Western Cape Department of the Premier: Annual Report 2021/22

Meeting report

Introductory Remarks by the Premier

Mr Alan Winde, Western Cape Premier, told the Committee that the filling of vacancies in the Department of the Premier (DoP) had been a challenge, mainly due to the decreased funding provided to provinces by National Treasury. With no indication provided on what the budget for the new financial year would be, the Western Cape Government (WCG) would have to continue to deliver services to its citizens with less funding. Regardless of these concerns, he was pleased by the audit outcome of the department.

Performance overview

Dr Harry Malila, Director-General, WCG, provided an overview of the performance of the DoP during the year under review.

The department underspent by R42 million, or 2.4 percent, of its appropriation of  R1.745 billion. This was due to underspending of almost R10 million on staff costs, staff exits and savings on recruitment processes and other processes, especially those related to the State Information Technology Agency (SITA). Savings on goods and services, mostly within the Children’s Commission, amounted to R18 million. However, the R18 million would be returned to the Children’s Commissioner.  

Debt management remained under control, as the department regularly reviewed and applied its policy strictly. Furthermore, the department managed to have an over-collection of R2.8 million, mostly due to the revenue received back from the Wesgro trade and investment promotion agency.

Fruitless expenditure amounted to R13 000. All irregular expenditure cases were resolved during the year, with the department regularly reviewing its procurement procedures. Gifts and donations in kind were shy of R2 million, he pointed out.

All the department’s terms of reference were continuously updated, so as to prevent fraud and corruption. There were no forensic cases outstanding. By regularly reviewing its internal processes and establishing its internal control unit, the department managed to minimise any conflicts of interest that might arise. An ethics committee was in place to resolve outstanding matters related to the concerns of the Western Cape Provincial Parliament (WCPP) Standing Committees.

Certain key risks emerged during the financial year concerning cybersecurity, load shedding and what would be done with the broadband contract in the next year.

All in all, he was pleased by the department’s performance, particularly the execution of its governance mandate. The Premier had established an institutionalised governance committee consisting of representatives from the Executive Committee (EXCO), deputy directors general, certain key managers and chief directors. The officials attended all meetings scheduled throughout the financial year.

The Chairperson opened the floor for discussion on Part C of the annual report.

Discussion: Part C

Mr C Dugmore (ANC) asked if he could speak to the concerns raised in the briefing note of the Auditor-General (AG).

The Chairperson requested that he only do so during the Committee’s discussions on Part E of the report.

Mr Dugmore asked the department to explain why deputy directors-general (DDG) positions for people management, strategic programmes and integration remained vacant.

Referring to the department’s requirement for designated employees to disclose their financial interests, he asked if there was no requirement for family members of senior management officials to do so.

He asked whether officials who had previously worked for the Centre for E-Innovation and left for the private sector, only to want to return to the centre, had to wait for a certain period before re-applying for their positions. In addition, he asked if the department was aware of any officials contracted by the centre who had gone to work for the private sector. 

Referring to a statement on page 104 that the department fully supported the public sector code of conduct, he said that previously, the Committee had indicated that part of building an ethical provincial government required that departments were consistent in dealing with allegations of sexual misconduct. He asked whether the People Management Directorate and the DoP were consulted by the Head of the Western Cape Department of Transport and Public Works (DTPW) on the decision not to institute any disciplinary action against Mr Farrel Payne, regarding allegations of sexual misconduct. He said documents from the Commission for Conciliation, Mediation and Arbitration (CCMA) showed that the labour relations unit within the DTPW and a legal opinion by Senior Counsel had recommended that Mr Payne undergo a disciplinary hearing. He added that Mr Payne was currently before a criminal court.

He asked whether the departments in the province had developed criteria to regulate Broad-Based Black Economic Empowerment (BBBEE) partnerships with the private sector. A section within the report stated that the DoP did not determine criteria for awarding incentives, grants and investment schemes in support of BBBEE. Did this mean that no such criteria had been developed at all in the provincial government.

Ms N Nkondlo (ANC) noted that in a previous meeting, the department had mentioned that it was awaiting a report from the BBBEE Commission on the BBBEE status of departments in the province. Has the department received the report on its BBBEE compliance?

Responses

Dr Malila, responding to the question on DDG vacancies, said that the department had lost the services of three DDGs in programmes 1, 2 and 3. Due to fiscal constraints, the department has been unable to fill those positions. It was decided to assign the responsibilities for the three programmes to three senior officials. Programme 1 was assigned to Mr Andre Joemat, head of the corporate services centre in the DoP. Programme 2 was assigned to Ms Louise Esterhuyse, programme manager in the people management programme at the DoP. Programme 3 was assigned to Mr Drikus Basson, chief financial officer of the DoP. The department was still looking to fill the three vacancies; however, this could only be done once it obtained the requisite funds. He noted that all three officials had worked well on their new assignments for the past year and a half, without extra compensation.

Regarding the question on the requirement for families of senior officials to disclose their financial interests, he explained that supply chain management (SCM) officials were particularly required to make such disclosures. If the department picked up any suspicious activity, it might request an audit assessment, or the Ethics Officer might intervene if something was detected that had not been disclosed by a particular official, but could not be verified.

Adding to this point, he said that the provincial government had a system that allowed departments to verify the financial interests of officials in the transport, deeds and other offices. The Director-General of the department signed off such matters. The department recently amended its ethics policy to include lifestyle audits if there was a reasonable suspicion of a possible conflict of interest.

In response to the question of whether officials in the Centre for E-Innovation had left it for the private sector, he indicated that the department dealt directly with the companies that provided it with consultation services. He added that there was a continuous movement of information and communications technology (ICT) officials from the public to the private sector and back.

Referring to criteria for BBBEE partnerships with the private sector, he clarified that the DoP had not participated in partnerships with the private sector. It was not involved in the awarding of any incentive grants and incentive schemes for BBBEE as BBBEE was a part of its own internal policies. The department would have to verify with other departments if they had developed such criteria or proposals for grants and incentive schemes to promote BBBEE.  

Mr Hilton Arendse, DDG: E-Innovation, DoP, explained that the department did not have restraint of trade provisions for its Centre for E-Innovation employees. He was unaware of the possibility that officials who left the department had since been reappointed as external service providers. The only senior official who left the department was the Chief Operations Officer (COO), hired to work at SITA.

Where a service provider put forward a former employee of the Centre to work as a consultant on its behalf, the department had a right not to reappoint that individual. He added that the department had yet to reappoint someone who had left it and sought to return as a consultant.

Dr Malila stressed that the department’s code of conduct was clear on sexual misconduct. Through the Corporate Services Centre (CSC), the department investigated such allegations internally and in the other provincial departments. The process involved the department investigating a complaint and thereafter providing a report to the accounting officer, who, in terms of the Public Service Act, was tasked with either agreeing to the CSC’s recommendation or rejecting it.

Ms Louise Esterhuyse, Chief Director: People Management Practices, DoP, clarified that the department did conduct the investigation and made a subsequent recommendation to the Head of Department  (HOD) to institute disciplinary action, which was not agreed to.

Mr Lucas Buter, Head: Legal Services, DoP, confirmed that the department conducted an investigation but the HOD declined to approve the recommendation to charge Mr Payne. Subsequent to that, a dispute was lodged by the complainant.

No legal advice was ignored, he said, and the opinion by Senior Counsel was only sought after the dispute was declared by the complainant. Senior Counsel, through the legal opinion – which was contained in the HOD’s statement of defence – advised that the wrong test in law had been followed. Currently, the matter is awaiting a ruling from the Commissioner and the CCMA.

Mr Dugmore reminded the department that the matter was before a criminal court. He added that the alleged misconduct was said to have occurred in the DTPW offices.

Ms Nkondlo noted that no response had been provided to her question about the department’s compliance with BBBEE regulations.

Dr Malila indicated that the department and National Treasury had been engaging on the BBBEE compliance certificate. At some point, the BBBEE Commission sought to charge each provincial department R150 000 to issue a compliance certificate. This was rejected, as it would have cost above R3 million and because the provincial government was confident that it complied with the BBBEE legislation.

More recently, the department had met with the BBBEE Commission and its legal representatives. In those engagements, it was agreed that the department would continue to report its progress on meeting the BBBEE targets. The department, he stressed, agreed to disagree on the matter.

Ms Nkondlo asked what it meant when it said it agreed to disagree on the matter, and which matter this referred to.

Dr Malila explained that the provincial departments agreed to submit the compliance certificates as part of the annual reports. Further, the department believed the R150 000 price for issuing the certificate to be unreasonable and was confident that it had correctly followed the legislation.

Ms M Maseko (DA) asked if this meant that the department would not pay the R150 000 because it was aware that it complied with the legislation, and whether this was where it agreed to disagree.

Dr Malila said that Ms Maseko was correct.

Mr Buter stated that there was an inconsistency between the BBBEE Act and the regulations. All the accredited information was required by the regulations, but this could not supersede the Act. The department did invite the Commission’s legal team to engage on the matter, but this was not taken up. In a previous engagement, the Premier’s Office was informed by the Department of Trade and Industry that it was in the process of amending the regulations to be in line with the Act.

Mr Drikus Basson, Chief Financial Officer, DoP, explained that the BBBEE regulations required the department to submit a two-page report on its gross annual turnover, but no government entity had a turnover – this was a business concept. The department felt that the template provided by the BBBEE Commission was not government-friendly. There was never an intention for the government to be BBBEE accredited; nonetheless, the department had continued to comply with the Employment Equity and the Preferential Procurement Acts. He added that BBBEE compliance was used in the procurement process to advance black-owned businesses.

The Chairperson asked what the department’s current BBBEE level was.

Ms Nkondlo said that the amendment of the BBBEE Act was to ensure that what was in the principle legislation was being adhered to. The BBBEE Commission was established to ensure compliance by state and non-state actors, with the certificate verifying that this had occurred. As such, she asked why the departments were expected to pay R150 000 for the issuing of the certificate.

The Chairperson indicated that this was a standard amount paid to the Commission for issuing the certificate. He proposed that the Committee invite the Commission, the department and the DTI to appear before it, so the matter was duly resolved.

Dr Malila supported the proposal.

Discussion: Part E

Mr Dugmore pointed out that the AG was concerned about the increase in the number of overpayments to employees within the province, resulting in increasing fruitless and wasteful expenditure. He asked if the department had any comment on this. What were its plans to eradicate such irregularities? How did it plan to institute debt management?

Ms Maseko highlighted that many officials who had received overpayments often resigned before paying back the debt. She stressed that the focus should be on dealing with the issue of overpayments rather than solely focusing on getting back the debt. Were there systems in place to address this issue? If there were, what were they and what progress had been made?

The Chairperson asked if there were any solutions for the historical R184 million claim against the department. He asked why the black African population, which constituted 32 percent of the population of the province, was not represented in senior management positions within the department.

Mr A van der Westhuizen (DA) said that the annual report cited SITA as a stumbling block in the implementation of certain projects and in the spending of money that had been budgeted. A reference was also made to delay in the renewal of a licence, which amounted to a transgression. He asked if these issues were due to the effects of the hard lockdowns imposed on the country. Had there been an improvement in SITA’s service provision after the lockdowns? He asked whether there had been a comparative study on the cost of procuring information technology and what this would be without procuring through SITA. Was SITA cost-effective?

To what extent had the lockdowns contributed to the department’s underspending for the year under review?

Ms Nkondlo asked what the reasons for the staff exits were.

She asked whether the AG and the department had different views on how to resolve irregular expenditure.

She asked why there was a difference in the funds surrendered by the department to the Revenue Fund in the 2019/20 and 2020/21 financial years, especially considering the department’s aim to achieve financial resourcing.

Mr Dugmore asked if a cost award would be given if the department won the case of the R184 million claim made against it.

Referring to page 224, where it referred to the intergovernmental payables, he noted that there was an amount of R72 000 owed to the Special Investigating Unit (SIU) by the Premier’s Office. He asked what this amount was related to.

He asked whether it was unusual for the department to owe money to Government Motor Transport (GMT) at the end of the financial year. If not, would the amount be settled at the end of the new year?

Responses

Dr Malila said that the money owed to the SIU was an unconfirmed balance, as the institution issued an invoice for thermometers it claimed had been provided to the department during the Covid-19 pandemic. Following receipt of the invoice, the DG met with the head of the SIU, where he indicated that the department could not take liability for the amount and that the unit should find an alternative mechanism to retrieve it.

The money owed to GMT was an outstanding balance for the 2019/20 financial year, and was carried over to 2020/21 as part of the liability process.

Regarding SITA, he said the department believed that it required some sort of exemption from having to procure items through SITA, as having to do so had led to delays in the process. The department had conducted a comparative analysis, which it shared with the executive head of SITA, on this matter and it had recently sent a letter applying for the exemption. In addition, the DG met with the executive head monthly to resolve some of the issues preventing the provincial government from delivering its services.

Still referring to SITA, he confirmed that some of the processes were affected by the pandemic, but there were other issues related to the systems.

The lack of black African representation within the department’s senior management had been discussed by the management team, which continued to strive for greater diversity. Dr Malila was disappointed that some of the DDGs lost were individuals from disadvantaged groups, but he assured Members that the department would continue to consider diversity when adjudicating on appointments.

Referring to the R184 million claim against the department, he indicated that the Premier was cited in the matter. While the department did not believe that the liability would accrue to it, it had no option but to disclose the matter.

Regarding the controls put in place to ensure that there were no overpayments in the system, he stated that this occurred in only three departments and the amounts were small. These occurrences usually took place when an individual resigned and left near the end of the month or if they did so and departed immediately. The Personnel and Salaries (PERSAL) system used by the department usually closed on the 5th or 6th of each month. Controls had been put in place by the department to deal with those matters.

The department believed that its debt management process had to be constantly reviewed. Where officials had proposed debt write-off that was not justifiable, the department would hold them to account.

Regarding the staff exits, he said all the reasons for the departures were set out on pages 127, 128 and 129 of the annual report. These included better remuneration, a lack of further promotions and a change of career, amongst others.

Ms Henriette Robson, DDG: Corporate Assurance, DoP, explained that the department needed to upgrade the webpage of its Teammate system – which the internal auditors used to document their work – otherwise it would no longer be supported.

Ms Esterhuyse explained that PERSAL was a payroll system used by the government, with salaries usually being paid on the 15th or 30th of every month. If payment was made on the 15th of the month, the system would close on the 5th, preventing any further changes. In a case where an individual resigned on the 6th, the department could not stop the payment of the salary to the employee, and an overpayment of salary was registered. Once it was registered, the Chief Financial Officer was made aware, and was then expected to institute a debt management process. Most of the provincial departments decided not to pursue the money. The Premier’s Office noted that some did not follow the debt management process.

Dr Malila further explained that an individual could pass away on the 16th after having been paid on the 15th, which would mean that half of their salary would become a debt. He admitted that there were difficulties in dealing with the issue, but stressed that the amounts involved were not substantial.

Mr Basson mentioned that the liabilities referred to the monies surrendered to the Revenue Fund, which amounted to R6.5 million for the previous year and R42.5 million for 2020/21. As this amount related to underspent funds, they had to be returned to National Treasury through the Revenue Fund.

Regarding the overpayments, he explained that if the Persal system closed on the 5th and the Chief Financial Officer’s office was immediately notified, it could stop the payment 48 hours before the 15th by informing the bank. A claim was laid against an official who received an overpayment. Due to a court ruling, the department could no longer institute its self-help policy, which allowed for it to deduct from an employee’s salary to retrieve the debt. As a result, the department could only request consent from an employee to deduct the debt from their salary, he said. Nonetheless, the department was confident that its debt control processes were working.

Mr Buter said that the department had consistently maintained that there was no legitimate legal action against the Premier. In fact, it felt that the claim made against the Premier was based on vague allegations about the conduct of another provincial department. The department had objected to the summons on three occasions, with the third one being filed in March of this year. He described this as trench litigation, which was where a party filed for litigation and the opposing party was able to change its particulars of claim. The litigants had not yet filed the amended particulars of the claim, and the matter was set to be heard on 24 February 2023.

One of two things would happen, he said. Either the department’s exception was upheld and the claim against the Premier was put to an end, or it was dismissed, in which case the pleadings would be filed and a trial date allocated. The department hoped that it would win the case.

Mr Arendse, on SITA, said that the delay in procuring items through SITA was causing delays, and put the department at risk of underspending and not fulfilling its service delivery objectives. The department managed SITA-related issues at the senior management level and through monthly quality-of-service meetings between SITA and a provincial management team. These engagements focused on resolving how and when procurement matters would be solved and which procurement matters would be escalated to the executive level from a local one. 

SITA, he said, had indicated that it would look into the delegations to allow the department to procure at a higher level than was allowed now. That message was shared at the beginning of the year, yet there had been no movement. The department had sent a letter to the Minister. While the department had noted very little indication of an improvement of services, it was encouraged by the appointment of a new provincial manager who was open to making changes to SITA’s procurement processes.

Touching on the comparative analysis done by the department, he indicated that when the DoP put requirements to SITA, it normally did so through a business case, followed by a procurement process. Before a specific requirement was provided to a service provider, it must be referred to the department and the accounting officer would have to sign off on that. Recently, the department sent one requirement back to SITA after completing a comparative analysis. It found the bid by the service provider to be unacceptable. After further deliberations between SITA and the service provider, the amount was reduced and thus agreed to by the department.

In response to the question on the extent to which the COVID-19 pandemic affected SITA’s ability to procure services externally, he stated that the pandemic had no effect, with most of the issues being systemic. The department was looking into how to speed up the procurement process.

The Chairperson thanked the department for availing itself to the Committee, which he believed showed its commitment to its work. 

Dr Malila thanked the Committee and the officials within the department.

Premier Winde thanked the Committee for the deliberations and the officials in his department for the work done during the year under review. He reiterated the department’s commitment to good governance, which would improve service delivery for the province’s citizens.

The meeting was adjourned for fifteen minutes.

Committee resolutions and actions

The Chairperson proposed that the Committee request that the department submit its plan on how to avoid overpayments. In addition, he suggested that the Committee consider inviting the department and the BBBEE Commission to appear before it.

Ms Maseko requested that the Secretary note all the recommendations made during the meeting.

Ms Nkondlo said that she was concerned by the increase in underspending by the department in the year under review, which was partly due to issues related to SITA, and asked for a report to be presented on the matter.

Ms Maseko recommended that SITA be invited to the planned engagement with the department and the BBBEE Commission.

The Chairperson proposed that a joint meeting between the Public Accounts Committee and the Committee for the Premier’s Office be organised.

The meeting was adjourned.