CIDB & CBE 2022/23 Annual Reports; with Minister and Deputy Minister

Meeting report

Construction Industry Development Board: 2022/23 annual report

Ms Bernice Swarts, Deputy Minister of Public Works and Infrastructure (DPWI), introduced the delegation from the Construction Industry Development Board (CIDB), and handed over to the entity to proceed with the presentation.

Mr Khulile Nzo, Chairperson, CIDB, said the entity continued to be sustainable despite various challenges that had been faced by the DPWI and other entities of the Department. Its outreach and stakeholder engagement had brought insight and provided a clearer understanding of the work and needs of stakeholders, including how the entity could ensure the effective delivery of its key mandate. During the outreach and stakeholder engagement, it was encouraging to notice that the CIDB was delivering according to the needs of the various stakeholders. Through consistent engagement with the Auditor-General of South Africa (AGSA), there have been major improvements as the CIDB incorporated the recommendations AGSA provided last year.

Mr Bongani Dladla, Chief Executive Officer (CEO), and Mr Sfiso Nsibande, acting Chief Financial Officer (CFO), took the Committee through the presentation slides.

In 2022/23, there were 15 performance targets planned to be delivered, and all 15 had been achieved. They mentioned that 377 contractors had been provided with contract development support.

To respond to the issue of transformation in the industry, the CIBD commenced the process of training 250 women-owned contractors on construction management systems. The Empowerment and Recognition of Women in Construction (ERWIC) awards were hosted on 24 August 2023 at the Indaba Hotel in Fourways. The event included a conference to empower women contractors to develop their companies, and provided a platform for information sharing, networking and strengthening business knowledge.

The contribution to the economic reconstruction and recovery plan (ERRP) by increasing government spending against the budget through client training has seen the capacitation of 110 client departments on the Infrastructure Delivery Management System (IDMS) and the implementation of the CIDB's BUILD Programme.

The CIBD had also participated in the BRICS skills development group, and actively supported the development of the building information modelling curriculum. Since this was still ongoing work, it would be highlighted in detail in the 2023/24 reporting period. Noteworthy, the South Africa team which was tasked with developing 3D models, including preparing a bill of quantities, calculating energy consumption, and presenting solutions related to water, energy and environmental health, won a gold recognition award at the BRICS "Future Challenges."

Spending had improved. Municipalities were the only category of clients in which expenditure had declined. Municipalities and state-owned companies spent below 80% of their budgets, while all the other entities spent above 80% of their budgets. Provincial departments made the highest contribution to public infrastructure expenditure, spending 93% (around R56 billion) of their budgets and contributing around 29% to total public infrastructure expenditure.

Regarding transformation, starting with black-owned contractor enterprises, the state of transformation decreased with the increasing CIDB grade (size of company). Specifically, for ownership of 51% and above, 53% of Grade 9 contractors were black-owned in 2022 quarter 4; 81% were black-owned for Grades 7 and 8; and 78% for Grades 7 to 9. Grade 9 contractor enterprises included publicly listed companies and wholly owned subsidiaries, for which black ownership other than directors was excluded. However, the impact of excluding listed and international companies from the profile was small. Black ownership in grades 2 to 8 of the register of contractors was above 80%.

On women-owned contractor enterprises, women's ownership of 51% and above for 2022 quarter 4 was, on average, 34%, against CIDB’s five-year target of 40%. The fewest women-owned contractors were in Grade 9, at 19%. Women's ownership in grades 2 to 6 was above 30%. The CIDB had launched initiatives to increase women's ownership, including a targeted development policy and construction management systems training programme to upskill women-owned contractors in general building and civil engineering.

The entity continued to support and partner with the Centre of Excellence (CoE) at the Department of Construction Management and Quantity Surveying of the University of Johannesburg. Student outputs for the year under review included five Honours graduates, two Master's and a completed PhD, with one more submitted for the April 2023 graduation period. The CoE had retained the services of three post-doctoral fellows who were being supported to grow their academic careers as co-supervisors of Honours and Master’s students, while carrying out independent research.

In the year under review, the audit outcome had improved from a qualified audit opinion to an unqualified opinion with findings. The CIDB had continued its solid performance on supply chain management (SCM) processes and performance information, as no material audit findings were raised. There were interventions in place to achieve a clean audit, which included an audit action plan that addressed all the AG’s recommendations.

The CIDB had continued with a healthy financial position, with R202 million in positive cash resources. A significant increase in current assets had been because of BUILD revenue and receivables.

See attached for full presentation

Discussion

Mr I Seitlholo (DA) highlighted the commendable work the entity had done, including the swift payment of 100% of invoices within 30 days. He also welcomed the achievement of the entity’s programmes in line with the Auditor-General's (AG) recommendations in the previous year. It was hoped that other entities would learn from the CIDB's best practices.

He asked what the intentions of Programme One’s output indicator on fraud and prevention awareness were, and what the indicator contained. This was particularly important because, in the current state of things, government was under siege by the "construction mafia." What had the impact of the construction mafia on the CIDB been?

In terms of the monitoring and evaluation that had been conducted, what had the CIDB found that was either advancing the industry or leading to setbacks in the industry? What had they anticipated discovering as far as the monitoring and evaluation was concerned?

Concerning the research and development highlighted in the presentation, were the research reports published by the CIDB accessible to the Committee and the wider public?

In the presentation, the CEO indicated that the entity had gone to court to challenge the findings of the AG. What was the outcome of this process, and was there any decision by the court that led to mediation between the CIDB and the AG regarding the audit outcome?

Mr W Thring (ACDP) welcomed the improvement in the audit outcomes, including the CIDB's stability in its cash flows. He also congratulated the entity for being able to achieve its targets and ensuring that it delivered on its mandates.

What interventions, if any, were in place to assist municipalities and state-owned enterprises (SOEs) to improve on their infrastructure spending?

The success within the doctoral programme was commendable, and it was encouraging that some of the students went back to do their work in underserved communities. However, he feared that some of the doctoral students were being lost to the private sector, or even to other countries abroad. Was there some kind of study looking at how long these students stayed in the public sector?

To avoid legal processes, companies were given a construction tender, but ended up illegally benefiting from such a tender without delivering on their mandates. What was being done to prevent construction companies from failing, and, in the process, causing harm to ordinary citizens who ought to benefit from the infrastructure?

 Ms S van Schalkwyk (ANC) welcomed the presentation, and indicated that this was a breath of fresh air. It was encouraging to see the current state of the CIDB, and it was a lesson that other entities should learn.

Referring to the 250 women contractors that were trained in construction, and looking at the vision of the CIDB to transform the construction industry, what was the status to ensure that this vision materialised? Were the women being trained also being absorbed into the system to ensure they had work?

Ms A Siwisa (EFF) commented that the revenue collection efforts of the CIDB were commendable. These best practices should also be shared with other entities of the DPWI.

The efforts made in providing contractor development support were also commendable, including consequence management and internal controls to address the audit outcomes raised by the AG in the previous year.

The entity had a low vacancy rate, but the Committee pleaded with it to fill the remaining vacancies so that the DPWI could effectively respond to the high unemployment rate prevalent in the country.

Ms L Mjobo (ANC) congratulated the entity for the progress that had been made, including the 250 trained women. However, what was the status of empowering the youth and those living with disabilities?

The Chairperson echoed a similar sentiment, indicating that although it was appreciated that the CIBD was empowering women, there should be a plan to train people living with disabilities and the youth.

CIBD's response

Mr Nzo said fraud and corruption remained a problem at the CIDB, especially on default contractors. When doing oversight, the Minister had also identified that the quality of construction by some contractors was not up to standard. However, the entity was embarking on enforcing strong internal control measures to respond to this challenge.

Many of the CIDB's stakeholders relied on the entity to answer some of the challenges that were being experienced, such as procurement issues, the construction mafia, and the training programmes mentioned in the presentation. However, it was limited in scope because the CIDB did not conduct the projects, and it was thus restrained from influencing the solutions it proposed for other entities with more capability than the CIBD to attend to these issues. For example, it had had no sight of the Procurement Bill only nine days before it was presented to Parliament, and its inputs were not considered because this was a Treasury document. This made it hard to instil key objectives to ensure the delivery of the DPWI’s mandates, despite the resources such as the research on procurement by the entity which could influence a more structured procurement process based on evidence.

Regarding the 100% payment of invoices, Mr Dladla said that the CIDB had also instituted a process of ensuring that all compliant invoices, if received on a Tuesday, would be paid by Friday. Therefore, its average for payment of invoices was around ten days for compliant invoices.

To deal with fraud and corruption, in addition to the workshops, the CIDB had taken a zero-tolerance approach to corruption, leading to the dismissal of officials, and even contractors, involved in corruption.

He confirmed that the construction mafia had an impact on the execution of construction projects, including the loss of life in instances when a project site was disrupted. However, there was continued engagement with various stakeholders to respond to these challenges, including working with communities and law enforcement agencies.

On the monitoring and evaluation report, specifically on the issue of transformation, one of the major issues was the slow rollout of projects and timely payments which was killing construction companies, especially black-owned construction companies. Hence, there was a proposal to include the private sector to facilitate an effective process.

Another aspect that was impacting on transformation, where the CIBD was facilitating both the clients, infrastructure and contractor, was the arbitrary interpretation of construction contracts which especially disadvantaged lower grade contracts, where sometimes they were either abused by the main contractors or by the clients when there were changes to the contract. Therefore, when standardising the CIDB's documents for tenders, the entity made an effort to educate both the client and the infrastructure clients.

Mr Dladla said that the research reports were available on the CIDB's website for the wider public, and would be shared with the Committee. The reports shared key insights, indicating that there would be a faster rollout of projects if the recommendations were implemented.

When the dispute resolution was working, the decision to litigate against the AG had been taken. Upon the AG’s request, the CIDB had filed documents and the AG had asked for further time to file a responding affidavit. After extensive discussions, the case was dropped, and both parties better understood how the CIDN should be audited. Although Mr Dladla indicated that he would confirm the correct costs of this process from the CFO, he estimated that it was approximately R500 000.

The cost of the Building Information Modeling (BIM) capacitation, including the conferences, had been R525 000. This was important, because there could never be a conversation about the 4th industrial revolution (4IR) without the proper information management systems and platforms. Hence, the CIDB was spearheading work with the BRICS Future Skills as the curriculum for developing and training young people as a basis to prepare for the 4IR.

The CIBD provides interventions to assist SOEs and municipalities in spending in various ways, including capacitation processes beyond just classroom training. They considered the adoption of clients where they were assisted in the process to ensure there were fewer risks with the tender documents, ensuring that they were clear, transparent and competitive. Through the CIBD's practice notes, there were guidelines for clients on conducting site briefings and other key issues. This had been focused on municipalities and state-owned entities (SOEs).

A longitudinal study has not been conducted on the duration that the CIDB graduates remain in the public sector. However, this was something that the entity would be delighted to look into and then deliver its findings to the Committee.

At the beginning of the term, the Board had focused on preventing fraudulent companies from returning to the entity's register. This was because the guidelines currently allowed only the CIDB to deregister a company, but not deregister the director of that company. The directors could be dealt with only at the level of National Treasury. This created problems, as the directors ended up registering other companies, despite their companies being deregistered by the CIDB.

To avoid extensive legal costs when construction companies were disputing awards, the CIBD submitted a feasibility study on establishing a construction ombud to the Minister for consideration.

Regarding the women-owned construction companies, one major aspect that it had been focusing on to ensure access to work, was the establishment of proper working contractor development programmes. The first step was developing the guidelines for establishing a contractor development programme. After the programme, the women had access to real-life projects.

For the transformation of youth and persons living with disabilities, the CIDB piloted the first implementation of the BUILD Programme, where there was an intentional focus on women. There was also a full commitment to supporting youths and persons with disabilities.

The CIDB had also partnered with the South African Police Service (SAPS) to be able to register cases, including working with the National Prosecuting Authority (NPA) to speedily prosecute the cases.

In her closing remarks, Deputy Minister Swarts joined the Committee in congratulating the CIDB on the work that had been achieved. The entity should look at further improving its internal systems of control, including putting effort into the programmes that require attention. More work was needed to prevent the construction mafia from infiltrating the industry.

The meeting adjourned for a brief break.

Council for the Built Environment (CBE): 2022/23 annual report

Ms Amelia Mtshali, Chairperson, Council for the Built Environment (CBE), introduced the CBE delegation.

Dr Msiza Myeza, Chief Executive Officer (CEO), CBE, took the Committee through the presentation of CBE’s performance for the 2022/23 financial year, and said its medium-term focus had been on transforming the built environment sector, creating skills and building professionals in the built environment, and expediting the empowerment of women, the youth and persons with disabilities.

The CBE had received a clean audit, and of the 18 targets set, and 15 (83%) had been achieved. Some of the capacity constraints and challenges faced included budget cuts, resignations at the executive level, and a lack of information communications technology (ICT) capacity.

Programme 1: Administration

He said 100% of the CBE’s revised organisational structure action plan’s identified priorities had been implemented by 31 March. This included job evaluations, salary costing for prioritised positions, and job profiling interviews for new and prioritised positions. Further, a Cloud additional server and disaster recovery initiatives had been implemented. To increase the footprint of the CBE, 23 activities have been undertaken in various provinces in the forms of career campaigns, including the CBE’s role in protecting the public, women, and youth through empowerment programmes.

Programme 2: Empowerment and economic development.

Two women's empowerment webinars were delivered. The first webinar was the inaugural webinar aimed at shattering the glass ceiling, and the second was aimed at bringing economic resilience in the built environment. The initiatives undertaken to promote youth development were the women empowerment webinars, the CBE/Feenix ‘Build a Dream’ giving campaign, and the built environment unemployed graduates placements at the DPWI Real Estate Management Services (REMS), with 20 graduates placed on a two-year internship.

Programme 3: Professional Skills and Capacity Development

36 district municipalities were supported through monitoring the implementation of the built environment structured candidacy programme. The CBE’s assessment of the engaged district municipalities revealed some common challenges, such as the lack of, or limited, funding to establish and sustain candidacy programmes and the limited exposure for candidates, as projects were outsourced to private contractors.

Programme 4: Research and Knowledge Management.

One research report on the assessment of built environment candidacy programmes within public sector institutions was completed. One research report analysing the implementation of legislation and policies impacting the built environment was produced. Further, an advisory brief on the assessment of candidacy programmes implemented within the public sector was submitted to the DPWI. Another advisory brief on preferential frameworks to drive transformation in the built environment was submitted to National Treasury.

Programme 5: Public Protection, Policy and Legislation

One report on the state of compliance with construction health and safety within the built environment was produced.

See attached for full presentation

Discussion

Mr Thring welcomed the clean audit achieved in the past few years. He hoped that this was a trajectory that would be seen in the future.

The transformation work of the CBE, including advancing women, should be based on the core values of quality and professionalism.

In Programme 4, it had been mentioned that there was underspending -- how did this impact the adoption of resources in preparation for the 4th industrial revolution?

South Africa had high unemployment and a lack of skilled professionals, and skilled workers were being lost. What type of focus did the CBE have in terms of the challenges around the lack of skilled professionals within the built environment?

Mr E Mathebula (ANC) congratulated CBE on retaining the status quo on the clean audit. It meant that the entity had adopted all the recommendations and guidance of the Committee. This good work must be maintained throughout.

Although the CBE had been around for a while, there seemed to be little progress in empowering people living with disabilities and women's empowerment in a male-dominated industry. The work that had been done was quite commendable, but more could be achieved as they were not where they would like to be.

Mr Mathebula commended the CBE for engaging the young and unemployed graduates. The high unemployment rate in the country was shocking, and these programmes aimed at addressing unemployment were commendable. What was the number of graduates who had been placed by the CBE?

The entity was aiming to spend 100% of its budget. What were the other issues, apart from the appeals, had impacted the entity and resulted in the spending being at 75%?

The meeting on Tuesday with the AG shed light that the entities of the DPWI had some form of irregular and wasteful expenditure. Why was this not mentioned in the presentation?  

Were there any issues of litigation against the CBE? How much had been spent on litigation?

Ms Van Schalkwyk thanked the CBE for the work that had been done. This showed that the entity was serious about delivering on its mandate, especially the inclusion of youth and women in the process.

Regarding the challenges that the CBE had identified in establishing a database for built environment mentors, what were the actual challenges being experienced, and what was being done to ensure that there was transformation?

The vacancy rate was concerning, especially in the context of the high employment rate in South Africa. How was CBE planning to fill the vacancies, especially the unfunded vacancies?

The Chairperson also congratulated CBE on receiving a clean audit. The regulations in the engineering industry were quite concerning, especially for young black professionals who could not access the industry because of extensive "red tape."  What was the CBE doing to ensure that there were more young black town planners and other skilled professionals in the engineering and building environments?

CBE's response

Ms Mtshali acknowledged the challenges highlighted by the Committee, and indicated that extensive work was being done to address them, especially issues of transformation.

Dr Myeza agreed that 29 years into democracy, the engineering and built environment was not fully transformed. A sector could be transformed if there was regulation, and this required that there was a strategy in place. For example, in previous school visits, it was noted that some schools in underserved schools were not doing mathematics, which limited pupils from accessing the built environment sector. There should therefore be support provided to learners, especially girls, to do mathematics. Policy mechanisms should be in place to ensure that girls in schools are absorbed into the sector.

There was work that was being done with universities. It had been noted that many young professionals who came into the sector were not prepared for the work environment. There had been engagement with universities such as the University of Cape Town and the University of Johannesburg to ensure that what was being taught at the university level was in line with what was happening on the ground. As a result of the delink between the university curriculum and the work environment, many young professionals were leaving the public sector for the private sector, with others leaving to work abroad. Work was being done to ensure that DPWI programmes were attractive to young professionals.

Dr Myeza added that in the past, a group of mentors had been procured through the normal procurement process. The CBE’s view was that professionals were reluctant to support and mentor young professionals. It was looking at a shared service model to ensure that support was provided to young professionals. This still needed to be driven aggressively to ensure that young professionals were mentored in the work environment. It must be noted that this was something that would be costly, due to the complexity of the industry.

To deal with the unemployment situation, the CBE consciously decided to appoint young people and women. This was a contribution that the entity continued to make to respond to this challenge.

Research and development (R&D) was the backbone of any country’s development in the built environment. The CBE was building this capacity and some researchers were being recruited. They would be focused on various issues of concern. This included augmenting the CBE's mandate to work with the universities and other stakeholders.

Ms Sarie Treeby, Chief Financial Officer, CBE, said the 75% expenditure was related only to the appeals. In Programme 5, both the appeals function and the governance legislative function were there. However, it was only on the appeals functions that the CBE was currently incurring costs.

It currently did not have any new irregular expenditure, and was in the process of clearing all irregular expenditure that had been incurred in previous years.

One litigated matter was currently being pursued, where the CBE had sought an appeal, and that appeal ruling had been taken to the court for review.

Ms Thembakazi Moya, Chief Transformation Officer, commented on the issue of transformation and maintaining professionalism, and said that empowerment meant ensuring that individuals had the confidence that they were capable while ensuring high professional standards. This was still a work in progress.

The CBE was a regulatory body that could not necessarily employ, but the partnerships being built ensured a response to the issue of unemployment. It created a database of unemployed graduates, and more graduates were employed through these partnerships. There were also programmes on youth development that looked at supporting young people to start businesses, including having the skills to run these businesses.

On the work being done with women and people living with disabilities, the CBE had been tasked with commemorating the International Day for Persons Living with Disabilities. It has been working with various stakeholders to empower professionals living with disabilities. There were also intentions to have campaigns and outreaches to ensure the CBE reached communities.

The candidacy and mentorship programme could not work unless there was structure to it. This required looking at how professionals would be requested to provide mentorship, including considering issues of remuneration.

In his closing remarks, Dr Myeza added that the issue of mental health was understated in the engineering and built environment. This was an issue that was starting to emerge due to the kind of pressures and the work environment professionals were exposed to. This should be looked at, especially given that no modalities were in place to respond to these issues.

Mr Sihle Zikalala, Minister of the DPWI, joined the Committee in congratulating CBE on the clean audit, including being visible on its mandate. The road ahead was still calling, and there was still more that needed to be done to develop the skills of young professionals, especially black women and other vulnerable groups. More collaboration with other department entities and tertiary institutions was needed to ensure that the mandates of the Department and its entities were delivered.

The meeting was adjourned.