National Treasury on deviations and expansions for national departments & entities

Meeting report

The Chairperson welcomed the members to the meeting on the briefing by National Treasury on deviations and expansions for quarters one, two and three. It was a lot of work the Committee was going to have to get through this morning. The members needed to take time into account as the debate of the State of the Nation Address was happening in the afternoon. The Committee would have to move with speed without losing the salient points and facts. Mr Somyo and Mr Lees would receive a response to their correspondence to the Chairperson by the end of today. There would be a letter sent to the members in response to the call for an open tender process from the Department of Health. Minister Mkhize had responded to that quite positively. The Committee will have to make important decisions on those matters in tomorrow’s meeting. He welcomed National Treasury who would be briefing the Committee. He was notified that the Director-General was held up with the Budget preparatory meetings which had been scheduled for this whole week as the Budget Speech was scheduled for next week. The Office of the Chief Procurement Officer was present in the meeting and would be delivering the presentation.

Ms Estelle Setan, Acting Chief Procurement Officer, National Treasury, welcomed and introduced the delegation from National Treasury.

The Chairperson asked Ms Setan how long she had been the Acting Chief Procurement Officer.

Ms Setan responded that she was the Acting Chief Procurement Officer since January 2020, just before the lockdown. She had been through some tough times through the last year but she was still surviving.

The Chairperson said that the position had been vacant for quite a while now.

Ms Setan agreed that the position had been vacant for quite a while and it was raised with the Standing Committee on Finance (SCOF) last week. She was sure that the process to find a permanent Chief Procurement Officer would start soon. Interviews had taken place but a suitable candidate could not be found in July 2020. There would now be a headhunting process to fill the position.

The Chairperson said that the Committee needed to take up this matter because whenever the Committee interacted with the Office of the Chief Procurement Officer it was faced with this perennial headache. It was in breach of the law. There could not be an elongated non-filling of the vacancy for such an important task. This was a matter the Committee would need to take up because it was totally unacceptable. National Treasury was dropping the ball on this matter because this position had been vacant for the longest of time. He asked the members to note that issue and said that if SCOF was dealing with the issue then the Committee would monitor the progress.  

Briefing by National Treasury on deviations and expansions for National Departments and entities Q1-Q3 2020/21

Ms Setan briefed the Committee on the deviations and expansions for National Departments and entities for quarter one to quarter three for the 2020/21 financial year. The presentation detailed the deviations, contract modification and common reasons for deviations and modifications. The trends and observations were also discussed. In conclusion the presentation outlined the operational challenges and remedies.

Deviations

In quarter one the value of deviations was about R10 billion. In quarter two the value of deviations was R75 billion. In quarter three the value of deviations was R10 billion. The spike in deviations in quarter two was due to eight applications from Eskom to the value of R68.7 billion.

In quarter one there were a total of 86 applications. In quarter two there were 85 applications. In quarter three there were 90 applications.

Common Reasons for Deviations and Expansions

• Sole Supplier and/or Single Source e.g. OEM.

• Closed bid process (Limited market).

• Business continuity.

• Business Strategy/operations (Recently found with SOCs with their turn around strategies).

• Service Delivery Urgency.

• Extensions on current contracts due to new tender processes not concluded in time.

• Failed tender processes; Restart tender processes.

• Value for money.

• Extension of Accommodation Leases.

• Continue using existing software.

• Government to Government Procurement.

• Expansion of scope (time & material).

Trends and Observations

• Increased departure from the competitive bidding process.

• Continuous modification of contracts that keep same service providers.

• Increasing audit disputes.

• Increasing compliance reviews related to Personal Protective Equipment (PPE) from the Fusion Centre.

• Some Accounting Officers and Authorities procure through deviation even though the Treasury has declined such a deviation.

• Poor procurement planning.

• Poor implementation of projects leading to either contract expansion or single source deviations.

• Poor governance structures.

• Non implementation of consequence management on officials who cause irregular expenditure.

Operational Challenges and Remedies

There was the challenge of the inability to design and implement proactive measures to minimise abuse of SCM system and non-compliance. The remedy was an automated system and additional capacity the Division can design and implement a Governance framework to proactively improve adequacy, efficiency and effectiveness of SCM units in government.

There was also the challenge of increasing investigations due to inappropriate use and implementation of emergency procurement procedures. The remedy was compliance reviews that were being conducted on emergency deviations and affidavits provided to law enforcement agencies (HAWKS, SIU, PP etc.) for procurement investigations.

(See Presentation)

Discussion

Ms B Van Minnen (DA) said that a large number of deviations and extensions seemed to be dominated by a couple of SOEs, particularly Eskom. How did the current financial year compare to previous financial years? Was there an increase in deviations? What would be the reasons for that? Would it be because of a new management team or turnaround strategy? It could not only have been because of the Covid issues. Everyone was aware of the issues at Eskom with regard to loadshedding and power supply.

She then discussed the issues around coal and wondered if Treasury could add any details on that matter? What happened when the deviations and expansions were not supported? Why did it appear that Eskom’s financial planning had required so many deviations and expansions this year?

Ms Setan said that she did do a comparison between 2019/20 and 2020/21. The numbers were comparable. There was no alarming number of deviations. The values in quarter three of the two years were not that different. She did not do a comparison between the quarter two of 2019/20 and 2020/21. She could, however, see a definite increase in the value of the quarter two of the current financial year. That could be attributed to single transactions and deviations such as the Eskom applications. She did not do a quarter-on-quarter comparison for all the quarters. She did have the statics for a quarter three comparison for the last two years.

Ms Basani Duiker, Chief Director: Office of the Chief Procurement Officer, National Treasurer, said that the application for deviations by SOEs has always been high even in comparison to prior years. This year it was attributed to a number of factors. One of the factors was that there was a turnaround strategy that the SOEs, in particular Eskom and Transnet, were implementing. There were also issues that related to procurement that National Treasury had identified together with the SOEs. Road maps had been put in place to resolve those problems. In Eskom, National Treasury identified that tendering was an issue. The number of cancellation of tenders by Eskom was quite high. When an entity cancelled a tender while the contract expiry was almost approaching the entity was left with no choice but to extend the contract to keep the service or the supply of the good that was required. This was done while the entity would go on tender for a second time. Some SOEs also asked for continuity and would request single source deviation to reappoint the service providers. In cases where the applications were not supported it was the responsibility of the accounting authority to determine the best way to move forward. National Treasury did make considerations when it received the applications to look at issues of service delivery. In cases where contract deviations and expansions could not be supported management had to go back to the drawing board and has to look at the best approach for procurement.

Ms B Swarts (ANC) said there was a worrying trend that there were more deviations not supported by National Treasury but Departments proceeded with contracts even without any support from National Treasury. What powers did National Treasury have in cases where Departments and entities proceeded with contracts that had not been approved by National Treasury?

Ms Setan responded that National Treasury did monitor those cases. There were not many of those cases. Entities that deviate even though National Treasury declined would result in irregular expenditure. The entity would then have to request for a condonation. The entity would have to go through a very rigorous process of doing assessments on who caused and what caused the irregular expenditure or if there was any criminality involved. The process of requesting for condonation for irregular expenditure was much more arduous than doing the right thing in the beginning. The Governance, Monitoring and Compliance Unit did follow up on these cases. National Treasury would intervene in the cases where Departments or entities continued with contracts even if their application was denied.

Ms Duiker said it was important to note that Nation Treasury did not have the power to take any action other than monitoring when it did not approve a particular deviation. National Treasury did work closely with the Auditor-General when an institution went ahead and implemented a deviation that was not supported. National Treasury reported the case to the Auditor-General. When the Auditor-General audited the particular institution it would audit that deviation and declare it irregular expenditure if the institution could not provide evidence that National Treasury had in fact approved that deviation. The irregular expenditure framework would then start at that point in time. Issues of consequence management, investigations for any criminal element or any losses to the State would also begin. If there was any criminality or losses to the State that were identified then the monies had to be recovered. If there was no criminality but there was non-compliance that was caused then it was the responsibility of the accounting officer, according to the PFMA, to take disciplinary action against the people who caused the irregular expenditure. That was when National Treasury would consider condonation.

Ms Swarts said that the response was difficult to process. National Treasury said it did not have powers and had to wait. That meant the State was waiting for people to do the wrong thing and then would contact the Auditor-General. It was a very long process any by then everything would have been messed up. She would say she was fine with the response even though she was not fine with it.

The Chairperson asked the members to apply their minds on the matter because it rendered the application for deviations and expansions as a cosmetic exercise. That was why deviations was now seen as a norm and not an exception. Something had to change.

Mr A Lees (DA) agreed that Ms Swarts raised a critical issue. When Parliament established the Office of the Chief Procurement Officer (OCPO) for the first time several years ago it was perceived as a silver bullet for the considerable amount of corruption that had since been exposed in the Zondo Commission and carried on with PPE procurement over the last year. The Office was not fulfilling the role that many people thought it would. It was a consequence of it being established in a way that was without any teeth. Ms Duiker has explained that just now. Kenneth Brown left as the Chief Procurement Officer in December 2016 and that was four years ago. While there might have been competent people in the acting position it was not a workable solution to have people acting for four years in a critical function. This was an indication of the lack of importance perceived by people with regards to the OCPO.

He asked Ms Setan to provide some understanding on why this new institution has not been able to deal robustly with the high levels of corruption in the State procurement of goods and services. It was a question about what kind of action Parliament should be taking to ensure that the OCPO fulfilled the role that Parliament intended when it passed that legislation. That concept of that legislation was a unanimous concept of Parliament. It was not like there was open opposition to the Office but clearly there seemed to be a lack of commitment. Perhaps more stringent powers needed to be introduced. Ms Duiker clearly explained the process and by the time the Auditor-General got to it and irregular expenditure was declared the people involved have long since moved on and taken up jobs in other Departments.

Ms Setan responded that his question was a difficult one to answer. She had been around since the establishment of the Office. The intention of the Office, as it was established, was to improve on the accountability of supply-chain management of Government. Giving the Office more power was being covered in the new Public Procurement Bill. The Office was being given more authority so that it had intervention powers. Currently in the legislation the Office did not have those powers and it was dependent on law enforcement agencies and the Auditor-General when it came across acts of corruption. The Office was working very closely with the Auditor-General to get to a point where corruption was stopped before it actually happened. At the moment that was not always the case. She admitted that the OCPO was not achieving what it was intended to do when it was set up.

Mr Lees said that Ms Setan’s response confirmed the concerns the Committee had that were expressed by Ms Swarts and the Chairperson. The Committee needed to assist in this process. It was not just about looking at the individual deviations, which was now becoming historical. There was a much bigger structural problem and issue to be dealt with. He was pleased that the Committee and the Office was seeing it in the same way. The process on how to deal with this problem could be moved forward quite consensually since everyone was in agreement. It was a distressing situation.

The Chairperson said that the Committee would have to have an engagement with the Parliamentary legal advisors to close this lacuna. It just did not sit well with him.

The Chairperson asked the delegation to find the list and schedule of the Departments or entities that had proceeded with implementing deviations or expansions even though National Treasury had not approved them. It was important for the Committee to see where the problem lies because it also might explain why a certain course of action was taking place and in which spheres.

Ms V Mente (EFF) said that she had two concerns. She also wanted a list of those Departments and entities that had ignored the directive from the OCPO. She wanted the Committee to think about the issues it was currently facing and specifically issues around the pandemic. It had presented an opportunity for those people who were unscrupulous. The Committee dealt with a very difficult situation of grants in the previous Parliament. A court had to rule that grants should be paid by a company even though that particular company was deemed unfit to be dealing with the matter. Grants were a human rights issue and people needed grants to survive.

She noticed in the presentation it said indicated that Higher Education was the highest, with Eskom, on deviations. Immediately after, it was mentioned that the deviation was asked for laptops. South Africa was in a pandemic and students needed laptops to do online learning. She discussed the basis of the Office rejecting the deviation. The rejection of the deviation was based on two things, as mentioned in the presentation. The one reason was that there was no value for money. In her view, there was always value for money when students needed to learn. The other reason was that the procurement was not according to the regulations of Treasury in terms of pricing. She wanted it to be explained to the Committee why when it came to an issue of a human right, that children could not be denied education, did the OCPO become a stumbling block and deny the application for deviation? Why would the OCPO reject that? How was the application supposed to have been done correctly? What were the Office’s observations? She also noticed that the Office gave guidance, where necessary, on how the entities should go about doing the proper procurement process so that the Office could allow such a deviation.

 She also had a concern with the matter that Ms Swarts raised. The Office gave conditional support for deviation. That meant as long as the entity complied to certain standards or submitted certain documentation that was not part of it. The presentation also indicated that the Office was dealing with these processes manually. That was why she was worried. If permission was given conditionally yet it was done manually while a plan was being devised on how to automate the system then how was the Office monitoring such conditions at the current moment? How far was the automation of the system from being complete? The Office needed to be up to speed with monitoring so that it could stop the looting.

Ms Setan responded to the questions on the Department of Higher Education. That procurement process was conducted by NSFAS and not the Department itself. It was denied with the DHET but that function was then proceeded with by NSFAS. NSFAS has already identified the preferred bidders so that was not a process that was halted all together. It was just taken over by NSFAS. The reason NSFAS provided for this was because it was closer to students than the Department of Higher Education. It was laptops for students who were on the scheme of NSFAS and not for all students.

She then discussed the conditional support. It was usually based on the need to ensure that it was cost effective and that there was value for money or that certain aspects of the tender process were adhered to. There were various reasons that the Office usually put in place when it gave the conditions. The automation of the system would definitely assist the Office with the continuous monitoring and to ensure that these conditions were complied with. The Office appointed a service provider late last year and it was busy with the development of that automated system where Departments were able to log their requests onto the portal. Departments would be able to track the status of their requests right throughout until the end of the process. It was hoped that that system would be in place in the first quarter of the new financial year.

Ms Mente asked what measure did the Office currently use to monitor those that have been given conditions and if the entities adhere to those particular conditions? If not, how then does the Office stop the procurement?

Ms Setan said that the Office had specific people dealing with specific institutions. When the Office noticed that there was a trend that conditions have to be continuously given then it would be addressed specifically with the Department. The Office would need to understand why the Department was not providing it with information and why conditions always needed to be provided to the Department. It was difficult for the Office to monitor as it wanted to. Currently, to monitor was an administrative burden for the Office. That was something that needed to be improved on.

Ms Mente said that there was no monitoring tool within the Office. The synchronisation of the OCPO, and AGSA with the law enforcement agencies was not something that could be used to stop looting because it was a method that was used after the act. The Committee was looking for a method that would stop the act and perform monitoring. If there was nothing currently then the Parliamentary legal advisors would have to advise the Committee how it would go about ensuring that there was a monitoring for OCPO.

Mr S Somyo (ANC) said that the members had voiced their frustration with the OCPO not acting as a deterrent for those who act wrongly in terms of the procurement process and not being proactive. When the controls fail at the various stages of procuring services it should be this Office that firmly insists that consequence management should be implemented from when the occurrence occurs. If things were going to be left to happen then what was the use of the Office?  The Office relied on referrals to the Auditor-General and other entities. People spend knowing that the expenditure was on the wrong side of the procurement system. That relied on the Office’s capability to stop the rot. If the Office could not do so then why did it make all these assessments and all this kind of information available? This was why there was the perennial nature of a declaration of wasteful or fruitless expenditure. That became the after effect. Huge sums of money were spent in this kind of way where people had to create a justification for frivolous expenditures on these matters. SOEs always spoke about turnaround strategies. Why were they talking about turning around an institution if they did not have a plan? If an institution had a plan there was no way it could create an expense which would fall foul in terms of the procurement system. He discussed Eskom needing coal. If it knew that it needed coal then why did it have to get into expenses that had questionable processes? This indicated the actual capacity that these institutions had to plan for the expense that would occur at the end of the day. Consequence management ought to be that which was required even from the side of Treasury. The responsibility was with Treasury to authorise such delegations to those who were supposed to perform. The failure by Treasury to insist that these things should form part of the performance of those who were in authority should not be taken lightly. It was not a failure or absence of legislation. It was not an absence of regulations. The regulations were there. The OCPO could not cry as if it did not have the ability to hold people accountable for these kinds of things. Why did the Office exist if that was the case?

Ms Duiker responded that this went hand in hand with the balance between the powers that the accounting officers and accounting authorities were given by the PFMA as well as the role of National Treasury. Currently, the role and the mandate of the OCPO fell within the role that has been legislated in the PFMA. It was important for the OCPCO to not overstep and impede on the responsibility that that accounting officers and accounting authorities have been granted by the PFMA. Quite a lot of these procurements happen within the Departments where the accounting officers and the accounting authorities have to make the decision to procure for the purposes of service delivery. Many times the Office had to consider service delivery. Similarly when National Treasury was faced with a request from the Department of Higher Education which required it to consider basic human rights but also consider the fact that the procurement has to be done within the ambit of the law in a manner that does not violate human rights. What does one do? The Office considered the risks that were associated with procurement. She used the example of the Department of Higher Education where an emergency procurement of laptops needed to be done because education must continue during lockdown. When thinking about value for money the Office needed to consider whether once the process has been done, and the appointments have been awarded and laptops delivered, will the laptops serve their purpose? Was there a strategy for the Department to allocate and manage the use of these laptops such that they will serve their intended purposes? Those were the kinds of risks and concerns the Office raised with Departments. Before the entity could implement emergency procedures for deviations it must make sure that the procurement will serve its intended purposes. She then discussed the issue of monitoring. On a quarterly basis institutions sent in procurement reports for all procurement they had done above R500000 for that quarter. The Office also received procurement plans. When the Office monitored procurement plans against the procurement reports it could see the procurement that was done according to the procurement plan. The Office could also see the procurement done that was not part of the procurement plan and that did not go through the normal tender processes. The Office then asked the Departments the right questions and the Departments were asked to submit documents. When material irregularities were found the Office did write to the accounting officers and the accounting authorities to declare that particular procurement as noncompliant and therefore irregular. Recommendations were made whether the Department should cancel the contract and this was communicated to the accounting officers. The Office, at that point, allowed the accounting officers their powers as given by the PFMA to make the right decisions and do what they were tasked to do. In the absence of that action the Office expected that consequence management would then take effect.

Mr Somyo said the outlook from Treasury should be proactive in dealing with these matters. When the Office received a report it was necessary for it to execute its mandate appropriately. The accounting officers ought to do something about the matters that the Office identified. It flies against the face of the Procurement Office. The Office says no but these Departments continue. Then the Office still awaits a particular process to look into the assessments when the Department made an appeal.

He then discussed certain behaviours in the South Africa procurement system. National Treasury needed to improve at looking at documentary proof so that consequence management could be followed.

Ms Swarts said that when the Committee listened to all the words spoken by Treasury on deviations it was very sad. Accounting officers knew that all National Treasury would do was write letters to them even after they went ahead with deviations without permission. She discussed how ETDP SETA also had a number of applications for deviations. What was the procurement for on these deviations?

Ms Setan said it was under the expansions in quarter one. There were 25 applications from the Education, Training and Development Practices SETA. 24 was to the value of R13 million. There were a couple deviations for cleaning services in the various provinces. The largest one was for Head Office and Provincial Offices was for the lease of multifunctional photocopy services. That was worth R1.4 million. Then there was also the lease of office space in the various provinces. Another deviation was for records, information management and document warehousing worth R2.2 million. There was also a deviation for network services, information security and telephone services to the value of R5.5 million. The information could be seen in the expansions for quarter one spreadsheets. There were a couple that contributed to the number of applications. Although relatively not high in value there were quite a few, about 25 applications.

Ms Swarts said that out of all the responses on the deviations of the ETDP SETA surely it was very poor planning for a Department to realise that a contract was going to end? She said it was concerning dissecting these deviations and realising what they were actually for. If a Department did not know when their cleaning contract would end and took it up to a deviation it was a problem.

The Chairperson agreed with Ms Swarts. He asked Ms Setan if she had the schedule of those that went ahead with deviations even after the Office did not give them the approval.

Ms Setan said that the Office did not specifically do that analysis. She gave an undertaking to do that analysis and share it with the Committee.

The Chairperson said he wanted to comment on something Mr Lees raised earlier on. Mr Lees wanted to know whether the OCPO was being taken seriously. What was the vacancy rate of the Office?

Ms Setan said that the vacancy rate was quite high at the moment. The Office was in various stages of appointing people in the vacancies.

The Chairperson asked Ms Setan to unpack what high vacancy rate meant?

Ms Setan said that there were at least seven vacancies. The Office was in the process of requesting additional resources for the Government Monitoring and Compliance (GMC) unit and it was doing that within the budget constraints. She added that she would be able to provide the Committee with the vacancy schedule as well. In the various Chief Directorate roles there were seven vacancies.

The Chairperson said that this was a salient point. There was merit in the Committee receiving that information and it should be readily available. There were seven of how many vacancies? How many people should be there and where were the vacancies? This went to the heart of whether the Committee could have any confidence in the effective functioning and efficiency of the Office to deal with the issues it needed to deal with. This also raised questions over whether the Office was receiving the necessary support and whether the capacity was there. This was not a reflection on the employees. This was a matter the Committee would have to take up with the Director-General of National Treasury. The Committee understood that Ms Setan was in an acting position and understood her dilemma. The Committee should be privy to what was the current situation of the Office. There were seven vacant positions at Chief Director level. The Committee would want to know how long those positions had been vacant. The Chairperson said he was just commenting on the issues the other members had raised on following up on matters. He had a suggestion that came from Ms Swarts’ question about powers and functions but he wanted to focus on the issue of vacancies.

Ms Setan responded to the questions on the vacancy rate at Chief Director level. All the Chief Director positions were filled at the moment. The Chief Directorate of Strategic Procurement was managed by Ms Balekile Ngalo who was acting on her behalf in that portfolio. The other director was Mr Mpho Nxumalo who was Acting Chief Director in Policy and Legal on behalf of Mr Willie Mathebula who was currently seconded to Prasa. The Chief Directorate positions were all filled. The vacancies were in the Director and Deputy Director areas. Those were the people the Office relied on quite heavily to do the footwork, responding, reading and assessing the deviations and preparing responses for the Chief Directors to assess. She was referring to the vacancy rate of funded positions but there were quite a few positions that were vacant and unfunded. Those details she could get from the HR unit to give to the Committee for specific information.

The Chairperson said that response did not inspire any confidence. The Committee would receive that information and follow it up. He made a suggestion on the issue of what happens if people proceed without permission. The issue of the lacuna in legislation did not sit well with him. If the Office did not approve the application then people were unofficially allowed to just proceed and the AG would come in at some point. That could not be right. He suggested that the Committee get the Parliamentary Legal Services to look at that lacuna. The OCPO and National Treasury needed to make suggestions to the Committee on this critical matter. He doubted that they felt it was desirable themselves nor that it was correct that there was this challenge. He wanted National Treasury to provide their thinking on this matter within the next 14 days. He suggested that in the interim, while the Committee embarked on this process, any deviation or expansion that National Treasury rejects should be communicated to the Committee at the same time it was communicated to the ones that made the application. This was to be done so that the Committee could begin a mechanism of tracking these things earlier so that it could do real-time oversight. One of the public accusations was that SCOPA came in at the tail-end. There was nothing that prevented the Committee from looking at matters as and when they happened. It was only correct that when the Office communicated its decision on a deviation or expansion the Committee should receive that communication. It was incumbent on the Committee on how to process and monitor that information. He suggested that the Committee call in those that were making the request for them to explain how they would proceed to move forward so that the Committee had it on record. The Committee would need to devise a framework on this matter. In the interim the Committee should be served with that information so that it could determine the way forward and have it all on record. These entities and Departments were left to their own whims. The entities needed to detail a roadmap on how they would appeal the rejection of the application. If the entity was going to proceed, then the Committee needed to be privy to that early on so that it could make determinations. That matter worried him. He hoped that measure would help the Committee look at these things.

When the Committee received the schedule of the vacancies then the matter would be taken up with the DG. The Committee needed to have a meeting with the DG as a matter of urgency. The Committee wanted the OCPO to function effectively and efficiently. It also needed to be fully resourced with the necessary skills, knowledge, expertise and resources. The issues that were raised in the meeting may be the reason why things were falling through the cracks. In his view the Office was not receiving the full support of National Treasury. That was very dangerous. National Treasury needed to play ball with this Office.

He said that the NSFAS matter was a serious one and the Committee received communication from members wanting to engage with NSFAS. The Committee was looking into that matter and trying to find a date. It was a matter of urgency so that the Committee was privy to the state of financial health of NSFAS ahead of students returning to institutions of higher learning and training across the country. The issue of laptops was one that the Committee needed to look at. When the Committee last met with the administrator he spoke in glowing terms and promised the Committee ‘heaven and earth and the universe beyond’. From there things just went downhill with that administrator and now NSFAS was back on its knees. The Committee would have to engage with NSFAS as a matter of urgency. Communication would be made to members.

He thanked the OCPO for briefing the Committee this morning. The Committee needed to focus on Eskom because the coal matter remained a perennial headache at Eskom. If Eskom was now asking for a deviation of R68 billion and increasing substantially the number of requests National Treasury needed to deal with it meant that Eskom had to appear before the Committee. Eskom was a problem child. He did not know what sheer miracle was now needed. If it was not the problem of loadshedding then it was expansions and deviations and then it was complaints and grudges. There was a fundamental problem at Eskom. The Committee members would have to apply their minds on how to deal with those things.

The Chairperson had a question on deviation number 74 in quarter one. Who was Tenova?

Ms Duiker said that Eskom had approached National Treasury for a deviation in quarter one. Tenova was a service provider that was appointed as a subcontractor in the contract for new critical works projects. Tenova was a subcontractor that was dealing with the designs of a coal tippler. At the time the takeout conveyor caught fire and that created an emergency situation for Eskom. An emergency was declared because they could not move coal from the mine to Eskom. Eskom negotiated to redesign a part of the coal tippler sometime between 2018 and 2019. The contract had lapsed between Eskom and the main contractor. Eskom then came to National Treasury for a single source deviation. At that time National Treasury did not support that deviation. However, Eskom came back to Treasury citing that this project and the contract was critical to them. Later in the year National Treasury supported Eskom’s request because of the criticality of the project to Eskom’s operation. There were conditions that stated if the contract was not irregular and if the contract was cost effective. There were some issues that led National Treasury not to support the contract in the first place.

Ms Setan said that in the end the deviation was supported and this was because of the critical nature of the contract. If it was denied it may have led to loadshedding. National Treasury also looked at value for money and the impact of not supporting the deviation versus supporting the deviation in terms of service delivery and the continuation of the service.

The Chairperson said that he raised that issue because when things were rejected then the roadmap moving forward needed to be understood. There was a subsequent approval. In his view the contract was irregular. That point of turning down an expansion or deviation becomes of critical importance. It sets into motion another plan and another outlook which if not pulled out of the shadows results in the approval of contracts in a manner which was questionable. The Committee would look at that matter as well. The Committee members would look at any resolutions and discuss it the next day. When the Committee called Eskom, or any other entity, it would call National Treasury to be a part of that meeting. National Treasury needed to be a part of those meetings with entities where deviations and expansions would be discussed. It would be prudent that the first SOE the Committee met with was Eskom with the huge amount of R68 billion for deviations. The Committee would also look at Tenova and others. The Chairperson was suspicious that there were double payments for services Eskom had already received. He thanked the members and the OCPO for being a part of the meeting. He said that all the questions the Committee had asked was in the spirit of helping the Office so that it could perform its duties, functions and so that it could be an enabler for the Committee’s oversight as well. The Office also needed to shape up and build up its capabilities. The Office should call on the Committee if it ever needed help. The Committee would like to receive all the outstanding information from the Office by Friday. The response as to how Parliament could close the lacuna in legislation needed to be provided to the Committee in 14 days.

The meeting was adjourned.