The Committee engaged with the Department of Infrastructure on adjustments for the 2023/24 fiscal year. The severe budget constraints, exceeding worst-case scenarios, led to a substantial main appropriation decrease of R259 664 million (2.6%). The dissolution of management arrangements and fund shifts resulted in changes in staff distribution between the Department of Infrastructure and the Mobility Department. The impact was felt across various programmes, including administration, public works infrastructure, and human settlements.
The engagement highlighted rollovers of R232 660 million for projects like local content tenders, roads, and human settlements. Fund shifts between votes amounted to R68 378 million, affecting Programme One (Administration) and Programme Two (Public Works Infrastructure). To address a budget reduction of R271,543 million, fiscal consolidation measures involved cuts in compensation of employees, operational costs, and consultants. The Department managed to absorb the wage agreement through increased attrition and delays in recruitment processes, addressing risks through internal reprioritisation. Concerns about potential interruptions in crucial services, including hospitals, roads, and schools, were raised.
The Committee voted in favour of the adjusted appropriation for vote 10 with the ANC registering a minority view to not support the adjusted budget.
Department of Infrastructure: Adjustment Estimates 2023
Ms Chantal Smith, Acting Head of the Department of Infrastructure, provided insights on the adjustments made for the 2023/24 fiscal year. The dissolution of the management arrangement in October 2023 led to the transfer of 126 staff members to the Mobility Department. As a result, the Western Cape Mobility Department's Administration Programme achieved 74% capacitation, while the Department of Infrastructure reached 65%.
The presentation highlighted the main appropriation decrease of R259 664 million or 2.6% from R9 887 089 to R9 627 425. Rollovers of R232 660 million were granted, covering various projects such as local content tenders, the Construction Industry Development Board (CIDB) Best Practice Assessment Scheme (BPAS), Roads, Human Settlements Development Grant (HSDG), Infrastructure Skills Upgrading Grant (ISUPG), and Title Deeds Restoration. Revenue retention of R32 193 million was also granted for projects like e-Merge and roads. Reductions in national grants, including Provincial Revenue Grants (PRMG), HSDG, ISUPG, and Expanded Public Works Programme (EPWP), contributed to the overall decrease.
Fund shifts between votes amounted to R68 378 million, primarily affecting Programme One: Administration and Program Two: Public Works Infrastructure. Fiscal consolidation measures involved cuts in different programs to address a budget reduction of R271 543 million, impacting Compensation Of Employees (COE), operational costs, and consultants.
The adjustment estimate further outlined how the Department managed to absorb the wage agreement, reflecting a 58.4% spend of the adjusted budget allocation. Increased attrition and delays in recruitment processes facilitated this absorption. Risks were addressed through internal reprioritisation, covering over-expenditure on business enhancement tools, Workplace Skills Plans (WPSP), health infrastructure capacity consultants, Information and Communication Technology (ICT) tech refresh, solar for government buildings, cleaning services, and operational maintenance. Remaining risks were identified in Program Oneme: Administration and Programme Three: Transport Infrastructure, necessitating ongoing attention to program sustainability and baseline issues.
(See presentation attached)
The Chairperson, invited Committee Members to pose questions, signalling the conclusion of the presentation segment.
Ms C Murray (DA) had an inquiry that was not tied to specific pages but focused on the impact of budget cuts on infrastructure in both the short and medium terms. She sought information on the number of schools, hospitals, road upgrades, and new road constructions that might be affected by these budget reductions.
Mr M Kama (ANC) had his first question directed at page 209, focused on Sub-Programme 2.6, particularly seeking clarity on the reallocation of funds for solar installations on various buildings. He inquired about the beneficiaries of these installations, specifically whether they are in public buildings.
Moving to page 211, Mr Kama discussed Sub-Programme 4.3.2 related to human settlements' development financial interventions. He sought understanding of what else is funded through these financial interventions. Concerning the title deeds restoration, he wanted insights into the strategies in place to address performance challenges and the direct transfer of funds to municipalities, if applicable, along with the rationale.
On page 212, he highlighted the shifting of funds, noting over R63 million received from vote eight for budget alignment and refresh management arrangements. Mr Kama requested more details on these funds and sought clarity on the R20 million received from asset finance reserves. He questioned the decision-making process behind these allocations and raised concerns about their use on pressing matters like informal settlement fires or acquiring land for affordable housing.
Lastly, on page 222, Table 10.1, Mr Kama focused on the office of the MEC. He asked officials or the Head of Department (HOD) to provide information on recent discussions regarding the rental for the MEC and whether there is an investigation. He also inquired about the budget allocation for such rentals and its source in the budget.
Mr P Marran (ANC) directed his attention to page 205, highlighting the main appropriation details and the budget decrease of over R72 million. Inquiring about the impact of this decrease, he sought information on which programmes would be affected, specifically asking about schools that may not be built, hospitals that might not be constructed or upgraded, and any related projects affected by the budget cuts. He requested a written list of the impacted programmes if the details were not immediately available.
Moving to the second question, Mr Marran focused on rollovers in Programme Four. He wanted clarification on whether the Silverton emergency housing project would be part of the rollover funds and if the housing project would also be included if the rollover funds were secured.
Mr I Sileku (DA) sought specific reasons behind the reductions in national grants for certain programs, noting that there were various reductions. Secondly, he emphasised the concern about granted rollovers for programmes, such as title deeds restoration, that were not effectively implemented by municipalities. He highlighted the challenge of municipalities failing to execute plans due to low capacity, suggesting that blaming the Department might be unfair. Mr Sileku wanted the Minister to elaborate on the risks associated with rollovers, especially the risk of not being able to spend them.
Moving on, Mr Sileku addressed the issue of absorbing wage increases. He questioned whether there were alternative approaches the Department could have taken and expressed concern about the impact of the dispute on the national wage agreement. He sought clarification on whether there were possibilities to handle things differently and the potential consequences if the dispute remained unresolved, impacting the Department's work.
The Chairperson raised concerns regarding the new Departments or amalgamated departments for Mobility Infrastructure. She noted that when these plans were initially formulated, the anticipation of budget cuts from National Treasury was not as severe as it turned out to be. The Chairperson sought information from the Department on whether, given the current circumstances and the need for extensive planning, there would be any significant goalpost shifting or restructuring that might impact the Department. Specifically, she inquired about the potential knock-on effects on planning for the main budget in the next financial year, 2024.
Western Cape Minister of Infrastructure, Mr Tertuis Simmers, began by stating that he would hand over most of the details to the Department team. He highlighted the severity of the current budget situation, emphasising that the worst-case scenarios presented to Cabinet had been exceeded. He used the phrase "the revolution will eat its own children" to describe the impact, stating that service delivery is under massive strain. The reduction in grants, particularly in human settlements, was attributed to the inadequate funding the province had been receiving for years. The Minister expressed concern about the infrastructure, roads, and EPWP programmes, stating that the consequences of long-term budgetary issues are now evident. He mentioned the dispute over the wage bill negotiated at the national level and the challenges faced in adjusting budgets. Minister Simmers concluded by highlighting the importance of spending rollovers and the risk of not receiving rollovers in the future if the funds are not utilised. He then indicated that he would hand over to the Acting HOD for further details.
Ms Smith addressed several questions. She discussed the impact of budget cuts on the Department of Infrastructure, emphasising the challenges they face due to uncertainty and the need for a stable procurement plan. Ms Smith explained that the Department had to consider multiple scenarios, including a worst-case scenario with a 7.5% cut and a best-case scenario with a 4.3% cut. She highlighted the difficulties caused by cuts in a Department where a significant portion of the budget is allocated to project delivery through supply chain processes.
Ms Smith provided an illustrative scenario related to the floods affecting the road network, leading to redirecting the normal roads program budget to address flood damage. The Department faced challenges in responding to the floods without relief funding, impacting the normal programme and pushing out road projects by more than two years in some cases.
Regarding solar installations, Ms Smith confirmed that the installations are in provincial-owned government buildings. She mentioned that her colleague would provide more details about the nature of the installations and specifications.
Concerning human settlements, Ms Smith acknowledged that the Department had to carry its share of budget cuts, affecting programs like title deed restoration. She mentioned that Ms Khamelia August would provide insights into the strategies implemented to address title deed restoration challenges.
Ms Smith explained the realignment of funds, including shifting over R63 million for budget alignment and refresh management. She clarified that the Department of Mobility's funds were received only for the period of the management arrangement, which lasted from 1 April to 31 October 2023. The allocation of funds and the complexity of the restructuring process were further elaborated.
Regarding the R20 million from the Asset Finance Reserves (AFR), Ms Smith clarified that it came from the public works AFR, specifically for leases involving UCT buildings. The funds were required to cover risks associated with an incorrect calculation in the lease agreements.
The issue of the MEC's office budget cut was addressed, indicating that all programmes, including the MEC's office, had to carry their share of the budget cuts due to fiscal consolidation.
Ms Smith touched on specific projects that suffered due to budget cuts, citing examples like the scheduled maintenance program for general infrastructure. She explained that cuts often occurred in conditional grants or transfers, impacting the Department from multiple fronts.
Regarding the reasons for cuts in the grants, Ms Smith explained that national departments protect their budgets, and the cuts often affect conditional grants or transfers to provinces. She cited examples of cuts in the provincial roads maintenance grant and the impact on the province.
Ms Smith mentioned that she would engage with Treasury on the approval timing of adjusted business plans, emphasising the need for timely approvals to enable project commitment and rollovers.
Addressing the question of absorbing the wage agreement, Ms Smith explained that the Department had been making forced savings in compensation of employees year on year. However, the unexpected nature of the wage agreement and the partial contribution from national departments significantly impacted the Department's budget.
In conclusion, Ms Smith highlighted the devastating impact of budget cuts on the Department, leading to uncertainties, delays, and challenges in project delivery. She invited colleagues to provide additional details on solar installations and title deed restoration strategies.
Ms Andrea Campbell, Acting Deputy Director. General: Provincial Public Works, provided details on the solar photovoltaic installations for government buildings. She mentioned that these installations were carried out in provincial government buildings. The work involved both ground-mounted solar PV systems and other installations.
One example Ms Campbell provided was the ground-mounted solar PV system recently installed at the Green Office building on the Karl Bremer Hospital site. Another installation involving a ground-mounted solar PV system took place at the Cape Teaching and Learning Institute (CTLI). Ms Campbell mentioned that they were currently working on another ground-mounted solar PV installation at the CTLI.
Additionally, Ms Campbell mentioned a recently completed project involving a battery and inverter backup system at the CTLI. She noted that the CTLI served as a metric exam marking centre and highlighted the importance of completing this project possibly just in time.
Ms Khamelia August, Chief Director: Human Settlement Planning, discussed key issues and strategies related to title deeds. The core challenge identified was the need to change the dynamic around municipal responsibility and reporting. While municipalities were primarily responsible, the Department aimed to take more control of reporting by implementing a data-led approach. This involved the appointment of a data analyst to improve data accuracy, with a focus on verifying data through comparison with the Housing Subsidy System (HSS).
To enhance funding allocation, the Department was introducing a readiness matrix that assessed different steps within the title deed process. Additionally, it planned to introduce milestone payments in the next financial year, ensuring no upfront payment if municipalities had not completed the necessary steps. Funds would be held until milestones were achieved. The goal was to improve the efficiency of the title deed process and address underreporting issues.
The Department was adopting a more hands-on approach, conducting quarterly meetings with each municipality to discuss progress and forward planning for title deeds. Business plans were being updated to include title deeds post-2014, with a focus on closing out projects when houses were built and reporting on the transfer status.
In response to the challenge of a lack of clear guidance on standard operating procedures, the Department was developing a title deeds policy framework for the province. The draft framework was expected by December, with the aim of finalising it by February. As part of this initiative, a peer review process had been initiated, involving experts in title deeds from across the country to identify gaps and improve responses to challenges in the title deeds process.
Overall, these measures were expected to contribute to addressing the backlog and improving the efficiency of the title deeds process in the province.
Ms Murray thanked the officials for their dedication and hard work during this unbelievably difficult period. She commended them for their work and acknowledged that the budget cuts will make things more difficult and compromise a lot of the work being done.
The Chairperson added that the maintenance of roads will be a big issue as money is being shifted to flats. She said that the ripple effect is bigger than anticipated and that houses that have to be built in the Western Cape should be for people 60 years and older. She said that people under 60 can still receive services, but there is an argument to be made about this.
Mr Marran said that the MEC had spoken about the rollovers and that they had been rolled over time and time again. He added that the municipalities had received a warning that it would not be rolled over if they did not spend the money this time. He said that most of the municipalities had received clean audits over the last couple of years, but that they had failed when it came to service delivery issues, such as building houses for people. He asked for a commitment from the officials to present the Committee with a list of those councillors who had not spent their money and the amount. He said that this could be in writing. He also said that the Department made the budget cuts and the decision to absorb the wage agreement. He added that the Department had decided to cut short projects and cut short service delivery. He said that this would affect hospitals, roads, and schools. He asked if getting a list of all the projects that would be stopped was possible.
Mr Marran said that some of these projects would be halted for two years or even more. He suggested that the Committee get a list of the infrastructure projects that had been changed and that they could make this part of one of their resolutions. He said that he wanted the Department to get this to the Committee. He said his last question was about page 213, Programme Four, Human Settlements, R30 000 relocation development project funding to render to SF finance reserves for year allocation upon implementation. He said this was not only the time project that had been experiencing delays due to disagreements between the province and the City in the study of a rezoning application. He said he wanted to check here because the MEC had intervened in other matters. He asked if there would be intervention from the MEC to get the Committee over this hurdle, either the difference between the City and the province, or the disagreements and reasoning issues. He said he just wanted to check whether the MEC would intervene to ensure that the Committee got over there and started delivering services to the people.
The Chairperson reminded Mr Marran that the Committee had a list of the tabled adjustments from page 227 to page 244.
He asked if the speaker had seen the list and if it was different from what was in the Blue Book from 227 to 244. He asked the Department to respond accordingly.
Mr Marran said that he would look at the specific page and asked if the Committee could get a list of the particular projects that would now be halted.
Mr Kama noted that he had not checked the past years regarding the Department's handling of the Informal Settlements Upgrading Partnership Grant. He observed instances, even in the City, where the Urban Settlements Development Grant (USDG) was returned to the national government. Mr Kama highlighted the importance of addressing the impact of consistent underspending or non-spending of allocated funds for upgrading informal settlements. He emphasised the need for the Department to develop plans and strategies to ensure full spending of these funds. Mr Kama expressed concern that the lack of development in these areas negatively affected policing and crime prevention in the province.
The Chairperson acknowledged the significance of project implementation within municipalities and stressed that municipalities must meet specific metrics to qualify for funding. Referring to Ms August's mention of the need for stringent metrics, the Chairperson asked if the Department would conduct due diligence to ensure municipalities were ready for project implementation. She inquired about the Department's diagnosis of challenges related to municipal capacity and how they planned to address this issue. The Chairperson emphasised the importance of balancing the administrative process with actual project implementation. She urged the Department to clarify the challenges they identified with municipal capacity and outline their strategies for overcoming these challenges. The Chairperson emphasised the need for the Department to ensure effective project implementation.
Regarding the question on Silverton project, the Minister said that he would refer the Member to his response to his Chief Whip in the House during the month of October, where he had indicated that the Department had communicated to the Member when construction was due to start in terms of the planning approval. He said that the City had approved the section 55 application by the Department to ensure that the planning issue was resolved, which could activate the project. He said that he thought this made the Member's question mute.
Ms Smith said that she could not commit to a written commitment from officials to spend the money. She said that the Department was doing everything in its power to put systems in place to ensure that the Human Settlements branch was poised to be able to deliver. She said that it was not an easy thing nor a quick fix. She said that she was working with the Head of Branch to put certain measures and mechanisms in place to address the weaknesses in the system. Ms Smith was setting up an engagement with the Director-General (DG) of the National Department of Human Settlements to see if it would consider giving back some of the money or giving an allocation specifically targeting acceleration programs. The Department was also looking at municipalities with capacity and governance problems.
The Department would not be paying over the money to these municipalities and instead, it wanted a tripartite agreement where it would pay on a certification of actual progress directly to the contractor. She said that this was one mechanism to ensure that the Department paid for actual delivery and for actual houses built, and not on the promises of an undertaking only for the money to be paid back to the Department when the financial year ended. She said there were also capacity issues within the Department itself, and she was addressing these issues with the head of branch. The Department owed the Minister a report on the steps that it was taking to turn things around. She said that what was needed was due diligence per municipality, and that no project should go on to the business case unless people were appointed to do the work. The Department was also scrutinising the Memorandum Of Agreement (MOA) with the implementing agents, and she was setting up direct meetings with implementing agents to understand why Grade Nine contractors were not able to deliver on the mandates when they had the capability to deliver everything, such as a World Cup stadium. She concluded by saying the timing of the approvals and the fact that it was construction break were also factors that made it difficult to spend the money.
Ms August agreed with Ms Smith and said the due diligence was the right approach. The Department wanted to understand the specific problems in each municipality so that it could respond in a focused way. It had appointed a specific organisation to do the due diligence and would contribute to cost containment. She said that all of the forward-thinking approaches required capacity at the municipal and provincial levels. The Department needed to be careful not to attempt too much and that it needed to set realistic targets for the next year. She said that the Department was beginning to do the due diligence this year and there would be progress as it moved forward.
Ms Smith expressed her gratitude to the Committee for its deliberations and the good faith in which they were conducted. She highly appreciated the Committee's efforts. Additionally, she extended thanks to her finance team for working late hours and navigating the unusual challenges to ensure the timely submission of the budget adjustments. Ms Smith also specifically thanked her top management team and acknowledged the support of the Minister in enabling her to perform her duties effectively.
The Minister thanked the Chairperson and the Standing Committee, acknowledging that preparing the adjustment budget was a challenging task. He referred to the difficulties highlighted and thanked the team and all branches for their efforts in ensuring that ongoing activities could continue to some extent under very difficult circumstances.
Looking ahead, the Minister acknowledged that the future would not be easy. He quoted lyrics from a song by Johnny Clegg titled "The Revolution Will Eat Its Children," emphasising the current challenges and upheavals. Despite the difficult times in the Western Cape, the Minister expressed optimism and mentioned embracing something called evolution. He believed that innovation would triumph over revolution, which he described as eating its own. The Minister concluded by thanking everyone.
The Chairperson thanked the Department on behalf of the Standing Committee for the hard work being done by the Department, especially considering the challenging operating space. Acknowledging the difficulties faced, the Chairperson noted the Department's efforts in managing the complex situation, often having to allocate resources strategically.
The Chairperson mentioned the Committee's awareness that the Department might be "robbing Peter to pay Paul" and vice versa, recognising the delicate balance required in such situations.
The Chairperson noted the Department's decision to enter into agreements to pay implementing agents within municipalities. This was seen as a positive step, addressing concerns about the performance of municipalities in implementing projects.
The Chairperson concluded by thanking the Department on behalf of the Standing Committee and wished everyone a fantastic festive season, hoping it could be enjoyed despite the challenging circumstances.
Mr Sileku took a moment to address the Minister and the Department. He acknowledged the challenging nature of their work during the adjustment period, especially in the absence of the HOD. Mr Sileku commended Acting HOD for supporting the Minister during this trying time.
He recognised the complexities involved in shifting both funds and personnel within the Department, emphasising the difficulty of dealing with uncooperative individuals in some municipalities. Despite these challenges, Mr Sileku appreciated the Department's honesty in responding to questions from the Committee.
Mr Sileku extended best wishes to everyone for the festive season, urging those who could take a break to do so and spend quality time with their families. He emphasised the importance of appreciating and supporting family members during the holiday season. Concluding with well-wishes for a prosperous 2024, he encouraged individuals to enjoy activities they love, whether it be swimming, hiking, or any other preferred pastime.
The Chairperson announced the departure of the Department. She discussed plans to reconvene at the end of the year. The Chairperson mentioned the provision of coffee and snacks for the attendees to boost their energy, particularly considering the early morning schedule and potential traffic issues in Cape Town. The Chairperson thanked everyone and conveyed appreciation for their presence.
Committee Report Western Cape Adjustments Appropriation: Vote 10 Infrastructure
The Chairperson proposed the adoption of reports to avoid the need for additional meetings solely for that purpose.
The report indicated that the Standing Committee on Infrastructure, following deliberations on Vote 10 Infrastructure, expressed either support or non-support for the vote, as outlined in the Western Cape Adjustment Appropriation Bill. The Chairperson sought the opinions.
Ms Murray conveyed her vote to support and adopt the report.
Mr Sileku supported and seconded the motion for adoption.
Mr Marran expressed that the ANC cannot support the report. He highlighted a decrease of more than R72 million, and the ANC is of the view that the provincial treasury should reconsider some of these cuts. He mentioned that the Department has agreed to reduce this budget, and the ANC believes some of these cuts have not been adequately justified. Therefore, the ANC does not support this report, and the vote against these decreases should be captured in the report as per Rule 90 of the standing rules.
The Chairperson outlined the report on the Standing Committee on Infrastructure in the schedule to the Western Cape Adjustment Appropriation Bill [B7 – 2023], dated 30 November 2023. The Committee, after deliberation, supported the vote. In accordance with Standing Rule 90, the African National Congress (ANC) expressed its minority view that it does not support the report.
Mr Sileku proposed the adoption of the report, and Mr Marran seconded, confirming that the report is a true reflection of the proceedings.
The Chairperson said there was a discussion about the resolutions captured in the report. The resolutions include a list of municipalities that have not spent their allocated funds and a list of projects at risk of being halted.
Ms Murray and Mr Marran agreed with the Chairperson on these resolutions.
Mr Sileku raised the issue of capacity in municipalities, particularly in housing sections. He suggested having a report on the challenges experienced by housing units in municipalities.
The Chairperson proposed that, instead of requesting this information, the Committee could schedule an agenda item at the beginning of the year to discuss the diagnostic assessment that the Department did for municipalities. This assessment would address capacity issues and serve as due diligence before allocating funds for projects.
Mr Marran sought clarification on whether this referred to the information requested from municipalities that have not spent their allocated funds.
The Chairperson clarified that they would discuss the diagnostic assessment of municipality capacity and due diligence in the new year.
Mr Marran sought confirmation that the Committee then had three recommendations.
The Chairperson informed the Members that they had received the Expropriation Bill and would engage with it. The date for the meeting on the Housing Consumer Protection Bill was still pending.
The Expropriation Bill was scheduled for discussion on 6 December 2023 and Members would receive notice accordingly.
The Chairperson concluded the meeting, wishing everyone a fantastic day and adjourning the session.
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