Tourism infrastructure projects: DBSA update; with Deputy Minister

Meeting report

The Chairperson welcomed everone and noted the Minister of Tourism had sent an apology and the Deputy Minister would join later.

Introduction by Department of Tourism Director General
As the Director General of the Department of Tourism, Mr Victor Tharage addressed the Portfolio Committee on Tourism on infrastructure projects undertaken through the Expanded Public Works Programme (EPWP). Based on past evidence, Tourism infrastructure projects had not achieved success and were often characterized by wastefulness and problematic administration. Despite this, projects continued some dating back to 2005, with little to show for them. Planning processes occasionally occurred, but often resulted in no concrete outcomes. The situation escalated to a point where budgets were depleted, leading to requests for additional funding to complete projects that remained far from finished. Further, accounting officers lacked the authority to authorize such deviations, with a 20% allowance intended for non-infrastructure-related matters. This raised concerns about the status of the 20%, as it was clear that these funds had already been fully utilized.

In light of these challenges, Mr Tharage approached National Treasury to outline the status of the various projects. Treasury clarified that no deviations would be granted; instead, fresh planning for certain projects was necessary, prompting the department to undertake processes to identify what needed to be done. To facilitate this, the Government Technical Advisory Centre (GTAC), a Treasury agency, was engaged to assess which projects should proceed and which should not. Mr Tharage presented a detailed briefing on the GTAC outcomes Parliament during the 5th Parliament and subsequently initiated a process to build capacity within the department.

This process faced numerous challenges, but ultimately, at the beginning of the 6th Parliament, a request was made to Treasury for a deviation to engage the Development Bank of Southern Africa (DBSA). Treasury approved this request, enabling NDT to enter into a memorandum of understanding with the DBSA in 2020. Although delays occurred due to COVID-19, the department was eventually able to reach the stage of presentation today. Mr Tharage emphasized a visible and significant turnaround; however, substantial challenges remain. Additional capacity is still required for effective monitoring, as only one individual with the requisite expertise and background is currently available. Recruitment for two more individuals is in progress, alongside the hiring of contract staff due to the department's existing structure not accommodating the necessary capacity. Looking ahead, Mr Tharage assured the committee that adjustments would be made within NDT's structure to establish a unit that can provide essential support.

Infrastructure Projects: Development Bank of Southern Africa briefing
Mr Chuene Ramphele, Group Executive for DBSA Infrastructure, presented an overview of the DBSA's role, emphasizing its focus on financing and delivering infrastructure projects, with the aim of augmenting state capacity. He emphasised that DBSA's involvement is temporary, as departments are expected to operate independently post-assistance. He highlighted DBSA’s participation in significant projects, such as the restoration of Parliament.

Feedback from the March 2024 meeting:
DBSA acknowledged ongoing challenges in project delivery, including delays, budget overruns, and contractor issues. A Memorandum of Agreement with the National Treasury has been established to improve project delivery, streamline fund flows, and enhance collaboration with municipalities.

Budget Overview:
Total Budget: R1.202 billion.
Committed Appointments: R956m allocated to ongoing and upcoming projects.
Expenditure by March 2024: R563m, with cash flow concerns due to high early spending.

Project Distribution:
Projects are spread across provinces, with concentrations in KwaZulu-Natal and Limpopo, based on infrastructure needs and community involvement.

Key issues include:
- Disruptions by construction mafias.
- Contractor terminations for non-performance.
- Delays in municipal services like water and electricity.
- Budget overruns due to poor planning.

Project Status:
- Behind Schedule: 14 projects, due to cash flow, contractor inefficiencies, municipal delays.
- On Track: 6 projects, having effective contractor management and direct DBSA payments.

Planning Phase & Cancellations:
DBSA oversees 14 projects still in planning, dealing with land claims and community engagement. Nkambeni Safari Lodge project terminated due to land ownership disputes.

Progress Summary:
36 projects have reached Practical Completion.
20 projects remain under construction with ongoing monitoring.

Project Documentation:
DBSA provided photographic evidence of project progress, highlighting completed infrastructure and ongoing construction challenges.

Discussion
Ms L Ligaraba (ANC) noted that 36 projects had reached Practical Completion and asked what operational support was being provided to ensure the sustainability of these projects.

On the 20 projects still under construction and 14 behind schedule, she inquired about the measures in place to ensure timely completion and avoid cost escalations.

She asked how DBSA was addressing community participation, particularly project ownership. She specifically referred to the Numbi Gate project in Mpumalanga and queried the future of this project.

Ms Ligaraba sought clarification on how many sustainable, full-time jobs had been created through these projects and asked for more details on the opportunities offered to the 242 SMME subcontractors involved in project implementation.

She raised concerns about the distribution of projects across provinces, asking what criteria were used to determine the number of projects per province, noting disparities between provinces such as Limpopo with 16 projects and Eastern Cape with 14, compared to provinces with as few as one or six projects.

Ms H Ismail (DA) referenced irregularities in 2019 with at least 14 projects and requested a full report on the progress of these cases, including consequence management taken.

She inquired if companies that failed to deliver in the past had been blacklisted and what measures were in place to prevent them from receiving future contracts. She asked if a list of these contractors could be made available to the Portfolio Committee to ensure effective checks and balances.

On Memoranda of Understanding (MOUs), Ms Ismail sought an update on DBSA efforts to assist NDT in building internal capacity, noting only one person had been involved so far.

She requested clarity on how responsibility for contract terminations is handled and asked what consequence management is in place to address potential misuse of funds during these terminations.

Ms Ismail inquired about measures to secure community buy-in and prevent projects from being stopped or vandalized, expressing concerns over avoiding “white elephant” projects.

She asked about the improvement of relationships with municipalities and provinces to ensure smoother project implementation, and how DBSA is ensuring local knowledge and project care after completion, emphasizing community involvement and responsibility transfer to municipalities and provinces.

Ms Ismail asked why there were delays in securing water and electricity supply for projects, noting that municipalities should have been engaged from the start to ensure these services were available.

She questioned the inclusion of security in the Bill of Quantities (BOQ), asking why there is still significant vandalism and what security measures are in place.

On jobs, Ms Ismail sought clarity on the types of jobs being created, if they were EPWP jobs, and if proper training was being provided for sustainable employment.

She asked about the criteria used to determine where projects are initiated.

Ms Ismail referred to infrastructure issues, specifically roads leading to tourist facilities, and asked what steps are being taken to address these logistical challenges to improve accessibility for tourists.

She requested explanation on projects that were reprioritized or removed, inquiring why they were initially included and later discarded.

On project timelines, Ms Ismail asked if the shift in completion dates to 2024/25 would affect project costs, and who would be held accountable for any additional costs incurred.

She inquired about the consideration of special needs such as wheelchair accessibility, asking if these were included in the original project scope or later added as part of an additional scope.

Ms Ismail requested an update on the status of projects listed for completion by 2023, seeking clarity if the projected outcomes had been met.

Lastly, she raised concerns about funds placed in a tourism account, specifically asking how interest from this account is being utilized. She referred to the Manyane Lodge project, where vandalism led to the project being redone, and asked who would be held accountable for this wasteful expenditure and what measures were in place to prevent similar issues.

Mr S Moodley (MK) said that the previous approaches to projects had failed and suggested that local communities should be more involved by employing people directly from the villages where projects are taking place to avoid "construction mafias" and disruptions.

Mr Moodley questioned the need for implementing agents, asking about the costs involved and why the responsibility could not be managed internally.

He requested the Memorandum of Understanding (MOU) between the Department and DBSA, asking if it had been approved by the Committee or signed without the Committee’s input. The Committee holds the authority to approve such agreements.

Ms L Tito-Duba (EFF) asked about NDT's capacity to take over infrastructure projects and requested an update on DBSA’s efforts to enhance this capacity.

Ms Tito-Duba asked about the cancelled project if any funds were lost and how much.

She expressed concern over payments to contractors, questioning if contractors were rushing to complete work by designated payment days and how their performance was being monitored.

On project duplication, she asked if there was adequate coordination with municipalities to avoid this issue.

Lastly, she queried the number of implementing agents who had failed to meet their contractual obligations and what steps were being taken to address these failures.

Ms E Linde (DA) expressed concern about projects being built on private property, asking what happens once millions have been spent on such developments. She queried if property owners could sell the properties immediately after completion and make a profit without accountability. She asked what contract safeguards were in place to prevent this and what the stipulations were when entering agreements with communities for such projects.

She requested clarity on how many of the 36 completed projects are operating functionally.

Mr S Maeco (ANC) emphasized the importance of stakeholder management, noting that it seemed to be lacking. He stated that effective organization, monitoring, and improvement of relationships with all stakeholders were essential to the success of any project.

Mr Maeco addressed project life cycle management, particularly the absence of a clear structural plan for project managers to guide projects to successful completion. He pointed out that many projects run over budget and time due to scope variations, which lead to requests for additional funds.

He questioned if the projects were properly audited and monitored, suggesting that earlier audits could help identify challenges and allow for corrective actions before the projects fall too far behind schedule.

He acknowledged the progress made but emphasized the importance of supporting DBSA as they move forward. He suggested that not all business forums should be labelled as "construction mafias," as many come from previously disadvantaged communities that lack the capacity to contribute effectively.

He stressed the need for NDT or government to advocate for and build capacity in project management. He recommended that, during the feasibility and initiation phases of a project, it is essential to assess community needs and identify local leaders who can take ownership of the project, ensuring smoother execution and stakeholder buy-in.

Mr Maeco emphasized early involvement of the community, consultants, and service providers in identifying potential challenges within the community and finding solutions early on to mitigate disruptions later.

He pointed out that the DBSA document did not fully capture key facts presented by Mr Rampele. The document lacked detail for a comprehensive understanding of DBSA’s work.

Addressing financial constraints, Mr Maeco raised concerns about the tender document process, particularly the financial viability requirements for bidders. He questioned if due diligence had been conducted during the evaluation process and emphasized the importance of appointing bidders who meet financial criteria.

Mr Maeco called for DBSA to conduct deeper research to identify the reasons behind delays and how financial constraints had contributed to project setbacks, advocating for improvements in the evaluation process.

He emphasized the need for proper monitoring and evaluation to identify underperformance by contractors early, ensuring that appropriate consequences are implemented not only for poor performance but also for systemic issues.

Mr Maeco requested clarity on the process followed when a contract is terminated and a new contractor is appointed. He asked if the new contractor continues with the remaining scope or starts from scratch, stressing that this distinction has implications for both project timelines and costs. He noted that projects from 2020 to 2025 could be prolonged due to the frequent resetting of timelines when new contractors are appointed.

Referring to page 30, Mr Maeco pointed out that while 36 projects had achieved Practical Completion, there were concerns about the KZN project. Completion was achieved in 2023 with an expenditure of R27 million (83% of budget), yet 17% of the retention fee has not been released by DBSA. He found the explanation that the final account was “under review” unsatisfactory, suggesting that this delay indicated deeper challenges in closing out projects.

He expressed frustration with project delays, noting that financial issues for projects completed in 2023 were still unresolved to date.

Mr Maeco noted the snag process and the need for proper defect reporting. He emphasized that once defects are identified, a report should be submitted, leading to a close-out report and a completion certificate, but observed that this process did not seem to align with what the report indicated.

On the Philip Sanders project, he noted that 63% of the practical work had been completed by February 2024 but there was a lack of accountability for contractors. He urged DBSA to develop stronger measures for ensuring contractors are held accountable for the work awarded and the funds disbursed. He called for more robust consequence management to prevent repeated delays and inefficiencies. Merely terminating contracts and appointing new contractors was insufficient.

On the Free State QwaQwa Guest House project, valued at R23 million, Mr Maeco pointed out that 87% of the budget had been spent by September 2023, yet a new RFQ (Request for Quotation) was underway for security companies. He asked why a new provider was being sourced at this stage and if this would lead to increased costs. He questioned why an RFQ was used instead of an RFP (Request for Proposal), particularly if the additional cost exceeds R1 million. Was this service expected to be completed quickly?

The Chairperson appreciated DBSA’s prompt contractor payment system, noting its efficiency in ensuring weekly payments. However, this success brings its own challenges. Some contractors divert funds from one project to cover expenses on another, which results in cash flow issues, delays, and material shortages that affect project timelines. There should be measures in place to ensure that contractors use the funds responsibly for the specific projects they are being paid for, preventing these disruptions.

The Chairperson emphasized a significant issue across government projects: the lack of integrated planning between national, provincial, and municipal departments. This disconnection has led to the completion of projects without essential services like water and electricity in place. She stressed the need for better coordination between these governmental levels to prevent such issues from recurring. Although Treasury grants sometimes provide for these services, the failure lies in the lack of early involvement and communication from municipalities in the planning stages. This is prevalent even in older metro municipalities with established infrastructure departments for water and electricity.

The Chairperson raised concerns on infrastructure management in metros, where one would expect more advanced systems, yet challenges remain. She called on the Deputy Minister to address this at a national level, ensuring that departments work cohesively. Further, he asked about the current status of the infrastructure planning office, which was previously housed in the Office of the President but may have been moved to Public Works. She stressed the importance of this office in aligning pipeline projects with all three spheres of government, ensuring that infrastructure projects are budgeted for and managed effectively, including aligning national and municipal budgets.

The Chairperson raised further concerns on financial budget cycles, noting the misalignment between the government’s fiscal year, which ends earlier, and the municipal financial year, which ends in June. This difference, she explained, often results in completed projects waiting for infrastructure connections such as water and electricity from municipalities. She suggested that while National Treasury and departments like Human Settlements can assist by providing grants to metros and some districts for infrastructure, this misalignment will continue to cause delays until resolved.

Moving to the issue of retention funds, the Chairperson asked if DBSA retains these funds in their own coffers or if they are transferred to the contractors. She acknowledged the commendable creation of the Tourism Fund for tourism-related projects but expressed concerns about the early release of retention funds to contractors. She stressed that retention funds should remain with DBSA, as the project owner, until aftercare services have been completed and all defects resolved.

The Chairperson sought clarity on how long DBSA holds retention funds post-project completion, asking if it was typically three months or six months. It was important to ensure that contractors address any defects within the agreed-upon timeframe before the final payment is released. This process must be a contractual requirement to ensure contractors fulfill their obligations.

Additionally, the Chairperson emphasized the impact of global warming on project planning, pointing out the increasing frequency of floods and unpredictable weather patterns. Projects which were once planned around traditional rainy seasons, now require re-planning to account for climate change. She called for project budgets to reflect these new realities and to accommodate delays caused by extreme weather conditions.

The Chairperson addressed projects that are behind schedule due to contractor performance. It was important to ensure contractors take projects seriously from the start. If a project is planned for 12 months or three years, it must be completed on time, accounting for expected but not avoidable delays. Road construction, including access roads, should be the responsibility of the contractor. Based on their site inspection during the bidding process, contractors should include the cost of constructing access roads in their bids.

The Chairperson asked for an update on the concerns previously raised by the Minister during the first meeting of this Committee. She asked if these concerns had been addressed, were still a work in progress, or were being actively attended to, underscoring the importance of following up on these matters.

DBSA response
Mr Chuene Rampele, DBSA Group Executive, thanked the Committee for their valuable input and advice, noting that it would help address DBSA weaknesses and improve its operations as an organ of state. He acknowledged that perfection was not the goal, but continuous improvement was.

Addressing the points raised, Mr Rampele confirmed that before awarding tenders, contractors are required to visit project sites to assess potential challenges and risks. This ensures that their bids reflect a thorough understanding of the project's logistical difficulties. Contractors are also expected to account for double or triple-handling of materials when necessary, and this should be reflected in their price estimates. He assured the Committee that DBSA had effectively communicated this expectation to the contractors.

On contractors behind schedule, Mr Rampele explained that the best approach was to enforce contractual terms, place contractors "in mora" (on terms), and impose penalties where appropriate. However, penalties alone were insufficient, as they did not resolve the incomplete projects. The goal was to identify the root cause of delays and, if necessary, bring in contractors with the capacity to finish the project.

He highlighted a common dilemma: when a contractor is close to completing a project but struggles with the final stages, terminating the contract could lead to further delays. In such cases, DBSA prefers to bring in someone else to finish the remaining work. Payments are only made for work completed, not advanced. DBSA ensures materials, such as bundles of bricks, are accounted for on-site even if a contractor defaults.

Mr Rampele emphasized the importance of climate-resilient infrastructure in the scope of work, reminding consultants that new projects should address pre-existing issues and incorporate sustainable technologies. For example, DBSA now includes water reuse systems and solar panels in suitable areas, contributing to decarbonization efforts and reducing dependence on electricity from polluting sources like generators.

On retention money, Mr Rampele explained that DBSA keeps it in a dedicated account. NDT disburses funds based on cash flow needs, such as R400 million requested per quarter. Any interest generated remains in the account and is declared annually to the Director-General, with the interest typically returned to the National Revenue Fund. By tracking funds in specific accounts, such as the Tourism Account, DBSA can manage interest generated by particular projects.

After Practical Completion, approximately 90 days are allowed for Works Completion and Final Completion, during which DBSA assesses any remaining liabilities and reconciles the final account. One challenge is the way the industry structures consultant fees. Consultants often claim up to 50% of their fees by Stage 4 (procurement), leaving only 20% for the final project stages (works, competition, and close-out). This structure can lead to consultants losing interest during the critical oversight stages, resulting in delays.

Mr Rampele acknowledged DBSA’s efforts to change this fee structure but they have faced resistance. He stressed the importance of consultants remaining engaged through project completion and not shifting focus after practical completion. In some cases, this disengagement has led to disputes over final payments, with consultants sometimes claiming millions more than what DBSA records show. To prevent overpayment, DBSA insists on accurate record-keeping and resolves disputes through arbitration when necessary.

Mr Rampele spoke to contractor documentation and compliance requirements. DBSA does not release payments until all necessary documentation is received, in line with a detailed checklist. One key requirement is the Electrical Compliance Certificate (COC), without which DBSA withholds payment. If contractors fail to provide the COC, DBSA hires a qualified electrical company to perform the assessment and deducts the cost from the contractor’s final payment, ensuring that projects are closed properly.

DBSA reports cases of unprofessional behaviour by some contractors and professionals to National Treasury for further action, although the final decision rests with Treasury.

On project planning, DBSA agrees on all fees and logistical considerations with contractors from the outset, and these are factored into their costs. However, execution remains a challenge, particularly with follow-ups on agreed-upon actions. For example, despite agreements, DBSA often finds itself chasing entities like Eskom to implement tasks such as pulling power lines. Despite escalating issues to regional offices, they often receive only promises, not action.

Mr Rampele proposed strategies to mitigate delays, such as ensuring material payments are made directly to suppliers rather than relying on contractors, preventing contractors from misusing funds meant for one project to cover another. These measures are part of DBSA’s efforts to improve control over projects and reduce delays caused by such practices.

Mr Rampele explained DBSA’s payment process for Practical Completion, noting that payments are made only for work done, as assessed and certified by professionals. No advances are paid; everything is based on value created. In situations where contracts are terminated, it is considered a last resort. For instance, Mr Rampele cited a woman-owned contractor who, despite receiving a loan from DBSA to support project completion, failed to make progress. After attempting to encourage the contractor to partner with a more experienced firm, DBSA was forced to terminate the contract when no improvement was made. In such cases, a new contractor is appointed to complete the remaining work.

Upon contract termination, DBSA prepares a termination account to determine what still needs to be done. This forms the new scope of work for the incoming contractor. However, the procurement process can introduce a delay of one to two months, as the contract must be advertised and proper procedures followed. The new contractor is given a fresh timeline and program to complete the work, rather than adhering to the previous contractor’s schedule.

On due diligence, Mr Rampele highlighted DBSA’s thorough process, which includes checking if a contractor is politically exposed, reviewing financial statements, and requesting bank rating letters. While financial capacity is evaluated, contractors cannot be excluded based solely on their financials, as some may secure loans to finance projects. The focus is placed on the viability of the project rather than the overall financial health of the company, particularly when dealing with black-owned businesses that may not have strong balance sheets due to historical disadvantages.

Mr Rampele noted that DBSA evaluates cash flows and project profitability to assess a contractor’s ability to complete the work. This approach, though sometimes criticized by groups such as the Black Business Council for being exclusionary, is aligned with government policies on preferential procurement to ensure that black-owned businesses are not unfairly excluded based on financial ratings alone.

Mr Rampele spoke to DBSA’s commitment to improving state capacity to better execute projects and support contractors, emphasizing the importance of continuous growth, particularly in stakeholder management. Before beginning any project, DBSA conducts a stakeholder identification process to map out key role players. This forms the basis for the Project Steering Committee (PSC), which plays a critical role in guiding the project.

However, political interference within these committees, especially around the appointment of a Community Liaison Officer (CLO), often presents challenges. While DBSA relies on municipalities to assist with the appointment process, councillor recommendations sometimes conflict with other community needs, leading to politically biased selections. To mitigate this, DBSA advocates for a clear and transparent appointment process that avoids political influence.

The effectiveness of the PSC is vital to project success. Mr Rampele described instances where PSC members or even the chairperson have had conflicting interests, such as being subcontractors, which can halt the project under the guise of community concerns. Despite these challenges, DBSA actively manages them and works to maintain project momentum.

Mr Rampele stressed that having a strong PSC and capable CLO is essential to keeping the project on track. He also echoed the importance of community engagement, noting that project managers need to be more present on-site, interacting directly with the community and overseeing timelines, rather than working remotely from their offices.

Mr Rampele discussed the 36 completed projects, emphasizing the need for developing maintenance plans once Practical Completion is reached. While DBSA’s role is to deliver infrastructure, it is crucial for operators and end-users to be responsible for maintaining the facilities to ensure their sustainability. He highlighted successes with Total Facilities Management, where maintenance is built into the project from the beginning, including ongoing maintenance of the Union Building and a military hospital.

Mr Rampele stressed the importance of shifting from reactive repairs to a proactive facilities management approach, which extends the lifespan of infrastructure and reduces the need for costly fixes. He suggested consolidating critical systems like generators under one plan to enhance sustainability. DBSA has consulted on how frequently maintenance should occur, ensuring the infrastructure is used as intended.

On job creation, while construction jobs are typically short-term, such as six-month projects, DBSA focuses on creating sustainable jobs that arise once the infrastructure is operational. These could include roles such as receptionists or other operational staff, providing longer-term opportunities for the community.

He concluded by mentioning the problem of project duplication, where departments sometimes provide overlapping project lists, and deferred the question to Mr Nxumalo for further clarification.

Mr Thulani Nxumalo, DBSA Programme Manager for NDT Programme, provided an update on the process of streamlining and coordinating the projects under DBSA management. When the initial project list was received, it contained 79 projects. Upon review, the DBSA team identified that several projects had been listed multiple times across different work packages. This overlap created inefficiencies in the project management process.

During site visits, it became clear that what appeared to be distinct projects were, in fact, the same projects listed under different work scopes. Initially, the team had assumed that the duplicated entries referred to different phases or aspects of the work, but on closer inspection, it was confirmed that these projects could be consolidated into a single work package. This allowed the DBSA to optimize its approach and reduce unnecessary duplication across several projects.

Mr Nxumalo highlighted specific examples, such as projects involving nature reserves. In some cases, the allocated work had already been completed by the nature reserves themselves by the time DBSA visited the site. As a result, these projects were removed from the list to prevent misallocation of resources. The funds earmarked for these completed projects were subsequently reallocated to other initiatives, ensuring a more efficient use of NDT’s budget.

Mr Ramphele responded to committee concerns about cancelled projects to ensure no financial losses. DBSA follows a strict payment policy, wherein payments are made only for work that has been certified as completed. In cases where a contractor vacates the project site, any materials or work paid for by DBSA become its property. This protocol ensures that DBSA can secure the site and materials . DBSA often replaces the contractor’s security with its own, particularly when a contractor is aware that they are being terminated. This prevents contractors from removing materials, such as bricks, that DBSA has already financed.

To further safeguard its financial interests, DBSA activates a construction guarantee, a critical part of its contractual agreements with contractors. Before any work begins, DBSA requires contractors to provide a construction guarantee, which is held until the project is completed. In cases where a contract is terminated, DBSA exercises the on-demand guarantee, allowing it to directly approach the insurance company for compensation without further negotiation with the contractor. For example, if a contract is valued at R4 million, the guarantee can be used to cover damages or costs associated with replacing materials or rectifying incomplete or faulty work. This mechanism ensures that DBSA can appoint a new contractor without incurring financial loss and guarantees that funds are not mismanaged.

Mr Ramphele addressed a broader challenge faced by DBSA when working with local municipalities. Many local councillors often prioritize how many small, medium, and micro-enterprises (SMMEs) and contractors from their own areas can be included in the projects, rather than focusing on the overall strategic objectives of the initiatives. This local focus sometimes leads to disruptions in project progress, as councillors push for more local involvement. While DBSA makes efforts to engage local officials by including them in the project steering committees, their attendance at meetings is often inconsistent. In many cases, councillors only become involved when a project is inaugurated, and their focus tends to shift to the number of local people involved rather than the project's overall success.

Mr Ramphele spoke to the operational dynamics of the steering committees, noting that once the Community Liaison Officer and other key roles are appointed, DBSA holds monthly steering committee meetings to monitor progress. However, he expressed concern over the lack of consistent participation from local stakeholders. He questioned if DBSA needed to enforce participation more rigorously but acknowledged that there were limits to how much pressure could be applied. "All we can do is push the project forward," he stated, emphasizing that this was a daily challenge DBSA encountered.

He went on to highlight the broader issue of inadequate cooperation from municipalities, which often leads to project delays. Mr Ramphele explained that local municipalities did not always appreciate the broader context of local economic development, which slowed their responsiveness. For example, something as simple as connecting electricity to a project could be done without delay, yet municipalities often failed to act swiftly. DBSA had been trying to work with municipalities from a local economic development standpoint, but this remained an ongoing challenge.

On the Memorandum of Agreement (MOA), Mr Ramphele clarified that it was a formal agreement entered into between institutions under section 239 of the Constitution, which permits one organ of state to request another to perform certain functions. He admitted that he had not initially realized that the MOA needed to be formally presented to the committee, as the focus had been more on presenting solutions and allowing the Committee to provide oversight. The MOA, signed by Mr Ramphele on behalf of DBSA and the Director-General (DG) on behalf of the Department of Tourism, provided the framework within which DBSA operated. What had been presented to the Committee were the specific projects, the challenges DBSA was encountering, and the mechanisms deployed to address them.

Mr Thulani Nxumalo, DBSA Programme Manager for NDT programme, provided an update on the progress of specific projects, with a particular focus on the Manyane Lodge. After assessing the damage to the lodge, DBSA had prepared a plan and initiated the tender process. A contractor was appointed to begin the necessary repairs, but the project was halted on-site before any work could commence. Despite extensive facilitation efforts, including the establishment of a Project Steering Committee (PSC) and the appointment of a Community Liaison Officer (CLO), the project encountered resistance from another section of the community. This group demanded the appointment of its own PSC and refused to recognize the existing CLO.

Mr Nxumalo detailed the protracted efforts required to resolve the conflict, explaining that it took numerous meetings and significant time to get the project back on track. Despite these efforts, the delays necessitated an extension of the project’s timeline. Once work finally began, additional complications arose, including the discovery that bathroom fittings had been stolen from the site. Further issues revealed that the electrical cables were missing.

As work progressed, more problems were uncovered, resulting in an expansion of the project’s scope. In light of these ongoing discoveries, DBSA requested that the Professional Service Provider (PSP) reevaluate the entire project. The reassessment’s aim was to quantify the damage caused by vandalism and revise the project’s budget accordingly. The final cost estimates for the project would be available soon, following the PSP assessment.

Another project, a guest house, faced a different set of challenges. The project involved a sewer line that was intended to connect the guest house to the main municipal sewer system. However, once the contractor completed the construction work, it was discovered that the municipal layout was inaccurate, and the necessary connections to the sewer line were incomplete. This oversight prevented the contractor from fully handing over the project.

To address this, the contractor requested partial release from the project, and DBSA is currently evaluating whether to bring in a security company to safeguard the equipment on-site, a service that could cost around R300 000. Alternatively, DBSA is considering keeping the contractor on-site to manage security while the issues are resolved. The best course of action is still under review.

In the meantime, DBSA has initiated the installation of a septic tank as a temporary solution, allowing the project to move towards closure. Feedback on the water use license was expected by the end of the month, and a meeting with the municipality had been scheduled to resolve the outstanding sewer connection issue.

Mr Ramphele addressed concerns on the capacity of DBSA’s partners, particularly for future infrastructure pipelines. DBSA had been actively working to support these partners by establishing project intervention units, similar to those implemented in other departments, such as the Health Department. This initiative, which has already commenced, aims to ensure that skilled personnel are in place to drive infrastructure projects forward, improving overall project execution and delivery.

He then shifted focus to sustainability, a key concern raised by the committee. Mr Ramphele explained that once infrastructure projects are completed and handed over, DBSA’s role extends to providing operational support to ensure that these assets continue to function effectively. While DBSA is not responsible for directly operating the facilities, it plays a crucial role in providing guidance and support to ensure that end users are equipped to maintain the infrastructure. This operational guidance helps sustain the projects long after DBSA’s involvement ends.

On the 14 delayed projects, Mr Ramphele provided an update on their progress, noting that some were 76% complete, while others had reached 90%. DBSA meets weekly with the project teams to accelerate the pace of completion. He identified funding as the primary issue contributing to the delays, explaining that some contractors lacked the financial resources to complete the work. While DBSA is unable to provide loans, it is exploring alternative funding mechanisms to support contractors. One such measure includes paying specialist subcontractors, such as electrical contractors, directly to ensure that critical components of the projects continue without interruption.

Mr Ramphele stressed the importance of holding project managers (PMs) and contractors accountable for the timely completion of the projects. He reassured the committee that DBSA is actively working to push contractors toward finalizing their work and remains committed to providing regular progress updates on these delayed projects as they move closer to completion.

On concerns about job creation through the infrastructure projects, Mr Ramphele acknowledged that most of the jobs generated thus far had been construction-related, which are typically short-term and not sustainable over the long term. However, once the projects are completed, DBSA would conduct evaluations to determine what sustainable job opportunities had been created. For example, operational lodges might generate employment that lasts beyond the construction phase, with positions extending for more than three to six months. This would be a positive outcome, providing longer-term employment in the tourism sector.

Mr Ramphele highlighted DBSA's commitment to supporting Small, Medium, and Micro Enterprises (SMMEs). For less complex tasks such as paving, DBSA has been giving local contractors the opportunity to participate in the projects. For more specialized work, such as air conditioning installation, local contractors with the required expertise are engaged. DBSA has introduced a management program to guide these contractors and ensure the quality of their work meets the necessary standards.

On provincial project distribution, Mr Ramphele replied that the project allocations had been based on numbers received from NDT. He acknowledged that some projects had encountered issues, and DBSA was working diligently to resolve these challenges in coordination with NDT and other stakeholders.

National Department of Tourism response
Mr Xolani Dlamini, Director of NDT Programme Co-ordination Office, gave an update on the skills transfer program. DBSA had developed a draft skills transfer plan, aimed at enhancing the capacity of NDT officials. The department had submitted a list to DBSA, identifying officials who required specific skills, as well as detailing the types of skills needed. These included project management, contract management, mentorship, and coaching.

The next step was for DBSA to finalize the skills transfer plan and send it to NDT for consideration and approval. This initiative was intended to ensure that NDT would have the internal capacity to manage future infrastructure projects independently.

Director General Tharage responded to the question on fruitless and wasteful expenditure, noting that NDT had prepared a detailed written response, which had been submitted under Question No 701 for the Minister’s reply. The standard procedure when such cases are identified is it must follow by a formal investigation whether the expenditure is flagged by NDT, implementing agents, or the Auditor-General. The purpose of the investigation is to determine the cause of the expenditure and to decide the appropriate course of action. In cases where the expenditure is recoverable, steps would be taken to recover the funds. In other cases, the expenditure might be written off. He cited corruption, inflated pricing, or other similar causes as examples of issues that could lead to fruitless and wasteful expenditure. Where necessary, investigations may involve the police, particularly in cases of suspected corruption or criminal activity.

The outcome of the investigation dictates the subsequent steps. As for the blacklisting of individuals or entities responsible for fruitless and wasteful expenditure, this process has been challenging. Although NDT has attempted to blacklist individuals through National Treasury, Treasury requires a court order before such action can be taken. Even if a person is identified as the cause of fruitless and wasteful expenditure in an investigation, blacklisting is not automatic without a court judgment. This requirement applies to both civil claims and criminal judgments, meaning that if no court order is secured, the individual can continue conducting business, often to the detriment of NDT.

In some cases, contracts are temporarily suspended to prevent further financial loss while investigations proceed. However, he acknowledged the lengthy nature of legal proceedings, explaining that it can take years for cases to reach court. Once a case is opened, there is often a significant waiting period before it is heard – during which time there is little NDT can do to expedite the process.

On the geographic spread of tourism infrastructure projects, Mr Tharage clarified that DBSA is responsible for implementing only a portion of the NDT overall portfolio, specifically in areas where significant challenges or problems had been encountered. He cited the Baviaansloof Nature Reserve in the Eastern Cape, which has been designated an international World Heritage Site, as an example of one such project. DBSA’s work on this site includes the development of a large interpretive centre for the Baviaanskloof region, along with a hiking trail that features scenic camping accommodations. The trail spans several days to complete, offering a unique experience for visitors. The total investment in the Baviaansloof project was about R70 million. Many of the tourism projects in this region are also managed by the Eastern Cape Parks and Tourism Authority.

Moving on to the Free State, Mr Tharage highlighted another significant project—the Dinosaur Interpretive Centre located in the Golden Gate Highlands Park. This project received an investment of about R120 million, further demonstrating the scale of NDT’s investments in tourism infrastructure across the country.

Mr Tharage emphasized the scale of investments across these regions, noting that each project contributes to regional economic growth and the development of tourism infrastructure. He provided Gauteng as an additional example, explaining that the province, being more developed than others, has benefitted from a number of high-profile projects, such as nature reserves.

Shifting to security and vandalism, Mr Tharage recounted a personal experience at the Manyane Lodge. Without informing anyone except his personal assistant and the Minister (for security reasons), he made an unannounced visit to the site. Upon arriving at the gate, he observed bullet holes on the building, clear evidence of a recent shooting incident. The security guard explained that a group of people had arrived demanding access to the premises, and when denied entry, they opened fire. Fortunately, no one was injured, as the security personnel were protected by bulletproof barriers. Mr Tharage noted that this was only one of several incidents that had occurred at the site, mentioning that seven cases had been reported, including theft of infrastructure such as cables. These incidents represent the ongoing security challenges faced by tourism infrastructure projects in certain areas.

Mr Tharage continued to address the complexities involved in managing projects that have already incurred significant financial losses. When such losses occur, it is critical to implement corrective measures thoughtfully, without rushing into action. "If you just rush in to try to retain what is not even retainable, you’re going to waste even more than was originally lost," he explained. In certain cases, losses may have to be written off; however, in others, it is essential to follow the money and ensure that the necessary steps are taken to recover misappropriated funds.

Mr Tharage clarified a critical point on the ownership of land used for certain tourism projects, dispelling misconceptions about these projects being developed on private property. He cited Isibhubhu, noting that while the project is sometimes perceived as being on the private property of the King, it is actually situated on land managed by the Ingonyama Trust, which is not private property. This extended to other projects associated with chiefdoms. These lands belong to community trusts and are under the custodianship of traditional leaders, rather than private individuals.

Mr Tharage stressed the importance of understanding that none of the projects DBSA is involved in are located on private land, reinforcing that such properties are governed by community or government trusts, with the Amakhosi acting as custodians. All these projects are subject to regular audits by the Auditor-General of South Africa (AGSA). The audits are designed to ensure full accountability for these projects, and audit findings of these are found in the NDT annual report. This auditing process ensures that both the financial integrity and project performance are monitored closely.

Mr Tharage provided two examples of the types of challenges faced in the execution of these projects. The first example was a project that had been initiated by a traditional chief, who subsequently passed away. Following the chief’s death, an Acting Chief was appointed, who demanded that the nearly 70% complete project be restarted to align with their new vision. This demand added complexity, especially as the new chief sought the involvement of Members of Parliament, further complicating the situation. On investigation, it discovered that there were other groups, previously excluded or unsuccessful in other projects, now seeking to leverage the situation to gain access to the resources and benefits of the project.

In such scenarios, the response is to engage the broader community directly. They call for a community meeting—not just a meeting with the trust—where all stakeholders are invited, including local councillors, ward councillors, the Amakhosi, the Royal Council, and community members. The purpose of these meetings is to openly discuss the issues, address the concerns of the various stakeholders, and attempt to find a solution. However, this approach has its own challenges. "Nobody wants to come to that kind of open meeting," he remarked. Instead, stakeholders often prefer smaller, private discussions, which can add another layer of complexity to the decision-making process.

Mr Tharage shared another example of a project that had been terminated. He had personally visited the site multiple times to better understand the issues. In this case, the land involved had been part of a successful land claim and was now managed by a communal property association (CPA), which included both the royal family and a board responsible for overseeing the land post-claim. Initially, there was a clear agreement among all parties to proceed with the project, and everything moved forward smoothly. However, as the project progressed, dynamics within the community shifted, leading to objections from various individuals who expressed dissatisfaction with the direction of the project. This situation led to significant delays and, ultimately, the termination of the project. These types of challenges—where community or internal disputes emerge after the project has begun—are issues that are faced regularly.

They continually learn from these experiences, encountering new challenges almost daily. While these projects are typically included in Integrated Development Plans (IDPs), and may even be discussed publicly by mayors during IDP presentations, the expected follow-through from municipalities does not always materialize. Whether it concerns basic services such as water or electricity, municipalities do not always provide the necessary support, even though they recognize that the project is bringing much-needed development to the area.

Mr Tharage had requested the team to develop a detailed sustainability framework to address these ongoing challenges. He reflected on past cases where sustainability difficulties were encountered and support was offered to communities by bringing on board experts with the required operational skills. Initially, communities often accepted the offer, mistakenly thinking that NDT would also provide funding for the project’s operations. However, later on, communities would state that they had found someone locally who could handle the project, declining further support. In response, NDT made it clear that if communities were going to manage the project independently without following a proper process, government involvement would no longer be required, and they could proceed on their own. This often happens in sensitive situations, particularly when dealing with royalty or communal leadership, where respect for local customs and authority is paramount.

There are many options for structuring project operations and it is not always necessary for government to take full control of the facility. One model that could be considered is a concession agreement, where a third party is brought in to operate the facility for a specific period. Under such agreements, the third party would have the right to use the facility, with the option to pay a fixed fee or share profits with the government or community. Importantly, under a concession model, the property must be returned in the same condition in which it was found at the end of the concession period. Exploring these different operational models is key to ensuring the long-term sustainability of the facilities, rather than simply relying on hiring someone to manage the site.

On the NDT-DBSA Memorandum of Agreement and the role of the Committee, Mr Tharage noted that it would not be appropriate to involve the Committee in the execution of departmental work. This, he explained, could potentially compromise the Members’ ability to oversee the projects impartially and might pose challenges during accountability phases. The Committee should not be positioned as joint executors of the Department’s responsibilities.

Mr Tharage noted the Committee concerns around social facilitation, consequence management, termination of agreements, and procurement had been answered. While these matters remain ongoing, he acknowledged the valuable suggestions received, which the Department intends to consider in addressing these specific issues.

On the slow expenditure, Mr Tharage replied that there had a recent improvement in spending. Delays often occur during the planning phase, which can affect the timeline for implementation. However, steps are being taken to address this, including a review of the ratio of project managers to projects, a critical factor in enhancing efficiency.

Deputy Minister remarks
Deputy Minister of Tourism, Ms Maggie Sotyu, thanked everyone for their engagement. She noted that several of the key questions had been addressed during her time in the meeting.

The Deputy Minister said that she had recently received a comprehensive briefing on the current status of these projects and the contributing factors to the delays. In these discussions, it was acknowledged that while there are multiple reasons for delays, some obstacles are more easily surmountable—referred to as “low-hanging fruit”—which can be resolved swiftly. Among these, she highlighted specific issues within certain departments that, with focused effort, should be addressed by the end of the financial year, facilitating the handover of projects to their respective owners. Ownership could vary between municipalities and Community Property Associations (CPAs).

Deputy Minister Sotyu raised concerns about the timing of several projects, many of which had missed their original deadlines. Numerous projects were initially slated for completion in 2023, while others had been scheduled for early 2024, yet these deadlines had lapsed. In the case of the Vredefort Dome project in Maluti-a-Phofung Municipality in the Free State, delays in this project were largely political in nature, necessitating political intervention. Both NDT and the municipality acknowledged that such intervention would be essential to overcoming the current challenges and moving the project forward.

Deputy Minister Sotyu acknowledged the considerable challenges faced by the Maluti-a-Phofung Municipality, noting its inability to meet certain commitments made on project support. She specifically referenced the QwaQwa Guest House project, expressing doubt that the municipality would be able to deliver on its promises due to a lack of resources. Given this context, the Department of Tourism would need to assume responsibility for resolving these issues. She explained that while several municipalities initially committed to providing assistance, it has become evident that they will not be able to fulfill these obligations.

In light of these challenges, the Deputy Minister announced her intention to personally visit several key projects in various provinces, starting in the second week of October. These visits will focus on projects that are near completion—between 95% and 99% finished—to identify the remaining obstacles. By conducting on-site assessments, the Deputy Minister aims to expedite the handover of these projects to their owners.

She cautioned that relying solely on reports from different officials often leads to inconsistencies in the information provided. To avoid this, Minister Patricia De Lille and she have decided that the Deputy Minister herself will visit the projects. This approach will ensure that the Department presents an accurate and unified account when reporting back to the Committee.

Concluding remarks by Chairperson
The Chairperson thanked Deputy Minister Sotyu for her thorough responses, clarifications, and comments. The Department should submit the Memorandum of Understanding to the Committee and DBSA should provide evidence of stakeholder consultations to ensure community engagement was properly conducted. This, she noted, would help mitigate any potential issues with local community members and prevent unrest.

The Chairperson urged the development of operational plans for projects that have reached critical completion. These plans should either be presented to the Committee or evidence must be provided that the operational plans are being implemented. She also stressed the importance of improving the Department’s engagement with municipalities, particularly given the Deputy Minister’s observations that some municipalities are unable to meet their commitments due to a lack of capacity and resources.

In addressing this, the Chairperson recommended that the Department establish a time frame for creating an internal infrastructure unit and present this plan to the Committee. She expressed hope that the budget would accommodate this initiative. DBSA has indicated they do not intend to serve as an implementing agent indefinitely and will need to transfer skills to the Department. She recalled that, in a previous meeting, the Director General had expressed NDT’s interest in developing internal technical capacity.

Concluding the meeting, the Chairperson thanked the Deputy Minister, Members and the DBSA and Department of Tourism for their contributions and adjourned the meeting.