DPWI/PMTE Q1 2022/23 Performance with Deputy Minister
Public Works and Infrastructure
09 November 2022
Chairperson: Ms N Ntobongwana (ANC)
In a virtual meeting, the Committee was briefed by the Department of Public Works and Infrastructure on the quarter one performance of the Department.
Members were pleased to hear that the Department had reached a target not to exceed an 11% vacancy level, and a 74% achievement in financial performance. The filling of vacancies with designated groups at senior management level was achieved concerning women but not people with disabilities. The draft Amendment of the Construction Industry Development Board Act (Act 28 of 2000) was submitted to Cabinet. Members heard that there was major underspending under capital assets within the Property Management Trading Entity (PMTE) due to the delays in several projects. The Department was working with the Department of Human Settlements in the release of land for their use. Total expenditure for the month ended September 2022 was R3.931 billion, equivalent to 48% of the total adjusted budget allocation of R8.136 billion. Compensation of employees at the end of September 2022 amounted to R244 million and was equivalent to 42% of the adjusted budget allocation of R581 million.
Members asked for clarity on the information provided around the handing over of buildings versus lease agreements as information previously received was contradicting the information presented; what was happening to the maintenance budget as there was no visible maintenance in the majority of government buildings; why there was underspending whilst job opportunities could be provided with such high vacancy levels; if contractors were blacklisted if there are delays or for when they provided bad service and why was there a discrepancy between the presentation by the Department (11%) and the calculation by the DA researchers (14%) on the vacancy level.
It was explained to the Committee that the Department is in the process of visiting regional offices to assess delayed projects and put in place consequence management. The cancellation of projects created problems when time lapses between the termination and follow-up contractors were appointed. Members were concerned about the inability of the Department to reach targets and asked the Department to provide an explanation and breakdown of the impact of unfilled positions on service delivery. Members felt that the matter around the Parliamentary Village Board needed resolution.
Members requested specific prioritisation of the payments of the EPWP projects; attention is given to the Parliamentary Village and their compliance and the filling of vacancies to ensure service delivery by the Department.
Opening remarks by the Chairperson
The Chairperson, Ms N Ntobongwana, opened the meeting and welcomed all present. The Chairperson experienced connectivity problems and lost the signal. Ms L Mjobo (ANC) then took over as Chairperson.
Briefing on the Department of Public Works and Infrastructure quarter one performance
The Deputy Minister for Public Works and Infrastructure, Ms Noxolo Kiviet, informed the Committee that the Department would present a report for both quarters one and two. She indicated that the report would reflect quite a high vacancy rate, but this was due to the fact that as they advertised positions, they were filled by internal candidates, creating vacancies. The Deputy Minister requested that the Acting DG and DDGs lead the presentation, where after she and the team would answer questions.
Mr T Mashele (ANC) pointed out that the Members only received information on the quarter one report. He said that although it might be logical to compare quarters one and two, it will be problematic for Members to engage with the quarter two report as they did not prepare for it.
It was agreed that the presentation should focus on quarter one and that discussions would only be around the quarter one report.
Mr Alec Moemi, Acting Director-General, informed the Committee that Mr Lwazi Mahlangu-Mthembu, DDG and Mr M Sithole, CFO, will present the two parts of the report.
Mr Mahlangu-Mthembu informed the Committee that the Department had a target not to exceed an 11% vacancy level and that target was reached. As explained by the Deputy Minister, this is due to the rolling effect when internal candidates fill positions. The filling of vacancies with designated groups at senior management level was achieved concerning women but not people with disabilities. This was due to the unavailability of suitable applicants with disabilities.
Although there were no first quarter targets for Ethics and Fraud Perception Rating Survey, questions had been developed and ready to be administered to participants. The Compliance Rate target was achieved although there had been some delays due to the formation of panels or postponements of scheduled meetings.
There was a 74% achievement in financial performance. The reasons for the slight under-performance included delays in the filling of prioritised vacant funded positions. The Non-transfer of R262 million for the Non-state Sector Programme by the EPWP due to tender processes for the appointment of the implementing agents and withholding of the EPWP Social Sector Incentive Grant for Provinces due to non-performance. Corrective measures have been put in place in this regard.
Inter-Governmental Coordination included the cooperation and coordination between the national and provincial departments. The sector plans of National and provincial departments should reflect a common understanding and goal focussing mainly on infrastructure. This process included consultation, MinMEC inputs, and technical MinMEC inputs supported by the work streams. The final sector plans were developed during Quarter 2.
The annual target for the number of beneficiaries participating in the Department of Public Works and Infrastructure skills pipeline was 1000. This target included internships and bursaries. The Expanded Public Works Programme was currently on track to achieve its five year target. Some measures were put in place to achieve EPWP objectives including the commencement and reporting of the Non-State Sector Non-Profit Organisation Programme. The analysis of the most efficient programmes and advocating the up-scaling of these programmes were continued.
The Property and Construction Industry Policy and Research target included drafting the Public Works Bill that was in progress. A workshop was held on 25 August 2022 to receive input from key stakeholders as the legislative drafters required clarity on some aspects. The draft Amendment of the Construction Industry Development Board Act (Act 28 of 2000) was submitted to Cabinet shortly after cluster approval and discussions with the National Treasury in September 2022. The Infrastructure Development Act Regulations were gazetted for noting.
Within the Property Management Trading Entity (PMTE), there was major underspending under capital assets due to the delays in several projects. An under spending of R1, 9 billion was being projected. The PMTE was looking at reprioritising some of these unspent funds under refurbishment to areas of spending pressures such as replacement of redundant lifts.
Targets were not reached for construction project management both in the areas of design and project completion. This was due to projects being cancelled and project specification redrafted and as a result, the Sketch Plan meeting had to be rescheduled. Some delays were due to the effects of Circular No 135 of 2022 which affected procurement processes.
Targets were not achieved around infrastructure projects completed within the approved budget. This was due to the cancellation of projects because of poor performance by the contractors; delays in the procurement process (Evaluation Stage) and disruptions by the so-called local business forums. Challenges regarding asbestos roofs which required additional funding contributed to delaying the project. There have also been delays in awarding projects, evaluating bids, and finalising sketch plan approvals.
Targets were on track to reduce private leases and the quarterly target on savings was reached. There was no target for the utilisation of vacant state-owned properties let out for GBV purposes. For the second quarter, the department was awaiting the sign-off from the Department of Infrastructure Development.
Private leases must ensure client satisfaction and include a maintenance plan. The Department was working with the Department of Human Settlements in the release of land for their use.
Mr Aaron Mazibuko, Chief Director: Finance, DPWI, continued the presentation with the Committee on behalf of the CFO and indicated that there was a reduction in budget allocation of around R410 million to the Department.
Total expenditure for the month ended September 2022 was R3.931 billion which was equivalent to 48% of the total adjusted budget allocation of R8.136 billion. The variance between expenditure and drawings amounted to R304 million and spending variance related to the below economic classification:
Compensation of employees at the end of September 2022 amounted to R244 million and was equivalent to 42% of the adjusted budget allocation of R581 million. The variance of R42 million against approved drawings of R286 million was attributed to the delay in filling vacant priority positions which were planned to be filled effective from April 2022 as well as positions that were vacated during the financial year.
Goods and services expenditure as at the end of September 2022 amounted to R153 million and was equivalent to 32% of the adjusted budget allocation of R480 million. The variance of R53 million against approved drawings of R206 million mainly related to delays in the invoicing of property payments and travel and subsistence due to the implementation of the cost containment measures on travelling and related activities.
Overall, the budget allocation for the Department was reduced by R410 million (net balance) during the Adjustment Estimates of the National Expenditure process and the adjustment related to:
- R389 million was shifted to the Department of Transport to implement the Welisizwe Rural Bridge as part of the provincial road maintenance programme.
- R22 million surrendered to Treasury was declared as unspent funds. The amount declared as unspent related to R15.7 million from the Non-state Sector Programme and R5.8 million from the Parliamentary Villages Management Programme.
- The Independent Development Trust was allocated R70.3 million, with the adjustment of funds from transfers and goods and services.
- ISA – IDC was allocated R100 million to implement PICC programmes, with the adjustment of funds from transfers, and payment for capital assets and goods and services.
- The Property Management Trading Entity (PMTE) budget has been reduced by R541 million to provide funding for the Welisizwe Rural bridge R389 million, R83.22 million to the PICC for the project preparations and the balance of R69 million for the IDT to cover the projected shortfall in revenue.
There was a delay in the transfer of funds to the non-state sector programme implemented under the EPWP. There were also delays in identifying the NPO that would implement the non-state sector programmes that resulted in the delay in the transfer of funds.
The Project Management Trading Entity has invoiced for R 8.8 billion of its budgeted R 17.8 billion revenue (excluding municipal services) as at the end of September 2022. This was equivalent to 49% of the total budgeted revenue. Actual receipts concerning 2022/23 invoices amounted to R 6.7 billion (76% recovery rate). In addition to the budgeted revenue streams, the recovery rate on municipal services was 65%.
The total expenditure for the period was R 7.6 billion, representing 42% of the total budget.
This was below the guideline expenditure of 50% and in line with the prior year spending. The overall spent in the last financial year at the same time was also 42%, but the current and transfer spending was lower this year. Client Capital is marginally higher. The major reason for underspending is infrastructure (capital and current) as only 28% of this budget was spent. 46% of the current and transfer budget was spent. The slow spending on the infrastructure budget remains a concern and all efforts are being put in place to continuously improve the spending.
Mr M Sithole, CFO, briefed the Committee on the budget and cash flow of the Department
Cash flow projections are based on projected monthly/quarterly revenue and expenditure. The PMTE tended to spend on a straight line with minor changes during January and April for Construction, but most of the cost drivers (Leases, compensation, property rates, and etcetera) are constantly paid per month
An analysis of the cash flow trend for budgeted items shows a negative cash flow of R 72 million and based on current trends, the expenditure at the end of the year will be marginally more than the receipts. The average received is 32% over all items. The transfer from the main vote increases this to 35%
This has a short term positive impact on the bank overdraft which may improve at the end of the financial year if clients pay all invoices
The budget for cleaning and gardening is at 43% expenditure against a budget allocation of R 389 million. The expenditure is below the guideline, but and amount of R 28m was added to this budget and it is envisaged that the expenditure will improve.
Private lease expenditure is at 52%. The expenditure is just above the guideline and all indications are that the budget will be spent. The allocation is based on inputs from the regions detailing the individual contracts. The expenditure trend will decrease slightly as Johannesburg is recovering overpayments to landlords.
The maintenance budget is at 50% expenditure against a budget of R 2.2 billion. Reallocations were done during September and an amount of R814 million was added based on inputs from the Regions. The increase was mainly due to repair projects late to implementation and accruals from previous years.
The repair budgets spend stands at 25%. Delays are being experienced on several projects and an underspending of R 471 million is being projected at this stage. Weekly meetings were being held with all stakeholders to unblock any bottle-necks. The budget was reduced.
Municipal Services is at a 53% spend of the R 480 million budget. This is just above the guideline, but the expenditure is based on consumption and varies from month to month. Currently, full expenditure of the allocation is projected at the end of the financial year. Reallocations were done during September 2022 which increased the allocation.
The budget spent on compensation of employees stands at 44%. Although there are still 481 vacancies, the expenditure is in line with the time-lapsed and should be mostly spent by the end of the financial year based on the recruitment interventions put in place. A straight-line projection indicates a possible underspending of R 133 million based on current levels.
Thirty percent of the Goods and Services allocated budget was spent. Funding was allocated to specific projects which were not procured in time due to the moratorium on tenders that was called by National Treasury in light of the Constitutional Court decision on PPR 2017. An amount of R78 million has been committed for transfer to the IDT through the Department of Public Works and Infrastructure. A further amount might be moved to the Infrastructure Security Agency if concurrence is received from National Treasury.
Property rates spending stands at 42% of the allocated R1.8 billion. This is below the guideline, but not a concern at this stage. The budget includes anticipated increases from municipalities later in the year (when their financial year starts and new rates are announced). Regions have indicated that they have not yet received all invoices and, in some cases, are disputing the valuations of the properties.
The refurbishment budgets spend stands at 33%. Delays are being experienced on several projects and an underspending of R315 million is being projected at this stage. Line function is looking at possible ways to spend the unallocated funding on value-added projects such as replacing redundant lifts. The original allocation has been reduced by R667 million and this funding was moved to the Maintenance budget.
Eighteen percent of the machinery and equipment budget was spent which is below the guideline. Laptops and other computer equipment are being delivered and expenditure should increase although it is currently significantly lower than the same time last year.
Client Capital budget spend stands at 30%. Delays are being experienced on several projects and an underspending of R827 million is being projected at this stage. Most Clients have signed off on the realigned allocations.
(Details available in the slide presentation)
Ms M Siwisa (EFF) asked for some clarity on the information provided around the handing over of buildings versus lease agreements as information previously received was contradicting the information presented. She asked what was happening to the maintenance budget as there was no visible maintenance in the majority of the government buildings. Are contractors blacklisted if there are delays or when they provide bad service? She asked why there was underspending whilst job opportunities could be provided with such high vacancy levels. She asked the Department to provide a breakdown concerning how many of their projects were in rural areas.
Ms S Graham (DA) asked why there was a discrepancy between the presentation by the Department (11%) and the calculation by the DA researchers (14%) on the vacancy level. She asked what quality control measures were in place or if it was just quantity that was recorded; this was based on the concern raised by the Auditor-General. She also wanted to know if contractors were blacklisted for bad performance, what the role of consultants were, and if there were duplicate payments made for work done. She wanted to verify if Circular 135 was the long-awaited circular that would assist with leases.
She said there was a delay in the funds to the Parliamentary Villages Board. Is there assistance provided to ensure that their financial statements are submitted and how has the delay in transferring funds affected their mandate?
Ms Graham said that the Property and Construction Industry Policy and Research branch was experiencing capacity constraints, which resulted in them subcontracting legal firms to fulfil their mandate. The Department was requested to provide the financial breakdown and allocation to the branch.
Ms M Hicklin (DA) asked why so much of the underspending was of the non-state sector of the EPWP. She proposed that this should be prioritised as transfers to the NGO sector as this affects the neediest families.
She said millions of Rands had been wasted on the immovable Assets register and the Properties register. A huge amount of information was put into the Archibus system and now the Department is moving to a new system. Has this been an effective use of the money or has it been fruitless and wasteful expenditure’?
Ms S van Schalkwyk (ANC) asked why there was a recurrence of underspending with filling vacancies. She wanted to know which provinces were affected by the EPWP grants that were withheld and what criteria were not met. She asked if any action was taken around the lack of financial accountability of the Parliamentary Village Board and if the transfer was made at the end of the day.
Mr W Thring (ACDP) raised his concern about the inability of the Department to reach targets. Some of the reasons previously provided included the ‘Construction Mafia’ and the implementing agents. What measures are in place to rectify this? He asked when the lease for the vacant state-owned land earmarked for GBV use was sent for signature and how long the Department has been waiting. Numerous complaints were received around maintenance, this needed to be prioritised otherwise it would catch-up with the Department. He asked that the matter around the Parliamentary Village Board needs to be resolved; failing to do so would result in the current Board seeing the Department as a cash cow.
The Chairperson requested the Department provide an explanation and breakdown around the impact of unfilled positions on service delivery.
Mr Moemi informed the Committee that the presentation was an overall representation of the state of affairs of the Department, and he is satisfied that the Department was doing better than in the past. Construction programmes are revised and overseen to ensure compliance. Different stakeholders are assisting in making progress, including SAPS which is involved in safeguarding construction sites.
Mr Sithole informed the Committee that they had not abandoned Archibus and the existing information would be used and transferred to the new system.
Mr Mazibuko undertook to provide the breakdown of transfers to the Committee. He indicated that the budget for the policy branch is R23 million, of which R15 million is allocated for employees and R8 million for goods and services. The additional funds that were allocated to the Information Security Architects (ISA) were for project preparation.
Mr Batho Mokhothu, DDG: Construction Project Management, informed the Committee that project delays in planning and design are due to different factors. There are currently around 600 projects. Delays included budgets and prioritisation by client departments. It sometimes took between eight and 12 months to appoint contractors; this meant that the start of the project was already behind schedule.
The Department is in the process of visiting regional offices to assess delayed projects and put in place consequence management. The cancellation of projects ran into problems when time lapses between the termination and follow-up contractors were appointed. They were in the process of improving the internal capacity in the project management branch.
Ms Siwisa raised a concern that all other entities are named in the responses by the Department, but the Independent Development Trust, the entity the Committee has oversight powers over, was never mentioned. With so many buildings owned by government, why is there a need to lease buildings on behalf of other departments which will incur costs for the Department?
Ms van Schalkwyk raised a concern that it was mentioned that agreements with the private sector are collapsing. If more private sector agreements are collapsing, how will the private sector become more involved?
Mr Moemi informed the Committee that on the instruction of the Minister, work with implementing agents had to be reviewed and a moratorium was placed on all allocations to implementing agents. A number of project reviews have been completed on projects in the pipeline. National Treasury has approved the involvement of the IDT in project management and project involvement/allocation will be at a ratio of 1:2.
Mr Moemi confirmed that accurate information is provided to the Committee and that information is verified before being presented to the Committee. Concerning Telkom Towers, he reported that there is progress on the project. The SAPS indicated that they would like to do some of the upgrades themselves and on other matters, costing was done and a contractor will be provided soon to finalise the project
Ms Ms Nyeleti Makhubele, DDG: Real Estate Management Services, clarified that there were some changes around the agreements with user departments where the lease agreement changed into a donation to the Department that was also the reason for the delay in the Department of Infrastructure Development and finalisation of agreements.
Due to connectivity problems during the meeting, some of the responses were not audible.
The Chairperson requested the Department to provide written responses around the standardisation of social facilitation to prevent social facilitators being taken advantage of by criminal elements. Security costs incurred in various projects, the number of project managers in the inception projects, the cost for project preparation with the ISA and the IDT and the cost for over and underspending of project with specifics on the Sarah Baartman site. Details on the Archibus project were also requested.
Adoption of minutes was deferred to the next meeting.
The meeting adjourned.
Mjobo, Ms LN
Ntobongwana, Ms N
Van Schalkwyk, Ms SR
Graham, Ms SJ
Hicklin, Ms MB
Kiviet, Ms N
Mashele, Mr TV
Mathebula, Mr EF
Siwisa, Ms AM
Thring, Mr WM
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