Report of the Portfolio
Committee on Human Settlements on the Rural Household Infrastructure Programme,
dated 1 July 2011
The Portfolio Committee on Human Settlements, having considered the
Rural Household Infrastructure Programme (RHIP), reports as follows:
Section
1
1. Introduction
The
National Sanitation Programme Unit (NSPU) was established in 2002 and
administered by the former Department of Water Affairs and Forestry (DWAF). The strategic objectives of the programme
were to ensure the provision of universal access to sustainable sanitation
services, the promotion of effective sanitation practices, health and hygiene
and the improvement of livelihoods. Since
2007, government had identified rural development as one of the country’s major
priorities. In May 2009, the President announced that the responsibility for
the provision of sanitation would be transferred from DWAF to the Department of
Human Settlements (DHS). In response to the prioritisation of rural
development, the National Treasury established the Rural Households
Infrastructure Grant (RHIG) over the 2010 Medium Term Expenditure Framework (MTEF)
period.
This
grant is gazetted as Schedule 7 of the Division of Revenue Act (DORA),
administered by the DHS for the provision of on-site sanitation and water
facilities to rural communities. A total of R1.2 billion has been allocated
over the 2010 MTEF i.e. R100 million for 2010/2011, R350 million 2011/2012 and
R750 million for 2012/2013[1].
In accordance with this, the DHS has identified 57 municipalities in 8
provinces of the country to implement sanitation services.
The
focus areas included the following:
2. Progress overview
The
DHS has made a series of presentations on RHIP progress to the Committee. The Committee raised concerns on the delays with
the implementation of the programme as it was already behind schedule.
The
first report dated 11 August 2010 indicated that:
1. The
delays concerning the implementation of the programme were as a result of a
challenge, namely that the DHS could not re-appoint implementing agents which
were used by DWAF as this would have resulted in an audit query.
2. The
placement of the advertisement for the appointment of implementing agents that
would be working on various projects also delayed programme implementation.
The
second report dated 16 February 2011 indicated that:
The
third report dated 14 April 2011 indicated that delays were due to:
Response to concerns raised by the
Committee
The Director-General informed the Committee that the delays in the
implementation of the programme were due to his refusal to agree on the
practices which were used by the Department of Water Affairs, which had Umngeni
Water, the Independent Development Trust (IDT)
and Mvula Trust as the implementing agents. The regulations used by Water
Affairs were not transferred to Human Settlements. He further indicated that
the challenge is that the DHS could not be used as a benchmark because it was
implementing a new programme. The department was going to ask for a roll-over
of unspent funds and would provide motivation for this to National
Treasury. In terms of project
management, the DHS will have to be stricter to avoid compromising quality on
the ground. The service
providers were aware of the
conditions of the tender, in particular the stipulation that they have to use
local labourers. He reported that,
unfortunately, local labour was not being used in all provinces. After numerous meetings with the IDT
concerning this matter, it was decided by the DHS that a review of the IDT had
to be done to find out whether they were suitable for the scope of work.
The Director-General agreed that an advance payment of R14
million to the IDT was made because
it is a parastatal of government. He further
stated that he refused to provide advanced payments to the IDT as it is
prohibited by the Public Finance Management Act (PFMA). However, treasury
regulations allow such payment to parastatals as they are non-profit
organisations and do not have savings or profits. National Treasury, in writing,
instructed him to make an advance payment to the IDT as the regulations allow
the accounting officer to verify whether the money was used for the intended
purpose. The advance payment was agreed to and signed for in an addendum to the
agreement. Clear directives were
included in the service level agreement and the issue of capacity was also
raised in the procurement process. However, the Director-General informed the
Committee that it was unfortunate that he was not part of the bidding committee
to decide in awarding the tender as the Act did not allow the accounting
officer to partake in such processes.
Service Providers’ Total
Expenditure for 2010/11 Financial Year
The
total expenditure for the whole programme in the 2010/11 financial year was R19
million (IDT) and R27 million (Mvula Trust), which amounts to R46 million of
the budgeted R100 million.
The
fourth report dated 1 June 2010 indicated that:
The
DHS confirmed that the planned delivery for 2010/11 was 11 920 units with
actual delivery at the end of March 2011 being 5 504 units (delivery for
2010/11 was thus only 46%). The service
providers were appointed in October for 25 municipalities, 15 to IDT and 10 to Mvula
Trust. The total allocation to IDT was R46 million and to Mvula Trust was R36 million.
The remaining amount of R12 million was allocated for management costs. As at the end of March 2011, the IDT spent
R19,6 million of their allocated R46 million budget. Mvula Trust spent R27.5 million of their allocated
R36 million budget. The DHS further indicated that it had applied for a roll-over of R34.9 million to complete phase one
projects (R26.4 million for IDT and R8.5 million for Mvula Trust).
The expenditure for the IDT was as follows:
•
Community Development R
96,491
•
Contractors R 107,874
•
Construction of
Toilets R 902,302
•
Households
registration R 69,679
•
Management fees R 1,499,664
•
Material R 12,123,209
•
Pit excavation R 549,602
•
Pit lining/fixing & top
structure R 1,444,228
•
Planning R 215,766
•
Quality inspection R 79,245
•
Slab cast R 63,504
•
Social facilitation R
102,875
•
Subtotal exc. VAT R
17,259,443
•
Vat @14% R 2,416,322
•
TOTAL R
19,672,766
The expenditure of Mvula Trust was
as follows:
•
Baseline study R 120,000
•
Completed structures R 10,641,780
•
Construction of VIPs R 1,608,678
•
Household register
compilation R 128,550
•
Project management
fees R 716,393
•
Implementation R 681,256
•
Management Fees R 278,508
•
Material on site R 11,215,986
•
Planning R 233,494
•
Pit lining R 1,350,431
•
Project introductions R 102,115
•
Reports to community R 233,896
•
Selections of builders R 64,674
•
ISD Training R 160,650
•
TOTAL R 27,576,411
Overall
comments and concerns of the Committee
The
decision to transfer responsibility of sanitation from DWAF to Human
Settlements was welcomed; however the Committee was disappointed that the
progress on sanitation was so slow and the following comments and points of
concern have been raised by the Committee:
1.
Delays in the development or
integration of policies and systems to manage RHIP resulted in the programme
not being implemented more than a year after the announcement by the President
in 2009.
2.
Clarity was sought on why, if
according to DORA the DHS is the implementing agent, the DHS appointed service
providers who later had to appoint subcontractors to do its work.
3.
The capacity of the DHS to deliver
on the service level agreement signed with the municipalities is put in
question.
4.
Changes made to presentations
after such documents have already been circulated and analysed by Committee (on
several occasions) hampers the participation of members and effective oversight
by the Committee. An example is during the meeting of the 1st June
2011 where a presentation on the expenditure report of the service providers
was completely changed. Specifically the information relating to the IDT’s
expenditure presented was different from what Members had been given prior to
the meeting.
5.
Contradicting statements provided
on questions raised by Committee members from one meeting to another (e.g.
during the meeting of 16 February, the IDT was reported to have been allocated
R52 million for 2010/11. In the meeting
of 1 June 2011, the IDT was reported that only R46 million was allocated for
2010/11) is of concern to the Committee and the DHS did not account for the
reduced amount.
6.
The failure of service providers to
deliver in some areas due to the inaccessibility dismayed the committee, i.e.
does it mean those communities will never receive any form of sewerage
infrastructure. Alternative must be explored.
7.
The Committee is alarmed by the failure
of the IDT to deliver despite receiving payment in advance.
8.
The failure to produce
correspondence from National Treasury instructing the Director-General of the DHS
to make an advance payment to the IDT contravenes the National Assembly Rules.
9.
The Committee is concerned about R80
paid for digging of pits as the only economic spinoff for the rural people as
this would constitute a poor attempt at alleviating poverty.
10.
Lack of clarity as to what the DHS
is doing about cases where there are disputes between municipalities and the service
provider or about the complaints raised by some communities on the exploitation
by the service providers (e.g. non-payment after digging of pits) as well as
the non-payment of some contractors as reported by the DHS. Furthermore, the Committee questions how the
IDT will reimburse pensioners at Inkandla village who paid for the digging of
their pits as well as why DHS allowed this to occur?
11.
The appointment of a service
provider that does not have sufficient experience in implementing sanitation
projects indicated that the procurement systems of the DHS are flawed. The DHS indicated that it ultimately
considered the proposal with the lowest tender price irrespective of expertise
and experience – yet it offered the full amount allocated in its MTEF budget
line, irrespective of the tender amount.
12.
Members were concerned over the
potential of fraud and corruption in the administration of procurement systems
as the Director-General has indicated that a new tender process was being
developed to address the above concerns.
13.
The DHS’ failure to justify why
the highest biding service provider was given more projects as compared to the
lowest bidder (e.g. the IDT requested R7 500 to construct a toilet whereas
Mvula Trust requested around R6 000 - R7 500 depending on the typology of the
area), adds to the Members’ concern about the procurement system of the DHS.
14.
The programme was not introduced
to the provinces for proper oversight and adherence to intergovernmental
relations and co-operative governance.
15.
Interventions that were reported on
in February were still unresolved as indicated in the report presented on 1
June 2011.
16.
The 12% set aside for project
management from the total budget of R100 million is not clearly accounted for
in the whole expenditure report.
17.
The reports did not clarify whose
responsibility it is to monitor the quality assurance where there is poor
workmanship or technical violations e.g. Aganang, Blouberg and Hlabisa where pit
slabs were fitted incorrectly, or at whose cost the correction of such errors
will be done.
18.
In evaluating value for money, the
Committee is of the opinion that most of the money spent has not been
translated to the final output, and will not contribute to sustainable
improvements to the lives of the affected communities.
19.
There is a double billing on the
pit-lining in the
20.
There is no clarity on who is
responsible for the planning and social facilitation services.
21.
The varying costs of material, pit
excavation, and pit-lining, even in municipalities that fall under the same
district, were worrisome.
22.
The construction of VIP toilets when there is
already a service provider appointed and the material has been purchased for
the excavation and construction of toilets structures has also raised a
concern.
23.
The billing of household registration
whereas details of beneficiaries are provided by the municipalities.
24.
The reports about the inspection
and repairs do not indicate whether any rectification has been carried out and
who was responsible for the rectification costs.
25.
It was further indicated that Ndwedwe
municipality was going to use co-operatives but there was no clarity on how the
process has to be managed.
Conclusion
Due
to a number of challenges cited by the DHS on the performance of the IDT (as
opposed to that of Mvula Trust) as well as the number of complaints from
communities the Committee decided to request the DHS to provide the Committee with
the following:
1. Letter
from the National Treasury to the Director-General instructing him to make an
advance payment to the IDT.
2. Memorandum
of Understanding (MOU) signed between the DHS and the IDT
3. Addendum
signed by the Director-General in respect of the advance payment.
4. Detailed
expenditure report on the R19 million spent by the IDT during 2010/11 financial
year.
After
a thorough analysis of the reports, the Committee referred the documents for
further analysis to the Parliamentary Constitutional and Legal Services Office
and the Research Unit to advise on how to manage this situation. The purpose of this exercise was to ensure
that this situation is managed in a constructive manner that will assist both
Parliament and the Executive in executing their mandates in an informed manner.
However, the Committee discovered that there was no correspondence directed to
the Director-General from the National Treasury relating to an advance payment.
The
agreement and tender documents elicited further questions as they seemed to be
contradictory.
Noting that:
to a certain extent, there are discrepancies observed in the implementation of
the programme such as:
1. Memorandum
of Understanding (MOU) implementation and the Addendum violations.
2. Inaccuracy
of information in the expenditure reports.
3. In
terms of DORA, the DHS has to consider a competent service provider (community-based
organisations (CBOs), non-profit organisations (NGOs) or public entity for the
purpose of providing training to local people, etc. The action taken by the DHS to enter into a
contract with the IDT after confirmation that it had no experience in the implementing
of a sanitation programme and then to award the greater portion of the work to
the IDT is questionable.
4. The
IDT violated its commitment in the MOU on a number of aspects, but specifically
in relation to developing business plans with provinces.
5. Under
expenditure is possibly an indication of capacity constraints resulting in poor
service delivery.
6. The
claim by the service providers on the inaccessibility of communities is not
acceptable as this undermines the constitutional right of citizens to have
access to basic services.
Further noting that:
1. The
roll-over for the service providers has not yet been approved by the National
Treasury for the incomplete projects.
2. The
service providers, in particular the IDT, are battling to implement the first
phase of the programme. It is
questionable whether it will be able to implement the second phase where it is
expected to provide water facilities in addition to the first phase’s
sanitation facilities.
3. The
delay for the DHS to develop a framework for procurement processes and
management of sanitation programme adversely affected the delivery of
sanitation.
4. The
Millennium Development Goals (MDGs) target of eradicating poverty and providing
proper sanitation may not be realised.
Therefore, the Committee recommends
that:
1. The
Minister be requested to commission an audit by the Auditor-General of the
expenditure in this programme for 2010/11 financial year, in order to evaluate
the value for money and if the money has translated in sustainable outputs.
2. The
DHS should present a broader perspective of the total backlog on provision of
sanitation as well as what has actually has been delivered.
3. The
DHS should present a framework and plan to manage the R1.2 billion budget
allocation to the programme.
4. The
DHS should also indicate the total number of jobs that would be created in the
implementation of the programme.
5. Co-operatives
should also be seriously considered in the implementation of the sanitation
programme in order to advance the national objective of job creation and
sustainable (self reliance) communities.
Women, youth and persons with disabilities should be given an opportunity
to actively participate in the programme.
6. The
DHS should put the IDT on terms to complete its backlog for the 2010/11
financial year (Phase 1) and seek legal advice on how to terminate the
remainder of their contract based on non-performance and inability to perform. The
DHS must urgently report on its progress in correcting its procurement system.
7. In
future the DHS must ensure that the programme is introduced appropriately to
provinces and in developing business plans service providers must consult with
the relevant provinces for compliance with the MOU and proper oversight.
8. The
DHS should develop a risk and recovery plan during the project management phase to mitigate the challenges that could arise in
future. The Committee should invite and engage with benefiting municipalities
in an attempt to oversee if the programme is managed effectively and
efficiently and further ascertain the challenges encountered.
9. “Happy letters” should be signed by the
benefiting municipality and the beneficiaries to indicate their approval of the
end product prior to payment.
10. The
MDG relating to eradicating poverty and providing proper sanitation has been compromised.
The DHS needs to catch up with the required rate of sanitation provision
because their progress is unacceptably slow.
11. The
Committee should write a letter to the Director-General and advise him that the
failure to produce correspondence from National Treasury instructing him to
make an advance payment to the IDT constitutes a misrepresentation to
Parliament and, therefore, is in contravention of National Assembly Rule 138(a).
Section
2
Report
of the Portfolio Committee on Human Settlements: (RHIP Performance)
The Portfolio Committee on
Human Settlements invited the following:
·
National Treasury to brief the Committee on
the Legal Framework Regulating advance payments to Service Providers (SP) and
its observations on the Rural Household Infrastructure Programme (RHIP)
expenditure 2010/11 financial year.
·
The
Minister of Human Settlements to discuss the departmental performance regarding
RHIP during 2010/11 financial year.
1. Presentation by National Treasury
Background:
Following the
enquiry that the Committee had regarding an advance payment made by the
National Department of Human Settlements to the Independent Development Trust
(IDT), the Committee requested the National Treasury to do a presentation on
its stance on advance payments. The National Treasury, represented by Mr F
Nomvalo, indicated the importance of understanding the context in which the
advance payment arrangement is raised.
He stated that the Constitution of the
The Public
Finance Management (PFMA) Act of 1999 was then promulgated with a key objective
of enabling public sector managers to manage, while at the same time holding
them accountable for their management decisions. The PFMA in section 38(1)(a)
prescribes the responsibilities of the accounting officers as follows:
·
To ensure that the department has and
maintains effective, efficient and transparent financial management systems and
risk management and internal control.
The essence is that there must be control in the department the
accounting office is serving under.
·
Section 38(1)(b) states that the accounting
officer is responsible for the effective, efficient and economical and
transparent use of the resources of the department. There has to be transparency, economical use
of resources and probity in the manner in which the resources of the department
are utilised.
He further
referred to paragraph (c ) subparagraph (3), that the accounting officer must
take effective and appropriate steps to manage the working capital of the
department economically and efficient. Managing working capital, amongst others,
means collecting all money due to the department but the other side of managing
the working capital is to ensure that there is sufficient cash available to meet
the obligations so that the department should have the sufficient cash to make
those payments. The department cannot
delay payments beyond a period of 30 days in terms of the PFMA.
He further
stated that the accounting officer must comply and ensure compliance within the
department with the provisions of the PFMA.
It is important that everybody in the department follows the law. He indicated that the accounting officer should
ensure that the executive authority complies with the law, because the accounting
officer has the responsibility over the resources of the department. The executive authority under rare
circumstances may issue an instruction that is inappropriate and the accounting
officer must ensure that there is compliance with the law hence, the provision
in sections 63, 64 and 65 of the PFMA that deals with the responsibilities of
the executive authority.
Section 7(1) of
the PFMA on page 17 and 18 says the treasury must prescribe a framework for
cash management which is covered in Chapter 15 of the treasury
regulations. It deals amongst other with
the issue of prepayments. Paragraph
15(10)(1)(2)(c) prescribes that for the purpose of the regulation sound cash management
included avoiding prepayments for goods and services unless required by the
contractual arrangement with the service provider. No payments can be made without having
received what the department is paying for (services rendered). This is not allowed. However, under certain
circumstances the department can do that. If the contract of the supplier
obligates the accounting officer to do so when entering into that contract, the
accounting officer is required to exercise caution when agreeing to make an
advance payment. It is expected of the
accounting officer to assess the potential risks involved before agreeing to do
so, in relation to a specific service provider or agency that the accounting
office is suppose to be paying in advance.
It is the
accounting officer’s prerogative but also the accounting officer’s responsibility
to make sure that s/he enters into an agreement that obligates him or her to
pay in advance only after s/he has satisfied himself or herself that the
service provider will not find it impossible for him or her to meet his or her obligations. He pointed out that on page 45 of the PFMA in
section 38(1)(c)(ii) that the accounting officer for the department must take
effective and appropriate steps to prevent unauthorised, irregular and
fruitless and wasteful expenditure and losses resulting from criminal conduct.
Where an advance payment is made and there is no reciprocal service delivery,
the state suffers a loss due to fruitless and wasteful expenditure. Should this
event occur, the accounting officer must clearly show that a proper risk
assessment was done before the advance payment was agreed to, failing which the
accounting officer would not have discharged his or her duties under the Public
Finance Management Act, 1999 (Act 1 of 1999) and the National Treasury
Regulations.
In totality,
section 38(1)(b) refers to effective, efficient, economic and transparent use
of the resources of the department means that the accounting officer must be
absolutely certain that the entity will deliver according to the obligations.
1.1
Deliberations by the Committee
The Committee raised
concerns and questions for clarity as follows:
1.1
Does the National Treasury believe that the
accounting officers actually properly understand the conditions set out and the
interpretation of the PFMA? The Committee advised that a presentation of this
nature should be made to all accounting officers.
1.2
At what stage will sanctions be applied if
the service provider failed to render the services according to the agreed
obligations? In so many cases contractors do not complete the job but they have
been paid and the sanctions are never applied.
1.3
What happens to the accounting officers who
have not taken proper precautions and put the state at a loss?
1.4
In an event of small, medium and micro
enterprises who do not have provisions to perform without advance payments,
what do departments do?
1.2
Responses from the National Treasury
1.2.1 Chapter 10 of the
PFMA rules it a criminal offence if the accounting officer negligently does not
know his/her responsibilities. Therefore, in an event where the accounting
officer is not familiar with the legislation, it is in his/her interest to
acquire assistance. Some do understand the legislation very well.
1.2.2 Parliament passes
laws, therefore, members have to be vigilant with legislation and make sure
that legislation is taken seriously. Citizens rely on Parliament to represent
their interests. In most cases disciplinary actions tend to affect officials
who are construed to be vulnerable (and it is biased in favour of the senior
managers). Sanctions are there but there is a lack of willingness to take them
up.
1.2.3 If the service
provider does not fulfil the obligations, the accounting officer bears the
consequences. Unless remedial actions are put in place, he/she should be
charged appropriately. The service level agreement should have provisions to
deal with challenges that might arise.
1.2.4 Government’s
priorities are about growing the economy and creating jobs. Government has to
act in a manner that enables SMMEs to grow, but it does not mean that one
should act in an irresponsible manner. There should be an arrangement that
allows the service provider who has completed his duties to be paid
immediately. Government officials should be sensitive to government’s policies
and devise creative means for laws to be implementable.
1.2.5 The Rural Household
Infrastructure Programme (RHIP) is a schedule seven grant. The department went
into an open tender which resulted in IDT and Mvula Trust being appointed as
service providers.
1.2.6 RHIP’s performance by February 2011 would
amount to approximately 11%. Large payments would then be made in March 2011
bringing RHIP’s performance up to 63% of the approved amount at the end of the
financial year. This creates an artificial picture of RHIP’s actual
performance.
1.2.7 National Treasury confirmed that the
Committee is correct in asking probing questions about the advance payment made
to IDT, and the subsequent lack of service delivery. It is for the accounting
officer to explain whether this payment was made subject to sound cash
management principles as is required by law.
1.2.8 It has been reported that IDT received R22.6
billion for various projects from eighteen Departments across the country.
Twenty five per cent was received in March 2011 and no clear conditions under
which the funds were transferred exist. There is growing trend of transferring
funds towards the end of the financial year. The National Treasury refers to
March as a dumping month, and strangely IDT tends to be the recipient of these
funds. This tendency conceals the true reflection of what is happening and this
gives a picture that the money has been spent by the Department and when one
get on to the ground there is no visible delivery.
2.
Deliberations by the Portfolio Committee
The Committee was of the
view that the advance should be avoided at all costs as the Department has
entities that provide bridging finance for service provision relating to
construction. The service provider such as the IDT obviously has a lot on its
plate and this makes it less easy for it to perform its duties satisfactorily.
This is a risk on its own. For the programme to suddenly record high
expenditure of 63% when it has initially indicated a low expenditure of 10%,
brings questions that could warrant proper audits to be instituted.
3.
Briefing to the Minister of Human Settlements by Portfolio Committee
The Committee briefed the
Minister on the concerns about the implementation, management and expenditure
patterns on RHIP. The Committee felt it was important that the Minister be
briefed about observations that were made during several interactions with the
Department and the recommendations thereof. The Committee indicated that
sanitation is one of the important Millennium Development Goals (MDGs) and the
pace in service provision has been observed as being very slow. The capacity of agencies reporting to the
Department is sometimes questionable as some of them do not operate according
to the prescripts. A decision to
transfer responsibility of sanitation from DWAF to Human Settlements was
welcomed; however the Committee was disappointed that the progress on
sanitation was so slow and the comments and points of concern have been raised
by the Committee as per the observations made on the report dated 10 June 2011.
The Minister welcomed and
appreciated the invitation by the Committee.
He stated that first and foremost he is the Member of Parliament;
therefore his participation was also important to the affairs of the Committee. However, he further acknowledged that he
accounts to the Committee, as the Committee deals with matters of public
interest, and that was a priority for all of us as public representatives. Sanitation broadens the mandate of the
Department. The transfer of the function
(including personnel) has not been an easy one.
The reluctance of some officials to be transferred from DWAF also
contributed to delays in the implementation of the programme. It has been a major shift in responsibility,
transfer of legislation, rules and policies.
There was a need to accommodate all staff members; therefore the
department had to acquire more space as it also did not have enough. He indicated that the whole world is
experiencing challenges of adequate sanitation and quality sanitation.
The Minister informed the
Committee about his commitment in implementing the decision taken by the Cape
Town High Court on the unenclosed toilets throughout the country. He indicated that there is still a challenge
of the bucket system in the country. He
informed the Committee that the Moqhaka project was started in 2004 and that
the company that was appointed must take responsibility. After the Moqhaka incident, he requested the
Director-General to write to all provinces and enquire whether there were any
toilets that were unenclosed. The
response received indicated that there were none.
The appointment of service
providers seemed to be the challenge, especially the IDT. The Minister informed the Committee that the IDT
is an organ of government and expressed unwillingness to prefer a private
sector company above a state organ. The Minister agreed that where such an
organ of state did not perform – as is the case with the IDT - it could not be
expected of the public to suffer the consequences. In his opinion, the Minister reckoned that the
IDT should be jacked up. The Minister indicated that he has been careful to act
in this matter, as sanitation is a new portfolio and he wanted to ensure that
his facts on the matter were correct and gave the full picture. He further indicated that the IDT was an
entity reporting to another Minister.
Therefore, in terms of good governance, it would be improper for him to
take action against the IDT without informing the relevant Minister. He further informed the Committee about the
suspension of the Chief Director who had been accused of writing illegal
correspondence terminating the agreement of the IDT and allegedly inciting
municipalities to reject the IDT.
The Minister also took an
opportunity to brief the Committee on the Special Investigating Unit report on
the new developments about the National Home Builders Registration Council
(NHBRC). He informed the Committee about
the outrageous revelations and has made an obligation to address the issue. He
further indicated that he has already communicated the matter with the
Chairperson of the entity and he committed himself to brief the Committee on
the developments on 27 June 2011.
Deliberations
by the Committee
The Committee raised
concerns and questions for clarity as follows:
3.1
The Committee expressed its deepest concern
on the issue of an agency to be jacked up whilst people are suffering on the
ground and yet huge sums of money have been deployed to implement the
project. The Committee did not agree
with the Minister to continue preferring state organs as service providers when
they are not delivering. The Committee
further indicated that the entity tendered for work and entered into an
agreement knowing very well that it would not meet its obligation. The entity literally informed the department
that it has no capacity to implement the sanitation programme.
3.2
The Committee indicated that
underperformance by the service provider cannot be embraced at the expense of
the communities. The fact that some
communities and some contractors raised complaints about the service provider
failing to pay them was not acceptable.
3.3
The Committee informed the Minister about
the National Treasury report in relation to the performance and the expenditure
of RHIP. It was indicated that huge sums of money amounting to R22.6 billion
were transferred for various projects from eighteen departments during the 2010/11
financial year. It was indicated that 25% of the transferred amount was made in
March 2011 and no clear conditions under which the funds were transferred
existed. This report clearly
demonstrates that the IDT had bitten off more than it could chew. Therefore the Committee requested the
Minister to review the contract of the service provider to continue with the
outstanding work (phase 1 of the 2010/11 financial year). However, the service provider should not be
given phase 2 of the programme.
3.4
The Committee further raised concerns about
poor workmanship in other areas. The
Committee also had an opportunity to present the pictures of the poorly
constructed toilets by the service provider.
3.5
The Committee felt that the department
could use more than two service providers in the implementation of this
programme as there is such a large amount of money appropriated to the
programme, which could fast-track the project.
3.6
The
Committee raised a concern about alarming high projections showed at the
performance expenditure at the end of the financial year and therefore
requested the Minister to commission an audit of the RHIP expenditure
performance.
3.7
The Committee alleged that provinces were
giving incorrect information about the unenclosed toilets. However the Committee informed the Minister
that the department has been requested to conduct its own site visits and also
to read the Committee oversight reports.
3.8
The Committee welcomed the briefing by the
Minister on the NHBRC issue and was pleased to hear that it was going to be
handled; the Committee will wait for the report.
4. Minster’s
response
The Minister informed the
Committee that he will not hesitate to terminate the contract; however he has
to discuss the matter with the relevant Minister. He indicated that RHIP does
face the challenges that go hand in hand with the lack of sufficient bulk
infrastructure. The circumstance surrounding this programme is such that it
requires in depth project management. Furthermore, the social realities of
informal settlements include an increase in refugees settling in
5.
Committee recommendation to the RHIP latest report
Having
considered reports, information and facts presented to the Committee, including
the administration, management and performance of the Rural Household
Infrastructure Programme (RHIP), the Committee came up with the conclusion that
the recommendations proposed in the report dated 10 June 2011 be reaffirmed.
The Committee has established the following:-
1. Appropriate
measures were not taken to assess whether there would be any risk of an
inability to perform on the side of the IDT when the department decided to
award the tender to them. Similarly, no appropriate measures were taken prior
to agreeing to pay in advance to ensure that the service provider will meet its
obligations as agreed.
2. The
fact that the service provider undertook to deliver services to the value of
the budget allocation for a whole financial year, towards the end of that
financial year raises a lot of questions. The service provider together with
the department should have considered the time of commencing with the project
seriously, and have planned and taken precautionary measures to that effect.
3. The
Committee is of the opinion that the Memorandum of Understanding, and the
addendum thereto, as signed by the IDT and the department has flaws. Over and
above this however, set conditions have not been adhered to and the department
has not enforced compliance with these preset conditions.
4. The
fact that the service provider informed the department in its tender that it
does not have the capacity to manage sanitation raises questions too. Given
that the IDT serviced 18 departments during 2010/11, what different situation
does one expect?
5. Risks
on the areas of the programme that were executed also arose, namely substandard
work and disputes surrounding payments of people and contractors.
The
Committee has been assigned a duty to represent public interests and to oversee
if public funds are administered and managed appropriately by those tasked to
do so. The Committee must satisfy itself that projects are executed in a manner
that shows value for money. In addition, the Committee’s objective is on
acceleration of service delivery in order to meet the Millennium Development
Goals (MDGs), to create job opportunities for the vast majority of this country
and to change their lives to a better quality of living.
The
Committee wishes to express its confidence in the Minister that he will act
decisively and use his wisdom and therefore recommends the following:-
1. The
Minister to commission an audit through the office of the Auditor-General, of
the RHIP including contractual arrangements entered into by his department, as
well as the performance within the RHIP, especially during 2010/11. The
Minister is requested to refer the Auditor-General to the Chairperson of this Committee
for an interview prior to commencing the audit.
2. Considering
that phase 2 of the programme is advanced, the Committee is of the view that the
IDT will not be able to deliver as expected and therefore the Minister should
review the contract and execute the correct legal route so as to demand that the
IDT complete its unfinished business under phase 1 and then be released from
the agreement. This will allow the department to appoint a service provider, or
service providers, with the capacity to complete this programme urgently.
Report to be considered.
Annexure “A”
- Analysis by the Committee of the MOU signed between DHS and IDT.
Annexure “B(i) & B(ii)” -
Analysis and advice from Parliamentary Constitutional and Legal Services Office.