Independent Development Trust and Construction Industry Development Board: briefings

Meeting report

PUBLIC WORKS PORTFOLIO COMMITTEE
18 October 2005
2004/05 ANNUAL REPORT: DEPARTMENT BRIEFING

Chairperson: Mr F Bhengu (ANC)

Documents handed out:
Highlights from the 2004/05 DPW Annual Report PowerPoint Presentation
Annual Report 2005: Building Together [please email [email protected]]

SUMMARY
The Department of Public Works briefed the Committee on highlights from their Annual Report for 2005. Prudent financial management had turned around the Department and it had received an unqualified audit report. The Extended Public Works Programme (EPWP) targets for the first year had been exceeded. The draft Government Wide Immovable Asset Management Bill (GIAMA), approved by Cabinet, was currently with the State Law Advisor. The concept Tshwane Inner City Programme had obtained Cabinet approval and was being implemented.

Considerable discussion ensued around the issue of disposal of property, including vacant land and unused buildings. It was agreed that further debate on this issue would take place at a later date.

MINUTES

Department briefing
Mr J Maseko (Director General, Public Works) briefed the Committee on the vision and mission, strategic drivers, summary of performance per programme, financial performance, achievements and strategic challenges of the Department.

Strategic drivers that made it possible to remain on track were the turn around in financial management, zero tolerance to corruption, the Expanded Public Works Programme (EPWP), an integrated Human Resources strategy, strengthening of the leadership role in the construction and property industries, finalisation of Government-wide Immovable Asset Management Framework (GIAMF) and the reinforcement of the custodianship role. Financial management turn around included an unqualified audit report. The challenges were sustainability of improvement and the improvement of efficiency of expenditure.

A lot of corruption was being identified. Corruption was a disease that required continuous and determined effort; fronting was corruption and was fraud.

In terms of Human Resource strategy, the wellness programme had proved to be a good initiative and the Departmental Bargaining committee contributed to peaceful labour relations set up in terms of the Public Services Bargaining Chamber. There had been tremendous progress in HR with the vacancy rate and staff turnover coming down.

Summary of Programme Performance
Programme 1: Made sure strategic planning was aligned to budgeting, had full complement of Deputy Directors-General; performance bonuses were aligned to overall performance, not entitlement, and given only to those performing beyond the call of duty. The Leadership Way was introduced to change the organisational culture, was a very consultative document and a key initiative in turning the Department around.

Programme 2: Achievements included improved optimal utilisation of immovable assets and the development standards for the minimum management of immovable assets and improved relationships with clients enabled a higher standard of cooperation. Some challenges were still fragmented immovable asset management, skills shortage of built environment professionals and a lack of an Integrated State Property Information System. Solutions included calculations of replacement costs for inner city buildings, investment analysis and property valuation.

Programme 3: Achievements were the launch of the Construction Industry Charter and the Property Sector Charter. The Department initiated programmes to further the goals of transformation and Black Economic Empowerment (BEE).

Programme 4: Consisted of auxiliary and associated services, of which the main area was in the area of decorating public functions. The Department had been in charge of organising the logistics for the inauguration of the State President, for state funerals, state visits and the like. The Department spent money and then submitted a claim to the Treasury, falling under ‘unforeseen expenditure’. Known State visits could be planned and budgeted for in advance.

The 3-year expenditure trend revealed 3.8% under expenditure and capital under expenditure came down from 11.3% in 2002/03 to 13.7% in 2003/04 and 0% for 2004/05.

There had been a slight under-expenditure in 04/05 due to late additional allocation for property rates arrears, but generally the figures indicated that the Department had capacity to spend on infrastructure.

Summary of Achievements
Mr Maseko summarised a list of the achievements of the Department for the year under review. These included:

-Moving from disclaimer to qualified to unqualified audit report from 02/03 to 03/04 to 04/05;
-A proactive disposal programme had been initiated. This ensured under utilised properties, having no further need, were advertised and disposed of;
-EPWP targets for the first year had been exceeded;
-The drafted Government Wide immovable Asset Management Bill (GIAMA), approved by Cabinet, was currently with the State Law Advisor; and
-The concept Tshwane Inner City Programme had obtained Cabinet approval and was being implemented. The plan was to turn Pretoria into the No. 2 African City, involving the construction of new head offices and refurbishment of existing buildings.

Discussion
Ms M Ntuli (ANC) referred to zero tolerance and asked whether fronting happened only with big companies or whether there were cases involving officials within the Department. Could he cite some examples? In terms of integrated strategy and affirmative action, what was the future for women and theinvolvement of young people, especially with regard to the outcry from Technikons, universities and young graduates? With regard to the role in industry, were training centres being brought to the people on the ground? Training in construction was only two weeks – what were they doing? She commended the work done with CIDP’s[What are these?] at the regional office in Durban and asked if this was also being done in other regions; the objective being to assist emerging contractors from time to time.

Mr H Maluleke (ANC) commended the Department on the unqualified audit report and asked what the challenges for provinces were with regard to the Expanded Public Works Programme.

Mr K Moomsamy (ANC) complimented the Director General on the fine presentation and on the unqualified report, which were the results of commitment and dedication and augured well for the future. He was very encouraged about the aspect of filling of vacancies for DDGs, which was a tremendous achievement, and asked how the Department had fared with Employment Equity. He was particularly concerned with the issue of bridges. After the 2000 floods, especially in the northern part of Limpopo, people were still having great difficulty. For instance, schoolchildren could not go where they needed to. He asked whether charters had been approved and whether the Department was building its capacity and whether all the vacancies had been filled.

Mr J Blanche (DA) also congratulated the Director General on the unqualified report but raised concern on the construction in Pretoria while other cities were in bad repair and needed development and improvement. Why concentrate on Pretoria when elsewhere police stations and other departments were in a dilapidated state?

Mr Maseko responded that the issue of zero tolerance could only be dealt with with passion and the overall support of staff. If anyone went out of line they would be reported. The only people who had been penalised were people at the bottom. Senior managers also had to be reported. They were starting to concentrate on the issue regardless of position. Fronting affected not only big companies but small companies also. This needed to be monitored. Fronting was exposing and affecting all levels of companies; there was an initiative to introduce business intelligence to track and monitor. Technology would not solve the problem but would assist in solving this problem.

A substantial number of companies that had received contracts were not BEE-compliant because they were not monitored. There was no concrete proof of corrupt officials not being prosecuted but there was sufficient circumstantial evidence to suggest that officials had been recommending contracts knowing they were for white-owned companies. Some officials had been implicated and would have to be dealt with. There was a move towards suspending officials but at the risk of affecting service delivery. Zero tolerance was more serious than under spending.

Mr Maseko said the Department was making progress on its Human Resource structure. He invited Members to go through the Report on the use of overtime and leave. At an operational level, Employment Equity was lacking. Employees in technical departments were white, male and Afrikaans-speaking but they were aging quickly and soon younger persons could be employed.

Mr Maseko continued that the Department was making some progress on the administrative level but the greatest progress in terms of Employment Equity had been at management level. Managers were not involved in the operations of the Department; sites were essentially run by white males.

In reply to the question of women in internship programmes, Mr Maseko responded in the affirmative, but added that the high unemployment and shortage of skills were unacceptable; especially of unemployed graduates.

The Construction Education and Training Authority (CETA) had to be looked at. He felt that not enough was being done in technical training. Historically, training had been done at technical schools (welding, building, construction).

On the subject of emerging contractors, Mr Maseko responded that small contractors had been identified so they could emerge fully-fledged. He had not yet been able to produce a black construction company outside of Murray & Roberts, which had five to ten black construction companies fully fledged in their own right. It still remained a challenge to get big black owned contracting firms and consulting engineers.

With regard to the EPWP in other provinces, Mr Maseko said those provinces where the Premier or MEC had taken charge of the programme showed results. There was a clear link between political leadership at provincial level and results. If municipalities were to be included, the same trend would be found.

In response to the question of building bridges, the President had directed a programme to accelerate growth. National government had also allocated money for specific projects; one of such projects being access roads in many parts of the country. There was a great need for this to be done. On the approval of charters, drafts had been finalised and were awaiting in-house work. The charter would be signed by the end of the year. As far as capacity was concerned, in the past financial year the vacancy rate was 18% - the skills required were not always available in the market place and salary scales were not competitive with the private sector. Vacancies existed at the crucial technical level.

In response to Mr Blanche’s concern about Pretoria, the Department would like every South African to be proud of its capitol city. Departments operated from about eight buildings in the city, which was not very efficient. The disposal plan was a national one for any unused vacant buildings, especially where it was costly to provide security and avoid vandalism. If there were an alternative that would be looked at or the property would be sold to the private sector. This embraced the whole question of improving government accommodation.

Mr Moomsamy referred to the asset register and levels of ownership. He was totally opposed to disposal and would rather lease the buildings.

Mr Bhengu asked what the R73 000 losses under assets and liabilities were. Mr Maseko replied that these included such things as burglaries and bad debts and ‘Acts of God’ – storm damage, fire and lightning.

With regard to the maintenance backlog, a presentation had been made to National Treasury. They had to choose between allocating money to buildings or social services infrastructure – socio-economic buildings, building a road and paying for education and toilets in rural communities. New buildings would be right at the bottom of the list. With inflation and deterioration they would become more expensive.

In responding to the question on the asset register, Mr Maseko said tremendous progress had been made. A management information system was required and National Treasury was assisting them to design a new system to manage assets.

In reply to Mr Moomsamy’s suggestion that property be leased rather than disposed of, it was not possible to totally exclude rental properties but management would do a proper analysis before dealing with these properties. The justification for disposal was the cost of maintaining these properties in terms of rates and taxes, monitoring and security. Disposal was usually the best route but a thorough portfolio analysis would be done before any steps were taken. The Department was the custodian of land belonging to the nation and for future generations.

Ms Ntuli wished to emphasise that there were some buildings which deserved to be kept as heritage sites or maybe could be used as libraries.

Mr E Magubane (ANC) referred to the Provincial Asset Registers. As Government had both National and Provincial Asset registers, did that mean that properties that did not appear on either of these had not been registered?

The question was raised whether client departments were falling in line with the Extended Public Works Programme, whether relationships between the ministry and departments had improved, and whether they had also found satisfaction in terms of their minimum expectations. Budgets had been overspent and the following year under spent – was the money well spent, or was the target reached because projects from previous years suddenly became expensive? Was this due to a lack of efficiency or just to clear the books?

More clarity was requested on the Department’s core functions. The main expenditure was in the area of decorating buildings and arranging functions yet they still had enough money to satisfy everyone. How was this achieved?

Mr Blanche asked the Department to weigh up the costs of refurbishing and rebuilding the Brintyria Estate. When considering renovating the old city and moving to a modern one, Public Works should rather look at the cost. The Department of Public Works would be sitting with outdated buildings in city centres when they should rather be getting out of the city. If the Director General needed support, Mr Blanche felt they should rather move, otherwise they would be repairing old buildings for centuries.

In the 2003/04 financial year municipalities in most of the provinces had problems with delivery and funds were carried over because of capacity problems. R100 million would be carried over this year. In 2004/05, R5.5 million had been advanced to the Department to improve arrears rates. Would that influence the budget with regard to municipalities? He also asked what role government played in assisting municipalities to try and meet their claims on time.

Mr Moomsamy continued on the issue of the disposal of assets. The Johannesburg Civic Centre had been sold and the government was now leasing it from the owner. The CBDs were being neglected because companies were not investing there because CBDs became mainly African cities. This also applied in KwaZulu-Natal and Durban where buildings owned by the business sector were left to decay. He felt there should be some legislation that at least the exteriors of buildings were the responsibility of owners.

It was suggested that the debate on disposal be extended to enable the issue to be explored to its fullest potential. It was an important issue in terms of development of our country and for job creation. Mr Bhengu agreed and asked the Director General to provide the framework on the issue.

Mr Blanche asked why old buildings were becoming obsolete.

The Director General replied that the issue of heritage buildings was an important debate and reflected the culture of a nation. European countries retained their buildings for centuries because history was important. The need was for a balance of the old and new; it was not holistic to get rid of properties just because they were old. In spite of legislation that stipulated if a building was more than 60 years old it was a heritage site, not many historical buildings were left. Inner cities should not be allowed to degenerate. Banks had reinvested in the Johannesburg city centre. There was a need to preserve our heritage; government should reinvest in the cities and preserve our history but also have new buildings for a balanced approach.

As far as the Asset Register was concerned, Mr Maseko continued that the provincial government’s assets fell under their control, and municipalities should have their own. There was an attempt to link these, which technology should be able to make possible, for example identifying pieces of land also linked with the Deeds Registry.

Irrecoverable debts were for a variety of reasons; the time frame being 3 years of prescription.

Mr Maseko responded to the question as to whether clients were coming on board; the solution was to give requirements in time and that would make sure the project was delivered on time. They were getting there slowly and if they did not deliver clients would have the option of going to the private sector.

On the question of expenditure fluctuations, staff sometimes spent funds for the sake of spending when they had not received clear instructions. It was a management responsibility to tighten this process.

Replying to Mr Blanche’s query, Brintyria was an important project providing proper accommodation to both Members of Parliament and office bearers. The State President had a decent house and hosted other Heads of State. Brintyria was a piece of land in Pretoria where it was best to accommodate ministers. Most of these houses were old and in need of repair, which should be a priority. The Service Department was required to provide this to the best of their ability. Security and quality were important issues.

On the question of municipal arrears, it had been explained to National Treasury that it would be irresponsible and illegal to pay every claim submitted without first substantiating it. They would get their normal allocation in terms of municipal rates and taxes. As to whether the Department supported municipalities the answer was negative.

Mr Bhengu said that some of the issues in Project Consolidate had been raised before. There should be uniformity. The Department had the right approach to the questions of not meeting criteria, municipalities and corruption. One burning issue was the question of disposal. The Committee would work on policy in this regard.

The draft Government Wide Immovable Asset Management Bill (GIAMA), approved by Cabinet, was currently with the State Law Advisor. The Committee would further interact with the Department and get a draft copy before the Bill was tabled in Parliament.

In conclusion Mr Bhengu commended the Department on work done to date and said it should be heard on the various programmes. The EPWP was the cornerstone. He felt that the Department should also consider more publicity on its activities.

The meeting was adjourned.