Procurement: Department briefing; Water Research Commission Annual Report

Meeting report

WATER AFFAIRS AND FORESTRY PORTFOLIO COMMITTEE
5 October 2004
PROCUREMENT: DEPARTMENT BRIEFING; WATER RESEARCH COMMISSION ANNUAL REPORT

Chairperson: Ms C September (ANC)

Documents handed out:
Department PowerPoint presentation on procurement
Water Services Amendment Bill: Further Submissions
Water Research Commission: Annual Report 2003/04
Private Sector Participation (PSP) and Contractors Tender Awards (email [email protected] for document)
South African Forestry Company Limited (SAFCOL) transaction composition (email [email protected])
Committee Business Plan
Committee Programme
Department of Water Affairs and Forestry website

SUMMARY
The Department of Water Affairs and Forestry explained its procurement policies and procedures especially in the light of Black Economic Empowerment. The Committee believed that the presentation was too technical and that it did not communicate enough what was being done to ensure that the Department's procurement practices were empowering people in the provinces.

The Water Research Committee presented its Annual Report and stressed that the lack of new scientists would pose problems for water research in the future if nothing was done.

MINUTES
Committee business plan
The Chairperson commented that the Committee's business plan was based on monitoring and oversight of service delivery. Its objectives had to be in line with the President's State of the Nation Address priorities: poverty alleviation, reduction of unemployment and dignity for all South Africans. The Committee needed to work with the Education and Health Portfolio Committees to ensure the identified targets were realised.

Ms S Maine (ANC) asked when was the Committee going to meet with the other Committees on the issue of the targets of the business plan.

The Chairperson commented that the targets they had put forward for the Committee to work with were the right targets. There was a general satisfaction within the Committee with the direction of the business plan.

Department briefing on procurement
Mr J Mabala (Department CFO) spoke about the procurement policies of the Department which had to be guided by Section 217 of the Constitution on how to procure goods and services. With reference to the State Tender Board, the Board Act had been amended to allow certain National Departments to procure their own good and services. Since June 2001 the Department had been released from the State Tender Board with the requirement that there be quarterly reporting to the Board.

Mr Mabala outlined the role and duties of the Department Control Committee and the Regional Tender Committees. On the issue of Black Economic Empowerment, the Department's policy on private sector participation (PSP) and the appointment of participators was outlined. Their Empowerment Strategy was to award contracts at a low level and as companies improved, they were awarded bigger contracts. The Department had been conducting analyses every year to make sure of the number of contracts that were awarded in a certain period and the beneficiaries of these contracts. For example, Corporate Services awarded a contract for R5 943 746 for a period of five months and 37% of the money went to historically disadvantaged individuals (HDIs).

The Department's procurement fraud prevention plan and the challenges it faced were also discussed. He noted that the Department was presently in arbitration for fraud with a big company that it had been working with for over 30 years. (See document for details of presentation).

Discussion
The Chairperson stated that the Department had presented a lot of technical background information. The Committee, she stressed, was interested in evidence. This meant that the Committee wanted to know how the Department had been able to turn the situation around in the provinces. For example, how had the Department used the figures that were presented to change situations in Limpopo. She gave an example of a project that had been carried out supposedly to benefit historically disadvantaged individuals, but during the Committee visit to the Province, there was no one to be found who had benefited from the project. How had the process that the Department had gone through led to actual projects in the provinces?

Mr Mabala responded that the example given by the Chair was an issue of fronting that he had mentioned earlier. He stressed that due to the huge size of the Department, it was difficult to pick up on corruption or fronting. The Department depended on the goodwill of those who come forward to expose fronting and corruption issues. He added that the Department had been going to the extent of interviewing individuals that were posing as shareholders for some companies. These people may not be actual shareholders but were presented by the companies as such.

These fake shareholders only come forward to expose the companies when something had gone wrong. This was one of the very limited ways the Department had been able to detect fronting.

Ms S Maine asked about the number of cases of fronting, how often they happened and what monitoring processed were in place.

Mr Mabala replied that the number of cases of fronting was not available but as an example, he had been involved with a case where a "director who had been expelled" two years ago accepted a contract from one of the companies doing work for the Department. He warned the company involved and they had decided to disengage from the individual.

The Department had created a monitoring unit that inspects existing companies to make sure that the Department was not doing business with fake companies and also for the companies to know that the Department was informed and therefore could not be fooled.

Ms T Mbasa, a member of the Department team, said there was need to acknowledge the areas of weakness within the Department. One major reason for the good performance of the Department is the fact that it had good partnerships with the private sector.

The capacity of HDIs needed to be developed to get quality work out of them. This was a very tricky business because there needed to be a balance between capacity improvement and quality production. The skills development of HDIs required time but needed to be worked on. The greater part of this work depended on the Department officials who needed to conform to Department policy and work diligently with the HDIs. She acknowledged that the Department needed to work hard on getting its officials to conform to its guidelines and policies. Managers had to make sure contracts were structured well so as to go beyond the issue of fronting.

The Chairperson referred to the percentages in the table on PSP Targets and asserted that they did not quite represent the work being done. There would be more work that need to be done. The Committee understood during the presentation that private sector involvement had influence these percentages, but there was nothing wrong about changing the present situation. The Department had to link up with others such as the Forestry Commission for example. There was the need to make a case that the Department had to do a lot of work on forestry aspects because the issues presented were not well explained. Also the Committee would like to know who were the private sector participators.

The Department had to link up the Labour Department and the relevant SETA (Sector Education and Training Authority). Procurement and tendering were the tools that were needed to empower people and change their lives.

She commented that the Committee agreed with the Public Finance Management Act which states that the accounting officer for a department must ensure "an appropriate procurement and provisioning system which is fair, equitable, transparent, competitive and cost-effective". However, the Department had to work out how this was going to happen. Working out the "how" was important. The Department had to do some break-down of this clause to figure out the different elements that were needed to make this clause work. She suggested that linking up with SETA was one way this could happen.

The Chairperson referred to the presentation slide on the Set Limits of the Regional Tender Committees and said the Committee could not understand why money was distributed in descending order to Chief Directors, Directors and Deputy Directors. While the Department's efforts were welcomed, evaluation had to be done along the way. Members of the Portfolio Committee liked to see tangible results. This was because of their responsibilities to their provinces. She suggested that in this light the technical report had to be married with the responsibilities of the Committee members.

Mr Mabala explained that money that was distributed by directors was allocated according to the size of the project. Directors at a lower status who were responsible for signing out smaller amounts of money for contracts were not require to seek approval from their superior before doing so. This would speed up contract processes.

Ms S Maine was concerned about the North West Province which she represented as she did not see anything about that province.

Mr Mabala responded that all the provinces existed and were important but some information did not get to the Department in time. Limpopo for example appeared without figures on the presentation because the information was slow to reach the Department.

The Chairperson thanked the Department for the presentation.

Water Research Commission Annual Report
Dr R Kfir presented the highlights of the 2003/04 Annual Report and stated that the Water Research Commission was a water-centred knowledge hub. The Commission engaged in leading and directing the creation of new and appropriate knowledge to enable the water sector and the people of South Africa to manage and sustain the nation's scarce water resources.

The Commission was concerned about the lack of new knowledge or scientists with new knowledge on water resources. The Commission had taken the responsibility to sponsor over 400 students who would be involved in water research to enable the flow of new knowledge and discoveries.

The Commission handed a copy of its Annual Report to a representative for the Office of the Minister. Minister Sonjica's representative said that the Minister was very pleased with the good work that the Commission was doing but, it needed to do more to transform the research into actual programmes that would help the thousand of South Africans who still needed clean water.

The meeting was adjourned.