ATC220303: Report of the Portfolio Committee on Public Works and Infrastructure on the 2021/22 First and Second Quarter performance of the Department of Public Works and Infrastructure (DPWI), and the Property Management Trading Entity (PMTE), dated 2 March 2022

Public Works and Infrastructure

Report of the Portfolio Committee on Public Works and Infrastructure on the 2021/22 First and Second Quarter performance of the Department of Public Works and Infrastructure (DPWI), and the Property Management Trading Entity (PMTE), dated 2 March 2022

 

1. BACKGROUND

The Portfolio Committee on Public Works and Infrastructure (hereinafter referred to as the Committee) having considered the first and second quarter performance for the 2021/22 financial year of the Department of Public Works and Infrastructure (herein referred to as either the Department or DPWI), and the Property Management Trading Entity (PMTE), on 16 February 2022, reports as follows:

 

1. INTRODUCTION

Parliament, through its committees, has a constitutional responsibility to do oversight over the executive authority and the manners in which the department implements policy. The Public Finance Management Act[1] (PFMA) (Act No. 1 of 1999) guides the Department to do quarterly performance reports to National Treasury. The Committee analyses these quarterly programme performance information of the departments and their entities[2] for each quarter during every financial year as part of the monitoring of financial and non-financial performance of the departments.

Consideration of quarterly performance reports by committees is one of the established tools to fulfil Parliament’s oversight and accountability mandates in terms of the Constitution, the PFMA, and under the rules established by the National Assembly. The analysis of quarterly performance reports assists the in-year monitoring of the non-financial and financial performance of the Department prior to its oversight over the annual financial statements in the Budgetary Review and Recommendations Report (BRRR)[3].

On 16 February 2022, the Committee considered the 2021/22 First and Second Quarter performance of the Department PMTE.

This report provides an overview of the performance of the DPWI and PMTE over the first two quarters of 2021/22 and the discussion that emerged during the meeting. The discussion focused on the achievements, programmatic output in respect of the performance indicators and targets that were stated in the Annual Performance Plan for the 2021/22 financial year.

This report further outlines the queries, findings and observations of the Committee regarding the quarterly non-financial and financial performance of the DPWI and the PMTE.

 

1. MANDATE OF THE DEPARTMENT

3.1. Constitutional mandate

The Constitutional mandate 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.

 

3.2. Legislative mandate

The Government Immovable Asset Management Act (GIAMA), (Act No. 19 of 2007), primarily provides the legislative mandate of the Department as manager, accommodator, and maintainer of government’s immovable assets.

Although these entities were not part of the meeting on which we report here, the DPWI regulates the construction industry and professional built environment through the Construction Industry Development Board Act, (Act No. 38 of 2000) and the six Professional Council Acts that regulate the six Built Environment Professions (BEPs), and through the Council for the Built Environment Act (Act No. 43 of 2000).

 

 

3.3. Policy mandates

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

 

4.2021/22 FIRST AND SECOND QUARTER PERFORMANCE

4.1. Overview of 2021/22 First and Second Quarter Expenditure

Table 1 below sums up the expenditure of the DPWI in relation to the appropriated amounts per programme for the first quarter of the 2021/22 financial year.

Table 1: 2021/22 Budget and Expenditure up to the First Quarter for Vote 13 - Public Works and Infrastructure

 

Programme R' million	Main Appropriation 2021/22	Actual Expenditure 2021/22	Expenditure as a % of Available Budget
1. Administration	511,2	88,8	17,4%
2. Intergovernmental Coordination	63,6	10,4	16,4%
3. Expanded Public Works Programme (EPWP)	2969,3	254,6	8,6%
4. Property and Construction Industry Policy and Research	4704,6	1226,0	26,1%
5. Prestige Policy	94,5	19,9	21,1%
Total	8343,2	1599,7	19,2%

 

Source: National Treasury (2021a) and (2021b).

Note: The outbreak of the COVID-19 pandemic and subsequent lockdown of the country in March 2020 resulted in government having to reprioritise funding, and redirect spending towards fighting the pandemic.

 

 

1.  Quarter 1

The spending during Quarter 1 under the Department’s five main programmes shows an improvement from Quarter 1 to 2.

 

R1.60 billion (or 19.2%) of the total allocation of R8.34 billion was spent, when compared to the R1.85 billion (or 22.9%) spent in the same quarter of the previous year.2 One of the five main programmes managed to slightly exceed the minimum expenditure rate of 25%. Programme 4 spent R1.23 billion, which constitutes 26.1% of the R4.70 billion allocation.

 

The other four main programmes did not manage to reach the minimum 25% threshold. Programmes 5 spent R19.9 million (or 21.1%) of the R94.5 million in 2021/22. The other two programmes spent under 18%, i.e. Programme 1 spent R88.8 million (or 17.4%) of the R511.2 million and Programme 2 spent R10.4 million (or 16.4%) of the R63.6 million. Programme 3, spent the least amount in percentage terms at R254.6 million (or 8.6%) of the R2.97 billion allocation for 2021/22.

 

Under-expenditure:

The DPWI underspent a total of R658.9 million of the projected programmatic expenditure of R962.06 million for this quarter, as follows:

 

R21.5 million underspent under Programme 1 (Administration) of the projected R110.3 million, the lower than projected spending is attributed to Compensation of Employees due to funded vacant posts. The Department reports that these vacant posts are in the process of being filled.

 

R2.9 million underspent under Programme 2 (Intergovernmental Coordination) of the projected R13.3 million due to underspending on Compensation of Employees due to non-filling of funded vacant posts. The vacant positions have been advertised for filling. Underspending is also evident under Goods and Services items (i.e. catering, venue and facilities, consultant business advisory service; and rental and hiring), due to less than expected activities resulting from the COVID-19 pandemic management restrictions.

 

R559.9 million underspent under Programme 3 (Expanded Public Works Programme (EPWP) of the projected R814.5 million with slow spending under Transfers and Subsidies, amounting to R510 million especially the EPWP Non-State Sector on account of a delay in the submissions of the Independent Development Trust (IDT) Project Implementation Plan and the 2021/22 financial year Non-Profit Organisation Implementation close out report. The IDT was expected to submit the outstanding documents, and the transfer payments were to be made by the end of July 2021.

 

R70.9 million overspent under Programme 4 (Property and Construction Industry Policy and Research) of the projected R1.16 billion, due to the higher than projected spending under Transfers and Subsidies, is due to increased transfer payments to the Property Management Trading Entity (PMTE). The Chief Financial Officer of the Department of Public Works and Infrastructure has indicated that the Department would furnish National Treasury with reasons for the unplanned payments to the PMTE. The Department will submit a request for Treasury to approve a  revised draw-down schedule to align cash flow projections and expenditure.

 

R2.9 million of the projected R22.8 million was underspent under Programme 5 Prestige Policy; it showed lower spending under Goods and Services due to fewer than projected planned activities as a result of the COVID-19 pandemic management restrictions on gatherings.

 

Note: The Department reported incurring no COVID-19 related expenditure during the 1st Quarter of 2021/22.6

 

Important matters to note:

• In spite of Programme 4 spending R1.23 billion, which was 26.1% of its R4.70 billion allocation, the Committee raised serious concerns that it remains unable to show sufficient progress with its core function, which is to research, review and draft policy and legislation for the property and construction industry. Most of the improved expenditure is therefore the increased transfers that was made to the PMTE and unfortunately, not improved expenditure in real terms. The reason for this increased transfers seems to relate to the cash-flow struggle of the PMTE. This matter requires a stronger oversight focus beyond the stated intention to request Treasury to approve a  revised draw-down schedule to align the PMTE’s cash flow projections and expenditure. Note that the input made by the Minister during the discussion session later in this report outlines these and other challenges of the PMTE. It also bemoans the lack of progress made by Programme 4 to review the two White Papers listed under the Policy Mandate in sub-section 3.3 above. We refer here to the slow progress of the White Paper: Public Works, Towards the 21st Century, 1997; and White Paper: Creating an Enabling Environment for Reconstruction, Growth and Development in the Construction Industry, 1999. Instead of the allocated funding of Programme 4 being spent on the draft legislation required to get a draft Public Works Bill in place. This Bill is crucial if the PMTE and the DPWI is to have a strong enough mandate to collect debt owed to it by client departments.

The importance of transforming the Construction and Built Environment Professional sectors remains a serious challenge. In previous oversight, Budget Vote, Budgetary Review and Recommendation as well as quarterly performance reports, this Committee referred to the urgent need for amendments to the Construction Industry Development Board (CIDB) and Council for the Built Environment (CBE) Acts to get the policy environment on a more solid footing. This report is stating it again as an element of performance that is acutely lacking.

 

4.3. Quarter 2

 

   Table 2: 2021/22 Budget and Expenditure up to the Second Quarter for Vote 13 - Public Works and Infrastructure

 

Programme R' million	Main Appropriation 2021/22	Q2 Actual Expenditure 2021/22	Expenditure as a % of Available Budget	Adjusted Budget 2021/22
1. Administration	511,2	204,4	40,5%	504,5
2. Intergovernmental Coordination	63,6	23,4	40,0%	58,5
3. Expanded Public Works Programme	2969,3	1279,2	43,8%	2921,1
4. Property and Construction Industry Policy and Research	4704,6	2215,0	46,3%	4781,0
5. Prestige Policy	94,5	29,3	32,9%	89,1
Total	8343,2	3751,3	44,9%	8354,2

(Source: National Treasury (2021a) and (2021b).

 

In the Second Quarter the appropriation was adjusted upwards by a net amount of R11.0 million from R8.34 billion in Quarter 1 to R8.35 billion.

Transfers and Subsidies increased by R94.5 million from R7.27 billion to R7.36 billion.

 

Decreases totalling R83.5 million were effected as follows:

The following economic classifications by a total of R83.5 million in Quarter 2 of 2021/22:7

• R76.3 million reduction from Current Payments to R975.8 million from R1.05 billion.
• R7.16 million reduction from Payments for Capital Assets to R17.3 million from R24.5 million.

 

1. DISCUSSIONS AND COMMENTS

Problems with the PMTE

The Minister shared that “the PMTE has just become a banking account that has an overdraft.” She added that 76% of the total budget of the DPWI was transferred to the PMTE. This was because this component within the DPWI deals with high cost items such as leases and the Immovable Asset Register. The challenge was that the PMTE remained incompletely operationalized. It was also severely understaffed in terms of specialized property, construction project management, and property leasing, facilities management, contracting, and debt collecting personnel. When the PMTE was established it was done following a decision of Cabinet that National Treasury (NT) to establish it. At the time of its establishment NT gave the PMTE six conditions before it could be fully established. The PMTE remains incompletely operationalized as it still did not comply with four of those conditions. The Minister indicated that she wanted to seek legal advice on what the status of the PMTE was.

Concerns expressed by Members of the Committee:

Members of the Committee expressed concerns related to the mandated tasks of the PMTE. This ranged from:

• the accommodation of Members of Parliament that are housed in Parliamentary Villages;
• challenges of client departments including the continued problem of accommodation of the South African Police Service that still did not have its own Headquarters;
• the maintenance of all state property that must move from a reactive to a scheduled, costed model (which leads to what the Minister referred to as a projected over-expenditure of R24 million by the end of this financial year);
• the management of service provider contracts for services ranging from maintenance, security, construction, project management, and legal services;
• the continued challenge of ensuring the security of vacant state buildings, and facilities management;

These were all tasks that the PMTE was responsible for that Members raised in previous quarterly performance meetings and annual performance sessions. These tasks are operationalised on a daily basis within the eleven regional offices that gives the DPWI and PMTE a country-wide footprint. The leadership challenge that is worsened by the struggles to use the compensation for employees budget allocation, has a negative effect on the performance of the core legal mandate of the PMTE and the Department (note 6.1. and 6.2. under Observations below).

Efforts to Fill Vacancies and Leadership Positions

The submission of memoranda to appoint Senior Management Service (SMS) personnel who would lead key branches in DDG positions are processed for due diligence procedures and compliance checks to the Department of Public Service and Administration (DPSA). The Minister reported to the Committee that she had complaints from the Minister of DPSA who was very frustrated as the documentation for the appointments from DPWI Corporate Services continually lacked information and did not comply to public service appointment procedures This slowed down the appointments of required personnel in leadership positions. This matter required serious attention and the Committee would need to request more information on this from the DPWI in due course.

Leasing and other problems

The Minister requested that where businesses reported challenges with leases, Members had to send the cases directly to the Office of the Minister. No further leases would be paid on a month-to-month basis. R155 million was paid to some private contractors that was still on a monthly basis. This practice weakens the resolve to fight corruption had to be ceased immediately.      

 

6.OBSERVATIONS

The oversight strategy of this Committee is to use comments and observations made in the meetings on quarterly performance reports as the preparatory data for its Budgetary Review and Recommendation Reports.  Except for the comparative figures on under and over expenditure, subsections 5 and 6 therefore form part of the continuous effort to keep a check on how this department uses the budget to implement promises made in its Annual Performance Plan.

 

1. All quarterly and annual performance reports of this Department reported slow spending under Compensation of Employees and Goods and Services. This was explained as mainly due to the non-filling of vacancies or payment for goods and services due to the reduction in departmental activities caused by the impact of the lockdown following the COVID-19 pandemic in each of the programmes of the DPWI and PMTE.

 

1. The discussion in sub-section 5 regarding filling vacancies and leadership positions in the section above shows that the blanket explanation of “due to the non-filling of vacancies” belie compliance and competence challenges in the Corporate Governance and other leadership positions.

 

1. As in the previous year, Programme 3, EPWP, again reported significant underspending due to the withholding of Conditional Grants due to some provinces not complying with the Division of Revenue Act (DORA) regulations. This poses a threat to the stated intention to achieve a clean audit for this financial year.

 

1. The Committee indicated that it would continue its oversight focus on the weak performance of Programme 4, the Property and Construction Industry Policy and Research branch, specifically on whether, and how it will improve its tasks to strengthen the mandate of the Department through a draft Public Works Bill; the transformation of the construction sector through the amendment of the Construction Industry Development Board; and the transformation of the professional built environment through the amendment of legislation that guides the Council for the Built Environment.

 

 

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[1] Act 1 of 1999 stipulates that monthly reports showing actual revenue, expenditure, and borrowings. In sections 39(2)(b) and 40(4)(d) it describes the monthly reports that is the contractual responsibility of the Director-General as accounting officers. The financial responsibilities of the executive authorities are described in sections 63, 64, and 65.

[2] The performance of the entities was not the specific focus during the quarterly performance review. However, while there is not a focus on each of the entities on their own, the budgetary allocations reported on and the analyses of the transfers from Programme 4 deals with an aspect of the financial transfers of entities from one quarter to the next. The Committee gives full effect to this aspect of its legal oversight mandate during the annual financial performance review in the latter part (often during October and November) of each year. The latter is reported on the Budgetary Review and Recommendation Report of this Committee.

[3] In preparing the BRRR, the Committee gives effect to Section 5 of the Money Bills Amendment Procedure and Related Matters Act (Act 9 of 2009).