Department of Public Works on its 2016 Strategic Plan, Annual Performance Plan & Budget

Meeting report

Department of Public Works 2016 Strategic Plan, Annual Performance Plan & Budget briefing
The Chairperson noted that the Committee was faced with some time constraints and asked the Department of Public Works to concentrate on presenting slides that set out the main thrust of the briefing.

Mr Imtiaz Fazel, Deputy Director General: Governance, Risk and Compliance, Department of Public Works presented the 2015-2020 Revised Strategic Plan and 2016/17 Annual Performance Plan for the Department (DPW). 

Mr Fazel briefly outlined the Department’s strategic overview, revealing that the Department’s vision from a strategic context, is to provide convenient access to dignified public services. Its mission statement included attaining a transformed built environment sector, by providing strategic leadership to the South African construction and property industries, and ensuring compliance to policy and legislation for the state owned and leased assets. Its programmes aimed to provide substantial job creation and poverty alleviation, through Expanded Public Works Programmes (EPWP).

The Department’s strategic goals included:
- Transforming the Construction and Property Sectors through the development of policy and legislature prescripts,
- Providing oversight of the public works sector,
- Providing an oversight role in the implementation of Public Employment Programmes (PEPs) through Expanded Public Works Programme (EPWP) standardised frameworks,
- Overseeing the efficient delivery of identified services to Prestige Clients, and
- Supporting service delivery in a smart, proactive and business-centric manner that is aligned to statutory requirements.

DPW operated under five programmes, each corresponding to a particular strategic goal. Part B of the presentation highlighted the annual targets, broken down further into quarterly targets.

He noted that Programme 1: Administration addressed, amongst others,Governance, Risk and Compliance. Strategic objectives include improving governance processes within the Department and Property Management Trading Entity (PMTE), and combating fraud and corruption both in the Department and the PMTE. The five-year targets set were outlined, including 100% compliance with management practices in line with the requirements and standards of the Management Performance Assessment Tool (MPAT), and an 85% reduction in fraud and corruption risk levels. Under Finance and Supply Chain Management the DPW hoped to achieve a completely clean audit in five years, with fully compliant internal controls, financial and supply chain management. Corporate Services was developing an annual integrated HR Plan for DPW and the PMTE, as well as management of litigation. Medium-term expenditure was estimated at R516.634 million in 2016/17 period, growing to  R582.679 million in the 2018/19 year.

Programme 2: Intergovernmental Coordination, was aimed at coordinating public works at the local government, provincial and international levels. This programme had a strategic goal of providing oversight of the public works sector, and a strategic objective of ensuring integrated planning and coordination of concurrent function. It aimed to introduce five interventions to improve the performance of the sector. The budget was R31.439 million for 2016/17, rising to R35.73 million by 2018/19.

Programme 3: Expanded Public Works Programme was the flagship programme of the DPW, that sought to create six million employment opportunities. There would be five annual progress reports on EPWP, and the DPW aimed to increase, to 300, the number of EPWP supported non-profit organisations that provided services to communities, coupled with 290 public bodies that implemented EPWP projects, with three projects being implemented. It would provide oversight on PEPs, through EPWP standardised frameworks, and would support non-profit organisations to implement these in the non-state sector. It would also support public bodies in their implementation in the infrastructure, social, environmental and cultural sectors. Implementation frameworks would be drawn for sector convergence. This programme had the second-largest, at R2.319 billion for 2016/17 and R2.628 billion by 2018/19.

Programme 4: Property and Construction Industry Policy and Research was to receive the greatest portion of the budget. Mr Fazel explained that this programme was strongly linked to the Construction Industry Development Board (CIBD) as well as the Council for the Built Environment (CBE). It aimed to  transform the construction and property sectors through development of policy and legislative prescripts. In the five year period it aimed to approve three legislative prescripts, and research and develop policies and legislative prescripts for the construction and property sector. Its estimated expenditure in the medium-term was R3.565 billion in 2016/17, rising to an estimated R4.307 billion in 2018/19.

Programme 5: Prestige Policy supported the delivery of prestige services to various clients and executives. The strategic goal was to oversee the efficient delivery of identified services to prestige clients, aiming amongst others to achieve an 80% improvement in the turnaround time for the resolution of maintenance breakdowns. Its expenditure was estimated at R96.092 million for the 20176/17 period, rising to R108.311 million in 2018/19 period.

Mr Fazel concluded by pointing out the Department’s links to long-term plans. These were listed as the Service Delivery Improvement Plan (SDIP), the Strategic Risk Plan, the four public entities to whom this Department transfers funds, and the Built Environment Professional Councils.

Property Management Trading Entity (PMTE)
Mr Paul Serote, Head of the Property Management Trading Entity, DPW, presented the 2015-2020 Revised Strategic Plan and 2016/17 Annual Performance Plan of the PMTE. In the interest of time, Mr Serote’s presentation focused mainly on the budgetary aspect.

Mr Serote mentioned that six programmes have been put in place to advance the attainment of the PMTE’s strategic goals. He further highlighted that a total of R10  722  049  000 is to be allocated for all six programmes. He noted that one of the most pertinent issues was the R250 million budget reduction in the amount transferred from the DPW to PMTE in 2016/17.

He outlined the various programmes, mentioning that the PMTE’s programme 1 is also an Administration programme with the same strategic goal of supporting service delivery in a manner aligned to statutory requirements. This programme’s five-year target is to have a clean audit outcome, to provide a compliant internal control and financial services, and to have a compliant Supply Chain Management (SCM) service. Expenditure was estimated to be R904.936  million in the 2016/17 period and is expected to fall to R844 million in the 2018/19 period, in line with the planned reductions.

Programme 2 addressed User Demand Management, which is the starting point for planning processes. The strategic goal is to consolidate user demands that enable planning and budgeting, and PMTE aimed to ensure that the User Assessment Plans (UAMPs) are produced in compliance with relevant prescripts, with full compliance over the next five years.  The second branch of programme 2 addresses Planning and Precinct Development, which looked to development of accommodation solutions for user departments in collaboration with the relevant spheres of government, in both urban and rural areas. It aimed to formulate 24 accommodation solutions for user departments within identified precincts. The third leg of programme 2 addressed Real Estate Investment Services, aiming to increase the value of the state’s immovable asset portfolio. This would be done by optimal investment solutions, and managing the performance of the immovable asset portfolio so as to ensure appropriate investment decisions. The five year targets included completing 724 investment solutions and obtained performance measurement on 3 100 buildings. Most of the R116.530 million budget was for human capital.

Programme 3, which addresses Construction Project Management, aimed to complete 339 design solutions for identified user departments, as well as achieve 90% implementation of Infrastructure Delivery Management Systems (IDMS) for key user departments. The strategic goal was to meet user department accommodation requirements and to develop detailed construction plans that directed the execution of construction projects according to approved criteria. Mr Serote said this programme was the implementation point for other programmes, and its total expenditure is estimated at R538.565 million in 2016/17, rising to R540.704  million in 2018/19.

Programme 4 addressed Real Estate Management and focused largely on leasing. The strategic objectives were to provide functional leased accommodation for user departments, to increase revenue through the rental of state-owned properties, and to manage and administer contractual obligations for all accommodation solutions. This programme aimed to provide quality accommodation while contributing to the financial sustainability of the PMTE. 80% of leases should be compliant with prescribed criteria. It was hoped that there would be a 37.5% increase in the revenue generated through rentals of state-owned property, and achieve 90% of the leases procured aligned to headline inflation. This budget would be 5.992 billion in 2016/17, rising to R7.031 billion in 2018/19.

Programme 5: Real Estate Information and Registry programme was progressive. It aimed to provide reliable immovable asset information that informs investment decisions and portfolio management, and to maintain a compliant Immovable Asset Register (IAR) and provide guidance and support to other custodians in the compilation of compliant Immovable Asset Registers. The five year target is to achieve an average increase of 60% in the compliance of provincial and national immovable asset registers. The budget was R326.836  million in 2016/17, and an anticipated fall to R273.86 million by 2018/19.

Programme 6 addressed Facilities Management, and was aimed at managing maintenance programmes in accordance with an approved plan, reducing unscheduled repairs on state-owned buildings and ensuring resource efficiency in state-owned buildings. Through this, PMTE aimed to optimise performance of the state’s immovable asset portfolio. Over five years, it hoped to achieve 100% implementation of water and energy management plans, have 2 000 buildings maintained through scheduled maintenance in line with the approved maintenance plan, and accomplish a 30% reduction in unscheduled maintenance incidents. The second largest budget was allocated to this programme, with an expenditure of R2.843 billion estimated for 2016/17, and an expected rise to R3.039 billion in 2018/19.

In conclusion, Mr Serote briefly explained that links to other plans, similar to the former presentation, involved the Service Delivery Improvement Plan and the Strategic Risk Plan.

Discussion
The Chairperson mentioned that it had come to his attention during engagements with provincial legislators that some of them were working on their provincial Immovable Asset Registers (IAR). He asked whether they would then need to use funding from provincial allocations if maintenance was needed. He also asked what the procedure would be for property owned by the Department of Public Works nationally but located in a particular province, and whether the Department had to carry out maintenance from a national plan.

He drew attention to the property section outlined in Programme 5, and asked when there would be a final verification on properties, noting the remark that there were between 250 and 300 that still needed to be verified.

He further wanted clarification on the difference between ‘scheduled maintenance’ and ‘maintenance’ as referred to on slide 47, and asked whether the operation leases that amounted to R4.3 billion, as exhibited on slide 41, included operational leases for other government departments. He was also concerned with the 50% annual target for the approved list of immovable assets let out for revenue generation indicated on slide 40, and asked why that annual target was set so low.

Mr B Nthebe (ANC, North West) asked what the Department’s intention was on management and performance enhancing incentives granted to provinces and municipalities for the stimulation of job creation. He then asked about the Department’s intention to effectively manage the geographical distribution of the grant. He commented that the aim of preventing urban migration is being impeded by the constant allocation of funds to provinces such as Gauteng, while predominantly rural provinces such as Northern Cape, North West and Limpopo are essentially neglected by getting low budgetary allocations. He wanted to know what could be done to create a better balance. He highlighted that there is a need for coordinated relations between the Department of Public Works and other departments such as the Department of Trade and Industry (dti) and the Department of Economic Development (EDD), in order to ensure that the priorities of government are met seamlessly .

The Chairperson further questioned the Department on the Independent Development Trust (IDT), and what the implications would be of ceasing to fund this in the current year. He also wanted more detail on the transfers and subsidies amounting to R5.4 billion, referred to on slide 27 of the first presentation, as well as the Border Fence boundaries, amounting to R7 million, as indicated on slide 29 of the second presentation.

Mr Stanley Henderson, Deputy Director General: Expanded Public Works Programme (EPWP), DPW, explained that when there was underperformance, the Department transferred 40% upfront and sought positive performance before it would transfer the next tranche of 30%. In the case that there was underperformance on spending, it was inferred that funds were not being utilised for their intended purpose of job creation, and there is then a legal obligation to withhold funds. The DPW would then also report this to the National Treasury. The DPW would further take it upon itself to follow up by looking into the relevant province or municipality, to find the reasons for their underperformance.

He also commented on the geographical distribution of the grant. Here too, prior performance plays a major role, and the provinces showing better performance in, for instance, their equitable share will receive a greater portion of the grant. The grant is an incentive grant and is thus not the sole source of funding for the implementation of public programmes, but rather was aimed at deepening the impact and improve performance.

Mr Cox Mokgoro, Chief Financial Officer, DPW, explained that the transfers to the EPWP amount to R1.9 billion. Slide 40 of the second presentation gave a rundown of Programme 4. This highlighted the Department’s transfers to their entities, as well to the Property Management Trading Entity (PMTE). Furthermore, the R7 million spent on Border Fence boundaries was the Department’s contribution to the Department of Agriculture, and it was aimed at facilitating the control of foot and mouth disease.

He noted that whether or not the IDT would survive without the Department’s financial support was something that would be dependent on the IDT’s business case. A critical principle underpinned in the business case stated that the IDT had to be self funding and the National Treasury had thus recently approved that it could begin to charge management fees for the work that it was doing.

He gave some further details on the leases valued at R4.3 billion, and explained that this figure did indeed include the leases that the Department acquired for client departments. The Department's role was to provide accommodation to client departments, and this would either be from the government stock or, when this was not available, by branching out into the market to lease property. The Department will then pay for the lease and recover the cost from the client department- essentially playing the role of a landlord.
 
Lastly, he noted that scheduled maintenance was planned, and unscheduled maintenance referred to ad hoc and unplanned activities.

Mr Fazel added that the business case for the IDT would be taken to Cabinet in the next few weeks. The IDT would be established as a Schedule 3A public entity. The IDT will also be entering into protocols with the National Department of Public Works as well as with willing provincial departments of Public Works.

Mr Fazel noted the need to seamlessly fulfil government priorities through coordination with other departments, and said that a new branch within Programme 2, the Intergovernmental Coordination, had been established for the very purpose of mobilising departments such as dti and EDD to work alongside the Department of Public Works, to ensure that there is a common view of service delivery across government.

The Chairperson asked whether the Public Finance Management Act (PFMA) allowed the Department to receive money from another department.

Mr Mokgoro explained that the PMTE was established for that very reason. Prior to 2006, everything pertaining to the accommodation of client departments resided in the DPE, when the decision was taken that DPW must provide accommodation to client departments, who would pay the DPW, except when government stock was available. The PMTE provided a mechanism for the Department  to collect money, pay expenditure and use any surplus to reach the objectives of the PMTE.

Mr Serote added that there were two major deadlines for the 250 properties: by 29 April 2016, it was expected that 200 of the properties should be verified, and the financial statements would be submitted for audit by 31 May 2016. On that date, however, there would still be 1 200 properties still to be verified, given that the process of engaging with the Deeds Office will not be complete by that time.
The Chairperson mentioned that Members were hoping to consider the impact of the tight economic climate on the fiscus, and consider whether DPW provided resources from which the government might generate revenue. Once that was done, he would like the DPW to return to engage on the progress of this matter and then the PMTE processes. He thanked the DPW and said that the budget figures could be presented with confidence in the NCOP.

The meeting was adjourned.