ATC150505: Report of the Portfolio Committee on Public Works on Budget Vote 11: Public Works and on the Strategic Plans 2015-2016 and Annual Performance Plans 2015-2016 of the Department, the Property Management Trading Entity and entities, dated 5 May 2015

Public Works and Infrastructure

Report of the Portfolio Committee on Public Works on Budget Vote 11: Public Works and on the Strategic Plans 2015-2016 and Annual Performance Plans 2015-2016 of the Department, the Property Management Trading Entity and entities, dated 5 May 2015
 

The Portfolio Committee on Public Works, having considered the Strategic Plans, Annual Performance Plans and Budget of the Department of Public Works, the Property Management Trading Entity, and the entities reporting to the Minister of Public Works, wishes to report as follows:

 

1. Introduction

 

The Portfolio Committee on Public Works has oversight responsibility over the Department of Public Works and the entities that report to the Minister of Public Works, namely the Independent Development Trust (IDT), the Construction Industry Development Board (cidb), Agrément South Africa (ASA), and the Council for the Built Environment (CBE).

 

The Portfolio Committee conducted public hearings with the Department, the IDT, cidb, and ASA to oversee the Strategic Plans, Annual Performance Plans and Budgets for the 2015/6 financial year. Due to unforeseen circumstances, the scheduled meeting with the CBE could not take place. The analysis on the strategic direction of the CBE as contained in this report therefore, does not include its presentations but is based on its Strategic Plan, Annual Performance Plan and Budget as tabled in Parliament.

 

1.1         The broad policy environment

 

The work of the Department of Public Works is aligned to the policy priorities stated in the National Infrastructure Plan, the National Development Plan (NDP), the Medium Term Strategic Framework (MTSF) and the 2015 State of the Nation Address (SONA).

 

The National Development Plan was developed from a Diagnostic Report that was released by the National Planning Commission in June 2011. The comprehensive research on which the Diagnostic Report was based, highlighted achievements and challenges that government has experienced from 1994 to 2011. It identified specific areas of weaknesses that cause slow progress that negatively impact on the objective to grow the economy and develop South Africa. Amongst these, the following were identified:

 

• The numbers of employed people were too low;
• The country remains challenged by poorly located, inadequate and under-maintained infrastructure;
• Inclusive development is impeded by the spatial divisions within the country;
• People receive uneven and often poor quality of public services; and
• Levels of corruption remain high.

 

The MTSF, NDP, and SONA places emphasis on job creation and infrastructure development. Government has taken steps to mandate specific Departments to play leading policy-making, coordinating, and regulating roles that are focused on these weaknesses. The Department of Public Works is one of the Departments that have to coordinate efforts to create employment across Departments and the three spheres of Government. The Department is mandated to make policy, draft legislation, and regulate the construction, built environment and property sector of the country to ensure that they are properly aligned to the challenges that have been identified. In collaboration with relevant departments, this Department therefore plays a coordinating role in giving effect to the emphasis that government placed on infrastructure development and job creation.

 

The Department remains charged with the responsibility to create job opportunities for vulnerable groups, particularly women, youth and people with disabilities. The President, in the 2015 State of the Nation Address, specifically emphasised the improvement of various types infrastructure in general; more specifically, reference was made to the need to build and maintain dams to ensure better access to water for people in rural areas. This is crucial in a context where the South African climate increasingly shows signs of water scarcity impacting negatively on social life and economic activity.

 

The Medium Term Strategic Framework (MTSF) refers to a priority area of “Radical economic transformation, economic growth and job creation”. This is aligned to National Outcome 4 in the National Development Plan, “Decent employment through inclusive economic growth”. This focus on economic growth is part of the diagnosis that job creation and infrastructure development is an important foundational area if the country’s economy is to develop consistently. In line with that, and consistent with the 2015 SONA, the Minister of Public Works as policy-leader of the construction, built environment, and property management sectors stated the following as the key policy priorities for this period:

 

• The creation of 6 million work opportunities for poor and unemployed people through the labour-intensive delivery of public services and infrastructure.
• The operationalisation of Property Management Trading Entity (PMTE) and the transformation of the core property business (including construction management);
• The operationalisation of the Governance, Risk and Compliance Branch to drive anti-corruption and to spearhead the second phase of the Turnaround Strategy;
• A policy review which will culminate in a Public Works Bill to be tabled in Parliament; and
• A renewed and sustained Programme of Action to transform the built environment and the construction and property sectors, as part of the second more radical phase of transition to democracy.

 

In its analysis of the Budget of the Department the Committee focused on whether and how the Department in its Programme allocations, uses the Budget as mechanism to deliver on these stated policy imperatives.

 

The Minister, as Executive Authority of the Department, has moved the Department along a deliberate Transformative Agenda that should unfold over the strategic term from 2015 to 2020. Much of this Transformative Agenda has been outlined in the “Seven-year Plan to rebuild the Department of Public Works” also referred to as the Turnaround Strategy (January 2012).

 

This Turnaround Strategy was necessary to address the historically poor performance and the lack of adequate management and financial controls that the Department of Public Works has suffered from. It is well-known that for eight (8) consecutive years the Department had a negative audit findings with high levels of fraud and corruption have been reported on in the reports of the Public Protector and the Special Investigations Unit (SIU).

 

The Turnaround Strategy importantly, includes the re-alignment of the Department to secure a better focus on its mandate as custodian and portfolio manager of Government’s immovable assets. This means that as the Property Management Entity becomes operational in this financial year, the Department could exercise much better oversight over policy formulation, coordination, regulation and oversight related to the provision of accommodation and expert built environment services to client Departments. The PMTE would then focus on the planning, acquiring, managing and disposing of immovable assets.

 

The Committee commits itself to continue robust engagements and oversight over this task of the Executive Authority by keeping a strong focus on the key tasks that the Minister has outlined in the Strategic Plan; these include the creation of 6 million jobs, the operationalisation of the PMTE, the Governance Risk and Compliance Branch, and the Programme of Action to transform the construction, built environment and property management sector.

 

The analytic comments, and recommendations that are included in this report form part of the arsenal that the Minister and the Department’s Senior Management team has to ensure that adequate management, administration, and financial controls are set up in this very important coordinating Department.

 

 

1. Presentations and analysis of the Strategic Plans, Annual Performance Plans and Budget allocations

 

1.  Department of Public Works

 

1. Background on the Department of Public Works

 

The Constitutional mandate of the DPW is provided for in Schedule 4, Part A, of the Constitution of the Republic of South Africa: Functional Areas of Concurrent National and Provincial Legislative Competence.

 

The legislative mandates of the Department are underpinned by the following Acts:

1. Government Immovable Asset Management Act, 2007 (Act No. 19 of 2007);
2. the Construction Industry Development Board Act, 2000 (Act No. 38 of 2000);
3. Council for the Built Environment Act, 2000 (Act No. 43 of 2000);
4. Professional Council Acts that regulate the six Built Environment Professions (BEPs);
5. Public Finance Management Act, 1999 (Act No. 1 of 1999);
6. Other Acts listed in Annexure A.

 

Policy mandates of the DPW are derived from:

1. DPW White Paper: Public Works, Towards the 21st Century, 1997
2. DPW White Paper: Creating an Enabling Environment for Reconstruction, Growth and Development in the Construction Industry, 1999
3. Construction Sector Transformation Charter, 2006
4. Property Sector Transformation Charter, 2007
5. DPW Broad-based Black Economic Empowerment Strategy, 2006
6. Property Management Strategy on BBBEE, Job Creation and Poverty Alleviation, 2007
7. Green Building Framework, 2011

 

1. Strategic Goals of the Department of Public Works:

 

1. Sound legislative and policy prescripts to accelerate service delivery;
2. Oversight, leadership and support to Provincial Public Works;
3. Coordination of the EPWP Phase III for the creation of decent employment through inclusive economic growth;
4. Strategic leadership and regulation of the construction and property sectors to promote economic empowerment and skills development; and
5. Good corporate governance to support effective and efficient service delivery.

 

Programme 1: Administration provides strategic leadership, management and support services to the Department.

 

For 2015/16, the Administration programme received an allocation of R476 million; (this constitutes a nominal increase of R1.7 million from the previous year), which proportionally represents 7.4% of the overall departmental budget. Of this amount, a total of R443.1 million is allocated to the three main sub-programmes. This total excludes the R32.9 million allocation to the Ministry, which increased by R842 000 from the R32.1 million it received in 2014/15, and constitutes 6.9% of the total allocation for Programme 1.

 

Programme 2: Intergovernmental Coordination seeks to promote sound intergovernmental relations and strategic partnerships. Coordinate with provinces on: Immovable Asset Registers; construction and property management; the implementation of the Government Immovable Asset Management Act (No. 19 of 2007); and the reporting on performance information within the Public Works Sector.

 

Programme 2 received an allocation of R47.2 million in 2015/16 and constitutes an increase of 21.4 million. It proportionally represents 0.73% of the overall departmental budget allocation for 2015/16. It reports on 2 sub-programmes: Monitoring, Evaluation and Reporting and Intergovernmental Relations and Coordination.

 

Programme 3: Expanded Public Works Programme seeks to ensure the coordinating the implementation of the Expanded Public Works Programme to create work opportunities; and the provision of training for unskilled, marginalised and unemployed people in South Africa.

 

Programme 3 was appropriated R1.99 billion in 2015/16 (a nominal increase of R40.9 million compared to the R1.95 billion allocated in the previous year), which proportionally represents 31.1% of the overall departmental budget.

 

Programme 4: Property and Construction Industry Policy and Research promotes the growth and transformation of the construction and property industries, as well as a standardised approach and best practice in construction and immovable asset management in the public sector.

 

Programme 4 received an allocation of R3.8 billion in 2015/16, which is an increase of R259.0 million from an allocation of R3.5 billion in 2014/15, which proportionally represents 59.3% of the overall departmental budget.

 

Programme 5: Prestige Policy seeks to provide norms and standards for the Prestige Accommodation Portfolio and meeting the protocol responsibilities for State functions.

 

Programme 5 received an allocation of R92.7 million in 2015/16, a decline of R33.3 million from the R126 million it received in 2014/15, which proportionally represents 1.4% of the overall departmental budget. It reports on the following 6 targets for the 2015/16 financial year.

1. Property Management Trading Entity

 

PMTE’s mandate is shaped by the legislative and other mandates which direct the Department’s functions and follows from devolving the roles and responsibilities from the Department of Public Works to the PMTE.

 

2.2.1 Past Challenges of the Department

 

The Department of Public Works has highlighted a number of challenges which will impact on the operations of the PMTE and include the following:

 

There was a growing trend in the late 1990s the Government Departments entered into agreements with private sector companies for accommodation and facilities management services. This led to an artificially created monopoly and resulted in Government paying exorbitant rentals.

 

The scarcity of appropriate infrastructure as well as a large maintenance backlog resulted in Government leasing accommodation from third party lessors. The Department in the past acted as an agent for sourcing accommodation for User Departments and resulted in the Department being a major tenant in the industry managing a lease portfolio of over 2 500 leases with an annual value of approximately R3.7 billion per annum.

 

Operating costs, in terms of electricity costs and municipal property rates rose from as early as 2000 and doubled in real terms. As a consequence the property rates and municipal services account for approximately 59% of total expenses (with property rates accounting for 21% and electricity 32% respectively).

 

The Department spent approximately R4.2 billion were on maintenance and repairs to state-owned infrastructure over the past three years, but remains in adequate.

 

2.2.2     Planned Outputs for 2015/16

 

Institutionalise the Infrastructure Delivery Management System (IDMS) to replace the backlog of infrastructure projects and to improve planning and turnaround times in project delivery.

 

Implement a new Supply Chain Model for Infrastructure Delivery, Property Management Services and Goods and Services.

 

Address the late payments to contractors especially for Small Medium Micro Enterprises (SMMEs) which are negatively affected when not paid within the prescribed 30 days period from receiving invoices.

 

Complete the review of the organisational structure and prioritised the budgeting for filling critical professional and technical positions including: Finance, Supply Chain Management (SCM), Property Management and Construction Management.

Construction Project Management is tasked with improving infrastructure delivery effectiveness and efficiency through business process re-engineering technical and professional capacity development and improved Information Communication Technology (ICT) systems.

 

Programme 1: Administration provides strategic management, governance and administrative support to the PMTE; and consists of the following sub-programmes:

 

1. Management Leadership.
2. Operations Support Management.
3. Finance and Accounting Management.
4. Supply Chain Management.

 

The total allocation for Programme 1 equals R1.01 billion for the 2015/16 financial year, an increase of R12.98 million from the adjusted appropriation of R1.03 billion in 2014/15.

 

 

Programme 2: Real Estate Investment Management seeks to optimise utilisation and maximise the value of the State Property Portfolio; and consists of the following sub-programmes:

 

1. User Demand Management.
2. Planning and Precinct Development Services.
3. Property Performance Management.
4. Investment Analysis.

 

The total allocation for Programme 1 equals R 114.4 million for the 2015/16 financial year, a decrease of R6.2 million from the adjusted appropriation of R 120.6 million in 2014/15.

 

Programme 3: Real Estate Investment Management seeks to provide effective and efficient delivery of accommodation needs for the Department of Public Works and Client Departments through construction; and consists of the following sub-programmes:

 

1. Construction Project Planning.
2. Construction Project Management.

 

The total allocation for the Programme equals R465.9 million for the 2015/16 financial year, which is a decrease of R61.9 million from the adjusted appropriation of R527.8 million in 2014/15

 

Programme 4: Real Estate Management seeks to timelessly provide and manage suitable accommodation in support of Client needs to meet their service delivery objectives; and consists of the following sub-programmes:

 

1. Management of Freehold Property.
2. Land Administration and Management.
3. Surplus Freehold Stock (Revenue) Management.
4. Leasehold Management.

 

The total allocation for Programme 4 equals R5.73 billion for the 2015/16 financial year, an increase of R365.6 million from the adjusted appropriation of R5.36 billion in 2014/15

 

Programme 5: Real Estate Information and Registry Services seeks to develop and manage complete, accurate and compliant Immovable Asset Register to meet service delivery objectives for the State, Department and PMTE business requirements; and consists of the following sub-programmes:

 

1. Asset Registry Services.
2. Conveyancing.

 

The total allocation for Programme 5 equals R1.67 billion for the 2015/16 financial year, an increase of R926.6 million from the adjusted appropriation of R738.6 million in 2014/15.

Programme 6: Facilities Management seeks to ensure that immovable assets used by Government Departments and the public, are optimally utilised and maintained in a safe, secure healthy and ergonomic environment while contributing to job creation, skills development and poverty alleviation and consists of the following sub-programmes:

 

1. Scheduled Maintenance.
2. Safety, Health, Environment, Risk and Quality (SHERQ) Management.
3. Unscheduled Maintenance Management.

 

The total allocation for Programme 6 equals R2.81 billion for the 2015/16 financial year, a decrease of R176.3 million from the adjusted appropriation of R2.98 billion in 2014/15. The

 

1. Construction Industry Development Board (cidb)

 

The Construction Industry Development Board is a Schedule 3A public entity established by the cidb Act (No. 38 of 2000). The cidb is expected to provide “leadership to stakeholders and to stimulate sustainable growth, reform and improvement of the construction sector, for effective delivery and the industry’s enhanced role in the country’s economy.” In terms of the Public Finance Management Act (No. 1 of 1999) (PFMA), the Board of the cidb is the Accounting Authority, responsible to the Minister of Public Works as the Executive Authority. The Board submits its Annual Performance Plan and budget for approval to the Minister.

 

The mandate of the cidb is to:

 

1. “Provide strategic leadership to the construction industry stakeholders to stimulate sustainable growth, reform and improvement of the construction sector.
2. Promote sustainable growth of the construction industry and the participation of the emerging sector in the industry.
3. Determine, establish and promote improved performance and best practice of the public and private sector clients, contractors and other participants in the construction delivery process.
4. Promote uniform application of policy throughout all spheres of Government and promote uniform and ethical standards, construction procurement reform, and improved procurement delivery management – including the Construction Code of Conduct.
5. Develop systematic methods for monitoring and regulating the performance of the industry and its stakeholders, including the Registration of Projects and Contractors.”

 

1. Agrèment South Africa (ASA)

 

Agrément South Africa is one of four entities reporting to the Minister of Public Works and is mandated to provide “fitness-for-purpose assurance of technologies that optimise resource utilisation and realise cost savings in the industry.”

 

The entity was established by the Minister of Public Works in 1969 and is mandated to “support and promote the process of integrated socio-economic development in South Africa as it relates to the building and construction industries by facilitating the introduction, application and utilisation of satisfactory innovation and technology development.”

 

The Entity’s mandate means that Agrément South Africa’s Board is expected to:

 

1. “Support and promote the country’s process of integrated socio-economic development.
2. Facilitate the introduction, application and utilisation of satisfactory innovation technology development.
3. Enhance Agrément South Africa’s position as the internationally acknowledged, objective South African Centre for the assessment and certification of non-standardised construction products.”

 

1. Council for the Built Environment (CBE)

 

The CBE is a schedule 3A entity established by the Council for the Built Environment Act (No. 43 of 2000). “The CBE and Professional Councils in the built environment value chain are to regulate those Built Environment Professions who conceptualise, design, build, maintain and transfer social and economic infrastructure.”

 

The six Professional Councils are as follows:

 

1. South African Council for Architectural Professions (SACAP).
2. Engineering Council of South Africa (ECSA).
3. South African Council for the Project and Construction Management Professions (SACPCMP).
4. South African Council for the Landscape Architectural Profession (SACLAP).
5. South African Council for the Quantity Surveying Profession (SACQSP).
6. South African Council for the Property Valuers Profession (SACPVP).

 

The CBE is a Statutory Council established in terms of the CBE Act as an overarching body for the six Built Environment Professions and mandated to:

 

1. Promote and protect the interest of the public in the built environment.
2. Promote and maintain a sustainable built environment and natural environment.
3. Promote on-going human resources development in the Built Environment.
4. Facilitate participation by the Built Environment Professions in integrated development.
5. Promote appropriate standards of health, safety and environmental protection in the built environment.
6. Promote sound governance of the Built Environment Professions.
7. Promote liaison in the field of training in the Republic and elsewhere and to promote the standards of such training in the Republic.
8. Serve as a forum where the Built Environment Professions can discuss relevant issues.
9. Ensure uniform application of norms and guidelines set by the Professional Councils throughout the Built Environment.

 

1. Findings

 

3.1

The broad transformation of the built environment and construction industry require more detailed attention in future strategic plans.

 

3.2

While the PMTE presented a comprehensive overview of its planned outputs over the next five years, some areas required clarification; this included the total budget allocation; its staff complement; as well as some areas where the targets were not set for certain sub programmes.

 

3.3

With regards to the revision of policy to ensure a proper alignment of the Department with the broad policy environment within which it plays a key coordinating role:

The Committee noted that some of the revision of policy has been initiated through the Turnaround Strategy of the Department and it welcomes the statements by the Department that as part of its Strategic Plan and Annual Performance Plan, it will revise the White Papers and prepare relevant legislation to ensure that the Department is best mandated and positioned to give effect to its Constitutional mandate.

 

3.4

With regards to operationalising the PMTE, the Committee expressed concern over the need for suitably qualified property managers, and specialised, well experienced legal, and property investment specialists to ensure that they can negotiate on behalf of Government in the South African as well as the global property market.

 

3.5

With regards to the decrease of R19.97 million from the R267.3 million allocated to the sub-programme Corporate Services in Programme 1, Administration:

The Committee notes the decrease in the allocation for this sub-programme. It took note of the Department’s explanation that the decrease was due to the migration of staff to the PMTE in this financial year. The Committee remains concerned that the decrease of R19.97 million from the R267.3 million allocated in 2014/15 could minimise the Department’s efforts to contribute to government’s effort to grow a skilled and capable workforce to support an inclusive growth path (Outcome 5 of the NDP).

 

3.6

With regards to the increased budgetary allocation to the Parliamentary Villages sub-programme, (an increase of R400 000 from the R8.7 million it received in 2014/15 to R9.1 million for 2015/16), the Committee expressed concern that in spite of an increased amount being allocated to the Parliamentary Villages Management Board sub-programme, the board have not functioned as it should. It meant that the actual achievement of maintenance, asset management and security of houses at the Parliamentary Villages requires attention.

 

3.7

With regards to human resources, in specifically Programme 4: Property and Construction Industry Policy and Research, the Committee was concerned that this Programme was not fully staffed – there was an expectation that with half of its staff establishment absent (12 vacancies of a staff establishment of 24) this Programme had to manage the allocated R3.8 billion budget to achieve the revision of the White Papers to ensure the tabling of a draft Public Works Bill; the business case to properly align the IDT as an entity; complete the draft Bill to Amend the State Land Disposal Act, 1961; submit the Public Works General Amendment and Repeal Bill to Parliament; complete revised Guidelines on User and Custodian Asset Management Plans; and biannually submit Contractor Development Implementation Reports to the Minister. The Committee is concerned that the high rate of vacancy in this Programme could lead to the outsourcing of key policy revision, research, as well as legislative drafting to external service providers.

 

3.8

With regards to the rest of the vacancies evident in the Department’s organogram, the Committee further noted the large number of positions (663) that are additional to the establishment. It was concerned at the largest number (650) of vacancies are situated in Programme 1: Administration. This could indicate weaknesses that needed further investigation.

 

3.9

The Committee noted the urgent need for the EPWP Branch to support municipalities so that they could benefit from the performance-based Incentive Grants. The Committee urged the Department to ensure that the relevant personnel are appropriately trained. The EPWP beneficiary tracking system should ensure that the training component is effective enough for beneficiaries to graduate to formal employment.

 

The Committee further noted that there was a need for trained staff to be retained within these municipalities. This was especially in terms of how EPWP projects could assist municipal Infrastructure Development Projects (IDPs) that was aimed at a more consistent maintenance and improvement of municipal areas. The training was further crucial to ensure that the collection and verification of data related to projects were improved. The Committee viewed this aspect of the EPWP as crucial for the long-term achievement of the stated objectives of the NDP.

 

3.10

The Committee found gender representation in the senior management of the Department not to be fairly representing women.

 

 

4.         Recommendations

 

The committee recommends to the Minister of Public Works that:

 

4.1

The Minister should ensure that the Department, PMTE and all entities should at all times adhere to the 30 days payment period as provided for in the PFMA.

 

4.2

The Minister should provide a status report to the Committee regarding the expenditure on the Turnaround Strategy.

 

4.3

The Minister should provide the Committee with a status report on the Parliamentary Village Board and its plans to ensure improved management of the immovable and movable assets, and security at the Parliamentary Villages.

 

4.4

The Minister should ensure that the Department and PMTE provide a detailed plan on its recruitment strategy to ensure suitably qualified and well experienced property managers, property investment specialists, and legal staff; it should further provide detail on the need for a training component to assist client departments with the User Asset Management Plans (UAMPS) to ensure compliance with the Government Immovable Asset Management Act (GIAMA).

 

4.5

The Minister should ensure that the Department provides regular reports to the Committee on the status of the immovable assets of government.

 

4.6

The Committee urges the Minister as policy leader, that as part of the outcomes of the Turnaround Strategy and as part of his Programme of Action, that the Department and the Council for the Built Environment conducts discussions with the Built Environment Professional Councils in the sector on their roles and contributions to radically transform to give effect to outcomes 4 and 5 of the National Development Plan in line with the Minister’s vision to transform the built environment and the construction and property sectors, as part of the second more radical phase of the transition.

 

4.7

The Minister should ensure there is a plan to address gender equity in the senior management of the department. Women should be adequately represented in senior management positions.

 

4.8

The Minister should ensure that the department links EPWP beneficiaries to programmes of the Department of Small Business Development.

 

 

Report to be considered.

 

 

 

 

 

 

 

 

 

 

LIST OF ABBREVIATIONS USED:

 

ASA                                                           Agrément South Africa

 

CBE                                                           Council for the Built Environment

 

cidb                                                           Construction Industry Development Board

 

DPW                                                          Department of Public Works

 

ECSA                                                         Engineering Council of South Africa

 

EPWP                                                        Expanded Public Works Programme

 

GIAMA                                                        Government Immovable Asset Management Act

 

IDPs                                                           Infrastructure Development Projects

 

IDT                                                             Independent Development Trust

 

MTSF                                                         Medium Term Strategic Framework

 

NDP                                                           National Development Plan

 

SACAP                                                       South African Council for Architectural Professions

SACLAP                                                     South African Council for the Landscape Architectural Profession

 

SACPCMP                                                  South African Council for the Project and Construction Management Professions

 

SACPVP                                                     South African Council for the Property Valuers Profession

 

SACQSP                                                    South African Council for the Quantity Surveying Profession

 

SMMEs                                                      Small Medium Micro Enterprises

 

SONA                                                         State of the Nation Address

 

UAMPS                                                      User Asset Management Plans