaz Fazel, Deputy Director General: Governance, Risk and Compliance, Department of Public Works and Infrastructure (DPWI), took the Committee through the performance of the DPWI and the Property Management Trading Entity (PMTE) according to their programmes for Q1 (validated) and Q2 (preliminary). The programmes of the DPWI included administration; inter-governmental coordination; the Expanded Public Works Programme (EPWP), the property and construction industry policy and research; and prestige policy.

The programmes of PMTE included administration (finance and supply chain management); real estate and investment services; construction project management; real estate management services; real estate information and registry services; and facilities management.

The challenges that faced DPWI were:

  • On Supply Chain Management (SCM) there was insufficient response from the market for procurement spends for bids awarded to designated groups.
  • There was a lack of available business representatives for the condition assessment module as per the Enterprise Resource Planning (ERP) implementation plan on corporate services.
  • On inter-governmental coordination, the conceptual framework towards finalisation of the sector plan was presented to the Ministerial Technical Committee (MINTECH) and the Ministers and Members of Executive Council (MINMEC) pending implementation of the recommendations and delayed by external partners in signing agreements for joint service delivery.
  • The Department had discontinued the Academy plan due to financial constraints on professional services.
  • The work opportunities target was not achieved, with low participation by designated groups such as youth and women and delays in the finalisation of the legal verification processes leading to delays in signing the Memorandum of Agreement for agents on the EPWP.
  • Progress on the development of the Public Works Bill was affected by the transition from the 5th to the 6th Administration in respect of the policy.

The challenges that faced the PTME were:

  • On finance and SCM, the client departments had not confirmed funds timeously, which affected payments within 30 days.
  • Late approval and confirmation of funds by user clients and poor performing contractors affected the delivery of projects.
  • No work opportunities reported through construction awaiting the EPWP construction project management (CPM) system.
  • Unavailability of approved delegation in signing of Real Estate Management Services (REMS) lease agreements.
  • The new letting out framework, which was the enabler through which new lease agreements were aligned and indirect work opportunities created had not been approved on the Small Harbour Coastal Development Unit (SHCDU).
  • Vesting applications on various stages were in process, residing at the Department of Rural Development and Land Reform (DRDLR) for Real Estate Investment Registry Services (REIRS).
  • Worx4U had poor control, resulting in inaccurate information reported for unscheduled facilities maintenance (FM).
  • Delays in receiving municipal bills had adversely affected the reduction in energy consumption reported

The DPWI had achieved 75% overall performance in Q1, and the PTME had achieved 50%. In Q2, the DPWI had achieved an overall performance of 53.6%, and the PTME had achieved 56.3%.

Mr Mandla Sithole, Chief Financial Officer (CFO), DPWI, said the Department’s total expenditure for the six months ended 30 September 2019 had been R3.8 billion, which was 48% of the total adjusted budget allocation of R7.9 billion. The variance between expenditure and drawings had amounted to R173 million. The PTME had a R17.164 billion revised budget, and the expenditure up to the end of September was R6.801 billion, or 40% of the total.

Discussion

Ms S Graham (DA) commented on small, medium and micro enterprises (SMMEs) refusing to tender, and said a lot of that happened because most of them did not know how to do a tender. Either they tender incorrectly, or they come in too high and cannot be considered for the job. She said having four lease agreements targeted for half of a year was quite low, and she hoped that it would become a little higher. She referred to a lease agreement for the detective branch, where about 54 South African Police Service (SAPS) detectives had been working in a small room and in that space they had to do interviews and investigations, and make telephone calls. They had moved temporarily into a police station, but since March nothing had been done about that. She added that climate change had to be focus area for everyone.

Ms A Siwisa (EFF) said there was underspending in administration because of the vacancies that needed to be filled, and commented that if the administration was not in order, then everything would fall apart. At the Independent Development Trust (IDT) there was a problem, and it seemed like no one wanted to do anything about it. The IDT was a schedule 2 institution, and it had come to the Committee’s attention that R5 million was allocated to public corporations to ensure the day to day activities were taken care of. What strategies had the Department put in place to make sure the IDT ran independently and secured all the projects?

She asked the Department to provide the list of non-profit organisations (NPOs) and where they were located so that the Committee could conduct oversight over those in their constituency.

On job opportunities, the Department had excluded the consultants within the Department was using external consultants. She believed that the country was at a point whereby unemployment was too high, and the Department was letting go of people and preferred using somebody else to do the work. She said that if the Department hired someone who was internal, that would cost less.

There was a report on vacant state-owned properties. She asked where those properties were so that the Committee could address the state of leasing for private owners.

Mr M Nxumalo (IFP) referred to the risks facing the Department, and what measures were being put in place to prevent the erosion of the its mandate. What could be done to ensure that the EPWP really assists in poverty alleviation and did not have any political party interference?

Mr E Mathebula (ANC) referred to the filling of vacancies, and said if they were not filled, there would be no service delivery and the people on the ground would suffer. The Department could not reach the employment target for youth and people living with disabilities, and asked if anything had been put in place to address that situation. Had the disciplinary action and arrests that had been made resulted in any decrease in fraud and corruption within the Department?

The Department had spent only 40% in the first six months, and there was no way it could spend the remaining 60% in the next six. That meant that money would have to go back to Treasury, and there would be lack of service delivery to the people.

As the training academy that had been stopped, was there any alternative that would be used, because it was primarily meant for previously disadvantaged people, and also for young people.

Ms L Shabalala (ANC) said the main issue was job creation, and the Committee had to stick together with Department to find a solution. She hoped that by the next financial year the Committee would see a strategic plan that would reflect in the Department’s organogram.

She asked if there was any way that the Department could package the EPWP programme so that it would attract the youth.

Ms S van Schalkwyk (ANC) was very concerned about the economic and unemployment rate in the country, and asked where exactly the vacancy rate in the Department stood at the end of Q2.

The projected under-expenditure of R217million on the compensation of the employees was a bit of a concern, because it was directly talking to bread and butter that could have been on people’s tables. What was the impact of the vacancy rate, or the non-filling of posts, on service delivery?

On DPW programme 4 -- Property and Construction Industry Policy and Research -- there had been a low level of performance but a high level of financial expenditure, and she asked for an explanation.

The PMTE had a poor performance with the EPWP, reporting only 539 job opportunities against a target of 1 800. How could this be changed by the end of the year?  

There was an outstanding debt on municipal services, and those amounts had accumulated from previous years. It seemed nothing was being done about it, because the amount kept increasing each year.

During the previous administration, a Sage software programme had been introduced to remedy a system problem. The Committee had identified areas of concern requiring the PMTE to provide progress reports on steps to address its challenges, and to unlock the value of its assets. The Committee had agreed that the Department should strategise and provide an update on how far those system problems had been remedied, but there had been nothing about this in the presentation.

The Chairperson asked how contractors that were appointed could not do their work.

Department’s response

Mr Stanley Henderson, Deputy Director General: EPWP, DPWI, replied that the Department would provide a list of NPOs to the Committee and welcomed the suggestion from a Member about conducting oversight over NPOs in their constituencies.

On the credibility of the EPWP, he urged the Committee to report any irregularities or undue practices they see at the EPWP to the DPWI.

The Department investigated all cases, and also made sure that there were fair recruitment procedures in place through the development of EPWP recruitment guidelines. He emphasised that the purpose of the EPWP was to employ people and as a means to build social cohesion in communities.

The Department’s focus on youth, women and people with disabilities had seen a high youth participation in water and fire programmes. It was also promoting programmes where young people would work with experienced people so that they could benefit from their experience in skills development programmes.

There were certain areas that were not suitable for people with disabilities, such as infrastructure projects, but the Department had engaged with organisations which dealt with disability issues in order to gain insight into areas where people with disabilities could participate.

Mr Clive Mtshisa, Deputy Director General: Corporate Services, DPWI, replied that the academy had performed poor simply because it was not funded. As a result, the branch had not been able to undertake whatever work needed to be done in order for the academy to make progress. When the Minister came on board with the 6th administration and received a report on the situation, she had realised that the Department would be fooling itself if it stuck to plans and activity that were not going to be achieved. She had intervened and instructed that the Department needed to find an alternative. The Department was working with schools to help them to improve the science and maths results of their students, and was also providing bursaries for tertiary level study.

The Minister had given the Department permission to fill the vacancies by the end of the financial year within the budget.  About R200 million had been set aside to fill those positions by the end of this financial year.

On previous occasions, the Department had wanted to introduce a new enterprise resource planning (ERP) system in order to ensure that it could have integrated end-to-end businesses operations, and that work got under way.

Mr Aaron Mazibuko, Chief Director: Finance, DPWI, said the R10 million for Parliamentary villages had mainly been utilised for the transportation of Members of Parliament from the village to Parliament.

Mr Sithole replied on issue of under spending, and said the Department would be above 60% by the end of October because of an improvement in its spending.

There needed to be a discussion on the issue of poor service delivery. The Department had clients which were not utilising their budgets, and it would welcome a meeting involving the Finance Committee and the Portfolio Committee on Public Works to discuss policy issues regarding infrastructure projects.  

The adjustment of the budget by Treasury had resulted in the Department having to surrender funds, which was a blow because it had given an assurance to client departments that the money was going to be spent so that their plans could be implemented.  

At the municipal level, the Department had had to appoint service providers to supply infrastructure to implement water saving initiatives.

Mr Batho Mokhothu, Deputy Director General (DDG): Construction Project Management, DPWI, referred to the Department’s under-spending, and said it had not been consistent in the past in its spending patterns on construction. It had warranted a discussion to see how it could address some of its inherited challenges, because without resolving them the next few years would have similar outcomes.

There were challenges such as poor contractors in the system, where one would find that their services had been terminated in one province and they had then found work in other provinces. The Department was making sure that measures were in place to ensure that poor performers were restricted. Delays in the transfer of funds from client departments also resulted in hold-ups in the tender process and ultimately a delay in the completion of projects. It also had to ensure the monitoring of work carried out remained under its control, because as an implementer it was directly responsible for the budget.

The Department had communicated with all principal agents and contractors that they must improve their productivity, and improvements had been noticed from last month and were carrying on into the current month. It needed to spend an average of around R580 million a month in order to reach an acceptable target by the end of the financial year. In November alone, the head office had processed R300 million in invoices, excluding the regional offices.

Mr Mokhothu said that SMMEs were vital in the construction industry, because they were the future, but they were often not very advanced on how they priced for contracts, or in understanding the scope of the work involved. It was always a challenge when SMMEs did not finish work on time, within budget and meeting quality standards, which was why the Department needed to be very innovative.

One of the initiatives was collaboration between the private and the public sector regarding funding because SMMEs had cash flows challenges. They would get projects, but they did not have the initial capital injection. The industry needed better collaboration around the issue of funding.

Other innovative programmes were on-going EPWP learnership programmes, and a programme to develop SMMEs where contractors which would be linked with mentors.

Mr Lwazi Mahlangu, Chief Director: Monitoring and Evaluation, DPWI, described the Department’s reporting timeline, which was guided by the Department of Planning, Monitoring and Evaluation (DPME). It involved an electronic reporting system which enabled quarterly performance reports to be available the month after the end of the quarter.

Mr Fazel said another challenge was that many client departments failed to submit credible planning documents, or provided incomplete information, which was not helpful when the Department prepared its strategies.

He assured the Committee that the Department would mitigate the risks, and monitored them on a quarterly basis.

Regarding misbehaviour, fraud and corruption, the Department was going to engage the Committee in a full session. It had been in collaboration with the Special Investigating Unit (SIU). About 3 000 investigations had taken place, and there was a huge story to tell about what had been found. Several people had been disciplined, and 100 referrals had been made to the National Prosecuting Authority (NPA). There were about 50 cases with the police for investigation.

He shared the disciplinary actions over which the Department had control. There had been 316 disciplinary actions, and 265 were finalised, with 12 dismissals, 49 written warnings, and 35 final written warnings. There had been 18 suspensions without pay, and 23 resignations taking place when somebody was going to be dismissed. 51 disciplinary actions were still in progress, and 44 cases had been referred to the police for further investigation where corruption had been detected.

Ms Noxolo Kiviet, Deputy Minister of Public Works and Infrastructure, said the Department was hampered by the legal processes involved. The legislation was silent on those employees who resigned at the end of a protracted disciplinary process because those who knew that they were corrupt.  They knew that they would be found guilty, but would prolong the process through doctor’s notes, and when the chairperson of the disciplinary panel finalised the outcomes, they would resign.

The Department’s relationship as an employer would end, and referring the matter to the NPA was another protracted action which may or may not see the light of day.  In the meantime that person would go to another department and continue to do what he/she was doing, and the previous employer could not block that person due to the technicalities that one could not convey that finding. The Department needed to deal with that.

Deputy Minister Kiviet said one of the aims of the Department was to help transform the built environment. The amount of money spent by the DPWI with entities in the built environment did not correlate with transformation, so it was going to meet with them to talk about restructuring.

The issue of an academy was going to be put on ice until the Department had the necessary resources, especially in an environment where funds were limited. It had not abandoned the idea of academy, but wanted to utilise the limited resources allocated to the Department for the maximum benefit of young people.

The EPWP programme had challenges, but the amount of interest it had attracted internationally had led to a number of countries wanting to be partnered with the Department with a view to enhancing their own youth programmes. It would also enable the DPWI to learn what they could do differently to enhance the EPWP programme.

The Deputy Minister urged the Department to implement the Sector Oversight Model (SOM) so that issues that had been raised could be followed up and dealt with. This would go a long way towards clarifying what needed to be done, when and how. She asked the Committee to assist in this regard.

There may be challenges but there was so much good that was taking place in the department, She had just come back from Bhityi in the heart of Mthatha, in the rural areas, where the Department was handing over to the Department of Justice a court which was 100% user friendly, as it accommodated the disabled, and was even adaptable to climate changes. The same had been done in Mpumalanga, and because of its size it had been handed over by the President, because the designs that Department had been rolling out responded to climate change challenges, issues of disability and so on.

The Department was going to deal with the administrative issues that had affected its reputation, and it was also doing something about the risks that had been listed.

The meeting was adjourned.

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