NEMLA Bill remitted: briefing; DEA audit action plan

Meeting report

NEMLA Bill: DEA briefing

Ms Linda Garlipp, Chief Director (CD): Law Reform and Appeals, Department of Environmental Affairs, (DEA) said the late Minister Edna Molewa had introduced the National Environmental Management Laws Amendment (NEMLA) Bill in Parliament after consulting Cabinet and after following a public consultation process.

Some of the clauses that were introduced by the Portfolio Committee had not gone through the Cabinet process, and affected Ministers or MECs were not consulted, and the late Minister had not been comfortable with this.

The Minister had written a letter to the Speaker before the second reading of the Bill, requesting that the Bill be referred to the Portfolio Committee.

The Minister had discussed the matter with the Chief Whip, who had resolved that the Bill must either be withdrawn, the issues resolved and reintroduced, or be referred to the Portfolio Committee.  The National Assembly had referred the Bill back to the Portfolio Committee.

The current section 48 of the Protected Areas Act was not amended in the Bill that was introduced.
Section 48 had been amended to prohibit exploration, prospecting, mining, production and activities related thereto, not only within protected areas, but also underneath protected areas.

When the Portfolio Committee adopted the new amendments, it had not considered amendments to the Memorandum of Objects of the Bill. It was preferable that the Memorandum of Objects of the B-Bill be aligned with the clauses in the Bill before the second reading of the Bill. 
The Memorandum of Objects may in future play an important role in the interpretation of the provisions of the subsequent Act.

It was suggested that the PC consider and adopt a memorandum of objects that was aligned with the text of the Bill

EPWP Turnaround Strategy and Expenditure Reclassification

Ms Matilda Skosana, CD: Information Management and Sector Coordination (IMSC), DEA, presented on the turnaround strategy and reclassification of the Expanded Public Works Programme (EPWP) expenditure for the 2017/18 and 2018/19 financial years.
 
There had been an Auditor General (AG) finding regarding the EPWP participants who were on the Personnel Administration System (PERSAL), and were doing business with the state. It included some who were not on the population register. Some ground work had been done in trying to mitigate the findings given by the AG.

The Department had looked at the dataset from the AG on the 2017/18 financial year participants. The DEA had delivered about 1 945 work opportunities. The participant who were on PERSAL numbered about 1 381.
The Department had engaged the Department of Public Service and Administration (DPSA) to try and understand the nature of their employment, for them to be on PERSAL.


Environmental Protection and Infrastructure Programme: Audit Intervention Plan
Mr Luvuyo Mlilo, CD: Environmental Protection and Infrastructure Programmes (EPIP), presented on the EPIP audit intervention plan.
The EPIP summary audit findings for 2017/2018 had been:

• Non-disclosures in the Departmental financials:
• Project bank balances at the end of the financial year were not recorded as pre-payments;
• Irregular expenditure at the project level was not disclosed in the DEA’s financials;
• Interest earned on projects was not disclosed as additional revenue to the DEA;
• Unrelated costs, such as marketing and others,  incurred at project level, were included in infrastructure costa in the Department’s books.
• Operational findings:
• No property, plant and equipment (PPE) or work in progress (WIP) was disclosed in the project financials;
• Supply chain management (SCM) processes were not followed at the project level;
• There was no evidence that service providers/suppliers were rotated on appointment.

Discussion

Dr Z Luyenge (ANC) failed to understand why the Department had to appoint auditors. He asked if there was no internal audit in the Department.

There was lack of clarity as to whether the EPWP was a programme or a project.  If it was a programme, there were projects within it. He asked if the Department had starting and ending times for such projects.
 
He was concerned about the way the EPWP was being managed. The people in rural areas were not being paid enough. He asked if what they were being paid, were wages. The labour laws were speaking very loudly about the poor black people in those areas, because the EPWP was meant for them. They regarded this as a form of job creation.

He said that the EPWP was not right. It undermined the intentions of the government, that of creating jobs. The programme was not part of job creation. It was not being managed appropriately, and was part of looting.

Mr S Makhubele (ANC) commented that the presentation had stated that the Department had requested Treasury not to submit the mid-term financials. He asked if the request was officially or formally granted.

The Chairperson clarified that it was verbal, and nothing was in writing yet.

Mr Makhubele referred to the green fund managed by the DEA, and said the indication of the CFO was that, at times, the money got loaned to people. The understanding was that the money was for projects and not for loaning to other people in the process. He asked if the Department allowed for the money to loaned to individuals for companies that may be running projects in order to make money.

In terms of consequence management, the indication was that there was a disciplinary process that would unfold later, or some penalty would be imposed if any official did wrong. The Committee would be interested to learn what had happened. Initially, this had been said to have very difficult requirements to comply with, but all of a sudden there was a lot of work being done around it for a turnaround.  The indication was also that some things were achieveable. He asked for an explanation of what the resistance had been all about, if everything could be done.

The Chairperson said the EPWP was one programme that had been feeding into the employment creation objective of government.  Now there was more emphasis on the appointment of contractors. The worry was that the element of having to maximize employment creation would be diluted. Even the salary structure was not the same as the normal employment. He asked the Department to provide some comfort that it was not going to compromise that, otherwise it was just going to be normal project management implementation of a project, and it was not going to be the EPWP as it was originally intended.

The Chairperson said that the issue of consequence management had not come out clearly. The statement was that in future there would be disciplinary action.  This implied that it was going to be a new thing and it had not been happening before. He asked for clarification on how it was going to be managed.

DEA’s Response

Ms Esther Makau, Chief Fiancial Officer (CFO): DEA, responded that the loans made by the Development Bank of Southern Africa (DBSA) were linked to the green economy project, and how the funds flowed to the DBSA. As a bank, they could make loans and collect them over time. A department could not make loans. The Public Finance Management Act (PFMA) did not allow the DEA to make loans, so it was not loans to people, but they were managed in the banking system. The DBSA had the Jobs Fund and other funds that came from other Departments.

She explained that the Department had an executive committee that sat in the DBSA to direct it on what projects that contribute to the green economy would look like. The DBSA had said they could manage the fund as a bank, but they were not familiar with the green economy initiative. The funds had started a while ago, and initially the Department had put a lot of money into DBSA. The initial funding had been about R520 million, and it had been running over the years. The Department could therefore rely on the DBSA as a bank that knew who to give money to, and knew how to conduct the feasibility studies.

What the AG was asking was for the Department to account for the revenue, expenditure, assets and liabilities.

Ms Skosana responded to the question on whether the EPWP was a project or a programme. According to its conceptualisation at the growth and development summit, it had been conceptualised as a nationwide government programme that was designed to provide a safety net in ensuring that unemployed and unskilled people got access to employment opportunities and skills transfer. Initially, in the first phase, it was saying that for every 22 days of work experience, there was a need to provide two days of training. It was also talking about providing exit opportunities. The lessons from that time was that, based on the structural unemployment challenges, it was very complex and difficult for a programme to be able to exit people because there were no employment opportunities in the formal economy. In phase two and phase three, the clause had been removed.  The EPWP was saying it would provide short to medium term employment opportunities for the poor and unskilled.

She said that it was important to acknowledge that, because the programme was implemented across all spheres of government, it was a big programme to manage. The DEA had taken an initiative to develop recruitment guidelines to ensure it was very clear and transparent on how participants were going to be recruited.  In this financial year, the Department of Public Works (DPW) had launched their recruitment guidelines on the EPWP, which guided how the EPWP would identify participants in a transparent manner within a specific geographic location where the programme was being implemented.

The Chairperson said that details of the design of the EPWP was not necessary now. The focus should be on whether the new approach was not going to dilute the government’s employment objectives.

Mr Mlilo responded that initially the Department used to use just project management companies without Construction Industry Development Board (CIDB) grading. However, based on the challenges that the Department would have had, and the AG as well, the Department had had no choice but to go for CIDB-graded companies. The Department had remained very objective, because the black economic empowerment (BEE) component was what counted most, even in those companies. Over and above that, the Department had contracts that would force those contractors to sub-contract to people who were part of the community.

He assured the Committee that the Department was not going to lose the objective of the programme, which was to create employment. Those contracts would have employment targets for the people who were from the local communities. However, with EPIP the Department was developing infrastructure, so it became too expensive. The Department therefore had to be innovative and have some programmes that would also massify employment. For instance, projects such as working for the coast, which involved the rehabilitation of the coastline, were appropriate, as the Department could use labour-intensive methodology so that many people could be employed.

Ms Veronica Steyn, CD: Budget and Finance, DEA, referred to the extension for the submission of the financials, and said the Department had written to Treasury, and they had verbally agreed to it. The Department was just waiting for Treasury’s correspondence in this regard. They had agreed verbally, but the DEA expected a written approval from them.

Consequence management was meant in two ways. One was to discipline employees if they did not adhere or comply to the policies. They faced disciplinary action, as did the implementing agents. There was a clause within the contracts that if they do not comply with what the Department requested from them on the project, there was some disciplinary action where the Department would not go on with the project or not provide them with funding.

The Chairperson said that the reason he had raised the issue was that the Department had approached it in a very casual way. It was one area where the Department needed to take a strong stance. Year in and year out, the AG reported on irregular expenditure and non-compliance with legislation. There were reports that people were not following the SCM processes, and nothing had been done about that.

He requested the Department to revise its plan so that the Committee understood that if there was irregular expenditure, the people responsible had to be reported to this Committee. This would allow it to establish who had been responsible for what, and what action had been taken.

Closing remarks

The Chairperson said that the main objective in requesting a presentation on the turnaround strategy and the proposed action was to make sure that the Department attended to all the issues that had been raised by the AG.

He asked the Department to change the situation. The DEA used to receive clean audits, but now it had fallen from clean to adverse, which was quite a significant movement. It was a big regression in terms of audit outcomes. Something had to be done about it. The Committee would like to receive follow-up reports on progress report, and where the Department picks up issues of irregular expenditure and non-compliance, it should provide details.  At some point, people needed to be held responsible and accountable.

The meeting was adjourned.