Property Sector Transformation Charter, ASGISA strategy: briefing by Department

PUBLIC WORKS PORTFOLIO COMMITTEE
13 June 2006
PROPERTY SECTOR TRANSFORMATION CHARTER, ASGISA STRATEGY, PREPARATIONS FOR WORLD CUP: BRIEFING

Chairperson: Mr F Bhengu (ANC)

Documents handed out:
Department of Public Works’ ASGISA presentation
Final draft of Property Sector Transformation Charter
Property Sector Transformation Charter presentation
Presentation on Department of Public Works’ preparedness for the 2010 World Cup [please email [email protected]]

SUMMARY
The Department of Public Works (DPW) presented the final draft of the Property Sector Transformation Charter (the Charter), and the Charter framework, which established the principles on which broad based black economic empowerment (BBBEE) should be implemented in order to address the inequalities and unlock potential in the property sector. DPW described the purpose, framework, progress and challenges in the process, stating that it would be submitted to the Minister of Public Works on 15 June and to the Minister of Trade and Industry on 30 June. Members sought clarity on the consultative process in the formulation of the Charter, the composition of the Council, clarity on under-developed areas, the impact and effectiveness of the provincial roadshows, the extent of youth and women participation and mechanisms to prevent or outlaw fronting companies. It was agreed that a public hearing would be convened on the Charter and that DPW would meanwhile produce and disseminate to the members of the committee a user-friendly manual to assist members in popularising the Charter during their constituency work, and also investigate radio publicity. It was also agreed that further work needed to be put into monitoring possible fronting.

DPW presented its strategy for bringing the Department in line with the Accelerated and Shared Growth Initiative of South Africa (ASGISA), highlighting the main challenges, the contributions already made, and the proposed steps to be taken through a variety of programmes, including expanded public works programmes, development of skills in the hospitality, construction and finance industries, greater involvement of women, placement schemes, improvement of maintenance on public infrastructure and expansion of SMME programmes and BBBEE programmes. Questions by members addressed the position of women in the United Arab Emirates trip, the criteria for selection of applicants and whether the placements would result in entrepreneurship activities. The challenges facing the programme were further clarified and discussed.

MINUTES
Presentation on the Final Draft of the Property Sector Transformation Charter (the Charter)
Ms L Bici (Deputy Director General, Policy Development, DPW) and Dr Sean Philips (Acting Director General, Department of Public Works (DPW)) presented the Final Draft of the Transformation Charter for the Property Sector (the Charter). South African society, including the property sector, remained characterised by racially based income and social services inequalities, which prevented South Africa from reaching its full economic potential. The Charter strove for transformed property relations in South Africa, to promote a growing sector. The process, which included government, business and state agencies had begun in 2004 and DPW was appointed to lead the government team. Roadshows were held from February to June 2005, and Parliament was briefed in September 2005.

The Charter Framework established the principles on which broad based Black Economic Empowerment (BBBEE) would be implemented. It laid the foundation for the Charter and set out the vision for the next five years. A Technical Committee had undertaken research and put forward proposals and all stakeholders were due to sign it off in March 2006. It envisaged direct empowerment through ownership, control and management. Human resources would be developed through employment equity, skills development, preferential procurement and enterprise development.

Achievements to date included 25% ownership targets being met, and development of 8% in under-developed areas.The Charter had been submitted to lawyers for legal verification, would be submitted to the Minister of Public Works on 15 June and the Minister of Trade and Industry on 30 June. It would also be referred to MinMEC, other relevant departments and a representative Property Charter Council would be established. The Charter was in line with section 12 of the BBBEE Act, gave the opportunity for and support to racial transformation, and the opportunity for growth and development of the sector.

Challenges included full commitment by other government departments and agencies, problems of fronting companies, and achieving synergy with other supporting programmes to create economies of scale.
Discussions

The Chairperson thanked Ms Bici and Dr Philips for their comprehensive and precise presentations.

Mr S Huang (ANC) noted that page 12 of the Property Charter presentation had illustrated the establishment of a representative Property Charter Council. He asked if the Minister would sit on the Council, and sought clarity on the composition and size of this Council.

Ms Bici explained that there would be twenty Councillors altogether; five from established business, five from black-owned enterprise, five representatives from Government, and five from other organisations.

Mr S Opperman (DA) questioned how widely the Department had consulted, and if any unions or labour groups other than COSATU had been included in the process leading to the Charter.

Mr Philips explained that the Department had not directly consulted COSATU, but had rather worked through the National Economic Development and Labour Council (NEDLAC). COSATU had at a later stage approached the Department directly. Other labour groups could have been further involved in the process by using NEDLAC channels.

Ms B Ntuli (ANC) requested clarity on how successful the provincial road shows had been, as they were the main medium of engagement with stakeholders to popularize and explain the Charter. Ms Bici had commented that they were poorly attended and she wondered if they had been adequately advertised and promoted.

Ms Bici conceded that perhaps there had been some inadequate promotion for the road shows, and that in future Members of the Portfolio Committee could assist by promoting road shows in their constituencies. However she was confident that the poor attendance had in no way undermined the final content of the Charter.

Ms Ntuli then asked if definitive benefits had been achieved from the road shows, and what mechanisms were in place to ensure a benefit to those most needing assistance.

Ms C Ramotsamai (ANC), substantiating Ms Ntuli’s question, asked what Members, as public representatives, could do to assist the road show process.

Ms Bici believed that all stakeholders must continue to popularise the Charter across the country, and that DPW would certainly appreciate the support of Members to ensure that the public gained an understanding of the Charter’s content. She offered to provide with a document highlighting the direct benefits of the Charter to the public.

Dr Philips felt that it might be useful for the Portfolio Committee to call all signatories of the Charter to give a presentation on how each was conducting implementation of the agreement.

Mr M Likotsi (PAC) questioned whether youth had been represented in the dialogue with stakeholders.

Ms Bici confirmed that there was real need for youth representation, and that there had been consultation with the Youth Commission.

Mr Opperman sought assurance that the Charter really would cater for broad empowerment.
 
Dr Philips explained that the Charter required that empowerment definitely be broad based, and this would be verified during the certification process, by ensuring that checks and balances were in place.

Mr N Magubane (ANC) questioned how the issue of fronting companies had been dealt with, and what mechanisms had been put in place to tackle the problem.

Ms Bici stressed that the Department were treating fronting as a serious issue, since it would divert funding intended to develop the Country away from its intended channels. DPW would continue to take measures to counteract this serious problem.

Ms Ntuli sought clarity on any framework of measures to counteract fronting, as she believed a firm stance was needed.

Dr Philips explained that there was currently legislation in place that firmly regulated against fronting. However, this legislation needed to be fully implemented, and the contracts given to companies needed to be monitored, in terms of the legislation, to detect fronting.

Mr * Blanche (party*) sought clarity on Ms Bici’s referral to “under-developed” areas, and enquired whether this meant “rural” areas.

Ms Bici clarified that the term “under-developed” referred to both underprivileged and rural areas.

The Chairperson agreed that there was a real need to prepare and circulate a more user- friendly document that would assist people to understand what the Transformation Charter really meant. He suggested that local radio would also be a useful method of communication. He commented that he had been impressed by the briefing that Dr Philips had delivered to SABC, and believed this kind of publicity was beneficial.

The Chairperson indicated that Members were truly concerned about the process. The property issue was very sensitive terrain. Several Members had been concerned about the consultation process. He suggested that Members of Parliament were ideally placed to assist communication with the public.

The Chairperson questioned whether the 40% women employment targets of the Department were high enough.

Ms Bici concurred that the current targets of 40% were not high enough, but explained that these figures reflected a compromise during the negotiation process. They were a step in the right direction.

The Chairperson suggested that there should be public hearings on the Charter.

It was agreed that the Portfolio Committee would convene a public hearing during the third quarter on the Charter, and that in the meantime DPW should prepare a more user-friendly manual to assist members in disseminating information during the constituency period and their provincial visits. DPW should also investigate the options of further radio talks or promotions to disseminate information on the Charter.

Presentation on Accelerated and Shared Growth Initiative of South Africa
Ms L Bici and Dr Sean Philips (DPW) presented to the committee the strategy for bringing DPW in line with the ASGISA policy, which was not a new economic policy, but an initiative to sustain higher and more shared growth. GDP growth over the last ten years had averaged 3%, and had reached 4% since 2004. However, the growth was still unbalanced because although strong prices had strengthened the rand, there was a 4.3% deficit in GDP in 2005. Under the current system the second economy was largely excluded from benefiting directly.

DPW stated that infrastructure spending of R370 billion over the MTEF across all spheres of government would lead to direct benefits to the second economy. Focusing on sectors such as tourism, agriculture, bio-oils, timber and food production and processing would contribute to high growth and job creation.

DPW believed it could assist by upscaling the Expanded Public Works Programme (EPWP) in the infrastructure and social sectors, improve the maintenance of the public infrastructure, prioritise the construction industry as a growth industry, ensure full spending of budgets without rollover, address scarce skills and expand the SMME (Small, Medium and Micro Enterprise) sector, with an emphasis on BBBEE. It would target women, use unemployed graduates.

DPW had already begun with a placement programme in the United Arab Emirates. DPW had already upscaled EPWP in access roads. In the social sector EPWP programmes were active in Early Childhood Development and Home Based Care, in conjunction with other Departments. It had drafted infrastructure strategy plans in collaboration with CSIR and intended to submit its plans to Cabinet. It had developed plans to position construction as a growth industry, and other departments were using these plans in the national industry strategy. SMME expansion included contractor incubation programmes, and placement of candidates in several countries.

Discussion
Mr Oppperman requested that the presenters identify the constraints DPW faced in implementing ASGISA targets.

Dr Philips believed that the biggest challenge for the Department was the shortage of skills in the construction industry, which DPW was working to redress.

Ms Ntuli sought clarity on the criteria and recruitment process used to select 123 out of 500 people, who would go through the training programme in the United Arab Emirates, which had been highlighted in the presentation.

Ms Bici explained that the Department had used various methods of communication, including radio broadcasts and newspaper advertisements. A panel had already been appointed to oversee the interview process.

Mr Blanche questioned the benefits of taking a selected handful of people oversees for training, as he did not believe that this alone would solve the skills problem. He expressed concern that those trained might be absorbed by the large multinational companies, rather than becoming entrepreneurs.

Deferral of presentation on DPW’s readiness for the 2010 World Cup
The Chairperson announced that owing to time limitations this proposed presentation would have to be deferred to a later date. He asked that the committee be invited to the launch of Construction Week in good time, as members would be in their constituencies during the parliamentary recess.

The meeting was adjourned.