The Committee met on a virtual platform with the Housing Development Agency, the Estate Agency Affairs Board / Property Practitioners Regulatory Authority and the Community Schemes Ombud Service for a briefing on their respective audit outcomes and annual performance reports for 2021/22. The Department of Human Settlements was present.
All the entities had new boards appointed and had their organisational structures reviewed to restore stability.
Members of the Committee expressed their extreme concern about the continued poor performance of the Housing Development Agency. The Agency had achieved only 29.41% of its targets, one of the lowest levels of performance since the entity’s inception in 2009. The main targets of concern were land which was supposed to be rezoned for human settlements and the delivery of housing units. Members spoke of the conditions in which many poor people were living in and government’s goals of transforming living spaces. Non-performance against these targets – which the Agency itself has set - was unacceptable. The audit report showed no evidence of disciplinary steps after investigations on staff conduct. The Committee asked what consequence management was being taken in terms of legislation.
The Committee commended the new board of the Property Practitioners Regulatory Authority for decisive actions it had taken, having been faced with challenges in the transition from the Estate Agency Board to the Authority. The Committee called the entity to account for its failure to meet its target of placing 2 000 youth interns with host employers in its One Learner One Estate Agent programme. Members requested an update on the entity’s progress on the online query management system and solutions for resolving the technological challenges that were preventing the property practitioners from obtaining licenses. They also questioned the poor management of requirements for Fidelity Fund Certificates and Continuous Professional Development.
The Committee praised the performance of the Community Schemes Ombud Service, which had achieved 82% of its targets. The Committee sought clarity on the timeframes in which the Service resolved disputes and asked how the entity would ensure regular and effective monitoring and reporting.
Housing Development Agency (HDA) Annual Report 2021/22
Dr Tshilidzi Ratshitanga, Board Chairperson, HDA, provided an overview of the HDA’s Annual Report for the 2021/22 financial year. The current board was appointed during the last quarter of the financial year (November 2021). They had taken over an entity that had been unstable with a non-existent board. The new board was appointed to stabilise the entity and there has since been a marked improvement in the functioning of the organisation.
Mr Bhekuyise Khenisa, Chief Executive Officer (CEO), HDA, conducted the presentation. Since the appointment of the CEO and the Chief Financial Officer (CFO), the entity has concluded disciplinary matters with executives. The organisation structure had been finalised and submitted for the Minister’s review. An improvement in organisational performance occurred. [See the presentation slides for details].
In 2021/22, the HDA achieved 29.41% of its targets. It had not achieved 70.59%. Only 2 451 housing units were achieved out of a target of 5 020. But 1 765 hectares of land for Priority Human Settlements and Housing Development Areas (PHSHDAs) had been acquired out of a target of 1 500. Only 2 806 serviced sites were achieved out of a target of 5 598.
The entity received a qualified audit opinion for the 2021/22 financial year on the basis that project obligations had not been correctly accounted for, project receivables had not been recognised in accordance with established standards, land valuations had not been properly completed, and the occurrence of irregular, and fruitless and wasteful expenditure. There was a 75% implementation of the approved internal audit plan, a -25% deviation from the target. Only 8.12% of the annual HDA procurement spend was with women-owned businesses, compared with the 35% target. 40 integrated implementation programmes for PDAs were prepared out of the planned target of 47.607 hectares of land rezoned for human settlements developed against the targeted 1 000 hectares.
Under Programme 3.1, five informal settlements were upgraded to phase three, exceeding the target of four as the HDA had entered into a tripartite agreement to assist in exceeding the set target. Under Programme 3.3, 1 685 Innovative Building Technology (IBT) housing units were delivered out of the 2 787 IBT units targeted. 2 596 serviced sites in Region A were delivered, exceeding the target of 2 513 but only 210 serviced sites in Region B were delivered out of a target of 1 400. Zero percent was achieved in respect of completion of bucket eradication projects.
Ms Joy Masemola, CFO, HDA, took the Committee through the financial position. (see presentation)
Estate Agency Affairs Board (EAAB)/Property Practitioners Regulatory Authority (PPRA) Annual Report 2021/22
Mr Steven Ngubeni, Board Chairperson, PPRA, introduced the presentation. Since the board’s appointment on 26 November 2021, they have appeared before the Committee to present their annual performance report (APP). One main concern was that the EAAB did not have an internal audit function, which had since been appointed. The Audit and Risk Committee reported satisfactory progress on the internal audit plan. The board has also since reviewed its organisational structure.
Ms Deli Nkambule, Acting CEO, PPRA, conducted the presentation. A key change in the operating environment of the EAAB was repealing the legislation that governed the entity, namely the Estate Agency Affairs Act no. 112 of 1976 (EAA Act) and ushering in the Property Practitioners Regulatory Authority. [See the presentation slides for details]. The EAAB received a qualified audit finding for the 2021/22 financial year. Core programmes of Fidelity Fund, Education and Training and Transformation under the EAAB achieved 100%, 67% and 43% of their targets, respectively. Despite the economic downturn, estate agents continued to register and renew their licenses. The total Fidelity Fund Certificates (FFCs) issued for the ten months of the 2021/22 financial year was 53 739 compared to a total of 51 063 issued the previous year. The Professional Designation Examination (PDE) conducted quarterly was undertaken by a total of 1 321 estate agents with a total of 1 088 being successful. To determine the level compliance, a total of 201 inspections were conducted and, a total of 6 648 audit reports were received in relation to the 6 688 audit reports received in the previous financial year. 20% of estate agencies were disqualified from being issued FFCs due to late and non-submission of audit reports to the EAAB. Out of a total of 21 targets for the year, seven were achieved. This translated to a 33% achievement level. Zero percent of Medium Term Strategic Framework (MTSF) targets were achieved and 100% of Fidelity Fund targets were achieved.
The entity had a qualified audit with material findings due to the inability of EAAB to separately keep records of exchange and non-exchange transactions. Zero percent of the Anti-Fraud and Corruption measures were implemented, the reason being that the Fraud Prevention Plan was not finalised during the financial year. Poor performance on registering property practitioners with the EAAB resulted from IT challenges. Out of a total 13 targets for the transition phase of the PPRA (1 February 2022 – 31 March 2022), two were achieved. This translated to a 15% achievement level. Significant improvements had however been made in some programmes towards implementing the capabilities of a fully functional regulator under the PPRA. The EAAB’s audit outcome was qualified with findings. PPRA’s audit outcome was qualified with findings. PPRA Fidelity Fund audit outcome was unqualified with findings. Findings included vacant positions for key IT staff, lack of review of the IT procedures and fraudulent procurement of inventory/study guides. Executive positions were expected to be filled before 31 December 2022. Updated ICT policies and procedures were expected to be finalised by end of October 2022. Findings of fraudulent procurement were subjected to forensic investigations, a report on which had been finalised and recommendations were being implemented.
Mr Napo Mafihlo, CFO, PPRA, took the Committee through the entity’s financials. The EAAB’s ten months 2021/22 operations resulted in a surplus of R23.8 million, indicating that the revenue was sufficient to cover all operating expenses in the normal course of business. The self-funding model for EAAB had proven to be achievable as per the 2021/22 results, with a profitability margin of 14% (9% budget) and cash generated from operations. The PPRA’s two months 2021/22 operations resulted in a deficit of R14.2 million, mainly due to once off expenditure on professional fees and legal costs, as well as a R7 million accounting adjustment for credit losses. The self-funding model for PPRA remained positive as portrayed by the ten months financial performance under the EAAB. (see presentation)
Community Schemes Ombud Service (CSOS) Annual Report 2021/22
Ms Phindile Mthethwa, Board Chairperson, CSOS, presented an overview of the performance of the entity. [See the presentation slides for details]. A new board was appointed and the entity had done well in terms of achieving its set annual performance targets by registering 82% performance, exceeding the previous year's performance by 22%. The board’s key achievements included launching a business automation project called “CSOS Connect” to fully digitise the CSOS environment and business platforms. There was also an improvement in the dispute resolution process as some disputes were concluded and handled via virtual platforms. The board improved the audit outcome from the baseline which was a “qualified’’ to an ‘’unqualified’’ audit opinion.
Adv Boyce Mkhize, Chief Ombud, CSOS, spoke about the operations of the entity. Overall, 82% of performance targets were met. Contributors to non-performance included lack of systems to automate core operations, a high vacancy rate, delays in the finalisation of disputes and transformation impediments. On Programme 1, 100% of the approved anti-fraud and corruption plan and 100% of the implementation of the approved risk management plan were achieved. Only 81% of the targeted 95% of the implementation of the audit remedial plan was achieved. The entity achieved the rest of its Programme 1 targets. On Programme 2, 73% of disputes were conciliated within 90 days out of a targeted 85% and only 28% of disputes were adjudicated within 90 days out of a targeted 85%. The entity achieved all its Programme 3 targets relating to training and education sessions for schemes executives, owners, adjudicators and more.
Ms Thembelihle Mbatha, CFO, CSOS, presented the audit outcomes and remedial actions. A matter affecting the audit report was that material adjustments had to be made to correct prior year balances and restatement of previously reported figures. Key administration matters included policies and procedures not being updated timeously and inconsistencies identified on the annual performance report (APR). Limitations on revenue and receivables balances have since been corrected. Remedial actions to address the 2022 audit outcomes included the development of an audit action plan with timelines to be monitored quarterly; the implementation of the revised accounting policy on revenue and controls on document management; a revenue collection drive and strategy to deal with the completeness of the entity’s database, amongst the other projects already underway in the CSOS governance unit. The entity aimed to continuously improve the collection of levies and improve overall outcomes to a clean audit. (see presentation)
Ms S Mokgotho (EFF) thanked the presenters. The HDA stated in their action plan that by 30 September, it would have strengthened its internal controls within its supply chain management (SCM) and finance to detect irregular expenditure. Had the entity achieved this objective now that time had moved to mid-October? According to the action plan, how frequently was HDA going to monitor that the SCM processes were adhered to curb irregular expenditure? The HDA had stated that it was not using the same audit standards as the AG. Why was it not using these same audit standards to avoid discrepancies between its audit outcomes and the AG?
The Agency was aware that most poor people were staying in non-conducive, overcrowded conditions but it was unable to meet the target that it set for itself of 1 000 hectares of land which was supposed to be rezoned for human settlements. It only rezoned 607 hectares. What measures had the Agency put in place to ensure that in future, if the entity sets itself a target, it ensured that it achieved it? On Programme 3, DHA set itself a target of delivering 780 housing units in 2021/22, but it did not achieve anything. The target achieved was zero, yet HDA knew that people were suffering; they did not have conducive houses to stay in. Again, it set itself a target of delivering 2 787 IBT (Innovative Building Technologies) housing units but failed to deliver. Instead, it delivered 1 685. How was HDA going to deal with the challenges that made it fail to achieve its set targets in the financial year 2021/22? What were the reasons that led to the contractors in Limpopo “withdrawing units allocated to them”, which caused the entity to miss its target of 1 463 houses?
What plans had CSOS made to ensure that all disputes were conciliated within 90 days? Only 28% of disputes were adjudicated within 90 days instead of the 85% target CSOS set for itself. How was it going to ensure that 100% of disputes were adjudicated within the time frames in future? On Programme 3, the entity set a target of 80% of community schemes requests for executive managing agents being awarded to previously disadvantaged individuals, but it did not meet any target. Did the entity have a timeline on which the awareness campaign would be coordinated on the importance of executive managing agents and the appointment process? How was it going to improve on processing and reconciling control while it was under financial performance management? How was it going to ensure that there was effective and regular reporting? How was it going to ensure compliance with the Public Finance Management Act (PFMA) and SCM and continuous monitoring?
The 100% fraud prevention target of the EAAB/PPRA was not reached. Instead, it did not achieve anything in this target. When would the fraud prevention plan be finalised? What were the challenges that led to the plan not being achieved? The presentation stated that the contracts of the disciplinary committee members expired in the financial year 2021/22 as a result of disciplinary hearing outcomes being enforced, hence zero percent of the target was achieved. Why did the entity not act on time to renew the contracts of the disciplinary committee members to ensure that 100% disciplinary hearing outcomes were enforced? On Programme 3, the entity stated that only 60% of estate agents enrolled for the Continuous Professional Development (CPD) in full instead of 90% which was targeted. Which intrinsic and technical challenges had hampered the 90% achievement of estate agent enrolment for CPD? What plans did the entity have to ensure that more than 40% of historically disadvantaged entities participated in the property sector in the [present] financial year 2022/23?
Ms E Powell (DA) commended the PPRA’s new board on the decisive action that it had taken. She knew that it had been slow drilling through hard walls and that the resistance and personal attacks had been rough. The Committee owed the new board a debt of gratitude for taking actions that the Committee had been calling for for years, which previous boards had not had the backbone to take. Could the Committee get an update on the new queries that were coming through on the online query management system? What time frames was the entity applying to the queries coming through the system? She was often contacted by agents and associations who said that the online query system was broken and they did not know who to address on this matter. What was being done to fix this issue? What was the justification for the revocation of the exemption that was being provided to over-60s to comply with the Professional Designation Examination (PDE) requirements? Was the PPRA aware of the implications of the compliance notice on agents over 60, given the short time frames? Interns who had exceeded the maximum period of two years to obtain the required qualifications were given until 31 January 2023 to comply, failing which they would be de-registered. On what legal basis was this extension granted? Was legal opinion solicited? There appeared to be a cumulative total of 30 900 interns from both reports. Taking a two-year period into consideration, as many as 20 000 of these interns could be de-registered in terms of training. Could the PPRA consider amending educational requirements to enable these interns to pass the PDE 4 exam in good time so that they could remain registered? FFCs could now, in terms of the new Act, be issued for a three-year period, which was welcomed. But newcomers were required to pay a R1 940 joining fee. The PPRA was empowered to invoice annually instead of for the full cumulative total, which would reduce the payment of this fee dramatically. Imagine if one was joining the industry, generating R2 000 was quite a lot to pay in fees.
Would the industry consider invoicing on an annual basis? The Property Sector Transformation Fund was to have been established by 1 August. Had this been done/achieved? Real Estate Business Owners of South Africa (REBOSA) was successful with an urgent court application last year on the FFC issues. They subsequently applied for a contempt of court order in respect of non-compliance. What was the outcome of this? What was the situation concerning the PPRA’s legal fees for which it had to compensate REBOSA? That morning she had been contacted by somebody concerned about penalties. It was an issue that came up often. The PPRA retrospectively applied fines and penalties to agents who erroneously failed to de-register. Some agents were, for example, accumulating in excess of R35 000 in fines because they did not de-register. Could the PPRA let the Committee know how this requirement was explicitly communicated to agents when they did not renew their FFCs? Her understanding was that the debt was prescribed in the Prescription Act. She was uncertain as to whether charging the backdated penalties was necessarily legal.
She said that CSOS was working to turn the corner and that she had a very positive engagement with some of the senior officials earlier in the year. She was very impressed that on many of the matters discussed, CSOS stuck to their word. She thanked the leadership in respect of the matters that she raised. Some of the issues were still ongoing. She had seen the draft directive on the Protection of Personal Information Act (POPI Act). There were issues with the schemes providing members with information. When was the draft practice directive going to be finalised and issued? Was CSOS going to implement an internal review procedure noting the shortfalls in terms of Section 57 of the CSOS Act and the lack of internal appeal mechanisms? What was being done to deal with adjudicators who made illegal rulings devoid of reference to the application of the relevant acts? She constantly escalated issues to Ms Kanozi Mlotha, the Adjudicator General, CSOS, who was exceptional and responded to her within 10 minutes on most days. But the number of issues she had to escalate was indicative of the quality of adjudications coming through, which was not sustainable. Could the Committee get information on this? She had submitted further parliamentary questions to CSOS’s inbox.
For the HDA, she said, it was Groundhog Day. In her opening notes to the annual report, the Minister said that the HDA had achieved the lowest performance levels since its inception in 2009. 29% of targets were met. Two administrators, and two CEOs were seen just in the financial year under scrutiny, which included 27 resignations. Further, there were three suspensions and zero dismissals. The Head of Corporate Services and the Regional Head of Region B earned R2.4 million and R2.5 million respectively, which was more than what the President of the Republic earned. But the entity only met 29% of its targets. She said her next statements would be very difficult to disavow or deny. The previous Minister ensured politically connected cronies were moved into key positions. Their tenure was insecure to dilute their authority and the authority of the accounting officers and accounting authority. From what was seen from the presentations, all the Committee’s warning about the unsuitability of the characters that the previous Minister moved into permanent or acting positions had materialised. She sent letters to the Chairperson and the Standing Committee on Public Accounts (SCOPA) over two years before, requesting an inquiry into the entity's affairs. Despite repeated warnings, the Committee did almost nothing to act. Despite the Committee’s BRRR recommendation, which was tabled in Parliament in 2021, stating in relation to the HDA that “progress on all audit action plans, investigations and consequence management should be provided to the Committee quarterly”, the Committee had not had a single quarterly presentation on compliance with the audit plan. This meant that the Committee was in dereliction of its own undertakings before Parliament in terms of the stabilisation and turnaround plan of the HDA.
The findings in the annual report were truly staggering. The chairperson of the audit and risk committee noted that the committee was concerned with the lack of implementation of internal controls designed to monitor compliance and adherence to legislation. According to the audit report, the accounting authority and management did not adequately perform oversight responsibilities over preparing the annual financial statements and being in compliance with the law. Auditors were unable to obtain sufficient and appropriate audit evidence that disciplinary steps were taken against officials that had incurred fruitless and wasteful expenditure. This was because investigations were not performed. This was a year after the entity had presented its original turnaround strategy to the Committee, undertaking that all these obligations would be met. But the audit report showed no evidence that disciplinary steps had been taken, because investigations had not been performed. The Committee was reading a repeat of the report that it had for the past three years and the indicators were deteriorating. The HDA did not have adequate systems for identifying and recording all irregular, and fruitless and wasteful expenditure which, according to the report, stood at a cumulative R153 million. She noted that 52% had been dealt with. The entity made payments in contravention of the SCM requirements resulting in additional irregular expenditure of R61 million. Section 81 of the PFMA talks about an accounting officer’s liability for committing financial misconduct or permitting unauthorised expenditure, either wilfully or negligently, financial misconduct. An accounting officer or accounting authority could be subject to criminal culpability in terms of the Act. In terms of Section 65, the Minister needed to present in Parliament the findings of disciplinary boards, and any sanctions imposed by a board. But these findings had not been tabled in Parliament, nor were they forthcoming, despite repeated requests. The Committee needed to understand from the new board what consequence management in terms of the PFMA was being taken? She understood they had taken over and were trying to stabilise the ship, but were members of the previous board subject to criminal charges? Were they being reported to the relevant authorities? That is to Treasury in terms of the PFMA and the Audit Act? When would the Committee, in terms of Section 65.1, receive the findings of the disciplinary board of the HDA or the detailed sanctions imposed against an accounting authority? Year after year, the Committee was told to accept that the board was dealing with it. This was no longer good enough. What action had been taken to charge officials involved in stated irregular SCM awards? What action had been taken to blacklist companies and recover the proceeds of stated irregular SCM awards? Only 25% of the approved internal audit plan had been implemented. That audit plan was supposed to have been presented to the Committee quarterly and that had not happened. Why had only 25% of this internal audit plan been achieved? Why had only 26% of the improved risk management plan been achieved? What was the status of the condonation committee? On the 52% of matters regarding irregular, and fruitless and wasteful expenditure, who had been held accountable in terms of these investigations? Were there individuals who were subject to disciplinary or criminal charges? What was the status of investigations into the exacting CEO Stephen Poya and his tenure with the Agency? Was he subject to a formal investigation? Were criminal charges laid? What was the status of investigations into Daphney Ngoasheng and her tenure with the entity? When could the Committee expect a Section 65(1)(b) letter? On the media coverage that the HDA had been subjected to, what was the status of the investigations into allegations contained in the affidavits submitted to the entity’s leadership in relation to the conduct of its exacting CEO by Malik Kashe, in August 2021? Could the board speak to consequence management processes at a broad level?
Ms N Sihlwayi (ANC) said that a newborn baby was reborn. She raised the issue because she heard the chairperson of HDA board try to explain weaknesses and reasons. She told him to cool down. When the DHS established HDA, it had established an entity which should be able to support the Department and try to curve along the issues of bureaucratic procedures of the state to give quality of life to the people. That was a test case. In most financial years, the HDA faced huge financial challenges. That was why the Minister established a process of stabilisation of the entity which was to turnaround the entity. The processes and procedures that had been put in place had managed to cripple the entity in performance. That analysis was what had brought the entity before the Committee. The Committee noted the weaknesses and issues the entity had not addressed, but also noted there were issues the entity had tried to address within a short time. This did not mean that it was entirely correct. It was important for the Committee to highlight the areas the entity needed to strengthen and put effort into addressing. The purpose of the meeting of the Committee and entity was to alleviate poverty and give equal life to people. She commended the board of HDA for now on where it had taken the entity from, but asked them to continue and address the issues. On the overall annual report, the executive overview described the entity well, with its six pillars which were fundamental directives for the board and the entity to do what was supposed to be done. She noted that Ms Powell was contacting the HDA often and she said this way was proper and okay. She said Programme 1 made her stomach grumble where it was highlighted in red. A house that did not have rules to set the pace to do things well was dysfunctional. She asked the entity to pull up its socks. On Programme 2, regarding the land rezoning, it was set to achieve 1 000 hectares but only managed 607 hectares. This issue spoke to transformation of the government, as well as when dealing with the land processes and land plans and land rezoning etc. She congratulated the entity on achieving more than its target of 750 hectares for land acquired. On Programme 3.1, the entity had new indicators and the Committee was waiting to see how it would perform. The entity had aimed for four informal settlements upgraded to phase three and achieved five. Upgrading informal settlement to phase three was to give dignity and investment to a person in the process of finalising a house. This was good progress which was commendable to the board. On Programme 3.2, the entity managed to achieve its target. She did not agree with the board when it achieved a target of 50 but had not finalised the business plan, cases, and financial plans. The international and global community wanted to see the planning process before getting to the end result. No one wanted to come to the entity but they would get to its website and if these were in good order, the entity would be considered a good and effective organisation. She urged the entity to try to finalise those plans as they were fundamental. On Programme 3.3: Regional Co-ordination [slides 17 and 18], the target was 1 389 with only 210 achieved which was not a good reflection on the entity. There was a target of 500 on serviced sites [Region C] with zero delivered and 1 554 serviced sites [Region B] with zero delivered. She said maybe they had time to take a holiday, leave the organisation and then it obtained zero. Zero could not be an achievement, but it struck one’s mind to ask what the entity did not do, and what could it do better to achieve something instead of nothing? She urged the entity to address this issue as it was not a good reflection. When speaking of monitoring and evaluation, one was referring to all the watchdogs that government believed in in a professional institution. Government was a professional institution. Risk management, and internal audit committees should be in the establishment. The monitoring and evaluation committee should come up and call on different programme units to say they were far from what they promised and could they clarify and clean out their issues. They should have authority. Sometimes only managers were given that work, and the boards did not listen to them. If that could happen, there could be a better organisation. The findings in the audit outcomes, such as insufficient audit evidence and no record keeping, spoke for themselves. Weaknesses of administration revealed themselves where structures necessary for professionalism were not in place. Systems of systems were the best. One could not expect them to go and see for themselves in the registers of the HDA in Lusikisiki; they had to come to the office where one could sit and analyse as they were. For as long as systems were speaking to each system of each fragmented office of HDA, the land inventory was critical for each province because not all land there was for housing delivery. Other pieces of land were not deliverable but it had to be known where they were and how big they were for the database and land evaluation of the whole process. It was important for the board of the HDA to appreciate that it had a structure established by law and that the AG’s office could assist them in addressing issues outside the box. It had to use the audit action plans given to them. The entity still had no asset register and it was not fair that this was not responded to when raised. On irregular expenditure, it was very clear that the entity had very weak systems where the statement of the budget vs the actual could not speak to each other. Therefore the entity had financial structures that were not strong enough to address the issues. She asked the CEO and CFO to strengthen the structures to make the HDA effective. A lot of audit action plans have been given. These indicated the weaknesses of the entity. These had to be used. She excused the new CEO and CFO only because it had only been a few months since they had been appointed but she asked them to work harder. She wanted to know what happened to a bidder/official that obtained the highest points. She said it was obvious, but she wanted to be told by the entity, in the face of its processes and procedures, why that official did that. It was unfair to that particular person because they had suffered due to the state that they believe in. The entity promised training for its SCM staff and it was urgent. The issue of creditors with a debt balance that was incorrectly classified as payable was unfair. It was sad and cruel that while there were those who were not being paid, they were being paid even when they were not owed. On irregular expenditure [slide 26], the presenter clarified well the transactions of R129 million, the total number of transactions of 157, the number of completed transactions of 81 and the R53.4 million remaining [from the 2017/2018 to 2020/2021 financial years completed and ready to be tabled at the Condonation Committee in line with the Irregular Expenditure framework]. In her opinion, there was no value for money. This could not be interpreted well. The Committee wanted to see the board rebuilding an HDA brand. Effective monitoring would help the HDA succeed. It was important to have efficient internal business processes known by the whole institution and not by the few, so everyone knew that the entity was working towards rebuilding an HDA brand. On consequence management, the Committee was happy to hear that the entity was dealing with the Talana Temporary Residential Units (TRU) issue. She hoped that the Committee could get a report soon about the disciplinary processes of Talana and the Mdantsane TRUs in the process. The issues of land management, land parcels and land inventory were critical for the country. That was where the redress and transformation was and she urged the HDA not to take them lightly, because it was one of their briefs.
The EAAB had indicated that it had not established a disciplinary committee up to now. What did this mean? She said the Committee must not be made suspicious. The Committee believed that the EAAB management had the capabilities to deal with the issues. If there were difficulties which could perhaps be internal, it had the right to approach the Department to intervene and the right to identify people to come in and address the matter. Not addressing the matter was not a good image for the EAAB.
She congratulated the HDA and said that it was working towards a success story of its trade name of rebuilding the HDA brand. The Committee believed that in the next annual report, it would perform at 100%.
Mr C Malematja (ANC) said he appreciated that the presentations had elements of honesty in terms of the bad and the good. He thanked Ms Sihlwayi for her detailed questions and comments, as she had covered many questions he wanted to raise. He raised concern over the asset registers of the HDA and its invoices which were the same. If somebody wanted to go purchase an item and that person deliberately threw away the invoice, then it meant that they were hiding something. The same applied to this issue of the asset register. If it was not used for other things, some people wanted to have cross deals on the issue of land. He reminded all the entities that they were summoned not to talk about future plans, but to discuss the AG’s report. He wanted to know why certain things had happened. At the centre of the formalisation of informal settlements were bucket systems. Telling the Committee that the HDA had not achieved anything regarding eradicating the bucket system was akin to telling the country that it had deliberately made sure that those using that system even after 28 years of democracy, must continue doing so. Meanwhile, the members of the entity were getting their salary every month with no problem.
South Africa was a growing nation. It could not be correct that an EAAB educational programme was not implemented, whereas all the departments had agreed that a huge chunk of money must go to educational programmes. The future lay with the youth. The educational programme meant for the youth was 2 000 below target and zero percent had been achieved. Why did the industry have this entity if it was not doing anything in the interests of the youth? The entity had also indicated that its performance percentage in empowering women had decreased yet it was said that this was the entity holding the future. It was not holding the future of the country if it was not taking care of women who suffered a lot, were discriminated against by the out-gone Apartheid regime and were not given opportunities for leading positions. Many of these women were heading their families, taking their kids to universities and need to be empowered. The entity was deliberately not able to assist them through its programmes. A huge chunk of youth roamed the streets in places like Eastern Cape, Cape Town and KZN. The government was giving the entity funds to create programmes for them, yet zero percent of the youth programmes had started. Other concerns were that of the asset register and the disciplinary hearings. If the entity was not doing anything, for which it had six months, what kind of lesson was it giving to other staff or people behaving according to the code of conduct of the entity if they were not dealing with those who were transgressing them? The entities were not necessarily helping the portfolio. They had to consider coming to the portfolio to ask what could be done with them. He reminded the entity that the Minister, through Parliament, had the right to defund them if there were not executing the mandate they existed for. He said that Members were informed about the values and percentages seen on reports. On Programme 6, there was one target and it achieved zero percent on that target. The entity came to the Committee with a programme that only had two items, and spoke as if it achieved 50% only to find that it had only carried one. He expressed the Committee’s disappointment with the EAAB and therefore the nation’s disappointment.
The CSOS’s achievement of 82% compared to 60% the previous year [slide 6] showed improvement. He encouraged the entity to keep up the good work and said he was proud of it. He was impressed that the CSOS was aware of its mandate which is what mattered most. It had to deal with the scheme registrations and formalise them. He acknowledged that this was not an overnight thing and that it dealt with poverty. He praised the manner in which the entity was dealing with its dispute resolutions in that it was able to clear them. He was happy and supported the entity’s unqualified audit opinion.
Mr A Tseki (ANC) said he wanted to call Ms Powell to order earlier. On the issue of deployment of like-minded to these institutions, as Ms Powell was alleging, she was out of order. These allegations of her saying that every time this is what she said, it was getting on his nerves as an individual and member of the ANC. He said that popular decisions must be respected and that she should work within those decisions. Ms Powell had raised many issues in many meetings and the Members had been considerate of many issues she had raised. But on one issue that there was a difference upon, she would always cry.
Ms A Buthelezi (IFP) said the weak control environment in the production of the EAAB financial statements resulted from the inadequate review of annual financial statements by senior management. What steps had been taken to review the performance of senior management responsible for these misstatements? What plans were being made to capacitate this level of management to ensure that the recurring issue ended there? What would be the consequences for those involved if these issues continue? An issue identified was the lack of an internal audit function. The audit risk committee has since been appointed. Could the Committee get details of this appointment and what could be expected from this committee now that it was in place? The EAAB was responsible for the professionalism of the industry. However, irregular expenditure of nearly R2 million had resulted from a lack of fairness and transparency and the breach of the pillars of procurement? How did the entity intend to rectify this broken trust within the industry? Targets not being met because of lack of capacity, skills or external circumstances were not good but could the Committee be afforded some understanding because nothing at all had been attempted and this was unacceptable. This was especially so in the case of anti-fraud and corruption measures because, in the climate and history of the country, not finalising the fraud and anti-corruption plan was unacceptable. When could the Committee expect this plan to be finalised? If it had been finalised, could the entity provide a detailed implementation plan?
What was the total cost of the CSOS Connect project? What challenges were encountered in the implementation of the project and how were these challenges overcome? A lack of systems to automate core operations has been noted as a contributor to non-performance. How did the entity envision the automation of governance systems within the entity? As vacancies were referred to as another key contributor to non-performance, could the entity provide an exact number of all remaining key vacancies and a timeline in which these vacancies could be expected to be filled?
The Chairperson welcomed the presentations. She congratulated the previous and the present board of CSOS because they had created stability and appointed Adv Mkhize as the Ombud. Adv Mkhize put the system in place and today, the Committee was talking about its audit qualification. The entity should then be able to address the issues that the AG has raised for it to reach its target of a clean audit. It was very clear that the entity had all the necessary governance committees and executives and who was doing a good job. She conveyed the Committee’s message that the board and the ombud had done a good job.
The EAAB had achieved 65% which was not bad, but with the new company, it had performed at 23% which was worrisome as the AG had raised. The Committee welcomed the work the entity had done on the disciplinary process that it had taken for its CEO. The entity was encouraged to finalise the process because, without other executives, the entity would come back in the next financial year with the same problems regarding performance and not attending to some of the issues that the AG had raised. She said she was not sure whether the Director General (DG) would like to tell the Committee about the allegations about the chairperson of the board of the EAAB and the PPRA, what had been the reaction of government and how far the process was. On irregular expenditure, there was no indication that the entity had started the process of condonation because it had to first have the condonation committee. Submissions must be made to the entity and then later to Treasury for the condonation of some irregular expenditures. This would fast-track the issues of fruitless and wasteful expenditure, because the entity would know the instances where it had not lost money in the process of the irregular expenditure occurring. She congratulated the chair of the EAAB/PPRA because transcending from one entity to a new one was not an easy task. The Committee hoped that the entity would have good results in the next financial year.
The HDA said a lot in its summary and the Committee noted the issues it had raised and what it had done. Within a period of time, it had appointed the CEO and CFO. It had established the necessary committees which would help resolve the issues that the AG had raised because in an environment where there was no stability and accountability, they would have challenges. Since they had taken over, they had done their best to ensure that two [former] executives were already out of the system and still indicated that they were going to follow the [disciplinary] process, even when these executives were outside the system. This was a good sign that this entity was in good hands and they were applauded for this. But the Committee was not appreciative of the entity’s performance of 29%, which was worrisome. The Committee hoped that with the new executive, there would be progress moving forward. The narrative that the Committee had not engaged with the HDA was false and misleading to the public. Mr Neville Chainee [appointed Administrator effective 17 February 2021] came to the Committee and presented the entity’s interventions and Dr Alex Mahapa [who replaced him as the Administrator in July 2021] did the same as mentioned. The executive themselves came twice. In March, they came and explained well how they were going to handle and stabilise the entity. On 25 May again, they came to the Committee to account on the matters that they were dealing with in response to the AG. One of the things that the Committee had done was to make sure that the entities were audited by the AG so that there was coherency within the system and that the Committee would then be able to work with the AG to deal with some of the issues as were raised. The Committee welcomed the board’s commitment to put the HDA in a better space to be able to perform its task as required. On the issue of irregular expenditure, the entity had submitted to the Committee the condonation report which the entity was still attending to and must be attended to through the board before it went to National Treasury, which the Committee acknowledged. The board had done its best to deal with the matters as required by the law. She thanked them for the presentation.
Dr Ratshitanga said there were quite a number of common concerns. He appreciated the frankness with which Members had scrutinised the report as they were the voice of the people. He acknowledged that the HDA had to account on how it was executing its responsibilities to the citizens through the Committee. Ms Mokgotho asked a fundamental question on what challenges had resulted in the HDA’s failure to achieve its targets. As shown, the entity had performed badly in the financial year being scrutinised. Other questions that were asked by other Members, including Ms Sihlwayi and Ms Powell, were on what the entity was doing about those causes that led to the lack of proper performance. The board had previously committed to the Committee to do certain things. There were reasons why the HDA was where it was, and the board knew what they were. There were also unknown issues as to what led to the terrible state of the HDA—but this did not mean that they were not doing anything about them. That was why there were investigations. Part of what they knew was that during the period when there was no proper governance in the form of a board, the HDA was managed by two administrators and two acting CEOs. During this time, a lot of things went wrong. The current board was demonstrating that if a board was not in place, it was difficult for the organisation to function properly. When the current board came into office, they had to establish different committees that were required by the HDA Act and the shareholder compact between the HDA and the DHS as the shareholder of the Agency. These committees would provide oversight on the work of the executive, in the absence of which, there was no set process to hold the executives accountable on the performance of the organisation. For example, the audit and risk committee provided monitoring on performance against the annual performance plan. It was meant to monitor internal controls and compliance with the PFMA. This was the only committee that was in place. The HDA’s reports indicated isolated areas where there was no compliance and they would have reported their dismay concerning performance, but because of the absence of a board, the reports could not be acted upon as usual. The land property and project development sub-committee of the board was created, which monitored projects across the country continuously. The board sat with the executive who updated them on the status of implementation of projects in all the provinces. The board provided guidance to management and sometimes made necessary interventions where management may be struggling and made recommendations. The social and ethics committee was seized with enforcing fraud and corruption policies, strengthening whistle-blowing procedures and processing whistle-blowing reports. Without this committee, reports would be made but no action would be taken, because the reports may have implicated those who were meant to take action. The corporate affairs and remuneration committee monitored the capacity of the human capital in the HDA and dealt with skills and competency to check if the organisation had the correct staff to do the work. The board had received the skills and competency audits that were being processed through the committee. The committee dealt with disputes and grievances which, when not attended to, could lead to very low staff morale. It also received responses on what was happening with cases at the Commission for Conciliation, Mediation and Arbitration (CCMA) and with legal cases that affected human resources and dealt with staff morale and the training meant to assist staff in improving dealing with change management. The committee had submitted the organisation structure to the Minister. All the committees reported to the board which intervened where necessary and sometimes asked the Minister to assist with the necessary interventions. The board had been improving relations with the provinces and metros, and had met with their principals to unlock blocked projects. In the absence of the committees in the year under review, not a lot was happening—this was part of what caused the lack of performance. At the level of corporate governance, a coordination committee was established to investigate all the issues the AG had flagged leading to its audit findings. On the expenditure that was in CAD, there was no loss and the cases were taken to National Treasury to request condonation. There was a strict guideline of requirements that the cases needed to meet before they were submitted to National Treasury for the condonation committee to decide whether there were justifiable reasons for not following procedure. The HDA would engage with Treasury in this regard but it had also flagged cases where it believed there was purely wasteful expenditure and recommended what action had to be taken. That would be the point at which it entertained disciplinary processes to bring those employees that may have deliberately transgressed regulations and compliance procedures of the PFMA and all other laws that govern the compliance of procurement of services. The board was taking responsibility for the performance even though it was prior to its appointment. This was why it had gone back three years to investigate all the cases coming from the prior years. Findings were repeated simply because they were not being investigated. Therefore irregular, and wasteful and fruitless expenditure was not being accounted for in terms of consequence management. At board level, they were waiting for the condonation committee to bring recommendations of what action had to be taken. They would wait for Treasury to tell them if they agreed with everything submitted for condonation. This would put the board in a better position to answer the causes of lack of performance and some transgressions. Some cases had been processed and some were still outstanding and these needed to be processed before the entity could finalise its recommendations and actions. The HDA agreed with Members about the importance of effective monitoring and a common understanding of business processes in the organisation. For everyone who worked for the HDA, there had to be a common understanding of its objectives as an agency and as a trading entity of government and the processes, it followed in executing its projects. Where there were challenges, everybody had to understand how the entity responded to them. On Talana, investigations were ongoing. The SIU had reported to the Committee a while back and the HDA was waiting for its reports on the employees that were affected. There was a pending court case so the outcome would be linked to the completion of the case. Ms Powell asked about Mr Poya and Ms Ngoasheng, who was the head of strategy. The executive had informed the board the previous week that Mr Poya had resigned from the HDA and was no longer an employee of the HDA at that time. Ms Ngoasheng’s five years ended and therefore she also ceased to be an employee of the HDA. The HDA was undertaking investigations on all the matters that the AG flagged. It would not spare any employee implicated in irregular, fruitless, and wasteful expenditure. So even if employees had left the organisation, the HDA had the right to follow employees implicated in any malfeasance. They would be dealt with upon the finalisation of investigations.
Mr Khenisa said that the HDA had put in internal controls to see if there was irregular expenditure and this was an ongoing process. When it had set up controls, it realised there were loopholes. It had also asked its internal auditors, who were outsourced, to test its controls continuously. Once the controls were implemented, the auditors tested them. A senior supply chain manager was employed to ensure there were good standard operating procedures set within the SCM. A Chief Audit Executive was appointed to monitor the operating procedures and a compliance manager who was helping to ensure that all tenders that went out had been looked at.
Regarding Generally Recognised Accounting Practice (GRAP) vs modified cash, the entity was not using a different method from the AG, but as a [PFMA] Schedule 3 public entity, HDA was using GRAP. National departments were using modified cash and the difference between the two was in terms of how they recognised receivables. For example, on the HDA’s side, they could accrue, but on the departments’ side of modified cash, they could not accrue. So the difference was that when the money was sent to the HDA, the funds on their side were expensed. When the AG asked why the entity put the funds under receivables, the entity said that to receive the funds, it had to send the Department an invoice, which would reflect as project receivables. Between executives, they looked at how they could best deal with that matter to ensure that it did not recur. Part of the agreed-upon solution was that all funds sent to the HDA had to be gazetted and sent to National Treasury. This would ensure that money being sent was also coming with projects to avoid an outcry accusing the HDA of being used for fiscal dumping. So this issue has been resolved.
The HDA did land rezoning, but the bigger part was done by municipalities. There was an interdependency between the municipalities and their [Municipal Planning] tribunals, which sat quarterly. That was one of the issues that caused delays. The other issue was that of advertising the rezoning. Advertising was done for a period of 21 days and the community was given an opportunity to say whether they objected to the rezoning. Most of them sometimes objected to the rezoning. For example, there were a number of pieces of land in Cape Town where the HDA was struggling with rezoning. It had a piece of land where it wanted to move people to the central line and the community objected to this movement. So, unfortunately, when it came to rezoning, the community also had a say and once they put in an objection, it would take longer because there had to be a process.
In some cases, they did not want to go through the internal municipal tribunal process and wanted to go straight to court and interdict the entity from rezoning. So the issue was mostly delayed by the interdependencies involved which the HDA did not have full control over. Regarding the housing units not achieved, the HDA acknowledged that some things could have been done differently. Some of the challenges faced by some of the provinces was where the service provider was on site but the HDA did not have the list of beneficiaries. Therefore there was interdependency between the HDA and the municipalities.
Regarding the Housing Subsidy System (HSS), houses could not be built when no beneficiary was allocated to occupy that property. For example, in Mansonville, Gauteng, properties had been completed. However, the Mogale City municipality still had to do the electrification, resulting in 90% completion of the houses, which the HDA cannot reflect in its portfolio of evidence (POE) because it required 95%.
The quantum was determined at national level and once determined, the MECs of provinces had to sign it off for their provinces. There were instances in the Eastern Cape where some service providers had moved out of sight [off site?] instead of building because they wanted to use the new quantum. Fortunately, he and the chairperson had a discussion with the new MEC who speedily responded and assisted in making sure that the quantum was signed. Another challenge was around seed capital, where the HDA tried to allow small businesses to grow. But once these businesses were given the opportunity, they did not have the money to build. In terms of the project’s top structure, which is different from other projects, the entity was not allowed to provide material on site or give them money to pay for the material. The businesses had to raise the money themselves. The HDA had come up with models to help address this challenge, including partnerships with the development finance institutions (DFIs) within government and were comfortable that it would be able to assist some of the small businesses. The HDA faced a myriad of challenges that put it where it was in terms of building houses. He acknowledged that part of it was also because the HDA had dropped the ball.
Ms Powell had asked about the blacklisting of companies. The HDA addressed these issues quickly, having blacklisted the service provider of the Talana TRU and the company’s owner. The HDA was also reaching finality with the blacklisting of the company involved with the Mdantsane TRU. The HDA had met jointly with the contractor and the SIU. HDA requested a preliminary report as to whether the HDA could continue working with that contractor. The HDA was happy with the presentation that the SIU gave to them. SIU had since written formally to the HDA, recommending that they not give any further work to the company. The HDA was still working on ensuring consequence management happened, but they were mindful that principles of natural justice should always apply. This also applied in the case of staff members. HDA was conducting investigations on those involved in fruitless and wasteful expenditure concurrently with the condonation process for cases where expenditure could be condoned. The first matter dealt with was in Mpumalanga, where the HDA had written to the individual concerned and asked for reasons on what happened, purely so it could stick to the principle of natural justice. Neither Mr Poya nor Ms Ngoasheng, were with the Agency any longer, but HDA would follow up on them to the extent that the HDA was negatively affected.
He acknowledged Ms Sihlwayi’s unhappiness with entity’s issues but also appreciated that she acknowledged and recognised its little progress. Regarding Mr Malematja’s concern about Plant, Property and Equipment (PPE) and the incompleteness of the entity’s asset register, the main issue concerned small items such as computers and office furniture. The asset register was mainly comprised of land. That was why HDA indicated that movement from Pilane to Megawatt Park was not treated well. As a result, everything was dumped into one room and when the AG wanted to do physical verification, they could not. On that basis, the AG did a limitation of scope. HDA appointed a company to start the process of automating its asset register, including determining the coordinates of where HDA’s land parcels were located. This would be done in the next financial year, including record management automation. One of the issues he raised when he joined HDA was that many boxes containing tenders in one boardroom were identified as a risk. He made sure that the automation of record management would be quickly dealt with. The HDA audit plan was risk-based, some of the issues listed were concluded, others raised, and provision was made for emerging risks. The entity was comfortable that its audit plan covered all the risks and issues raised. The HDA was comfortable sharing it with Members. The HDA was not happy with its performance of 29% [slide 6] but in the first quarter of the previous financial year, a difference could be seen in that it was sitting at 61% [slide 4] as opposed to the previous 23% and 72% for the second quarter as opposed to 19%. Though the entity was not yet at its target of 97%, it was moving toward it quickly and the last two quarters left of the current financial year would show whether the board was there to increase the problems or to resolve the challenges. The board was comfortable with its decisions to turn around the entity.
Dr Ratshitanga said that the board was being overseen not only by the [Portfolio] Committee, but also by a division of the DHS called Entities Oversight. This ensured that all the entities stuck to their work as was inscribed in the shareholder compact and the acts that established them. Therefore there were a number of platforms that were monitoring the performance of the HDA that assisted it in staying on track. The board was very thankful for its interaction with the Entities Oversight division.
Mr Ngubeni said that he would deal with the issue of the filling of vacancies. The PPRA had submitted an organisational structure for the Minister’s approval which was subjected to rigorous interrogation because of things that were not clear. The PPRA was reliably informed that the Minister had approved the structure so it would proceed with filling the vacancies. This approval was the only holding issue. It would also deal with the placement of the personnel inherited from EAAB in the new structure. He said he was not the suitable person to respond to the question of the allegations that were raised against him. The Minister was the right person to answer that question as he was unsure what those allegations were.
Ms Nkambule said that the CPD programmes used to be venue-based and would happen on specific dates. However, under COVID, it was moved online and a service provider assisted. Because of technical issues in relation to the entity’s system and the service provider system not being integrated, several technical glitches led to some candidates being unable to register or do their CPD. However, this issue was being resolved together with the entity’s IT and service provider. Since September, most of the candidates and those supposed to be doing CPD were already doing it. The entity was still getting some minor glitches, which were reported to the service provider who then attended to them.
The online query management system was currently operating but the PPRA was still faced with a number of system challenges and technical glitches. PPRA had interventions in place to deal with these problems. It had created a separate email address used for clients when the query management system was not working. Sometimes this caused duplication. A person who lodged a query online would also submit the query via email. But to deal with this issue, the entity had to allow the email avenue to allow estate agents or clients to submit their queries. It was mindful of the problem and fixing the system.
The PPRA had a good relationship with REBOSA. REBOSA took action concerning the contempt case but PPRA was busy with engagements with them to find a solution. The solution was concerning the payment of their fees. PPRA was hopeful that it would come to a settlement in this regard and it was not looking to suffer through any further court cases. This was why the board had been in discussion with REBOSA and also mandated the PPRA management to continue to engage with REBOSA on a settlement of the dispute.
EAAB/PPRA did not have the funds to achieve the target of the youth programme. This was an empowerment programme under the EAAB/PPRA transformation plan. The PPRA was a self-funded entity and had to use whatever money it made from registrations [for its own operations]. However, the transformation programme was sponsored by Services SETA. PPRA now had a transformation fund through which it was able to drive some of its projects as its programmes required a lot of money. With the fund, PPRA would be seeing traction, especially in driving youth employment and there were no issues foreseen concerning funding.
Ms Nkambule said she accepted that management had failed to ensure that the disciplinary committee was in place. They had not renewed the contracts for the committee members in time so they could hold disciplinary hearings. The target in question, which was not achieved, related to disciplinary hearings against estate agents, which the consumers usually filed that the entity needed to protect. She sensed a misunderstanding [amongst Members] between that process and the process of disciplinary hearings against staff. The non-availability of contracts with the disciplinary committee never affected the staff disciplinary hearings. It was a separate process driven by legal representatives that the PPRA engaged with as and when required to discipline internal staff for any transgressions. Since August, the PPRA has entered into contracts with service providers and resumed the disciplinary hearings against estate agents. Looking at the entity’s second quarter report, this target was now achieved. [It is not clear whether the speaker was referring to the present financial year – 2022/3 – or the year under review].
The fraud prevention plan was not developed. It was not implemented and therefore, the target was not achieved. The plan was developed in July and was awaiting presentation before the entity’s audit risk committee. Once the committee had reviewed it and made recommendations, it would then be submitted for approval to the board. Although the plan had not been approved, the entity did implement the activities in the plan because a draft fraud prevention plan was developed but had not been approved. The PPRA could then not say the target was achieved because the plan had not been approved. The plan provided a quarterly performance report and monitoring of the plan and dealt with control measures to control fraud. It also looked at internal controls and fraud detection and brought in internal audit, which would also assist management in implementing the internal controls effectively. Another issue in the plan was an independent investigation undertaken in cases of [suspected] fraud. There would be a preliminary investigation and then an independent investigation conducted to ensure proper recommendations. So while the implementation of the plan was delayed by the non-approval, it did not stop the PPRA from internally implementing some of it. The entity had employees who were undergoing disciplinary action as a result of fraudulent actions that they engaged in, especially in the SCM department. When those fraudulent actions were discovered, the entity engaged in forensic investigations, and this report was already out with its recommendations being implemented.
PPRA invoiced property practitioners for FFCs. While the previous legislation provided annual FFCs, the new law provided for three-yearly FFCs and the fees to be paid. However, Ms Powell had pointed out correctly that PPRA could invoice annually. The difficulty was that if the PPRA issued an agent with a three-year FFC, they would trade for those three years. The entity would have to follow that particular estate agent annually to pay the PPRA the money owed for that [portion of the] three-year FFC. This would be administratively difficult. As seen in the AG’s findings, the PPRA’s record on the collection of revenue had not been the best.
PPRA foresaw that if it did follow the route of issuing three-year FFCs to be paid later, it would continue to have repeated findings. The legislation was clear that the annual invoicing was a discretion of the PPRA. It would continue to engage with the industry to find a solution to implement it without it causing further audit findings. Another issue faced by the PPRA was when estate agents de-registered or left the industry without informing PPRA. This was required in terms of legislation so that they could be de-registered. After a few years, these estate agents would want to come back [to practice] and the Act was clear that they would be liable for penalties in such instances. The penalties were indeed limited in terms of the Prescription Act and the PPRA did not charge penalties beyond three years. So the submission by Ms Powell that some penalties amounted to over R30 000 was not correct. PPRA could give Ms Powell information on the amounts that would be charged and she would be able to determine that they could not even exceed R16 000. PPRA was still busy looking at this issue with the industry. PPRA had tried to make estate agents aware that they needed to de-register when they left the industry as there was not much awareness of the requirements of the Act. PPRA would address this issue as part of its consumer awareness going forward so that agents understand this responsibility. Even under the new Property Practitioners Act (PPA), it was still a requirement and if the issue of the penalties was not resolved now, it would persist.
PPRA had sought to set an increased number of days for exams to give intern estate agents time to write. Otherwise they would be de-registered because they would have failed to qualify in terms of the educational requirements. It had targeted three exam days that quarter but added more exam days and would soon be communicating these dates. In January , the PPRA would consider how many intern estate agents were still not qualified and it would then communicate further. For an industry that was properly qualified, action needed to be taken against those property practitioners who did not aspire to continue with their qualifications. It was a requirement in terms of the Act that every property practitioner must be qualified. Section 50 of the Act says that estate agents that have failed to comply with the standards of prescribed training will be disqualified. PPRA was trying to implement this legislation but would nevertheless communicate with the industry based on the outcries and see what to do going forward.
PPRA acknowledged that it had not done what it was supposed to and, as a result, had not achieved some targets. But it was working hard to ensure that it would reflect better performance next time. PPRA had challenges with its subs system which was currently being upgraded. The subs system was static and did not enable the entity to have any add-ons that would allow it to deal with specific issues such as the writing-off of debts, invoicing and automation of billing. The upgrades would allow the system to address these issues. PPRA was also facing challenges concerning registration. It had a target of 9 000 new role players that it was hoping to have on-boarded onto the system but was unable to do so because when the system was being developed, the developer found that the rules PPRA wanted to implement concerning bringing on board all the property practitioners would require four months to develop. PPRA was in the process where those rules were being developed but in the meantime, it had an intervention where all those role players were being granted exemptions. This meant that PPRA had full details of all these new property practitioners. Once the system was up and running, it needed to import the details from those exemptions onto the system and call the estate agents to pay for their FFCs. PPRA continued to strive to ensure that it served the industry that it was mandated to serve. As a team, together with the board, they were committed to listening to the industry as it implemented the new legislation. They hoped that the industry would also assist and work with PPRA with the new legislation because, with new legislation, implementation was different and difficult.
Mr Mafihlo responded to the concern about the failed target regarding the SCM on procurement opportunities that were earmarked for specific designated groups, such as enterprises that were owned by women. PPRA was working with the SCM department to try and increase its database to include businesses owned by the specific persons from the designated group, mainly enterprises owned by women and enterprises owned by people with physical disabilities. The database was being built and was growing and improving. He said the PPRA applied the measurement criteria set in its APP. It had achieved its target of women-owned enterprises because it had signed more contracts with them. PPRA’s Request for Quotation (RFQ) systems also ensured that they were given preference.
Mr Mafihlo explained that some of the weaknesses identified by the AG in its financial statements were because the PPRA SAP system [for accounting records] was hacked two days prior to 31 May, the date by which the entity was supposed to submit its AFS to the AG. The hack rendered the system non-functional when wrapping up the preparation of the AFS. In order to ensure that it was compliant and submitted to the AG on time, PPRA had made some offline adjustments that were not on SAP. In preparing the AFS it had to combine information from the SAP ledger systems with what it prepared offline to build a complete set of AFSs. These were submitted to the AG with proper reconciliations reflecting what was in the general ledger system and what had been done offline. This process was reviewed by internal auditors who brought in their comments which were incorporated before they were submitted to the AG. On submitting the AFS, supported by the reconciliations, the AG accepted and relied on the information. PPRA was taking remedial actions to ensure this risk did not recur.
PPRA ensured processes were implemented to bring more security to its IT systems. PPRA implemented anti-virus software and firewall protection systems. PPRA was running a SAP remedial project that would ensure that the findings raised by the AG that related to the way that the SAP system was configured, were addressed in a way that the SAP reports could be aligned with the accounting standards provisions and requirements. This would ensure that moving forward, whatever audit findings the entity had received that were specifically aligned to how SAP was configured would be addressed.
PPRA had a plan to close the gaps within its SCM system that gave rise to findings of irregular expenditure. PPRA enhanced the procurement function to be more efficient, transparent and accountable to manage costs and avoid any form of fruitless and wasteful expenditure. Management also ensured that it capacitated the SCM function with the correct and relevant managerial skills. This would ensure that any weaknesses resulting from poor contract management, poor communication, issues related to stakeholder engagement, and things that should have gone to National Treasury but did not, could be addressed and mitigated. This would also bring a better overall SCM strategy into perspective. The entity’s overall aim was to ensure that whatever findings for non-compliance and inefficiencies were raised as a result of its SCM and how it operated could be closed off as soon as possible and prevent the recurring of the same findings.
Ms Mthethwa thanked the Members for their input and feedback on the entity’s APR. She assured Ms Mokgotho that there was no backlog at CSOS around conciliation and disputes. It was dealing with all current issues and had put measures in place to ensure it did not regress. In this regard, it distributed the work to other regions by centralising the dispute resolution mechanisms and ensuring equitable work distribution amongst the provinces. It was also acting on its targets for establishing other regional centres to have more representation around the country. One centre in Gqeberha was put up in the past financial year. CSOS was ahead in terms of the appointment of its executive managing agents. Its challenge at that moment was having them placed; however, it had made inroads with all other well-established managing agents to absorb the managing agents that the entity had trained. In this regard, it was also looking at innovative ways of finding work for these managing agents, especially with the work coming up from other entities and all the skills emerging from initiatives being developed by its sister entities. CSOS looked forward to interacting with Ms Powell and the document she would be providing. She told Ms Buthelezi CSOS was working on reducing the vacancy rate. At the end of quarter two, the entity had reduced the vacancy rate to 31%, employing about 38 people. This was being continuously monitored and she assured the Committee that key positions had largely been filled. At executive level, there was one vacancy for the Chief Risk Officer, which was in the process of finalisation.
Adv Mkhize said that the entity was monitoring the conciliation and adjudication of disputes monthly.
CSOS had institutionalised ongoing monitoring to address reconciliations and compliance with the PFMA. This was over and above the loss control committee that had been institutionalised. It had also been tracking how it was doing with staff in requirements as basic as ensuring 30-day invoice settlement. The entity was tracking the issues of SCM compliance and how the bid committees were enabled to perform their duties. This had been coupled with an internal probity review by the internal audit function where all bids were subjected to evaluation or review by internal audit before being awarded. He thanked Ms Powell for commending and supporting the entity in that regard. He appreciated that the entity could be of service to Members and the general public. The practice directives related to POPI had been issued as drafts because CSOS sought to canvass comments. As soon as those comments were received, the final directives would be issued. This would happen within the next two months. CSOS had received a lot of recommendations on the internal appeals process, but this was a function of the legislative framework and would have to be authorised in terms of the law. Therefore they were considered as part of the propositions in consideration of the amendments to legislation. CSOS believed that it would offer some relief to members of the schemes, body corporates etc. who may have had adverse rulings against them, rather than having to approach the High Court for appeal which could be costly and time-consuming. Therefore there would be merit in looking into establishing an internal tribunal to look into appeals processes.
When CSOS was confronted by erroneous adjudication orders, again, this was an issue of the legislation which did not provide specifically for the rescission of judgments. The entity did not have an inherent internal power to rescind adjudication orders largely because of the principle of functus officio, which meant that once a decision had been taken at an administrative level then that decision maker no longer had the authority to go back on that decision. However, CSOS was looking into mechanisms and had institutionalised a kind of review process for cases where there was an obvious or patent administrative error in the adjudication order, without necessarily dealing with the substance of the legal arguments. Such orders, in some cases, may be subjected to a rescission process so that another adjudicator could take care of the matter. In other instances, the same adjudicator had to correct that particular erroneous order. Additionally, CSOS had institutionalised a quality review process where quality assurers looked into the quality of the orders, whether the law had been cited correctly, whether the facts had been interpreted correctly, whether the law had been applied to the facts correctly and whether there had been consideration of precedents. They would then come up with a quality review report upon which an adjudication order was then issued. CSOS had seen significant improvement in the quality of orders because of this, coupled with fortnightly sessions with the adjudicators themselves to discuss best practices.
He appreciated the commendation from Mr Malematja. Ms Buthelezi had asked about CSOS Connect which was a massive ICT project that was costed at about R104 million. The project would digitise and automate everything within CSOS through the web, from record keeping in the cloud and the enlistment of schemes to determining adjudications and related issues. For example, schemes not registered with CSOS and those coming up in terms of development would be able to use a self-help mechanism by going on the CSOS web platform and initiating the process of their own enlistment and registration. This would interface with the banking facilities being created so that schemes intended to register would process themselves right up to the point where the certificate was being issued to them. This would also apply to adjudications and governance. There were several models behind this which would integrate the Enterprise Resource Planning (ERP) which was the back office support. This massive ICT programme was going to enhance user experience, enhance efficiencies in terms of public engagement and reduce dependency on person availability. The challenges thus far included slight delays in the commissioning of some of the models as a result of some issues that were not anticipated. For example, it was discovered that to incorporate the banking model, several bank accounts needed to be opened to enable clients from all major banks to interact with the system. This also meant that CSOS needed to get ministerial approval and approval from National Treasury. CSOS had just received approval from Treasury which meant that the process was proceeding ahead and issues were under control. The entity was addressing vacancies by also engaging with the trade union. The support from the Committee, the Minister, the DHS, and the CSOS board had been impeccable. It enabled the executive to move with speed in turning the entity around with half the capacity needed. CSOS was headed for better days and performance would continue to be its underlying mantra.
Ms Sindisiwe Ngxongo, Acting DG, DHS, said that she was not in a position to respond to the allegations against the chairperson of the PPRA. The process was managed by the executive authority. She confirmed that the HDA and PPRA’s proposals for the approval of their organisational structures had been assessed by the Department and forwarded to the Minister for consideration and approval. The Minister had considered the proposals and the entities would receive the outcomes.
The Chairperson thanked the entities and the Members for their interaction. With all hands on deck, the sector would be improved.
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.