REPORT OF THE PORTFOLIO COMMITTEE ON PUBLIC WORKS ON THE WORKSHOP HELD WITH:
THE DEPARTMENT OF PUBLIC WORKS INFORMATION SHARING WITH MECS
SCOPA PUBLIC HEARINGS ON THE ANNUAL REPORT OF THE DEPARTMENT
THE BUDGET COMMITTEE PUBLIC HEARINGS WITH THE DEPARTMENT
DEPARTMENT (ANNUAL REPORT) AS ADOPTED ON 24 NOVEMBER 2004:
VENUE: M46
DATE: 24 NOVEMBER 2004
COMMITTEE MEMBERS PRESENT
African National Congress
Mr. TG Anthony
Mr. F Bhengu (Chairperson)
Mr. NJ Gogotya
Mr. LB Maduma
Mr. NE Magubane
Mr. HP Maluleka
Mr. SN Nxumalo
Ms CPM Ramotsamai
Ms PS Sekgobela
Mr. S Siboza
Democratic Alliance
Mr. SE Opperman
United Democratic Movement
Ms NM Mdaka
TABLE OF CONTENTS
Content: Page
Glossary 2
Presenters 2
Members in attendance 2
Introduction 3
Workshop 3
NDPW Challenges 3-4
Challenges of EPWP 4
Challenges in Property Development Policy 4-5
Challenges in HR and Legal Services 5
Challenges on maintains Plan and delivery
Improvement programme 5
Provincial briefings
Eastern Cape 5-7
Mpumalanga 7
KwaZulu-Natal 7-9
North West 9-10
Northern Cape (Written presentation) 10
Limpopo 11
Free State 12
Western Cape (Written presentation)
Gauteng (Written presentation
Audit and Financial Statements
Of the DPW 12-14
Conclusion 14
Recommendations 14-16
Reporting framework on
Recommendations 16
Annexure
Draft SCOPA Report 17-25
GLOSSARY Black Economic Empowerment (BEE)
Construction Education and Training (CETA0
Director-General (DG
Emerging Contractor Development Programme (ECDP)
Extended Public Works Programme (EPWP)
Head of Department (HOD)
Independent Development Trust (IDT)
Members of Executive Council (MECs)
National Department of Public Woks (NDPW)
Department of Public Works, Roads and Transport (DPWRT)
Public Financial Management Act (PFMA)
Property Policy Development (PPD)
Provincial Steering Committee (PSC)
Standing Committee on Public Accounts (SCOAP)
PRESENTERS Mr. J Maseko: The Director-General (DPW)
Mr. S Phillips: Chief Operation Officer (COO)
Ms L Bici: Deputy Director Property Holdings
Mr. Z Ntsaluba: Chief Financial Officer (CFO)
Mr. S Kwelita: MEC for Eastern Cape Public Works
Ms M Masego-Dlamini: MEC for Mpumalanga Public Works
Mr. MB Gwala: MEC for KwaZulu-Natal Public Works
Mr. BM Cele: MEC for KwaZulu-Natal Transport and Roads
Dr. K Mbanjwa: HOD Department of Transport KwaZulu-Natal
Mr. C Chabane: MEC for Limpopo Public Works
Mr. R Shingange HOD Department of Public Work Limpopo
Mr. H Yawa: MEC for North West Public Works
Dr. H Sebego HOD Department of Public Works North West
Mr. S Mohai: MEC for Free State Public Works
Mr. S Maganedisa: Deputy Director Department of public Works
MEMBERS OF PROVINCIAL LEGISLATURE IN ATTENDANCE
Ms P Majodina: Chairperson Standing Committee on Public Works Eastern Cape
Mr. R Tsikwe: Chairperson Standing Committee on Public Works Northern Cape
Mr. N Hantiso: Member of the Standing Committee on Public Works Free State
Mr. T Gwabeni Chairperson Standing Committee on Public Works North West
National Assembly
Report of the Portfolio Committee on Public Works on its strategic workshop held with the Department of Public Works, information sharing with the Provincial MECs of Public Works and SCOPA hearings with the Department of Public Works took place on 8 and 9 September, 14, 15, and 19 September and 20 October 2004 respectively dated 23 November 2004.
The Portfolio Committee on Public Works, having embarked on the above-mentioned processes on those dates, reports as follows:
1. INTRODUCTION
This report will summarise the main points of the workshop held between representatives of the National Department of Public Works (NDPW) and members of the Portfolio Committee on Public Works on 7-8 September 2004, as well as two briefings held between representatives from the Department of Public Works and Department of Transport in the Provincial Governments and members of the Portfolio Committee on Public Works. The first briefing was held on 14 September 2004 with representatives from Mpumalanga, KwaZulu-Natal and the Eastern Cape; while the second was held on 19 October with representatives from the Northern Cape, North West, Limpopo, KwaZulu-Natal and the Free State. To date, reports from the departments responsible for public works issues in the Western Cape and Gauteng, have not yet been received.
In addition to providing a summary of the main points of the workshop and the briefings, this report will provide an overview of the progress made thus far, while highlighting any obstacles in the path of delivery. Finally, the report will conclude with a set of recommendations.
Members at present: Mr. F Bhengu Chairperson, Mr. TG Anthony, Mr. NJ Gogotya, Mr. NE Magubane, Mr. HP Maluleka, Mr. SN Nxumalo, Ms CPM Ramotsamai, Ms PS Sekgobela, Mr. S Siboza, (all ANC). Mr. S Opperman (DA) and Ms NM Mdaka (UDM)
2. THE WORKSHOP1
The main aim of the workshop was to discuss the programmes informing the core business of the NDPW.
NDPW Challenges
Clarification of the NDPW’s mandate.
Transformation.
Service delivery improvement.
Contribution to the land reform process.
Black economic empowerment (BEE).
Corruption.
Asset management.
HIV and Aids programmes.
Backlogs.
Equity.
Challenges of the Expanded Public Works Programme (EPWP)
The following challenges confront the EPWP:
The EPWP is still not widely understood among stakeholders and communities.
Lack of co-ordination of projects among provinces.
There is difficulty in obtaining progress reports from the provinces and the social sector.
Directors-General (DGs) does not attend steering committee meetings - this impacts on the co-ordination of projects as well as on the completion of progress reports.
There are problems around the acceptance of CETA-accredited standards and the low numbers of training providers applying for accreditation.
Programme management support for participating provinces and municipalities urgently needs to be put in place.
Additional learnerships and training provider mentors need to be secured from CETA.
There is a lack of personnel, especially in the social sector departments allocated to the EPWP, as well as a lack of high-level drive to expand EPWP programmes in this sector.
The consolidation of existing programmes is progressing very slowly.
Progress in securing the support and co-operation of Eskom, Transnet and the National Road Agency is rather slow.
A number of specific actions to deal with these challenges are in the process of being taken. Timeframes were given for various actions and all target dates reached were noted – for example, all EPWP launches have been completed.
Challenges in Property Policy Development (PPD)
The following challenges confront the PPD:
Inadequacies relating to the Emerging Contractor Development Programme (ECDP).
Inadequacies relating to procurement guidelines and the involvement of previously disadvantaged communities in the construction industry.
Problems relating to leased properties.
Insufficient information on the state of the construction industry.
Inadequacies in the management of immovable assets and in the maintenance of the Asset Register.
A number of specific actions to deal with these challenges are in the process of being taken. These actions (including those relating to the Asset Register, the Incubator Programme, the issue of ‘fronting’ etc), together with their target dates, were noted.
Challenges in Human Resource Management and Legal Services :
The following challenges confront this programme:
Finding, hiring and retaining top talent.
The development of employees.
Transitioning of employees.
Business processes/work flow.
A number of ongoing strategies and actions are in place to address these challenges.
Challenges in the Maintenance Plan and the Service Delivery Improvement Programme
The following challenges confront this programme:
Poor quality of service and lack of a customer-driven culture.
Low morale among staff.
Lack of professionalism among staff.
Management of the maintenance programme.
The provision of support to provincial sphere of government.
The funding of a multi-year maintenance programme by National Treasury and sale of redundant properties to finance maintenance.
A number of ongoing strategies and actions are in place to address these challenges. Current and future actions, together with their target dates, were also noted.
PROVINCIAL BRIEFINGS
EASTERN CAPE 2
Socio-economic conditions:
High rural population.
Widespread unemployment and poverty.
Dominance of low-wage sectors (commercial agriculture and domestic work).
Dependence on subsistence agriculture and the informal sector.
Acute backlogs in access to potable water, sanitation and healthcare.
The Expanded Public Works Programme
The EPWP was launched in the province on 3 September 2004.
Publicity material and information packages on the EPWP are being produced in order to publicise the programme.
The EPWP is being driven by: the MEC for Roads and Public Works; the Provincial Executive Council; the Provincial Steering Committee; and the Cabinet Cluster on Economic and Infrastructure Development.
The Provincial Steering Committee (PSC):
The Committee is chaired by the Head of the Department of Roads and Public Works, and will report to both the Director-General and the MEC for Roads and Public Works on a monthly basis.
The function of the PSC is to ensure that all departments, municipalities and state-owned enterprises contribute towards the success of the EPWP.
The PSC reports to the national EPWP Unit on a quarterly basis.
The EPWP is divided into three sectors (viz. Infrastructure and Economic; Social; and Environment and Culture), each consisting of a number of provincial departments, with a specific department nominated to lead each sector:
The Infrastructure and Economic Sector is led by the Department of Roads and Public Works.
The Environment and Culture Sector is led by the Department of Economic Affairs.
The Department of Social Development leads the Social Sector.
Each of the three lead departments is responsible for setting targets and performance standards, as well as monitoring and evaluating the performance of each sector. Challenges
There are a number of challenges that exist, all of which are currently receiving attention:
Given the challenges involved in establishing the EPWP, the province recognises the need to establish an EPWP Unit within the Public Works Directorate. However, lack of human resources precludes this from taking place at present. Clearly, the need to create additional capacity is urgent.
There is a problem with lack of co-operation with line Departments.
Co-ordination with local spheres of government is weak.
There is lack of understanding of the programme by managers.
MPUMALANGA 3
The Expanded Public Works Programme
The EPWP was launched in the province on 30 August 2004.
Thus far, 1001 projects in various sectors have been identified, including gravelling rural roads and renovating or building schools.
It is anticipated that these projects will result in 10 000 jobs.
It is projected that an amount of R377, 602m will be spent on these projects.
A number of strategies have been identified and/or launched in order to prepare the way for the implementation of the EPWP. These include:
The re-launching of an existing project, Land care, according to EPWP principles.
The identification of 45 learnerships.
Under a road construction project, individuals in learnerships have been given two-year contracts via a relaxed tender procedure. The intention is that after the two-year period, these individuals will have been enabled to tender for projects on their own.
The provincial Cabinet has been requested to increase infrastructural projects by 5%.
Learner contractors will not need collateral to bid for projects up to R5 million.
A deal has been struck with ABSA Bank, whereby contractors will be given access to overdrafts, service and investment accounts.
Challenges
In view of problems experienced in the past, attention needs to be given to redirecting the Municipal Infrastructure Grant.
The issue of corruption, with specific regard to councillors who are also building contractors, is a major problem.
Another aspect of the problem of corruption is the possible use of public works funding for other purposes.
KWAZULU-NATAL 4
The Expanded Public Works Programme
The EPWP was launched in the province on 28 September 2004. The general Provincial Public Works Programmes are done by the Department of Public Works but the EPWP done by the Department of Transport
One third (viz. R320m) of the total amount of R960 million set aside for the next financial year, has been earmarked for EPWP projects Types of projects that are ongoing and to be included in the EPWP are:
Construction, e.g. roads and school building projects.
Maintenance, e.g. landscaping of public facilities, painting and renovation of public buildings.
The social targets set are and will be in accordance with those set by the Code of Good Practice for Special Public Works Programmes, viz. 60% women, 20% youth; and 2% disabled.
A number of targets with regard to jobs, projects and skills training have been set. 5
Budgeting arrangements to underpin these targets have been made.6
The Zibambele programme:
This is a labour-intensive road maintenance programme that allocates a length of road to one household.
The programme focuses on woman-headed households.
24 000 Zibambele contracts have been budgeted for this year.
The Vukuzakhe programme:
This is a staged advancement emerging contractor programme
Over the past five years, contractors on this programme have created more than 100 000 jobs.
Over the past year, two new road construction programmes, with a budget of R25 million, have been launched
Institutional arrangements:
The Department is a member of the PSC, which is responsible for the co-ordination of provincial EPWP projects.
A Business Unit responsible for the implementation of the EPWP programme is represented at Head Office, and also has sub-units in all four regions of the province. However, the Unit has not yet been fully capacitated.
Provincial Public Works Programme
Challenges Government properties and provincial assets accommodation are dilapidated.
There is a illegal occupation of state property and vandalisation of these properties
Occupants of properties are defaulting on payment of rents and rates.
NORTH WEST PROVINCE 7
The Expanded Public Works Programme
The EPWP was launched in the province on 2 April 2004 under the brand name, ‘Semelela ’.
A pilot project has been launched and aims to be completed by December 2005.
The following departments are participating in the project: Public Works; Roads and Transport; Agriculture, Water Affairs and Conservation; and the Central District Municipality.
The project comprises three labour intensive aspects: road maintenance and upgrading; agricultural projects and construction.
Employment:
11 small contractors will be appointed to work on the projects.
275 labourers will work on construction and maintenance.
30 families will earn a living from farming.
About 100 permanent jobs and 200 temporary jobs will be created.
Additional income of about R1, 92 m per year will be generated for the target communities.
Training will provided to contractors, farmers and labourers
Institutional arrangements:
The (provincial) Department of Public Works is the overall co-ordinator of the EPWP.
The EPWP Steering Committee comprises all provincial departments, all municipal managers and the Office of the Premier.
Technical Committee of the Steering Committee comprises the Department of Public Works, the Department of Local Government and Housing, the Office of the Premier, plus two municipal managers.
Challenges
Misunderstanding of the role of other departments.
Insufficient reporting.
Commitment to EPWP targets.
Commitment and co-operation of targeted beneficiaries.
Monitoring systems.
Co-ordination at local and provincial levels.
Financial constraints for emerging contractors.
NORTHERN CAPE PROVINCE8
The Expanded Public Works Programme
Implementation dates for Social Cluster learnerships have been set.
The lead department, Education, is in the process of allocating the remaining 73 interns to the departments.
An additional R1 million is required to reach the targeted number of job opportunities to be created for this year.
An additional R14 million is required to reach the targeted number of volunteers this year.
A ‘learnership on roads maintenance’ programme with 30 learners has been launched.
15 learnerships (for small contractors) have been approved.
Joint ventures on road maintenance with other departments have been entered into.
Special projects have thus far created hundreds of jobs in road construction projects. The main beneficiaries have been women and youth.
Future projects on the construction and upgrading of roads and road infrastructure are planned.
Technical teams have been re-aligned in accordance with the national sectors, viz:
Infrastructure Sector.
Social Sector.
Economic Sector.
Environmental Sector.
Challenges
The vastness of the province causes difficulties with regard to the supervision and monitoring of projects.
Budget constraints.
Lack of availability of training service providers.
Lack of sustainable opportunities after qualifying as contractors and learners.
LIMPOPO9
The Expanded Public Works Programme
A number of projects have been identified for implementation, including the following:
Labour-intensive Rural Roads programme (Gundo Lashu).
The ECDP.
The Electromech Contractor Development Programme.
The Mechanical Mobile Units Contractors.
Labour Intensive Maintenance.
The Gundo Lashu Programme:
Has been developed in consultation with 26 local municipalities in the province.
24 contractors and 6 engineering consultants have been trained in Lesotho.
It has been proposed that a training centre for contractor development be established in the province, as it will be impractical to continue sending trainees to Lesotho.
Institutional arrangements:
The (provincial) Department of Public Works is the overall co-ordinator of the EPWP.
The Infrastructure Sector is co-ordinated by Public Works.
The Environmental Sector is co-ordinated by the Department of Agriculture.
The Social Sector is co-ordinated by the Department of Health and Welfare.
The Economic Sector is co-ordinated by the Department of Finance, Economic Affairs and Development.
Challenges
Limited understanding of the conceptual framework of the EPWP among stakeholders.
Budget constraints.
Lack of skills within the country to assist in developing business plans.
Inherent conflicts with ongoing conventional projects.
Unfair labour practices.
Delays in finalising the business plans of the different spheres of Government and the timing of the financial years.
Shortage of properly accredited training providers for the various sectors.
Lack of clarity on training requirements.
FREE STATE 10
The Expanded Public Works Programme
The EPWP was launched in the province on 28 September 2004.
An amount of R52 million has been budgeted for the implementation of the EPWP.
It is estimated that a total of 17 340 jobs will be created in the current financial year.
30 learnerships are targeted for the Infrastructure Sector.
A number of projects have been launched thus far:
Road construction.
Construction of 1 000 low-cost houses – it is estimated that more than 500 people will be employed during the construction phase.
A hydroponics project.
A waste management project.
Institutional arrangements:
The province’s Department of Public Works, Roads and Transport (PWRT) is in the process of establishing an EPWP Unit to be led by a Chief Director.
The current Executive Council Cluster will co-ordinate the work of the EPWP until a comprehensive approach to institutional arrangements has been decided upon.
A Steering Committee, comprising provincial departments and district municipalities chaired by the head of the PWRT, has been established.
The Steering Committee is responsible for the overall co-ordination and management of the EPWP in the province.
Sector EPWP Management Committees are being established to co-ordinate projects at sector level.
Challenges
Co-ordination of the various structures, departments, municipalities and State-owned enterprises needs to be tightened up.
There is insufficient training.
Monitoring and evaluation – there should be more comprehensive reporting and consistency of representation.
Audit and financial Statement of the Department of Public Works: Financial Cluster Group Discussions
Introduction:
The core functions of the Department make effective, efficient and economic 11 financial management the key drivers or success factors for the Department to implement and achieve its objectives. Such core functions are:
the provision and management of state property and
the implementation of National Public Works Programme.
On the provision and management of state property core function, the implementation activities entail:
the provision, development and maintenance of accommodation
acquisition and disposal of state asset and
the management and maintenance of state property portfolio.
The implementation activities on the national public works programme entails:
creating assets through the community public works programme
influencing and stabilising the construction and property industries and
ensuring the infrastructure is provided in a way that creates jobs, empowers communities and develops human resources.
Although, there could be integration and sharing of experiences at different levels of implementation, the two programmes are different and the point of reference in the strategic framework and implementation is different. However, the question of assets, creation and influencing asserts and maintenance of assets and property for job creation, economic development and empowerment is central for both programmes.
The skills required and the financial management capacities and capabilities needed for the continuously successful implementation of the programmes are of central importance. The Department’s challenges and limitations with the implementation of the Public Finance Management Act No 1 of 1999 requirements in the past appear to make this a conditionality 12. The same as most public institutions, the Department use of public resources and conditions that such resources are properly spent and that there is value for money becomes important.
Audit and Financial Statement
The idea perhaps should not be reinvent the will on the work done by the work of the Standing Committee on Public Accounts (SCOPA). Based on the Departments financial statements, Auditor General Report, the Departments Audit Committee Report, the Standing Committee goes through evidence gathering process or hearing to identify and measure the Department level of progress in the implementation of the PFMA. The Department makes certain observations and recommendations. For now, it would be a logical process for the Portfolio Committee to ‘pick up’ issues at that level in order to monitor the integrated implementation of policies and their successes.
Fruitless expenditure
Note 12.4, p65 of the Departments financial statements discloses amount of R167, 000 in respect of fruitless expenditure. The amount has declined from R16, 547 million in the previous financial year and the Standing Committee has commended this.
The Department is also engaging with other Departments and relevant clients on conditions and consequences of vacating buildings before the rental contract expires. A system of user chargers is being introduced in about two years that will force user departments to budget for rental charges.
CONCLUSION
Based on the presentations at both national and provincial level, the Portfolio Committee has noted the numerous positive actions undertaken with regard to the core business of the NDPW, as well as the launch of the EPWP in the all the provinces and the projects initiated under this programme thus far. Notwithstanding the progress made up to this point, it is clear that a number of significant shortcomings, problems and obstacles remain at both national and provincial levels (see sections on Challenges).
Recommendations13
It is therefore recommended that:
National (see pp.2-3) - The NDPW urgently addresses the specific challenges relating both to its core business and the EPWP (p.2).
The NDPW should prepare guidelines that would enable provinces to report comprehensively upon the monitoring and evaluation of their projects.
The challenges faced by the PPD must be urgently addressed (p.2).
The challenges faced by Human Resource Management and Legal Services must be urgently addressed (p.3).
The challenges faced by the Maintenance Plan and the Service Delivery Improvement Programme must be urgently addressed (p.3).
The Department should monitor tenders and their implementation more closely, as it is important to ensure that tendering process is a fair one and that it is free of corruption.
A range of support services (including financial support) should be made available to emerging contractors, as a supportive environment is empowering and also prevents corruption.
The Department must review its current guidelines to prevent the practice of " fronting" Provincial (see pp.4-10) - The successful implementation of the EPWP at local and provincial level is critical to the ultimate achievement of job creation and poverty alleviation in South Africa. It is thus essential that the provinces urgently address the specific challenges relating to the implementation of the EPWP (pp.5-10).
The lack of co-operation with line departments should urgently be addressed.
There should be co-ordination with local spheres of government, for example, through the South African Local Government Association (SALGA) - the latter’s role should be strengthened.
The issue of ‘fronting’ should be addressed otherwise the objectives of Black Economic Empowerment will not be met. Many black companies fail because they do not have access to the necessary resources and are then vulnerable to offers of fronting.
A range of support services (including financial support) should be made available to emerging contractors. For example, the agreement reached with ABSA Bank in Mpumalanga, whereby contractors will be given access to range of services, should be published in all provinces. This type of support is closely linked to the promotion of BEE and the genuine empowerment of historically disadvantaged communities. In particular, access to finance and the ability to draw up a proper tenders are essential to eliminate the practice of " fronting’.
The issue of corruption should be urgently addressed – an example is that of the conflict of interest created by councillors responsible for decisions on public works projects and who also tender for building contracts.
The issue of insufficient numbers of training service providers should be addressed.
It is crucial and urgent for the Department to upgrade its debtor sub-system before the end of the current financial years in order to capture incoming receipts, as this was not done previously.
It has been established that no interest is charged on outstanding amounts, and monthly invoicing and submission of statements to debtors is not done, therefore it recommended that the Department must implement initiatives that include an "interest clause" in all lease agreements, late payments and a market related annual rental increase should be implemented.
Discrepancies on rates and services on different properties under the Department must urgently be streamlined and the billing system of the Department must be upgraded.
The valuation policy and systems used by the Department must be clearly defined in line with norms and standards as required by the law. Seeing that the Department has no valuers of its own, it is recommended that the Department must utilize tertiary institutions and interns who will be supervised by experts in order to minimize the costs and to address unemployment in terms of EPWP.
On issues of fruitless expenditure, governance and lack of independent checks in the Department, it is a matter of grave concern that policies and procedures are not followed. The Department therefore must urgently put in place mechanisms to ensure that the internal audit its work. This must be reported as per SCOPA recommendations and adhered to in terms provisions of the PFMA.
REPORTING FRAMEWORK
By the beginning of the next financial year, a progress report is required on how the challenges facing the NDPW are being met.
Future reports to Parliament should contain full details on how the NDPW’s challenges are being met, and whether the targets set by the Department are being reached and report to the Committee quarterly.
The Department should establish a task team inclusive of Departments of Local Government, Land Affairs, Housing, SALGA and any other relevant departments led by the Department of Public Works to investigate and assist with the completion of the Asset Register. This team should report on progress to the Portfolio Committee on a six-monthly basis and complete their work within two years.
The Department with continued interaction and involvement with the private sector should address the issue on procurement, BEE and job sustainability. The possibility of tax incentives could be considered to businesses, which successfully addressed this issue.
An audit of vacant buildings, a disposal policy including any other information on property and land must be provided to the Committee on quarterly basis.
In promoting interdepartmental cooperation, it is recommended that the Department must consult with the Department of Public Services regarding central bargaining chamber in order to resolve the issue of annual review tariffs for official housing, which has been outstanding, and report to the Committee before end of the current financial year.
The Department must as a matter of urgency address the question of lack of management skills and provide full disclosure of plans on skills development programme, strategy on recruitment and employee’s retention at all levels. The Department must provide the Committee with its organogram before the end of the current financial year.
The Department must provide report on progress made on the filling of the vacant posts of the DDGs: EPWP and Asset management in February 2005.