Budget Briefing

PUBLIC WORKS PORTFOLIO COMMITTEE
2 May 2001
BUDGET BRIEFING

Chairperson: Chief M W Hlengwa

Documents Handed Out
Department of Public Works Budget Presentation (See Appendix)

SUMMARY
The Deputy Director General of the Department of Public Works briefed the committee on budget expenditure. He focussed on how funds were spent in the previous year, and performance. He gave a detailed description of budgetary allocations and expenditures of Departmental projects.

MINUTES
Mr. Sangqu outlined the vision of the Department of Public Works, which " is to provide and manage in accordance with prescribed standards and directives, accommodation, housing, land and infrastructure needs of national departments.

The mission he said is to ensure that the National State Department of South Africa have a 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

To implement the National Works Programme by:
· Creating assets through the Community Based Public
· Influencing and stabilizing the construction and properties industries

Mr Sangqu said that the department is the custodian of state fixed property assets. The Department would promote national competency,and human resource development through training and job opportunities, and influence delivery and investment in the construction industry.

He identified major clients of the Department being; SANDF, SAPS, Departments of Justice, labour, Home Affairs and National Interdepartmental Structure for Border posts (NIDS).

Expenditure Report
Mr. Sangqu ran through expenditure report to the end of the year 2001 showing the allocated amounts and expenditure. He focused on four programmes outlined in the expenditure report

Programme 1,- had been allocated about R135 million, whilst the expenditure hovered over R133 million. He cited the reason that "all vacant management posts had been filled during the Financial year 2001

Programme 2- had been on provision of land and accommodation. He gave the total allocation including rollover as approximately R4, 145,282, 000 . The total expenditure as end of March 2001 was estimated at R 3 billion.
In programme 2, the Deputy Director-General gave the Committee a number of areas where the focus had been:
1.1 Capital works- Allocation= R1, 237,815,00
Expenditure= R622,169,000
1.2 Maintenance-Allocation= R760, 966,000
Expenditure= R724, 529,000
1.3 Building promotion industry-Allocation=R4, 900,000
Expenditure=R4, 900,000
1.4 Leasing-Allocation=R760, 966,000
Expenditure=R724, 529,000
1.5 Cleaning buildings and tending gardens-Allocation=R108, 285,00
Expenditure=R103, 308,000
1.6 Municipal services-Allocation=R744, 927,000
Expenditure=R719, 079,000
1.7 Rates on state property-Allocation=R522, 000,000
Expenditure=R548, 686,000

Programme 3, - the "National Works Programme" had been allocated a figure around R631 188 000. The expenditure was estimated at R621, 125, 868. He noted that budget allocation had been fully utilized in accordance with planned projects.

Programme 4 - Auxiliary and associated services; these had been allocated about
R10, 422,000, while the expenditure had been estimated at R3, 314, 427.

The Deputy Director-General further gave a detailed explanation of the allocation 2001-2002 financial years. He said that in terms of final allocations per standard item, there had been substantial decreases in Programmes 1,2 and 3, while there had been a relatively increase on Programme 4 for financial year 2001/2002. He further gave a complete breakdown of the department's final allocation per standard item: financial year 2001/2002
· Personnel expenditure - R332 125 000
· Administrative expenditure-R47 403 000
· Inventories-R19 803 000
· Equipment - R18 988 000
· Land and buildings- R 1135 754 00
· Transfer Payment - R 25 786 000
· Professional and special services - R1940 602 000
· Miscellaneous Services - R 1 126 000
Total: Department R 3521 587 000
The DDG summarized what they have achieved in percentages on each programme

Programme 1 = 95%
Programme 2 = 83% far below the expectation
Programme 3= 98%
Mr. Sangqu listed a number of problems, which they encountered:
· Attracting and retaining staff
· Poor skills level
· Poor service management culture
· Very difficult process

Discussion
Mr. Middleton commented that the Deputy Director spoke about acquiring the services of SKM associates and Mckinsey International consultants. He inquired about the whole process of consultation and asked why they turn to consultants.

Mr. Sangqu replied that the Department is under a lot of pressure to deliver a service within a short space of time. He pointed out that there is a lack of capacity and due to competition with the private sector the Department had to employ consultants to identify problems.

The Deputy Director-General stated that the project was likely to cost the Department about R4 million. He further stated that if they do not undertake this, the Department was faced with poor performance and non-service delivery. Therefore, the project was fully supported by the Minister and Director-General.

Ms Shilubane (ANC) wanted to know whether it was not possible for the Department to contract gardening tending and cleaning to the excess staff to cut cost.

Mr. Sangqu indicated that there was limited scope to undertake such measures, because of the decisions taken at the Bargaining Council of which the Department was part of the National Framework Agreement.

Mr. Moonsamy (ANC) commented on outsourcing stating that it led to unemployment contributing to the crisis in the country. He asked why the Department of Public Works did not utilize the staff effectively.
Mr. Sangqu replied that the Department is not underestimating the capacity of their personnel however the current remuneration does not attract the people with good and sufficient skills.

The Chairperson asked the Deputy Director-General to clarify the question of rollovers.
Mr. Sangqu pointed out that there were two sides to this; firstly, it had to do with the late confirmation of the rollovers which took about 5 to 6 months after the budget for confirmation and approval from Parliament. He informed the Committee that they had taken up this matter with the National Treasury. Secondly, rollovers were envisaged as moving monies which would be reflected in the budget.

Mr. Chikane (ANC) commented on the consultants' track record.
Mr. Sangqu replied that SKM Associates, the local firm of management consultants, had a good track record. He cited a number of public utilities where SKM Associates had been involved such as IDC in its transformation, South African Revenue Services, part of the team together with Bain consultants involved in SAA and SITA restructuring. Their counterparts, Mckinsey International, had international credentials.

Mr. Chikane asked whether there had been any arrests of people who were involved in corruption.

Mr. Sangqu observed that corruption thrives in an environment where there is disintegration of control. He said that arrest is a good deterrent after the event. He pointed out that the Department had approved of fraud prevention strategies, which involved punishing and singling out as reactive measures. On the proactive side, the Department had taken initiative to educate people about corruption. On 1 May 2001, the Department had introduced a hotline for whistle blowing to encourage people to come forward. The DDG assured the Committee that the Department would constantly improve its plans on curbing corruption.

The meeting was adjourned

Appendix
DEPARTMENT OF PUBLIC WORKS
PRESENTATION TO PORTFOLIO COMMITTEE
DATE : 2 MAY 2001

Presented By : A Sangqu
DDG : Fin & Corp Services

EXPENDITURE REPORT AS
THE END OF THE YEAR 2001
PROGRAMME 1
Allocated Amounts R135,102,000
Expenditure R133,973,531

REASONS
All Vacant senior management posts have been filled during the financial year 2001

PROGRAMME 2
PROVISION OF LAND& ACCOMM
Total Allocation Including Roll-Over = R4,145,282,000
Expenditure As End Of March 2001 = R3,447,210,435

1.1 CAPITAL WORKS
Allocation R 1,237,815,000
Expenditure R 622,169,000
Long Lead Time Before Projects Commence
Late Submission By Client Departments Of Requests
Cyclical Nature Of Projects

1.2 MAINTENANCE
Allocation R 614 053,000
Expenditure R 488 693,000

1.3 BUILDING PROMOTION INDUSTRY
Allocation R 4 900 000
Expenditure R 4 900 000

1.4 LEASING
Allocation R760,966,000
Expenditure R724,529,000

1.5 CLEANING BUILDINGS AND TENDING GARDENS
Allocation R 108,285,000
Expenditure R 103,308,000
Some Contract Were Entered During The Course Of The Financial Year

1.6 MUNICIPAL SERVICES
Allocation R 744,927,000
Expenditure R 719,079,000

LATE SUBMISSION BY LOCAL AUTHORITIES OF ACCOUNTS
1.6 RATES ON STATE PROPERTY
Allocation R 522 000 000
Expenditure R 548,686,000
The Department Is Paying
-Debt Of The Formerly Tbvc States
-Paid Accounts For Previous Financial Years

PROGAMME 3
NATIONAL PUBLIC WORKS PROGRAMME
Allocation R 631 188 000
Expenditure R 621,125,868

BUDGET ALLOCATION FULLY UTILISED IN ACCORDANCE WITH PLANNED PROJECTS

PROGRAMME 4
AUXILLIARY AND ASSOCIATED SERVICES
Allocation R10,422,000
Expenditure R3,314,427

ASSISTANCE TO FOREIGN ORGANISATION NOT CLAIMED