The Committee was briefed on the 2018/49 CIDB Annual Performance Report. The legislative mandate of the CIDB was to stimulate growth, reform and improvement of the construction sector, with emphasis on the participation of the emerging sector in the industry. The Committee heard that 23 out of 30 targets for the various programmes were achieved; a stakeholder perception study was undertaken; Tender value limits were revised for contractors to access work opportunities of higher values; and Business advisory services were provided to 100 contractors from four provinces.
The Committee was pleased to hear that the role of women in construction was promoted, but disappointed that the lack of transformation in terms of black ownership and access to work opportunities was most pronounced at higher contractor grade levels. The CIDB received an unqualified audit opinion, with findings. The challenge hindering the CIDB from obtaining a clean audit was reliability of annual performance reports and the quality of annual financial statements.
In discussion, there were remarks and questions about possible tensions and conflict between the roles of regulator, promoter and facilitator; complaints about the quality of work done by contractors; ownership of construction companies by women; monitoring of quality of work performed and enforcement of engineering standards; lack of credit to drive transformation; monitoring of subcontractors; tenders awarded to incompetent contractors; revenue streams; learner development; vacancies; irregular expenditure; enhancement of transformation; transformation at district level, and overhead costs of CIDB own offices.
Introduction by the Chairperson
The Chairperson welcomed the Deputy Minister and the CIDB delegates. He said that the CIDB had to assist government to regulate the construction industry. It had to live up to expectations to transform the industry so as to make a meaningful contribution to people’s lives and the economy. He reminded the CIDB that the NCOP was not a mere copycat of the NA. It had a responsibility towards the provinces.
Briefing by the Construction Industry Development Board on the 2018/9 Annual Report
The briefing was presented by Mr Cyril Gamede: CEO, and Mr Sifiso Nsibande, CFO: CIDB. The legislative mandate of the CIDB was to stimulate growth, reform and improvement of the construction sector. This was done with a focus on the participation of the emerging sector in the industry. 23 of 30 targets related to the various programmes were achieved. A stakeholder perception study was undertaken. Tender value limits were revised for contractors to access work opportunities of higher values. Business advisory services were provided to 100 contractors from four provinces. The role of women in construction was promoted. Lack of transformation in terms of black ownership and access to work opportunities was most pronounced at the higher contractor grade levels. The CIDB received an unqualified audit opinion, with findings. The challenge hindering the CIDB from a clean audit was reliability of annual performance reports and the quality of annual financial statements.
Mr M Dangor (ANC, Gauteng) expressed concern about the CIDB having become the regulator as well as a facilitator and promoter. There was a potential for conflict in that regarding access to finances. ‘Why was surplus monies not returned to the National Treasury’?
Ms B Mathevula (EFF, Limpopo) referred to complaints about construction companies, and asked for a breakdown by provinces. Bad building methods had led to complaints about RDP houses in Limpopo. It happened that people would perform badly in Limpopo, and would then get a tender in North West province. ‘What was being done in the line of punishment’? ‘How many companies were owned by women’?
Mr T Brauteseth (DA, KZN) referred to quota versus quality. The CIDB seemed too obsessed with quotas. ‘Were there mechanisms to monitor quality’? Companies obtained work through the CIDB, and good engineering was needed. ‘Were engineering standards enforced’? As regulator, the CIDB had a say in which companies got work. ‘How did the CIDB make sure that proper work was done’? A boardwalk built in his home town in KZN was falling apart, and wide cracks were visible. Could it be ascertained who built it? The CIDB had to provide a list of companies checked up on, with an indication which companies had to be blacklisted. Quality monitoring of contractors was essential, as the work done by the higher grade companies involved a higher level of complexity. A hierarchy of competence had to be established. He used only black contractors for work done on his house, but building the arch at the Moses Mabida stadium was another matter.
Ms H Boshoff (DA, Mpumalanga) opined that there was inadequate access to credit to drive transformation. There had to be MOAs to facilitate who would be responsible for repayment of loans, and how that would occur. Ownership of construction companies by women was inadequate. The briefing referred to a breakfast to engage with female contractors, but that could not lead to success. There had to be a more practical approach, with extensive workshopping. She referred to the monitoring and regulation of registered contractors. ‘Who monitored the sub-contractors appointed when a contractor could not cope with the work on its own’? Incompetent contractors were being awarded tenders. There had to be closer monitoring. There was only one disabled member among the CIDB permanent staff. The national norm was three percent. ‘How could the situation be improved’?
Mr M Rayi (ANC, Eastern Cape) referred to competence and quality. It had to improve for transformation beneficial to black people to occur in the industry. ‘What were the other revenue streams alluded to under the Administration programme’? The compliance percentage target for advocacy was 65 percent. ‘Why was it not 100 percent’? The target to develop and facilitate learners was 1000, but only 118 were achieved. He asked for a breakdown of registered contractors per province, and business advisory services rendered. It was stated that the vacancies of CEO and Chief Information Officer would be filled by March. ‘Was that done’? ‘An unqualified audit was received, but was there irregular and fruitless and wasteful expenditure’? ‘Were there any cases of fraud’?
Mr E Landsman (ANC, North West) opined that contractors at the higher grade levels got the greatest share of the cake. Subcontractors and emerging contractors could not compete lacking training and skills. Grading depended on work already performed, and adverse economic conditions could cause contractors at the lower grade levels to be downgraded. He asked for a breakdown of level 6 to 9 figures per province. Some provinces had only one or two contractors at those levels. He asked about methods to enhance transformation in the industry, and how the transformation vision could be focused on.
Mr Brauteseth remarked that there was no racial undertone to his earlier remarks about quota vs quality. He would only insist that construction in the public sector had to adhere to engineering standards, to prevent infrastructure from killing people. He asked how was such standards to be enforced?
The Chairperson asked about capacity in provincial offices. Transformation imperatives required growth and transformation at the district level. ‘What were the results of the SIU proclamation’? ‘Was there evidence of collusion among contractors’? He was concerned about the overhead costs of owned offices for the CIDB.
Ms Nonkululeko Sindane, Board Chairperson, responded that there was indeed conflict and tension between the roles of regulator, promoter and facilitator. The roles were grounded in the legislation, which required a focus on the developmental aspect, besides regulation. The CIDB was an independent regulator that also had to deal with hard-core technical regulations. The roles did at times collide, but it did not hamper performance. It could be seen as a necessary tension, as the different roles were derived from the Constitution. Not returning cash to the Treasury was not done in a willy-nilly fashion. Rollovers were applied for with the Treasury being informed of what the money was being reserved for, based on an analysis by the CIDB of future needs, as organisational design was a long process. The CIDB needed money for IT development. It was not a CIDB initiative to lease its own office space. The spatial needs of the DPW and the CIDB had become irreconcilable.
Mr Gamede added that the CIDB could get better value for money spent on office space. A breakdown of complaints about contractors would be furnished. He answered Ms Mathevula about contractors who performed poor quality work in one province, and was then awarded tenders in other provinces. The role of the CIDB was to execute projects, and responsibility for quality was shared between the CIDB and clients. The framework to establish competence determined grade levels on the basis of the amount of work done before. A method had to be found to prevent contractors from biting off more than they could chew. There had to be a code of conduct to enforce expected behaviour. Complaints reached the CIDB through the client or municipality, and the CIDB could then enforce discipline. But clients were slow to complain. Monitoring of quality was also the responsibility of the client, and the CIDB had developed a contractor performance rating. The challenge was getting the client to comment on contractor performance. He answered Mr Brauteseth about quota vs quality. Mechanisms had to be developed to monitor engineering standards, but there had to be transparency on the part of contractors and clients. Not all municipalities complied with that. The CIDB had to be properly informed about quality work completed by a contractor. In terms of the code of conduct, the CIDB did not intervene directly. If a complaint was received about engineering standards, the CIDB could employ sanctions. The due process followed with grade changes, was that grades 8 and 9 were achieved on the basis of work done over the preceding five years. If the amount was insufficient, there was downgrading. However, due to the fact that the economic situation did not permit sufficient work to be done, a moratorium on downgrading was instituted. Very few contractors could currently be upgraded. The CIDB was not liable through credit access. There was an agreement that clients paid the tender first. The CIDB did conduct workshops to increase the amount of companies owned by women.
Mr Ebrahim Moola, Director: Industry Regulation, responded that provincial offices had started a process of organisational design. There was not as yet a complete picture of what was happening at provincial offices. The CIDB set a target of 1000 for providing learner opportunities in the workplace, but there was a lack of responsiveness from departments where the CIDB wanted to place learners. The best process assessment fee was geared towards improving performance and development. The project assessment scheme included a skills development support strategy.
Mr Nsibande responded that the other revenue streams referred to under the Administration programme, were money from registrations and interest received from investments.
Mr Gamede answered that a CEO and COO were already appointed.
Mr Nsibande responded that no irregular or fruitless and wasteful expenditure was incurred in the financial year. Irregular expenditure had to be disclosed until condoned, but there was no new irregular expenditure.
Ms Sindane responded that the CIDB would respond in writing about challenges experienced by lower grade contractors. There had to be more contractors at the higher levels, with technical expertise. More clarity on how the grading system worked would be furnished. A breakdown of registrations, advisory services and stakeholder engagement per province would be supplied. Clients had to come forward with complaints. There were few grade 9 contractors, as the contractor had to build up a CV through completed projects, but there had been a lack of big projects after 2010. She agreed with the Chairperson that capacity could be built on the ground through the district model. There was a lack of engineering capacity from level 6 upwards. The SIU proclamation did not result in anyone going to jail. What the SIU shared with the CIDB was already known. The SIU needed until March 2020 to conclude its investigations. The question was if value was being paid for. Detail could not be given about collusion. Colluders had entered into agreements with government. The CIDB was not expected to act on collusion, and could only rely on stronger internal processes. The CIDB regulatory mechanism did not allow for engagement with collusion.
Mr Dangor asked if the collusion of 2010 was penalised, and if there were companies that were still liable and yet getting contracts. He cited the example of buildings erected without brick coursing, which resulted in damp. ‘Were infringements of good building practice measured, as part of monitoring quality’?
Mr Moola responded about collusion, that matters were complicated by the fact that companies changed through restructuring. The CIDB was increasing its monitoring of collusion. The CIDB legislation allowed for performance evaluation of contractors. Issues were raised by clients or their representatives.
Ms Sindane responded that the CIDB offered training and development by itself or through other agencies, but there was not enough to meet demands at the lower grades. The CIDB was stretched, but the best practice fee assisted it. Consistent training per grade could be given, but could not empower a contractor fully. Contractors had to be trained to manage budgets, as projects were seldom concluded at the same rate as stated initially.
Ms Noxolo Kiviet, Deputy Minister of Public Works and Infrastructure, stated that the CBE could assist the CIDB with learners. The rate at which engineers were produced was dismal. In SA there was one engineer per 2600 people, whereas the international ratio was one in 40. Change had to happen from the ground. The CIDB only came in when a company was already formed. Skills were needed, but there was duplication in skills development. Pricing for work done for government was inflated. She agreed with the Chairperson about the need for a district development model. Infrastructure was a catalyst for job creation, but big companies were thriving at the expense of smaller ones, and those owned by women. Regulations did not permit the opening of doors for smaller contractors and women. Legislation had to change, as there were bottlenecks that impeded transformation. SA had not yet properly analysed the impact of a corrupt relation between big players in cartels, on pricing and performance in the industry. Legislation had to be reviewed. The CIDB Act was comprehensive, and much was expected of the entity. The mandate was too broad; some of the roles could be removed. Infrastructure was the backbone of employment and equality, and transformation was a Constitutional imperative. Past injustice had to be dealt with.
The Chairperson concluded that the Select Committee appreciated the honouring of the invite to the CIDB. It also had sympathy for the complexities of the environment that the entity had to operate in. It was hoped that there would be no findings in the next audit opinion received. The Committee looked forward to future engagement with the CIDB, and would want to see progress with its information agenda.
Adoption of minutes
Minutes of 12 February were adopted without amendments.
The Chairperson adjourned the meeting.
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