ATC121106: Report of the Standing Committee on Appropriations on the follow up Oversight visit to the Eastern Cape Province from 30 July to 03 August 2012, dated 12 September 2012

REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON THE FOLLOW UP OVERSIGHT VISIT TO THE EASTERN CAPE PROVINCE FROM 30 JULY TO 03 AUGUST 2012, DATED 12 SEPTEMBER 2012

The Standing Committee on Appropriations, having undertaken a follow-up oversight visit to the Eastern Cape from 30 July to 3 August 2012, reports as follows:

1. Introduction

In terms of section 4(4) of the Money Bills Amendment Procedure and Related Matters Act, No. 9 of 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 the National Youth Development Agency in terms of National Assembly Rule 199 (b) on 1 November 2011.

1.1 Purpose of the visit

During the previous Committee oversight visit undertaken in June 2012, the Committee observed that there were still challenges facing the health and education sectors in the Eastern Cape Province such as clinics that did not have medicine and some doctors who have not received their salaries. The Committee also made an undertaking to the public that it would return to the province to follow-up on the progress regarding the Hospital Revitalisation Grant and the Health Infrastructure Grant.

Part of the follow-up visit to the Eastern Cape Province was to evaluate the progress that has been made by the Department of Basic Education on the implementation of the Accelerated Schools Infrastructure Development Initiative (ASIDI) programme and School Infrastructure Programme. In respect of the former, the objective was to get the commitment of the service providers for the 2012/13 financial year to get Eastern Cape contractors on board. The said contractors have complained about being marginalised by the Department and its service providers.

The Committee also engaged with the National Youth Development Agency (NYDA) on the youth development programmes that were offered in the Eastern Cape Province . 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 light of this, part of the strategic plan of the NYDA was t o provide a comprehensive suite of interventions that would lead to decent employment, skills development, education, and entrepreneurship to all young people between ages of 14 to 35. The NYDA received a budgetary allocation of R385 million for the 2012/13 financial year.

In the light of the above, the Committee took a decision to go back and revisit the health and education sectors and also to engage the NYDA in the Eastern Cape Province .

1.2 Delegation

The delegation of the Committee consisted of Mr EM Sogoni , African National Congress (ANC), the Chairperson and the leader of the delegation; Mr JP Gelderblom (ANC); Ms RJ Mashigo (ANC); Mr M Swart Democratic Alliance (DA) and Dr SM Van Dyk (DA). The delegation was supported by Mr D Arends and Ms A Kakaza (Committee Secretaries); Mr P Dlomo and Mr M Zamisa (Committee Researchers) and Ms V Makubalo (Committee Assistant).

The Committee was joined by Members of the Portfolio Committee on Health, Dr MB Goqwana (ANC), the Chairperson of the Portfolio Committee on Health; and was supported by Ms V Majalammba (Committee Secretary) and Ms N Mnyovu (Committee Assistant).

2. Terms of reference

The visit was a result of the Committee’s extended mandate which included conducting oversight over the Department in the Presidency for Performance Monitoring and Evaluation and the 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.

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 ( PPPs ). The successful roll-out of the pilot phase of the National Health Insurance (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 Eastern Cape Province (OR Tambo District) in preparation for the rolling-out of the pilot phase of NHI in the said province.

The Committee undertook a follow-up oversight to the Eastern Cape Province on 21 June 2012 at the Transet , Mthatha where it met with national and provincial departmental officials. The Committee received a briefing on the progress regarding the 49 schools that were to be built under the ASIDI programme in the Eastern Cape . Concerns were expressed that contractors and material suppliers in the Eastern Cape were not benefiting sufficiently from the ASIDI programme. Reference was made to the ASIDI plan for the 2012/13 financial year which included 100 inappropriate schools, 692 electrifications, 453 sanitation, 928 water and 50 specialist class room projects. Coega Development Corporation, Independent Development Trust, and the Eastern Cape Department of Public Works have been appointed for the implementation of 50 schools in the Eastern Cape during 2012/13.

3. Engagements during the oversight visit

3.1 Hospital Revitalisation and Health Infrastructure Grants

On Tuesday, 31 July 2012 the Committee met with the Eastern Cape Provincial Department of Health in East London International Convention Centre and conducted a site inspection of the Cecilia Makiwane Hospital in Mdantsane . The following provincial and national officials were in attendance: Eastern Cape MEC for Health, Mr S Gqobana , Ms NP Makwedini (Eastern Cape Department of Health, ECDOH), Ms T Majaja (ECDOH), Dr ML Matiwane (ECDOH), Ms MT Tuswa (ECDOH), Mr JS de Jager (ECDOH), Ms ZPP Tantsi (ECDOH), Prof L Galo (ECDOH), Mr A Dzuda (ECDOH), mr MB Boya (ECDOH), Mr GLQ Kalimashe (Eastern Cape Provincial Treasury (ECPT), Ms NTM Mbina-Mthembu (ECPT), Ms SS Nqadolo (ECPT), Mr RW Morewane (National Department of Health, NDOH) Ms PS Khosa (NDOH), Mr I van der Merwe (NDOH), Mr B Melitafa ( Coega Development Corporation), Ms FF Nemasetoni (Hospital Design Group, HDG), and Mr AJ van der Hoven (HDG).

The following Members of the Portfolio Committee on Health and support staff were in attendance: Dr MB Goqwana (ANC, Chairperson), Ms MC Dube (ANC), Ms TE Kenye (ANC), Ms MR Motsepe (ANC), Ms B Ngcobo (ANC), Ms MJ Segale-Diswai (ANC), Ms D Robinson (DA), Ms SP Kopane (DA), Mr DA Kganare (Cope), Ms V Majalamba (Committee Secretary), Mr MZ Rahim (Committee Researcher), and Ms N Mnyovu (Committee assistant).

The presentation of the Eastern Cape Department of Health (Provincial Department) focused on the success of the Department to date, expenditure as at the end of the 2011/12 financial year, budget cuts for over the Medium Term Expenditure Framework (MTEF) period, implications of the budget cuts, structural weakness of the Provincial Fiscal Framework, improving Health Infrastructure Investment and recommendations. The Committee has however requested the Provincial Department to focus on the issues pertaining to the under spending on the Hospital Revitalisation and Health Infrastructure Grants that could not be responded to during the Committee oversight visit in June 2012.

In its presentation the Department reported on the following challenges that were experienced: other projects that were put on hold would be postponed by a further three year period and this was due to budget cuts over the MTEF by the provincial Treasury; delays in payments which resulted in some payments being made late December 2011; budgeting challenges due to accruals and rollovers on conditional grants that were only approved towards the end of the third quarter which left the Department with insufficient time to spend the funds.

The Department reported on the following successes that were made:

· After 17 years of returning funds the infrastructure budget was fully committed;

· Expenditure recorded at the end of the 2011/12 financial year reached a historical high of R1.3 billion or 90% of a R1.4 billion allocation;

· For the first time in the history of the Department no infrastructure funds were withheld;

· Better management of contracts resulted in savings in certain projects;

· More active oversight over the implementing agents was exercised; and

· Reporting structures have been put in place with project monitoring and monthly expenditure reviews and a payment tracking system introduced.

The Eastern Cape Provincial Treasury (Provincial Treasury) reported that the Province had appointed a total of 483 medical officers. The appointments were reported as follows:

• Alfred Nzo District – 12
• Amathole District – 37
• Cacadu District – 25
• Chris Hani District – 27
• Complex: East London – 96
• Complex: Port Elizabeth – 117
• Complex: Mthatha – 74
• Department of Health Head Office - 1
• Nelson Mandela Metro District – 30
• OR Tambo District - 41
• Regional Hospital : Frontier - 13
• Regional Hospital : St. Elizabeth -3
• Ukhahlamba District – 7

The Provincial Treasury reported that there was a 3320 growth in personnel in the Eastern Cape Department of Health between 31 March 2010 and 31 March 2011. The said growth in personnel was not budgeted for resulting in the over expenditure of the overall budget. The over expenditure was therefore mainly attributed to Compensation of Employees which was mitigated by under spending on non-personnel items, including infrastructure and conditional grants. It was further reported that the Provincial Department continued to appoint personnel without the budget which resulted in a cost pressure of R421 million in May 2012. In light of this, the appointment authorization function of the Provincial Department has been taken over by the Provincial Treasury.

3.2 Deliberations

The Committee observed that the National Treasury should not be the one to be blamed for not increasing the budget of the Eastern Cape Department of Health since it was evident that there was a poor management of funds in the department. It was also noted with concern that there was an absence of culture of accountability in the Province and that there were no clear guidelines of accountability.

The Committee raised concerns regarding the future of the Department and sought clarity as to who exactly was responsible for decision making in the Department as it related to budgeting.

Members of the Committee had difficulty in ascertaining the state of affairs in the Department and whether it was making any progress in its spending performance.

Clarity was sought on whether the Provincial Department had an engineer for infrastructure projects at the moment as it was the case in KwaZulu-Natal . Of importance was whether the Provincial Department was looking at prioritizing projects given the big number thereof and questions were raised on whether recovery mechanisms were introduced as it related to poor performing contractors.

Concern was expressed at the lack of accountability as it related to the mismanagement of funds and clarity was sought on how the matter would be addressed. Another concern of the Committee was at the observed lack of proper planning within the Provincial Department and the non-compliance with the 30 days payment of service providers as per the Treasury Regulations. It was stated that the health sector in the Eastern Cape Province needed to be restructured.

The Committee stated that the National Department of Health needed to assist the provincial departments on the planning and monitoring of the health grants. It was also suggested that the Eastern Cape Provincial Department of Health needed to consider the restructuring of the department to ensure more effective accountability.

The Provincial Department was requested to provide the Standing Committee on Appropriations and Portfolio Committee on Health with copies of the Service Delivery Rationalisation Plan and Special Investigation Unit (SIU) reports, which they reportedly had.

3.3 Site visit to Cecilia Makhiwane

The Committees visited the Cecilia Makhiwane Hospital Revitalization. It was reported that the project commenced in 2007 and was subsequently handed over to the Coega Development Corporation for completion. It was a joint construction project between the Stefanutti , Sakhekhaya and Simunye construction companies from the Mdantsane Township . The estimated total cost for the project was R2.1 billion and the construction was expected to be completed by December 2014.

It was noted that there were issues around the planning stage on revitalization of the Cecilia Makhiwane hospital from a level 4C hospital to a level 2 or regional hospital and the Health Portfolio Committee would take the matter up with relevant people and that the clinicians in the Province should also take the concerns raised by the authorities to the relevant officials in the province. The Committee requested a progress report on the current status of the project and its expenditure.

4. Accelerated Schools Infrastructure Development Initiative (ASIDI)

On the second day of the visit the Committee met with the Department of Basic Education and implementing agencies to gauge their progress with a view to ensuring improvement on the performance during the 2012/13 financial year. The purpose of the ASIDI Programme was the eradication of entire inappropriate schools and provision of basic level of water, sanitation and electricity to schools.

The following departmental officials were present at the meeting that was held at the East London International Convention Centre: Ms T Diale (National Department of Basic Education, NDBE), Mr SG Padayachee (NDBE), Mr ED Fray (Eastern Cape Department of Education, ECDoE ), Mr M Dlelanza ( ECDoE ), Mr B Ngxito (Eastern Cape Department of Roads and Public Works, ECDRPW), Mr MF Matsoha (ECDRPW), Ms GLQ Kalimashe (Eastern Cape Provincial Treasury, ECPT), Mr R Matlala (Development Bank of Southern Africa, DBSA), Mr CW Ramphele (DBSA), Mr MA Katsana (DBSA), Dr MC Mabula ( Coega Development Corporation, CDC), Mr S Ntantala (CDC), Mr GM April (Independent Development Trust, IDT), Mr FLB Nzawa (IDT), Mr BM Makupula (IDT), and Ms VS Tandwa ( Mvula Trust).

The ASIDI progress analysis for the 2011/12 financial year on the inappropriate schools was reported as follows:

• Over 86% of contract period has lapsed and the programme was behind schedule on all of the schools;
• Contractors were being scheduled by between 75 and 151 days based on their baseline programmes;
• Progress at 6 of the schools was between 10.1% and 20%;
• Progress at 8 of the schools was between 20.1% and 30%;
• Progress at 14 of the schools was between 30.1% and 40%;
• Progress at 9 of the schools was between 40.1% and 50%;
• Progress at 8 of the schools was between 50.1% and 60%;
• Progress at 3 of the schools was between 60.1% and 70%;
• Progress at 1 of the schools was over 70.1%; and
• Contractual provisions have been invoked for non-performing contractors.

The Department reported that, based on the current rate of progress, 12 schools would be completed by August 2012 instead of the initially envisaged 5. According to the Department, all 49 schools would be completed and handed over to the Department of Education by November 2012 in the following order: 12 schools by August (instead of the initially envisaged target of 5); 22 schools by September 2012; 7 schools by October 2012, and 8 schools by November 2012.

An amount of R1.5 billion has been allocated towards the Eastern Cape Province under the ASIDI programme for the 2012/13 financial year. It was reported that the Memorandums of Understanding ( MoUs ) with the implementing agents that would construct 50 schools in the Eastern Cape Province during the 2012/13 financial year still needed to be finalized. These agents, i.e. the Independent Development Trust (IDT), Mvula Trust, Coega Development Corporation, and Eastern Cape Department of Public Works, were appointed in May 2012 and were required to submit implementation plans before the MoUs were finalized. It was reported that contractors for the construction of the schools would be appointed by October 2012.

4.1 Deliberations

The Committee noted with concern that there was a problem with regard to the progress of the ASIDI programme in the Province. Of concern to the Committee was the fact that not even one of the 49 schools for the 2011/12 financial year had been completed let alone the target of 50 schools for the 2012/13 financial year. The Committee further questioned the credibility and reliability of the Department’s revised commitment of achieving a target of 12 schools, instead of the earlier target of 5, by or before the end of August 2012. Of greater concern to the Committee was the fact that, by the time of reporting, only 20 days was remaining before the end of August 2012; hence the completion of 12 schools was deemed unattainable. The Committee expressed serious concern about the poor planning with regard to the ASIDI programme and reference was made to the fact that contractors were yet to be appointed to commence the construction of 50 schools for the 2012/13 financial year.

Members were concerned about the high cost of contractors and sought clarity on whether the Department had investigated the possibility of using the Department of Public Works’ costing model for the construction of schools. The Committee raised questions as to why most of the contractors were from outside Eastern Cape . The Committee was of the view that the new service providers for the 2012/13 financial year needed to ensure that Eastern Cape qualified contractors be afforded opportunities. The Committee’s view was that the aim of the ASIDI project was to develop the Eastern Cape Province , hence the need for prioritizing local contractors with the necessary capacity.

5. Meeting with the National Youth Development Agency (NYDA)

On the third day of the visit the Committee met with the National Youth Development Agency (NYDA) in the East London International Convention Centre. The following officials were present at the meeting: Mr S Ngubeni (National Youth Development Agency, NYDA), Mr C Peter (NYDA), Mr D van Vuuren (NYDA); Mr M Mawela (NYDA), Mr D Maqubela (NYDA East London Branch); Ms N Mazwi (Eastern Cape NYDA Board), Mr A Matiti (Eastern Cape NYDA Board), Ms D Mokgohla (Office of the President), and Mr SG Skiti (City Press).

Mr Ngobeni, CEO of NYDA reported that the NYDA’s footprint in the country consisted of the NYDA Board at the head office in Midrand , NYDA head office management and corporate support functions in Midrand , the NYDA provincial advisory boards with 7 members per province, 9 NYDA provincial offices, 52 NYDA regional offices and 230 NYDA local offices. The role and responsibilities of the structure levels were explained.

However, the CEO mentioned that the NYDA had not yet has NYDA provincial office in all 9 provinces. The service delivery channels were 14 full service branches at present located national in all major centres and in all 9 provinces with a staff component of 16 – 20 personnel, 168 local youth offices at present located within municipalities and strategic hosting partners with a staff component of 2 -5 personnel and roaming mobile vehicles equipped with Information Communication and Technology (ICT) and media equipment, youth advisory centres that forms part of the outreach component targeting youth in rural and remote areas.

With regard to funding applications, it was reported that the provincial branches could only process applications to the maximum amount of R50 000. All applications above the said amount needed to be referred to the head office of the NYDA.

It was mentioned that the Eastern Cape Provincial Advisory Board was appointed by the NYDA board for a 2 year term to provide advice to the NYDA Board on youth development matters in the province, to advise on provincial youth development priorities and to lobby the public, private and civil society sectors for an integrated approach to youth development.

The Chairperson of the advisory board in the Eastern Cape, Mr Ayanda Matiti raised concerns about funding of NYDA, whether the funding from national should or supposed to be centralized to the provinces, because currently the NYDA in the province was not receiving any funding, they had to request the province to get funds. The Chairperson also raised concerns in regard to NYDA structural alignment whether it was correctly located and whether it was serving its purpose, that NYDA was top heavy and was not accessible to all the areas in the Eastern Cape especially the rural areas.

5.1 Deliberations

The Committee raised concern that there was no NYDA office in the former Transkei especially in the rural areas. The Committee also sought clarity on the matter of distribution of funds to provinces and questions were raised on where exactly the appropriated funding to the NYDA was spent.

Reference was made to the fact that only five provinces benefited from the National Senior Certificate 2 ^nd Chance Project and concerns were raised about what happened to the rest of the provinces. It was stated that four mobile trucks to reach rural areas were not sufficient and clarity was sought on what measures were put in place with regard to the accessibility of its services in the deep rural areas where the services were needed the most. Of greater importance to the Committee was the criterion used to select for young people to access the funds from the NYDA.

It was suggested that the Committee needed to arrange a meeting with the national NYDA board and the Chairpersons of the Provincial Advisory Boards to discuss the funding challenges of NYDA before it considered the NYDA’s annual report for 2011/12 financial year. The Committee was subsequently informed that such a meeting took place in the Northern Cape .

5.2 Site Visit to the NYDA branch office in the Eastern Cape

The Committee visited the office of the NYDA in East London and observed the following:

• The location of the office was not adequate as it was situated in East London or urban area and was not accessible to rural areas that it was supposed to be service;
• Human capacity was also a challenge although, it was noted that the officials in the office were multi-tasked; and
• The branch did not have a mobile van and it was reported that the procurement of the vehicle would be done in the next two months.

6. Findings

The following findings have been made by the Committee:

6.1 The Committee observed that there was a need for the employment of skilled personnel in the Eastern Cape Provincial Department of Health, as there was a lack proper planning and management of funds.

6.2 The appointment authorization function of the Eastern Cape Provincial Department of Health has been taken over by the Eastern Cape Provincial Treasury due to continued appointments being made without the necessary budget, which resulted in doctors not being paid.

6.3 The National Department of Basic Education and the Provincial Department viewed the Accelerated Schools Infrastructure Development Initiative (ASIDI) projects in isolation to other education grant projects.

6.4 The Department of Basic Education was still in the process of finalizing the Memorandums of Understanding with the implementing agents for the construction of 50 schools during the 2012/13 financial year. To this end, no contractors have been appointed as yet for the 2012/13 and subsequent financial years.

6.5 There were challenges regarding the accessibility of the National Youth Development Agency (NYDA) services in the rural areas which was a cause for concern.

6.6 There were serious challenges relating to communication, integration and coordination between the national, provincial, and branch structures of the NYDA.

7. Recommendations

The Standing Committee on Appropriations, having engaged with the above stakeholders, recommends as follows:

7.1 The Member of Executive Council (MEC) for Health in the Eastern Cape ensures that the Eastern Cape Provincial Department of Health submit a comprehensive report on the rationale behind the revitalization of the Cecilia Makhiwane Hospital from a level 4 to a level 2 or regional hospital. This report needs to be submitted within 30 days of adoption of this report by the National Assembly.

7.2 The Provincial Department of Health to provide both the Standing Committee on Appropriations and Portfolio Committee on Health with an action plan on how it proposes dealing with challenges facing the department before December 2012.

7.3 The Member of Executive Council (MEC) for Education in the Eastern Cape ensures that the Provincial Department of Basic Education provide the Standing Committee on Appropriations with progress reports on the two education grants, i.e. the Schools Infrastructure Grant and the Technical Secondary Schools Recapitalisation Grant. This report needs to be submitted within 30 days of adoption of this report by the National Assembly.

7.4 That the Minister of Basic Education ensures that the National Department of Basic Education submit roll-out plans on the Accelerated Schools Infrastructure Delivery Initiative the 2012/13 financial year as well as the 2013/14 financial year within 30 days of adoption of this report by the National Assembly.

7.5 That the Minister in the Presidency for Performance Monitoring and Evaluation ensures that the National Youth Development Agency (NYDA) develop and report on a plan on how it proposes to address the challenges relating to the accessibility of NYDA services in the deep rural areas. This report needs to be submitted within 30 days of adoption of this report by the National Assembly.

7.6 That the Minister in the Presidency for Performance Monitoring and Evaluation ensures that the National Youth Development Agency develop and report on a strategy on how it proposes to address the communication, integration and coordination channels between its national, provincial and branch structures. This report needs to be submitted within 30 days of adoption of this report by the National Assembly.

Report to be considered.