ATC120125: Report Oversight visit to the Eastern Cape Province from 23 to 25 January 2012, dated 09 May 2012

Standing Committee on Auditor General

Draft report of the Standing Committee on Appropriations on the oversight visit to the Eastern Cape Province

REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON THE OVERSIGHT VISIT TO THE EASTERN CAPE PROVINCE FROM 23 TO 25 JANUARY 2012, DATED 09 MAY 2012

 

The Standing Committee on Appropriations, having undertaken an oversight visit to the Eastern Cape Province from 23 to 25 January 2012, reports as follows:

 

1. Introduction

 

The oversight visit took place from 23 to 25 January 2012. Meetings were held at the East London International Convention Centre with the intention to undertake site visits depending on whether or not construction of the schools had commenced. The delegation was as follows: Hon E M Sogoni (Chairperson of the Committee); Ms R J Mashigo; Mr J P Gelderblom; Mr G Snell, Mrs L Yengeni; Mr M Mbili; Dr P J Rabie; Mr L Ramatlakane; Mr M Mrara (Provincial Chairperson of the PC Education); and Mr M Matomela (Provincial Chairperson of the PC on Finance). The delegation was accompanied by the following Parliamentary officials: Ms TP Xaso and Mr D Arends (Committee Secretaries), Mr P Dlomo and Mr M Zamisa (Committee Researchers); and Mr S Mthonjeni (Committee Assistant).

 

The Standing Committee on Appropriations (the Committee) met with departmental officials and representatives of the Development Bank of Southern Africa (DBSA). The departmental officials were as follows: Department of Basic Education: Mr S Soobrayan (DG); Mr E R Mofoko; Mrs N Molalekoa (CFO); Ms T Diale; Ms I C Assam; and Ms P Njobe. Development Bank of Southern Africa : Prof B Figaji (Chairperson – DBSA Board); Dr P Kibuuka; and Mr C W Ramphele. National Treasury: Mr Lindsey Martin. Eastern Cape Education Department: Mr E D Fray. Eastern Cape Provincial Treasury: Mr G L Q Kalimashe (HOD); and Ms F N Vokwana . Eastern Cape Legislature officials: Mr N N L Mkosi (Education researcher); and Mr N M Myataza (Finance researcher).

 

2. Terms of reference

 

The visit was a result of the Committee’s engagement with the Department of Basic Education during the 2011 Medium Term Budget Policy Statement (MTBPS) period. An amount of R700 million which had initially been unallocated in the 2011/12 Division of Revenue Act at the start of the 2011/12 financial year was now allocated to the Department of Basic Education for the eradication of inappropriate schools infrastructure. Of note was the fact that this amount of R700 million had to be spent by the end of the 2011/12 financial year. The bulk of the allocated money (R520.7 million) was to be used for the construction of 50 schools in the Eastern Cape Province which had the highest number of mud schools in the country.

 

On engaging with the Department of Basic Education (the Department) during the adjustments budget period on 16 November 2011, the Committee was informed that the construction of the 50 schools in the Eastern Cape Province would commence in December 2011. While the Committee was sceptical of the practicality of such an assertion given that the construction industry comes to a halt around the middle of December, the Department assured the Committee that construction would commence and carry on throughout the festive season. The Committee was informed that part of the requirements and conditions that bidders had to meet was that they would work throughout the holiday season and that building materials would be available as required during this time. The Committee resolved to visit the Eastern Cape Province at the start of 2011 to assess the extent of progress in the construction of the schools. The visit would also determine the extent of expenditure given that the funds were to be spent and the project concluded by 31 March 2012.

 

3. Engagements during the oversight visit

 

On Tuesday, 24 January 2012, the Committee convened at the East London International Convention Centre to engage with the relevant stakeholders prior to undertaking site visits. Participants in this meeting were the National Department of Basic Education, Development Bank of Southern Africa (DBSA), National Treasury, Provincial Treasury and the Provincial Education Department. In this meeting the Committee expected the Department to produce an outline of the project as well as to report on progress at the various construction sites. Much to the dismay of the Committee, the Director-General of the Department of Basic Education (DG) was not present at the meeting. Despite the fact that the invitations for the oversight visit were sent on 6 December 2011, the office of the DG had failed to submit an apology nominating another departmental official to represent him. The Committee then agreed to suspend engagements and reconvene on Wednesday, 25 January 2012, at which point the DG would be present.

 

Accordingly, the Committee reconvened the next day. While the Committee had the option of putting the DG under oath in terms of rule 138(a) of the Rules of the National Assembly, it opted to get verbal affirmation from the DG that the information that he would present to the Committee would be factual and that set targets could be achieved.

 

The Department reported that, as opposed to the initially planned 50 schools, 49 schools would be build as part of this project. The Committee was informed that the Ntsikayesizwe Primary School was removed from the list because it was one of the schools that the Provincial Department was planning to construct. It was reported that the original cost for the construction of the 50 schools was R400 million. However, the latest figures revealed that the construction of 28 schools would cost R711 million.

 

The completion date that the Department had received from the DBSA as the implementing agent on 30 November 2011 showed that some schools would be completed at the end of March 2012 and some at the end of June 2012. However, the latest submission received on Monday, 23 January 2012 from the DBSA showed that the completion date would be August 2012. The sites were handed over to contractors on the 12 and 13 January 2012. The Department committed that it would engage the DBSA further to ascertain whether or not this latest target for the completion of the schools would be met.

 

Questions were raised about the variance in the cost of construction from the original figure of R400 million for 50 schools to the amount of R711 million for 28 schools. Furthermore, the Committee sought to determine the exact cost per square meter in view of the huge variance and whether any of the successful bidders came from the Eastern Cape Province . The Department reported that the costs for construction were at R10 200 per m². A detailed breakdown outlining what this amount included was requested from the Department. It was also reported that the higher than expected costing for the construction of the schools by the bidders led to a delay in the commencement of construction.

 

The Committee expressed concern that at its last meeting with the Department on 16 November 2011; a commitment was made by the Department that a memorandum of understanding between the contractors and the DBSA would be forwarded to the Committee. This had not materialised at the time of the visit. The Department was urged to forward this information prior to the next meeting on 8 February 2012 with the Committee.

 

It was noted that the 2012/13 Division of Revenue Bill would soon be allocating more funds to the Department in respect of this project. The Committee was concerned that, given the slow pace in rolling out the project, it was not certain that the Department was ready for further funding. Furthermore, while the state had a Department of Public Works with all the required capacity to embark on projects of this nature, the Department had opted not to utilise it.

 

In view of the two conflicting deadlines for the project, the Committee sought to determine whether the Department had received written assurance from the DBSA that the new deadline of August 2012 would be met. To this end, the Department noted that it had not received written confirmation from the DBSA. The Department reported that it only found out on 23 January 2012 about the revised completion date and that it still needed to engage with the DBSA in that regard.

 

It was also reported that capacity within the Department had improved significantly with the establishment of the Programme Support Unit (PSU) aimed at providing support and monitoring projects of this nature. The Committee was informed that the awarded contracts did not include furniture and teaching equipment but that a parallel process was underway at the Department to ensure that, on completion, such furniture and equipment would be available.

 

A total number of 49 schools were handed over to contractors. The Committee was informed that contractors were on site setting up their site offices and would soon commence with the digging of trenches. Drawings were given to the respective contractors on 20 January 2012. The meeting was informed that seven of these contractors came directly from the Eastern Cape Province . A further five came from the Gauteng Province and two of these had joint ventures in the Eastern Cape Province and two contractors came from the KwaZulu-Natal Province with joint ventures in Mthatha. Another contractor came from the North West Province while another came from the Limpopo Province .

 

The DBSA reported that one contractor was struggling to secure the required guarantee from the bank. It further explained that this process of requiring guarantees followed the issuing of a letter of intent by the implementing agent. Essentially, this meant that the contracts were awarded subject to contractors submitting the required guarantees.

 

The Committee requested that the Department submit a detailed project plan for the construction of the 49 schools in order to assist the process of following up on progress. This programme also needed to outline the number of classrooms at each school and additional facilities. Concerns were expressed that the Lusikisiki and Libode areas were prone to tornados. Questions were thus raised on whether the designs at these areas had taken this into account. The Committee also sought to determine the number of jobs that were to be created through the project as well as the amount spent on planning to date. It was reported that about 22 000 jobs were projected to be created under the Accelerated Schools Infrastructure Delivery Initiative (ASIDI) programme as a whole

 

The Department reported that about R24 million had been paid on professional fees to date. The total budget for professional fees was R64 million. It added that the engineering drawings took into consideration areas prove to tornados and various weather conditions. .

 

The project encompassed two types of schools; small and medium primary schools. The majority of the schools were small primary schools. Each school would have a netball/volleyball court, administration building, a library, computer room while soccer fields would depend on the availability of space.

 

The Committee requested the National Department of Basic Education to ensure that its provincial counterpart was kept abreast of developments in respect of the project. It was agreed that a follow-up meeting would be held on Wednesday, 8 February 2012.

 

4. Findings

 

The Committee made the following findings:

 

4.1 Despite a commitment made by the National Department of Basic Education on 16 November 2011 that the construction of 50 schools would commence during the December holiday season with the completion date set for 31 March 2012, the construction of these schools had not commenced at the time of the visit.

 

4.2 The number of schools to be built had since decreased from 50 to 49 and the projected completion date had changed from 31 March 2012 to 31 August 2012.

 

4.3 While the completion dates were set, at the time of the visit, the National Department of Basic Education could not assure the Committee that all the schools would be completed by the end of August 2012. This was due to the fact that it still needed to engage with the Development Bank of Southern Africa .

 

4.4 A total of 22 000 jobs were to be created under the entire Accelerated Schools Infrastructure Delivery Initiative (ASIDI) programme. This was a cause for concern given the fact that a total amount of R8, 2 billion had been allocated to this programme over the 2011 Medium Term Expenditure Framework.

 

4.5 At least one tender had been awarded to a contractor irrespective of the fact that the contractor could not provide the necessary guarantees. This was a cause for concern.

 

6. Recommendations

 

Having engaged with the National Department of Basic Education on the above mentioned matters, the Standing Committee on Appropriations recommends that the Minister of Basic Education should ensure the following:

 

6.1 The National Department of Basic Education should submit to the National Assembly a detailed report on the dates that the 49 schools budgeted for in the 2011/12 financial year would be completed and the plans and timeframes for rolling out the balance of the project and the anticipated budget requirements and availability, indicating any shortfalls if any.

 

6.2 The National Department of Basic Education should submit to Parliament a report indicating how many jobs would be created through the Eastern Cape component of the Accelerated Schools Infrastructure Initiative (ASIDI) programme.

 

6.3 The National Department of Basic Education should submit a report to the National Assembly on the reasons for awarding a tender to a contractor without obtaining the necessary guarantees and what it intended to do ensure that this did not reoccur.

 

 

7. Conclusion

 

The recommendations as set out above should be submitted to the National Assembly within 90 days of the adoption of this report by the House.

 

 

 

Report to be considered.