A joint meeting of the Portfolio Committee and Select Committee met with the Department of Public Works and Infrastructure to discuss the proposed exit strategy of the Independent Development Trust (IDT).
The Department said it took this decision because of the various financial, institutional and governance challenges the IDT faced over the years. In 1997 the mandate of IDT was changed and the entity became a state social infrastructure development entity, with no adjustments to its funding. IDT faced issues with clients not making payments, numerous litigations, increased liabilities to service providers, and monthly reliance on the fiscus to cover operational costs. Despite many transformation initiatives, including a cash injection of R550 million since 2012, the entity proved to be financially unsustainable.
The IDT is regulated by both the Deed of Trust and the Public Finance Management Act (PFMA). This presents governance challenges as the legislation is sometimes in conflict.
According to the Department, the IDT currently has an incorrect staff mix and high employee turnover which impacted its ability to maintain its programme portfolio. IDT currently has R26 billion in project liability. The Committee requested a full report detailing the liabilities and how the Department intends to address the matter.
The Department said, prior to deciding to pursue dissolution, three options were presented by the Board of Trustees to the Ministry. The Ministry chose dissolution.
A task team is appointed to devise an IDT Exit Strategy Implementation Plan. This is submitted to the Minister, Deputy Minister, and Director-General of the Department for comment. The process is still a work in progress and a report will be provided to the Committee once it is finalised.
The Department said a resolution will not be enacted until approved by the Minister, Cabinet, and the President.
The Committee said dissolving the IDT must not be the only option presented. If the IDT is dissolved or not, the Department is still responsible for fulfilling the mandate of social infrastructure development. Members raised concern about dissolution ultimately leading to job losses. This will exacerbate the country’s challenge of high unemployment.
The Minister committed the Department to providing full reports and said it will return to the Committee on 24 June 2020 to present on infrastructure development and the reconfiguration of the Department.
The Minister of the Department of Public Works and Infrastructure (DPWI), Ms Patricia de Lille, and Deputy Minister, Ms Noxolo Kiviet, were present at the meeting.
DPWI briefed the Committee on the proposed exit strategy of the Independent Development Trust (IDT).
The Chairperson recognised the commemoration of Youth Month, in remembrance of students who protested in the Soweto Uprising of 1976 to demand education. She said it is a pity today’s youth is not as conscious as the youth of 1976. While the country is celebrating, it is crucial to highlight, many young women are killed by intimate partners every day. All women and children have the right to be safe and live freely without the threat of Gender Based Violence (GBV). This is a matter requiring the joint effort of all individuals across political parties. She said the increasing rates of COVID-19 infections and deaths are alarming, and encouraged Members to remain conscious of this and to take all necessary measures to stay safe.
The Chairperson advised the Committee to be conscious of time as a plenary hearing was scheduled to follow. The meeting had to be adjourned by 14:30 and not the scheduled time of 15:00.
She read apologies for Ms M Hicklin (DA), Mr M Tshwaku (EFF), and Mr E Mathebula (ANC).
Opening Remarks from Minister de Lille
Minister de Lille was joined by Deputy Minister Kieviet, by the Director-General (DG) Adv Sam Vukela, Acting Deputy Director-General (ADDG) for Inter-Governmental Coordination (IGC), Mr Molatelo Mohwasa and Acting Chief Executive Officer (ACEO): IDT, Mr Chris Lombaard. An apology was read for Mr Tlhotse Motswaledi, Interim Chairperson: Board of Trustees IDT.
Presentation by the DPWI
Mr Molatelo Mohwasa , Acting DDG: Inter-Governmental Coordination , DPWI, said the purpose is to brief the Committee on the planned exit strategy for the IDT. Over the years, the IDT faced several challenges. These include:
- The change of the IDT’s mandate in 1997 increasing service offerings to the State with no adjustment to its funding
- In 2006, a cost-recovery mechanism was introduced but failed to generate revenue due to clients not paying.
The key areas of concerns are:
- the institutional form of the IDT,
- its financial sustainability,
- governance issues,
- Government’s stance on the review and rationalisation of State-Owned Enterprises (SOEs) underperforming or heavily reliant on the fiscus.
The rationale informing the planned dissolution of IDT is based on the Entity’s inability to be financially sustainable. This is despite an approximate cash injection of R550 million from the DPWI since 2012. The IDT is currently facing insolvency and relies on the fiscus on a monthly basis because of limited revenue generation. An audit is currently underway and is likely to reflect this concern.
The IDT is currently regulated by a Deed of Trust according to the Trust Property Control Act, 1988, Act 57 of 1988. Its operations follow this legislative framework. It must also comply with the Public Finance Management Act (PFMA). The use of two pieces of legislation makes it difficult to manage its governance and financial management as there are areas of conflict.
The IDT currently has an incorrect staff mix with more non-core staff than core staff. As a social infrastructure organisation, it must have more core or technical staff. The Minister said the IDT is meant to have 80% of technical staff and 20% support staff. It currently has 80% support staff and 20% technical staff. This coupled with high turnover negatively impacts its ability to maintain its programme portfolio.
Before deciding to dissolve the IDT, the Interim Board presented the Ministry with other options. These are to close the IDT or to preserve it in its current form as a Schedule 2 Entity. It has a three-year reprieve until the IDT is able to be financially sustainable. Another option is to privatise the Entity once it is able to achieve financial sustainability. The Board is leaning towards making the IDT independent after the three-year period.
This requires support from the fiscus. The Ministry opts to pursue dissolution. A multi-disciplinary task team is appointed by the Minister to develop the IDT Exit Strategy Implementation Plan (IESIP) by 15Th June 2020. This is completed and submitted to the DG, Deputy-Minister and Minister. The plan is currently under consideration.
As part of the exit strategy, the IDT has to assess an extensive portfolio of active projects. 2647 projects are currently committed for the Financial Year 2020/21. The total commitment over the Medium-Term Expenditure Framework (MTEF) is 3549 projects to the amount of R8.2 billion. The IDT has 49 projects currently under litigation for failure to pay. Total project liability is above R26 billion.
The ADDG said, prior to any resolution enacted regarding the future of the IDT, it must go through several channels of approval. These channels are:
- the Minister,
- Cabinet and
- The President.
The Minister confirmed she, the Deputy-Minister, and the DG indeed received the Exit Strategy Implementation Plan and it is currently under review. When finalised, it will be brought to the Committee. DPWI is also looking for a way forward regarding the IDT’s programme portfolio. The IDT does not have a consolidated public information system to manage projects. It is currently managed on a manual basis on Microsoft Excel. This is not reconciled with the financial management system. This method is vulnerable to human error and corruption. Dr Van Rensburg is appointed to assess how DPWI can manage the 2647 projects committed for the 2020/2021 financial year.
DPWI has a total of 8025 legacy projects. 12251 projects are identified with no confirmation of being contractually closed. DPWI will look into how to salvage some of the projects within the IDT. It will brief the Committee on any possible long-term solutions. The DPWI will work closely with the IDTs technical staff, who have a better understanding of the projects.
Mr W Thring (ACDP) alerted the Committee to the image of Mr Christopher Mulaudzi, a delegate present at the virtual meeting. He was in bed and inappropriately dressed. Mr Thring asked if this is an employee of the DPWI. The DG removed the individual from the meeting platform.
The Chairperson apologised to the country and said she was not aware there was an individual who was not dressed accordingly. She asked the DPWI to deal with the matter after the meeting.
Ms S Van Schalkwyk (ANC) said, as a shareholder of IDT, the DPWI will presumably be responsible for all contractual obligations, if the Entity exists or not. In her opinion, it is in the best interest of government to see how the situation can be remedied before implementing the last resort of dissolving it. She said the R26 billion project liability is a huge figure to incur.
There is currently no report on the value of revenue not collected, despite services rendered. This is important because it can help toward normalising the institution, and can potentially provide more information on how best to pave a way forward.
She said job losses will result from the dissolution, especially given the current economic and unemployment situation in the country. She asked what is going to happen to staff if IDT is dissolved.
Ms Van Schalkwyk also said the entity is a crucial asset. The DPWI must find a way to save it.
Mr Thring said, as presented, the background of the IDT shows it has a history of many challenges. He asked:
- Why clients, who are not making payments, are not held accountable.
- Why was the IDT not restructured earlier, if the endowment was exhausted in 2010?
- Having two pieces of legislation, namely the Deed of Trust and the Public Finance Management Act (PFMA), presents issues. He asked why this is allowed to continue and how the exit strategy addresses this particular issue.
- If the decision to accept the exit strategy is made on 17 February 2020, he asked why it has taken so long to bring it to the attention of the Committee.
- He said when the Executive Management of IDT attempted to buy a project management system compatible with its financial management system, the attempt was not approved. He asked why this was disallowed, and who made this decision, as it sounds like sabotage.
Ms S Graham (DA) said:
- She is concerned because the Committee was never presented with the Annual Performance Plan (APP) of the IDT. It had three options outlined. The decision to dissolve the IDT was made without giving the Committee an opportunity to interrogate any potential alternatives.
- The DPWI is given an infrastructural mandate and is now getting rid of one of its infrastructure entities. She asked where infrastructure will reside. She specifically asked if the projects of the IDT will be carried across, or if it will be placed under another area of the Department to handle social infrastructure.
- She said she is not confident that thr Property Management Trading Entities (PMTE) are in a position to take over these projects as it struggles to meet its own mandate and financial requirements.
- The DPWI will have to find another arm to do social infrastructure delivery.
- She agreed with Mr Thring and said it is inconceivable IDT uses Microsoft Excel to manage multibillion projects.
- She agreed it is a form of sabotage not to upgrade and upskill the technology.
- She also agreed with Ms Van Schalkwyk’s concern about the probable unemployment and the cost implications associated with retrenchment. She asked if this was considered, and at which point the Committee will be presented with the exit strategy implementation plan.
Mr P Van Staden (FF+) was concerned by the lack of accountability of clients who did not pay the IDT. He also asked the DPWI to give a timeframe of the exit strategy.
Ms A Siwisa (EFF) said she is disappointed about the outcome of the meeting, because she expected an actual exit strategy to be presented. She asked:
- What the problematic sections within the IDT are and what interventions were done.
- Similarly, she said the Property Management Trading Entity (PMTE) demonstrated it has the same problem of not collecting revenue from the client department. She asked what difference the strategic exit plan will make and who will take over the work of IDT.
- She wanted to know under what Schedule this Entity will be.
- She asked if an entity with a different Schedule will be used, and why the IDT is not being converted to this Schedule. If not, what difference will it make if the same Schedule is used?
- She also asked which interventions are taken to make sure payments are made on time.
- In July 2019, DPWI was already aware of the possibility IDT will face closure. When this issue was raised by her and Mr Thring, DPWI assured Members it will never reach this stage.
Ms P Kopane (DA) said the presentation is the same as the one given five years ago. She said it is clear taxpayer money is being wasted and no one is held accountable. The Committee was never given honest information of the status of the IDT. Ms Kopane asked why there is no verification of the completion of 49 projects government spent a significant amount of money on.
She also asked who will be held accountable for clients who did not make payments. Going forward, the DPWI must be honest about what is happening with the money allocated to IDT. The exit strategy does not address crucial issues and is a repetition of what the DPWI is telling the Committee for the past five years. Accountability is needed.
Mr M Rayi (ANC, Eastern Cape) said the Committee needs full reports from DPWI:
- A full report on the issues highlighted in the problem statement,
- a full report regarding clients who did not make payments,
- what is being done to address this, and
- a full report on the issues of governance faced by the IDT and its management consequences.
He also asked for details on the R26 billion in liabilities, and how it will be paid. He said the report must include information on the institutional arrangement of the Board of Trustees and Schedule. He asked what happened to the panel appointed to develop a turnaround strategy for the IDT in 2018. He wanted to know if this strategy was implemented and what the areas of failure are. Lastly, he asked who will take responsibility of the IDT mandate.
Ms S Boshoff (DA, Mpumalanga) asked why it took so long for a proposal on the future of IDT to be presented. She said another concern is related to staff and money wasted. If DPWI knew since February 2020 the intent is to dissolve the IDT, she wanted to know if a discussion took place with staff and if staff has the option to take severance packages.
Mr M Dangor (ANC, Gauteng) said it is difficult for the Committee to give approval on anything as the exit strategy is still a work in progress. He asked if DPWI presented all possibilities to the Committee, Cabinet, and the President. He said it is too early to settle on one scenario and there must be other possible solutions.
Mr M Nxumalo (IFP) took a moment to commemorate the youth of 1976. He asked the Chairperson to refrain from assuming the youth of today are not as conscious. He said not to make the comparison because it is the government sidelining and preventing young people from participating in all spaces in the country for the past 26 years.
He asked the following:
- He asked who will take over the mandate of the IDT if it is dissolved.
- He asked why the Minister did not approach the Committee sooner.
- He recognised certain parties are involved in the adoption of a resolution. Still, it is beneficial to engage with the Committee.
- He asked what will happen to cases currently under litigation.
- He wanted to know what happens to projects committed for the 2020/21 financial year.
- He asked for clarity concerning projects which did not receive final completion certificates.
- He asked if it means no payments were made for 14 years.
- He said it is disingenuous IDT has such a progressive mandate, yet it does not have the software to match and is using Microsoft Excel.
Mr T Mashele (ANC) said he did not believe dissolution is the right approach for the IDT. He asked the Minister to recognise lower level employees will be the ones bearing the brunt of the dissolution. Surely the IDT has problems, however, there must be other solutions to making it a sustainable entity.
He said it is important to recognise the DPWI in fact failed to ensure the IDT has the leadership it needs, such as a full Board. The Department has just been given the mandate of implementing infrastructure. The problem statement is clearly driving a narrative to support dissolution. This is not right, and dissolution cannot be the only viable option.
Mr M Mmoiemang (ANC) thanked the DPWI for the presentation. He said it is clear the IDT is a limping entity and has been for a long time. He said governance matters are concerning and the fact IDT has one registered Trustee is an indication of the challenges it faces.
The work done thus far presents a bit of hope on the possible interventions which could be used. Given the approval process required, it will take between 18 and 24 months to decide what happens with the IDT. Various consultations must be held with provinces concerning the management of the Entity’s programme portfolio.
Response from the Minister
The Minister said the point of presenting the history of IDT is to provide context. She said when her administration arrived in 2019, the DPWI had to pick up the historical issues of IDT which were present in prior years, evidenced by parliamentary and annual reports. When looking at the state of IDT and trying to pave a way forward, it is crucial to take into account government’s current approach with State-Owned Enterprises (SOEs). It says no more bail outs. This coupled by the impact of COVID-19 places government in an even worse financial situation. If you look at the number of pending court cases, it is clear it is all outstanding from the last five financial years. It is the same government which must be held accountable.
The job of the appointed task team is to assess the status of all of IDT’s projects, if a decision is made to save the entity, it must be justifiable.
It is the first time in the history of the country that an infrastructure department is established. Part of the Department’s task is connected to the IDT dealing with social infrastructure. This is one of the key priorities of the new Administration. As far as projects are concerned, it is important to separate these from the operational structure of the IDT.
Last year, DPWI asked to seek permission from National Treasury (NT) to bail out the IDT. NT said this will only be permissible if the IDT provides invoices detailing how this money will be spent. NT and the Chief Financial Officer (CFO) of the IDT scrutinised all the required invoices and concluded DPWI can only provide R10 million in bailout. The intention is not to ignore the infrastructure mandate.
The Minister said, regarding the Committee’s concerns about the future of IDT’s staff, whatever is done will be in accordance to Labour Relations statutes. Section 198 of the Labour Relations Act clearly says no one in the Ministry can fire employees arbitrarily. Due process will be followed. The Minister said she will look into the 2018 task team to find out what happened to the plan it devised.
She could not provide an answer as to who will take over the mandate of the IDT. DPWI will return to the Committee on 24 June 2020 to present on infrastructure development and the reconfiguration of the Department.
She agreed with Members saying the exit strategy is still a work in progress. It showed it will be Cabinet making the decision to pursue the dissolution of IDT or not. She reminded Members, Cabinet took an overall stance to stop the bailout of SOEs. As a department, DPWI will certainly abide with whatever decision is made by Cabinet and will return to the Committee to present a full report.
Response from the DPWI
Adv Sam Vukela, DPWI DG, said the majority of the questions raised require DPWI to compile reports. He said DPWI is still working on producing a Cabinet Memorandum for the dissolution of IDT. In his view specific issues such as the status of clients who did not pay IDT, governance, and the programme portfolio is best addressed in full reports.
He committed DPWI to making these available.
Mr Mohwasa said the Minister replied to most of the key questions as the majority are similar. He acknowledged the concerns of Members and said the Department will keep the Committee informed as the process unfolds. The Cabinet Memorandum will be shared once finalised.
The reason the Minister appointed a multidisciplinary team is to assess the full extent of the current status of the IDT. Experts are looking into issues of finance, implications for employees, cases currently under litigation, the programme portfolio, movable and immovable assets, and the Expanded Public Works Programme (EPWP). All of these measures are put in place to effectively provide a picture of what is going on in the IDT.
The Minister consulted with Labour to ensure any steps taken are in alignment with the Labour Relations Act.
DPWI will provide a report concerning governance matters, particularly why IDT only has one registered Trustee.
Mr Lombaard, who is also a member of the Task Team appointed by the Minister, said he is working closely with the Ministry in the process of assessing the status of IDT, and the form it will take in the future. He said he is aware governance issues provided many challenges for the Entity. There is a wealth of skill and expertise in IDT’s workforce and the majority of the projects undertaken by the Entity are good. Going forward he will be working closely with the DPWI and is certain all these factors will be used to achieve the mandate of social infrastructure development.
The Deputy Minister acknowledged that the IDT is faced with many challenges. She said the Department’s report does indicate a number of interactions occurred regarding the status of the IDT. As responsible leaders, it is important to not protect and advocate saving IDT as it implies the current issues are minor and can be easily fixed. She said she will not like to leave this impression, because the problems within the IDT are deeply entrenched. She is comfortable with the approach of periodically briefing the Committee as the DPWI has always done. As a newly reconfigured Department it is crucial to ensure the skills and experience within the IDT are utilised to strengthen the basis of the DPWI. She hopes this is the approach taken by the DPWI, as she will not want the Department to be seen as contributing towards increased unemployment. DPWI wants to use the social infrastructure mandate as a means to create employment opportunities. It is important to face the baggage and challenges of the IDT head on, ignoring these will be detrimental. Moving forward this must be addressed. Consequence management must be employed where needed and areas of positive performance must be salvaged.
Follow up questions
The Chairperson thanked the DPWI for its frankness. She acknowledged the Minister’s promise to bring the team coordinating infrastructure from the Presidency. The IDT has challenges, but someone must perform the mandate of social infrastructure development in the DPWI. She asked DPWI to provide specific timeframes of what is proposed, as well as written responses to the questions the delegation did not answer. These must be submitted to the respective Portfolio and Select Committee offices.
Ms Siwisa asked why the task team looking into the status of the IDT was not appointed sooner.
Mr Mashele said the Committee is working with the DPWI, however, it feels irrational to set up a task team for the development of an exit strategy and not to look to address the challenges and ways to make the Entity sustainable. Instead of bringing forward an exit strategy, the Department must provide a variety of possible solutions to be discussed. In the past, the Committee engaged extensively to address the problems faced by the Department itself and developed strategies on how to improve the organisation. He asked why this approach was not applied to the IDT. At the core of the matter, the Committee wants to have an entity functional and to deliver the mandate of social infrastructure no matter what it is called.
Response from the Minister
The Minister said the DPWI will look into the 2018 Report. This will be given to the Task Team for assessment. The task team is established around April 2019.
The Department is looking forward to finding the best solution in the interest of the South African public. While looking for solutions it is important to look at what worked in the past and continue with those. The DPWI has no intention of discarding positive aspects. The basis of proposing the dissolution of the IDT is numerous, such as, parliamentary discussions, annual reports, and an assessment of the history of the Entity. This decision is not taken without reason.
The Minister asked the Chairperson to provide a date when the DPWI is expected to return so it can complete full reports for questions it did not answer. By law, there is an obligation to fully disclose all findings of wrongdoings. There will be a need to apply for a proclamation from the President to release all investigations performed by the Special Investigations Unit (SIU). DPWI does not have authority over this matter. The Minister urged the Committee to write to her detailing any other information needed.
The Chairperson agreed the matter is a work in progress. She thanked DPWI for appearing before the Committee to provide more information. The issue of IDT was already discussed in media without the knowledge of the Committee. In the Committee’s view, dissolution must not be the only option considered by the DPWI. The reality is the Department will need a similar entity. This Entity will need the same technical expertise found in the IDT to manage the social infrastructure mandate given to DPWI by the President. She thanked the Minister for the Report and asked a full report on the work done by the task team. She thanked Members for contributions and urged everyone to stay safe in light of the COVID-19 pandemic.
The meeting was adjourned.
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