Expanded Public Works Programme Phase II revised incentive grant model

Meeting report

Revised incentive grant model under Expanded Public Works Programme
Mr Ignatius Ariyo, DPW Chief Director: Infrastructure Sector, stated that the Expanded Public Works Programme (EPWP) Phase I was successful in creating more than 1 million work opportunities over five years however the scale of unemployment and poverty experienced by South Africa required a much more large-scale response to the problem. EPWP Phase II was seen as an opportunity to address the social welfare gap on a larger scale. Key issues that needed to change to scale up in Phase II were:
▪ making the creation of paid work the primary objective of EPWP;
▪ locating clear political and administrative accountability for EPWP job creation targets across all spheres of government;
▪ providing fiscal incentives to accelerate the scaling up of EPWP (allow incentive to be performance/demand driven);
▪ maintaining mainstream EPWP criteria & outputs with the core mandates and programmes of the implementing public bodies;
▪ mobilising non-state capacity to deliver additional EPWP work opportunities;
▪ providing support to spheres, sectors and implementing bodies.

The DPW had set out to pilot a number of funding models:
First model was the wage subsidy incentive
This model was provided to existing non-government organisations who already created work for poor communities; had programmes that could be expanded in terms of size, reach and coverage; were able to secure funding for all other programme-related costs and involved the payment of a minimum daily wage rate for every day of work created. The model subsidy incentive paid all wages (monthly) as work was created and applied to the non-state sector (Non-Profit Organisation pilot & Community Work Programme).
Second model was the expansion incentive
This was provided to existing performing government programmes that had a performance track record and had met high performance criteria, that had the potential to immediately expand due to demand, had the capacity to manage expansion, and had capable implementers. The expansion incentive was dedicated to expansion costs and targeted attached incentive efficiencies in job creation.
Third model was the performance based incentive
This was provided to provincial and municipal public bodies who participate in EPWP. Allocation was based on how many jobs could be created with funds already being received by provincial depts./ municipalities through grants. It was also provided as an incentive to provincial and local government.

A lot of experience had been gained in implementing all EPWP incentives. In respect of the wage subsidy incentive, it had worked well for established capacitated Non Government Organisations (NGOs). The NGOs were able to fund all wages and use other funding for operations, materials, etc. There was a quick uptake where there had been unpaid volunteeers. The incentive also worked well where services were in demand by society and the wage subsidy went into the pockets of workers through their NGOs. The wage subsidy incentive had not worked in instances where small/new NGOs struggled to find other funding for non wage costs.The complications experienced in respect of the wage subsidy incentive was that reporting and payment procedures were difficult for NGOs with limited operational capacity to manage large numbers of workers and payments.

For the expansion incentive, performing programes were able to to become more effecient and more labour intensive, performing implementers were incentisived to expand and had been expanding quickly. The complications experienced were in relation to reporting procedures.

For the performance based incentive, more provincial and municipal public bodies participated in EPWP. There was general mobilisation to create jobs and performing public bodies performed better. However, the performance based incentive had not worked in small and rural municiplaities as they did not have sufficient grant funding to particpate and incentives were not built into contracts. The incentive did not reach contractors at the bottom end of the supply chain which meant that they did not have any reason to change delivery methods. The incentive earned was also not been ploughed back into job creation. The complications experienced in respect of the performance based incentive was that the performance bonus concept was not easily understood, provincial and municipal treasuries were not sure how to appropriate incentives and small municipalities were struggling with no base funding to perform.

There were a number of recommendations for an improved, simplified EPWP grant. This included taking special cognisance of small and rural municipalities and other public bodies with smaller Municipal Infrastructure Grant (MIG) / Infrastructure Grant to Provinces (IGP) allocations or limited funding, but which had the potential to contribute to job creation. There should be an attempt to directly incentivise/implement increased labour intensity. An easier flow of funds to kick start job creation should be allowed and there should be provision of more certainty in the allocation to ease appropriation difficulties. There should also be greater oversight over the incentive being spent to further increase job creation and the issue of public bodies not earning their allocations should be addressed. Also, there ought to be an enhanced packaged technical support to public bodies, particularly small and rural municipalities.

Mr Ariyo stated that the intention of the new EPWP Conditional Grant was to make available EPWP funding aimed at expanding job creation efforts within existing government programmes but targeting specific focus areas, where labour intensive delivery methods could be maximised. This essentially meant that there was a stream of additional funding aimed at expanding or funding unfunded labour intensive projects. EPWP Planning would be mainstreamed into both existing planning processes, asset repair and maintenance. Submitted projects would be reviewed and if verified as being labour intensive, would qualify to be EPWP projects. Further design support would be done if required. Specific focus (service) areas where labour intensive delivery methods had proven to be successful would be targeted. One specific starting point to identify key focus areas to align with EPWP funding would be in municipal Integrated Development Plans (IDPs). To be eligible for the EPWP Grant, the only criteria was that a public body should currently be participating in EPWP and reporting on performance. To be eligible, a public body should have reported to Public Works on past EPWP performance, that is, performance of the prior year or the current year’s performance to date.

The basis for determining the EPWP grant allocation was past performance in terms of the work created and reported; achieved labour intensity (how much benefit went to workers); what had already been done in EPWP (whether they were implementing projects in more than one sector); the potential to create work with the budgets they already had; need for work in an area (factor to indicate levels of unemployment and/or poverty); and need to identify and address the special needs of small poor rural municipalities.

There was a methodology for determining the EPWP grant allocation. Firstly, the model would start from the basis of past performance and estimates from the minimum cost of the jobs created by the public body in the past year. This minimum cost represented the possible grant allocation, that is, Cost of work created = Number of days of work created X minimum EPWP wage (R63.18 per person day of work). However, the public body would not necessarily receive the exact cost of work created in the past year – they could receive more or less depending on their potential to create work and the imperative to inject funding into poorer areas. Secondly, the model worked out how much of the possible grant allocation a public body could earn by applying an adjustment factor for potential, need and special considerations for poor areas.

There were a number of adjustment factors to be considered. These factors included the level of unemployment or poverty in an area; the potential number of jobs that could be created from existing budget allocations (only applied to those who have MIG/IGP/ Urban Settlements Development Grant etc) and 30% of these were expected to be EPWP specific; the rest would likely focus on bulk infrastructure; public bodies using a large portion of their project budgets for wages (high labour intensity); whether the municipality was implementing EPWP projects in more than one EPWP sector; whether the municipality was classified as part of the special dispensation created for poor and rural municipalities.

In relation to EPWP planning, given that there are existing processes for development and infrastructure planning at provincial and municipal levels, DPW would provide support public bodies to mainstream job creation and EPWP principles. DPW would also actively support planning and simplify the planning requirement of a normal schedule 5/6 grant. DPW would communicate to stakeholders that any plan for projects identified as a labour intensive projects or part of the EPWP focus areas, should contain certain information (required by EPWP). This would provide clarity on what is a labour intensive project, encourage public bodies to think about job creation in the planning phases and get public bodies using existing plans to include job creation implications. DPW would support the mainstreaming of EPWP by negotiating with national departments (Roads, Education, Health, Department of Cooperative Governance, Human Settlements, Agriculture) to include the required EPWP information fields in their normal grant plans. The EPWP team would extract EPWP project information from the relevant databases to compile draft project lists for public bodies. These project lists would be analysed by DPW to assess whether public bodies are able to meet their targets. This pre-completed project list would be sent to public bodies for further details where there were gaps; for inclusion of new projects and signature.

To guide funding, DPW had identified focus areas for the grant where labour intensive delivery methods worked best. These focus areas were road maintenance and the maintenance of buildings; low traffic volume roads and rural roads; basic services infrastructure, including water and sewer reticulation, sanitation, pipelines and dams (excluding bulk infrastructure); tourism and cultural industries; waste management; parks and beautification; sustainable land based livelihoods. DPW would provide Project Selection Criteria to assist or if necessary even pre-package projects for public bodies that aimed to better identify EPWP projects to be funded through the grant.

For the technical support programme, the National Department of Public Works would provide technical support in the following areas as required or agreed with public bodies:
▪ planning support to identify suitable EPWP projects and programmes;
develop plans to meet targets and ensure alignment within existing planning mechanisms such as the IDP and MIG submissions;
▪ project design support for design of projects and advising on contract documentation details and alignment of procurement processes to facilitate EPWP implementation;
▪ implementation support to review progress (including reviewing site visit reports and performance information, identifying and understanding blockages to implementation and developing innovative methodologies to resolve them and identify training needs and facilitate procuring of training);
▪ reporting support to develop effective management information systems and provide assistance in reporting on EPWP projects implemented.

The National Department Public Works would also develop and implement a structured technical support programme; focus technical support, with small rural municipalities being the priority; focus on replicating and supporting the implementation of labour intensive projects in specific areas and utilise mainstream reporting support or re-think the manner in which this support was currently being provided wherein it absorbed a significant amount of resources.

In respect of monitoring and reporting, reporting would continue to occur via EPWP's reporting system. This would be enhanced to distinctly report progress on implementing projects and creating work with existing budget allocations, and progress in utilising the incentive (whether this is used in supplementing, complementing or leveraging existing projects or implementing new ones) to create work towards its Grant full-time employment (FTE) Target. In addition, there would be validation of financial data, in particular expenditure and wage data, with existing reports.

EPWP would make efforts to simplify the reporting process by negotiating with other partners involved in implementation and expenditure monitoring to include EPWP information fields in existing reports. For example, it would be negotiating with Treasury to include in their In-Year Monitoring (IYM) a distinct reporting line item for expenditure on the grant; and simplifying the quarterly reporting on the grant with National Treasury to occur solely through the existing EPWP reporting system and not duplicating reporting; it would investigate the possibility of linking to existing systems or uploading certain data from existing systems to relieve the burden on public bodies of re-capturing this information.

Disbursement of the EPWP allocation would now take place in the manner that normal schedule 5/6 grants did. It was anticipated that 40% of the allocation would be disbursed at the beginning of the financial year upon the approval of the public body's EPWP business plan by Public Works. A further one to two payments would take place, provided the public body was implementing its EPWP projects and spending its initial 40% towards its job creation targets.

Discussion
Ms C Madlopha (ANC) asked what were the criteria for equitable share.

Ms A Dreyer (DA) stated that she did not see much emphasis on training. She asked this because most of the people that would be employed were unemployed youths who did not have many skills to offer in the open labour market. She asked what plans the DPW had in respect of training those youths who would be employed.

Mr P Mnguni (ANC) asked if there was sufficient capacity to ensure that the municipalities complied with what was required from them by the DPW.

Ms N Ngcengwane (ANC) referred to the presentation stating that over 1000 municipal officers had been trained. She asked when the training of these officials took place and the exact figure of those who had been trained.

Ms Ngcengwane referred to page 13 of the presentation and commented on the minimum wage of R63.18 per person. She asked if this money was paid across the board to everyone in the municipalities. She commented on the DPW technical support programme on page 14, asking if the DPW had executed this programme and if not, what was the laid-down plan to carry out its execution.

Ms N November (ANC) noted that 273 of the 278 municipalities were on board the EPWP. She asked what could be done to get the remaining five municipalities on board.

Ms P Ngwenya-Mabila (ANC) commented that it had been observed that there were no officials specially dedicated to deal with EPWP. She asked if those officials who had been trained would be the ones accountable in each and every municipality in respect of the EPWP. She added that the EPWP was a conditional grant which had conditions attached to it. What plans did the DPW have in place to ensure that every municipality adhered to the conditions attached to the EPWP.

Ms Ngwenya-Mabila commented that the DPW had earlier informed the Committee that data capturers had been assigned to all the municipalities. However, the Committee had observed during its oversight visits that there were no data capturers to be found in some municipalities. She asked what was been done about this.

The Chairperson asked if R63.18 per person was the maximum or minimum money to be paid.

Mr Ariyo replied that the training of the municipal officials took place during the 2011/12 financial year and particularly on 1 April 2011. This training was the second round of training. The first round of training had been undertaken during the EPWP Phase I. A total number of 1 212 officials had also been trained. There was a detailed report of the number of officials trained in each province and this would be made available to the Committee as soon as possible.

Mr Ariyo said there were thirty data capturers who were in the different provincial departments of Public Works in the regional offices. There were also sixty data capturers who were employed by the Independent Development Trust (IDT) who sat at the data centres of the DPW. However, there were officials in the technical support team who went to every municipality to get data which would then be handed over to the data capturers.

He said R63.18 per person was a minimum wage and there were presently engagements with different public bodies concerning what rates could be paid. The decision about what rate was to be paid was the responsibility of the municipality or provincial department. What had been set by the DPW was the minimum wage to be paid under any situation.

Mr Stanley Henderson, DPW Deputy Director General: EPWP, confirmed that the minimum wage was R63.18 per person. He stated that the upper limit was R150 per person. The reason for this upper limit was not to encourage poor wages but it was simply to ensure that there was no job displacement. The EPWP was meant to draw poor unemployed people from the streets.

Ms Fatyela Lindie, Acting DPW Director General, responded to the question on whether there was sufficient capacity to ensure that municipalities complied with what was required of them by DPW. This question was connected to how far the DPW was reaching throughout the country. The ability of the EPWP to spread its tentacles to all parts of the country was based on the funds which could be gotten from Treasury and how these funds could be maximised. The DPW would have to carefully consider what it could do to achieve more with very limited funds as there were competing interests in the country for the budget.

Mr N Magubane (ANC) asked what was the relationship between the DPW and the Department of Agriculture.

Ms Ngcengwane asked about the relationship amongst the regional offices, the provinces and the municipalities. This question was important because where issues had been raised by the Committee with the municipalities, then the provinces would be able to make follow-ups on those issues.

Ms Ngcengwane observed that there had been an outcry concerning the late payment of the small contractors in the rural areas, especially in the Eastern Cape. The latest report was that the contractors had not been paid since August 2011. She asked what the DPW was doing about this situation.

The Chairperson asked if the DPW was content with the performance of the Non Governmental Organisations (NGOs) in respect of the EPWP projects. She was not impressed with the way the NGOs had been utilising the money given to them in respect of the EPWP. She wondered if money was not been wasted in funding NGOs.

Mr Henderson responded to question about the connection between the DPW and the Department of Agriculture, saying there were a whole range of initiatives which were been explored by DPW in conjunction with that department. The details of these initiatives would be provided to the Committee before the next meeting,

Mr Ariyo spoke about the relationship between the regional offices and the provinces. There was an EPWP coordinating department in every province which was the Department of Public Works. This was apart from the province of Kwazulu Natal which had a Department of Transport. Each province had an EPWP Steering Committee which sat on a regular basis to monitor the activities in the province. These Steering Committees had provincial departments which usually invited some municipalities to engage them at district forums. There was also a programme manager for EPWP at the regional offices in each province who had the obligation of working in conjunction with the provincial coordinator to monitor EPWP activities in the province.

Mr Ariyo said in respect of the criteria for equitable share, the Department for Cooperative Governance (DCG) was better placed to elaborate on the criteria because it was the custodian of the equitable share.

The Chairperson thanked the DPW for the presentation and the meeting was adjourned.