Western Cape Adjustments Appropriation Bill: Infrastructure

Meeting report

Opening Remarks

The Chairperson opened the Standing Committee meeting on Infrastructure by welcoming attendees and outlining the agenda. The main focus was on discussing and deliberating Vote 10 of the Infrastructure Appropriation Bill, as detailed in the Western Cape Adjustments Appropriation Bill. The relevant sections of the bill were noted as being between pages 217 and 266.

Minister's overview

Mr Tertius Simmers, Western Cape Provincial Minister of Infrastructure, began by acknowledging the challenging context in which the budget was developed, citing the lingering effects of the COVID-19 pandemic, economic recession, load shedding, and consecutive national disasters over the past two years. Despite these difficulties, he emphasised the Department's determination to remain focused and committed to delivering results.

The Minister highlighted key aspects of the adjusted budget, which had increased by nearly R520 million, bringing the total budget to approximately R10.8 billion. A substantial portion of the increase was directed towards transport infrastructure, with an additional R507 million allocated, representing an increase of 9.79%. Funding for human settlements was also boosted by R81 million, an adjustment of 3.79%. Community-based programmes, such as the Expanded Public Works Programme (EPWP), saw an increase of R214 million.

The adjusted budget incorporated conditional grants like the Informal Settlement Upgrading Partnership Grant and the Provincial Roads Maintenance Grant, which secured further resources for specific projects. Over R38 million in revenue retention from the sale of first home finance properties was reinvested into human settlement acceleration projects, fostering a self-sustaining development model.

Disaster relief was a central focus, with R571 million allocated nationally to repair and protect infrastructure. This included R388 million for roads and R183 million for Cape Nature, reflecting the province's commitment to safer roads and environmental conservation. Additional allocations were made to support healthcare and wellness, with R4.7 million for the nursing college and R3.2 million for the Brackengate business park facility. The agriculture sector received R269 million for bulk irrigation infrastructure, while R50 million was realigned to the provincial revenue fund, and R32.2 million was dedicated to energy initiatives. Housing delivery was also prioritised, with R23.9 million allocated for projects aimed at providing homes and dignity to residents.

The Minister noted the Department’s achievements during its first financial year, including receiving a clean audit report for 2023/24. He assured the Committee and residents that fiscal discipline, careful spending and long-term sustainability would remain guiding principles for the Department. He concluded by reiterating the Department's citizen-focused approach and its commitment to delivering excellent services, with the proposed budget adjustments reflecting this dedication.

Department of Infrastructure: Adjusted budget 2024/25

 

Ms Rifqah van de Fort, Director: Management Accounting, Department of Infrastructure, provided an overview of the Department's adjustment budget. It tabled an adjusted allocation of R10.792 billion, which included a R520 million increase. As part of disaster relief, the Department received R571 million from the national government, with R388 million earmarked for roads and R183 million for Cape Nature.

Through Section 31.2e, which allows for transfers between departments, the Department received R2.289 million for the reconfiguration of an administration block, and R269 000 for bulk irrigation in collaboration with the Department of Agriculture. It also received R3.286 million for operational costs at Brackengate and R4.787 million for the Southern Cape Karoo Nursing College, both from the Department of Health and Wellness.

The Department had reallocated funds from the 2023/24 financial year, including R11.393 million for roads and financial assistance for municipal road construction, and R4 million for the Human Settlements deferred ownership project. Other projects included the Melkhoutfontein Solar Geysers (R6.067 million), the La Colline Flats upgrade (R6.4 million), and electrification in Railton, Swellendam (R33 000). The housing acceleration projects received an additional R78.699 million, bringing the total allocation to R118.103 million in the adjustment budget.

The Department had also made realignments, including surrendering R50 million to the Provincial Revenue Fund to support Provincial Treasury, moving R32.28 million to 2026/27 for the energy programme, and reallocating R12.5 million for the Emergency Medical Service's (EMS's) head office upgrade in 2025/26. Further, R3.06 million was moved to the asset finance reserve for project preparation, and R35 million was allocated to the child and youth care centres (CYCCs).

On revenue retention, R38.267 million was allocated for housing acceleration, stemming from over-collection in the first home finance projects, while R4.97 million was earmarked for acquisitions in health and education.

On internal reprioritisation, the Department had allocated funds for various capacity issues, including R2.9 million for retirement costs and R7.3 million for the Economic Development Hub and Jobs Growth Project. Other reallocations included R6.7 million for acquisitions and disposals capacity, R4.6 million for asset management practices, R18 million for energy performance certificate compliance, and R20.2 million for facility condition assessments. The Department had also prioritised public works capacity (R16 million), road project support (R11 million), and conveyances in human settlements (R7.7 million). An additional R650 000 was allocated for the skills development programme.

To meet departmental pressures, funding was allocated for operational costs, including for OptiPlan, bursaries, and professional development programmes. The Department had also earmarked funds for emergency responses, including the Riverlands floods, Construction Industry Development Board (CIDB) allocations, public works for E-Merge, rates and taxes, and lease property maintenance. In human settlements, the funds covered operational costs, security, maintenance, municipal services, and housing acceleration. R616 000 had been allocated for community-based programmes, alongside further funding for the Skills Development Programme.

Discussion

The Chairperson thanked the Minister for the comprehensive overview of Vote 10, and commended the quality of the graphic summary provided. He invited Members to pose questions for clarification on the Department’s budget adjustments.

Ms P Lekker (ANC) acknowledged the increase in the Department’s budget, rounding the adjustment to R520 million, and linked it to national funding aimed at addressing damage caused by natural disasters. She raised concerns about two main issues for the Minister and the Head of Department (HOD) to address.

She highlighted the impact of extortion, particularly in the metro, which had caused significant delays to various projects over multiple years. She asked if the current budget included funding for previously delayed projects and how it aimed to address the challenges posed by extortion. She also expressed concern about allegations involving construction mafias and their links to politicians and senior officials in Cape Town. She inquired about the Department’s stance on these relationships, whether investigations were being conducted into the extent of mafia involvement in government affairs, and the potential implications for infrastructure projects.

Secondly, Ms Lekker turned to financial matters outlined in the budget documents. She referred to Table 10.1 on page 218, questioning the Department's inability to spend over R117 million allocated for employee compensation. She asked for the reasons behind this underspending, the number of vacancies affected, and the anticipated impact on the Department's operations.

She also referred to the human settlements' budget on page 290, mentioning a rollover allocation for electrification in Railton, Swellendam. She noted that the ANC had repeatedly raised concerns about inadequate water and electricity in the area, and sought an update on the project’s progress.

She focused on page 220, specifically sub-programme 1.3 under corporate support. She questioned the reallocation of underspent funds originally intended for employee compensation. She asked if these funds were now being redirected to less critical expenditures, such as external capacity, computer services, bursaries, training, and emergency response costs. She expressed concern about whether this reallocation constituted fiscal dumping, and requested clarification on what “external capacity” meant, along with details of its scope and purpose.

Throughout her remarks, Ms Lekker emphasised the importance of transparency and accountability in the management of public funds, and sought assurances that critical projects and public needs would not be neglected.

Minister Simmers responded to the questions by acknowledging their relevance and addressing the concerns raised. He clarified that the matters involving the City of Cape Town, particularly allegations of corruption and links between politicians and contractors, fell under a separate sphere of government. He commented that these issues were now before the courts, and due process needed to be respected. Upon investigation into these relationships, he reiterated that the City of Cape Town was responsible for its governance and processes.

He assured the Committee that within his Department, robust oversight and supply chain processes were in place to prevent inappropriate relationships between officials and contractors. He emphasised that he maintained a clear boundary in his role, and did not directly engage with contractors, except when exercising oversight. Such engagements were conducted in the presence of senior officials, such as the Head of Department (HOD) and Deputy Directors-General (DDGs), to ensure legality and accountability. He highlighted the Department’s diverse responsibilities, including roads, human settlements, and work for other Departments, underscoring the importance of maintaining integrity in all operations.

Regarding concerns about projects affected by delays or extortion, the Minister deferred to the HOD for a detailed explanation. However, he noted that the Department had achieved significant progress, particularly in human settlements and in addressing the impact of the recent storms on roads. He said the Department had implemented mitigation strategies and contingency plans to ensure targets were met and underspending was avoided.

The Minister also mentioned efforts at both provincial and national levels to address extortion. He referred to a national summit led by Minister Dean Macpherson, during which a national hotline was launched for residents to report extortion attempts. This initiative was supported by similar hotlines established by the City of Cape Town and the Cape Business Chamber. He expressed his Department’s commitment to these efforts, noting that extortion was less prevalent in non-metro areas due to active involvement by local councillors and communities.

He concluded by stating that most extortion-related challenges were confined to the City of Cape Town. He commended the collaborative approach in non-metro areas, where stronger community and councillor engagement had fostered greater support for projects and mitigated such issues.

Adv Chantal Smith, Head: Department of Infrastructure, provided detailed responses to the Committee's queries. She began by addressing the impact of the construction mafia on halted projects, stating that the total value of affected projects was R390 million. These included Valpark Primary School, Clarke Primary School, the Ravensmead Community Day Centre (CDC), and a temporary relocation area (TRA) in Delft South. The most significant of these was the Airport Infos project, valued at R248 million. However, the R520 million adjustment in the budget did not address the construction mafia, as this funding was specifically earmarked for disaster relief related to floods occurring between December 2023 and July 2024.

On compensation of employees (COE), she explained that underspending was not due to failure, but compliance with national directives. Departments were required to control COE budgets and prioritise critical appointments through approvals from the Director-General and the Premier. This resulted in over 209 recruitment processes being withdrawn and restarted, affecting numerous vacancies. Despite this, the Department had addressed staffing needs by engaging external capacity through contractual appointments.

Adv Smith clarified that the electrification of Railton was primarily Eskom's responsibility, but delays had affected departmental projects. To prevent further disruption, the Department had provided bridge funding from the departmental asset finance reserve to ensure that housing projects could proceed with basic services. Though not ideal, this approach was necessary to support households awaiting homes, and had been raised at the Energy Council for resolution.

She also responded to questions about reallocating funds within corporate support. She confirmed that R50 million had been surrendered to the Provincial Revenue Fund to address broader provincial financial pressures, such as funding for education. She emphasised that this was not fiscal dumping, as no funds were taken from essential projects. The reallocation of compensation funds helped manage provincial priorities while maintaining the Department's ability to deliver on its commitments.

Lastly, on the Riverlands disaster, where dam walls had collapsed, the Department had prioritised responding to this emergency to safeguard lives and property. Adv Smith stressed that such interventions were central to the Department's mandate and were treated with the utmost importance. This approach demonstrated the Department’s commitment to addressing immediate needs while ensuring long-term infrastructure development.

Mr B Herron (GOOD) sought clarity on several aspects of the adjustment budget, particularly concerning the movement of funds. He asked about the allocation of R3.2 million from Vote 6 to fund operational costs for a transitional care facility, and questioned the Department of Infrastructure's involvement in managing such operational costs. He also highlighted discrepancies related to funds transferred and realigned for CYCCs. Specifically, he queried why R25 million had been transferred from Vote 7 to Public Works and Infrastructure, while a similar amount was realigned elsewhere in the budget. He sought an explanation for these movements.

Mr Herron also asked about the R38 million generated from the sale of First Home Finance (FHF) properties, enquiring if these properties were developed by the Department of Infrastructure’s Human Settlements branch, and requested details on the specific properties sold. He sought clarification on funding realignments for energy projects, asking if these were for provincial buildings or projects within the Department of the Premier. He also questioned the movement of R3.8 million from Human Settlements to the Provincial Revenue Fund, noting the branch's reliance on conditional grants and querying the flexibility to redirect such funds.

Lastly, he requested details about the R6.4 million rollover in Human Settlements for the La Colline flats in Stellenbosch. He sought clarity on whether these funds were for upgrading the flats or purchasing them, and if it was a purchase, he asked from whom and the context of the transaction.

Mr B Petrus (PA) raised concerns about how emerging contractors and small, medium and micro enterprises (SMMEs) could benefit more substantially from departmental projects -- not just as subcontractors, but as specialised main contractors. He inquired about support mechanisms to assist these contractors in securing larger contracts.

Department's response

Minister Simmers acknowledged the Department’s efforts to empower SMMEs and emerging contractors through monitoring and investment tools. He highlighted success stories where contractors had progressed significantly within their classifications, demonstrating the Department's commitment to their development. He spoke about the empowerment impact assessment tool as a unique initiative to track the outcomes of investment in emerging contractors. He noted additional programmes aimed at supporting their growth into larger contracts.

On the La Colline flats, the Minister explained that the Department owned several rental properties, which were gradually being transferred to municipalities as part of a title transfer process. He deferred to the chief financial officer (CFO) and HOD for detailed clarification on whether the R6.4 million was for upgrading or purchasing the flats.

Adv Smith explained several aspects of the Department's work and the budgetary adjustments. She clarified that the Brackengate facility was leased on behalf of the Department of Health, which reimbursed the lease costs annually. She also addressed the La Colline flats, explaining that the Department was devolving them to the Stellenbosch Municipality. Contrary to an error in the documents, the Department was not purchasing the flats. Instead, the municipality was acquiring them, and the Department was providing funds to upgrade the flats. This ensured that the stock transferred was in a suitable condition, allowing the municipality to either lease or sell them.

On the R38 million generated from FHF property sales, she indicated that a list of these properties would be made available upon formal request. On energy projects, she said that the Department held funds to support municipalities in implementing energy initiatives. This included providing assistance and expertise to municipalities for tender processes, as they often lacked capacity.

Adv Smith addressed questions about the R3.8 million related to the COE in Programme 4. She clarified that the COE funds came from the provincial equitable share, not conditional grants. The R50 million surrendered to the Provincial Revenue Fund was shared across programmes, including Human Settlements, but this did not involve project funds.

She also elaborated on efforts to assist small contractors in becoming main contractors. Framework contracts had been in place for over a decade, helping contractors to progress to higher grades by meeting the CIDB's criteria for tendering on larger projects. However, she said that the withdrawal of scheduled maintenance projects by the Education Department had negatively affected these contractors, limiting opportunities within framework agreements.

Mr Mujahid Solomons, Deputy Director: Budget Revenue and Expenditure, responded to Mr Herron's query about the shifting of funds. He explained that R25 million from Vote 7 was being utilised in the current financial year to allocate to Vote 10, though the Department required these funds only in the subsequent financial years. This arrangement was dictated by Provincial Treasury's formatting requirements, making it appear as a temporary in-and-out transaction for the current year.

On the R35 million aligned for CYCC capital projects, he clarified that it had been placed in an asset finance reserve for future use. These funds would be formally requested in the next financial year through an adjustments process.

The Chairperson concluded by noting the request for the list of FHF properties, as discussed earlier.

Dr N Mbombo (DA) highlighted the importance of infrastructure investment, emphasising its role in attracting investors and boosting economic activity. She said the province’s infrastructure investments, including adjustments for existing and new infrastructure, totalled over R832 million, with a significant portion allocated to disaster-related infrastructure. She expressed concerns about the province’s ability to use these funds effectively within the current financial year, given the challenges such as contractor holidays in December and January, and the need for commitments before the financial year ends in March. She commented that national disaster relief funds were unlikely to be spread over two years unless committed.

She questioned the rationale behind the low achievement of expenditure targets, especially in Quarters 1 and 2, where only 35% of the capital budget had been spent by the end of Quarter 2. She attributed this underperformance to challenges in public works, such as delays in rehabilitation and refurbishment projects, and to human settlements projects being in the early stages of initiation. She also raised concerns about the continuous reallocation of funds across departments, citing the R146 million adjustment as an example.

Dr Mbombo asked how the Department, as an implementing agent for other departments, planned to ensure effective use of the funds, given its history of under-expenditure and the risk of returning unspent funds to National Treasury. She referred to the Department’s responsibilities in handling projects for CapeNature, agriculture, and disaster rehabilitation, and sought clarity on whether there were platforms for coordination with other departments. She questioned if the Department engaged with clients to prevent project rollovers and to address projects that were not proceeding as planned.

Lastly, she queried the exclusion of Education’s R250 million allocation for the Rapid Schools' budget facility for infrastructure (BFI) from the report, asking if the Education Department managed these funds independently. She raised concerns about the potential inability to use the nearly R1 billion allocated for in-year projects, and sought reassurance on plans to avoid financial wastage or unmet targets.

Mr F Kamfer (ANC) expressed concerns about repeated flood-related infrastructure issues in the Western Cape, specifically in the Cederberg and Witzenberg areas. He said significant amounts of money had been spent in 2023 and 2024 to address these problems. However, the same contractor had been used for repairs in both years, and he was worried about the quality and progress of the work. He highlighted that a road damaged in June 2024 had only a single lane open, which was causing inconvenience. He raised concerns about a bridge being rebuilt on private farmland, questioning if this was appropriate.

He also mentioned longstanding issues on the R303 in Witzenberg, which had faced flooding as far back as 2004, disrupting children’s access to schools and connectivity between Elandskloof, Cederberg, and Citrusdal. He criticised the lack of action to resolve these issues over the years.

Department's response

Minister Simmers said that the previously repaired sections of the Citrusdal road had remained intact during the recent storms, and only three other sections had been damaged. A temporary bypass was built with permission from a farmer to enable one-way traffic while upgrades were underway. He gave an assurance that the damaged culvert system was being replaced with a higher and wider double culvert system to better withstand future storms. He clarified that the structural issues were caused by damage to subterranean infrastructure, not poor road construction, and attributed some of the problems to inadequate river and routine maintenance by the agricultural sector and delays in obtaining necessary permissions.

Regarding the R303, the Minister said that the province had reprioritised funds to focus on roads of economic and community importance due to consecutive storms. He pointed out that the total damage to the road network was close to R2 billion. He emphasised that the province was using a conditional grant with specific projects identified by the National Department. He clarified that poor road quality was not the cause of the Citrusdal road issues. Instead, they had resulted from broader maintenance and infrastructural challenges.

Adv Smith addressed concerns on flood damage, funding priorities, and expenditure processes. She said that the total estimated cost of flood damage since December 2022 was R1.8 billion. In December 2023, R850 million was needed to repair only 70% of the damage. This necessitated prioritisation, which resulted in the postponement of regular road maintenance and capital projects by more than two financial years. She emphasised that the funds received for flood damage repairs were conditional, requiring strict adherence to specific projects verified by the National Disaster Management Department and National Treasury.

Of the R571 million allocated for roads and CapeNature, she clarified that the funding was arranged uniquely since it lacked a governing body for disaster relief grants. The funding was designated for flood damage occurring between December 2023 and July 2024, with earlier damage excluded. National Treasury’s conditions prohibited using these funds to reimburse provincial spending on flood repairs, even for verified projects already underway. This had created delays, as the province awaited an official list of approved projects, expected by February 2025.

Regarding expenditure processes, Adv Smith explained that much of the money for other departments, such as Health and Agriculture, had already been spent. For example, lease payments for Brackengate, funding for the Nurses College, and bulk irrigation were made upfront, with reimbursements processed through interdepartmental claims. Funds for property purchases were drawn from the Asset Finance Reserve (AFR) as needed, ensuring no surplus remained unallocated in the main budget.

On roadworks, she highlighted the legislative restrictions on resealing roads during winter. Climate change has extended winter months, delaying work until 15 October 2024. As a result, expenditure on road repairs would increase significantly. She commented that contractors were prepared to work through December to ensure budget utilisation and programme completion. Requests to pause roadworks for tourism activities had been denied to prioritise infrastructure repairs.

She also clarified the Department’s lack of involvement in education-related projects, including Rapid School builds under the budget facility for infrastructure. She said the Department of Education had not provided funding or projects for the Department to manage, and some education projects were halted without replacement initiatives. She concluded by affirming the Department’s commitment to completing its allocated programmes efficiently despite these challenges.

The Chairperson referred to the limited time left, and suggested that Ms Lekker submit her follow-up question in writing or address it during the resolutions part of the meeting.

Ms Lekker disagreed, stating that the meeting was scheduled from 08:00 to 09:30, and she believed there was still time to ask questions. In response, the Chairperson agreed to handle the question later as part of the resolutions, and ensure a response was provided.

Minister Simmers expressed gratitude to the Committee for their insightful and detailed questions about the adjustment budget. The questions reflected the complexity of the Department of Infrastructure’s budget, and he hoped the adjustments, along with the medium-term budget policy statement (MTBPS), would lay the groundwork for the main budget to be presented next year. He looked forward to continued discussions.

Adv Smith also thanked her team for their preparation and hard work in making the meeting possible. She appreciated the Committee’s questions, acknowledging that they helped guide the Department in understanding the areas of focus and how to respond when presenting future work.

The Chairperson thanked the Minister, the HOD, and the entire Department for their thorough explanations, particularly the informative infographic, which helped unpack the complexity of the Department's operations. He expressed appreciation for the clarity provided during the meeting.

Consideration and adoption of draft Committee Report on Vote 10

The Chairperson moved the consideration of the Committee report on Vote 10 in the Schedule to the Western Cape Adjustments Appropriation Bill, and asked Members who supported the vote to raise their hands.

Several Members, including the Chairperson, Mr G Bosman (DA), Dr Mbombo, Mr Herron, Mr P Johnson (DA), and Mr Petrus, raised their hands in favour of adopting the draft Committee report.

The Chairperson then asked those who did not support the vote to raise their hands, and Ms Lekker from the ANC expressed the party's rejection of the report and the budget.

The Chairperson acknowledged that the ANC did not support the vote, and this would be recorded in the report. He also offered the ANC Members the opportunity to have their minority view documented in the minutes. Ms Lekker confirmed that the ANC was exercising its minority right under Rule 90.

The Chairperson outlined the structure of the report, stating that it would note the deliberations on Vote 10 and include the ANC’s minority view.

Mr Bosman proposed the adoption of the report, and Mr Herron seconded.

Mr Petrus emphasised the importance of helping upcoming contractors and specialised contractors through funding, which was considered a key point for empowerment.

The Chairperson noted the resolutions to be addressed, including a request for a list of FHF property, a review of how the Department managed upcoming contractors, and the Minister’s mention of success stories.

Ms Lekker added to the resolutions, requesting a list of small companies that had been upgraded, and a detailed explanation of the rationale behind devolving provincial rental stock. She stressed the need for clarity on the decision-making process and the beneficiaries of this action.

The Chairperson thanked the procedural officer and all Members present for their thorough deliberations, expressing appreciation for their contributions.

The meeting was adjourned.