IDT & Agrement SA Annual Reports 2021/22; with Deputy Minister

Public Works and Infrastructure

12 October 2022
Chairperson: Ms N Ntobongwana (ANC)
Share this page:

Meeting Summary

Video

Agrement SA

Independent development trust (IDT)

The Independent Development Trust (IDT) briefed the Portfolio Committee on the 2021/22 annual performance, and it was mentioned that through the office of the acting Chief Executive Officer, the IDT was strengthening stakeholder management as part of building a client-centric organisation culture and gaining public confidence.

The IDT is also looking at improving its revenue generation management. The management at the IDT is proud of the reduction in litigation cases as the management has been working reducing litigation cases and the Board has approved a litigation strategy which includes implementing a new contracting model.

The new IDT Board has focused on reconfiguring the entity into a fit-for-purpose and financially viable entity that can meet client expectations. The Board has further made notable progress in working to generate business from national and provincial clients.

The IDT achieved six of its 13 targets. Five targets were partially achieved and two were not achieved. Achieved targets include the number of new or replacement facilities that comply with infrastructure norms completed, percentage of projects completed within budget, number of construction work opportunities created, number of work opportunities created through EPWP (EPWP-NSS excluding IDT programme portfolio), value of programme spending, and the management fee collection ratio.

Partially achieved goals are the number of non-greenfield social infrastructure facilities that comply with infrastructure norms completed, percentage of projects completed on time, percentage of weighted B-BBEE spend (based on total programme spend), percentage of compliant programme invoices paid within 30 days of receipt, percentage of compliant overheads invoices paid within 30 days of receipt.

The goals which were not achieved were the percentage of programme contracts awarded to women and youth contractors (participating in the CDP).

After more than five years of audit disclaimers, the IDT received a qualified audit outcome for the 2021/22 financial year.

Members of the Portfolio Committee congratulated the progress made by the IDT. However, they raised concerns about various issues, including the ethics of appointing the acting CEO who was the Chairperson of the Board, vacancy rates at the IDT, the lack of consequence management, options to make the IDT a financially viable entity, and delays in construction projects.

Agrément SA also briefed the Portfolio Committee on the 2021/22 annual performance. It was discussed that there are four outcomes that Agrément SA looked at: (1) transformed built environment, (2) quality manufactured non-standardised products, (3) optimised use of non-standardised products, and (4) broadened geographic footprint of non-standardised products.

For the annual financial statements and non-financial performance information completed on 29 July 2022, Agrément SA achieved an unqualified audit opinion with other matters on supply chain management and non-financial performance information on technical services. 88.9% of the external recommendations were implemented.

Agrément SA achieved an overall average of almost 63%. It is important to note that on each of the targets planned to be achieved versus the actual performance, three targets had a 100% achievement.

Members of the Portfolio Committee raised discussions about the importance of Agrément SA’s focus on the Auditor-General’s findings about the lack of sufficient audit evidence. The discussion also focused on how Agrément SA plans to improve its revenue sources independent of the Department of Public Works and Infrastructure.

The Committee wanted clarity about the reasons some projects were stalled including the impact of COVID-19 and how the entity was planning to have a national footprint.  

Meeting report

The Chairperson officially opened the meeting and welcomed all to the meeting. She said that she was looking forward to engaging with the entities of the Portfolio Committee to ensure accountability. An apology from the Minister of Public Works and Infrastructure was acknowledged.

Independent Development Trust Annual Report 2021/22
In her opening remarks, the Deputy Minister of Public Works and Infrastructure, Ms Noxolo Kiviet, said that IDT was going to share its annual performance with the Committee.

She added that this was also an opportunity for the Department of Public Works and Infrastructure to share where they are in reconfiguring the IDT. She said that reconfiguring the IDT has been an involved process that has progressed well.

The Deputy Minister added that Cabinet had instructed for a review of other programme options for the IDT and this is a process of reconfiguration that took place with the support of the Government Technical Advisory Centre (GTAC) which looked at the state of affairs at the IDT with the view to provide programme options for the entity.

She applauded the leadership at the IDT for their work during a difficult time to improve the IDT’s performance to the point of getting a qualified audit opinion for the 2021/22 financial year.

Ms Zimbini Hill, Acting Chairperson of IDT, said that addressing the various challenges at the IDT included starting with filling the critical vacancies at the leadership level. This has seen improvements in certain areas, including receiving a qualified audit opinion.

She added that through the office of the acting Chief Executive Officer (CEO), the IDT sought to strengthen stakeholder management to build a client-centric organisational culture and gain public confidence.

The Acting Chairperson said that the IDT is also looking at improving its revenue generation management. She added that the reduction in litigation cases is something that the management at the IDT is proud of.

The management at the IDT has been working on reducing litigation cases, and the Board has approved a litigation strategy including implementing a new contracting model.

Organisational Context
The appointment of the new Board in July 2021 resolved a governance crisis that had set in following the departure of the previous Board.

The new Board has focused on reconfiguring the IDT into a fit-for-purpose and financially viable entity that can meet client expectations.

The Board has further made notable progress in working to generate business from national and provincial clients. Some new national clients include the Departments of Higher Education, and Health, and the provincial Departments of Transport in KwaZulu-Natal and Rural Development in North West.

Most IDT policies have been, and some are being reviewed to bring them up to date with current legislative and related prescripts trends. This includes having a litigation strategy to reduce litigation cases.

The IDT achieved 6 of its 13 targets; five targets were partially achieved and two were not achieved.

Targets Achieved:
The number of new or replacement facilities that comply with infrastructure norms completed.
Percentage of projects completed within budget.
Number of construction work opportunities created.
Number of work opportunities created through EPWP (EPWP-NSS excluding IDT programme portfolio).
Value of programme spend.
Management fee collection ratio.

Partially Achieved Targets
The number of non-greenfield social infrastructure facilities that comply with infrastructure norms completed.
Percentage of projects completed on time.
Percentage of weighted B-BBEE spend (Based on total programme spend).
Percentage of compliant programme invoices paid within 30 days of receipt.
Percentage of compliant overhead invoices paid within 30 days of receipt.

Targets Not Achieved
Percentage of programme contracts awarded to women contractors (participating in the CDP)
Percentage of programme contracts awarded to youth contractors (participating in the CDP)

2021/22 Financial Report
Ms Clarinda Simpson, CFO,  said that IDT underachieved in terms of programme expenditure as by 31 March 2022, the programme spend was approximately R2.3 billion against an annual budget target of approximately R2.6 billion.

This resulted in the underachievement of the management fees billed which were approximately R122 million against the total operating expenditure of approximately R205 million representing a 60% self-funding rate while the 40% was funded through a government grant of R93 million.

The cash flow projection challenges include that the IDT requires an additional revenue stream to fund the shortfall in revenue and operational expenses.

A request for grant funding was submitted to the Department of Public Works and Infrastructure, and grant approval of R70 million was received on 22 September 2022 from the National Treasury and the Department of Public Works and Infrastructure for the 2022/23 financial year.

After more than five years of audit disclaimers, the IDT received a qualified audit outcome for the 2021/22 financial year.

Discussion
Ms S Graham (DA) congratulated the IDT for the progress that had been made in improving the entity’s audit outcomes.

She wanted clarity if it was good practice to allow for the acting CEO, who was the Chairperson of the Board, to have overlapping roles.

Ms Graham also wanted to know why the acting CEO is remunerated as the Board Member when they are paid as the CEO.

She further asked if there was no conflict of interest for the entire internal audit committee to be the trustees of the entity instead of having someone independent from the Board of Trustees.

Ms Graham sought clarity on who the company secretary is because the IFS speaks to the company secretary falling within the trustee secretariat.

She raised concern that all control is vested in the Board of Trustees with no independent information.

In terms of IDT’s human resource plan, she pointed out that there were 292 approved posts and 204 employees, therefore, leaving 88 vacancies. However, page 81 of the IDT report says that there were four vacancies with a 0% vacancy rate and page 82 of the report says there are 0 vacancies and a 0% vacancy rate. She asked for clarity on this discrepancy.

She raised concern about the AG’s report which stated that for the IDT programme one, there was insufficient audit evidence for 3 out of 9 indicators.

Ms Graham said there were a few issues with internal controls, specifically recording keeping, as there were a lot of noted errors and poor maintenance of policies with a lack of consequence management.

She pointed out with concern that there were three investigations by the Special Investigating Unit (SIU) which include the procurement on behalf of the Department of Basic Education, Correctional Services, and improper conduct concerning the Department of Justice. These were concerning in terms of the ongoing issues on the governance of the IDT.

On the projected cash flow for September 2022 to March 2023, there is an exceptional amount paid on travel. Therefore, Ms Graham wanted clarity on what warrants that kind of expenditure.

She added that the function of the IDT is to fix and maintain buildings. She wanted to know why this was not happening at the building of the IDT itself to the extent that the cost of maintenance was higher than the projected cost of leasing.

She asked where the Department of Public Works and Infrastructure was going to get the grant to financially support the IDT and what the implications would be for keeping the IDT afloat.

What would IDT do if there remains a shortfall in the grant received from the department, and at what point would the IDT be a financially viable entity?

Ms M Hicklin (DA) also congratulated the IDT on their achievements to date.

She raised her concern about a potential lack of confidence that the IDT can remain a going concern. This is because the IDT had to get grant funding from the department to meet its commitments and obligations. Therefore, is there a guarantee that the IDT will be able to meet its commitments if clients do not meet the obligations of paying?

Mr W Thring (ACDP) also passed a message of congratulations to the IDT for their progress and notable work. He asked if any overlapping service objectives could impede the work of the IDT.

Mr Thring asked what plans are in place to mitigate the delays caused by construction collaborators including knowing the collateral losses resulting from these delays.

Ms S Van Schalkwyk (ANC) joined the Committee in congratulating the IDT on the progress made thus far.

She however expressed her worry about what happens to the employees after they exit the programme and if they get sufficient training to assist them in occupying future positions.

What is the IDT doing to address the issue around construction projects that are not always completed within the agreed period budget time, therefore, leading to many significantly delayed projects?

Ms Van Schalkwyk wanted clarity on what is being done to improve the percentage of programme contracts awarded to women contractors. Does the IDT have a database of women contractors that they may use or is there engagement with other entities to ensure that they have such a database?

Mr E Mathebula (ANC) started by congratulating the IDT for the work well done.

He expressed his worry that there was no indication that the disclaimer received in previous years did not have any consequences ordered.

He further said that looking at the amounts incurred in the fruitless and wasteful expenditures including the irregular expenditure, was worrisome. If care is not taken, the IDT will likely relapse from a qualified audit opinion.

Regarding litigations, Mr Mathebula wanted to establish whether the IDT was litigating against or defending matters. He requested more information to be provided on the litigation cases to ensure that there is accountability.

Mr T Mashele (ANC) also congratulated the IDT for the work completed.

He emphasised that the Committee would want to see improvement in the IDT. He asked how the IDT was going to ensure that they do not regress from the progress that has been made thus far.

In her remarks, the Chairperson of the Portfolio Committee also added her congratulations for the progress made by the IDT and encouraged the entity to ensure that they keep up the good work. She added that it was important for the IDT to be a self-sustaining entity.

Responses
On the issues around the Chairperson of the Board, Ms Hill said that this was a process that went through the Board of Trustees and was guided by the company secretariat on whether this was something that could be done. Therefore, given the experience of the current acting CEO who had served as an executive at the IDT when there was no one at the top or second tiers at the IDT to take the leadership roles. Thus a proposal was made to the Department for the Chairperson of the Board to step down from the role as acting CEO. This has had a positive impact on the performance of the IDT.

She added that the IDT had been motivated by the idea that the entity would break even, and it would be sustainable in the future. This will be primarily driven by new projects which will improve the management fees.

She assured the Committee that the IDT is right on its way to ensuring that the entity is sustainable.

On the consequence management of the SIU investigations on fruitless and wasteful expenditure, it was mentioned that a report would have to be produced focused on these investigations including the disciplinary hearings that have been ongoing.

In certain instances, employees who were found to have transgressed were relieved of their duties in various areas of the IDT.

Consequence management is an ongoing process taken seriously by the IDT without fear or favour.

Although the EPWP programme was previously done on a year-to-year basis, having a better outlook on the programme, the IDT has decided to advertise the programme for a year two-year period. This has been in discussion with the shareholder to relook at the model, probably looking at it between a three to five-year period to ensure its sustainability.

It is true that previously there was a shortfall in expenditure, and that was mainly the expenditure on the PPE which was in line with what had happened when the National Treasury had to put certain tenders on hold in that period thus affecting the tender on PPE. There were funds which were not used.

It was reaffirmed that there is a company secretariat within the IDT.

To ensure that outside the grant funding the IDT remains sustainable, it was mentioned that the IDT contracting model had been revised which is in line with the IDMS in terms of claim periods to allow less room for delays. This has included working together with the client department to ensure that clients understand the implication of not taking decisions timeously or effecting payments to the IDT timeously. This will assist in ensuring that payments are processed on time.

In conceptualising the IDT projects, the CIDB and the Agrément SA have been brought in to assist. The next phase of the Contractor Development Programme (CDP) will be advertised, and it will be focused on the participation of youth-and women-owned entities including entities owned by those living with disabilities.

The CDP has already started in Mpumalanga and will be tested in about 150 schools going through the maintenance programme.

On the duplication of services, it was mentioned that there is work that the IDT is participating in where there is alignment with other entities. Although at certain points in time, there might have been unintended task duplication, such as having been picked up and ongoing work to ensure proper deliverables.

Ms Simpson said that the IDT had developed policies to address proper recording keeping, especially regarding the decentralised nature of the IDT. Furthermore, human resource policies have been updated and approved, including updating the finance policies which will be tabled at the Audit and Risk Committee this quarter. That should address the Auditor-General’s concerns on issues around record keeping.

The travel expenses are quite high because IDT is an implementing agent with several programme implementation managers who oversee projects that are under construction. Therefore, travel relates to that activity. And the growth in the business with eased COVID-19 travel restrictions, hence there is more travel when it comes to overseeing a project.

Programme expenditure supports revenue because if the IDT’s programme contracts are not awarded, then the entity will not be a going concern, and so will rely on grant funding.

There is thus an estimation that in the 2024 financial year, the entity should be able to break even with the increase in the programme expenditure which will increase the entity’s management fee which should be able to cover operational expenses. 

The recent appointment of the risk management manager will take over the process of investigating the fruitless and wasteful expenditure.

To ensure a high level of independence, objectivity, and fairness in the investigation, the IDT is in the process of outsourcing all the investigations related to fruitless, wasteful and irregular expenditure.

The IDT identified various areas to recover costs which will decrease the operational expenditure while making the entity more self-sustainable.

Further details on the litigation against the IDT will be provided to the Committee including the amounts concerned. The reasons for this litigation are poor performance by the suppliers and instances where clients do not comply with the 30-day payment turnaround time.

It was acknowledged that there was a misalignment concerning the vacancy rate. However, some measures have been taken by the IDT to respond to the current vacancy rate, including auditing the employees. There have been efforts to obtain the required skillset in the IDT including a mini skills audit that has been conducted to ensure the alignment.

It was added that, at the moment, the building tender is in progress and there cannot be much comment on that issue without the process ending.

Mr Adam Mthombeni, Deputy Director General (DDG): Intergovernmental Relations, DPWI, said that as a shareholder of the IDT, the Department of Public Works and Infrastructure views the entity as a going concern that needs to be supported in this current state for its sustainability. Therefore, the Department had to look at its budget to see how best to support the IDT, as there was no budget from National Treasury earmarked to support the IDT.

Internally, a Budget Management Committee dealing with such issues investigated all aspects of budget utilisation across the programs and economic classifications.

In the process, National Treasury was consulted and concurred with the provision of the grant funding to the IDT and confirmation was received from the National Treasury.

On the ethics around the acting CEO who was the Board Member of the EDT, the DDG indicated that the Department was aware of this as there was a thorough consultation after the new Board was appointed. This was aimed at strengthening governance of the IDT with a resolution passed by the Board to support the movement of the Board member to becoming an acting CEO. This was also informed by the acting CEO’s corporate knowledge of the IDT. This is all aligned with the principles of good governance.

In wrapping up the discussion segment, the Deputy Minister added that the Minister's decision to focus on the entities with clear oversight measures is indeed producing positive performance outcomes.

Continuous collaboration and cross-cutting support between the entities ensure enhanced performance. The Department is also working hard to ensure that the entities such as the IDT lives up to their mandate.

The Chairperson thanked the IDT and the Department of Public Works and Infrastructure for their detailed presentation to the Portfolio Committee.

She thanked and congratulated the IDT for the progress that has been made by the IDT to date.

Agrément SA 2021/22 Annual Performance
The Chairperson welcomed the team from Agrément SA.

In her opening remarks, the Deputy Minister said that Agrément SA is an entity that has lived up to its mandate with a continuous clean audit.

She added that although the entity has been limited by not being able to publicise its work to ensure that the built environment industry is aware of the products produced by Agrément SA, however, the entity has performed well.

The Deputy Minister added that the current financial year would see more publicisation of the work done by Agrément SA.

Dr Jeffrey Mahachi, Acting Chairperson, Agrément SA, took the Committee through the beginning of the presentation.

Achieved Targets
Mr Richard Somanje, CEO of Agrément SA, outlined that there are four outcomes that Agrément SA looks at four outcomes which are: (1) transformed build environment, (2) quality manufactured non-standardised products, (3) optimised use of non-standardised products, and (4) broadening geographic footprint of non-standardised products.

Agrément SA contributes towards the outcome of the Department of Public Works and Infrastructure through a dignified client experience, productive infrastructure investment, and optimisation of job opportunities.

The audit of the annual financial statements and non-financial performance information was completed on 29 July 2022.

Agrément SA achieved an unqualified audit opinion with other matters on supply chain management and non-financial performance information on technical services.

88.9% of the external recommendations were implemented. The remaining recommendation on irregular expenditure is pending condonation by National Treasury.

Agrément SA achieved an overall average of almost 63% during the financial year under review.

It is important to note that on each of the targets planned to be achieved versus the actual performance, three targets had a 100% achievement.

On financial performance for 2021/22, Agrément SA’s CFO, Ms Lebogang Madumo, said that there was a 175.19% increase in the rendering of services, 107.95% increase in recoveries from bad debts and bursaries, and an increase of 0.78% for the interest received. There was an increase of 13.96% in government grants with a total revenue increase of 20.31%. There was a decline of 5.06% in the total expenditure.

Discussion
The Chairperson thanked Agrément SA for the presentation and invited Committee Members to comment on the presentation.

Ms M Hicklin (DA) highlighted the need for Agrément SA to focus on the Auditor-General’s two findings about the lack of sufficient audit evidence, particularly in the disciplinary steps that must be taken against officials that incurred fruitless and wasteful expenditure and issue around the proper and complete records which were not maintained as evidence to support fruitless and wasteful expenditure.

Ms Hicklin highlighted that, overall, Agrément SA is in a financially healthy position and it was admirable that the entity was able to issue 15 certificates for innovative building and construction technology products, the focus on green building strategies, the increased revenue from previous years, including having recoveries for bad debts.

However, the issue is that the entity is still dependent on the Department of Public Works and Infrastructure. She asked how Agrément SA would ensure improved revenue sources independent of the Department.

She asked if there were any reasons for the projects that were stalled. The concern about the vacant posts in senior positions was also raised.

Mr W Thring (ACDP) welcomed the presentation and the positive financial position of Agrément SA.

He asked why the irregular expenditure item was raised and awaiting condonation from National Treasury.

What is Agrément SA's national footprint in all the provinces?

Mr Thring highlighted that underspending should not be the entity’s norm as such, as it has a knock-on effect on service delivery.

Ms S Graham (DA) raised a concern and asked if there was a mitigation plan in place to deal with project management.

There is a close relationship between Agrément SA's vacancy rate and the achievement of the set targets, as a high vacancy rate means that targets cannot be met.

She added how the entity makes itself viable by generating revenue without having to depend on grants from the government.

Clarity was sought on the community outreach in Polokwane on 20 October 2022, specifically whether the outreach was aimed at the community or the business community.

The Chairperson added that the Portfolio Committee commends the work done by Agrément SA. However, the entity needs to expand and grow to ensure national and even international reach.

Responses
Dr Mahachi said the work of Agrément SA was affected by COVID-19 as the work of the entity relies on being physically present and the COVID-19 restrictions limited this. However, there have been improvements since the eased restrictions.

For the sustainability of Agrément SA, introducing and promoting other products to generate revenue from other initiatives is under consideration. This includes focusing on the green star rating system for innovative building technologies.

Dr Mahachi said that the entity did not have a national footprint besides where they are based in Pretoria. However, what is being initiated is to work with other partners across the country to ensure such a national footprint. There is an intention to increase such an impact on the other parts of Africa and eventually have a global influence.

Some projects were indeed stalled by COVID-19. However, some of the projects in the current year were not implemented because of supply chain challenges. A strategy has since been devised to work with the Department and other stakeholders in terms of sourcing the required expertise.

There has been a review of how Agrément SA can optimise and manage the vacancy rate at a reasonable level. This included strategising a job evaluation system to grade the vacant positions to determine if Agrément SA is on par with other organisations listed as 3A. This exercise will be finalised and presented to the governance structures and will be implemented if approved.

Regarding the stakeholder, the Acting Chairperson of Agrément SA said that the entity maintains a national database that reports on progress made. Further, it is important to have a register of complaints, which is another way of engaging with certificate holders. The website intends to expand the list of frequently asked questions to ensure that the entity is proactive and engaged.

The outreach in Limpopo is focused on companies and organisations with a keen interest in the work of Agrément SA. There is engagement with the municipalities and the regional departments in the area to facilitate.

Agrément SA will also be on Capricorn FM on 19 October 2022 marketing the outreach that will be hosted the next day. Furthermore, towards the end of October, Agrément SA will be on E-tv to share the work of the entity. There is also the consideration of the Green Building Magazine to keep communities up to date with its work.

There is a review of Agrément SA’s process to ensure that a viable business model thus not be solely dependent on the funds received from the Department. And there are already a few initiatives set to generate revenue for the entity.

Agrément SA is working hard to review its internal controls and processes so that there are preventative controls in place and no irregular expenditure reoccurrence.

Ms Lebogang Madumo, CFO, added that the staff is engaged so that everyone at Agrément SA is aware of the processes that need to be put in place to engage with supply management processes. This has included working closely with National Treasury in reiterating these processes to the staff members at Agrément SA.

On the framework for irregular expenditure and fruitless and wasteful expenditure, once a determination test has been done internally, the entity must submit the irregular expenditure and fruitless and wasteful expenditure to the National Treasury for condonation. Therefore, the instances that are listed in the report have been through the internal processes and been tabled at the various governance committees and it was recommended that the instance are submitted to National Treasury for condonation. Consequence management is a very important aspect that is being implemented, as these instances are not taken lightly.

The underspending is related to projects that were not finalised for various reasons. This resulted in the entity being unable to commit the funds as of 31 March 2022.

The Chairperson thanked Agrément SA for the presentation and the engagement of the Portfolio Committee.

The Committee then adopted the programme for the fourth quarter.

The meeting was adjourned.

Download as PDF

You can download this page as a PDF using your browser's print functionality. Click on the "Print" button below and select the "PDF" option under destinations/printers.

See detailed instructions for your browser here.

Share this page: