Agrément South Africa on its 2014/15 Annual Report, with Minister

Public Works and Infrastructure

20 October 2015
Chairperson: Mr B Martins (ANC)
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Meeting Summary

[Awaited document: Agrément South Africa 2014/15 Annual Report [email protected]]

Agrément South Africa (ASA) said that it was an entity of the Department of Public Works, whose accounts were audited together with those of the Council for Scientific and Industrial Research (CSIR). Its mandate was to offer an opportunity for the introduction and use of modern and improved innovative construction technologies to the market, in order to accelerate infrastructure rollout. Its activities were defined as providing assurance of fitness-for-purpose, innovative, non-standard construction methods, as well as on-going quality assurance.

It had met, and in some cases exceeded, its annual targets. Its strategy had been aligned to support key priority areas of government, and it had started to lay a foundation for higher growth in infrastructure development. ASA had received an unqualified audit opinion because of its continuous scrupulousness in the management of public funds. It had received a grant of R9.6 million in the 2014/15 financial year and R1.9 million from local private sector fees. Nothing had been received from the public sector, and R160 000 from the international sector. The total income for the year was R11.6 million. Expenses included employee remuneration of R5.9 million and depreciation of R516 000. Operating expenses were R5.31 million. The surplus was R367 000. One of ASA’s biggest challenges was the lack of a legal mandate, but this issue was in the process of being resolved.

Members wanted to why the entity did not fall under the Department of Science and Technology (DST), as the focus was on overseeing the development of new technologies and making use of laboratory tests from the CSIR. It was important for the Committee to be given more information on the experts that were appointed to perform the tests and certification of products. Who appointed them, were they employed full-time or contracted, and from where were they outsourced? Why was the entity not making use of local public sector products? What were the reasons for the significant decline in revenue collection from the international sector? They also asked if the entity still needed to fill vacancies, especially considering that the entity had a surplus of R367 000.

Agrément was asked if the entity had any relationships with the institutions of learning, and this was not necessarily limited to institutions of higher learning. The entity was very relevant in the context of creating jobs, and therefore it was important to begin encouraging people at a young age to start thinking outside the box. Was it possible to measure the socio-economic impact of the products that were being tested and certified? What was the way to ensure that the products were marketed? Was it possible to have offices in different municipalities throughout the country? What was the lifespan of the products that were being certified or tested by ASA? Concern was expressed that little was known about ASA despite it being in existence since 1969 -- what could be done to ensure that it was well-known and visible to the general public? 

Meeting report

Briefing by Agrément South Africa (ASA)

Mr Joe Odhiambo, Chief Executive Officer: Agrément South Africa, briefed the Committee on its 2014/15 Annual Report. This entity was an agent of the National Department of Public Works (NDPW), with a mandate to offer an opportunity for the introduction and use of modern and improved innovative construction technologies to the market, in order to accelerate infrastructure rollout. Its activities were defined as centering on providing assurance of fitness-for-purpose of innovative, non-standard construction methods, as well as on-going quality assurance. It would disseminate correct, objective and relevant information in respect of the technical, socio-economic and regulatory aspects of building. The entity had supported the National Building Regulations, and supported policy makers in the use of innovative technologies. It had also worked with industry in the development of cost-effective, innovative technology and non-standardised construction technology.

With regard to the quality management system, one of the requirements that Agrément advocated for certification was that each certificate holder must have a quality management system in place that was documented in a quality manual, which was approved by Agrément. No certificate would be granted until a satisfactory quality manual had been received and the quality management system had been approved by the board of ASA. The application had to comply with the quality management system of Agrément SA, which was based on the SANS 9001 standards. In respect of technical outputs, the organisation issued certificates, which were technical documents. These described the system or product, summarised the assessed performance, stated which National Building Regulations were deemed to be satisfied by the subject of the certificate, and gave the conditions and requirements that must be met if the assessed performance was to be attained.

The entity had met annual targets and projections of outputs and its strategy had been aligned to support key priority areas of government. It had started to lay a foundation for a higher growth in infrastructure development. The entity had received an unqualified audit opinion because of its continuous scrupulousness in the management of public funds.

Mr Odhiambo said that in relation to building systems, various aspects were assessed, such as:

  • Structural strength and stability
  • Behaviour in fire
  • Water penetration
  • Acoustic performance
  • Durability and maintenance required
  • Thermal performance and energy requirements
  • The quality management system of the applicant

Mr Thabelo Tshikomba, Chief Financial Officer (CFO) of ASA, said it had received a grant of R9.6 million in the 2014/15 financial year and R1.9 million from local private sector fees. Nothing had been received from the public sector, and R160 000 from the international sector. The total income for the year was R11.6 million. Expenses included employee remuneration of R5.9 million and depreciation of R516 000. Operating expenses were R5.31 million, which. included the running expenses of the office, travelling, stationery and all the other administrative issues, as well as the executive levy and the support that was received from the Council for Scientific and Industrial Research (CSIR). The interest that was received from the grant money and the income from certification was R181 000. The surplus was R367 000.

Discussion

Ms A Dreyer (DA) wanted to know why the entity did not fall under the Department of Science and Technology (DST), as the focus was on overseeing the development of new technologies and making use of laboratory tests from the CSIR. It was important for the Committee to be given more information on the experts who were appointed to perform the tests and certification of products. Who appointed these experts to perform the tests and certification of products? Were they employed full-time, or contracted? Where were they outsourced from? It was good to see that the financial performance of the entity looked quite healthy, but it was important to know the reason for the significant decline in contract income from the local public sector. Why was the entity not making use of local public sector products?

The Chairperson said that the ASA board might not be in position to respond to the question as to why the entity was located in the remit of the Department of Public Works (DPW) instead of the DST. The simple response that could be provided was that ASA had been formed in 1969 by the then Minister of Public Works, and the rationale had been that the entity should be located under the DPW since the bulk of their work was in the construction industry.

Mr Thulani Nxesi, Minister of Public Works, responded that the Chairperson had already clarified that the location of the entity was based on its mandate to operate in the construction industry. He confirmed its location in the DPW had a historical legacy since the entity had been established in 1969 under the then Minister of Public Works. The entity had been mandated to test the fitness for purpose of any innovation that was introduced in the built environment.

Mr Odhiambo said that ASA appointed the experts who performed the tests and certifications. These experts came from industry or the universities -- any individual that was recognised as an expert in field of built environment. The income for local public sector products had been zero because the entity did not dictate who had to come for assessment or certification, and therefore there was a fluctuation in the income for local public sector products.

Dr C Madlopha (ANC) commended the entity for receiving an unqualified audit opinion. This showed that the entity was consistent in the management of its finances and adhering to the Public Finance Management Act (PFMA). What were the reasons for the significant decline in revenue collection from the international sector? She wanted to know if the entity still required to fill vacancies, especially when one considered that it had a surplus of R367 000. What were the challenges in filling the key vacancies?

Mr Odhiambo responded that there had been a decline in international funding because once again, this was an area that ASA was unable to control. It had just happened that there had been a spike in international funding in 2014/15, compared to the previous financial years. He said there were currently no vacancies at ASA, and therefore there was no relationship between the surplus funds and a possible shortage of personnel within the entity.

Mr M Filtane (UDM) also appreciated that the entity had demonstrated astuteness in the handling of public funds. It was important to know whether the methodologies that were used for testing and certification were environmentally and economically friendly. Was there any relationship with the institutions of learning -- and this was not necessarily limited to institutions of higher learning? The entity was very relevant in the context of creating jobs and therefore it was important to begin encouraging people at a young age to start thinking outside the box. He wanted to know if the entity was able to measure the socio-economic impact of the products that were tested and certified. What was the way to ensure that one’s products were marketed?

Mr Odhiambo said that the test methods used by ASA were in line with the best international standards, and the tests were benchmarked against other organisations that were run worldwide. The entity was taking care of the environment, and this was done by conducting an Environmental Impact Assessment (EIA) to see whether a product was fit for its purpose. There was a need to broaden this particular area, as legislation was becoming more and more stringent. The entity was not allowing products which may be harmful to the environment to get into the market, and this could be achieved only through testing, certification and stringent regulation, and the products had to be fit for purpose in terms of the health and safety of the public.

ASA had a relationship with the institutions of learning and there were interactions with the schools on an extensive basis. There were also an outreach programmes to schools in order to showcase what was done by the entity. ASA was also interacting with tertiary institutions. This was to introduce the kind of work that was done by the entity, from laboratory to the performance of other rigorous tests. ASA was also playing a role in the area of special education and training, and there was need to do a lot of these outreach programmes in order to attract young minds to science and technology, so as to play a bigger role. There were students who came to work for ASA as interns, where the entity was able to offer experiential training to graduates and increase their future employment prospects.

The products of ASA had to comply with the National Building Regulations as part of the Building Standards Act. It must be clarified that ASA was not the producer of the products, so it was difficult to determine the extent of the socio-economic impact of the products that were tested. However, it was clear that the products did have social-economic impact in terms of creating job opportunities and reducing poverty.

Mr Odhiambo pointed out that ASA was not involved in the marketing of the products either, as the mandate was limited to testing and certification only, but there was a requirement that a product that had been tested by ASA should be labelled. The reason ASA was not well-known to the public was the fact that the entity was limited to testing products only in the built environment.

Ms S Kopane (DA) wanted to know about the challenges that were still hampering the progress of the entity. She asked if performance bonuses were paid to staff members, as this had not been indicated in the presentation on expenses. It was indeed worrying that there had been a significant decline in the income derived from contracting companies in the international sector. What was causing this decline?

Mr Odhiambo responded that one of the biggest challenges of the entity was the lack of a legal mandate, but this issue was in the process of being resolved.

Mr Tshikomba said that ASA fell under the CSIR, and all the bonuses were included in the employment remuneration according the CSIR criteria for calculating the bonuses. ASA was treated as a unit under the built environment.

Mr K Sithole (IFP) also commended ASA for the sterling work in achieving an unqualified audit, saying this was one of the entities that was able to manage public funds. It was important to know about the number of offices of ASA, as this was an important marketing strategy. Was it possible to have offices in different municipalities throughout the country? What was the lifespan of the products that were certified or tested by ASA?

Mr Odhiambo said that ASA was currently operating in Pretoria, but there was also a presence in Port Elizabeth. It had to be taken into consideration that this was one of the smallest entities, and therefore it was impossible to have a provincial outreach. The whole country was covered by the operation in Pretoria, meaning the product could be tested in Pretoria in order to be used nationally. The municipalities were the ones approaching the operation of ASA in Pretoria, and they were often given technical support in the approval of innovative construction materials to be used. ASA was carrying out scientific tests to simulate accelerated weathering to determine the lifespan of products. A building was expected to last for about 30 to 50 years, depending on the environmental conditions. The lifespan of products was also dependent on their maintenance.

Ms P Adams (ANC) asked what had causing the steep depreciation in the 2012/13 financial year. It had been indicated that ASA planned to reduce the risks associated with innovative technologies -- what kind of risks were these? Did ASA have any relationship with international bodies? Did it share the risks with international bodies in order for them to be manageable?  Was quality assurance done periodically? It was important for the Committee to know if ASA had any relationship with international bodies in respect of the assurance and certification of products. What strategies were used to encourage the utilisation of the new innovations?

Mr Odhiambo responded that ASA was aware of all the risks involved in innovative technologies, but the risks were minimised by the performance of scientific tests to prove that the product could be fit for purpose. ASA had relationships with international bodies and was currently a member of the World Federation. There was sharing of test methods and the risks involved in the products that were introduced into the market, and the test criteria were in line with the international best practice. The entity was attending conferences, symposiums and participated in workshops and exhibitions in order to showcase new innovations. ASA was focused on protecting the consumers from using products that had not been scientifically tested.

Mr Tshikomba said that the depreciation had been caused by the fact that many of the assets in 2012/13 had already been written off in that year, but the depreciation had been reduced in 2014/15 because of the additional assets that had been bought for ASA.

Ms D Mathebe (ANC) wanted to know if ASA was doing manufacturing and regulation at the same time, as this sounded like a “player and referee” situation. She wanted to know about the areas of operation of ASA. Was the entity operating nationally or provincially?

Mr Odhiambo clarified that ASA was not manufacturing products, and was involved only in the testing of products for the construction industry. There were offices in Pretoria and Port Elizabeth. There had been a request from the City of Cape Town for ASA to have an office there.

Mr Filtane commented that ASA had been existence since in 1969, but all that was visible on the building materials was the South African Bureau of Standards (SABS). Little was known about ASA. What could be done to ensure that the entity was well-known and visible to the general public?

Ms Kopane wanted to know about the time it took before the approval of the products that were being tested or certified. Was there any backlog in the testing of the products?  What steps were taken by ASA if there was continuous use of a product in the market, despite it being tested as unfit for public use?

Mr Sithole commented that it would be difficult to recognise ASA, because was operating under the CSIR which was under the DST.

Minister Nxesi responded that the entity was under the CSIR because of the value chain with the SABS, but the Department was in a process of constructing ASA to be a legal entity. It had to be emphasised that the work of the entity remained critically important in ensuring that the products in the construction industry were fit for purpose.

The Chairperson thanked ASA for the presentation and ensured the board that the Committee was willing to assist the entity in addressing the challenges that had been flagged.

The meeting was adjourned.

 

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