The Committee met with the Department of Public Works and Infrastructure (DPWI) in a virtual meeting to discuss the challenges faced by the Property Management Trading Entity (PMTE) in collecting user charges from client departments. It expressed great concern about the rate at which outstanding payments were escalating, and warned that if this continued, the DPWI risked finding itself sitting on more than R100 billion owed to it by other government departments. Such non-compliance had a negative trickle-down effect, so it needed to be resolved.
The Department provided a historical background of how the PMTE had been founded and how its mandate had evolved since 1997. Its seminal year had been 2006, because this was when the devolution of power had been approved by the Cabinet. From this point onwards, user departments had been given the responsibility for paying for their accommodation costs, and the PMTE had become the organ that was responsible for the management and maintenance of the DPWI’s property. However, the business model that operated this arrangement stipulated that the PMTE had to cover user charges for client departments, and then collect its money within 30 days. This arrangement had created numerous liabilities for the DPWI, as most client departments were reluctant to pay their debts. Some of the reasons that were forwarded to explain this were that its buildings were poorly maintained, and that the Public Finance Management Act indirectly gave user departments power over the DPWI. As a result, the PMTE found itself paying R4.2 billion worth of user charges, yet it was collecting only R60 million within the space of 30 to 90 days.
The DPWI had proposed various strategies to deal with this problem. Chief among these were interventions through engaging the Director-Generals and Chief Executive Officers of user departments that were reluctant to pay. Other initiatives had been engagements by the Minister with National Treasury and the Deputy President. Measures had been proposed that involved strategising methods to generate income. This would be done through optimising the Department’s assets, like letting out small properties and renegotiating leases. The Public Works Bill was another solution that the Department believed would bring a significant change in the relationship between user departments and the PMTE, as it would provide the entity with sufficient control over its budget. Finally, in the talks about optimising and sweating the Department’s assets, emphasis had been placed on the maintenance and refurbishment of buildings. New initiatives were proposed to provide scheduled maintenance, which would allow the Department to let out its property at market rates to both the public and private sector.
The Committee acknowledged the delicate position in which the PMTE found itself. However, they all shared a common observation that the DPWI’s business model was weak. One Member remarked that it seemed to be somewhat reluctant to make money, and encouraged it to adopt a commercial approach to the management of its assets, because very little effort had been put into leasing some of the properties that were not occupied. When private businesses showed an interest in these properties, the Department sabotaged itself by not responding swiftly to these requests. Another Member echoed these sentiments, and said the DPWI could learn from smaller entities like the Judicial Service Commission, which seemed to accumulate significant profits from its immovable assets.
The Chairperson explained that the meeting’s main purpose was to discuss the functions of the Property Management Trading Entity (PMTE) in preparation for the Budget Review and Recommendations Reports (BRRR) by the end of November 2020. She pointed out that this entity had challenges in collecting user charges from client departments, and suggested that this may have been caused by the absence of the Public Works Bill.
She acknowledged the apology in advance of Minister Patricia de Lille, who had advised that she could attend the meeting for only an hour. Before allowing the Department to proceed with their briefing, she congratulated the Minister for her presentation on the Infrastructure Investment Plan, and applauded how she handled questions directed to her.
Lastly, she indicated that she was communicating from a rural area in the Eastern Cape, so she was bound to face network problems. In case she lost the signal, she delegated Ms L Mjobo (ANC) to continue with her duties as the Chairperson.
Minister’s opening remarks
Minister De Lille thanked the Chairperson for her kind words, and introduced the Deputy Minister of Public Works and Infrastructure (DPWI), Ms Noxolo Kiviet, and other officials in the delegation. She said the Department had assembled a team that was going to provide details of the functions of the PMTE, including its history. The Chief Executive Officer (CEO) would report on some of the challenges that the Department faced in collecting user charges, and emphasised that the Department had tried several attempts to rectify this, but had achieved very little success. This matter had been referred to the Deputy President who in turn was going to convene a meeting between the Minister and the Minister of Finance to discuss how to resolve this issue.
She said the Department of Treasury believed that the current system was working, and that what was needed was to change the tendency of non-payment of services by government departments. Currently, the Department was sitting on almost R4.2 billion in overdrafts, and that the Auditor-General (AG) was concerned about this. The Department was looking forward to the Committee’s input, as this was a matter that urgently needed a solution.
Origin and evolution of PMTE
Mr Imtiaz Fazel, Acting Director-General, DPWI, began by providing a background of the PMTE. He briefly explained how the idea to establish a state property agency had originated in 1997, when the Department of Public Works (DPW) introduced the concept of user charges, where user departments were required to pay for services rendered on their behalf by the DPW.
In 2002, a joint National Treasury and Department of Public Service and Administration (DPSA) technical committee had recommended that the state property agency concept should be realised through the creation of a trading entity -- a trading entity was needed to render the services of a state property agency. In 2006, this was approved, and budgets had been devolved from the DPW to all user departments. From this point onwards the PTME became a vehicle to effect accommodation charges on client departments.
Between 2012 and 2015, Cabinet had acknowledged the progress that was being made by the PTME, but at the same time suggested some recommendations and even introduced additional features to the concept. However, in 2017 it had resolved that while the PTME showed progress, it faced challenges. It said the entity had no evidence of operational efficiency, had challenges with user charges, and concluded that its business model was not properly optimised. It then recommended that the PMTE had to extract value from its portfolio, reduce overheads, and had to begin to save expenses.
Having described how the PTME had evolved over the years, Mr Fazel explained in greater detail the significance of the devolution of power. He said its main aim was transparency on the full costs of managing immovable assets, and to reflect this in the budget of the department that used these assets for service delivery. Accommodation charges were intended to pay for property rates, maintenance, and major refurbishment of state properties. Rates were calculated per client per facility and it was noticed that the ideal charge during this period was R26 per m2. This proved unaffordable to the fiscus, especially when one looked at what had been devolved and what was calculated as necessary to pay for rates, taxes, and the general maintenance of the buildings. To fit within the DPW’s baseline budget vote, this amount had been reduced to R4.74 per m2. Under these circumstances, the Department had been forced to manage and maintain high quality buildings with a deficit budget.
Mr Mandla Sithole, CFO, DPWI, said that according to the devolution framework of 2006, the PMTE was supposed to be financially sustainable because of itemised bills -- capital budget, leasing, municipal services, and accommodation charges -- had all been devolved to client departments, and that the devolved accommodation charges were based on asset registers. However, when this process was conducted, the asset registers were not complete, and this meant that the devolution process was executed incorrectly.
To illustrate how fragile the PMTE’s position was, he explained its financial sustainability was heavily reliant on the government, because 97% of its facilities were occupied by client departments. He outlined its different types of accommodation, how many of them were occupied, and how they were used. Of notable importance was that 59% of these accommodation facilities were specialised assets (military and SAPS facilities), and that 97% of these assets were occupied, with 81% of these occupants being user departments. Considering that the average condition of most assets in the PMTE portfolio were fair, the PMTE had a lot of maintenance work to do.
Mr Sithole said the PMTE operated under a “awkward principle,” where its user departments controlled its capital budget. He suggested that this was probably the reason why departments were reluctant to pay their dues. This arrangement had created a situation where user charges decreased in value, while operational and maintenance costs increased. There was no relationship between the PMTE’s tariff structure and its operational costs. To counter this problem, the DPWI had agreed with the National Treasury to implement itemised billing. This strategy was scheduled to last for five years, so the first cycle was completed in 2019 and the last one was scheduled to end in 2023.
This solution, however, presented new challenges to the PMTE. For instance, immediately after completing the first cycle, it had experienced a R221 million shortfall. This was because the National Treasury had claimed the state was struggling to afford user charges. In some cases, it was found that departments had been given more money in 2006, but when devolution commenced, they had kept the money. This excess capital was noticed when calculations revealed that these client departments were now occupying fewer assets than when the budget was devolved. Shortfalls persisted and increased during the three years this programme was running. In 2020, the shortfall had increased to R824 million, and in 2021 it had increased to R990 million. It was anticipated that in the in the following cycle, these figures would escalate to billions.
Mr Sithole explained that the business model agreed for PMTE stipulated that it paid service charges for user clients, and then claimed its money a month later. This resulted in bank overdrafts, because the PMTE did not have enough money to operate in this manner. On average, it spent R1.3 billion per month on behalf of client departments, which was more than it collected from user departments. This was aggravated by the fact that client departments took about 60 or 90 months to pay the money they owed to the PMTE. This had resulted in an outstanding balance of R7.2 billion.
To overcome this situation, a new billing framework agreement had been drafted which allowed the PMTE to bill its portfolios in advance, resolve disputes within 30 days, and to stop paying for all disputes and non-settlement of outstanding claims. However, client departments were reluctant to sign the agreement.
Mr Sithole also pointed out that there was no relationship between the amount of money that client departments channelled towards private leases, and the rental for state-owned property. Their budget for private leases had increased significantly each year, while the one for the rental of state-owned property had remained stagnant. This was ironic, considering that they leased only 2 500 private facilities compared to the 76 278 facilities they rented from the Department.
He proposed that the DPWI had to meet with the National Treasury to discuss how it could take control of this budget in order to cover the money that was owed to it. New strategies were supposed to be drafted to address how these client departments could be encouraged to rent state-owned property.
A breakdown of the top 10 client departments that owed the PMTE money showed that chief among these were the Department of Defence (DoD) and the Department of Correctional Services (DCS). While progress was being made with the DoD, the South African Police Service (SAPS) and the National Treasury, the DCS had been uncooperative. It was unwilling to engage the PMTE through quarterly meetings, like other departments. Apart from this hurdle, SAPS was paying on a monthly basis, and National Treasury, the Independent Police Investigative Directorate (IPID), and the Department of Transport were willing to pay -- but on condition that the disputes between them and the PMTE was resolved. These entities were therefore not to be blamed, because the PMTE had to resolve these disputes. The PMTE’s disputed claims amounted to R3.4 billion, and even though it had settled all these disputes, it was going to take some time for it to receive money from client departments. He added that the budget cuts by the National Treasury had the potential to slow down the payment of these claims.
Mr Sithole outlined the several interventions that had been implemented to address these issues. These included efforts by the PMTE itself, like DG to DG or CFO to CFO meetings, billing agreements, and engagements with the AG, National Treasury and the Minister. Unfortunately, these efforts had not yielded any progress, partly because clients were uncooperative, and that there was no Public Works Bill. The promulgation of this legislation would give the PMTE power over its clients, because currently they possessed more control. He also mentioned that in the Department’s annual report, the Chairperson had suggested that the Portfolio Committee of Finance and that of the DPWI had to meet and discuss possible solutions for the PMTE’s financial woes.
Notwithstanding the numerous challenges that the PMTE had encountered in addressing these issues, revenue generating initiatives had been implemented to improve financial sustainability. These involved optimising the Department’s assets. He pointed out that only 3% of the Department’s buildings were unoccupied, and 36% of land parcels were vacant. It was thus the intention of the PMTE to maximise revenue generation in these assets. Cost reduction was one of the key measures that was being taken to generate revenue.
He said the PMTE had managed to obtain R122 million from land disposals, and R21 million from letting out small harbours. Costs of approximately R92 million had been reduced by appealing against municipal valuations in the Free State, and through lease negotiations by about R338 million. Since the latter agreement was valid for the duration of the lease, the reduction amounted to R480 million in total. There were seven other “big” landlords that the PMTE intended to negotiate leases with. He anticipated that this was going to significantly cut its costs. Finally, he outlined some of the additional strategies that had been drafted to generate more revenue for the PMTE.
Ms Mjobo, as Acting Chairperson, thanked the DPWI for its presentation and asked if the Minister wished to make additional contributions.
Minister’s final remarks
Minister De Lille pointed out that slide 31 was a wish list, because it had not been formalised. She emphasised that the PMTE faced a few structural problems. She had reviewed Chapter 5, Section 36 (b), of the Public Finance Management Act (PFMA), which governed trading entities within government departments, and found that it had numerous shortcomings which were responsible for some of the problems that the PMTE faced.
The second structural problem was that from the budget that the PMTE received from user departments, it had to fund Facility Management (FM), which was another branch of the DPWI. This caused tremendous strains on its finances. She explained that the purpose of the FM branch was to minimise the reliance on private organisations for the maintenance of government buildings. Not only was this expensive, but user departments complained about the delays that were associated with this type of maintenance. The FM, therefore, provided reactive and scheduled maintenance. She said a term tender had also been instituted for service providers, who would be on standby to attend to all maintenance issues arising at these buildings.
The Minister also expressed concerns about the persistent qualified audit that the PMTE received every year. According to the AG, the problem was the Department’s immovable assets. It had been found that the immovable asset registers, and the way the PMTE determined the value of its assets, was incorrect. Unfortunately, this had not been fixed and the problem had cascaded down each year that followed.
She agreed with Mr Sithole’s proposal for an intervention by Parliament as this would help the PMTE, especially with its imbalances. The government spent R4.2 billion on letting its properties, and when one closely evaluated this expenditure, there was a monopoly of seven companies. For that reason, the DPWI proposed that these leases had to be renegotiated. However, upon making this proposal, there had been an internal decision that instructed that these renegotiations had to stop, although the DPWI had reinstated this procedure. She emphasised that the imbalances were because the DPWI was collecting R60 million per annum, yet it was paying out R4.2 billion. She expressed the need for optimising and sweating the Department’s assets.
The Minister proposed that early in 2021, the DPWI was willing to present a report to the Portfolio Committee on how it was going to sweat its assets and deal with the imbalances. In addition, the Acting Director General had been given a mandate to engage the DGs of non-complying departments when he attended the Forum of South African Director-Generals (FOSAD). He had been encouraged to seek answers regarding why user departments were not paying their dues.
Lastly, she said the situation was dire and that the DPWI was eager to receive suggestions from the Portfolio Committee. She apologised for leaving the meeting early.
The Acting Chairperson thanked her for her informative remarks, and accepted her apology. She opened the meeting for discussion.
Mr W Thring (ACDP) said it had been difficult to follow the presentation because the slides that were sent to the Committee in preparation for the meeting seemed to have been incomplete.
The Chairperson commented that she had also noticed the same problem.
Mr Thring continued that trouble with presentations seemed to be recurring. The Committee had previously discussed the inconvenience that late presentations imposed on Members, but now incomplete presentations seemed to have ushered in new challenges, and this needed to be addressed.
After commenting on these administrative aspects, he said that the gap of the baseline from 2006 was a recipe for disaster, and was unsustainable. He anticipated that this shortfall was going to continue growing, and that this in the long run would compromise the PMTE’s ability to maintain and refurbish the buildings. He lamented that if this was not addressed promptly, the health and safety of government officials in those buildings was at risk.
He referred to the deficit between the R4.74 per m2 and the required R26 per m2 from 2006 as a double deficit for the DPWI, if non-payment and non-compliance was to be considered. He was even more concerned about the effect this had on municipalities. In eThekwini, they described this as an unfunded mandate -- this was when municipalities had to carry utility charges (electricity, water and sewerage), yet they were not receiving any charged fees. In the long run, this affected service delivery. Therefore, non-payment by client departments had an adverse effect on service delivery.
He pointed out that according to law, clients had to pay within 30 days. Given this provision, he asked why non-complying clients were not being held accountable. He suggested that the DPWI could learn from other departments on how to manage its portfolios. He proposed that the Department could use its size to rectify some of its challenges. For instance, about two years ago he had read that the DPWI was one of the largest property portfolios in the country. However, smaller property portfolios, like those in the Judicial Service Commission (JSC), seemed to have a unique way of managing their portfolios so that they could generate income from them. He suggested that surely there was a model that the DPWI could follow to yield similar results. Finally, he asked why the immovable asset register determinations were not correct every year.
Ms S Graham (DA) supported Mr Thring’s observations, and added that the government seemed to have a bit of resistance to making money, and seldom operated with a commercial mindset. For example, she had been approached by an individual who wished to rent a DPWI property in Pretoria at a market rate. It had been almost impossible to get a response from anyone in the Department, including the PMTE, which controlled the bulk of the properties owned by the DPWI. When a response finally came, it was said that the property was used for filing. She commented that surely another place could have been found for filing, because the DPWI had an opportunity to generate revenue from potential clients who wished to setup a workshop in the building.
Recently she had received another letter from people who wanted to hire property in the East Rand, but still the Department had made it almost impossible for these individuals to do so. In a way, it was deliberately limiting its chances to generate income. Although some of this property interest was small, it had the potential to accumulate substantial profits in the long run. She mentioned that in Graaff-Reinet there were DPWI houses that were being vandalised and were standing empty. This property could have been sold or leased, but instead it had been left to deteriorate because the DPWI was simply not paying attention.
Ms Graham also referred to an oversight that she had carried out on property that was leased to the SAPS. Everyone was supposed to have been evicted, and currently the premises looked like “an absolute dump,” and squatters now resided there. Services were still being charged on this property owned by the DPWI, but the Department was not getting any rental from SAPS because they were not using the property any more. She had issued a full report on this matter, but nothing had been done to address it. Once again, the Department was not actively looking for ways to generate income.
She built on Mr Thring’s point that in the private sector, property owners always evaluated ways of maximising the income from their assets, so it was time for the Department to emulate such profit-driven approaches in relation to its property. She referred to proactive maintenance, alluded to earlier by the Minister, and said it was “super important.” With a proper maintenance schedule, the Department could charge higher rates and start leasing property to clients in the private sector. It could not expect client departments to pay if the Department was not committed to the maintenance of its property.
Ms Graham said the immovable asset register was a huge problem. This was because she had noticed that the Department intended to increase the interest rate on outstanding accounts. However, eThekwini was trying to settle its account with the Department, but the Department it owed it so much money that it had requested a write-off of the interest. Therefore, if the Department owed money and was not paying interest, it was unfair of it to demand its dues from other departments. She also mentioned that there was a great possibility that the DPWI did not know all its properties, and this could have been one of the causes of the disputes.
She lamented that disputes were another huge problem in the Department, and asked Mr Sithole how much of the R3.4 billion of disputes were going to be settled in the Department’s favour, and how many were going to end up being written-off. She commented that the recent decision to cut off the Department of Defence, and to allow it to pay for its services, was an indication that its financial systems were “off the rails.”
She asked why the Department was not using the Expanded Public Works Programme (EPWP) to maintain its properties. It was possible for it to maintain its properties by harnessing the youth into the programme. This in turn would skill the youth and create employment opportunities for them.
She also commented that it seemed the Minister’s vision was to move what the PMTE was doing, to Infrastructure South Africa (ISA). This was going to be an issue, especially around putting the Public Works Bill in place, because it created a conflict between the Minister’s vision and what the Department required at the current moment. She argued that the Minister’s focus was on ISA, and not on the public works mandate, which was the core of the DPWI. While there was no problem with channelling financial resources from the policy development into the ISA, the Department was in dire need of the Public Works Bill because none of the issues that had been raised in this meeting would be resolved without it.
Ms S van Schalkwyk (ANC) also expressed disappointment in the incomplete presentation that had been sent to the Committee. Like the previous speakers, she said this had made it difficult to follow the presentation.
She expressed concern about the top ten clients that owed money to the Department. It was ironic how the Department often sought intervention from the Treasury, yet the Treasury was among the clients that owed it money. She proposed that engagements with these client departments should be conducted at a ministerial level. She was aware that the Ministry had tried several strategies of engagement to no avail, but suggested that active engagement by the Minister could hasten the recovery of this money. She said that if this problem persisted, the recouping of the money owed was going to be very low in terms of value, because most clients owed the Department money from years ago. In the same vein, she was against the writing-off of outstanding money. Instead, she persuaded the Department to remove interest charges as a strategy to encourage clients to pay their debts.
Ms Van Schalkwyk pointed out that about 3% of the Department’s property was unused, and that there were numerous reports of vandalism on this property. She asked who was responsible for inspecting these buildings, both used and unused, and how often this was done. This information was important to establish the condition of these properties, so that when the DPWI prepared the needs analysis for maintenance there was accurate and updated information.
She supported Ms Graham’s suggestion on the use of the EPWP. Instead of releasing the youth that had just completed the programme, the Department could recruit them as part of the maintenance programme. Although she was not advocating cheap, exploitative labour, employing these individuals would help in cutting costs.
She said she was puzzled by the large sums of money that government entities paid to occupy private property. She gave the example of the Health Department, which often paid leases for private property for its doctors -- especially foreign doctors -- at exorbitant prices. If those amounts were scrutinised, it would be apparent that they were inflated. She asked why government entities were hesitant to lease property from other government entities.
The Chairperson thanked the Committee Members for their contributions and questions. She noted that Mr T Mashele (ANC) wished to make some contributions, but she could no longer see him in the virtual meeting platform.
The Committee Secretary responded that he was no longer in the meeting, probably due to network problems.
The Chairperson proceeded to make her contributions, but said she was not sure if her questions had been asked already, because she had also been in and out of the meeting because to network problems.
She said that notwithstanding the necessity of a Public Works Bill, the Portfolio Committee had to issue a strong statement about these departments. As Ms Van Schalkwyk had pointed out, the reality was that the Department could not expect ordinary people to pay consistently for leased DPWI property when other government departments were failing to do so.
She echoed Ms Graham’s suggestion for the Department to consider the EPWP as a strategy to solve the maintenance question.
She also expressed great concern about the rate at which outstanding payments were escalating. She anticipated that if this continued, the DPWI risked finding itself sitting on more than R100 billion owed to it by other departments. Such non-compliance had a negative trickle-down effect, and this needed to be resolved. For example, municipalities faced lawsuits or got their assets attached by service providers because departments failed to pay their dues.
Finally, she stressed that the Portfolio Committee needed to introduce timeframes. In the past, there had been a lot of procrastination, but it was time to take the necessary action. In addition to this, the Committee had to find ways of engaging the portfolio committees of the departments in question. Such an approach would help to create a platform were departments could state how the actions of other departments stifled their operations, and how this could be resolved.
Mr Sithole took charge of the responses, and started with Ms Graham’s question on how much he was expecting to recover from the R3.4 billion in dispute. He said this was a difficult question, but as the CFO he wished to recover every cent that was owed to the DPWI. This was possible, given the processes that were been during payment. One such process was the line function, which involved the daily operations of the entity. Thus, if the line function said something had happened on the ground, one then expected that this meant there had been a valid payment for the service that the Department had rendered.
He agreed with Ms Van Schalkwyk’s suggestion about not writing-off payments. In previous years, the DPWI had encountered a case were a department had owed it money from ten years ago. The DPWI had engaged this department until it had raised enough money to pay its debt, which was around R78 million. He said the DPWI was not prepared to write off payments unless the Deputy Director Generals (DDGs) saw it fit to do so, although such cases often invited consequence management.
He confirmed that the Treasury was one of the top ten clients that owed the DPWI money. It was willing to pay what it owed to the Department on condition that the dispute was resolved. The Department’s DDG was thus currently heavily involved in the process of resolving the dispute in question.
Mr Sithole welcomed the suggestion of the Chairperson about making a strong statement supporting the Department. Such an initiative would greatly assist the DPWI to put pressure on the departments that owed it. The observation by Ms Van Schalkwyk on leases was very relevant, and he had touched on it in the presentation. He confirmed that leases for private property were overstated, yet the government entities preferred them over public property. As a result, the DPWI had started a process of renegotiating all the leases.
He said the DPWI intended to use the Public Audit Act (PPA) to resolve issues in the Department, and that he had already started engaging the AG pertaining to this issue. He added that if financial losses occurred due to delays in resolving disputes, the DG held the officials accountable because the Department had to prove its claims when clients were disputing them.
Mr Nkosana Kubeka, Chief Director: Property Management Operation, PMTE, commented on the strategy that had been drafted to deal with maintenance. He said the DPWI had put in place term contracts that were increased monthly. These contracts sought to forgo reactive maintenance by introducing preventative maintenance. As part of the strategy to monitor performance, the Department had introduced an indicator to reduce reactive maintenance throughout the system. These efforts had been cemented by the introduction of total facilities management. This system was employed in all the prioritised facilities of the Department. He described it as a whole maintenance approach, which included both reactive and preventative measures. It operated under a company that had a handyman on site, and offered a 24-hour service. Four facilities were currently on this programme, and it was intended that there would be 20 such facilities by the end of the financial year. This initiative demonstrated that the Department was committed to the fundamentals of maintenance. It was linked to what Mr Sithole had spoken about in terms of charges. Although it was an expensive model, it provided comfort to the users. Users negotiated the charges based on the scope of the total facilities management.
Mr Kubeka shed light on the property in Durban alluded to by Ms Graham. He confirmed that SAPS were no longer the occupants of this property, and that the current users of the premise were doing so illegally. The DPWI was working closely with the Durban regional office, and legal procedures were under way to evict these occupants. As soon as this was done, DPWI would be in a better position to undertake a proper assessment of the building. Its engineers had already identified some structural challenges with the building in question, and had made recommendations on how these conditions could be improved.
He concluded by addressing the questions raised by Ms Graham about adopting a commercial approach to the PMTE’s portfolios. He said that measures were being taken in that regard, and that a new letting protocol had been drafted to accommodate members of the public who wished to occupy the Department’s properties. He asked his colleagues who were better informed on this matter to shed more light for the Committee Members.
Mr Solly Ncoane, Director: Real Estate, DPWI, said the letting out of state property was a delicate procedure. The Department was currently working on it and had identified properties that were suitable to be let out to the market. His team had presented a strategy to the Department’s executive committee and had received support to proceed with this process. The Department was currently in the process of finalising the strategy, and that once this was done, property was going to be advertised openly on the market. He expressed great optimism about the prospects of this initiative, as he anticipated that it would generate significant revenue for the Department.
Mr Fazel addressed three concerns that had been raised by the Members. These were the questions about how the 2006 baseline was unsustainable, the resistance of the Department to make money, and the general reluctance to explore alternative ways of generating income. He said all of these issues were addressed by the PMTE. He suggested that Members had to start viewing the PMTE as an entity to commercialise property and business, and to deliver those services to the user departments that the DPWI served. He supported this by stating that in the 2017 Cabinet meeting, the PMTE had been acknowledged to have provided a financially sustainable programme that addressed many of the concerns that had been raised by the Committee. It reduced the Department’s reliance on the government’s fiscus, and provided a sustainable accommodation service to the government.
Mr Fazel said the DPWI held quarterly bilateral meetings with its clients, and that currently it had managed to cover about 50% of its clients through these engagements. The first item on the agenda was the money they owed the Department. This approach prioritised what was owed to the Department before listening to the concerns of the client. In the following two weeks, arrangements had been made to meet with the Inspecting Judge of the Judicial Inspectorate for Correctional Service, Justice Edwin Cameron, to discuss the quality of the prisons and correctional services. He emphasised that this process was going to continue in order to recover what was owed to the Department, and to hear directly from clients about their concerns to provide a better service.
While the DPWI was near to receiving a clean audit outcome, the PMTE had received some negative feedback and had been classified as a qualified audit. He explained that the PMTE was carrying an audit outcome that related to the Department’s immoveable asset programme dealing mainly with the valuation assertion. However, there had been improvements in this regard, and the Department was working hard to move the PMTE from a qualified audit.
In conclusion, he said that ultimately the PMTE was an important initiative, and that the Committee and the DPWI should not lose their focus. Commercialising and professionalising this entity was the only way the Department was going to generate income. He described it as a sacred entity that necessitated the creation of new government agencies that were sustainable, and sweated the Department’s assets.
Deputy Minister’s comments
Deputy Minister Kiviet thanked the previous speakers for their responses, and began by stating that in the previous financial year the DPWI had signed a memorandum devolving the payment of services by various departments. However, two ministries -- the SAPS and the Department of Justice and Constitutional Development -- had written to the Department asking if it could cover their payments for the current financial year whilst they dealt with their internal affairs.
She suggested that the Committee, and members of the DPWI, at this point had to focus on the debt. She highlighted that in the following financial year, the Department was supposed to be able to allow departments to pay for themselves. She believed that this was going to go a long way in relieving pressure off the Department, and allow it to focus on other issues. In this way, these departments would take full responsibility for their payments, and it was hoped that the tendency to incorrectly use funds for the payment of services would stop. For instance, if municipalities cut the provision of services to these entities, it was now entirely their responsibility to settle the outstanding payments.
Having relieved itself from other departments’ financial responsibilities, she suggested that the DPWI had to focus on clearing its backlog and ensure that its systems were ready to move away from the payment for services. This left the Department with a duty to pay for rates and taxes. She pointed out that these were stable payments, and even suggested that it was possible to pay rates for the full year. Municipalities often rewarded clients who made such payments with favourable discounts.
The Deputy Minister congratulated all the Members who had participated in the Parliamentary debate. She said it was balanced, and had helped to clarify certain issues for the public. It had also invited important feedback from individuals whose political parties were not represented in the Portfolio Committee. She believed that this feedback was going to be instrumental in addressing some of the concerns that had been raised by Committee Members.
She addressed Ms Graham’s observation that the Minister seemed to be biased towards the ISA. She pointed out that it was important to remember that the Department now had two mandates -- Public Works and Infrastructure. There was therefore no choice in the Department for an “either or,” as these two arms worked hand in hand for the betterment of South Africa as a whole. She explained that when necessary, the DPWI used the public works framework to strengthen the infrastructure portfolio, and likewise it used the infrastructure framework to strengthen the public works portfolio. It was impossible to separate these two departments.
Deputy Minister Kiviet said that the Department intended to use the EPWP and National Youth Service (NYS) in the delivery of infrastructure. The Department had sufficient knowledge in the councils’ and universities’ databases about young individuals who were qualified to occupy technical positions in the infrastructural development. She agreed with Members on the suggestion that the DPWI had to sweat its assets.
In conclusion, she said it had come as a surprise that some Members thought the Minister had certain biases, because she was passionate about the Public Works Bill -- to the extent that she had set a deadline for the drafting of this bill. She pointed out that the Ministry took the bill very seriously because the success of the DPWI, and the fulfilment of its mandates, was contingent upon it.
The Chairperson asked if Members wanted to have another round of questions, but they replied that they were satisfied with the responses.
She proceeded to make her final remarks. Her first observation was that perhaps the reason why client departments were not paying was because they had lost trust in the DPWI, and that it had a lot of work to do to regain this trust. However, she encouraged the Department to continue with its strategies to recoup the outstanding money that was owed to it. She also stressed that the Department had to arrange a bilateral meeting with the Department of Justice before the end of the year, because it owed the highest amount of money among all client departments. Immediately after settling matters with the Department of Justice, the Department had to meet with the Treasury, as it was of strategic importance to its success. The Portfolio Committee would play its part by meeting with the Portfolio Committee of the Treasury and the Minister to share some of the concerns that had been raised in the meeting.
The Chairperson explained in isiXhosa that when the term ended, it had to be clear that the mandate of the Department had not changed. Of course, infrastructure was an added responsibility, but the Department had to remain committed to its mandate. She encouraged the DG to present these issues in the annual FOSAD meeting, and emphasised that he had to demand the money that was owed to the Department by other departments.
Lastly, she said that if there was a bill for Public Works and Infrastructure, the Department was not going to be in its current position. It was therefore important to fast track the enactment of the bill.
The Committee Secretary said that the minutes of the previous meeting, and those of the current one, would be considered and adopted at the following meeting. She added that in the following week, the Committee was going to receive briefings from the Department and its entities.
In her final remarks, the Chairperson suggested that soon the Committee would have to arrange for physical meetings. Due to network problems, she had been in and out of the meeting, and Mr Mashele had encountered the same challenge. This was not ideal, and despite the warnings of a second wave of COVID-19, the Committee had to consider meeting in Cape Town. She suggested that the halls at the Pelican Park Parliamentary Village were large and well ventilated, and could accommodate Members of the Portfolio Committee.
The meeting was adjourned.
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