Budget vote: briefing

PUBLIC WORKS PORTFOLIO COMMITTEE
17 May 2000
DEPARTMENT BUDGET REPORT

The Deputy Minister, Ms Busi Nzimande, said that the mission of their department is to ensure that National State Departments of South Africa have a built environment that meets their financial, technical and social requirements, as well as to implement the National Public Works Programme (NPWP). She added that they would never be happy with the budget because the Department of Public Works (DPW) has a huge commitment.

Mr T Sokutu, Director-General from the Department, presented a slide presentation on the Budget of the Department of Public Works 2000\1.

DEPARTMENT OF PUBLIC WORKS PRESENTATION ON BUDGET
Background
Department of Public Works facilitate delivery by other government departments and manages the largest property portfolio in the Southern Hemisphere.

DPW's task is to enable national government departments to fulfill their tasks efficiently, build capacity at all three ties of government, and at community level.

The Department is faced with considerable challenges:
1. Human Resources Management
Tami Sokutu's appointment in September 1999 was the first step in improving management capacity. This was followed by the appointment of Lydia Bici as the Deputy Director-General: NPWP with effect from 1 October 1999. Andile Sangqu was appointed as the Deputy Director-General: Finance and Corporate Services and TP Nchocho as the General Manager: Gauteng with effect from 1 May 2000.

There is also a concerted effort of upgrading regional offices and to transform them into operational business units.

2. Financial Management
The Auditor-General's report has revealed weaknesses in internal control systems and these can be summarised below as follows:
 Non adherence to internal control procedures and policies
 Unintegrated financial systems
 Lack of management information systems
 Poor financial management knowledge and capability

Financial reporting structures have been revamped and a new financial reporting framework has been created, which, on a monthly basis, keeps track of key operational areas.

We have now instituted stringent control measures in many areas where there were glaring shortcomings. We have introduced a 5-Point Anti-Corruption Drive to the MEC's for public works in October 1999, which they have adopted. It comprises:
 Training of officials to improve their knowledge of procedures and control measures,
 Internal control measures ,
 Proactive corruption-busting investigation,
 Measures to be taken against officials and contractors involved in the promotion of corruption and,
 Strengthening of administrative and financial capacity.

The work of our Fraud and Corruption Investigations Unit and our internal audit structures has paid dividends for the Department.

Expenditure levels on vulnerable accounts, such as day to day maintenance, have shown a huge decline.

Investigations of mismanagement and fraud in respect of magistrates' courts and residential property involving ± R54 million have led to 40 officials being implicated.

The Heath Commission is investigating these officials. Nine have already been subpoenaed; others will be subpoenaed shortly.15 contractors have been blacklisted and removed from the department's contractor base; criminal investigations are under way in some instances.

Stolen warrant vouchers with a value of 600 thousand rands, were recovered before the Department incurred any loss.

Four corrupt department officials have been dismissed and 12 suspended. Investigations are continuing.

3. Service delivery
In October 1999 a lekgotla strategic planning session took place to address the crucial challenges facing the Department. The following action plans have been formulated:

(A) STATE PROPERTY HOLDINGS AND ASSET MANAGEMENT
1 Development Of The Property Bill
There is duplication, inconsistency and inefficiency in the acquisition, management and disposal of the State's fixed assets. To resolve this we have prepared a Property Bill targeted for adoption by parliament by October 2000. The Property act will ensure consistency and efficiency in state property transactions.

2 Unlocking Of The Value Of The State's Fixed Assets
Now that a domestic asset register is in place, the Department is embarking on a drive to unlock the latent value of the State's fixed properties.

The first phase of this project disposal of all redundant State owned properties by end of year 2000, many of which are being vandalised or are illegally occupied.

Over the next two years we intend to put on the market for sale or lease, five large properties that are under utilised and 10 redundant military bases.

In the longer term, say five years, 10 large properties and 20 redundant military bases will also be released into the broader economy. These include properties such as Nasrec, near Soweto, 100 hectares of prime land, south of the Development Bank in Midrand, Waterkloof Ridge in Pretoria, Silvermine in Cape Town and various other properties throughout the country.

The Department has made 4362 hectares available throughout the country for low cost housing and community development. A great deal more land will be released over the next five years.

3 Re-Imaging Of State Owned Property
Some State owned properties still carry the stigma of the country's apartheid past. The Department intends to profile the significance of these properties and re-image them to reflect our democratic society.

Among such properties are Parliament, the Union Buildings, Vlakplaas, and Cinderella Detention Barracks in Boksburg, Constitutional Hill in Braamfontein, and the Palace of Justice where Nelson Mandela was sentenced.

4 ECONOMIC EMPOWERMENT IN ACQUISITION, MANAGEMENT AND DISPOSAL OF THE STATE'S FIXED ASSETS
Skewed property ownership and lack of participation in the property industry by previously disadvantaged groups persist in South Africa. The first phase is to draw up an economic empowerment policy to address this problem.

In the medium term when we acquire or dispose of property or grant management contracts, we will ensure that at least 20% of the transactions will benefit the previously disadvantaged. This figure will increase substantially in the longer term.

5 BEYOND THE ASSET REGISTER
A national asset register has been compiled. Now we have to investigate and seek prosecutions in cases where properties were acquired or sold through clandestine means. In addition, the Department is immediately embarking on the compilation of a Foreign Asset register.

Until now government departments have not paid rent or contributed to the maintenance of state-owned buildings they occupy. We will introduce a system under which government departments will pay market-related rentals.

At the moment there are complaints about the quality and speed of Public Works maintenance. We have a three- year plan to redress these problems.

(B) PROVISIONING OF ACCOMMODATION
1. Reducing the maintenance backlog
In order to address the maintenance backlog R10 billion must be invested over the next ten years. Clearly, the State cannot afford this.

To solve this problem the private sector will be involved in innovative financing and delivery mechanisms. It is envisaged that 25% of the R10 billion will be addressed within the next five years.

Several other components of property related functions would also be managed in partnership with the private sector, for instance the area of property and facilities management.

Leasing is an area that has been identified for more effective management. Savings generated will be used to help reduce the maintenance backlog. We envisaged reducing the leasing portfolio by up to 30% in the next five years.

The Department took a decision to implement the facilities Management pilot projects. The main reason for taking this decision is to redress current operational deficiencies in the department, namely:
· Deterioration of buildings and building components
· Incapacity to resolve maintenance backlog with internal resources
· Lack of responsiveness to clients needs
· Fragmented unco-ordinated approach to service delivery
· Inappropriately skilled staff
· Lack of risk transfer to private sector (no risk management plan)
· Non-existent facilities management and building management plans
· Non-existent life cycle planning/budgeting w.r.t facilities
· Poor or non-existent preventative maintenance/proactive plans
· Inefficient management information systems that provide no reliable audit trail or historical information on work done.

Program of action is as follows: -
1 Planning phase ( April - mid July 2000)
2 Procurement phase (End July - October 2000)
3 Execution phase (November 2000 - November 2003)

(C) COMMUNITY BASED PUBLIC WORKS PROGRAMME (CBPWP)
Community Production Centres (CPC's)
The CPC concept is an initiative by the Department in conjunction with the Ministry for Agriculture and Land Affairs to rehabilitate rural irrigation schemes and provide agricultural infrastructure. The main object of this approach is to ensure that our poverty alleviation programmes have broader impact on improving the quality of life of many people in rural areas in a sustainable way. These centres will only be funded by government only at their initial stages. Thereafter they will be self-funding through generation of marketable crops. Pilot projects are under way in Makhathini Flats (200 000 people) in KwaZulu Natal, Lambasi (56 000 people) in the Eastern Cape and Veeplaas in the Northern Province.

Multipurpose Centres
The Department has also initiated a new approach of clustering projects, which incorporates a number of villages. The idea behind the Multipurpose centres is integration of services delivery by different Government Departments with the purpose of achieving better social cohesion.

There is a role out plan to launch the following projects during the year:
- Ladysmith in KwaZulu Natal
- Bizana in the Eastern Cape
- Northern District Council in the Northern Province
Willowvale in the Eastern Cape

Accelerated delivery
The confirmation of funding through the MTEF over the next three years has presented an opportunity to accelerate the implementation of the programme.

The planning for CBPWP projects which normally takes about six months will now take three months and will be done before the end of each financial and thus allowing for implementation at the beginning of the next financial year.

(D) CONSTRUCTION INDUSTRY DEVELOPMENT PROGRAMME (CIDP)
Focus on Black Economic Empowerment
· Affirmative Procurement Policy (APP)
The Affirmative Procurement Policy, piloted by the Department, has helped create economic and business opportunities for emerging contractors. The SMME contractors now undertake 30% of the Department's output (as opposed to 4% in 1994). The emerging contractor development programme that addresses supply side constraints such as finance, training and information is being expanded to other departments and public sector institutions.

· Women empowerment
Promotion of women in construction industry is one of the key focus areas of the Emerging Contractor Development Programme. A draft Memorandum of Understanding has been developed with South African Women in Construction (SAWiC) which focuses on training in business skills, tendering procedures and technical advice.

· Youth Skills Development and Mentorship Programme
A total of 503 youth, largely women, were trained in specific construction skills. The aim of the programme is to link the training of youth from local communities to employment of construction projects, to improve the skills base and create employment.

2. Construction Industry Development and Transformation
Build environment legislation:
The first set of legislation deals with the regulation of the built environment professions.

It seeks to address inconsistencies in the current legislation administered by the Department, to promote improved coordination and to enable a climate for the ongoing transformation and development of the professions.

To achieve this, the proposed legislation will establish an overarching Council for the Built Environment Professions, which will re-enact the laws on existing Councils and will establish new Councils for the two professions - Project and Construction Management and Landscape Architects.

The Public Works Portfolio Committee will conduct public hearings on the proposed legislation on 6 and 7 June 2000 to afford the public and stakeholders a final opportunity to comment and possibly improve on the final drafts on these Bills.

The new legislation reflects the precepts of our new democracy and will:
 Improve ability of the professions to develop and to respond to transformation and ongoing change in the modern world.

 Enable consistency and appropriate coordination between the professions, and with Government.

 Enable recognition of new professions and categories of the professions

 Enable recognition of prior learning and career path development

 Enable public involvement to improves transparency and accountability of the professions.

But unlocking the potential of the construction industry as a whole must engage not only the professions, but all service providers as well as public and private sector clients and investors, who have a significant role to play in shaping the performance of the industry.

For this reason, the Department, in consultation with the key national infrastructure delivery Departments has published a draft Bill to establish a Construction Industry Development Board to implement a national industry development strategy.

The Construction Industry Development Board must be a catalyst for change, promoting best practice by service providers and clients alike.
It must ensure that our industry grows rapidly, that it reflects and delivers the aspirations of all South Africans, that it is increasingly representative, embraces a culture of continuous innovation, and that it prospers in the regional and global economy.

It is appropriate on this occasion to recognise the
considerable industry participation and input that has
been mobilised to refine the basic content of this
legislation and to develop key outputs that will lay the
foundation for the Board's future operation.
The Inter-ministerial Task Team has facilitated an
output-driven process of consultation that has engaged
industry stakeholders, specialists and innovators
to develop,inter-alia:

 A framework plan for the CIDB that provides a sound basis for future business planning.

 Plans for the Register of Contractors, which categorises contractors in a manner that facilitates public sector procurement, promotes contractor development and will lead to reduced public sector risk and costs;

 A business plan for the establishment of the new Construction Education and Training Authority that will promote increasing access to training by workers and the emerging sector;

Construction Industry Development Board
The objectives of the Board are to:
 Establish a National Register of Contractors and Register of Projects as an instrument to promote best practice.
 Optimise industry's contribution in meeting national construction demand and promoting socio-economic development objectives, performance, efficiency, competitiveness, and improve value to clients.

Appendix:
MTEF ALLOCATIONS 2000/2001 - 2002/2003
VOTE 26: PUBLIC WORKS

COMPARATIVE ANALYSIS BETWEEN 1999/2000 AND 2000/2001 ALLOCATIONS

SUMMARY OF ALLOCATIONS

FIRST CHARGES AGAINST ALLOCATION FOR OTHER SERVICES

FUNDING OF REST OF VOTE

* EXCLUDING PERSONNEL EXPENDITURE

Mission
1. To ensure that national state departments of South Africa have built environment that meets their financial, technical and social requirements through the:
- provision, development and maintenance of accommodation
- acquisition and disposal of state land
- management and maintenance of the state property portfolio

2. To implement the NPWP by
- creation of assets through the CBPWP
- influencing and stabilising the construction and property industries and ensuring that infrastructure is provided in a way that creates jobs, empowers communities and develops human resources
aims as reflected in estimates of expenditure to conduct the overall management of the department.
to provide land and accommodation to national departments.

3. To promote and facilitate job creation, skills development and capacity building in the delivery of infrastructure.

4. To render services associated with the department's aims.
influence of the activities of other departments on DPW budget

DPW's expenditure (except for NPWP) is generated by the policies of national departments for whom it provides accommodation.
A change in the policies of such departments which results in an increased allocation inevitably results in increased expenditure for DPW - a factor not recognised in the budgetary process (especially leasing).
A reduction in allocation to client departments can also result in expenditure on physical facilities, e.g. defence.
- cost of rehabilitation of sites before disposal
- additional accommodation because of geographical regrouping
national responsibilities executed by former self-governing territories have been transferred without funds for accommodation

DPW responsible for payment of rates on provincial properties - increase in their portfolio results in unforeseen expenditure