Department of Public Works on its Second Quarter 2011 Report

Meeting report

Opening comments by the Minister
The recently-appointed Minister of Public Works, Mr Thulas Nxesi, was invited by the Chairperson to address the meeting prior to the scheduled presentations, as he had to leave to attend another Parliamentary meeting.

The Minister said that in preparing the presentation, he had impressed on the officials the need for them to be open and honest with the information provided to the Committee. This was the new culture which was needed to turn the Department around. All the senior officials had been involved in a three-day strategic planning session, concentrating on the challenges and identifying the issues to be tackled in the short, medium and long term. In the short to medium term, these were the DPW’s finances and its response to the audit report, aspects of the reports of the Special Investigating Unit (SIU) and the Public Protector, as it made sense to “clean up the mess” before looking further ahead.

He pointed out that the delegation appearing before the Committee comprised the Director General (DG) and seven Deputy Directors General (DDGs), which placed a heavy financial burden on the Department. He asked if future meetings could perhaps be held more frequently, but with fewer issues so that fewer officials needed to be involved.

The Chairperson agreed that the Committee would consider this proposal.

Parliamentary Villages and Ministerial Houses presentation
Mr Peter Chiapasco, CEO of Prestige Property Management, gave a presentation on the activities of this body which, under the umbrella of the DPW, is responsible for providing and maintaining the office and residential accommodation of the Presidency, Presiding Officers, Ministers, Deputy Ministers and Members of Parliament.

He provided details of the procurement process followed in the selection, sourcing and purchasing of furniture for residences in the parliamentary villages. Items were selected by the interiors designers to ensure standardisation and uniformity, and were ordered after quotations had been received and the choice of a supplier had been approved. If there were items of furniture which needed to be disposed of, these were moved to a holding store from where they could be donated to “good causes” or transferred to another department.

The Parliamentary Villages Management Board was responsible for the transportation of Members of Parliament, sessional officials and learners to various schools. The service providers were Springbok Atlas and African Wildcats Charters and Tours.

The facilities management company was responsible for the upkeep and maintenance on a day-to-day basis, covering areas such as locksmith services, plumbing, electrical, minor construction work, carpet cleaning, household appliances, alarm systems, pest control and normal cleaning.

Mr Chiapasco advised the Committee that furniture was expected to last at least five to seven years before it would be replaced, but experience had shown that in some official residences, the lifespan was reduced to three years owing to changes in Cabinet appointments, or damage to property due to negligence. The purchasing of furniture for parliamentary village residences was done “in bulk” for the sake of uniformity and to receive volume discounts.

Discussion
The Chairperson said she was not happy with the state of Acacia Park, for several reasons. She felt that everything that was not needed was just “dropped there,” and she did not consider it a suitable place for “honourable members” to stay. She said there was a house where outsiders were moving in and making themselves comfortable, and a small child had died and a small coffin containing the ashes had been found there. She asked how safe children were in this environment, and also referred to numerous break-ins in the village. Pest control was a problem, with cockroaches infesting refuse bins. The appearance of the frontage to Acacia Park needed to be improved through clearing the area in front of the bridge. Paper and plastic debris needed to be cleared away, but she had been told this was the municipality’s responsibility. She had also seen garden service providers using stolen supermarket trolleys to transport their equipment, which made her concerned for the safety of residents’ own belongings.

Ms C Madlopha (ANC) said there did not appear to be “standardisation and uniformity” as far as facilities for the different parliamentary villages were concerned. For instance, Pelican Park had no sports fields for children, while Acacia Park did. There was also a bad smell which frequently emanated from a dam near Pelican Park, so that doors and windows had to be kept shut. Flies were a problem. Baths, and bathrooms, were in a poor condition, and she wanted to know who carried out inspections of the facilities.

Mr L Gaehler (UDM) supported Ms Madlopha, and said people should not be accommodated in houses which had stained mattresses and couches, and where curtains were missing. Despite fumigation, there were cockroach infestations.

Mr P Mnguni (COPE) said that according to his culture, he could not sleep in someone else’s bed, and had wanted to buy his own bed. He was told this was not allowed, and now he could sleep only two hours a night.

Mr N Magubane (ANC) asked how frequently fumigation was supposed to be carried out, as he had never seen this being done at Acacia Park in the 18 months he had been there.

Mr Fred Johnson, Regional Manager for the DPW, said all the concerns raised by members would be investigated and addressed. He said all the illegal residents had been evicted from the domestic quarters, and the area would be kept clean on a regular basis. The SA Police Service (SAPS) had been asked to increase the number of patrols in the Parks, to reduce burglaries and provide more safety for the children. In the past, pest control had been carried out when requested by residents, but the facility management contracts would in future specify that it should be handled on a quarterly basis. Special attention would be paid to resolving the cockroach problem at Pelican Park. The municipality had made a commitment to clean up the area in front of Acacia Park, as mentioned by the Chairperson, but if there were any further delays, the DPW would deal with the matter itself and recover the costs from them. The supermarket trolleys would be removed and steps taken to ensure service providers had the necessary vehicles to move their equipment around. The municipality had undertaken to clean the dam at Pelican Park regularly, to reduce the smell. Referring to maintenance issues, Mr Johnson said the policy with stained mattresses and couches was to deep clean them, but if this did not work, to replace them.

Mr Mandla Mabuza, the Acting Director General, said the facilities management contracts for both Cape Town and Pretoria would be ending in January or February next year. A firm decision had been taken not to pay any final accounts until a thorough inspection had been carried out, and all the concerns raised by members had been attended to.

Mr Gaehler said the question of Ministers’ residences had received widespread media coverage, and he suggested that when a Minister was replaced by another, the vacated house should be inspected to ensure it was in good condition. This would help to eliminate the large amount spent on providing hotel accommodation. He asked whether Ministers were allowed to choose their own furniture.

Mr Magubane commented that there should be no difference in the policy regarding the provision of furniture for Ministers or MPs, as a lot of money was being “wasted for nothing.”

Mr Mabuza said the Ministerial Handbook laid down that when Ministers left office, they had 30 days in which to vacate their official residences. However, the Minister of Public Works could approve extensions of up to 90 days, based on their personal circumstances. Once this period expired, the DPW would send in a professional team to conduct an inspection of the house and check on the movable assets inside the house. It was not automatic that the new Minister would receive new furniture – this had happened only when the Cabinet was expanded in 2009.

Mr K Sithole (IFP) complained about frequent water supply problems at Acacia Park. The Chairperson followed up by asking when Acacia Park would have its own electricity and water supply, currently supplied via the Defence Force facility.

Mr Johnson replied that a consultant had been appointed a year before to investigate the direct supply of water and electricity to the Park, and the investigation would be completed by the end of the year.

Mr Sithole asked how much furniture was disposed of by means of donation, and who the recipients were.

Mr Mabuza said the disposal policy was determined by the provisions of the Public Finance Management Act (PFMA). This provided for any member of the public, in the interests of social development, to apply to the DPW for donations of furniture earmarked for disposal. This benefited poor schools and orphanages, for instance.

Mr Johnson told members that furniture had been donated to the following institutions this year: Pelican Park High School, the Department of Human Settlements, the Department of Health, a children’s hospice, Red Cross Children’s Hospital, the DPW’s regional office in Mthatha, and the Department of Social Development.

Ms P Ngwenya-Mabila (ANC) asked what had happened with the project to provide access cards for the children of residents, in order to control movement in the villages.

Mr Johnson said access cards had been issued to the dependents of all members at the Parks, and SAPS had been asked to exercise improved control over movement in an out of the area.

Ms Ngwenya-Mabila said she did not believe old furniture in the homes of MPs was being replaced after five years.

Mr Johnson said all furniture had last been replaced between 2006 and 2008, when an extensive renovation programme had been carried out.

Ms Ngwenya-Mabila asked if transformation was considered when appointing transport service providers.

Mr Mabuza replied that transformation was considered in relation to both the transport and facilities management contracts. The facilities management contracts had been structured to include maintenance, events management, horticultural services, capital services, refurbishment and so on. This had created unexpected consequences, as the high cost of providing all these services – about R500 million altogether – effectively made it impossible for black entrepreneurs to compete for the business. In future, these services would be unbundled, so that the reduced monetary value would allow historically disadvantaged individuals an opportunity to participate.

Ms N Ngcengwane (ANC) asked whether the policy was to purchase furniture direct from shops, or whether a “middle man” was involved in the process. The Chairperson said she had heard a “middle man” was involved, and that this had the effect of doubling or tripling the cost.

Mr Mabuza conceded that the use of a “middle man” had cost the state a significant amount of money. It was realised that some of the services provided by “middle men” could be handled internally, so it had been decided to purchase movable assets, including furniture, from next year without the intervention of a “middle man.”

Ms N November (ANC) proposed that members of the Committee should set aside a day to visit a parliamentary village in order to see the conditions there for themselves.

Mr J Steenhuizen (DA) asked whether there was a register of Ministerial houses, and if an annual report on their condition was done, as press reports indicated the DPW owned a number of very dilapidated houses that needed to be repaired. He also asked if auctions were held to dispose of redundant furniture.

Mr Johnson replied that redundant furniture was donated to worthy causes, and only furniture that was totally beyond repair was auctioned off. An accurate record of all furniture disposals was maintained.

Ms N Madlala (ANC) said the villages used to have “mayors” and regular meetings were held at which problems could be raised. She asked why these meetings were no longer held.

Mr Johnson said last year, each Parliamentary village had been visited and the election of village committees took place. These committee members were members of the board, and while the boards had not been active, the committees themselves were.

The DG said the DPW would respond to all the issues raised, and gave a commitment that the senior management of the Department would visit all the Parks to get practical exposure to the matters identified during the meeting.

DPW Second Quarter Performance Report
Ms Cathy Motsisi, Chief Financial Officer, presented the Department’s financial performance figures for the second quarter of the 2011/12 year.

She said the total budget allocation for the year was R7,8 billion, and expenditure to date was R4,2 billion, or 55% of the total, compared with only 45% for the same period last year. DPW’s expenditure on infrastructure – R426 million out of a budget of R1,4 billion – was only at 30%, which was below last year’s level.

Her presentation gave a detailed breakdown of expenditure by programme, by branch and by regional office.
One area of significant under-expenditure was the Expanded Public Works Programme, where the incentives for provinces and municipalities were running at only 20% of the full-year allocation. However, Ms Motsisi reported that submissions totalling some R150 million had been received in November, and would be paid out in the near future. State functions had resulted in an 18% over-expenditure, mainly as a result of the costs surrounding the funeral of the late Albertina Sisulu. No funds had yet been allocated to the updating of the Asset Register, but this would change with Ernst and Young having become involved in this project since the beginning of October.

Reporting on the financial performance of the Property Management Trading Entity (PMTE), Ms Motsisi said the organisation was in the “unhealthy situation” of having an overdraft of over R1,6 billion. This was largely as a result of having paid out R1,7 billion for leases for private accommodation, and receiving only R872 million so far from client departments. A breakdown of state-owned and private accommodation charges identified those areas where slow payment was contributing to the problem. Some departments had not paid any accommodation charges this year. In some cases this was due to staff turnover, where new personnel did not understand the system whereby the DPW paid the leases up front, and then invoiced the client departments to recover the expense. Another factor was that because of the state of the asset register, it was not yet possible to provide accurate billing to departments requiring itemised billing.

Mr Obed Molotsi, Acting DDG, Projects, presented the infrastructure expenditure report. The total budget of R6,4 billion was made up of three programmes – the clients’ capital budget, where the funds were contributed by the client departments, and the DPW’s capital and maintenance budgets.

The expenditure rate in the clients’ capital budget was lower than expected, largely owing to the performance of the Arts and Culture, Home Affairs and SAPS departments. Expenditure was running at 39% for the DPW capital budget, and 47% for the DPW maintenance budget. The main challenges were a three-month delay in the department’s tendering programme following a National Treasury directive in May, and problems in transferring rural land under traditional leadership so that SAPS projects could proceed.

Discussion
Ms Madlopha said the Auditor-General had found “material misstatements” in the DPW’s previous annual report, and sought an assurance that the department’s financial reporting was now in line with the AG’s requirements.

Ms Motsisi said the interim reports were compliant with the framework set out by the AG.

Ms Madlopha asked for comment on the fact that invoices were not all being settled within the 14-day targeted time.

Ms Motsisi said there was actually an over-achievement, as 98% of payments were handled within 14 days. This was without including information from the regions, as it had been received but not corroborated.

Ms Ngwenya-Mabila referred to the breakdown in accommodation charges, which showed the National Treasury, which should be setting an example, was one of the departments which had not yet made payment. She urged the DPW to follow-up on the non-payment situation.

Ms Motsisi said the DPW had engaged with National Treasury on the matter. She explained that private leases were entered into with private landlords when the DPW was unable to find suitable accommodation in its state-owned properties. The DPW used to invoice the relevant departments, based on information in the system. However, problems often arose because the information was not updated, or new lease agreements had not been entered, which meant the DPW had to reconcile the accounts before they were accepted by the client departments. The DPW now paid the landlords up front, and then claimed back from the client departments.

Ms Ngwenya-Mabila asked for an explanation for the over-expenditure by Prestige.

Mr Mabuza said three critical factors had contributed to the over-expenditure – the expansion of the Cabinet, an increase in official or special funerals, and a greater number of incoming state visits.

Ms Madlala said expenditure on infrastructure had slowed down, compared to the same period last year, and asked if the DPW could provide reasons.

Mr Molotsi agreed that there had been a 3% decline, but this was mainly due to external factors which had not been present last year. While the Department was hopeful that conditions would improve, it was possible it would fall short of its target. Currently, there were 344 projects out for tender, which would be awarded during the third quarter and would start in the fourth quarter.

Mr Steenhuizen asked how service providers were selected to care for the South African war graves overseas, and how the quality of service was monitored.

Mr Chiapasco explained that this service was provided by the Commonwealth War Graves Commission, and members with a shared historical interest in previous world wars made a joint contribution for the maintenance of the graves.

Mr Gaehler asked what was causing the review of legislation involving the Expropriation Act, the Built Environment, and the establishment of Agrément SA as a juristic person, to be delayed.

Ms Lydia Bici, DDG Policy, said this legislation involved an executive authority prerogative, and this required prior approval of policy. Further consultations had been necessary, but the Bills were now ready for submission to the Minister. Once he had given approval, the legislative process would be taken forward.

During the second round of questions, members raised issues involving the training of officials, the training and placement of youths in DPW projects, the updating of the Immovable Asset Register, the policy regarding internal promotions, skills shortages within the department, and implementation of the Expanded Public Works Programme in the Eastern Cape. Because of time limitations, it was agreed that the delegation would provide written responses to the Committee within 14 working days.

The meeting was closed.