The Department of Public Works and Infrastructure (DPWI) had spent 51% of its total annual adjusted budget allocation of R8.476m by the second quarter of the current financial year. It had achieved 52% of its targets. It provided these details when it briefed the Portfolio Committee in Parliament, during which it outlined the achievements and challenges in its 11 programmes.
The biggest headache for the Committee was the cancellation of all projects in the construction project management programme because of poor performance by contractors. The Committee attributed this to laziness on the part of the Department, arguing that it was unacceptable to report underperformance due to the cancellation of projects and contractors abandoning sites.
Other issues raised by the Committee included the finalisation of disciplinary cases, delays in settling invoices, poor implementation of the expanded public works programme (EPWP) in some provinces, persistent vacancies in critical senior positions in the Department, the lack of information on concerns raised by the Auditor General and the Public Service Commission at a recent meeting, and why there had been slow progress in letting out properties to accommodate the security cluster.
The Deputy Minister said the EPWP branch had been told to submit a strategy that was achievable to the Committee, and to go to the provinces that had not done well. The poor performance of contractors was something that she had tried to bring to an end when she joined the Department. Contracts for service providers were going to have a legal clause that dealt with abandoning a site. The DPWI had to build internal capacity to monitor the work of its implementing agents, because that money belonged to the Department.
Department of Public Works and Infrastructure (DPWI) second quarter performance report
Ms Bernice Swarts, Deputy Minister of Public Works and Infrastructure, said the presentation would touch on the capacity in the Department and the leadership capacity. They were working on stabilising the Department. The appointment of the Head of Department (HOD) for the Property Management Trading Entity (PMTE) would help speed up projects, improve public facilitation, and improve the maintenance of buildings. The Expanded Public Works Programme (EPWP) should contribute to the alleviation of poverty and equality. The Director-General (DG) and Minister had been on the ground to see how projects had been rolled out, but there had been delays in their implementation.
Mr Lwazi Mahlangu, Acting Deputy Director-General (DDG): Governance Risk and Compliance, said the Department had achieved 52% of its targets during Q2, compared to the 41% it had achieved in Q2 of the previous financial year.
In programme 1 (Administration), 33% achievement had been registered. There were challenges with disciplinary cases, as they took longer to conclude, and there were delays in finalising the Promotion of Access to Information Act (PAIA). The slow pace of payment within 30 days had contributed to a lower-than-targeted compliance rate. There were delays in finalising the amended memorandum of agreement (MOA) between the Department and the Industrial Development Corporation (IDC) regarding implementing the project preparation budget. The withholding of the conditional grants to provinces and municipalities was due to non-compliance with the Division of Revenue Act (DoRA). There had been a delay in the filling of the positions with effect from March until June 2023 due to the Departmental moratorium, which was lifted on 28 June, hence there was a high vacancy rate of 12%. Due to the moratorium, most of the positions were not filled within the stipulated period of six months. 46% of the budget was spent during Q2.
In Programme 2 (Intergovernmental Coordination), the sector Technical Ministerial and Members of Executive Council (MinMEC) was sitting outside the DPWI reporting cycle. The report on the sector plan had been prepared and was due for ratification by the Technical MinMEC. A progress report on the 1 200 beneficiaries participating in the skills pipeline intervention of the DPWI has been submitted, and the number of beneficiaries has been detailed. Discussions were continuing at a workstream level to inform the ultimate review of the sector plan. 45% of the budget was spent during Q2.
In Programme 3 (EPWP), targets were achieved on the number of progress reports on the EPWP reporting system on validated work opportunities reported by public bodies. 668 308 work opportunities were reported, constituting 64.3% of the 2023/24 annual target of 1 038 742 work opportunities. 47% of the budget was spent during Q2.
In Programme 4 (Property and Construction Industry Policy and Research), the draft Public Works Bill was not gazetted for public comments. Internal consultations were undertaken during August 2023 with DPWI entities, branches and regional offices on the Bill. Stakeholder consultations were not undertaken on the Construction Industry Development Board (CIDB) Amendment Bill. Following the legal opinion by the Office of the Chief State Law Adviser (OCSLA) in December 2022, and subsequent consultations with the Department of Justice and Constitutional Development (DoJ&CD) and National Treasury, the contentious Clause 25 was removed from the draft CIDB Amendment Bill in August. The draft Infrastructure Development Amendment Act Bill had been developed. One implementation report on the status of strategic integrated projects (SIPs) has been developed and submitted. The programme had spent 54% of its annual budget.
In Programme 5 (Prestige Policy), four planned state events were supported with infrastructure. 72% was achieved on the provision of moveable assets from a condition assessment register of moveable assets. 50% of movable assets requests were provided within 60 working days after approval by Prestige clients. 43% of the budget was spent during Q2.
In Programme 6 (PMTE administration), the major underspending had been under capital assets due to delays on several projects. An underspending of R1.5 billion was being projected. There was also projected underspending of R470 million on repairs for several projects, while the total facilities management projects had also experienced delays.
In Programme 7 (Real Estate Investment Services), one custodial asset management plan (C-AMP) was submitted to National Treasury. Work had been in progress on the development of the Government Precinct.
In Programme 8 (Construction Project Management), all cancelled projects were reportedly because of poor performance by the contractors. Factors contributing to the poor performance included delays in the import of equipment, and designs being altered before the project could get to the construction stage.
Most targets were achieved in Programme 9 (Real Estate Management Services). The Department had been assessing various strategies to accommodate the security cluster. Some of the strategies being explored were the Refurbish, Operate and Transfer Programme (ROTP), public-private partnerships (PPP) and Lease to Own programme. Implementing the interim guideline on letting out had resulted in an increase in revenue. There had been a slow process of approval for letting out when it came to the number of unutilised vacant state-owned properties let out.
In Programme 10 (Real Estate Information Registry), the target had been achieved on the number of provincial immovable asset registers assessed for compliance. Regarding the number of immovable assets physically verified to validate existence, the mobile app upgrade was being finalised and tested for a more streamlined workflow process, due to the aged application not working. Critical resources were required, and important posts were still vacant. Lack of vehicles and a cumbersome hiring process were problematic in all regions, and head office had to get vehicles for extended periods to assist the team in installing photovoltaic ( PV) equipment.
In Programme 11 (Facilities Management), the current resources in this programme did not match the deliverable set target. The programme had established a panel of consultants to augment the current resources. Unfortunately, the programme had experienced delays in bringing the consultants on board to assist. Regarding the number of preventative maintenance contracts, there had been an emphasis on a shift from reactive to preventative maintenance, to reduce maintenance. Supply chain management (SCM) processes impacted the implementation of term contracts, either positively or negatively. For Q2, most of the projects had moved from the pipeline stage to the award stage.
Mr Mandla Sithole, Chief Financial Officer (CFO), took the Committee through the budget allocation and expenditure. The total expenditure for the month ending September 2023 was R4.329 billion, which was equivalent to 51% of the total annual adjusted budget allocation of R8.476 billion. The variance between expenditure and drawings amounted to R186 million.
(Tables and graphs were shown to illustrate budget allocations and expenditure)
Ms S van Schalkwyk (ANC) commended the Department for making new appointments. She wanted to know the provinces in which the buildings catering for gender-based violence (GBV) victims had been opened. Inroads needed to be made in terms of capacity building to ensure people with disabilities were employed in the Department. What had led to the poor performance on the EPWP by the Free State and Northern Cape, and what would the remedy be for this situation because the EPWP provided relief for poverty? She sought clarity on why the draft Public Works Bill would not be gazetted for public comments; commented that the projection on underspending in the PMTE was a serious concern; asked what was going to be done to remedy the situation in construction project management, where the reasons were the same for poor performance by the contractors, as the Committee would like to see consequence management so that contractors did not continue with poor performance in other departments. She enquired what was being done to correct the non-increasing budget in facilities management; wanted to find out when the moratorium on the filling of vacancies would be lifted, and what the impact of that had been on service delivery; and asked if the Department had prioritised the Covid-19 budget.
Ms Thembi Hlatshwayo, Acting Deputy Director-General (DDG): Corporate Services, said the moratorium had been lifted, and a letter from National Treasury was received to focus on prioritised vacancies and cost containment measures. The 57 vacant posts were senior management service (SMS) positions. Nine positions had been advertised, and two had been filled for the PMTE and the Project Management Office (PMO). While it was filling the vacancies, the Department was losing people on the other hand. The Department could not fill all the vacancies due to cost-containment measures. Management had decided to ring-fence positions to focus on designated groups. By the end of the financial year, sufficient females at the SMS level would meet the desired targets.
Ms Myeleti Makhubele, DDG: Real Estate Management Services, said that Road Asset Management Systems (RAMS) had finalised refurbished properties in some provinces, but no properties had been identified in others. Three properties had been identified in the Eastern Cape, two in the Free State, and an MOU was signed, but no properties were finalised in KwaZulu-Natal. In the Northern Cape, one property had been identified and an MOU signed, two properties were identified in the North West, six were identified in the Western Cape, and five were identified in Limpopo and an MOU signed. Five properties were identified in Gauteng, while nine in Mpumalanga were identified but had not been refurbished.
Mr Nkosana Khubeka, DDG: Professional Services, said that the reasons for cancelled projects on construction project management were the same because contractors were experiencing the same cash flow problems when the projects were on site. The Department had not focused on underperforming and cancelled projects. The list of cancelled and abandoned projects and non-performing contractors would be forwarded to the Committee. All these matters were being addressed in the "war room" quarterly to see how these projects would be completed and where to terminate contractors. He added that the Department was tracking the top 50 projects, because they constituted 40% of the budget.
Mr Ntokozo Chonco, DDG: EPWP, said the consequence of underspending by municipalities had become adverse for the Department, and the next tranche would not be released, which would affect the DPWI's outcomes. The Free State and Northern Cape provinces had done their work on the EPWP, but had failed to include figures/data in their reporting, so the Department had been assisting these two provinces.
Mr Masilo Maake, DDG: Policy and Regulation, said the Public Works Bill was intended to be an omnibus bill. Some of the pieces of legislation would be collapsed into one Bill to provide for the mandate of the Department in a streamlined fashion. The intention was to ensure it was gazette in Q4.
Ms L Mjobo (ANC) asked how many projects had been affected by the delays in appointing consultants by Infrastructure South Africa (ISA) and what the financial value had been. How many staff members had benefited from the bursary of the Department? Why was the Nolitha Company doing work in Acacia Park, instead of the IDC, that the Department had allocated R81m -- was the IDT not good enough to do the work carried out by the Nolitha Company?
Mr Mahlangu explained that when correspondence came from National Treasury, it was classified under corporate services. The Department had met all the conditions set by the Treasury. The first tranche had been transferred to the IDC because their work augmented what the Department was doing. He was not able to quantify what the financial implications would be -- this would come to light towards the end of the financial year. Some of the work had been accelerated.
Mr Richard Sizani, Acting Director-General (DG), said Nolitha was not doing any business in Acacia Park. A provider had been appointed to do the maintenance. Nolitha was a sub-contractor of the appointed service provider.
Mr I Seitlholo (DA) commented that the major concerns raised by the Auditor-General (AG) and the Public Service Commission PSC) during the meeting on 10 October had not been included in the presentation to address some of the matters raised. The AG had highlighted some major issues, and the Committee would like to know how the new PMTE HOD would address them. He asked how the problem of contractors abandoning sites would be addressed; sought clarity on why there had been a slow process for letting out properties to accommodate the security cluster, because circular 135 was for the leasing of state buildings; requested the Department to forward to the Committee a list of priority buildings for leasing; enquired how the 25% expenditure on repairs was affecting the refurbishing and transfer programmes and how this had affected the Department; wanted to understand how the policy would assist with debt collection from client departments, and what sort of teeth it was going to give to the Department so that it could deal with client departments that were not servicing their debts; wanted to find out if there were any available mechanisms nationally to monitor the EPWP in municipalities, because rural communities benefit largely from the EPWP; and wanted to know which entities of the Department would take part in the rebuilding of the national Parliament.
Deputy Minister Swarts said the Committee must be aware that the national Parliament had signed its own agreement with the Development Bank of Southern Africa (DBSA) to refurbish its building. It was the DBSA that needed to brief the Committee on the matter.
Ms Makhubele said the Department had approved 101 lease applications with a potential revenue of R140m. Lots of properties had been identified, but the tender processing usually took a long time to synthesise. The list of properties would be forwarded to Committee.
Mr Mahlangu referred to consequence management regarding the leases, and said there had been a round table discussion on this with PSC, focusing on section 25 of the constitution. The Department had taken the recommendations from the AG and PSC, and these had been synthesised and presented to the Cabinet. He said consequences were dealt with on a case-by-case basis. If it was an SCM issue, it would be discussed internally through proper channels, and if it was a labour issue, the matters would be referred to law enforcement agents and the courts. The leasing portfolio had been subjected to the investigations, and once they were completed, the report would be shared with the Committee.
Mr Khubeka said a panel of contractors had been started, and was being finalised by the Bid Adjudication Committee to be able to replace a terminated contractor. This should be done within three months. On consequence management, once a contractor was terminated, its name was given to the Restriction Committee for blacklisting. The Department was tightening controls on the appointment of contractors because when the contractors failed, that meant the professional services team also failed.
Mr Chonco said they were assisting the Department on mechanisms that could be put in place nationally to monitor the provinces and municipalities on EPWP activities. The municipalities were aware of the report guidelines they had to use in their reporting, and these would be augmented to assist them.
Mr Sizani said a full report on the EPWP would be discussed at the next MINMEC meeting.
Mr Rachard Samuel, DDG: Facilities Management, said they were supplementing their own capacity through human resources (HR), and making use of their own tools and entities.
Mr Sithole said there was no correlation between the refurbishment, operation, and transfer (ROT) programme line item and repairs. 25% was not related to ROT. He said the involvement of National Treasury in debt recovery allowed it to issue a practice note or circular. If a client department does not pay the DPWI, then the Department must not continue to provide that service. However, there were considerations in place because the Department had to think of consequences for stopping providing a service to the courts, for example.
Mr T Mashele (ANC) commented that Deputy Minister Swarts had joined the Department when it had a lot of people in acting positions, and asked her and the Minister to deal with the matter. She asked if the Department understood the cost of underspending and underperformance on service delivery because each time the Committee interacted with the Department, underspending cropped up; if there were any consequences for people or programmes that were not performing in the Department, and for evidence to be provided; if the performance percentage from Q1(41%) to Q2 (52%) was an accumulative one; and what could be done to meet the targets on people with disabilities. He sought clarity on the CIDB Amendment Bill that had been submitted to the Minister, and asked if the Department felt it was right to tell the country there had been the submission of a document to the Minister; he wanted to find out what would be done to address the projected underspending of R1.5 billion on the PMTE administration; and remarked that there was laziness on the part of the Department in respect of construction project management, because it was not acceptable to state that the cancellation of projects caused underperformance. He asked what the Department meant by a revised budget in maintenance and repairs, because there was planned and unplanned maintenance, and he wanted to know how the Department came to the conclusion that the budget would be revised because of underspending. He also wanted to understand how the Department was dealing with the recommendations of the AG, and asked it to indicate if it would improve its next audit outcomes.
Mr Sizani said the Department was on 1.42% of its personnel representation when it came to people with disabilities. It had people who were disabled but had not declared it. That was why they would be allowed to compete amongst themselves.
Ms Carmen-Joy Abrahams, DDG: EPWP, said they would present a strategy to MINMEC on professionalisation to address designated group matters. The value chain had been there for capacitation, and positions would be ring-fenced for people with disabilities.
Mr Sithole confirmed that the performance percentage from Q1(41%) to Q2 (52%) was an accumulative figure. He added that the impact of the reduction of budget on repairs had led to interventions put in place by the Minister and the DG, which had led to improvements in the systems of the Department. From a finance point of view, audit action plans were in place and would be implemented. The audit outcomes depended on what each unit did every day.
Deputy Minister Swarts said it was not good to have acting DGs, and also to tell Parliament a submission was on its way to the Minister. She noted that change was painful, and the Department was not going to allow people to do as they pleased.
The Chairperson remarked that the presentation had not provided detailed information on projects that had been cancelled under construction project management. There had been no mention of any name of a contractor that had abandoned projects and if consequence management had been applied, only that projects had been cancelled due to delays. She said it could not be business as usual when a project took more than ten years to be completed. The Committee had now been told that the IDT would be the entity. The Committee needed to be given a report on incomplete projects and a list of contractors that had abandoned projects.
The budget spent on repairs had increased, and this meant doing more maintenance that was not routine. It was unacceptable to have an expenditure that exceeded the budget (sitting at 62%) in the second quarter. The AG had raised the matter of leases in the audit report, and it was not acceptable for the Department to tell the Committee it was still strategising about how to accommodate the security cluster. The Committee had been getting glowing reports, but the opposite happened on the ground. She wanted to know which piece of land the Department had issues with when strategising with the Department of Land Affairs.
Ms Makhubele, on leasing for the security cluster, said the target was based on Telkom Towers. The Department had looked at other strategies that were going to reduce its over-reliance on leasing. Another strategy visited was that of lease-to-own for their clients. The Department of Land Affairs issue was for the release of land for various reasons, including human settlements and restitution. Many applications have been sent to the Land Affairs Board for consideration.
Mr Khubeka said the delayed projects were being prioritised, and a report would be given on Q3. He indicated that the challenges experienced in construction had affected the project's overall completion.
Mr Samuel said they needed to be detailed regarding failed projects and who was responsible. Sometimes, these issues were caused by a rift between the officials and service providers. The 62% expenditure on maintenance had been a result of the reactive nature of how things were done in that programme.
Deputy Minister's closing remarks
Deputy Minister Swarts said the entities would be assisting each other when it came to recruiting people with disabilities, and this would be addressed in a conference that would be held soon. The EPWP branch had been told to submit a strategy that was achievable to the Committee, and to go to the provinces that had not done well. No EPWP project would start without an exit strategy. The poor performance of contractors was something that she had tried to bring to an end when she joined the Department. Contracts for service providers were going to have a legal clause dealing with abandoning a site.
She said the Department should stop stating that it had an asset register, because it did not have one. The AG had disputed what the Department had been saying about the asset register. She asked the Department to be honest with itself. It had to build internal capacity to monitor the work of the implementing agents, because that money belonged to the Department.
She pointed out it was unacceptable for the Department to have an information communication technology (ICT) system that was not integrated. It had been installed in 2015 and was operating manually. She had asked the State Information Technology Agency (SITA) to assess the ICT system of the Department. She also ensured all the war rooms of the branches met regularly to ensure project implementation happened.
Committee Legacy Report
The Chairperson asked Members to forward inputs to the Committee secretary.
The meeting was adjourned.
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