ATC121121: Report of the Standing Committee on Appropriations on the Oversight Visit to Kwazulu-Natal and the Eastern Cape Province from 18 To 22 June 2012, dated 8 August 2012

REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON THE OVERSIGHT VISIT TO KWAZULU-NATAL AND THE EASTERN CAPE PROVINCE FROM 18 TO 22 JUNE 2012, DATED 8 AUGUST 2012

The Standing Committee on Appropriations, having undertaken an oversight visit to the Kwazulu-Natal and Eastern Cape Provinces from 18 to 22 June 2012, reports as follows:

1. Introduction

In terms of section 4(4) of the Money Bills Amendment Procedure and Related Matters Act, No. 9 0f 2009, the mandate of the Standing Committee on Appropriations (the Committee) is to “consider and report on the following:

· spending issues;

· amendments to the Division of Revenue Bill, the Appropriation Bill, Supplementary Appropriation Bills and Adjustment Appropriation Bill;

· recommendations of the Financial and Fiscal Commission, including those referred to in the Intergovernmental Fiscal Relations Act, 1997 (Act No. 97 of 1997);

· reports on actual expenditure published by the National Treasury; and

· any other related matter set out in the [above-mentioned] Act”.

In addition to the above, the Committee has been tasked to oversee the activities of the portfolio Performance Monitoring and Evaluation, including youth matters in terms of National Assembly Rule 199(b) on 1 November 2012.

1.1 Purpose of the visit

The purpose of the visit was as follows:

· To engage with the National Youth Development Agency (NYDA) on the youth development programmes that it was offering and to inspect the 12 Months Call Centre Training and Internship Programme in Durban, Kwazulu-Natal;

· To investigate whether the hospital facilities in the Kwazulu-Natal and Eastern Cape Provinces have undergone the complete hospital revitalisation programme in order to assess its readiness for the pilot phase of the National Health Insurance (NHI); and

· To do a follow-up visit to the Eastern Cape Province in order to investigate whether progress has been made by the Department of Basic Education since the Committee oversight visit from 23 to 25 January 2012 on the implementation of the Accelerated School Development Programme (ASIDI).

1.2 Delegation

The Members of the Committee were as follows: Hon EM Sogoni (Chairperson of the Committee); Hon R J Mashigo; Hon J P Gelderblom; Hon NNP Mkhulusi; Hon GT Snell; Hon N Singh; Hon M Swart; and Hon L Ramatlakane.

The delegation was accompanied by the following Parliamentary officials: Mr D Arends (Committee Secretary), Mr M Zamisa (Committee Researcher); and Ms T Majone (Committee Assistant).

2. Terms of reference

The visit was a result of the Committee’s extended mandate which included the Department in the Presidency for Performance Monitoring and Evaluation and the National Youth Development Agency (NYDA). The Committee’s engagements with the NYDA during the consideration of the NYDAs Strategic Plan, Annual Performance Plan (APP) and budget for the 2012/13 financial year have led to a decision to visit some of the programmes that it was offering to young people. It was therefore agreed that the 12 Months Call Centre Project in Durban , Kwazulu-Natal Province be visited in order to do a site inspection and to engage with the NYDA on the other programmes that it was offering to young people throughout South Africa . Part of the mandate of the NYDA was to lobby and advocate for integration and mainstreaming of youth development in all spheres of government, private sector and civil society. In the light of this, part of the strategic plan of the NYDA was to provide comprehensive interventions that would lead to decent employment, skills development, education, and entrepreneurship to all young people between ages 14 to 35. The NYDA received a budgetary allocation of R385 million for the 2012/13 financial year.

The purpose of the Hospital Revitalisation Grant (the Grant) was to enable provinces to plan, manage, modernise, rationalise, and transform health infrastructure in line with national policy objectives and to supplement expenditure on health infrastructure delivered through public private partnerships (PPP). The successful roll-out of the pilot phase of the NHI was dependant on the effective implementation of the Grant. Therefore, the Committee resolved to assess the extent to which the Grant has been implemented in the Kwazulu-Natal (uMgungundlovu and uMzinyathi Districts) and Eastern Cape Provinces (O R Tambo District) in preparation for the rolling-out of the pilot phase of NHI in the said provinces which commenced in March 2012.

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 under the Accelerated Schools Infrastructure Development Initiative (ASIDI). According to the Department, these schools were scheduled to be completed by 31 March 2012. The Committee undertook an oversight visit to the Eastern Cape from 23 to 25 January 2012 to assess the progress that had been made on the construction of the 50 schools, which have subsequently been reduced to 49. During the visit the Department reported that the completion date has been shifted to 31 August 2012 as it would be not able to complete construction of the 49 schools by 31 March 2012 due to a number of factors. The Committee resolved to do a follow-up visit to the Eastern Cape Province in June 2012 to assess the extent of progress in the construction of the schools.

3. Engagements during the oversight visit

3.1 National Youth Development Agency

On Monday, 18 June 2012 the Committee engaged with the NYDA at its Durban branch, Office Boardroom, Smart Exchange Building , Walnut Roa. The following NYDA officials attended the meeting: Mr M Mawela (Parliamentary Liaison Officer); Ms I Mphago (Senior Manager: Skills Development); Ms I Machume (Administrator in the Presidency); Mr S Ntoli (Branch Manager: Durban Branch); Mr M C Zwame (KZN NYDA Chairperson); Mr B Ligema (National Youth Service Offficer); Ms D Sithole (Programmes Officer); Ms PBP Sipamla (Community Development Facilitator: Durban Branch); and Mr F Shishi (National Treasury).

The NYDA reported verbally that its Durban Branch consisted of 11 staff members out of an approved organogram of 19. The Provincial Advisory Board consisted of only three members out of 11. It was verbally reported that the following programmes were in place:

· The National Youth Service was rolling out a programme with the Department of Public Works in which eight young people were part of the construction and maintenance of government owned buildings in Kwazulu-Natal ;

· There were 1333 young people under the Narsec programme in Kwazulu-Natal which was in consultation with the Department of Rural Development and Land Reform;

· In the Office of the Kwazulu-Natal Premier, 3000 young people were placed under the Youth Ambassadors Programme;

· The Department of Social Development is responsible for the Masubatsele programme in consultation with the NYDA in KZN.

The NYDA reported that it did not have sufficient finances to fund youth development programmes in the KZN therefore it only offered support in terms of life and entrepreneurship skills. It was stated that the 11 officials in the Durban branch had to service the entire Kwazulu-Natal Province . It was reported that Municipalities were reluctant to renew existing or enter into new Memorandum of Understanding (MOUs) with the NYDA due to its lack of budgetary contribution in the proposed joint ventures.

It was stated that the Durban branch did not have its own budget, but only operated on petty-cash for travelling and that the money was disbursed at the head office of the NYDA. It was reported that an amount of R4.2 million was required to operate the Durban branch of the NYDA.

The Committee undertook a site inspection of the BizWorks Internship project, which formed part of the 12 Months Call Centre Project and it was reported that an amount of R10 million has been allocated towards the placement of young people in call centre services. It was reported that 500 young people were under the programme and that it commenced in March 2012. A stipend of R2 000 per month was paid to all benefiting youth under the programme.

3.1.1 Deliberations

The Committee expressed concern at the fact that the NYDA made verbal presentations at the meeting. The point was made that there was a lack of coordination at the national, provincial and local levels of the NYDA which created the impression that there was no institutional framework.

Concerns were expressed at the report that the Durban branch, which was the only branch serving the Kwazulu-Natal province operated on petty cash and clarity was sought on the relationship between the national, provincial and local structures of the NYDA.

Reference was made to the education and training programmes that were offered by the NYDA throughout South Africa and it was agreed that a report thereon be submitted to the Committee. This report needed to be submitted to the Committee within seven days and had to be inclusive of the number of beneficiaries and the amounts of funding involved.

The Committee noted that a comprehensive workshop would be essential to ensure better understanding of the institutional setup of the NNYDA prior to any oversight related engagement.

3.2 Hospital Revitalisation and Health Infrastructure Grant

3.2.1 King Edward VIII Hospital

The Committee met with the following national and provincial departmental officials on 18 June 2012 at the King Edward VIII Hospital in Durban: Kwazulu-Natal MEC for Health, Dr S Dhlomo, Ms EJ Flemming (National Department of Health, NDOH); Dr ML Mhlongo (NDOH); Mr S Khosa (NDOH); Mr R Morewane (NDOH); Mr NN Mphephuli (NDOH); Mr NG Manana (NDOH); Mr M G Gcaba (Kwazulu-Natal Provincial Department of Health, PDOH); Dr T Mhlongo (PDOH); Dr S Zungu (PDOH); Dr OSB Baloyi (PDOH); Mr P Mkhize (PDOH); Dr SA Moodley (PDOH); Ms BB Khoza (PDOH); Dr S Mndaweni (PDOH); Dr ST Mtshali (PDOH); Dr MLB Simelane (PDOH); Dr J Mthethwa (PDOH); Mr G Govender (PDOH); Ms JN Makhanya (PDOH); Ms N Ncume (PDOH); Mr S Mkhize (PDOH); and Mr M Bhekiswayo (PDOH); and Mr F Shishi (National Treasury).

The following Members and support staff of the Portfolio Committee on Health joined the Committee for the health related matters of the oversight visit: Hon MB Goqwana (Chairperson), Hon MC Dube, Hon TE Kenye, Hon R Motesepe, Hon BT Ncobo, Hon MJ Segale-Diswai, Hon D Robinson, Hon DA Kganare, Hon HS Msweli, Ms V Majalamba (Committee Secretary), and Ms V Makubalo (Committee Assistant).

The Chairperson stated in his opening remarks that, after consultation with the Chairperson of the Portfolio Committee on Health it was agreed that due to the fact that the NHI pilot phase only commenced in March 2012, that the terms of reference of the oversight visit be changed. The focus would thus be on the performance of the Kwazulu-Natal and Eastern Cape Provinces ’ Departments of Health on the Hospital Revitalisation Grant and the Health Infrastructure Grant. The effective expenditure on these grants is important for the roll-out of the NHI pilot phase.

The Kwazulu-Natal Department of Health (the Provincial Department) in its presentation and in light of the fact that the terms of reference for oversight visit has changed only focused on the history, progress to date, new site, public-private partnership, and upgrades and renovations to the existing facilities at the King Edward VIII Hospital. An amount of R52 million for infrastructure projects has been allocated to the King Edward VIII Hospital for the 2012/13 financial year.

The MEC for Health in the KwaZulu-Natal Province reported that two districts in the province were identified for NHI, i.e. the uMgungundlovu and uMzinyathi Districts. In addition to this the Province wanted to add a third district for the NHI pilot phase, i.e. Amajuba District.

In respect of the Hospital Revitalisation Grant, the Province has under spent on its budget allocation for the 2011/12 financial year in the amount of R833 million. Under the same period, the Department reported that the under-funding for infrastructure projects was estimated at R1.2 billion. The point was made that an optimisation plan, which would be discussed with the National Treasury, has been developed. The Dr Pixley ka Seme Hospital was underfunded and construction was suspended due to financial constrains. The sod turning event for the hospital was held in 2004 and the current budget allocation allowed for at least a ten year construction period. The Department planned to build this hospital within a three year period since the cost escalations would be significantly higher if it was constructed over ten years. Table A, hereunder illustrates the budget shortfall of the Dr Pixley ka Seme Hospital .

Table A: Budget shortfall of Dr Pixley ka Seme Hospital

	2012/13 R’000	2013/14	2014/15
PIP Allocation	43.2	32.9	100.2
Required Budget	234.8	531.9	746.9
Budget Shortfall	-191.6	-499.1	-646.6

The National Treasury indicated that gaps were identified in the budget for hospitals in the Kwazulu-Natal Department of Health and that financial infrastructure analysing skills were needed to address the matter. The National Treasury was in process of consulting with the Department of Public Service and Administration in order to address the matter.

3.2.1.1 Deliberations

The Committee expressed concern at the fact that the sod turning event for the Dr Pixley ka Seme Hospital was held in 2004, yet the hospital was a long way from being completed. Clarity was sought on the actual amounts of funding spent against the allocations that were made to the Kwazulu-Natal Department of Health and concerns were expressed at the fact that the KwaZulu-Natal Provincial Treasury was not present at the meeting despite being invited.

The point was made that there was a need to assess whether services have been rendered against the expenditure to which the Kwazulu-Natal Portfolio Committee on Health responded that it was closely monitoring the value for money in terms of the NHI districts in the province.

3.2.2 Rietvlei Hospital

The Committee met with the following national and provincial departmental officials at the Rietvei Hospital in uMzimkhulu, Kwazulu-Natal on 19 June 2012: Mr S Khosa (National Department of Health, NDOH); Mr R Morewane (NDOH); Mr NN Zuma (Kwazulu Natal Provincial Department of Health, PDOH); Mr V Singh (PDOH); Ms VJ Khumalo (PDOH); Ms TM Ngoakaza (PDOH); Ms TC Motseki (PDOH); Mr P Mba (PDOH); Mr C Mutsambiwe (PDOH); Ms B Zindela (PDOH); Mr M Bhekiswayo (PDOH); ms SE Khumalo (PDOH); Ms JN Nqopiso (PDOH); Ms NA Mboto (PDOH); and Mr F Shishi (National Treasury).

The KwaZulu-Natal Department of Health (the Department) in its presentation focused on the progress made and challenges experienced on the construction of the Rietvlei Hospital . In terms of background it was reported that the Reitvlei Hospital was a District Hospital located at uMzimkhulu area under Sisonke District Municipality . The Sisonke District was 100 percent rural and the rural node with 20 municipal wards comprised of 202 682 thousand inhabitants. The Hospital catered for patients from 13 surrounding clinics.

An amount of R478 million under the Hospital Revitalisation Grant has been allocated towards the project out of which R95 million or 30 per cent has been spent as at the time of the oversight visit. It was reported that the initial completion date for the project was August 2010.

It was reported that only four doctors served the hospital whereas 16 were approved in terms of the organisational structure. It was stated that the lack of proper accommodation and the fact that uMzimkhulu was a rural area has affected the ability to attract doctors to the hospital negatively. Proper accommodation was in the process of being constructed which would assist in the recruitment of doctors to the hospital.

The implementing agents for the project were the Department of Public Works and the Independent Development Trust (IDT).

The criterion for appointment of contractors was also identified as a challenge. The practice of awarding multiple contracts to a single contractor was singled out as the biggest challenge and reason for the delays. For instance it was mentioned that failure by a contractor involved in multiple contracts with the Department would ultimately affect the implementation of multiple projects which would then result in sustained delays in the overall revitalisation project. According to the Department, a contractor would abandon a project and enter into a contract for another project and this would happen haphazardly without any repercussions to the contractor and no cost recoveries by the Department. The Committee expressed concern at the fact that the Department seemed not to have an effective mechanism to indentify and blacklist contractors who failed to honour the previous contracts with the Department.

The issue of litigations against the Department was also reported as the reasons for the delays experienced. For instance it was mentioned that in instances wherein the Department terminated contracts due to implementation failure or breach of contracts by contractors, contractors would threaten with legal action. In one instance a contractor whose contract had been terminated due to implementation failure attempted to sue the Department for R13 million but lost the case. However, the project sustained undue delays including financial implications and this occurred despite the Department winning the court case.

The Department also reported that the road upgrade was in progress and had been subject to delays relating to the appointment of a new contractor. Part of the delays in the project was under phase 3 (a) where the concrete failed as a result of the poor quality of the pillars which were not up to the required standard. This project included the pharmacy, stores, laundry, lab, maintenance, waste area, parking, and generator. The pillars needed to be demolished and this has led to delays which ultimately resulted in the Department of Health terminating the contract. The original budget for phase 3 (a) was R47 million and this would escalate, however the phase would be completed before the end of this financial year. The Department was in the process of recovering the money in that regard from the defaulting contractor. It was reported that the envisaged time for the new contractor to be on site was mid July 2012 in order to finalise the project.

Table B hereunder which was presented to the Committee depicts the Kwazulu-Natal Department of Health's planned expenditure per programme over the 2012 Medium Expenditure Framework.

Table B: Planned expenditure per programme

Funding Source	2012/13 R’000	2013/14	2014/15
Equitable Share	1.930	2.453	2.068
Health Infrastructure Grant	393	416	427
Hospital Revitalisation Grant	566	595	659
Nursing College Grant	16	23	29
Planned Total	2.906	3.489	3.185
Allocated Budget	1.916	2.114	2.169
Budget Shortfall	-990	-1.375	-1.015

3.2.2.1 Deliberations

The Committee expressed concern at the delay in the completion of the project, especially phase 3 (a) and clarity was sought on how these delays affected service delivery. The point was made that the delays in the completion of the project would have significant cost escalation implications.

The Committee expressed great concern at the fact that the Hospital had a shortfall of 12 doctors (i.e. only 4 available against a requirement of 16). The Department acknowledged the shortage of doctors as a huge challenge and bottleneck to the delivery of health services to the people of uMzimkhulu. The Department reported that measures have been put in place to attract doctors within and outside of South Africa and it was hoping that, with the assistance of institutions such as the Department of Public Administration (DPSA), it would overcome the challenge.

The Committee sought clarity as to whether the Department was paying service providers within 30 days of receipt of invoice as required in terms of Treasury Regulation 8.2.3. The Department reported that there had been no incidents of late payment since it had embarked on rigorous monitoring process including “Operation Siyakhokha”. The Committee noted the response, however mentioned that it will be requesting an official report from National Treasury for verification.

The Committee sought clarity on whether there was a company roster that would ensure that non-performing contractors did not benefit from any tenders in future.

In closing the Committee thanked the Department for its presentation, particularly its willingness to share information regarding the challenges experienced. The Committee encouraged the Department to effectively deal with the challenges experienced and ensure successful revitalisation of the Rietvlei Hospital for the benefit of the people of uMzimkhulu.

3.2.3 Nelson Mandela Academic Hospital ( Eastern Cape Province )

The Committee met with the following national and provincial departmental officials at the Nelson Mandela Academic Hospital in Mthatha on 20 June 2012: Mr R Morewane (National Department of Health, NDOH); Mr MT Tuswa (Eastern Cape Department of Health, (PDOH); Dr M Xamashe (PDOH); Mr K Tungata (PDOH); Mr M J Masusana (PDOH); Dr TM Madiba (PDOH); Ms P Pepu (PDOH); Ms UN Bomela (PDOH); Ms NS Ntshanga (PDOH); and Ms RN Nondoda (PDOH).

The following Members of the Eastern Cape Portfolio Committee on Health and its support staff were present: Mr MM Mhlati, Ms MB Ndlangisa-Makaula, Ms N Kuluta, Ms T.W Mbengo, Ms N Mtonyana, Ms U Millie (Committee Researcher), and Ms TB Qambata (Committee Co-ordinator).

In its presentation the Eastern Cape Department of Health (the Provincial Department) focussed on its successes to date, the expenditure as at the end of the 2011/12 financial year, the budget cuts over the 2012 MTEF period, the implications of the budget cuts, the structural weaknesses of the Provincial Fiscal Framework, and improving health infrastructure investments.

The Provincial Department has spent R1.2 billion or 89 per cent out of a total budget allocation of R1.3 billion as at the end of the 2011/12 financial year. In respect of the Health Infrastructure Grant, R328.5 million or 87 per cent has been spent out of a total budget allocation of R376.7 million. With reference to the Hospital Revitalisation Grant, the Provincial Department has spent R556.9 million or 88 per cent out of a total budgetary allocation of R663.3 million.

It was reported that the budget cuts by the National Treasury have negatively affected its ability to render services effectively to the people. The Department presented Table 3 hereunder which depicts how the budget of the Eastern Cape Provincial Department of Health has been cut over three years.

Table 3: Budget cuts in the Eastern Cape Department of Health over three years

Fund Share	2011/12 original R’000	2011/12 revised	2012/13 original	2012/13 revised	2013/14 original	2013/14 revised
Equitable Share	825.8	456.6	890.8	435.3	939.8	481.8
Hospital Revitalisation Grant	386	382	406.9	402.6	429.2	408.7
Infrastructure Grant to Provinces	428.7	299.7	428.7	258.8	452.2	276.9
				14.6		21.5
	1 640	1.138	1.726	1.111	1.821	1.167
Equitable Share		369.2		455.4		457.9
Hospital Revitalisation Grant		4.0		4.2		20.5
Infrastructure Grant to Provinces		128.9		101.1		175.3
Cuts		502.1		560.7		653.8

The Department reported that these budget cuts have negatively affected the payment of contractors and its ability to plan effectively. The non-payment of contractors has led to: contractors moving off the sites, legal contractual challenges, delayed re-start of projects, cost escalations, maintenance contracts lapsing, and warranties being compromised. The point was made that these budget cuts would impact negatively on the roll-out of the NHI pilot phase in the Eastern Cape Province .

The Department reported on a number of planning challenges that were consequent to the budget cuts. It was reported that the roll-overs on conditional grants that were only being approved towards the end of the third quarter was a challenge since it left insufficient time to spend.

Amongst the structural weaknesses identified by the Provincial Department was the per capita allocation which did not take the cost of delivery into account and the inadequate budget for maintenance of infrastructure, which was more extreme in the rural areas. It was reported that due to insufficient budgetary allocations, the Department was not able to respond adequately to building repairs and an example was made of where the patients in one hospital had to be moved to the paediatric ward.

A document relating to an application by the Department to the National Treasury requesting additional funding was distributed at the meeting. In this document it was stated that the Department has over-committed in terms of projects under the Hospital Revitalisation Grant in the amount of R366.2 million for the 2012/13 financial year. The over commitment for the 2013/14 financial year on the said grant was projected at R125 million. The point was made that contractors could charge up to R90 thousand per day in interest if there were delays in the payments by the Department which would have a significant impact on cost escalations.

3.2.3.1 Deliberations

Reference was made to the fact that the MEC for Health in the province and the Head of the Department of Health (HOD) were not present at the meeting. It was suggested that the meeting be re-convened towards the end of July 2012 since the MEC needed to be present. It was ascertained at a later date that the MEC’s office had submitted an apology.

Concerns were expressed at the report that the NHI pilot phase in the Province would be negatively affected as a result of the budget cuts and clarity was sought on how these cuts would impact on the roll-out of the said programme. Clarity was sought on the reasons for the budget cuts and the point was made that the Eastern Cape Department of Health has underperformed consistently on the Hospital Revitalisation and Health Infrastructure Grants for a number of years.

The Committee expressed concern at the fact that contractors were moving off sites and a report was requested on the names of the contractors that moved off site in the 2011/12 financial year, inclusive of the original and current values of contracts.

Reference was made to the reported over commitment of contract by the Department in terms of the Hospital Revitalisation Grant and concern were expressed in that regard since it would lead to litigation and cost escalations.

The Committee referred to the ability of the Department to plan effectively in terms of the awarding of contracts and the point was made that more controls were needed in order to address the issue of the abandoning of site by contractors.

3.3 Accelerated Schools Infrastructure Initiative

The following national and provincial staff were present at the meeting that was held at the Transet, Mthatha on 21 June 2012: Eastern Cape MEC for Education and Training, Mr M Makupula, Ms V Diale (National Department of Basic Education, NDOH), Mr R Mafoko (NDOH), Mr Q Msiwa (Eastern Cape Province Department of Basic Education, PDOH), Ms N Duntsula (PDOH), Mr A M Katsana (Development Bank of Southern Africa, DBSA), Mr CW Ramphele (DBSA), Mr RL Matlala (DBSA) and Dr P K Kibuuka (DBSA).

The following Members and support staff of the Portfolio Committee on Health were present at the meeting Hon H H Malgas (Chairperson), Hon F F Mushwana, Hon A C Mashishi, Hon A Lovemore, Hon W Madisha, Hon A M Mpontshane, Mr D Bandi (Content Advisor), Mr L Mahada (Parliamentary Researcher) and Mr L Brown (Committee Secretary).

The following Members and support staff of the Eastern Cape Provincial Legislature were present:, Mr P Van Vuuren, Ms M Matomela, Mr V Limba, Ms M Michael-Peter, Ms A Ponco, Ms J Bici, Ms MJ Daniels (Committee Coordinator) and Ms N Myataza (Committee Researcher).

The Department gave some background to the School Infrastructure Backlog Grant and indicated that the purpose of the grant was for eradicating of entire inappropriate schools as well as providing basic levels of water, sanitation and electricity to schools. In its presentation, the Department reported on progress made during the 2011/12 financial year in respect of eradication of inappropriate schools, the water and sanitation and electrification programmes. The Grant was also referred to as ASIDI (Accelerated School Infrastructure Delivery Initiative). The targets for ASIDI over the 2011 Medium term Expenditure Framework (MTEF) were as follows:

Infrastructure Category	Baseline	2011/12	2012/13	2013/14
Inappropriate Structures	496	50	100	346
Water	1257	188	1069
Electrification	878	164	714
Sanitation	868	354	514
Specialist Classrooms			50

The budget allocation for the ASIDI programme over the 2011 MTEF period was R8.2 billion. An amount of R700 million has been allocated for the 2011/12 financial year, R2.3 billion for 2012/13 and R5.2 billion for the 2013/14 financial year.

The Committee received a breakdown of the overall contractors’ physical progress as at 11 June 2012 showing the percentage progress achieved for all contractors. Further, the Committees were given a detailed breakdown of progress for each contractor. This breakdown included the number of schools allocated, the names of these schools and the percentage building progress to date for each school.

In its analysis of progress the Department indicated that the programme was behind schedule on all of the schools. Contractors were behind schedule by between 15 and 77 days based on their baseline programmes. Progress at 6 of the schools was between 3.2 and 10 percent. Progress at 16 of the schools was between 10.1 and 20 percent. Progress at 17 of the schools was between 20.1 and 30 percent. Progress at 6 of the schools was between 30.1 and 40 percent. Progress at 3 of the schools was between 40.1 and 50 percent. Progress at 1 of the schools was over 50 percent. The Department indicated that contractual provisions had been invoked for non performing contractors. It was reported that penalties of at least R32 thousand per day would be applied and where necessary, there was a ten per cent retention and ten per cent guarantee.

Based on the current rate of progress of contractors, the Department indicated that the indicative practical completion dates for the completion of the 49 schools in the ASIDI Schools Building Programme was as follows:

5 Schools - August 2012

11 Schools - September 2012

22 Schools - October 2012

11 Schools - November 2012

The Department alluded to some of the factors that influenced the slow progress in respect of the inappropriate schools as follows:

· Difficulty of obtaining material supply since the suppliers were not in a position to meet the demand placed by the ASIDI contractors;

· Adverse weather conditions;

· Difficult terrain requiring unusual earth works and poor access to schools;

· Redesign of site drawings due to unforeseen physical features on site for instance grave sites;

· Poor performance by contractors; and

· Competition with other business sectors for transportation of bulk material.

The Department also mentioned the risks identified and related mitigation actions. In conclusion, the Department indicated that from close monitoring and analysis conducted, it was evident that not all schools would be completed by the end of August 2012. Construction work at all schools would be completed on, or before November 2012. DBSA continued to engage the contractors with the view of a practical approach to expedite the work to ensure that more schools were completed by end of August 2012. In order to assist effective monitoring, the DBSA has opened an office in the Eastern Cape . Contractors which have shown poor performance had been issued with notices of defaults and in one case a contract has been terminated. The point was made that the termination of contracts would be the last resort as it had the potential of serious costs overruns.

3.3.2 Deliberations

Members were concerned, and raised issue with the high target levels projected by the Department and were not certain whether these were attainable. Serious concern was expressed at the report that the envisaged completion date of the 49 inappropriate schools in the Eastern Cape has been moved to the end of November 2012. This completion date was initially shifted from 31 March 2012 to the end of August 2012. Questions were raised on the credibility of the reports by the Department to the Committee given the fact that there was scepticism around the initial report in November 2011 that the schools would be completed by the end of March 2012. Further concern was raised at the ability of the Department to meet the revised completion date and the cost escalations that would be associated with the delays.

With reference to the report that there were challenges regarding material, concerns were expressed and it was stated that this was used as an excuse for poor performance. The Committee advised that material suppliers from the Eastern Cape needed to be fully utilised in order to benefit from the programme, to which the Department responded that 70 per cent of all supplies came from the Eastern Cape .

There was further concern over the criteria used to select contractors and the rationale for awarding a numbers of schools to certain contractors over others who got only one. It appeared that those contractors who were awarded more than one school were not performing. Clarity was sought on whether contractors who had their contracts terminated were blacklisted from doing business with Government or given a second chance.

Of importance was how the programme was aligned to the overall rationalisation/redesign of schools. The Committee noted that all schools needed to be built as per the Departments minimum guidelines for construction. The Department responded that school construction was done in line with the guidelines on the norms and standards. The Department further mentioned that in respect of class-size, the smallest school comprised seven classrooms (135 – 300 learners) and included an administration block, laboratory, sport field and nutrition centre.

Members questioned the role of the Provincial Departments of Education and the Department of Public Works in the projects. Of concern was the delay in the digging of the boreholes at certain schools and that it was important that the Department had a risk management plan in place.

4. Findings

The Standing Committee on Appropriations, after deliberating with the stakeholders made the following findings:

4.1 The National Youth Development Agency only had one branch, i.e. Durban , which serviced the entire Kwazulu-Natal province and it only operated on petty-cash with the rest of the required funding being disbursed at the head office.

4.2 The National Youth Development Agency has a shortage of staff in its Durban Branch with only 11 staff members out of an approved organogram of 19.

4.3 The National Youth Development Agency Kwazulu-Natal Provincial Advisory Board has a shortage of staff with only 3 members out of 11 required.

4.4 The Rietvlei Hospital has a shortage of doctors with only four out of the approved 16.

4.5 The Rietvlei Hospital project under the Hospital Revitalisation Grant was originally scheduled to be completed by the end of August 2012 but to date; only 30 per cent has been completed.

4.6 The Eastern Cape Department of Health has over committed funds under the Hospital Revitalisation Grant during the 2012/13 and 2013/14 financial years amounting to R366.2 million and R125 million respectively. This was a serious cause of concern and could open the Provincial Department up for litigation by the contractors for non-payment.

4.7 The Eastern Cape Department of Health reported that the budget cuts imposed on it would impact negatively on the roll-out of the pilot phase of the National Health Insurance in the OR Tambo District in the Province.

4.8 The completion date for the construction of the 49 schools under the Accelerated Schools Infrastructure Development Initiative (ASIDI) has been shifted to the end of November 2012. The initial completion date for the 49 schools was 31 March 2012, which has been shifted to the end of August 2012 during the Committee’s oversight visit to the Eastern Cape Province in January 2012.

4.9 The Department of Basic Education reported that there were challenges with the supply of material in the Eastern Cape Province which has contributed to the completion date being shifted for the second time. This was a cause for concern given the fact that the Department initially assured the Committee in November 2011 that there would be a constant supply of material over the December festive period.

4.10 The lack of contract management by the Department of Public Works and the Provincial Health Departments during the implementation of Hospital Revitalisation Grant and other capital projects.

4.11 Some contractors have not been able to complete their construction projects awarded by government.

6. Recommendations

Having engaged with the stakeholders on the above mentioned matters, the Standing Committee on Appropriations recommends as follows:

6.1 That the Minister of Health ensures that the Department of Health submit a report to the National Assembly on its recruitment strategy for doctors relating to the Rietvlei Hospital in uMzimkhulu, Kwazulu-Natal .

6.2 That the Minister of Health ensures that the Department of Health submit a report on the extent to which the budget cuts in the Eastern Cape Department of Health would impact on the roll-out of the National Health Insurance pilot phase in the province.

6.3 That the Minister of Basic Education should ensure that the Department of Basic Education submit a report on the envisaged cost escalations that would arise as a result of the shifting of the completion date for construction of the 49 schools in the Eastern Cape Province as part of the Accelerated Schools Infrastructure Development Initiative. In this report, the Department should indicate whether provisions were made in tenders for the payment of penalties in the event of delays that came as a result of non-performance.

6.4 That the Minister in the Presidency for Performance Monitoring and Evaluation should ensure that the National Youth Development Agency (NYDA) in the next budgeting cycle prepare a separate budget for each of its provincial and national offices.

6.5 That the Members of Executive Committee (MECs) for Public Works should ensure that the Provincial Departments of Public Works improve the Management of contractors together with other departments particularly when implementing capital projects.

6.6 That contractors be properly scrutinized before awarded or given any government work or tender in order to identify the non performing contractors. And those that are not performing must be black listed.

7. Conclusion

The recommendations as set out in section 6 above should be submitted to the National Assembly within 90 days of the adoption of this report by the House.

Report to be considered.