ATC110701: Report on Rural Household Infrastructure Programme (RHIP)
Human Settlements, Water and Sanitation
Report of the Portfolio Committee on Human Settlements on the Rural Household Infrastructure Programme, dated 1 July 2011
The Portfolio Committee on Human Settlements, having considered the Rural Household Infrastructure Programme (RHIP), reports as follows:
Section 1
1. Introduction
The National Sanitation Programme Unit (NSPU) was established in 2002 and administered by the former Department of Water Affairs and Forestry (DWAF). The strategic objectives of the programme were to ensure the provision of universal access to sustainable sanitation services, the promotion of effective sanitation practices, health and hygiene and the improvement of livelihoods. Since 2007, government had identified rural development as one of the country’s major priorities. In May 2009, the President announced that the responsibility for the provision of sanitation would be transferred from DWAF to the Department of Human Settlements (DHS). In response to the prioritisation of rural development, the National Treasury established the Rural Households Infrastructure Grant (RHIG) over the 2010 Medium Term Expenditure Framework (MTEF) period.
This grant is gazetted as Schedule 7 of the Division of Revenue Act (DORA), administered by the DHS for the provision of on-site sanitation and water facilities to rural communities. A total of R1.2 billion has been allocated over the 2010 MTEF i.e. R100 million for 2010/2011, R350 million 2011/2012 and R750 million for 2012/2013[1]. In accordance with this, the DHS has identified 57 municipalities in 8 provinces of the country to implement sanitation services.
The focus areas included the following:
- Creating an enabling environment for the delivery of the National Sanitation Programme through development of policies, strategies, frameworks, guidelines and tools.
- Direct intervention with municipalities with critical capacity constraints.
- Building the capacity of the sanitation sector.
- Supporting municipalities in the delivery of household sanitation services.
- Implementing on behalf of other sector departments (schools for Department of Basic Education and clinics for Department of Health).
- Special programmes (farm dwellers, bucket eradication, informal settlements).
- Job creation through sanitation delivery.
- Implement the Health & Hygiene Programme.
- Direct monitoring, reporting and evaluation of the implementation of the programme.
- Intra and inter departmental co-ordination to achieve the above objectives.
2. Progress overview
The DHS has made a series of presentations on RHIP progress to the Committee. The Committee raised concerns on the delays with the implementation of the programme as it was already behind schedule.
The first report dated 11 August 2010 indicated that:
1. The delays concerning the implementation of the programme were as a result of a challenge, namely that the DHS could not re-appoint implementing agents which were used by DWAF as this would have resulted in an audit query.
2. The placement of the advertisement for the appointment of implementing agents that would be working on various projects also delayed programme implementation.
The second report dated 16 February 2011 indicated that:
- Strategic goals were set out and these were to have facilitated hands-on involvement of beneficiaries in the implementation of the programme so as to instil a culture of ownership towards sustainable communities.
- The DHS encouraged the use of community-based organisations (CBOs), non-governmental organisations (NGOs) and public entities to ensure that communities were trained on how to sustain and maintain the infrastructure beyond implementation. DHS also wanted to contribute to alleviating poverty by implementing programmes through labour intensive mechanisms.
- The procurement of service providers was done through an open tender process and the DHS secured the services of two service providers, namely the Mvula Trust and the Independent Development Trust (IDT). In the first financial year (2010/11), 52% (R52 million) of the allocation had been awarded to the IDT and 36% (R36 million) to Mvula Trust. The remaining 12% was set aside for project management.
- The DHS presented a graph depicting the progress made per province. Overall, there was a total of 26 municipalities that benefited. Of a target number of 12 043 toilets, as at 9 February 2011, a total of 4 657 pits was constructed, with 1 203 of the sanitation facilities completed. It was noted that rain in some provinces had affected progress, and that this was one of the reasons why the Department would not be able to reach 100% of the target set out.
- One of the appointed service providers does not have sufficient experience in implementing sanitation projects at municipal level and especially in such a magnitude.
- Inaccessibility of some of the benefiting households, e.g. in Free State (Ngwathe LM) where only 70 pits had been excavated so far as well as the need to reduce a number of units due to travelling costs (long distances between farm households) also contributed to delays.
- There was also a challenge in some municipalities where construction started late due to tender processes and some contractors that had no capacity to perform.
- Municipalities experienced problems with the implementation of the sanitation programme and the reasons therefor varied. The municipalities were dissatisfied with one service provider, namely the IDT. The IDT wanted to use its own contractors to dig pits and that was challenged by local contractors and labourers. There was also a challenge of hard rock conditions, so much so that one municipality had been given an alternative village where sanitation pits would be constructed.
- Overall challenges were that five benefiting municipalities were rejecting the appointment of IDT as a service provider. The municipalities insisted that local contractors, labourers and co-operatives should have been used.
- The DHS reported some intervention strategy where benefiting municipalities were resisting the nationally appointed service providers that the DHS would enter into funding agreements with the relevant water services authority to implement the programme with the hands-on support provided by the DHS.
- In cases where an appointed service provider had declared that it had no experience in the implementation and delivery of rural sanitation, the DHS would consider reviewing the scope of work in the coming financial years.
The third report dated 14 April 2011 indicated that delays were due to:
- In Umkhanyakude district municipality (DM) (KZN), the municipality was dissatisfied with the manner in which the programme was implemented by the service provider (IDT). It sent a request to the DHS to remove the service provider and its contractors.
- In Inkandla local municipality (LM) (KZN), the IDT wanted to use its own contractors to dig pits and that was challenged by local contractors and labourers.
- In ILembe DM (KZN), the municipality demanded the use of co-operatives as it was adopted in all sanitation programmes when it was administered by DWAF.
- In Mopani DM (Limpopo), the target was 400 units in each LM and nothing was delivered. It was stated that this was due to the failure in working relations and the manner in which the programme was to be implemented. The DM felt the budget must be transferred to the municipality to implement. Therefore it was reported that the IDT is however of the opinion that their relations have broken down, the disagreements cannot be resolved and has requested that they be given another district.
- In Capricorn DM (Limpopo), some units had to be demolished due to non-compliance with technical specifications.
- In Blouberg LM (Limpopo), there was a challenge of lack of water resulting in water having to be transported from far away. It was also reported that work came to a standstill due to non-payment of labourers by the contractor appointed by the IDT.
- In Waterberg DM (Limpopo), the IDT appointed a contractor who had no capacity and the contractor handed the contract to another contractor.
- In Amathole DM (Eastern Cape), hard rock, heavy rains and inaccessible roads delayed the programme.
Response to concerns raised by the Committee
The Director-General informed the Committee that the delays in the implementation of the programme were due to his refusal to agree on the practices which were used by the Department of Water Affairs, which had Umngeni Water, the Independent Development Trust (IDT) and Mvula Trust as the implementing agents. The regulations used by Water Affairs were not transferred to Human Settlements. He further indicated that the challenge is that the DHS could not be used as a benchmark because it was implementing a new programme. The department was going to ask for a roll-over of unspent funds and would provide motivation for this to National Treasury. In terms of project management, the DHS will have to be stricter to avoid compromising quality on the ground. The service providers were aware of the conditions of the tender, in particular the stipulation that they have to use local labourers. He reported that, unfortunately, local labour was not being used in all provinces. After numerous meetings with the IDT concerning this matter, it was decided by the DHS that a review of the IDT had to be done to find out whether they were suitable for the scope of work.
The Director-General agreed that an advance payment of R14 million to the IDT was made because it is a parastatal of government. He further stated that he refused to provide advanced payments to the IDT as it is prohibited by the Public Finance Management Act (PFMA). However, treasury regulations allow such payment to parastatals as they are non-profit organisations and do not have savings or profits. National Treasury, in writing, instructed him to make an advance payment to the IDT as the regulations allow the accounting officer to verify whether the money was used for the intended purpose. The advance payment was agreed to and signed for in an addendum to the agreement. Clear directives were included in the service level agreement and the issue of capacity was also raised in the procurement process. However, the Director-General informed the Committee that it was unfortunate that he was not part of the bidding committee to decide in awarding the tender as the Act did not allow the accounting officer to partake in such processes.
Service Providers’ Total Expenditure for 2010/11 Financial Year
The total expenditure for the whole programme in the 2010/11 financial year was R19 million (IDT) and R27 million (Mvula Trust), which amounts to R46 million of the budgeted R100 million.
The fourth report dated 1 June 2010 indicated that:
The DHS confirmed that the planned delivery for 2010/11 was 11 920 units with actual delivery at the end of March 2011 being 5 504 units (delivery for 2010/11 was thus only 46%). The service providers were appointed in October for 25 municipalities, 15 to IDT and 10 to Mvula Trust. The total allocation to IDT was R46 million and to Mvula Trust was R36 million. The remaining amount of R12 million was allocated for management costs. As at the end of March 2011, the IDT spent R19,6 million of their allocated R46 million budget. Mvula Trust spent R27.5 million of their allocated R36 million budget. The DHS further indicated that it had applied for a roll-over of R34.9 million to complete phase one projects (R26.4 million for IDT and R8.5 million for Mvula Trust).
The expenditure for the IDT was as follows:
• Community Development R 96,491
• Contractors R 107,874
• Construction of Toilets R 902,302
• Households registration R 69,679
• Management fees R 1,499,664
• Material R 12,123,209
• Pit excavation R 549,602
• Pit lining/fixing & top structure R 1,444,228
• Planning R 215,766
• Quality inspection R 79,245
• Slab cast R 63,504
• Social facilitation R 102,875
• Subtotal exc. VAT R 17,259,443
• Vat @14% R 2,416,322
• TOTAL R 19,672,766
The expenditure of Mvula Trust was as follows:
• Baseline study R 120,000
• Completed structures R 10,641,780
• Construction of VIPs R 1,608,678
• Household register compilation R 128,550
• Project management fees R 716,393
• Implementation R 681,256
• Management Fees R 278,508
• Material on site R 11,215,986
• Planning R 233,494
• Pit lining R 1,350,431
• Project introductions R 102,115
• Reports to community R 233,896
• Selections of builders R 64,674
• ISD Training R 160,650
• TOTAL R 27,576,411
Overall comments and concerns of the Committee
The decision to transfer responsibility of sanitation from DWAF to Human Settlements was welcomed; however the Committee was disappointed that the progress on sanitation was so slow and the following comments and points of concern have been raised by the Committee:
1. Delays in the development or integration of policies and systems to manage RHIP resulted in the programme not being implemented more than a year after the announcement by the President in 2009.
2. Clarity was sought on why, if according to DORA the DHS is the implementing agent, the DHS appointed service providers who later had to appoint subcontractors to do its work.
3. The capacity of the DHS to deliver on the service level agreement signed with the municipalities is put in question.
4. Changes made to presentations after such documents have already been circulated and analysed by Committee (on several occasions) hampers the participation of members and effective oversight by the Committee. An example is during the meeting of the 1st June 2011 where a presentation on the expenditure report of the service providers was completely changed. Specifically the information relating to the IDT’s expenditure presented was different from what Members had been given prior to the meeting.
5. Contradicting statements provided on questions raised by Committee members from one meeting to another (e.g. during the meeting of 16 February, the IDT was reported to have been allocated R52 million for 2010/11. In the meeting of 1 June 2011, the IDT was reported that only R46 million was allocated for 2010/11) is of concern to the Committee and the DHS did not account for the reduced amount.
6. The failure of service providers to deliver in some areas due to the inaccessibility dismayed the committee, i.e. does it mean those communities will never receive any form of sewerage infrastructure. Alternative must be explored.
7. The Committee is alarmed by the failure of the IDT to deliver despite receiving payment in advance.
8. The failure to produce correspondence from National Treasury instructing the Director-General of the DHS to make an advance payment to the IDT contravenes the National Assembly Rules.
9. The Committee is concerned about R80 paid for digging of pits as the only economic spinoff for the rural people as this would constitute a poor attempt at alleviating poverty.
10. Lack of clarity as to what the DHS is doing about cases where there are disputes between municipalities and the service provider or about the complaints raised by some communities on the exploitation by the service providers (e.g. non-payment after digging of pits) as well as the non-payment of some contractors as reported by the DHS. Furthermore, the Committee questions how the IDT will reimburse pensioners at Inkandla village who paid for the digging of their pits as well as why DHS allowed this to occur?
11. The appointment of a service provider that does not have sufficient experience in implementing sanitation projects indicated that the procurement systems of the DHS are flawed. The DHS indicated that it ultimately considered the proposal with the lowest tender price irrespective of expertise and experience – yet it offered the full amount allocated in its MTEF budget line, irrespective of the tender amount.
12. Members were concerned over the potential of fraud and corruption in the administration of procurement systems as the Director-General has indicated that a new tender process was being developed to address the above concerns.
13. The DHS’ failure to justify why the highest biding service provider was given more projects as compared to the lowest bidder (e.g. the IDT requested R7 500 to construct a toilet whereas Mvula Trust requested around R6 000 - R7 500 depending on the typology of the area), adds to the Members’ concern about the procurement system of the DHS.
14. The programme was not introduced to the provinces for proper oversight and adherence to intergovernmental relations and co-operative governance.
15. Interventions that were reported on in February were still unresolved as indicated in the report presented on 1 June 2011.
16. The 12% set aside for project management from the total budget of R100 million is not clearly accounted for in the whole expenditure report.
17. The reports did not clarify whose responsibility it is to monitor the quality assurance where there is poor workmanship or technical violations e.g. Aganang, Blouberg and Hlabisa where pit slabs were fitted incorrectly, or at whose cost the correction of such errors will be done.
18. In evaluating value for money, the Committee is of the opinion that most of the money spent has not been translated to the final output, and will not contribute to sustainable improvements to the lives of the affected communities.
19. There is a double billing on the pit-lining in the Elias Motsoaledi Municipality. The committee is concerned that this has not been identified or queried by the DHS.
20. There is no clarity on who is responsible for the planning and social facilitation services.
21. The varying costs of material, pit excavation, and pit-lining, even in municipalities that fall under the same district, were worrisome.
22. The construction of VIP toilets when there is already a service provider appointed and the material has been purchased for the excavation and construction of toilets structures has also raised a concern.
23. The billing of household registration whereas details of beneficiaries are provided by the municipalities.
24. The reports about the inspection and repairs do not indicate whether any rectification has been carried out and who was responsible for the rectification costs.
25. It was further indicated that Ndwedwe municipality was going to use co-operatives but there was no clarity on how the process has to be managed.
Conclusion
Due to a number of challenges cited by the DHS on the performance of the IDT (as opposed to that of Mvula Trust) as well as the number of complaints from communities the Committee decided to request the DHS to provide the Committee with the following:
1. Letter from the National Treasury to the Director-General instructing him to make an advance payment to the IDT.
2. Memorandum of Understanding (MOU) signed between the DHS and the IDT
3. Addendum signed by the Director-General in respect of the advance payment.
4. Detailed expenditure report on the R19 million spent by the IDT during 2010/11 financial year.
After a thorough analysis of the reports, the Committee referred the documents for further analysis to the Parliamentary Constitutional and Legal Services Office and the Research Unit to advise on how to manage this situation. The purpose of this exercise was to ensure that this situation is managed in a constructive manner that will assist both Parliament and the Executive in executing their mandates in an informed manner. However, the Committee discovered that there was no correspondence directed to the Director-General from the National Treasury relating to an advance payment.
The agreement and tender documents elicited further questions as they seemed to be contradictory.
Noting that: to a certain extent, there are discrepancies observed in the implementation of the programme such as:
1. Memorandum of Understanding (MOU) implementation and the Addendum violations.
2. Inaccuracy of information in the expenditure reports.
3. In terms of DORA, the DHS has to consider a competent service provider (community-based organisations (CBOs), non-profit organisations (NGOs) or public entity for the purpose of providing training to local people, etc. The action taken by the DHS to enter into a contract with the IDT after confirmation that it had no experience in the implementing of a sanitation programme and then to award the greater portion of the work to the IDT is questionable.
4. The IDT violated its commitment in the MOU on a number of aspects, but specifically in relation to developing business plans with provinces.
5. Under expenditure is possibly an indication of capacity constraints resulting in poor service delivery.
6. The claim by the service providers on the inaccessibility of communities is not acceptable as this undermines the constitutional right of citizens to have access to basic services.
Further noting that:
1. The roll-over for the service providers has not yet been approved by the National Treasury for the incomplete projects.
2. The service providers, in particular the IDT, are battling to implement the first phase of the programme. It is questionable whether it will be able to implement the second phase where it is expected to provide water facilities in addition to the first phase’s sanitation facilities.
3. The delay for the DHS to develop a framework for procurement processes and management of sanitation programme adversely affected the delivery of sanitation.
4. The Millennium Development Goals (MDGs) target of eradicating poverty and providing proper sanitation may not be realised.
Therefore, the Committee recommends that:
1. The Minister be requested to commission an audit by the Auditor-General of the expenditure in this programme for 2010/11 financial year, in order to evaluate the value for money and if the money has translated in sustainable outputs.
2. The DHS should present a broader perspective of the total backlog on provision of sanitation as well as what has actually has been delivered.
3. The DHS should present a framework and plan to manage the R1.2 billion budget allocation to the programme.
4. The DHS should also indicate the total number of jobs that would be created in the implementation of the programme.
5. Co-operatives should also be seriously considered in the implementation of the sanitation programme in order to advance the national objective of job creation and sustainable (self reliance) communities. Women, youth and persons with disabilities should be given an opportunity to actively participate in the programme.
6. The DHS should put the IDT on terms to complete its backlog for the 2010/11 financial year (Phase 1) and seek legal advice on how to terminate the remainder of their contract based on non-performance and inability to perform. The DHS must urgently report on its progress in correcting its procurement system.
7. In future the DHS must ensure that the programme is introduced appropriately to provinces and in developing business plans service providers must consult with the relevant provinces for compliance with the MOU and proper oversight.
8. The DHS should develop a risk and recovery plan during the project management phase to mitigate the challenges that could arise in future. The Committee should invite and engage with benefiting municipalities in an attempt to oversee if the programme is managed effectively and efficiently and further ascertain the challenges encountered.
9. “Happy letters” should be signed by the benefiting municipality and the beneficiaries to indicate their approval of the end product prior to payment.
10. The MDG relating to eradicating poverty and providing proper sanitation has been compromised. The DHS needs to catch up with the required rate of sanitation provision because their progress is unacceptably slow.
11. The Committee should write a letter to the Director-General and advise him that the failure to produce correspondence from National Treasury instructing him to make an advance payment to the IDT constitutes a misrepresentation to Parliament and, therefore, is in contravention of National Assembly Rule 138(a).
Section 2
Report of the Portfolio Committee on Human Settlements: (RHIP Performance)
The Portfolio Committee on Human Settlements invited the following:
· National Treasury to brief the Committee on the Legal Framework Regulating advance payments to Service Providers (SP) and its observations on the Rural Household Infrastructure Programme (RHIP) expenditure 2010/11 financial year.
· The Minister of Human Settlements to discuss the departmental performance regarding RHIP during 2010/11 financial year.
1. Presentation by National Treasury
Background:
Following the enquiry that the Committee had regarding an advance payment made by the National Department of Human Settlements to the Independent Development Trust (IDT), the Committee requested the National Treasury to do a presentation on its stance on advance payments. The National Treasury, represented by Mr F Nomvalo, indicated the importance of understanding the context in which the advance payment arrangement is raised. He stated that the Constitution of the Republic of South Africa, Chapter 13 in section 216(1), directs the establishment of national legislation that will in turn establish the National Treasury and prescribed measures to ensure both transparency and expenditure control in each sphere of government. Subsection (2) requires that the National Treasury must enforce compliance with the measures established in terms of subsection (1).
The Public Finance Management (PFMA) Act of 1999 was then promulgated with a key objective of enabling public sector managers to manage, while at the same time holding them accountable for their management decisions. The PFMA in section 38(1)(a) prescribes the responsibilities of the accounting officers as follows:
· To ensure that the department has and maintains effective, efficient and transparent financial management systems and risk management and internal control. The essence is that there must be control in the department the accounting office is serving under.
· Section 38(1)(b) states that the accounting officer is responsible for the effective, efficient and economical and transparent use of the resources of the department. There has to be transparency, economical use of resources and probity in the manner in which the resources of the department are utilised.
He further referred to paragraph (c ) subparagraph (3), that the accounting officer must take effective and appropriate steps to manage the working capital of the department economically and efficient. Managing working capital, amongst others, means collecting all money due to the department but the other side of managing the working capital is to ensure that there is sufficient cash available to meet the obligations so that the department should have the sufficient cash to make those payments. The department cannot delay payments beyond a period of 30 days in terms of the PFMA.
He further stated that the accounting officer must comply and ensure compliance within the department with the provisions of the PFMA. It is important that everybody in the department follows the law. He indicated that the accounting officer should ensure that the executive authority complies with the law, because the accounting officer has the responsibility over the resources of the department. The executive authority under rare circumstances may issue an instruction that is inappropriate and the accounting officer must ensure that there is compliance with the law hence, the provision in sections 63, 64 and 65 of the PFMA that deals with the responsibilities of the executive authority.
Section 7(1) of the PFMA on page 17 and 18 says the treasury must prescribe a framework for cash management which is covered in Chapter 15 of the treasury regulations. It deals amongst other with the issue of prepayments. Paragraph 15(10)(1)(2)(c) prescribes that for the purpose of the regulation sound cash management included avoiding prepayments for goods and services unless required by the contractual arrangement with the service provider. No payments can be made without having received what the department is paying for (services rendered). This is not allowed. However, under certain circumstances the department can do that. If the contract of the supplier obligates the accounting officer to do so when entering into that contract, the accounting officer is required to exercise caution when agreeing to make an advance payment. It is expected of the accounting officer to assess the potential risks involved before agreeing to do so, in relation to a specific service provider or agency that the accounting office is suppose to be paying in advance.
It is the accounting officer’s prerogative but also the accounting officer’s responsibility to make sure that s/he enters into an agreement that obligates him or her to pay in advance only after s/he has satisfied himself or herself that the service provider will not find it impossible for him or her to meet his or her obligations. He pointed out that on page 45 of the PFMA in section 38(1)(c)(ii) that the accounting officer for the department must take effective and appropriate steps to prevent unauthorised, irregular and fruitless and wasteful expenditure and losses resulting from criminal conduct. Where an advance payment is made and there is no reciprocal service delivery, the state suffers a loss due to fruitless and wasteful expenditure. Should this event occur, the accounting officer must clearly show that a proper risk assessment was done before the advance payment was agreed to, failing which the accounting officer would not have discharged his or her duties under the Public Finance Management Act, 1999 (Act 1 of 1999) and the National Treasury Regulations.
In totality, section 38(1)(b) refers to effective, efficient, economic and transparent use of the resources of the department means that the accounting officer must be absolutely certain that the entity will deliver according to the obligations.
1.1 Deliberations by the Committee
The Committee raised concerns and questions for clarity as follows:
1.1 Does the National Treasury believe that the accounting officers actually properly understand the conditions set out and the interpretation of the PFMA? The Committee advised that a presentation of this nature should be made to all accounting officers.
1.2 At what stage will sanctions be applied if the service provider failed to render the services according to the agreed obligations? In so many cases contractors do not complete the job but they have been paid and the sanctions are never applied.
1.3 What happens to the accounting officers who have not taken proper precautions and put the state at a loss?
1.4 In an event of small, medium and micro enterprises who do not have provisions to perform without advance payments, what do departments do?
1.2 Responses from the National Treasury
1.2.1 Chapter 10 of the PFMA rules it a criminal offence if the accounting officer negligently does not know his/her responsibilities. Therefore, in an event where the accounting officer is not familiar with the legislation, it is in his/her interest to acquire assistance. Some do understand the legislation very well.
1.2.2 Parliament passes laws, therefore, members have to be vigilant with legislation and make sure that legislation is taken seriously. Citizens rely on Parliament to represent their interests. In most cases disciplinary actions tend to affect officials who are construed to be vulnerable (and it is biased in favour of the senior managers). Sanctions are there but there is a lack of willingness to take them up.
1.2.3 If the service provider does not fulfil the obligations, the accounting officer bears the consequences. Unless remedial actions are put in place, he/she should be charged appropriately. The service level agreement should have provisions to deal with challenges that might arise.
1.2.4 Government’s priorities are about growing the economy and creating jobs. Government has to act in a manner that enables SMMEs to grow, but it does not mean that one should act in an irresponsible manner. There should be an arrangement that allows the service provider who has completed his duties to be paid immediately. Government officials should be sensitive to government’s policies and devise creative means for laws to be implementable.
1.2.5 The Rural Household Infrastructure Programme (RHIP) is a schedule seven grant. The department went into an open tender which resulted in IDT and Mvula Trust being appointed as service providers.
1.2.6 RHIP’s performance by February 2011 would amount to approximately 11%. Large payments would then be made in March 2011 bringing RHIP’s performance up to 63% of the approved amount at the end of the financial year. This creates an artificial picture of RHIP’s actual performance.
1.2.7 National Treasury confirmed that the Committee is correct in asking probing questions about the advance payment made to IDT, and the subsequent lack of service delivery. It is for the accounting officer to explain whether this payment was made subject to sound cash management principles as is required by law.
1.2.8 It has been reported that IDT received R22.6 billion for various projects from eighteen Departments across the country. Twenty five per cent was received in March 2011 and no clear conditions under which the funds were transferred exist. There is growing trend of transferring funds towards the end of the financial year. The National Treasury refers to March as a dumping month, and strangely IDT tends to be the recipient of these funds. This tendency conceals the true reflection of what is happening and this gives a picture that the money has been spent by the Department and when one get on to the ground there is no visible delivery.
2. Deliberations by the Portfolio Committee
The Committee was of the view that the advance should be avoided at all costs as the Department has entities that provide bridging finance for service provision relating to construction. The service provider such as the IDT obviously has a lot on its plate and this makes it less easy for it to perform its duties satisfactorily. This is a risk on its own. For the programme to suddenly record high expenditure of 63% when it has initially indicated a low expenditure of 10%, brings questions that could warrant proper audits to be instituted.
3. Briefing to the Minister of Human Settlements by Portfolio Committee
The Committee briefed the Minister on the concerns about the implementation, management and expenditure patterns on RHIP. The Committee felt it was important that the Minister be briefed about observations that were made during several interactions with the Department and the recommendations thereof. The Committee indicated that sanitation is one of the important Millennium Development Goals (MDGs) and the pace in service provision has been observed as being very slow. The capacity of agencies reporting to the Department is sometimes questionable as some of them do not operate according to the prescripts. A decision to transfer responsibility of sanitation from DWAF to Human Settlements was welcomed; however the Committee was disappointed that the progress on sanitation was so slow and the comments and points of concern have been raised by the Committee as per the observations made on the report dated 10 June 2011.
The Minister welcomed and appreciated the invitation by the Committee. He stated that first and foremost he is the Member of Parliament; therefore his participation was also important to the affairs of the Committee. However, he further acknowledged that he accounts to the Committee, as the Committee deals with matters of public interest, and that was a priority for all of us as public representatives. Sanitation broadens the mandate of the Department. The transfer of the function (including personnel) has not been an easy one. The reluctance of some officials to be transferred from DWAF also contributed to delays in the implementation of the programme. It has been a major shift in responsibility, transfer of legislation, rules and policies. There was a need to accommodate all staff members; therefore the department had to acquire more space as it also did not have enough. He indicated that the whole world is experiencing challenges of adequate sanitation and quality sanitation.
The Minister informed the Committee about his commitment in implementing the decision taken by the Cape Town High Court on the unenclosed toilets throughout the country. He indicated that there is still a challenge of the bucket system in the country. He informed the Committee that the Moqhaka project was started in 2004 and that the company that was appointed must take responsibility. After the Moqhaka incident, he requested the Director-General to write to all provinces and enquire whether there were any toilets that were unenclosed. The response received indicated that there were none.
The appointment of service providers seemed to be the challenge, especially the IDT. The Minister informed the Committee that the IDT is an organ of government and expressed unwillingness to prefer a private sector company above a state organ. The Minister agreed that where such an organ of state did not perform – as is the case with the IDT - it could not be expected of the public to suffer the consequences. In his opinion, the Minister reckoned that the IDT should be jacked up. The Minister indicated that he has been careful to act in this matter, as sanitation is a new portfolio and he wanted to ensure that his facts on the matter were correct and gave the full picture. He further indicated that the IDT was an entity reporting to another Minister. Therefore, in terms of good governance, it would be improper for him to take action against the IDT without informing the relevant Minister. He further informed the Committee about the suspension of the Chief Director who had been accused of writing illegal correspondence terminating the agreement of the IDT and allegedly inciting municipalities to reject the IDT.
The Minister also took an opportunity to brief the Committee on the Special Investigating Unit report on the new developments about the National Home Builders Registration Council (NHBRC). He informed the Committee about the outrageous revelations and has made an obligation to address the issue. He further indicated that he has already communicated the matter with the Chairperson of the entity and he committed himself to brief the Committee on the developments on 27 June 2011.
Deliberations by the Committee
The Committee raised concerns and questions for clarity as follows:
3.1 The Committee expressed its deepest concern on the issue of an agency to be jacked up whilst people are suffering on the ground and yet huge sums of money have been deployed to implement the project. The Committee did not agree with the Minister to continue preferring state organs as service providers when they are not delivering. The Committee further indicated that the entity tendered for work and entered into an agreement knowing very well that it would not meet its obligation. The entity literally informed the department that it has no capacity to implement the sanitation programme.
3.2 The Committee indicated that underperformance by the service provider cannot be embraced at the expense of the communities. The fact that some communities and some contractors raised complaints about the service provider failing to pay them was not acceptable.
3.3 The Committee informed the Minister about the National Treasury report in relation to the performance and the expenditure of RHIP. It was indicated that huge sums of money amounting to R22.6 billion were transferred for various projects from eighteen departments during the 2010/11 financial year. It was indicated that 25% of the transferred amount was made in March 2011 and no clear conditions under which the funds were transferred existed. This report clearly demonstrates that the IDT had bitten off more than it could chew. Therefore the Committee requested the Minister to review the contract of the service provider to continue with the outstanding work (phase 1 of the 2010/11 financial year). However, the service provider should not be given phase 2 of the programme.
3.4 The Committee further raised concerns about poor workmanship in other areas. The Committee also had an opportunity to present the pictures of the poorly constructed toilets by the service provider.
3.5 The Committee felt that the department could use more than two service providers in the implementation of this programme as there is such a large amount of money appropriated to the programme, which could fast-track the project.
3.6 The Committee raised a concern about alarming high projections showed at the performance expenditure at the end of the financial year and therefore requested the Minister to commission an audit of the RHIP expenditure performance.
3.7 The Committee alleged that provinces were giving incorrect information about the unenclosed toilets. However the Committee informed the Minister that the department has been requested to conduct its own site visits and also to read the Committee oversight reports.
3.8 The Committee welcomed the briefing by the Minister on the NHBRC issue and was pleased to hear that it was going to be handled; the Committee will wait for the report.
4. Minster’s response
The Minister informed the Committee that he will not hesitate to terminate the contract; however he has to discuss the matter with the relevant Minister. He indicated that RHIP does face the challenges that go hand in hand with the lack of sufficient bulk infrastructure. The circumstance surrounding this programme is such that it requires in depth project management. Furthermore, the social realities of informal settlements include an increase in refugees settling in South Africa, communities developing in prime areas in order to be close to work opportunities and furthermore settling without any prior planning. This results in the Department being faced with new demands from new communities on a regular basis. The Minister further committed himself to report to the Committee on both the RHIP and the NHBRC.
5. Committee recommendation to the RHIP latest report
Having considered reports, information and facts presented to the Committee, including the administration, management and performance of the Rural Household Infrastructure Programme (RHIP), the Committee came up with the conclusion that the recommendations proposed in the report dated 10 June 2011 be reaffirmed. The Committee has established the following:-
1. Appropriate measures were not taken to assess whether there would be any risk of an inability to perform on the side of the IDT when the department decided to award the tender to them. Similarly, no appropriate measures were taken prior to agreeing to pay in advance to ensure that the service provider will meet its obligations as agreed.
2. The fact that the service provider undertook to deliver services to the value of the budget allocation for a whole financial year, towards the end of that financial year raises a lot of questions. The service provider together with the department should have considered the time of commencing with the project seriously, and have planned and taken precautionary measures to that effect.
3. The Committee is of the opinion that the Memorandum of Understanding, and the addendum thereto, as signed by the IDT and the department has flaws. Over and above this however, set conditions have not been adhered to and the department has not enforced compliance with these preset conditions.
4. The fact that the service provider informed the department in its tender that it does not have the capacity to manage sanitation raises questions too. Given that the IDT serviced 18 departments during 2010/11, what different situation does one expect?
5. Risks on the areas of the programme that were executed also arose, namely substandard work and disputes surrounding payments of people and contractors.
The Committee has been assigned a duty to represent public interests and to oversee if public funds are administered and managed appropriately by those tasked to do so. The Committee must satisfy itself that projects are executed in a manner that shows value for money. In addition, the Committee’s objective is on acceleration of service delivery in order to meet the Millennium Development Goals (MDGs), to create job opportunities for the vast majority of this country and to change their lives to a better quality of living.
The Committee wishes to express its confidence in the Minister that he will act decisively and use his wisdom and therefore recommends the following:-
1. The Minister to commission an audit through the office of the Auditor-General, of the RHIP including contractual arrangements entered into by his department, as well as the performance within the RHIP, especially during 2010/11. The Minister is requested to refer the Auditor-General to the Chairperson of this Committee for an interview prior to commencing the audit.
2. Considering that phase 2 of the programme is advanced, the Committee is of the view that the IDT will not be able to deliver as expected and therefore the Minister should review the contract and execute the correct legal route so as to demand that the IDT complete its unfinished business under phase 1 and then be released from the agreement. This will allow the department to appoint a service provider, or service providers, with the capacity to complete this programme urgently.
Report to be considered.
Annexure “A” - Analysis by the Committee of the MOU signed between DHS and IDT.
Annexure “B(i) & B(ii)” - Analysis and advice from Parliamentary Constitutional and Legal Services Office.
[1] Department of Human Settlements (2011), RHIP 2010/2011 Report on the IDT Programme
Documents
No related documents