Provincial Treasury and Entities Annual Report 2021/22

Meeting report

Minister’s introduction

Ms Mireille Wenger, Western Cape Minister of Finance and Economic Opportunities, said that it was a pleasure to present before the Committee as it would assist Members in doing their oversight functions as they reviewed the year under review. She added that, as Provincial Treasury, they looked forward to questions posed by both the Committee and the public. She explained that the period under review was still under the grips of the COVID-19 pandemic and that the Provincial Treasury had been instrumental in guiding the Western Cape government departments in navigating the crisis. She said that their mandate is to drive good financial governance across provincial and local government spheres through sound fiscal management, effective and efficient use of resources, effective financial oversight, and building the capabilities of local governments. She said that she believed that Provincial Treasury had done well on its mission to build capacity in the public sector by being adaptive, innovative, and supportive. She acknowledged her predecessor Mr David Maynier and thanked the Department for all the hard work done during difficult times.  

Department’s input

Mr David Savage, Head of Department, Western Cape Provincial Treasury, emphasised that the year under review was challenging for the Treasury as they were still navigating through the pandemic and part of the post-pandemic environment, and added that they were able to manage to stay on course in terms of the key frameworks on the fiscal and financial governance perspective. He stated that the year required ongoing agility in fiscal management through the budget process and to ensure it was an evidence-led process. He explained that in the supply chain processes, there were a number of things that were happening and were not pandemic related, particularly related to state procurement. He said that local government also needed the municipalities and the province to navigate the uncertain terrain and the Department had to assist particularly in vulnerable municipalities. He said what held them in position through the year was an increased level of alignment around a common strategy or one that prioritised what the Department sought to do regarding provincial governance, local governance, infrastructure, and supply chain and how this would be achieved. He added that a lot of emphasis had been put on the people within the Treasury, as the biggest and most important asset in making sure that the team was able to contribute practically to the vision of the Department and to the execution of its strategies.

The Chairperson thanked both the Minster and the HOD and stated that they would move on to tabling the annual report for the Department. She proposed for the report to be sectioned and thereafter the annual report for the Western Cape Gambling and Racing Board would be dealt with.

Deliberations on the 2021/22 Annual Report

Part A

Mr R Mackenzie (DA) stated that COVID-19 had been an interesting learning curve. He said that the question he would ask would be directed to the Minister and some to the HOD as well. He said that in the previous two years, the Provincial Treasury had performed incredibly, referred to page 11, and asked whether the Department really looked at its role as Treasury because, pre-COVID, it had focused on governance and regulatory matters. He asked whether some of the things learned during the pandemic, such as the procurement report, would be standardised for the next ten years, whether these would be ingrained in government, and how this would be passed down to municipalities, particularly those struggling.

He asked whether some of the normal targets had been suspended during the pandemic, for example, visitations to municipalities, and inquired about the way forward in this regard.

Highlighting page 13, which focused on the strategic intervention municipal budget engagements and technical integrated municipal engagements, he asked how struggling municipalities had been assisted and whether the indicated engagements had any notable impacts despite the political turmoil.

He asked about the limits the Treasury has in place in terms of employing people to continuously aid municipalities. He expressed that he felt it was a waste of money because every year, interventions are done in struggling municipalities. He highlighted that on page 17, there was an indication of management service costs of R290 000 that had been directed to Kannaland Local Municipality.

On page 19 on public participation and private partnerships, he asked whether the Departments actively looked for such and whether there were proactive engagements from Treasury to look at how to better governance through more public participation and partnerships. 

Mr A van der Westhuizen (DA), addressing the topic of procurement processes, asked whether suppliers were being evaluated upon completion of a contract or assigned work and further inquired on the main reason behind regressed performance in municipalities. He asked if something could be done in advance instead of waiting for the regression and the poor audit outcome.

Referring to page 13, he said there had been a number of delays experienced by the Department in terms of its performance, and some of the delays, specified on pages 16 and 17, resulted in underspending. He explained that he had mixed feelings regarding underspending as it is a good thing to be able to save money. However, when it is a sign of the Department being unable to procure services, it then raises questions. He added that the Provincial Treasury should be setting standards for other departments concerning managing a budget and procurement processes. Referring to reasons forwarded by the Department for the indicated delays, he said that these simply showed a lack of “homework” and asked why the entity waited until they reached procurement processes to only identify technical matters. He said that they would have avoided the delays if they had been well prepared and had done their “homework” and looked through various problems that could arise. He asked whether the delays were due to the lack of capacity, commitment or a lack of a sense of urgency to procure services and products. He added that it was not first known in March of the current year that there was a problem in procuring IT equipment, as motor dealers had complained for over a year because of a shortage of computer chips. Specifying the second bullet on page 17, he added that it showed that Treasury was guilty of fiscal dumping and things were only being resolved during the end of the financial year because it is a requirement. He added that this did not instil confidence in terms of the Department’s own procurement processes.

Ms N Mkamba-Botya (EFF) referred to page 10; she asked about the function of the dashboard and how it could assist small businesses. On page 11, paragraph 4, she asked how the Provincial Treasury aimed to uplift the well-being of all citizens. She gave an example of the poor people living in townships and asked how the Department planned to assist them with long-term sustainable jobs and not Expanded Public Works Programme (EPWP) short-term jobs. Within the same environment, she asked how small businesses would be assisted in terms of funding.

On page 13, paragraph one, she inquired on how the Department would assist municipalities with sustainable service delivery issues because some are unable to respond to issues such as the provisions of emergency housing such as Drakenstein Municipality. She also asked how Bergrivier Municipality would be assisted in increasing the budget for the provision of housing, as this is currently a pending problem. She asked how the 24 municipalities with unchanged audit results from the outcomes of the 2020/2021 financial year would be assisted.

Taking into account the challenges faced by the Western Cape, she referred to page 15 and asked how it was possible that R17.6 million of the budget remained unspent. She highlighted that on page 16, the Department blamed all this on delays and asked whether there was a lack of capacity or not.

The Chairperson indicated that her first question would be based on pages 10 and 13, where it had been mentioned that extensive support had been given by the Strategic and Technical Integrated Engagements (SIME and TIME) and the Joint District and Metro Approach (JDMA) to achieve effective local governance. She asked what additional measurements would be taken for municipalities that have a qualified finding and asked for an elaboration on the reasons for the findings.

Highlighting page 11, where new government structures had been referenced, she wanted to understand the details surrounding the matter and the outcome across entities in the Department.

On page 14, regarding the Procurement Client Centre (PCC), she said that she wanted to understand the percentage of queries that had been resolved, how these are dissected into categories, and the approach for differentiating the various queries received.

She mentioned that she wanted to better understand the roll-out of the automated procurement planning toolkit.

On page 18, she indicated that there was a reference made to the technology used for the SEM processes and that they were also automated. She said she wanted a more practical understanding of the technology used, whether this specified a coding language or Artificial intelligence (AI).

Ms N Nkondlo (ANC) apologised for joining the meeting late. She said her first question would be on underspending and stated that she wanted to understand the notion of the delays because of the appointment of a panel of experts. She asked what the delays were, what caused them, and how the concept of a panel of experts assists in the participation of more and broader enterprises, particularly new entrances into the systems. She added that her understanding, although open to correction, was that a panel of experts was used as a method through which service providers are appointed for three to five years. She asked for clarification on the matter and inquired about how the entity ensures that work is fairly distributed amongst the experts and what type of services would be given to the experts.

Referring to the issue of the Centres of Excellence (COE) and that of vacancies, she asked what the implications of the underspending on COEs were and inquired for more information regarding cutting down personnel and mitigation strategies.

On page 17, she inquired about the strategic focus on the short-medium term period and whether there would be downsizing in certain components of the Department which would aggravate unemployment.

Minister Wenger addressed Mr Mackenzie’s question and indicated that the Procurement Disclosure Report (PDR) would continue quarterly but in a new format as Personal Protective Equipment (PPE) is no longer the focal point. She added that the Department was looking across the procurement landscape to find important indicators that should be included in the PDR going forward and reports would be shared with the Committee when they have been produced.

Addressing the issues on municipalities, she indicated that a lot of information would be shared regarding the technical engagements and the tremendous amount of work done to assist vulnerable municipalities and how they would be supported. She said that the mandate of the Provincial Treasury was to help support municipalities to be financially viable and that their work was not only directed towards municipalities alone but also spanned to National Treasury. Systemic issues were being addressed through the Budget Council as this was something that all provinces grappled with. She stated that the entity was also moving into a new environment on the local government level as it is the age of coalitions. She added that the current period was post-Zondo Commission. Therefore, it was important that Treasury looked into the role it could play in making sure that all or some of the recommendations and lessons, from the Commission, could be taken on board within the province.

She indicated that the team would answer questions about the issue of PCP, how supplies are evaluated, and the quality of work.

Addressing the questions about underspending, she reminded the Committee that the Department struggled like everyone else with the global shipping crisis and stated that goods that needed to be imported, such as laptops, were all subject to the same difficulty experienced globally where there was uncertainty in terms of when they would be received or if at all.

She explained that the procurement dashboard was a very exciting programme that was web-based and user-friendly. It allows users to filter key information on the Departmental Procurement Plan, consisting of an estimated 4000 tenders. She stated that the dashboard helps suppliers to access and plan for future tender opportunities especially small businesses so that they are able to prepare to participate in the procurement process of government and added that the team would better explain the functionality.

Minister Wenger said that, in the period under review, the Department had a 0.7% vacancy rate, indicating that the entity worked hard to ensure it had a full complement during the specified period. She then handed over to the HOD.

Mr Savage addressed the question of the role of Treasury, post-COVID-19 and stated that it was one that they also were asking because the environment continues to evolve with a lot of uncertainty. He said that what the Department was clear about was that they were shifting from being focused on conformance with rules and regulations, as this is largely embedded in the system in the province, to performance which focuses on service delivery outcomes. He emphasised that their focus was not only to get clean audits while the quality of services was not good. He added that this was part of two interventions, the first ensuring that the entity invests in people and what the Treasury of the future needs to look like. He explained that these required skills which were not the old state expenditure skills from the 1990s but were much more digital skills, engagement skills which mean being able to work with people and technology as well. He said that digitisation was also being accelerated in terms of moving more to digital platforms, how monitoring is done, and how certain functions and tasks could be automated in the provincial and local government environment with the data sets in place. He added that their products are also evolving, alongside with the mentioned, and these are products such as the Provincial Economic Review and Outlook (PERO) which had been tabled recently and the Municipal Economic Review and Outlook (MERO) which is still to be tabled. He added that the PDR would be converted into a quarterly report with a broader scope.

He indicated that the key role of the Treasury post-COVID-19 is a “people role” and is not merely counting things up on spreadsheets but the ability to engage with people. He said that although much had been learned from interacting with people online, it did limit the quality of engagement, particularly at the municipal level. Teams had already resumed site visits in the hope that a hybrid approach would evolve where there is more regular contact in an online environment and also an investment in being in the same space with municipalities. He indicated that this was particularly important for the more vulnerable municipalities so that Treasury officials are not only able to get a strong sense of the context that such municipalities are operating in but show practically that they intended to support and strengthen collaborations with officials within municipalities. He emphasised that being in the municipalities was key, which had already been evident in the current year.

He explained that during the pandemic, the Department did not suspend any targets or ambitions as these core platforms needed to be sustained. However, there had been disruptions to some of the quarters.

Referring to the questions around vulnerable municipalities, he emphasised that municipalities in the province were not the same and therefore there is no “one size fits all” approach. If a municipality is considered to be vulnerable, the Department tries to understand the issues faced and works with that particular municipality to determine the specific vulnerabilities and how strategies can be developed to address such. He said that in the case of Beaufort West Municipality, the provincial executive decided to intervene in Section 139(5). The Municipal Recovery Service at National Treasury then prepared a financial recovery plan which the then Minister of Finance in the province signed off on. The Department has been working regularly and intensively with the municipality, and there are early signs of progress. He mentioned that different approaches were taken in other vulnerable municipalities depending on the context.

He said that Kannaland Local Municipality is predominantly challenged by something that is not immediately within the control of the Provincial Treasury, which is political instability that inevitably begins to damage the quality of public administration. Simply put, few people desire to be public officials in the municipality, especially senior leadership positions, which is a real vulnerability. He mentioned that the Department struggles with such environments as such is beyond their mandate, however, the entity relentlessly supports and guides within the framework of the law. Together with the Department of Local Government, Treasury was trying to review a diagnostic assessment of the progress made and how such challenges have evolved but the political makeup means that instability levels continue. He indicated that such challenges also manifest elsewhere.

Addressing the deployment of officials, he emphasised that they were quite careful in their use of funds and did not view interventions as an act of money wasting. He explained that leaving problems unaddressed leads to a cascade of other problems. Therefore, it is more efficient and effective to work on issues as early as possible without overinvesting in areas where there is complete resistance or a lack of appetite to address challenges. He added that the team was taking a carefully calibrated approach such as the technical and strategic integrated municipal engagements which are robust engagements where issues are discussed and resolved. These methods always offer additional insight and improvements on moving forward, which also prevents us from adopting a “one size fits all” approach to all municipalities. He added that this did not mean that the Department always does everything right, as sometimes they are not able to move as quickly as needed but they keep learning and always reflect back on the actions taken.

On the question of Public, Private Partnerships (PPPs), he mentioned that there were two issues regarding this. The first being that there is a complicated framework in the Treasury rigs and secondly, the relevant legislation around how to navigate PPPs which is still something that is under review and is almost concluded at the national level. He added that the review aims to ease the processes. From the perspective of Treasury, they had always been interested in the prospects that well and appropriate PPPs would have for unlocking both capacity and financial partnerships for improved service delivery. He said there was a pipeline for PPPs and votes would be given to other departments to explore. He added that such processes, by nature, were very rigorous and would take time to mature. One of the things done, from a budget fiscal policy perspective, was that the process had been announced in the budget for the year under review, and the formation of a project preparation facility to support the development of PPPs had been initiated.

On the question of the evaluation of suppliers, he indicated that the key is not only looking at a single point in the process and when issues are being picked up, it already reveals that there may be challenges in contracts management from conception through to specification and award as well as ongoing project management and the final quality at the exit point. In terms of the overall contract, good contract management should have the exit reviewed as part of the commissioning process and it should be made sure that that is in-flight management of the contractor corrections.

Regarding regressing municipalities, he said that this indicated a limited set of municipalities and the entity engages and monitors the audit process at the municipal level extensively and this is done before municipalities submit their annual financial statements. This also involves assisting municipalities with quality assurance, reducing errors on submissions, and so forth. He added that during the audit process, there is also a platform where historical information is collated around audit queries, requests for information, and communications for audit findings. This has allowed the Department to build a historical view of issues that have affected different municipalities within the province and how these have been addressed.  As such, there is much more peer learning involved in the environment which is a positive outcome as municipalities often have to navigate complicated issues on their own.

He indicated that the issues of underspending were concerning and explained that the focus for the current year was to get over the challenge experienced with vacancy rates and amongst the COVID-19 machinations, the Department did not give enough focus on goods and services procurement. He said, as was stated by the Minister, there was a complete disruption of global supply chains, particularly with laptops, where the entity tends to use State Information Technology Agency (SITA) contracts. This being the case, it became a lengthy process to change suppliers but they did manage to do so after they had taken a lot of additional and anticipated efforts.

Regarding the consultancy services, Mr Savage stated that the entity struggled partially with the online environment as well as departmental systems and this was mainly because it was the first year the procurement planning toolkit had been introduced. He stated that there were shortfalls in the bid specification processes, resulting in the Department not being comfortable to proceed with certain procurements, leading to delays. He added that they had been holding managers to account so that it would be clear who needed to lead particular contracting processes through the supply chain processes, and who needed to offer support. This would phase out any ambiguity so that the necessary tools and support can be provided to managers. He added that he was confident that in the current year, things were progressing and were on track compared to the previous year, concerning the supply chain management. He said the underspending for professional services procurement was undesirable and left the entity slightly scrambling.

Addressing the question on the panel of experts, he said that he would allow the team to further explain the process and what it entails. However, the aim was to have a process that adds value in terms of the capabilities unavailable within the Department and for expert services required on a more ad hoc basis rather than a standing basis. This was done so that the scope of supplier could be broadened in terms of available professional experts. The design was also around a fair distribution of work for the tasks and work orders.

On the compensation issues, he said that the Department was not downsizing but the emphasis was more on working smarter and in an integrated way across programmes. For example, if a municipality was facing an audit challenge driven by policy and supply chain management challenges, the entity would then engage with such municipalities in all areas in an integrated way. This is to establish a single view of a particular municipality to be able to find a single port of call for support and guidance and the same is also done with engagements with departments and public entities.

Answering the question on the dashboard, he said that the availability of information at the right time for suppliers is critical and what has been done was that procurement plans had been published.

In addressing the question of how the Provincial Treasury assists in improving services for poor people, he explained that fiscal and economic policy frameworks are essentially choices made by the government in terms of what is channelled through the budget process and is built on a capability foundation of government. He added that these were the two critical things which Treasury plays a role in establishing frameworks for both the province and municipalities. Without the governance foundation and without making choices around resource allocations, he said that it was possible that frontline departments such as health clinics, teachers and refuse services would not happen on a sustainable basis. Although the Provincial Treasury is not a frontline service department, the entity creates a framework which is managed and maintained in a modernised manner to enable services to be delivered t better the lives of citizens. 

Mr Faez Salie, Director: Local Government Accounting, stated that 24 municipalities have not seen any changes inthe audit outcomess because they were able to produce the best audit outcomes in the country, which they hoped to maintain until the next growth agenda. When looking at the five-year trend of municipalities and their audit outcomes for the year 2021, a total of 22 municipalities had been able to receive clean audit outcomes and across 40 municipalities which obtained clean audits, 20 were from the province of the Western Cape. He explained that local government assists municipalities in attaining such results by being involved in assessing their audit plans from the beginning of each year. Municipalities are required to prepare a plan based on their last audit outcome and the issues they might have encountered that need to be addressed. The plans are then assessed by local government quarterly and discussed robustly during engagements to analyse any governance issues, changing roles and regulations and various processes.

When financial statements are prepared, municipalities are required to understand the rules and what is needed to prepare financial statements. When this phase has been accomplished, all provincial municipalities, together with local government, meet in a consistency workshop where peer-to-peer learning is commenced.  Municipalities with good performances are then given a platform to share their experiences and thereafter, financial statements are submitted to the Auditor-General (AG). If there is a municipality that is experiencing issues, this is addressed across the board and comments received from the AG are then taken into a digital platform so that all municipalities are made aware and are able to prepare sufficient evidence to be able to respond. He added that, as an entity, they also avail themselves to municipalities so that as soon as a matter may result in a difference of opinion, it can be sent to the Provincial Treasury with a response. He said that during the process, municipalities are continually supported. This is the relationship they maintain with them, the AG, and the technical units within the Provincial Treasury across all local government units. He mentioned that for Provincial Treasury, it is not only about the audit outcomes. As soon as a law or regulation is promulgated, this is communicated to municipalities through workshops so that they better understand the new requirements.

Answering the question on public entities, he stated that in the year 2016, the Provincial Treasury did a desktop analysis of how public entities compared against the backdrop of failure of State-Owned Enterprises (SOEs) in the country and on most of the highlighted red flags the Western Cape government as well as Provincial Treasury performed well. In 2022, with the Zondo Commission having been concluded, there is continuous monitoring of public entities in terms of their performance and how to better improve such and therefore, there have been engagements with a service provider which is tasked with looking at the laws and regulations that affect public entities. Also, from the findings of the Zondo Commission, the local government has looked at the financial health of public entities and the expected requirements in terms of operating expenditure and capital expenditure, and the work is almost completed. The outputs will result in a new support package, not yet available in the country, that has guidelines for accounting office’s so that they can better manage public entities and executive offices. The second output is a technical analysis that interrogates service delivery so that budgets for public entities can be better assessed and it can be assured that whatever is being spent has been costed appropriately. The process involves the Department, public entities, and Provincial Treasury to be able to better manage public entities for improved performance.   

Ms Naadia Ismail, Director: Strategic and Operational Management Support, explained that the panel of experts is a mechanism for the Provincial Treasury to be more responsive and efficient regarding the support provided to municipalities. It is a list of pre-selected service providers that can be issued tasks as and when required. Currently, there is a panel that has existed for the previous three years with a contract that ends on the 30th of November. As such, there is an ongoing process concerning the establishment of a new panel of experts. This consolidates the panel for municipal interventions with resources that will also respond to normal support as well. She added that as an entity, they had taken note of lessons learned from the existing panel, which would be incorporated into the specifications for the new panel of experts.

Ms Ismail dealt with the procurement question and said that the entity played two roles in this regard, one being the enablement role and the next being the enforcement role. She mentioned that the client centre encompasses all the questions forwarded, such as data management and technology services. She explained that what was done in the procurement process and any initiative implemented in the province was based on the ease of doing business with the government. The first phase in the process is procurement planning, which uses a procurement tool developed as an IT application to assist provincial departments in better planning within the procurement space. The process starts off by looking at the budget and once signed off and tabled, it gets loaded in from a goods and services perspective in terms of what needs to be looked at from a procurement planning viewpoint. The toolkit is also used even pre the budget allocation because it allows departments to be able to manage their performance and spending and to also reflect on prior performances and how they might have failed within the procurement space. When the budget is loaded, it allows for an analysis of the suppliers and the marketing analytics to understand how to approach the market. It also allows for a reflection on the areas to focus on, the areas that need consolidation, and key policy directives as a range of information can be brought into a common space. She added that an impact assessment toolkit also allows departments to load supplier information. What the toolkit does for Provincial Treasury is that it gives access so that proper planning can be done and allows for an overview of all 13 departments. It also allows the entity to maximize available opportunities to prepare and know the demand for goods and services.

She explained that the PCC manages all technology services such as the supplier database services, both national and provincial, to determine how to engage the national Central Supplier Database (CSD) as well as the evidence bank which forms the basis of procurement with any government institution. Without a tender, she mentioned that compulsory bidding documents are stored within the central repository of information. When procuring a claim for a requirement is insufficient, there needs to be evidence and the database/evidence bank allows the Western cape to have all this in one central space. She said that Treasury provided support across all 13 departments so that they have access to information and the compulsory bidding documents housed within the database information services. Provincial Treasury also engages with suppliers, provides necessary skills and support, and also adds them to the database. The entity also provides e-procurement systems that permit quotes below R1 million to be done on an automated platform where bids are invited electronically and suppliers are able to engage.

She stated that the second range of services provided in the client centre is query handling which entails, on the supplier’s side, how to register, what to do, what documents are required, what information is needed, and also technical governance requirements. The third range is based on complaints handling from suppliers in their areas of difficulty and the Treasury, as the arbitrate, finds a resolution to complaints forwarded. She highlighted the last leg is about information handling and how to provide information to suppliers, the public, and departments. She added that the dashboard was about supplying information to the public and was also about transparency and accountability.

Mr Mackenzie highlighted that on page 17, it was said that R290 000 management service costs had been directed to Kannaland Local Municipality. There was a need to access the panel of services twice because initial bidders were found to be uncompliant. He stated that he did not understand how the column was written. He asked why such amounts were being paid while a panel of experts had been there for three years.

He asked whether consultants who are sent to municipalities unearth foundations that had been laid years back and therefore need to rebuild on such or do they completely have to start from the beginning. He added that he wanted to understand why such services were being provided to municipalities and if the support that had been given prior was being built on or if there were new systems put in place.

He asked for the review report on public entities to be sent to the Standing Committee. He asked whether it was necessary to spend so much money on municipalities and whether there was anything to be learned from the 2016 report that could be implemented.

Mr van der Westhuizen stated that he was going to touch on what was said about the exit strategy at the end of the contract. He mentioned that the matter was subjective and asked whether there was anything being done to encourage new entities to start contracting with public services so that no single official is able to perform gatekeeping subjectively. He added that this would aid in assessing whether good services had been rendered or whether a contractor differed from the final assessment. He asked if there was any communication between the contracting party and the public service to clarify the scores given for the quality of work done.

Referring to the monitoring processes of local government, he said that small local authorities with a smaller staff complement and a capacity problem are required to adhere to the same prescripts as bigger municipalities. He asked whether there was any assistance given to such municipalities in terms of monthly reporting and financial performance as many have to have to get full-time employees to be able to manage to complete monitoring instruments that various spheres of government expect. He asked the extent to which questions asked of municipalities by departments of local government, Provincial Treasury, National Government, and the South African Local Government Association (SALGA) had been consolidated. He inquired about the efforts made to lighten the burden on municipalities.

Ms Nkondlo expressed that she was happy with the responses to her question on the panel of experts and indicated that she wanted to understand why there were delays in appointing them. She also asked about the notable improvements seen in municipalities after they had been assisted and stated that she wanted to understand the specifications of the matter.

The Chairperson said that she wanted to make a follow-up on her question concerning the automation and digitization related to the SEM processes. She asked what this specifically meant and about the technologies practically being used and how to further automate and digitise SEMs.

Mr Savage addressed the question posed by Mr Mackenzie on whether systems within municipalities were uprooted. He said the matter could be viewed in two ways depending on the context. He mentioned that when political instability translates into administrative instability, it erodes an organisation's capability. As the Provincial Treasury, in such circumstances, they act to uproot pending issues and work together with municipalities to install system that aim to stabilise the environments. However, one of the challenges they encounter is that the original teams they work with disperse and find jobs elsewhere as people are not willing to work under unhealthy working conditions. He added that there is always a residual effect of the systems that had been installed, the processes, and the practicalities of how things had been done but these may no longer be as agile, efficient, and responsive as they need to be because there is a human element to everything. He stated that context does change; for example, in local government environment, there has been a lot of effort into the Municipal Standard Chart of Accounts (MSCOA) which is a deep reform for local government and it is still a journey that most municipalities are on as it is a difficult and lengthy process to introduce. He said that their support will be in new areas, and new frontiers in terms of modernising municipal governance and administration. He clarified that the entity did not repeat things done eight years prior, as policies and administrative environments continue to change.

Addressing the question on regulations in supply chain management, he stated that there was quite a lot on how one could avoid subjectivity but this does not remove the need for qualitative assessment which has an inherent subjectiveness. He said that the system was designed, from conception, through the contractual management process to limit inappropriate levels of subjectivity which can limit the levels of performance assessment review if poorly executed. He added that this meant that during the process, there is a need for an expert partner on the side of the government who had the ability to work with contractors.

He highlighted that the regulatory differentiation and the streamlining of reporting was a challenge as creating a one-size-fits-all framework was nearly impossible because municipalities themselves operate differently. There have been numerous efforts at a national level to try and streamline reporting requirements and systems. Most of these systems emanate from national and provincial governments only using the available information streams. He explained that the effort was not only on streamlining and reducing the data points collected but also on digitising to make submissions easier and automated.

On the grant consolidation question, he said that the entity was trying to move from purchasing specific inputs through grant support but was working towards closer collaborating outcomes in the municipal space. The Department’s input might be that they commission and pay for a particular study or a piece of technical work for municipalities to use but this, however, did not give a guarantee that the outcomes would be taken on and embedded into their systems. He added that this was not the only assistance that they intended to provide but the entity was also working towards helping to support the emergence of the whole puzzle through single support plans that are negotiated through engagements between the province and the municipality. He said there was a consolidated support plan and programme across departments of the provincial governments aimed at supporting municipalities to address key priorities that the Treasury would agree with. In the current year, the Department has also consolidated two grant programmes that would be taken across the province. These entail various transfers to municipalities so the value chain can be easier to manage. The aim is to get outcome improvements and not necessarily efficient inputs that do not achieve an outcome and from the support that has already been provided, improvements are notable.

He mentioned that a large majority of municipalities in the province have funded budgets, which reflects the hard work that has already been done on their side. Also, a large majority have creditors under control as they are struggling with payment plans with Eskom and this area has been extensively facilitated by the Department.

On the supply chain management side, he mentioned that the entity was engaging with municipalities around modernising supply chain management systems and getting a better grip on asset management practices. He added that a programme had been rolled out which is the entity’s effort to contribute to overcoming the infrastructure spending hurdle that municipalities continue to face in the province.

Mr Aziz Hardien, Chief Director: Financial Governance, said he suspected that the issue around the panel of experts would come up a lot during the meeting and therefore he would give an overview of how the process worked. He explained that from engagements, they were able to identify struggles within municipalities in order to address the laws, regulations, and frameworks that need to be implemented. Giving Kannaland Local Municipality as a practical example, he stated that the municipality needed an internal auditor as required by law and the Municipal Finance Management Act (MFMA). The auditor would then have to follow internal audit standards which require a quality assurance review to be done every five years but the drawback was the lack of capacity within the municipality. What the Provincial Treasury decided to do in 2021 and the year prior, was to financially support such vulnerable municipalities to be able to have access to the service and this was accomplished through accessing a panel of experts who are able to do a quality assurance review. In Kannaland Local Municipality, a service provider was found that would assist and the municipality had made commitments to engage with the experts. However, when the experts would reach out to the municipality to have engagements, no one within the municipality was willing to initiate and continue with the process. The funds which had been allocated; specifically the mentioned R290 000, could not be used. He highlighted that whenever there is a change in government, people often leave the system which further deters any progress made as there is a need to recreate an understanding of the processes that need to be undertaken.

Under the matter of public entity reviews, he mentioned that in the year 2016, there was an internal desktop assessment done by the Provincial Treasury which did not incur costs apart from the normal COE and Treasury official’s costs. He added that understanding numbers from reviews is different from interactions with people working with public entities because it gives a different picture and understanding of the situation. In 2022, the total cost of the public entity review amounted to R 1.361 million, mainly for the work done by specialists in governance, those that work in laws and regulations, and those that understand financial statements. The reason behind outsourcing was that Treasury already had oversight over public entities but when an external expert is involved, there is added credibility, and also, the actions were a means of assisting with the capacity constraint that had been experienced the previous year. He mentioned that the 2016 report had been tabled in Cabinet, where the public entities and accounting officers of relevant departments had accepted the findings and the 2022 report was not yet available. From the year 2016, there were certain tasks expected from public entities which dealt with looking into revenue-enhancing opportunities. Some entities had taken an initiative into the process but this did not always materialize. He added that the Department wanted to communicate that there were key standards that public entities needed to be mindful of and manage, just as with COEs and other government processes. He mentioned that for the current governance of public entity review, the Department is looking into consolidating certain functions such as having a shared service for audit committees but such considerations need to be deliberated on to determine whether they would be cost-effective or not and whether they would be beneficial. 

Mr Steven Keynon, Chief Director: Local Government (Public Finance), said that when they deal with municipalities in financial distress, they deal with a situation where essential components might not be available. As a result, the Department took a different approach where funds previously allocated in grant transfers to municipalities were shifted into support in the form of a panel of experts. Although this reduces risks on one level, there is difficulty in appointing appropriate consultants. He explained that what happened in Kannaland Local Municipality for the 2021/22 financial year was that the Department was overly ambitious in what they asked from the panel of experts, resulting in a change of scope. A comprehensive revenue enhancement project was alternatively required, but it cost more than the allocated budget and the procurement had to be cancelled. Thereafter, there were further engagements with the municipality but the courts ended the intervention and the procurement was stopped.

He clarified that the problem with expenditure and municipalities was on capital budget and highlighted that majority of municipalities did not have problems spending their operating budget but the issue was around infrastructure investment where there is recurrent underspending. He added that the Treasury and the Department of Local government both worked with municipalities to offer necessary support, particularly around grant spending. Although improvements are visible, there are still procurement challenges.  

On the question of onerous reporting, he stated that it was a struggle as there is a need for a lot of reporting. He agreed that reporting was necessary in the local government space but highlighted that numerous issues occur, leading to more information being requested by the national government. He mentioned that as an organisation, they work within the context of legislation and regulation that comes from the national government and therefore engage in forums to try and simplify the reporting requirements, but it has proven difficult to do. He acknowledged that there are other areas in the country where there is good reason to impose such reporting requirements. He added that where the Western Cape is in charge of reporting requirements, they try not to duplicate what has already been done by the national government. He gave an example that the national government has introduced the Financial Management Capability Maturity Model (FMCMM) which duplicates much of what is already being done in the Western Cape process.

Ms Ebrahim, addressing the issue of technological requirements, said that past technologies used in the years 2001 until 2021 had been exited at the end of last year. The Western Cape developed an in-house system which is a fully-fledged application that the province has developed via the transversal application division within the Department of the Premier. She explained that the Electronic Procurement System (ePS) is an initiative from the province which has been mainstreamed across all 13 departments with plans to integrate it into the procurement planning system in the current year. She added that the ePS toolkit was currently used as a bid invitation system and deal with former quotations that have been automated.

On how performance is measured, she said that within the Provincial Treasury, there are no performance rating models as the entity is not in the purchasing space except for initiatives via the office of the CFO. She explained that the process is dealt with, depending on the maturity of the procuring institutions in the province, as part of contract management processes and plans are in place to build an e-procurement system performance model that departments can use. She added that in dealing with the procurement system, the entity aims to build a resilient governance platform where embedded governance is dealt with through the accounting officer’s systems. There is a blueprint in place for such, which deals with risk and internal controls, mechanisms of risk mitigation, and internal controls within the system itself. She said that the entity also issues Provincial Treasury instructions and standardized uniform documentation such as the standard bid documents, an example being the WCBD 4 exclusive to the Western Cape government. This document consolidates standard bid documents 4, 8, and 9 into one document that is reduced in size and is managed by the procurement client centre. She explained that such interventions are what the Provincial Treasury does and departments evaluate performance. However, there are plans to incorporate such into the system.

Part B

Mr van der Westhuizen said that he was proud of the work done and achieved by the Department.  Referring to page 53 which stated that one of the Treasury’s initiatives, drafted for local government, had been adopted nationally. He asked to what extent this had been incorporated by other provinces or by the national government.

On pages 58 and 59, he said that he had been informed that national government sets performance indicators, which limits local governments in terms of setting their own performance targets. He highlighted that Mr Savage used the term “qualitative indicators”. However, a number of these indicators could be classified as being quantitative and not qualitative since there is no measure of quality. He asked what options there were at Treasury’s disposal, to be able to evaluate the reports externally via an independent body so that the quality may be vetted and to also determine whether the reports are used by those they have been intended for and what value they added.

He added that having 22 municipalities with a clean audit within the province was something to be proud of.

On the fourth bullet of page 63, he highlighted that it had been stated that 24 700 procurement events occurred in the first nine months of the year and 14 500 occurred in the last four months. He added that the average number of procurement events for the first nine months was 2 750, and it jumped by more than 30% for the last four months to 3 633. He said that this pointed towards the notion that there is a huge spending spree towards the latter part of the financial year which officials such as Mr Savage have been conscious of and are aware that it needed to be avoided. He asked what the Treasury was doing to try and assist provincial entities in ensuring that their spending starts the moment the financial year gets underway.

He mentioned that it was said that one of the targets not reached was due to the late communication from national government with regard to the budget adjustment. He asked if there were currently any signs in terms of the delays in the adjustment process which last year had to be postponed and whether everything was on track.

part highlighted that on page 75, one of the comments was that the reason funds were not transferred was due to the delay in receiving the recovery plan from National Treasury, and asked for the reasons behind such.

Ms Nkondlo asked about the expenditure review under programme two around the learner transport programme in the province. She said that the subsidy for certain areas had been revoked and learners were left without transportation. She asked whether there was a possibility for Committee Members to have access to the submissions made in this regard. She asked about the mechanisms put in place to assist the affected areas.

Under infrastructure, she asked about the mitigation plans put in place post the pandemic, and how the Treasury interacts with the infrastructure department to ensure that the sourcing of materials does not result in added delays.

Referring to subprogramme 4.2 on accounting services, she asked for an elaboration on the interventions contributing to the overachievement of internal controls and measures.

On page 57, under subprogramme 2.3, she indicated that she was interested in what could have been the reasons provided by the Central Karoo District Municipality for not tabling and adopting the budget before the start of the financial year. She acknowledged that political issues disrupted administrative services within municipalities and stated that she wanted to know the specifics of the matter. Also, clarity on whether there was a report handed in that explained the issue, the response from the Provincial Treasury, and whether the matter had been escalated to the executing authority. She asked how this situation could be mitigated and how political dimensions could be managed.  

Mr G Brinkhuis (Al Jama-ah) referred to page 78 and asked why Treasury did not receive donor funds and if there was any effort towards getting such funds.

The Chairperson indicated that on page 40, there was a reference to the modernization of financial systems, a specific reference to the data centre established, and the introduction of technologies such as machine learning and artificial intelligence. She asked for practical information on what this entailed, the technology that made it possible, and how it is used, for example, in costing tools.

On page 47, she asked what the drawbacks were of not implementing the Chartered Accountants Academy (CAA) and the PERO and MERO campaigns and how this would be addressed in the future. With regards to the Central Karoo District Municipality, she asked the reasons why the municipality did not table and adopt the budget before the start of the financial year.

On page 72, she asked the Department to elaborate on the critical interventions that took place in the second quarter.

Ms Mkamba-Botya referred to page 32 regarding the Department’s graduate development programme and asked how it functions and how graduates are tracked to ensure they are permanently employed.

On page 35, it was mentioned that the issues faced were diverse and that there were also external forces that the Department did not have control over. She asked for details on the external forces mentioned.

Referring to page 36, she asked the reasons behind government printing works being offline and how the Department would make sure that this did not happen again. She asked about the safety measures as this could be a huge inconvenience for potential service providers. She added that the e-tender portal ended up being offline itself, and asked going forward, there would come a time when it becomes unnecessary for an advertising medium to be offline.

On page 36, she asked whether the national minister resolved the conformation mentioned in the last paragraph regarding agri-businesses. 

Indicating the issue of donor funds on page 78, she asked the Department to elaborate on the process and how it works, whether the entity actively sought out donors or waited until offers came. She asked whether there were circumstances where donations were rejected from donors doing business with the provincial government, either directly or indirectly. She also inquired whether the Department ran background checks on potential donors before receiving donations.

Minister Wenger addressed the question on performance indicators in terms of the responsibilities of either the National or Provincial Treasury. She indicated that some reports are legislated and required by the Public Finance Management Act (PFMA) and others are owned by the Department. She added that the adjustment process was on track in the current year, and hopefully, the same issue experienced previously would not occur.

She expressed that it was unfortunate that the instability at a political level negatively impacted administration, and this was evident countrywide. She stated that as an entity, they were in conversation with national counterparts in the Budget Council and forums. These included MECs of local government and finance from other provinces, national ministers of finance and Cooperative Government and Traditional Affairs (CoGTA) to collectively try and understand how to best create greater stability within local governments. The office of the Auditor General (AG) had also been involved in evaluating whether reviewing the term of office of senior officials could assist in creating stability.

Mr Savage addressing the question on the socioeconomic profiles, indicated that he knew that engagements had occurred but was not sure of the extent to which the entity is able to track the adoption by other provinces.

On the performance indicator asked, he said that the Provincial Treasury did not have a performance indicator as it was always a problem getting the indicator to be something that is objectively verifiable which then can enable the entity to count the number of reports to make sure that they were of appropriate quality. He explained that the Department does perform quality assurance; for example, municipal reports undergo a fairly extensive production process and feedback is received from the same municipalities that are core clients. He added that there was no third party involved in the performance of quality assurance as there was nothing fundamentally broken with what was currently being done.

He said there were two factors to consider under procurement events, one being the post-pandemic resurgence and, secondly, the preparations for the following year. He explained that many people were remobilising resources in the fourth quarter to be able to spend in the first quarter of the following financial year and added that the funds should not be simply seen as dumping. He said that there was no data to differentiate between the factors that could have led to the heightened spending for the period in question. What was being done to counter the act was using the procurement planning toolkit that gives the ability to lay out procurement details for each quarter and monitor them to avoid inappropriate fourth quarter bunching and encourage appropriate actions and preparations for the following financial year. Also, to ensure that procurement challenges were not unnecessarily delaying the execution machinery.

He indicated that the delay in the receipt of the financial plan for Beaufort West Municipality was due to two factors. The first was that the municipality’s financial recovery service was under-capacitated and second, it had to manage an intervention under Section 139(7) directly. The municipality was also facing a challenging environment that caught it in the December period which also led to delays. He said that consultations and engagements by the community in the municipality with the draft FRP should not have been confined just to the holiday period when people might not be paying as much attention.

He expressed that they were excited with the direction the expenditure review was taking regarding the expenditure on learner transport. The focus in the first year was making sure that teams in the Treasury and departments were trained in the methodology. The work also involved working closely with the government technical advisory centre at National Treasury, where an online environment was used which was a novel experience for all parties and included technical training, support and guidance. In the first rounds of reviews, the focus was on building internal capacity to keep doing such reviews in the year under review. He added that another round of reviews was underway and sustaining the partnership with GTech was key as the Department wanted to keep learning more and embedding the methodology into its systems. He mentioned that they were excited about the prospects both for collaborations with departments and in terms of the methodology itself. The important benefit was picking up and driving forward with the recommendations that come out of the reviews so that follow-ups could be done.

Addressing the issues under infrastructure, he mentioned that the sourcing challenges faced were predominantly related to external global imports, particularly steel, and the disruptions continued due to the war in Ukraine. He said there was not much that the Department could do to get over the delays from the global markets and also, what had to be considered was the import capacity and productivity of ports in Cape Town.

On the issue of Central Karoo District Municipality not tabling and adopting the budget before the start of the financial year, he said that this was something that the entity could foresee because of the challenges faced by the municipality. These involved issues around convening, which had been covered broadly by the media, as the municipality had challenges in the council membership and contestations over which seats were filled or vacant. He explained that if a municipality did not pass a budget by the end of the financial plan, they would have to begin a new financial year without a budget which automatically triggers Section 139(4) of the constitution. In this context, the MEC for finance has to essentially impose an expenditure control system which is what was done. Upon such, the Provincial Treasury set up a committee led by Dr Roy Havemann that evaluated all expenditure items and all payments proposed by the municipality. A system was set up that detailed control on every payment the municipality made and the municipality was encouraged to get over the hurdle and pass the budget. After a four-week period, Section 139(4) was withdrawn. He added that there was no specific report which had been issued but there were a series of weekly reports on the payments that needed to be processed and the necessary authorisations for those to take place, that the committee generated to give to the minister for his determination.

On the question of donor funds, he said that most of the donor engagements were either towards relevant departments or, in the case of a development partner, which would be an international aid agency for government bilateral aid relationship, there might be engagements held but these do not indicate that funding will be secured. He mentioned that a department could be approached by a donor, particularly a government donor, or by an agency but currently, they did not have such relationships formally in place. When such relationships are initiated, they are then sent through the Department of the Premier in terms of international relations environment. He added that the Department does its due diligence whenever donations are made.

On the data centre and machine learning question, he said that the simple answer would be that the entity uses two platforms, one being the Microsoft Power BI platform and the other being Zoho which is an advanced Customer Relationship Management (CRM) platform used for trends in audit queries and outcomes.

Addressing the issue of lack of campaigns, he said that the Department was unable to disseminate information actively and as a result, some of the audience hoped to be reached was missed. He added that the campaigns were not the only way to issue out information around the Chartered Accountants Academy (CAA) or the MERO and PERO. Other means were through professional associations and direct interviews with municipalities, and the area was one they hoped to improve on.

He said that the government printing and e-tender portal were systems that simply collapsed, and added that it was something outside of the entity’s control which disrupted even their own systems. He said that departments had to be guided to take emergency measures, and both systems were currently back online. He mentioned that the province was in talks with the National Treasury as there was significant progress made in developing a digital framework for procurement within the Western Cape.

Ms Analise Pick, Chief Director: Public Finance, mentioned that the year under review was the first year that the entity had undertaken the expenditure review. She added that there was much to be learned; the major component was that data is the driving point for changing behaviour, which was one of the key learnings. She said that the expenditure review for learner transport was about analysing the expenditure and the different models of the learner transport rollout within the Western Cape education districts. What was found was that there was a differentiated approach in the rollout. There were also inconsistencies picked up in terms of the reporting on financial and non-financial information from the different districts. As part of the recommendations, the Department had indicated that there needed to be a centralised database that would be able to state the norms and standards so that data could be compatible. Once this had been done, the Department needed to follow up on the actual expenditure review, where they could be able to review and compare the efficacy and efficiency of the different district models used.  

Ms Julinda Gantana, Deputy Director General: Governance and Asset Management, answered the question about the modernisation of systems together with machine learning and said there was a programme running. She emphasised that the Department was dealing with legacy systems in their effort to gather information and that the intelligence was not keeping up with their plans to transform governance and address the service delivery agenda.

Mr Aphiwe Mazomba, Director: Supporting and Interlinked Financial Systems Management, agreed that the systems used were quite old and the progress on the Integrated Financial Management System (IFMS) was slow. He said the data centre partnered with the CEi component with a data link purchased through the Microsoft Azure platform. The platform contains a financial, operational data flow utilised to ingest data from legacy systems. This ensures that data can be transformed to provide information such as staff cost forecasting based on the cost of living. This is achieved through utilising machine learning and AI technology, which relieves manual compiling and reporting and essentially automates reports. He added that the system was currently available and was accompanied by Azure machine learning and the Power BI that comes with the Microsoft package. The system facilitates the production of reports on asset management dashboard capability. It is an automated conflict of interest tool used in cases whereby a director in a company doing business with a government entity is also an employee of government. He said there was also work done in identifying vulnerable municipalities for interventions and that the data centre assisted in automating reports for easy access for stakeholders.  

Mr Hardien said that the Department piloted a platform called Zoho in 2019/20.  He painted a picture for the Committee, explaining that the entity deals with 13 municipalities and approximately 150 auditors during an audit cycle. Across the 13 municipalities, about a thousand queries or comments are being raised that could result in a regression of a municipality audit. He stated that previously, these were sent through emails and the Department only has about 11 staff members, working in the local government, which are assigned to the task and as a result, emails would be lost. The change in the system was that the process had been taken into an electronic platform where municipalities could access a web-based system to load comments and the Department would also have direct access to see what the problem was and be more impactful in terms of the responses. The system also allows for officials to see the time in which comment had been raised, when it required a response by the AG, and who in the Provincial Treasury had to support the municipality across the various disciplines. The further functionality of the systems was, it not only allowed the Department to look at current issues but also allowed the loading of all comments the entity has access to and creating a library. He gave an example and said that if a municipality has an issue around Broad-Based Black Economic Empowerment (BB-BEE) and they type the word in the system, queries with BB-BEE would pop up and this allows them to do self-service and determine the type of response needed by the AG. He emphasised that this was a pilot exercise and the entity was looking at the procurement of putting it out into the market to determine its effectiveness and whether it can be rolled out further. He said that Treasury could be more impactful regarding technical matters that could not be found in the system.

In item 4.2, which the provincial government accounting and compliance programme had over achieved in May 2019, he said that National Treasury had delegated powers of condemnation of irregular expenditure to the local minister of finance. Before the delegated powers, a number of cases were forwarded to national which showed that the national authority could not be responsible for every province and provincial delegation needed to occur. The transition to provincial ministers resulted in an extensive backlog and there had not been a plan to address all the cases. He stated that this was the first time National Treasury had delegated all the powers to the province. The shift required a change in management and additional training with departments and public entities. He added that there were a lot of training initiatives which counted as additional outputs not previously planned for.

On the topic of the bursary programme, he said that the Provincial Treasury runs a number of graduate programmes, one being an external bursary programme targeting matriculants, previously disadvantaged individuals and those who are financially in need. He highlighted that the programme met the critical skills that Provincial Treasury requires and it goes through an open and transparent process in terms of allocation. When an individual is afforded a bursary, they are allowed to work back time for the period of the bursary and if the person then prefers to enter into the CAA, they would then be trained and moved to the level of professionalisation. Another type of bursary offered is within staff members who wish to better their qualifications, however, there is an obligation to work during the time of holding the bursary. He stated that the Department also houses matriculant interns, which addressed two of the indicators in programme 4 and mentioned that the CAA targeted to sign off 100% of the trainees, but this was not possible as all competencies had to be met. He added that one of the staff members contracted COVID-19 and the programme had to be extended; hence, the sign-off happened later in the year.  

Ms Melissa van Niekerk: Director: Corporate Governance, stated that various initiatives aimed at developing the skills pipeline existed. This included taking students from grade 12 level to tertiary and into an internship programme, ideally for them to be absorbed into a municipality or department. She added that this was, however, dependent on the availability of vacancies. The Department also tracks individuals within the programs in terms of whether they have completed the program and if they have been absorbed.

Ms Ismail said that the external policy programmes have existed for more than a decade and as a result, there is a lot of data available. The data is currently maintained in an Excel sheet and the plan is to leverage technology so that the process can be automated to enable an electronic tracking system.

Mr Malcom Booysen, Director: Government Budget Office, confirmed that National Treasury rolled out the municipal socioeconomic profiles to other provinces. This was done with the assistance of GTECH to ensure compatibility in analysing the Integrated Development Plans (IDPs) and budgets of municipalities. He added that sessions had been held that focused on skills transfer and capacity building to create awareness about the use of the systems. A series of workshops held during 2021 focused on theory and the assumptions of the set model, basic data management and analysis, the demonstration of the set models' capability and limitations, and model analysis and interpretation. He added that they were proud of the achievement.  

Mr Savage spoke on page 35, and said that the supply chain management risks that emerged with the successful court case against regulations, where the constitutional court delivered judgement on the unconstitutionality of those regulations, threw the entire supply chain of government into disarray. This then required active and agile risk management from the province and the Provincial Treasury to understand the processes to help keep stability.

Concerning the issue around litigations, he said that it was unclear from the constitutional court’s judgment what the date of invalidity of the regulations would be, and in the supply chain environment, the slightest uncertainty can have magnified effects. He added that National Treasury had to approach the constitutional court to seek clarity on the matter they received. He said that the revised Preferential Procurement Policy Framework Act (PPPFA) regulations were expected to be issued in the current week. He mentioned that this was an advanced stage which would clear up the period of uncertainty and the risk transited through. This would also initiate a new regime in terms of the regulations and there would be a follow-up series on requirements to navigate through the new norm. He explained that this was an external issue as it was completely outside the Department's control and is determined by national legislation through the constitutional court.

He expressed that both the government printing works and the e-tender portal are under national government and not provincial, and they did go down simultaneously at one point. The province, however, has backup platforms that could be used such as the ePS, the procurement systems and the departmental web pages. The availability of such allowed for a flow of information to suppliers.

The Chairperson thanked the Department for the answered questions and proposed that further questions be sent directly to the Department accordingly.

Part D

Mr Mackenzie highlighted pages 130 to 33 and asked what was meant when the duration of contracts stated hours, months and days. He sought clarity as he pointed out that there was no consistency.

On page 134 he asked why external bodies and not the state, were the ones providing support.

 

Mr van der Westhuizen said that the vacancy rate of 0.7% was quite exceptional in any organisation, and asked how the Department calculated the percentage.

Ms Mkamba-Botya indicated page 105, table 3.1.2 and asked what was meant by the description “average personal expenditure” since the interns were only 26 and how much they earned.

On page 108, she inquired why there were no employees whose positions had been upgraded due to an upgrade in posts.

On page 113, she asked why there was no indication of employees with disabilities in senior management.

On pages 114 and 115, she inquired whether the termination of African employees, as indicated in table 3.5.5, related to the same recruited employees indicated in table 3.5.2.

On page 128, table 3.12.4, she asked what the grievances related to and why were three of them not resolved.

Ms Nkondlo asked the Department to indicate the nature of the misconduct referred to on page 110 and how it could have been avoided.

On page 111, she asked why 11 out of 72.7 resignations did not provide reasons for leaving. She said it was concerning that people would exit without giving feedback and at such a high rate. She added that this caused concern because it is important for employers to understand good and bad triggers that result in resignations. On the same page, she asked why younger employees were not being retained and the challenges faced which may be the root cause of such. She inquired whether there were mitigating strategies based on what was picked up.

She asked the Department to indicate how it was trying to improve female representation in line with the 55% women representation of Senior Management Service (SMS) by the Department of Public Service and Administration (DPSA). She inquired on the programmes initiated and how these are monitored towards opening up space for female competent employees to advance.

Mr Savage answered Mr Mackenzie in terms of PERSAL support. He said that the system was written in an archaic programming language and very few people have the skills to write in that particular language. He added that the entity is contracted through business connection support and the personnel dealing with the system were not full-time employees in the public sector.

He clarified that employees were not upgraded because posts were not upgraded.

He explained that currently, there were no SMS members with disabilities. However, the Department reaches its overall target in terms of staff members and tries to offer an environment that would be attractive to people with disabilities.  

He said that the African employees in question reflected one employee who recently joined the entity but had been immediately poached, and another who also joined the entity but decided to leave during the same year.

He indicated that the exit reasons were because of the churn rate and added that all healthy organisations move on for a number of reasons. He said that younger employees in the field that they specialise in are very marketable and there are a number of opportunities available to them which results in a high rate of resignations.

On the SMS, he said that female representation, particularly in management, is an issue the entity faces. He indicated that the Department has Women in Management Leadership chaired by leading women managers whose goal is to try and understand what would make an attractive working environment for female professionals. It also deals with questions which address whether the entity offered the right context at particular phases of female staff members' careers, as they may be expected to play a role in the home front as well as deal with a high-pressure job as well as what the red lines are which should not be crossed so that it is easier for women to succeed. He highlighted that the forum meets quarterly and is currently chaired by Ms Robison, who took over from Ms van Niekerk. He said that the forum showed visible progress in addressing issues such as what a conducive working environment looked like to facilitate success for women in Treasury. These discussions had also been spread broadly to include many topics relevant to female staff members and in terms of their careers. 

Mr Hardien stated that National Treasury and DPSA put together the annual report in terms of what they want to be reflected, and the requirements of utilising consultants is a section requested by the DPSA. He said they also recognised that Part E of the financial statements contained consultants. However, National Treasury was moving towards getting departments and public entities to be consistent in terms of reflecting consultants under Part D. He added that in the following year, departments would be required to include how long they have used consultants and when a particular contract is to end. He said the initial idea of bringing consultants in was to correlate vacancies versus how many people were used outside the organisation, but the thinking has evolved.

Ms Ismail agreed that there was a low vacancy rate which is lower than the CAC average of 1.9. It had been calculated by taking the number of active vacancy posts as a percentage of the active number of posts on the establishment.

Regarding the stipend for interns, she said that the entity was guided by the directive on the internships and developing programmes and by the DPSA. She added that the entity afforded interns 30% of salary level 6 and depending on the qualifications, the stated amount is between R6 000 to R7 000.

She mentioned that there was a total of nine grievances comprised of issues and concerns from staff members regarding promotions and supervisor conduct concerning matters pertaining to performance management and leave. The three that were unresolved were still within the process, as there is a 90-day period within which to respond when a complaint was lodged.

The Chairperson proposed for follow-up questions to be sent to the presiding officer.  

She welcomed present members of the public to forward questions or comments.

 

Western Cape Gambling and Racing Board annual report 2021/22

Minister Wenger mentioned they were delighted to present before the Committee and welcomed questions and comments that would be forwarded. Just as the Department had also explained, the board was still in the grips of the pandemic during the period under review.

Mr Claude Bassuday, Board Chairperson, Western Cape Gambling and Racing Board, mentioned that there were currently five board members, but in terms of the legislated membership, the number should be seven. During the term under review, the board collected gambling taxes in the region of R750 million on behalf of the province. Although the entity has had to adapt to the challenge of COVID-19, it achieved 14 of the 15 annual targets, contributed R17 million in terms of corporate social investments, and achieved an unqualified audit outcome with no findings.

The Chairperson said that the entire report would be tabled for questions.

Mr Mackenzie said he would ask a legacy question because he remembered that a few years ago, an office space issue was raised, and even in the current report, this was still mentioned. He asked whether there were any changes since he has served on the Committee for the past four years and the same problem was still discussed.  

He said that during an oversight visit to Caledon Casino, there was one of the Non-Governmental Organisations (NGOs) which is funded as part of the casino’s corporate responsibility. He said he was interested in understanding the gambling board’s role in overseeing how the NGO spends the money and whether a legislative measure was in place. He said he was curious because, on their visit to the communities on completely different matters, they were asked how monitoring was done regarding how NGOs spend the money. The Committee answered that the money given to these NGOs was not government money, but because of the license conditions, the casino had a commitment to give to certain communities as part of their social responsibility. He added that the community had mentioned that the same people benefited from the NGO money.

Mr van der Westhuizen said that he hoped that the board had an office to go to after the session because, from the report, it was indicated that their contract had expired the day before the seating.

He said that in the annual report, the board states that it had been advised that it is an autonomous body outside of government. Yet, it was funded heavily by the Western Cape Provincial Administration. He mentioned that there was also an indication that there were plans to purchase a building, and asked whether it would not be a loss to the Western Cape Provincial Treasury if the building was later sold. He asked the board to explain their position, particularly regarding its assets, and why they adhered to public finance management legislation if they are outside of government and are autonomous.

In terms of financial sustainability and self-sufficiency, the last amendments adopted in terms of the gambling legislature for the Western Cape were meant to ensure a move towards financial self-sustainability. He asked the board whether they saw any progress, and, if not, when they expected to see progress.

He stated that there were a number of figures mentioned in the report. He asked if there was any indication of the total contribution to the Western Cape economy that the gambling board was bringing.

He said that horse racing has been a recreation over a number of years. He asked what the plan was to try and turn around the horse racing industry because the breeding of horses and other factors, played a huge role in the economy. He added that there were breeders who depended on the horse racing industry.

In terms of illegal gambling, on page 24, he expressed that there were a number of investigations indicating positive and negative ones and requested clarity on the matter. He asked the board to explain the powers it held when it came to addressing a warranted complaint. He asked if they were able to move into the premises and investigate.

Ms Nkondlo said that she wanted to get information on the responsible gambling articulated, what the extent of illegal gambling in the province was and how it was determined, and how much of it could be accredited to the transition into the technological space introduced by the Fourth Industrial Revolution (4IR).

In terms of the work to set a committee around transformation-related matters, she mentioned that she was interested in the context of what the profile of the gambling sector in the province was, both racially and gender, particularly from an ownership and management stance.

In the financial year under review, she asked the board to indicate any license that would have been given across the different areas of gambling where there could have been new entrances.

She said that it was mentioned that a research report was awaited by the Provincial Department and asked the Minster to indicate how far it was from being concluded, and also what the findings in as far as the horse racing industry were, the opportunities available and how government support could assist in providing opportunities, particularly for the youth.

Highlighting page 22, the Chairperson said that she was interested in finding out why licenses had not been rolled out and what the benefits of rolling out would be.

On page 24, regarding the awareness programmes, she said that she wanted to understand the matrix of success and what was being monitored in terms of the effectiveness of the programmes. On the same page under the elimination of illegal gambling, she said that she wanted to understand if the board was working with other security agencies broader than the South African Police Service (SAPS) and if this would be expanded on in the future.

Also, on page 24, under corporate social investment, she asked whether what was indicated was part of the licensing conditions or it was something that was simply being encouraged for license holders to take part in and how it was promoted.

On page 38, concerning new applications processed, she said she had noticed that there was a deviation of -2%. She asked why this was, whether it was related to the pandemic, and if so, whether there are any expected increases in the coming years.

Mr Bassuday responded to the first question on the accommodation and said that the board occupied premises in the city owned by the Department of Public Works, which were not suitable for the board’s use. Currently, the board occupies office in Parow and has a lease held by the Department of Public Works which expires in October 2023.

He explained that being an autonomous body should be understood in the context that the Western Cape gambling board is an organ of the state. He added that as a sphere of government, the entity would acquire buildings using its own initiatives and procedures and would not rely on department properties.

Answering the question on the analysis, he said that the Provincial Treasury allowed the board to retain a surplus of R16 million from the previous financial year and an application had been made to retain the current surplus.  He explained that in terms of the legislation, the gambling board was allowed to purchase property, which would be more economical than holding a lease. To acquire a building was estimated around the region of R25 million to R30 million, whereas to hold a lease for a five-year period would cost around R50 million.

He said the Corporate Social Investment (CSI) was largely imposed through license conditions. The board had committees such as the casino committee and the Limited Payout Machine (LPM) committee where contributions are monitored. In addition, social investment visits to determine the type of work done are also performed.

For financial sustainability, he said there was legislation, particularly the 19th amendment bill, which had been passed and only required the Premier to sign before it came into effect.

In terms of transformation, he said that licenses issued are required to adhere to BEE levels. He added that responsible gambling committees had been put in place in the previous year and a number of initiatives had been started.

Mr Robin Bennett, Head of Department: Compliance, addressed the question regarding the CSI on Caledon. He said that a general response was that when applicants make applications for a relevant casino license, it is done on a competitive bid basis. The requirements are set up in terms of the Request for Proposal (RFP) and the commitments made in terms of the application would become the license conditions. For this reason, the CSI and the shareholding of casinos would differ.

In terms of this, the CSI for Caledon, is an empowerment and community trust and both companies contribute 10% each of the preference shares. When the initial application came in 1998, the lead applicant was Ladbrokes PLC, which subsequently withdrew its application and paid R1 million for compensation. A new company came in and set up a new structure, and it was not part of the normal shares but part of the preference shares, so they could only receive dividends from money flowing from the casino and not the entire complex. What the board does regularly, as a chair indicator, is to conduct oversight in terms of the projects funded. Quarterly, the company also provides reports and the board looks into the indicated beneficiaries and how these are supported. License conditions are also audited to ensure that the amount required to be paid has been paid.

Regarding illegal gambling, he said that the positive indicates that the allegations received resulted in positive information and the board could have the implicated premises closed and the machines removed. The negative information means that allegations were received and upon further investigations, it was determined that they were negative. There are various reasons for this. Firstly, the person giving the information could have been confused on the difference between a gaming or an arcade machine and a gambling machine. Secondly, the machines may have been removed before the investigations were conducted. The reasons for the latter could be that the relevant law enforcement officials assigned to the area would leak information which then would alert the culprits. The board then tried to bypass this and only deals with the Firearms Liquor and Second-Hand Goods Control (FLASH) unit which is in control of the entire province and the unit assists in providing members with information.

The powers of the officers of the board relate to investigating allegations of illegal gambling and also to providing expert witness if the matter goes to court. The board does not hold powers of police officers and, therefore, cannot make arrests and confiscate any goods. However, the office enjoys a healthy relationship with members of the SAPS. He stated that the entity is part of a committee formed by national SAPS called the Strategic Priority Committee, which focuses on illegal gambling and consists of the FLASH unit together with the liquor authority, Metro Police Vice Squad and law enforcement. Monthly meetings are held and joint inspections are conducted at both licensed and unlicensed premises. The board also receives information through a network of confidential informers who provide relevant information.

He mentioned that the prevalence of illegal gambling in the province compared to others indicates that the Western Cape is in a far better position. Currently, there are about two online gambling cases where gambling took place in a café and the case has become difficult as it involves computers and not an illegal device. The board has successfully solved two such cases where computers have been confiscated. The difficulty with taking such matters to court is that the organisation that provides needed experts on computers and information is Cyber Crime, which is currently short-staffed and is primarily focused on other matters and not gambling. He added that Gauteng is sitting with over 300 online illegal gambling cases which is a big challenge.

He said there was no technology to be used in detecting illegal gambling, apart from tracking online gambling where activity can be picked up. He clarified that the organisation could only act on online gambling when an office or a service is located in the Western Cape. The information would then be passed on to the National Gambling Board which would proceed with relevant action.

The Chairperson proposed that further detailed questions be tabled and sent to the presiding officer.

Mr van der Westhuizen said that he was not sure if he missed some of the responses but had not received responses to the following; the total contribution to the Western Cape’s economy and the initiatives taken regarding the horse racing industry.

Minister Wenger answered the questions on the new gambling policy and said there had been a shift on how people gambled and several amendments to the gambling act. She added that the team had been doing a lot of homework that would inform the new gambling policy which is underway.

Mr Savage addressed the question on the rollout of gambling and the benefits of a rollout into other gambling license types. He said that there were policy and fiscal issues embedded because certain types of gambling may be more tax productive than others, and one would want to make sure that one subset of gambling revenue was not being cannibalised for another subset that may reduce the overall tax take for the province. He indicated that there were some policy issues in the space which require quite a detailed discussion both with the regulator, which is the gambling and racing board, and from a policy perspective. He added that this was what the entity tries to achieve in its quarterly gambling committee meetings, to understand changing dynamics and what these mean for the policy and fiscal interest of the province and the role of the board.

He stated that they understood the important role of the horse racing industry in the overall economy as it is a relatively job-rich sub-economy or sector. He added that many of the services that government provides were not necessarily through the gambling industry but the industry itself played an important part. He said that the regulations of horse racing were an important part of the industry as services such as veterinary services, provided by the Department of Agriculture, stimulate international connections in horse racing. He said that the policing of the African horse sickness which the Department of Agriculture took responsibility of, was critical for stabilising the context and environment for horse racing in the province.

Mr Booysen indicated that the background research document had been concluded and laid a foundation for the draft of the policy document. He said the process was in its final consultation stage and there still needed to be deliberations with the board before the Green and White Paper could be developed.

Ms Yvonne Skepu, Manager: Legal Services, stated that for the year under review, the gambling board collected taxes to the amount of R758 million which became part of the funds available for the provincial revenue fund to be distributed to different departments. He added that the gambling industry contributes to the creation of employment, and economic empowerment and, in addition, attracts tourism and results in increased revenue for the province.

She addressed the question of what would happen when the board wants to sell the building. She explained that the board is a Schedule 3C public entity in terms of the PFMA and it is defined in terms of the PFMA and Section 54 which states that if the board wants to acquire or dispose of a significant asset, it needs to inform the relevant Treasury and obtain approval from the minister.

Mr Booysen added in terms of the contributions of the industry. He said that recent research reports commissioned, indicated that the industry contributed about R5.2 billion direct GDP and sustained about 13 000 direct and 11 000 supply chain and downstream jobs. The total profit was R950 million, which contributed significantly to the provincial revenue fund of about R660 million in the last election.

Mr Bennett said that in 2018 the Provincial Treasury commissioned research into the feasibility of having junkage in the Western Cape which would only be applicable to foreigners. The research was done and the report was presented to the board. The entity was then advised that the report needed to be tabled by the provincial legislature.

Ms Skepu said that the HOD had addressed the policy issues and the board was waiting to finalise the policy currently in progress. Regarding Mr Booysen's update, she said that there had been finalised and engagements with the board would take effect.

In terms of the benefits that would flow from the granting of categories of license listed in the annual report, she indicated that these would include economic development, job creation, additional taxes would be accrued to the provincial fiscus and there would also be additional community benefits in the form of providing entertainment.

Ms Megan Basson, Head of Department: Licensing, mentioned that the question on the -2% deviation was, in part, as a result of COVID-19 and on whether this had picked up, she answered yes.

Mr Terence Arendse, Board Member, explained that the board did not regulate horse racing as this was done by the National Horse Racing Authority and the entity only regulated gambling orbiting on the horses. He said there were reports on what was currently happening regarding the sustainability of horse racing in the Western Cape. An investor loaned Kenilworth Racing Pty Ltd (KR) an amount of R150 million with which they could have their debt cleared out. An interested party also wanted shares in the company and indicated that they would be submitting R200 million into KR. He added that the key investor intended to completely turn horse racing in the Western Cape, bringing hope that the industry may once again be a viable business.

Ms Nkondlo said that she did not get a response to her question on the current profile of the gambling sector and whether there have been any new entrances licensed in the 2021/22 financial year.

She asked for an indication of when the issue of the policy update would be concluded, given that, in terms of the invalidity provision, the court granted a timeframe of 12 months.

Ms Skepu said that the Department would speak to the timeframes regarding the policy and the interplay in terms of the judgment.

On the racial breakdown of the participants in the gambling industry, she stated that the board would have to compile a report detailing the required information.

Answering the question on the board’s BB-BEE conditions imposed on the industry, she said that it addresses all the pillars of the BEE codes. The board has set up sectoral committees that engage license holders quarterly regarding their challenges and achievements. She added that there was vigorous oversight, dialogue and engagement with the industry to see real progress from a transformation perspective.

An official stated that the policy document would be completed in November. As far as the legislation was concerned, it would come to the provincial government within the fourth quarter of next year.

Ms Basson said that in reference to new entrances to the market in terms of licensing, the categories of the casino route operator or totalisator require RFPs to be issued. So there have been no new entries. However, applications were still being received for LPM sites and bookmaker operator licenses, and in the period under review, licenses were received and approved.

The Chairperson thanked the Department for attending and inquired if any members of the public wished to comment or ask questions.

Committee Resolutions

Western Cape Provincial Treasury

 

Mr Mackenzie asked for a copy of the 2016 report from the Provincial Treasury on the entities, and the feasibility study or desktop report which indicates recommendations.

Ms Nkondlo asked the Treasury to share the Section 139 process.

Mr van der Westhuizen asked the Provincial Treasury to give a monthly breakdown of the expenses incurred through the procurement office for goods and services. He added that the purpose was to determine the extent to which dumping occurred. He indicated that these should be for the previous financial year.

He asked for an indication of vacancies in Provincial Treasury, the period these have not been filled and when the new income assumed services.

The Chairperson commended the Department on continuously being among the best performing in the country and yet again receiving an unqualified finding. She requested information on the successes and challenges of the pilot programme using machine learning and the details of rollouts going forward.

Mr van der Westhuizen stated that a year ago, when the Standing Committee on Public Accounts (SCOPA) met, the Department had been asked about the progress on the IFMS. He asked for a detailed progress report on the matter, indicating the amount of work that still needs to be done before it can be implemented in the public service. He added that according to his experience, piloting new software was a very painful exercise and quite often, one only discovers its limitations once it is being used. 

Western Cape Gambling and Racing Board

Mr van der Westhuizen asked what the board recommends in terms of filling vacancies, the term of office of board members and proposals they might have to streamline the recruitment and appointment of new board members. He said that he wanted members of the board to address his query because the Committee normally interacts with officials from the Department.

He highlighted that the annual report referenced a number of court cases in which the gambling board was involved, and these often were appeals. He asked about the latest updates regarding this and whether dates were set for the future.  

Mr Mackenzie asked for the board to provide a consolidated report on all the casinos and the corporate social responsibility spending in the Western Cape for the last quarter of the financial year.

He asked for a short report on the licensing conditions.

Ms Nkondlo requested the board to share the list of new licensees in the financial year under review.

She asked for an update concerning the timeline of the revised gambling policy which is set to be completed by November 2022.

She asked for an update on the recommendations by the Department around the totalizator and horse racing, the broadening of the industry and the betting sport and the consultations they are dealing with. She added that it was important for the Committee to get updates on the self-sustainability mandate that the gambling board had been asked to work on.

She said that she wanted to understand what the CSI framework entailed and asked for a sample if possible.

The Chairperson thanked the Members for their support and for applying their minds to the discussions and time they allocated toward what the Committee was trying to achieve.   

[The meeting was adjourned]