Department of Public Works Conditional Grant spending first quarter 2008

NCOP Finance

26 August 2008
Chairperson: Mr T S Ralane (Free State)
Share this page:

Meeting Summary

The MECs and heads of the provincial departments of Transport, Roads and Public Works attended the meeting to give reports on the performance on spending of conditional grants in the first quarter of 2008, in relation to the conditional grants for public works schemes. Four provinces presented similar reports. In Limpopo, rates and taxes were being paid in a scattered manner for the most part, and only some municipalities were billing properly. The devolved function was still in its first year of implementation and there were some difficulties in picking it up.  Challenges were identified as procuring funds from National Treasury, implementation of the turnaround strategy, building of permanent capacity, and best practice methods.

North West said that this province experienced problems because one municipality alone claimed more than the entire allocation. The Departments of Health and Education were taking up a substantial part of the projects. Challenges here included lack of capacity in the built environment and job hopping, inadequate funding, in adequate experience and delay in payment by service providers.

Western Cape agreed that the position was much the same. The money was yet to be paid, with the first tranche only taking place later in the month. There was sometimes disparity between what was claimed and what was granted.

Gauteng concurred with the problems expressed, but noted that in Gauteng the allocation fell into three portions, one in respect of the Gautrain, of which 48 % of the budget had been disbursed already. In respect of rates, he agreed that there were problems as these had to be verified from valuation rolls but there were inadequate staff to do the verification, and amounts would not be paid without supporting vouchers. Historical arrears provided a challenge.

National Treasury explained that the budgeted amounts were intended to supplement the provincial amounts, and were not to be viewed as the only source of funds for infrastructure. Health and Education needed to be treated separately. In short, there was a need to achieve a balance between what money was allocated and available, what the needs were, and the planning in respect of those needs, and above all he stressed that decisions needed to be taken timeously.

The Committee felt that capacity was a problem, but was sometimes being used as a convenient scapegoat for the Departments of Public Works. Many problems did appear to lie with Education and Health. There should be regular interaction between the parties of an ongoing nature and at regular intervals, to take all submissions into account and measure them against capacity and funding. The Western Cape had reported the use of Cuban and retired expertise as possible sources to try to alleviate the problems of expertise and capacity. The Chairperson thought that the historical debts must be considered against new requirements to make the necessary allocations. The tranches should be further discussed.  It was necessary to interpret the Division of Revenue Act properly. There was provision that 4% of the budget could be utilised for capacity building or training, and he felt that this should be used.  The proper and creative use of skills, the proper gazetting of projects, the proper managing of projects by Project Managers skilled in the fields, who were prepared to advance beyond their initial disciplines and cost control of projects was required.

 

Meeting report

Consideration of conditional grant spending of provincial departments: Public works grants: First quarter 2008
The Chairperson welcomed the MECs and heads of the provincial departments of Transport, Roads and Public Works, and asked them to briefly give their reports on the performance for the first quarter spending of 2008, in relation to the conditional grants for public works schemes. 

Limpopo report
The MEC for Public Works in Limpopo, Ms Rosina Semenye and the HOD Mr R Shingange went through the written presentation on the devolution of the property rate fund grant. They said that the National Department of Public Works had been paying for some of the Rates and Taxes to various municipalities on immovable properties belonging to the Provincial Government, the bulk of which were schools. For other immovable properties, the rates and taxes were paid in a scattered manner. R12. 2 million was allocated as conditional grants for functions devolved from the National department. Only 12 of the 30 municipalities were apparently billing for taxes and rates. Different accounting systems were used. The devolved function was in its first year of implementation and trends were difficult to pick up. The iE Works programme had been equipped with
the necessary data to enable operators to pay the bills from municipalities. Training had been given to officials responsible for payment to try to ensure that these were processed as submitted by municipalities. The transfers would be disbursed in four equal tranches between August 2008 to February 2009. The expenditure for the first quarter was nil.  The Department is presently capturing details of properties that have been devolved in the iE-Works. This would ensure Conditional Grants were utilised for devolved functions in terms of the submitted lists

Challenges were identified as including the fact that only 12 municipalities were billing the National Department, and others would be called to come forward. The dual system was confusing.

A full summary of the projects implemented during the 2008/09 financial year was attached (see presentation for full details). There was about a 23% increase on the allocation when compared with the previous year. NO funds were transferred between departments as client departments did the payments to service providers.  A trackers system was installed. Challenges were identified as procuring funds from National Treasury, implementation of the turnaround strategy, building of permanent capacity, and best practice methods.

Discussion
Ms D Robinson (DA, Western Cape) made reference to a report in that day’s newspapers alleging that many Councilors were verbally and numerically illiterate, and submitted that Councillors should be made aware of the fact that bills need to be paid. She added that there seemed to be an endless number of workshops without any results. She submitted that effective training, in a more focused way was required.

North West presentation
Mr J Thibedi, MEC for Public Works, North West tabled a written presentation and in addition stated that whilst his Province had received an allocation of R58.9 million, one municipality alone had claimed about R90 million and that the province could not pay over the money without supporting verification. He described the allocation and expenditure, setting out pictures and figures to support what he was saying. Of the 38 renovation office projects, 21 had been completed. He set out the hospital revitalisation projects for the Department of Health, and the 21 projects undertaken for the Department of Education, as well as a variety of other projects (see attached presentation). In terms of monitoring, he said there were client focus teams. Challenges included lack of capacity in the built environment, and “job hopping” between the market’s vacancies, especially due to generally lower salaries in the public sector. There was also inadequate funding, inadequate experience and delay in payments by service providers. Monthly reports were submitted. He said that in respect of the devolution of rates and taxes, the municipalities were still busy with budgets and that arrears were still owed.

Western Cape presentation
Mr
Kholeka Mqulwana, MEC for the Western Cape then addressed the meeting, on the basis of his written report, and stated that his story was much the same as all the other provinces. He noted that the money was yet to be paid, with the first tranche only becoming available later this month, and that there was a disparity between what was granted and what was claimed. He also noted the need to have claims supported by verification. Further details were contained in the written presentation (see attached document)

Gauteng presentation
Mr Gilberto Martins, Deputy Director General, Provincial Department of Public Works, Gauteng, concurred with the previous speakers but said that the allocation for Gauteng fell into three main divisions, of which some was for Rates, some for the Gautrain, and some for infrastructure.
With regard to the Gautrain the allocation is R4.7 billion but this was divided into, R842 million in the first month, in the second month R600 million and in the third month R547 million, amounting to approximately R2 billion. Thus about 48 % of the budget had been disbursed. It was clear that the money was depleted by the end of the first quarter and the remainder needed to be borrowed.

Addressing the question of Rates he stated that these had to be verified from the Valuation Rolls but there was an inadequately trained staff to do such verification, and without supporting vouchers the amounts could not be paid. He added that historical arrears which were now being presented provided a major challenge and problem.

The remainder of the detailed report was merely tabled for information of Members and was not summarised in any depth.

National Treasury Comment
At the invitation of the Chairperson, a representative of National Treasury explained that the budgeted amounts were intended to supplement the provincial amounts, and were not to be viewed as the only source of funds for infrastructure. Health and Education needed to be treated separately. In short, there was a need to achieve a balance between what money was allocated and available, what the needs were, and the planning in respect of those needs, and above all he stressed that decisions needed to be taken timeously

The Chairperson summarised the previous Speakers by saying that capacity appeared to be problematic but capacity must not be used as a scapegoat for the Department of Public Works, and that most problems seemed to lie with Education and Health. For example, the payment by municipalities of property rates was a new development. It was necessary to take into account the  historical debt and the fact that there were now new rating levels,  but that he felt that such things should be discussed on time. He asked what the National department could do to obviate the problems.

The representative from National Treasury responded that the grants were conditional grants intended to supplement the provincial needs, which were to come from the provincial budgets. It was not intended that there be devolution. If there were issues, such must be dealt with by National Treasury and National Public Works, as early as possible. She posed the question as to why there was no regular interaction between the parties of an ongoing nature and at regular intervals.

The Chairperson said that the situation would not be difficult if all submissions were made, and received, from the Provinces, were considered and taken further in consultation with the Provincial Departments of Public Works, and were measured against capacity and the funding. The Western Cape had reported the use of Cuban and retired expertise as possible sources to try to alleviate the problems of expertise and capacity. He posed the question whether it is simply a matter of writing off the historical debts, having a clean slate and proceeding, which he did not feel was justified; or of considering the historical debts and the new requirements and making the necessary allocations. He again observed that Departments of Health and Education seemed to be particularly problematic and there was always the call for skills, but the stage had been reached where it seemed to be that even menial jobs “required special skills”. He reiterated that there must be clarification of objectives.

A Member commented that with regard to arrears of rates,  Public Works was always regarded as the scapegoat. He asked where the arrears came from, for Public Works was supposed to have cleared them. He asked that there must be an investigation. He also asked whether it was justifiable and acceptable to allege that Municipalities did not have capacity to do their work properly, and suggested that Municipalities should be engaged.

Mr E Sogoni (ANC, Gauteng) then explained that capacity was the challenge. He said that Department of Provincial and Local Government (DPLG) and South African Local Government Association (SALGA) had investigated and the issue of capacity was always one that appeared on  paper. He added that there were clearly problems but it seemed that capacity was another excuse that appeared continuously.

The Chairperson again summarised, pointing out that DPLG, SALGA and National Treasury were shortly to have a combined meeting to consider this major problem. He felt that everyone else should also engage with the issue. However, the question was how to deal with the current allocation. Gauteng had indicated that there were four tranches, but this did not assist timeous payment, and he felt that this was a matter for further discussion. He felt that the Municipalities were always in arrears.

A Member commented that it seemed that the process was from National Treasury to National Public Works to the Provincial Treasury to the Provincial Department of Public Works, and that there was no correlation of activities or approaches.

The Chairperson pointed out that the country and the system was fourteen years old, and the problems should by now have been worked out, but that they seemed to be intensifying and it all boiled down to training and capacity .

The Chairperson then explained that every one concerned must study the Division of Revenue Act and interpret them in the same way, and that the Heads of Department must read, consider and follow the enabling legislation. He referred, for example, to Section 14, which he read out. He gave as examples Provinces building clinics, without building roads to access the clinics, to building housing schemes without there being any infrastructure of roads, sanitation, water and electricity reticulation, and such services not being provided until 80% of the houses were occupied. He added that there was provision that 4% of the budget could be utilised for capacity building or training, and he felt that this should be used so that such egregious mistakes were not repeated in future in other areas of infrastructure development.

MEC for Gauteng, Mr Ignatius Jacobs pointed out that Education and Health knew what they required but did not have the skilled and experienced personnel to translate their requirements and wishes to Public Works. Then Treasury did not possess the skilled and experienced personnel to understand what it was that the technical people require, then there was no proper communication and everyone was talking past each other.
The Chairperson said that it seemed to him that the needs must be identified, and that there should not be an expectation of handouts in regard to allocations. The Public Finance Management Act (PFMA) should be operative and Provinces should set out their requirements clearly. With regard to capacity and the call for skills, he added that it was not only a question of skills, but of the requisite experience for effective functioning..

Mr Madala Masuku, MEC for Public Works, Mpumalanga, said that there was a need for an attitude change among service providers, who tended to view the Government as a “cash cow” and make little effort to curtail costs. He agreed with all the Chairperson’s viewpoints about training.

After further discussion the Chairperson again summarised the views by stating that capacity and training was seen as a great handicap, but the Western Cape was using whatever was available, and perhaps the other provinces could follow this example.

Mr Martins said that he was having monthly meetings with the service providers in Gauteng, and additionally was making regular, but irregularly timed and unannounced site visits to determine whether the situation on the ground equated with the reports received at the monthly meetings. He added that a “dashboard” system had been implemented and this was proving of increasing benefit. He added that what was in short supply, more than professionals, were professionals in various fields who were prepared to act as Project Managers to drive the process.

The Chairperson summarised further discussion by saying it seemed that while there was little attempt to control costs, the proper implementation of the tender process would go a long way to restraining costs.

Another official suggested that there needed to be a creative use of the available skills and that training, properly directed, could alleviate the shortage. However, he felt that what was really required was the proper and consistent gazetting of projects. 

The Chairperson summarized the views and opinions of the presenters by emphasising that the proper and creative use of skills, the proper gazetting of projects, the proper managing of projects by Project Managers skilled in the fields, who were prepared to advance beyond their initial disciplines and cost control of projects is what is required.

The meeting was adjourned.

 

Share this page: