Department Annual Report: briefing

Meeting report

PUBLIC WORKS PORTFOLIO COMMITTEE
2 November 2004
DEPARTMENT ANNUAL REPORT: BRIEFING

Chairperson: Mr F Bhengu (ANC)

Documents handed out:
Department PowerPoint presentation on the Annual Report 2003/04
Minister's Briefing Notes and Background to the Launch of Transformation in the Property Industry
Minister's speech on the Launch of Transformation in the Property Industry

SUMMARY
The Department of Public Works gave a presentation on its Annual Report. They discussed operations, achievements, asset management, financial and human resources management, the Expanded Public Works Programme (EPWP), the policy unit, and public entities. Finally, challenges faced by the Department were pointed out. The Committee raised concerns about funding for municipal accounts, asset management, valuation of state-owned properties, and the beautification of state buildings. Finally, the Construction and Property Industries Charters were discussed.

MINUTES
The Chairperson emphasised that public hearings with stakeholders, the construction industry and clients of the Department still had to take place. The public hearings existed to draw attention to the public's concerns. The Department would be invited to the public hearings. Thereafter, a consolidated report would be written and tabled in Parliament with recommendations. The Committee would interact with the Department regarding the draft report. The Committee had been subdivided into two clusters investigating and consolidating the draft report. The Committee clusters would have to submit a progress report the following Wednesday.

The Chairperson pointed out that there was a need for training Members to enhance their understanding of construction and property management, and Information Technology. A circular was to be returned to the Speaker's office.

The Chairperson commented that the Committee would table its own report in Parliament regarding the departmental briefing. There would be a workshop that would engage the Annual Report and related issues. During the Chairpersons forum the previous day, the Committee had been given leeway to ask for more time to table their consolidated report. If the Committee required an extension, they would have to write a letter to the Office of Chairperson of Committees.

The Chairperson emphasised that the Committee and the Department had to work together, and that the Committee had to assist by tabling recommendations and performing its oversight role.

Department of Public Works briefing
Mr J Maseko, Director-General, gave a PowerPoint presentation on the Department's Annual Report. The programme, RAMP, which dealt with the disrepair of facilities and a significant backlog associated with maintenance, had been successful. Since 1999, RAMP had awarded R1.9 billion in contracts through 294 contracts. The programme had made appointments of 491 professional consultants to the value of R262 million of which 48% went to affirmative professional service providers, which contributed to Black Economic Empowerment. Moreover, a nation-wide call centre had been established to deal with repair breakdowns, and a long-term maintenance plan had been developed, taking into consideration 10-, 15- and 20-year funding scenarios.

The implementation of the next phase of asset management had begun, and R10 million had been set aside to support the process. Financial management had significantly improved as indicated by the last Auditor-General's report. However, there were concerns around the clearing of suspense accounts with the National Treasury. Furthermore, Cabinet had adopted the EPWP framework.

In the ECDP programme, R791 million had been awarded to affirmable business enterprises. Contracts to the value of R88 million were awarded to women owned business enterprises. An incubator programme had been developed to promote the development of sustainable emerging contractors. Challenges still faced included the successful co-ordination of the implementation of the EPWP, the valuation of state-owned properties, and adequate funding for municipal accounts.

Discussion
Mr S Opperman (DA) asked whether Treasury funding for the municipal accounts was adequate.

Mr J Maseko responded that the R599 million allocated by the Minister of Finance the previous week was based on information received from the Department of Provincial and Local Government. This Department had undertaken an audit of all the municipalities in the country, which indicated that the national government owed them R600 million. Hence the Department felt that the funding was adequate.

Mr N Gogotya (ANC) enquired if the Department could dispel concerns raised around state assets, particularly with regard to the ownership of properties, and if there were any disputes between national and provincial government, companies, and individuals. He asked about the costs incurred and the time spent on dealing with disputes.

Mr J Maseko replied that there was no dispute between national and provincial government, and individuals. Provision for redistribution of assets had been made in the Constitution. The Minister and the Department of Land Affairs were involved in the distribution of assets.

Ms S Sigcau, Minister of Public Works, commented that an asset register existed, but uncertainty about its accuracy persisted. The only area where the asset register was badly lacking was the incomplete information received from the Department of Foreign Affairs. Flexibility was needed to include newly reported properties. The destructive fire and the subsequent upkeep of the asset register in the Eastern Cape had been discussed with the MEC.

Mr J Maseko highlighted the motivation and eventual use of the asset register. The asset register was not a new creation, but rather an updated and upgraded version of the old one. An administrative process was needed to complement this updating and upgrading. The asset register had to include management information to make it a useful management tool.

Mr N Gogotya (ANC) suggested that the nation-wide call centre that had been established to deal with repair breakdowns could also be used to channel new information about properties to the relevant sections. Mr J Maseko conceded that this suggestion had to be investigated further.

Mr J Blanche (DA) wondered why state owned properties had to be valued in order to estimate taxes owed to the local government, as this caused additional costs. He asked whether there was not a more economical and efficient manner to do this valuation.

Mr J Maseko explained that the valuation was required by the National Treasury who was busy designing a new accounting system for the government. They intended to move from a cash accounting system to an accrual accounting system. One of their requirements was that every asset had to be valued and included in the government's records. Property value was estimated at R120 billion.

Mr J Maseko conceded that valuing the assets was an expensive process. The Department and the National Treasury were discussing which model would be most economical to value state properties. Municipalities were required by the Rates Act to value every asset within their jurisdiction. Municipalities had not started the process of valuing. The Department could benefit from their model of valuation. However, this method could drain state resources. More discussion was needed before implementation. The Standing Committee on Public Accounts (SCOPA) recommended asking the National Treasury and the AG's Office if they could be exempted from valuation until this problem was solved.

The Chairperson asked the Department for a briefing on the launch of the construction and property industry charters. Ms S Sigcau pointed out that copies of her speech of the previous day were available. Mr J Maseku explained that the process of the construction charter had been launched about six weeks ago, and the property charter had been launched the previous day.

Ms S Sigcau referred to the second page of her speech, highlighting that the second paragraph explained that the National Department of Public Works (NDPW), in conjunction with the private sector, had embarked on a process of establishing a transformation charter in the property sector. The aim was to launch a finalised charter in June 2005. It had to be ensured that the people receiving land were enriched through partnership with property developers and investors.

The Chairperson expressed concern about how the land that had been given by the government was being used by the recipients, highlighting an example of the sale of five farms in the Kidds Beach area in the Eastern Cape to golf course developers.

Ms S Sigcau commented that the participation of communities would be more important in the future when approached by potential investors.

Mr J Blanche (DA) was pleased that the property charter was being investigated and commented on undeveloped mining land that could be utilised in a more efficient manner.

The Chairperson asked whether the Department had a timeframe for when to table the report about the long-term plan to the AG or National Treasury.

Mr J Maseko replied that the document had been completed, and that an agreement on the process was needed, which included a briefing to the Minister on their options. The Minister would need to send the document to the Minister of Finance for further discussion. However, it would be too costly for the government to make funding available immediately for all the maintenance requirements, as that would be a drastic increase in their budget in a short period of time. The Treasury contact person had said to put in options so that the Budget Committee could choose an appropriate budget.

The Chairperson felt that when the Department presented before SCOPA there was not enough communication between the Department and the Treasury. He wanted to know if there was common ground.

Mr J Maseko conceded that there was insufficient communication and that the Treasury had occasionally misinterpreted the Department's activities. There would not be full understanding between the two parties in the near future, but the relationship was being improved.

Mr S Opperman (SA) asked whether there were short-term lease contracts in the National Department that would be given out on a monthly basis. He referred to the private sector, which was leasing land from the Department of Public Works.

Ms J Maseko replied that there would be long-term and short-term contracts. However, short-term contracts would be the exception. He was unable to refer to specific figures.

Ms S Sigcau commented that there were cases where people had attempted to lease land from the Department. The type of business the lessee intended to establish influenced the type of lease that was offered. Another debate about whether to sell or not to sell had to be entered at a later stage.

The Chairperson pointed out that selling was an important issue and deliberation with the Minister would take place in the future. He then asked the Minister how the Eastern Cape government planned to establish ownership of properties without records, as the records had been destroyed by the fire in Umtata.

Ms S Sigcau responded that she was unsure about the requested information and would follow up. The Chairperson commented that this information would assist the Committee when visiting the provinces.

Mr J Blanche (DA) said that regarding the EPWP, the beautification of government buildings should be taken into account, and that there was a serious problem with the maintenance of buildings.

Ms S Sigcau replied that the Department would consider his concerns, emphasising that this could be an opportunity for job creation. Long-term projects would be launched.

Mr M Likotsi, Secretary General of the Pan Africanist Congress of Azania (PACA), asked whether the Department had already started to engage in the public-private partnerships process, and whether they had made any progress. Ms S Sigcau replied that the process of public-private partnerships in the Department had already started and was at that time ongoing.

Mr M Likotsi commented that the property business was very competitive. Hence the beautification of the Department's properties was crucial.

Mr S Sigcau responded that the Department had devised plans for dealing with the matter. These plans were currently being discussed by Cabinet and would be open for further discussion thereafter.

The meeting was adjourned.