Government Tenders; Skills Shortage in the Property Valuing: Department Budget hearings

Meeting report

PUBLIC WORKS PORTFOLIO COMMITTEE
4 April 2005
GOVERNMENT TENDERS; SKILLS SHORTAGE IN PROPERTY VALUING: DEPARTMENT BUDGET HEARINGS

Chairperson Mr F Bhengu (ANC)

Documents handed out:
Problem Areas for Small Businesses
PowerPoint presentation by the Council for the Built Environment
African Outbacks Services Letter to the Minister of Public Works
Department of Public Works’ response to African Outbacks Services
Letter from M van Leeuwen regarding enquiries made by Mr M Mvandaba

SUMMARY
Various stakeholders highlighted a number of problems they were experiencing when dealing with the Department of Public Works. It was alleged that Department staff were often not present in their office to help address the needs of the communities. Also most tenders still went to big white-owned companies. The presenters raised the issues of racism and nepotism in institutions such as the South African Defence Force and Metrorail as some of the problems they were still facing. Members of the Committee agreed that it was time for the Committee to see to it that some of the concerns were addressed.

The Council for the Built Environment also appeared before the Committee. The exaggeration of property prices was a major problem as it also impeded the land restitution programme. The Municipal Property Rates Act would soon come into effect and this would require municipalities to value properties at regular intervals. This would be a major challenge given the small number of valuers available in South Africa. A policy intervention was required to reverse the problem of skills shortage in the property valuing and related professions.

The over pricing of housing in Cape Town could be attributable to the lack of information possessed by sellers and buyers. The prices of houses in the former white areas were rapidly increasing as uninformed black people bought houses there. It was important for people to use the services of a registered valuer before buying any property.

MINUTES
Ms Y Beukes (Khaya Women’s Project) briefed the Committee on various problems that small businesses were encountering when they applied for State tenders (see document attached). She said that she was appearing on behalf of the Khaya Women’s Project, Dumela Construction, Imvusa Trading, and African Construction. There were problems in the way in which the Department of Public Works awarded tenders. In some instances tenders were awarded to companies that had not tendered and very few, if any, explanations were given on how this could happen. The Department’s help desk was also not of assistance to the majority of people. Discrimination in institutions like the South African Defence Force, City of Cape Town and Metrorail was still rife. The issue of fronting remained a major problem.

Ms M Matanda (African Outback Services) said that the Department of Public Works had failed many people in the Western Province. The government had committed itself to black economic empowerment but there were no practical examples to talk of. Department staff members were often not in the office to help the people. She cited the Regional Office in Foreshore as one of the offices that had not been helpful. Most of the time people were not given clarification on how they had lost tenders. In response to a query why a particular person was not awarded the tender, the Department would normally respond that the person or company was a big risk and banks were unlikely to give financial assistance to them. The attitude of the Department implied that their businesses could not grow and would always be small businesses. She had tendered for school renovation projects and she had not receive any information on which company had won the tender. When she enquired on who had won the tender she was informed that the results were not yet available. What surprised her was that there were already people working on site despite the fact that the results were not yet available. There was lack of transparency in the Department. She had been told on numerous occasions that there was no way that the Department would give her any jobs. An official from the national Department even suggested that she could approach the President or Parliament but nothing would change. There was a need for change within the Department.

She said that Metrorail was one of the most racist companies she had come across. It was very difficult to be awarded a tender by Metrorail if one was not related to some employees of the company. Companies that were contracted to clean trains also experienced major problems. They would clean the trains but then at night people would paint graffiti on them. Metrorail would inform the company that it had not cleaned the train and would therefore not be paid for that train. They would consequently reduce the amount of work they gave to the company thereby forcing it to close down. It was very expensive to remove the graffiti. The companies had no access to storerooms for their chemicals nor change rooms for employees. It was disappointing that small businesses had no one who could fight for and protect them against bullish big companies.

Mr T Mtokwana (Lukhanyo) said that the consultants in the Department remained largely white. He wondered how black companies would access the business of the Department given the large number of white consultants who were still "living on their own island". The Department would send a letter confirming that it had awarded a tender to your company. But then you would suddenly receive another letter from the Department informing them that the decision to award the tender to them had been reversed. It was important to understand that companies normally make financial, labour and other arrangements once they had been informed that that they had won a tender. The acts of suddenly reversing such decisions were setting up small companies for failure.

He said that the City of Cape Town also did not give work to small businesses. Some businesses had moved out of the Western province to other province so as to ensure their survival. The City had recently reversed its decision to give portions of land in Big Bay to 17 black companies. White people had made a noise about the decision to give the land to black companies and the City Council saw it fit to reverse its decision. The companies that were involved in the project incurred expenses. His company was still servicing a loan of R250 000 it had taken for the purposes of the project. It was worrying that no one was keeping these companies updated on recent developments. It was important to understand that the pieces of land were not given to the companies for free. The cost of the pieces of land were about R2.5m. Nobody was asking any questions about the civil works currently taking place in Big Bay. A white-owned company, Power Construction, was doing all civil works in the area. Another white company was a facilitator of the project and was making a lot of money from the project.

Mr Mtokwana said that it had often been said that there was a lack of qualified black people in the province. It was strange that the City was able to find trained black people when it was convenient for it. The City had recently decided to appoint a company from Johannesburg to facilitate the Gateway Project. This was irritating for the people of Cape Town. Everybody, except people living in the Western Cape, was raping the province. One wondered if black businesses in the Western Cape had to belong to a particular cluster for them to be seen and recognised. Most black companies would have closed down if it were not for the joint ventures that they had with other companies in other provinces. Most of the tenders were awarded to white companies. He urged the Committee to look at the records and see how much business had been allocated to black companies in the province.

He was concerned about a culture or tendency that was emerging in Khayelitsha. People in the area were beginning to make demands in terms of who should be awarded tenders to work in the area. One had to be resident in the area before they could be allowed to work there. This culture was bad and would effectively divide communities. He wondered if it would be appropriate to say that people in Khayelitsha should not be found anywhere else and should therefore live and work in their area. It was important to discourage this culture. It was important for someone to start giving attention to some of the problems or else black business, particularly in Western Cape, would cease to exist. He called for a collective effort to help address the problems.

The Chairperson asked if Mr Mtokwana meant that nothing should stop a person who lived in Sea Point from facilitating a project in Khayelitsha or Gugulethu.

Mr Mtokwana agreed.

The Chairperson was surprised the presenter was of the opinion that a person who lived in Sea Point should be allowed to facilitate a project in Khayelitsha whilst a person from Gauteng was denied that right.

Mr Mtokwana replied that his company had tried to buy a building in Commissioner Street in Gauteng. The building belonged to the Gauteng government. They were told that they could not buy the property unless they were in partnership with a Gauteng company. He believed that Western Cape companies should be given first preference for all projects in the province.

Ms Beukes added that it was interesting to note that black companies were not allowed to work in Khayelitsha whilst Power Construction was allowed. Most people who were involved in the renovation of the Lingelihle Training Centre were not resident in Khayelitsha. They were working for Power Construction.

Mr Mtokwana added that Power Construction was notorious for setting up small black companies. Some people were still living with the mentality that everything done by a white person was of a superior quality compared to that done by a black person. His company did not have white lawyers or accountant and it would never use them. He felt that white people who were looking for jobs should approach white companies. Black people had extended their hands too much to make reconciliation work.

Mr M Mvandaba (Mvandaba Cleaning Services) said that he had encountered numerous problems with the Department of Public Works. He had submitted his quotation for a grass cutting tender (K372/04) in schools. The tender was awarded to a company that had not been listed as submitting a quotation. He also bid and was unsuccessful with tender S110/04, Artscape Garden Service. His quotation for this tender was the highest. He had received a letter from the Department informing him that he had been awarded the tender and should indicate before the 24 February 2005 if he was accepting the tender. The same tender was awarded to another company on the 7^th February 2005. He thereafter received a letter informing him that his tender had been unsuccessful. He went to enquire why the decision to award him the tender was reversed and could not receive any answer. He also took his grievance to the following officials in the Department ’s office in Cape Town: M van Leeuwen, R Melody and T Mguli. He made it clear that he would take the issue to Premier E Rasool and MEC Mr Skhwatsha. Mr Mguli had replied that he was free to take the matter to those people but they would take years to respond to his concern. He later found out that the tender had been awarded to AST African. The company had submitted the lowest quotation. Their price was about R5 700 per month or R69 000 per annum. The amount of R5 700 could not maintain the garden given the number and price of things that had to be bought and salaries to be paid to employees.

Mr Mvandaba said that he had never received even the smallest tenders from the Department. He wondered how he would gain the necessary experience to undertake big projects. He wondered what kind of democracy existed in South Africa if departments did not respond to the people.

Ms Beukes added that small businesses had to buy the tender documents and be registered somewhere but yet they did not get the jobs.

Mr Mtokwana said that Ithubalabantu, a conglomerate of construction and development companies, had confronted the City Council about why black businesses were not getting tenders from the City Council. Five companies were acknowledged as successful bidders. Whilst the companies were busy making arrangements to start their projects they received a letter informing them that there was an appeal against the decision to award the tenders to them. The project had to be stopped so that the Council could first listen to the views of white businesses. What was interesting was that a number of black companies had raised concerns in the past but nothing was done about them. Black businesses had consistently worked from disadvantaged positions. The City had not yet responded on when the companies should start with the project because they still had not decided how to deal with the white companies.

Ms Matanda also gave an account of racial abuse she and her employees suffered when they were subcontracting for WBHO (PTY) LTD. Her employees were expected "to parade" before the management on daily basis. Her contract with the company was consequently terminated after she voiced her displeasure with the attitude of the company’s management.

Discussion
Ms M Ramotsamai (ANC) said that officials from the Regional Office of the Department of Public Works should have been present at the meeting so that they could attend to the allegations made by the presenters. The government had created opportunities for people to be actively involved in the economy. It was disappointing that the Department was making a mockery of the government’s commitments. The Committee should follow up on the issues raised in the meeting. A lot of work still had to be done. A number of people had in the past complained about various issues and it was time for the Committee to act. She appealed to the presenters to furnish the Committee with specific incidents so that it could make follow ups if necessary. She felt that the doors to economic development were being continually closed on the face of black companies. She wondered why tenders were continually awarded to established big companies.

A member of the Committee said that the attitude of the Department left too much to be desired. It had always been said that the Department was incubating small companies. He wondered where the incubated companies were located. The Department was entrusted with the Extended Public Works Programme and learnership programmes and it was questionable if it was really driving these programmes. The Expanded Public Work Programme was closely related to Black Economic Empowerment. It was disappointing that the construction industry was still not open to women. The Committee should take the matter further. The provincial MEC, the Director General from national office and the Minister should be invited to a meeting to address the issues raised.

Ms P Nwamitwa-Shilubana (ANC) most of the problems raised were not confined to the Western Cape province. It was important to attend to the racism allegations.

Mr N Gogotya (ANC) said that people should lay criminal charges with the police. They could also raise issues of discrimination with the Public Protector.

Ms Beukes said that the problem was that the Public Protector and Consumer Protector took too long to deal with complaints.

An official from the Department agreed that there was a need to address the issues raised in the meeting. The issue of fronting remained a major problem. The Department had initiated a process of verifying the credentials of the Black Economic Empowerment companies. It would look into all contracts that were awarded to purportedly black economic empowerment companies. He acknowledged that payments for work done were usually late by three to six months as alleged in the submission. He encouraged the presenters to furnish further details about issues like racism so that the Department could take the necessary action. He said that the requirement for the registration of contractors was brought up by contractors so as to protect themselves bogus companies. It was intended to ensure that only genuine companies would benefit from black economic empowerment. It was unfortunate that the implementation of the register had brought about some unintended consequences.

The Chairperson said that it was important for the Department to arrange a meeting with the presenters and deal with some of the concerns raised. It was also essential for the Department to undergo some restructuring process.

Ms Ramotsamai suggested that the official from the Department should take note of the complaints from the presenters and report back to the Committee on action taken.

The Chairperson said that it was important for the Department to have interactive meetings with communities rather than simply telling them what to do. The Committee had the right to call upon the Department and big companies to come and account for what they were doing.

Council for the Built Environment (CBE)
Mr A Mokweni (Acting Chairperson) and Dr M Neluheni (CEO) represented the Council. Dr Neluheni made the presentation (see document attached). She highlighted the Council’s objectives, challenges and programmes. Its mission was to facilitate integrated development whilst promoting efficiency and effectiveness through good governance of the built environment professions. Lack of staff and office accommodation were some of its challenges.

Mr Mokweni added that there were a number of problems facing the built environment profession. He gave the collapse of shopping malls and bridges as examples. The CBE had to deal with such issues. The exaggeration of property prices was a major problem as it also impeded the land restitution programme. The Municipal Property Rates Act would soon come into effect and this require municipalities to valuer properties at regular intervals. This would be a major challenge given the number of valuers available in South Africa. It was important for the majority of our people to gain access into the property valuing and related professions. A policy intervention was required to reverse the problem of skills shortage. The legislation governing the built environment profession created some gaps. The Council had to redefine the parameters of each profession within the built environment. The redefinition of the parameters could not be done until such time that the identification of work process had gone right through to the Competitions Commission. The determination of fees for the profession was also still outstanding.

Discussion
Ms Mwamitwa-Shilubana said that there were some professionals before the establishment of the CBE. She asked if the Council had any data about the professions that were in existence before the establishment of the Council. She asked if it was possible for the Council to intervene from high school level to ensure that learners followed specific subjects that would make it easy for them to enter into the profession. Career guidance was very important in this regard.

Dr Neluheni agreed that the built environment profession had been in existence for some years. However, the Council did not have details on how many professionals existed before. The database was being upgraded. The Landscape Architects profession, with about 82 members, was the smallest profession in the built environment. It was difficult to have an accurate number of the professionals because some of them were not registered. The Project and Construction Managers Council was still very knew. It was in the process of registering its professionals. The Council was in constant contact with various bodies that produced the built environment professionals. The Council for Higher Education was the appropriate body to go deeper in the education system. The Council had conducted roadshows to market itself to people in all provinces.

Mr Mokweni added that the issue of the entry of new blood into the profession was very critical. It cut across a number of issues. One was that one might have to look at the number of people who did mathematics at high school level. The requirements at some tertiary institutions might be very onerous and thereby making it difficult for people to enter the profession.

Mr Gogotya said that there had been interesting developments in the built environment in countries like Brazil, the Caribbean and West African countries. He asked if the Council had any contact with the built environment profession in such countries with a view of learning from them. He also asked what kind of assistance was required by the Council in order to ensure that it was self-sufficient.

Mr Mokweni replied that there were very good property valuers in Ghana. The City of Cape Town valuer was also from Ghana. The Council initially had capacity problems. It had only recently engaged the services of a project manager who would be responsible for researching the state of the profession in the country. Part of the research might, depending on the resources available, involve looking at what other countries were doing.

Ms Ramotsamai said that properties, especially in the Western Cape, were being over valued. She asked if there was anything that the Council was doing with the people involved in the over valuing of property. The Department of Public Works was faced with a problem of ageing professionals. She wondered if there was anything that the Council was doing in order to introduce new blood in the Department. It was also very difficult for black people to enter into the built environment profession.

Mr Mokweni replied that there was a strict code of conduct that professionals had to adhere to. It important for people to report cases of over valuing of properties to the South African Council for Property Valuers Profession. The Council would ordinarily investigate the case and take necessary disciplinary action.

He agreed that there was no new blood entering the profession. There were at one stage only 369 proper and high-level property valuers in the country. There were many blockages in the system and the CBE was established to unblock them and ensure that there was transformation in the profession. It was true that it was difficult for black people to enter into the profession. The Department of Public works could for instance, say that a company would not benefit from work opportunities from the Department unless it had a training programme and a black trainee in its ranks.

Mr Gogotya said that there was also a valuer from the bank that would finance the buying of the property. That valuer was the final decider on whether the other valuer had done justice to the valuing of the property.

The Chairperson said that the price of land in Cape Town was a major concern.

Ms Mwamitwa-Shilubana added that the price at which farmers sold land to government was unreasonable.

Mr Mokweni replied that the Chief Land Claims Commissioner had approached the South African Council for Property Valuers Profession on this issue. Some intervention mechanism through which the Council could assist in determining if the price was realistic was agreed upon.

With regard to the high prices of houses in Cape Town, he said that it was important to note that there were market forces and the professionals at play. The professionals determined the market value by interpreting the behaviour of the persons participating in the market. They would look at how people transacted in a particular area before arriving at a value of a property. It was important to understand that one transaction did not make up a market. There must be an established trend. The degree to which sellers and buyers were informed was also critical. The truth was that the prices of houses in the former white areas had rapidly increased. This was because uninformed black people were beginning to buy properties in those areas. There was a need to educate the public and ensure that they used the services of registered valuers before buying or selling any property. It was important not to blindly accept the opinion of the estate agent or the seller because they wanted to make maximum profit. Some people did not even know the difference between an estate agent and a property valuer.

The Chairperson said that it was also important to educate Member of Parliament on these issues.

Mr Gogotya asked what was the current status of the CBE in terms of accommodation.

Dr Neluheni replied that was renting offices from the Construction Industry Development Board. There was a need for more office place. The Council was looking for new office space.

Mr Gogotya said that the Department of Public Works had in the past indicated that it had a number of empty buildings.

The meeting was adjourned.