Adjustments Appropriation Bill: DBE & 4 PEDs Input; with Deputy Minister

Meeting report

The Chairperson welcomed the Committee, the four provincial departments, and the Deputy Minister of Basic Education. He said that the Committee was meeting with the Department of Basic Education (DBE) and the province to analyse the impact of the 2023 Adjustments Appropriation Bill. He said that thereafter there would be an effort to finalise the Bill.

The Chairperson said that the Committee had previously highlighted to the departments what they would like from them in their letter of invitation, and they hoped that these questions would be addressed in their presentations.

DBE on impact of Adjustments Appropriation Bill [B34-2023]

Deputy Minister Dr Reginah Mhaule thanked the Committee for inviting the Department to the meeting. She said that migration was affecting the availability of adequate schools and infrastructure in the country. She introduced her team, and said the Director General would start the presentation.

Mr Hubert Mweli, Director General (DG), DBE, opened the presentation and thanked the Committee for allowing the Department to present to them.

Mr Patrick Khunou, Chief Financial Officer (CFO), DBE, said that the Department aimed to ensure that all schools meet minimum standards for infrastructure and commit to progressively upgrading each school's infrastructure to meet optimum standards. The Department was committed to eradicating 496 inappropriate structures and providing 1 257 schools with basic water.

Ms Tsholofelo Diale, Acting Deputy Director General (DDG): Infrastructure, DBE, presented the Department's rollover plan. The School Infrastructure Backlog Grant (SIBG) adjusted budget was R1.917 billion. The cash outflow, including tranches to implementing agents (IAs), was at R1.86 billion, so the available budget for the year was R53.41 million. The DBE was therefore monitoring expenditure patterns carefully to minimise the risk of under-expending due to unspent funds from tranches advanced to IAs by the end of the financial year.

She said the Accelerated Schools Infrastructure Delivery Initiative (ASIDI) project pipeline included ten construction projects in the Eastern Cape (EC), and tenders were out for seven overcrowded schools. The Sanitation Appropriate for Education (SAFE) pipeline included the following projects:

• 19 Development Bank of Southern Africa (DBSA) projects;
• 65 National Education Collaboration Trust (NECT) projects;
• 227 The Mvula Trust (TMT) projects;
• Two Community Development Centre (CDC) projects;
• 60 donor projects; and
• 39 Education Infrastructure Grant (EIG) projects.

The purpose of the Education Infrastructure Grant was to provide water, sanitation and electricity to schools, and to construct, maintain, upgrade and rehabilitate new and existing infrastructure in education. It aimed to address achievement of the targets set out in the minimum norms and standards for school infrastructure and address damage to school infrastructure. The grant also provided funding for additional classrooms to address overcrowding.

The reduction in the appropriation would further exacerbate the sector's ability to meet its own annual infrastructure goals to provide new schools and maintain, upgrade and rehabilitate dilapidated schools. A condition had been introduced for provinces to allocate no less than 60% of the EIG to maintenance. Any reduction would undermine this effort to address backlogs in the maintenance of school infrastructure. Over and above that, they needed to factor in committed projects, where contractors had been appointed and were on site. A budget reduction might result in the inability to honour those contracts, which might lead to interest charges being levied on the sector by service providers.

Any reduction would finally lead to a significant number of projects in the planning, design and procurement stages being delayed and or stopped. Due to disasters that usually occurred during December, provinces reprioritised their budgets to provide mobile classrooms, address vandalised schools, provide sanitation (chemical toilets), and address storm damage. This would not be possible.

There would be an accumulation of payables by the end of the financial year with a negative effect on cash flow at the beginning of the financial year. The budget cut would also have an effect on employment, with a reduced contribution to job creation.

From a monitoring point of view, the implementing agents would be held responsible for a delay on any project related to design, tender and construction. Any cost of corrective action would be for the account of the IA, and may be set off against any payment due to the IA.

Recommendation

The DBE recommends that the Standing Committee on Appropriations should note the Department's progress in delivering school infrastructure, and the challenges experienced, discuss the presentation, and provide guidance.

See attached for full presentation

Free State DBE on impact of Adjustments Appropriation Bill

Mr Makalo Mohale, Free State Member of the Executive Council (MEC): Education, began the presentation, and said that the Department would complete their presentation within 15 minutes.

Mr Molehe Ledibane, Acting CFO, said that the Department had been overspending on the compensation of employees (CoE) over the years due to insufficient budget allocation, and the unauthorised expenditure was approved without funding. The Department had to reduce its CoE budget to enable itself to fund the operational budget and the national and provincial priorities on an annual basis.

Mr Thato Nthunya, Chief Director: Infrastructure, presented the spending trends for the Department, noting that the spending for the 2023/24 financial year was sitting at 60%.

He said only two schools in the Free State still utilised pit latrines. Both would have proper facilities by the end of the current financial year. All ASIDI projects had been completed.

Reporting on the utilisation of the EIG to improve school infrastructure, he said the Department was currently implementing projects in-house with professional service providers, as well as through two implementing agents, the Department of Public Works and Infrastructure (DPWI) and the DBSA, and was in the process of adding the Independent Development Trust (IDT) to this list.

The EIG was also utilised to:

• Build various additional facilities such as classrooms, Grade R classrooms, new ablutions, halls, nutrition centres, science laboratories and media centres.
• Upgrade existing schools, by replacing inappropriate facilities with permanent structures.
• Renovations and refurbishments (scheduled maintenance).
• Repairs and maintenance to facilities (unscheduled maintenance).

The effect of the baseline reduction of the EIG in the 2023/24 financial year had been limited due to the approval of a rollover from the 2022/23 financial year. Management of the procurement and appointment processes would continue with the implementation of planned projects, but with expenditure spread over more than one financial year.

See attached for full presentation

KwaZulu-Natal DBE on impact of Adjustments Appropriation Bill

Ms Mbali Frazer, MEC for Education, KwaZulu-Natal (KZN), said that the ablution projects had been halted in small schools, as these were still being developed.

Adv Bheki Masuku, Deputy Director-General (DDG): Corporate Services, said the Department had been spending its entire budget during the past five financial years. The Auditor-General's (AG's) final management report for 2022/23 indicated that there were no significant shortcomings in the management of the grant. There were no spending inefficiencies that were identified and indicated in the AG's audit outcomes.

The Department provided electricity to all schools in KZN. Where there was no provision of electricity from the national grid, the Department provided alternative sources of electricity that included solar panels and generators. It was currently undertaking electrical upgrades and maintenance works for various schools, where the electrical connections would have either deteriorated and therefore required maintenance, or would have been subjected to vandalism and the theft of cables, conducting and accessories.

The main sources of water supply to schools were municipal reticulation, tankering by district municipalities, and boreholes. All schools had been provided with water tanks which acted as water reservoirs. The Department was implementing a borehole programme to reduce the cost and number of schools reliant on tankering by district municipalities as the only source of water supply.

The Department had initially identified 1 377 schools with pit latrines. These were currently being eradicated at 60 schools. Construction was at various stages.

Adv Masuku described the impact of the reduction of the EIG and the mitigation initiatives, and said the budget cut being effected in the 2023/24 financial year was R296 371 000, which was a 10.1% reduction. The Department had affected this cut in the refurbishment, renovations and rehabilitation (R&R) programme. The main contributor to this programme was rehabilitating storm-damaged schools, flood-damaged schools, schools with asbestos, and schools with civil and structural defects. These projects would therefore not reach the construction stage, nor be completed in the 2023/24 financial year. There were 373 projects in Stages 3 and 4 under the R&R programme. Professional service providers were already working on tender documentation and preparing to go out on tender on these Schools. The impact of these budget cuts meant that these 373 projects, which could have been implemented and completed in the current financial year, would not proceed to the construction stage.

Adv Masuku said the budget cuts would expose the Department to the following risks:

• Service delivery protests by local communities.
• Compromised teaching and the learning environment at schools.
• The Department would not meet its job creation and small, medium and micro enterprise (SMME) development targets.
• Postponement of delivery timelines set for programmes.
• The Department was likely to have a higher accruals amount, and this would have a ripple effect of negatively affecting the budget for the 2025/26 financial year.

See attached for full presentation

Limpopo DBE on impact of Adjustments Appropriation Bill

Ms NyaMuofhe Lerule-Ramakhanya, MEC for Education, Limpopo, acknowledged the issues that departments had when it came to promises they had made towards eradicating pit latrines and developing infrastructure. Targets needed to shift and align with technological development.

Mr Isaac Malatji, Head of Infrastructure, said that the reasons for under-expenditure included non-performance by implementing agents and contractors, the effects of the replacement contractor appointment process, disruption of projects by business forums, the effects of the Covid-19 pandemic, and over-commitment by the mobile classroom providers.

There have been interventions to mitigate slow expenditure. In September 2021, the Department procured the Infrastructure Technical Resource Unit, which provided the much-needed additional technical capacity for infrastructure delivery. It had managed to procure a panel of contractors across several grades, and this had assisted particularly in improving procurement turnaround times.

There was monthly monitoring of financial performance by all IAs, and there was provision of feedback and emphasis on areas for improvement. There was strict application of the form of a contract signed with contractors, and application of the early detection and action technique. The Head of Department's (HOD’s) office holds quarterly progress review meetings with the implementing agents, and consequence management was applied for persistent transgression.

Regarding the provision of electricity to schools, the Department had identified three schools without electricity. One school, Asiphumelele Special School, had a major infrastructure project that included electricity, but the other two schools had no access to the national grid. The schools would be provided with alternative energy sources in the last quarter of the current year.

The Department had targeted to provide 30 schools with water in the 2023/24 financial year. To this end, 52 schools have been provided with water infrastructure.

Of the 3 671schools in Limpopo, 2 514 had been provided with appropriate toilets, and there were 257 projects in construction. 566 schools depended on basic pits, which continued to pose a serious risk to learners, particularly in primary schools. The Department had embarked on a programme to demolish all basic pit latrines in schools. Contractors had been appointed and the demolition had commenced.

Mr Malatji said the EIG allocation had been cut by R182 338 (12.1%) during the 2023/24 financial year, and would have the following impact:

• The Department would not be able to meet the annual performance plan (APP) targets, as the projects currently on site would not be completed before the end of the financial year due to non-payments.
• The current expenditure was sitting at 69%, based on the original budget, but with the cut, they were sitting at 85% as at mid-November.
• The cut would also have an impact on the Komape programme, as the remaining budget would be completed by December due to the current projects implemented by all the IAs.
• The cut would also have an impact on the targeted job opportunities in the expanded public works programme (EPWP).

The letter to communicate the cuts had been issued to all the implementing agents, and they had been requested to do the following:

• To slow down progress on site, and submit to the Department the revised programme of works and cashflow projections for all their projects.
• To put all activities with a potential to incur financial commitments in abeyance.
• To start the builders’ holiday for the 2023/2024 financial year from 11 December to 26 January, and there should not be any activities on site during this period.
• To slow the pace of expenditure until the start of the new financial year.

Risks due to the budget cut would include a compromised teaching and learning environment at schools due to incomplete facilities, service delivery protests by local communities, the Department incurring interest due to non-payment to contractors -- which would lead to audit findings -- and the postponement of delivery timelines set for programmes.

See attached for full presentation

Eastern Cape DBE on impact of Adjustments Appropriation Bill

Mr Tsepo Pefole, Director: Infrastructure, said that the Eastern Cape (EC) Department was still faced with a mammoth R79bn infrastructure backlog in terms of the minimum uniform norms and standards for public school infrastructure, as well as a condition backlog due to insufficient routine maintenance. This phenomenon had hurt the core business of teaching and learning, and so the quality of its value proposition was fundamentally compromised.

Over the years, the EIG had been provided to eliminate the backlogs, and the Department relied entirely on it to fund its infrastructure programme. This funding should be augmented by the Provincial Equitable Share (PES) fund voted to infrastructure by the Department to supplement the EIG. Unfortunately, the PES allocation had declined annually, to the extent that there had been no equitable share contribution to the infrastructure budget for a number of years. Other areas affected were the provision of basic services -- water, sanitation, electricity and fencing to schools where these were lacking or insufficient in line with norms and standards.

Like the rest of the country, the province was faced with significant school infrastructure backlogs that would take years and substantial budgets to address. An amount of R79 billion was required to address the infrastructure backlog to get schools on par with the minimum uniform norms and standards for public school infrastructure (MUNS-PSI).

It was recognised that the educational facilities currently available, regardless of their condition, were inadequate for effective teaching and learning. This shortfall/backlog had been calculated for each school, based on the regulations related to MUNS. Norms and standards for PSI were set out in the infrastructure asset management plan.

Mr Pefole said the Department had implemented 250 fencing projects. To date, 122 fencing projects have been completed in this financial year, and 128 fencing projects are currently under construction.

(For full presentations, see attached documents.)

Discussion

Ms T Tobias (ANC) noted that the Free State had reported household items that had 100 million unauthorised expenditures in their presentations. She asked which household items these were. Why was money always moved from public schools and not private schools and other funded schools, to pay salaries? She also asked how the EIG worked and how it was implemented.

Mr X Qayiso (ANC) appreciated the presence of the ministries from the four provinces and the Deputy Minister. He acknowledged the number of areas that were progressing and areas of challenges. He said the presentations helped the Committee understand the challenges and their causes. The compensation of employees was a problem that had been encountered, so the issue of the budget needed to move forward, and the Treasury should assist the provincial departments with this so that they do not carry the burden of compensation. Separate budgeting for salaries and wages is needed. Unauthorised spending could not be justified because it was a crime and a contravention of rules, therefore someone should account for it.

He asked how many schools required the removal of asbestos, and how this removal would be done. Was there an audit for this? He suggested that all the schools should be allowed to deal with the issue of asbestos in all the schools in the county, not just some. He asked if there was a backlog for the payment of service providers. Did provinces comply with the 30-day payment commitment that they had made? The backlog of infrastructure required intervention from the national Department, because the number was concerning.

Mr Qayiso expressed concern that there should have been progress in certain projects, but there had not been, and the Eastern Cape was concerning in this regard. This would have implications for the quality of learning that learners received. He asked if the Department would meet their target for the removal of pit latrines. It had previously mentioned that two mud schools would be completed this year, and they have not been completed. He requested that the Committee be provided with the reason why these had not been completed. According to the presentations, he noted that the school refurbishment programmes were underway. He suggested that the refurbishment system should include upgrading technology to make teaching and learning easier. The teacher/learner ratio was a big problem. He referred to farm schools which were closing resulting in children moving to township schools, leading to overcrowding in these schools and the lack of an adequate number of teachers, as the Department was unable to appoint more teachers. He maintained that the reality was that there were remote farming communities, and there should be a focus on making sure that children in these areas could attend schools closer to where they lived. He asked if the Department of Education in KZN had received assistance from the Disaster Management Fund to fix its schools.

Mr H Mmemezi (ANC) said that the report from the Free State brought confidence to the Committee. He hoped that one day, pit latrines would be a thing of the past. He acknowledged the damage caused by natural disasters in KZN. There had been too many disasters in that province, and he asked that people try and speak to “our god” to try and ask for better weather conditions in KZN. The Eastern Cape was equally affected by bad weather conditions, which were worse than in other provinces, so the standard of building in these provinces should be stronger than other schools, because they were the provinces that had to deal with extreme weather conditions. These buildings should not be built according to minimum standards -- they should be able to withstand abnormal weather conditions.

He asked what the KZN Department would be doing to deal with vandalism. He agreed with Mr Qayiso that it was concerning that a large number of schools were closing. The Department needed to look into schools far from residential areas, because these may be losing students and may be lacking in resources. He said it was good when provinces spent their budgets, because they would be reallocated to other provinces if they did not. He asked that a proper plan be established for demolishing and eliminating pit latrines to ensure everyone's safety. He said the Limpopo province presentation concerning their plans to demolish their pit latrines had been encouraging. He acknowledged the risks listed as the consequences of introducing budget cuts.

Mr Z Mlenzana (ANC) said there needed to be adequate justification for underspending. The vocabulary of “cuts” was concerning. What needed to be focused on was reprioritisation. The challenges facing most provinces were the centralisation of infrastructure projects, disputes resulting in work not being done, and money not being spent. He asserted that provinces undermined the work done at the national level. The priorities made at the national level were not honoured at the provincial level. He asked for clarity on the issue of power and functions because they were reasons for non-spending. Some projects that had become successful were run at a national level. He suggested that districts procure school and office furniture and decentralise the learner/teacher support material (LTSM) budget to schools, but also ensure a clear cash flow and accountability.

Responses

DBE

DG Mweli acknowledged that under-expenditure was not a good thing -- when money was allocated, it should be spent. KwaZulu-Natal should be an example in this regard. The national and provincial levels of the Department were working on dealing with the issue of under-expenditure, which could not be defended.

He agreed that some functions should be decentralised, but he said that the challenge of decentralisation of LTSM would decrease the economies of scale of the state. Money could be redirected to receive more infrastructure. If individual schools procured books on their own, they would pay more. Group purchases allowed the Department more bargaining power. A lot of maintenance was done by districts, which could do things faster and more cost-effectively.

Unauthorised expenditure was against the Public Finance Management Act (PFMA), but there was a statutory obligation to pay employees who could not be retrenched, and this forced the Department to have unauthorised expenditure. A reduction of resources contributed to this if the staff was not reduced. It was undesirable but it was unavoidable.

Regarding paying service providers within 30 days, the Department could pay on time. The impact of business forums was a big problem that the whole country was facing, and profoundly undermined service delivery.

The infrastructure backlog nationally was growing bigger. Since 1994, there has never been a budget to deal with the backlog. There was a need for intervention in the Eastern Cape. The efforts of the national Department were not enough to deal with the backlog in the Eastern Cape. The Department was making progress with the 700 sanitation facilities, and a significant number of them had been completed.

The provinces did not provide the national department with all the schools requiring monitoring. There was a need for reliable data from the provinces.

One mud school had been completed, and the other would be completed at the end of the year. Refurbishment was specific to the quality of each school, based on what the school needs.

Migration was a problem; rural areas were becoming depopulated because people were moving to places that had economic growth, and this was why there were pressure points in the urban areas. Any school with less than 135 learners was regarded as non-viable unless there was no alternative school.

Schools were not catered for in the Disaster Fund.

He agreed that dangerous pit latrines would soon be a thing of the past. Conversations between building experts and environmentalists were taking place to see how infrastructure could be built to deal with extreme weather. All implementing agents should be working under the DPWI, and the role of the DBE should just be monitoring. The law did not allow the Department to invest taxpayers' money on private land. This was the problem with schools known as public schools on farms.

KwaZulu-Natal

MEC Fraser said the Department continued to plea that Treasury should not cut the infrastructure appropriation because the KZN Department uses its budget. Some of the issues for payment could be dealt with using the wage bill. The province had demolished unsafe pit latrines. Schools that would be closed due to low learner numbers would be finalised when the Department could determine the reallocation.

Limpopo

A panel of contractors had been established to reduce the number of implementing agents. Maintenance in Limpopo was done mainly by these contractors. The Department strives to avoid 100% payment of service providers on time. Where there was a delay, it would be because service providers overcharged and had to make new invoices, or had changed their bank details without informing the Department. There were no claims against the state. The Department had been giving schools in certain circuits money for feeding schemes.

Free State

The Director-General had sufficiently covered all the questions posed. The province had realised that the majority of expenditure generated little value-added output. Too much money left the province and it did not serve the people of the Free State. School nutrition had been decentralised to the schools. This resulted in a loss of the benefits of economies of scale. The Department took economic empowerment seriously and aimed to award contracts to those who would generate value-added output.

Eastern Cape

The Department was implementing decentralisation wherever it was possible. The province aimed to deliver as quickly as possible. Its goal was to work closely with the districts. It also aimed to improve monitoring.

Deputy Minister’s closing remarks

Deputy Minister Mhaule said she appreciated the feedback and questions. The Department aimed to see basic functionality in schools. This included prioritising sports, although this was difficult when communities had houses on this land. Schools were not just closed -- they were merged. There was, however, a problem with scholar transport in valleys and mountains, for example, where learners had to walk long distances. There had been engagement with the Department of Transport in this regard. The DBE aimed to give special attention to challenged children. It also aimed to build the countriy's economy by providing internships to unemployed graduates and providing them with experience. The mass skilling of young people would grow the economy. A skills revolution was needed in South Africa.

The Chairperson thanked the departments for their responses and attendance. He said that the Committee would continue interacting with them, adding that it was important to achieve economic growth.

The meeting was adjourned.