Department of Public Works 1st Quarter 2015/16 performance

Meeting report

First Quarter non-financial performance

Mr Imtiaz Fazel, Deputy Director General (DDG), DPW, said that the service-orientated Public Works Department (DPW) was delivering value and contributing to the agenda for social and economic development.

Five strategic goals had been identified by the Minister for DPW:

• Creation of six million work opportunities through the Expanded Public Works Programme (EPWP);
• Operationalisation of the Property Management Trading Entity (PMTE);
• Operationalisation of the Governance and Risk Compliance branch to fight corruption;
• Review policy, looking at provinces to create a Public Works White Paper and Act;
• Transformation of the built environment.

Main features of the Department’s performance for the period were:

Programme 1: Administration

• Reduction in irregular expenditure by 44%.
• Payment of invoices within 30 days -- 94% compliance.
• Vacancies were funded and prioritised at 100%.
• Skills development programmes – 1 237 beneficiaries participating in DPW programmes.
• Investigations of corruption initiated within 30 days --100% (9/9).
• Fraud and corruption cases reported -- 100% (3/3).

Programme 2: Intergovernmental Co-ordination

• Accountability management committee to drive compliance.
• Five-year strategic plan and annual performance plans (APPs) developed.
• Service delivery improvement planning and monitoring developed.
• Quarterly monitoring and evaluations in place.
• Annual strategic and operational processes in place.

Programme 3: EPWP

• Work opportunities – 222 564 out of a target of 300,000 reported.
• Another 6 900 work opportunities created through labour-intensive approaches.
• 1 428 beneficiaries trained through the National Skills Fund.

Programme 4: Property & Construction Industry policy regulations

• Public Works white paper research had been developed.
• Bill to manage the disposal of immovable assets was under way.
• A Public Works General Laws Amendment and Repeal Bill was in progress.

Programme 5: Prestige Policy

• Prestige events – four of six events supported and developed.
• Service Level Agreements (SLAs) have been completed.

Property Management Trading Entity (PMTE) Performance

Programme 1: Administration

• Debtors’ balance -- 65.5% of invoices issued during this quarter collected within 60 days.
• Payment of invoices within 30 days -- 73% compliant.

Programme 2: Real Estate Investment

• Created a user demand management strategy;
• Planning and precinct development services;
• Preliminary investment decisions -- 80% of the investment decisions approved within three months, against a 75% target.

Programme 3: Real Estate Investment

• 3 841 work opportunities created through construction projects.
• 23 projects completed within agreed construction period (target 16).
• 23  completed within budget (target 16).

Programme 4: Real Estate Management

• 99% lease agreements reviewed.
• 40% of leases renewed before expiry date.

Programme 5: Real Estate Information and Registry Services

• Verification of real estate assets -- 0%.
• Conveyance -- 0% verified.
• Coastal reserve -- 0% verified.

Programme 6: Facilities Management

• There was a 18 065 kwh reduction in energy consumption.
• There was zero reduction in water usage.
• 30% efficiency for unscheduled maintenance.
• 1 915 work opportunities created through maintenance programmes.

Challenges included the appointment of service providers where certain scarce skills were required, capacity and budget constraints, and meeting energy and water efficiency targets as part of the green building programme. Successes included implementation of a turnaround strategy in construction projects, an improvement in the organisational structure at the DPW and PMTE, and there had been greater accountability through governance structures and an increased drive towards achievement of EPWP targets.

Discussion

Ms A Dreyer (DA) queried the non-compliant invoices, asking how many there were. How did the DPW prioritise the vacancies when there had been a freeze on employment? Were there only nine fraudulent cases -- this number looked very suspect, given the former DG’s declaration that corruption was extremely rife in the Department? Why had only 6 900 work opportunities been created -- why was this so low? Did funerals fall under prestige events? Was there a policy for state funerals? Did the asset register include property in foreign countries?

Mr M Filtane (UDM) stated that the DPW had given a general overview but nothing specific. The Committee wanted more detail, and there was no point of reference. He asked what “decent employment” was. How was the DPW tackling transformation? Was there a follow through when the EPWP workers had been given skills? Could they be absorbed? Did workers know that the jobs were temporary in the EPWP? Why was there no request from Operation Phakisa during the quarter? Why were there problems with the appointment of service providers?  The scarce skills had not been discussed properly. He requested an interim report showing the specific report details.

The Chairperson asked what the scarce skills were that had been referred to in the presentation. The DPW could not be crucified entirely for Operation Phakisa -- it was a multi-departmental programme.

Mr K Sithole (IFP) asked how many workers would be temporary and how many would be full-time jobs within the six million to be created. Why were there capacity issues? Why had only 6 900 jobs beencreated? Accreditation had not been dealt with when discussing training programmes.

Ms P Adams (ANC) asked what the timelines were for the policy review and the development of the Act. The Committee needed a baseline to work off. How could the DPW set such a low target of a 5% reduction in irregular expenditure? What steps were the DPW using to set targets? What happened with the other 6% of invoices not paid within 30 days?  Where were the external transfers going to, what were the promotions for, and how many vacancies had been funded and prioritised? What was the DPW’s plan for the interns? What were the reasons and extent of the transgressions in corruption and fraud? What was the reason behind the over-achievement within the EPWP? The DPW should state how far they had progressed with the research papers. Why did debtors have 60 days? Why did the DPW not go out and find projects for Operation Phakisa? What was the DPW doing about the shortage of skills in verification and conveyance? Why was there a zero reduction in water usage?

Ms E Masehela (ANC) asked what the DWP was doing to assist with the payment of invoices. Why were some of the EPWP projects being discontinued in the provinces? What was the DPW doing to address the issue of capacity? Subcontracting could often result in a dilution of services and abuse -- how was the DPW preventing this? Why was the DPW team made up of mostly males?

Mr Fazel responded that the nine and three cases were not the extent of the corruption. There were over 300 cases pending. There were four proclamations with the Special Investigating Unit (SIU).  There were a number of leases under investigation. The refurbishment of ministerial houses was under investigation. A number of referrals were with the SA Police Service (SAPS). The DPW had an anti-corruption unit that had won a corruption case. The DPW was well on its way to curbing this problem. The Independent Development Trust (IDT) was undergoing a reorganisation at the moment. The IDT had developed its own business formula to be self-sustaining. The PMTE used to be housed in Programme 2, but it now had its own section. The white paper timeframes would be provided.

Mr Cox Mokgoro, Chief Financial Officer (CFO), said that the IDT would be getting its last amount from Treasury and would be self-sustaining going forward. They were running a programme to investigate irregular expenditure. The target had been set so low due to a conservative mindset, and the large amount of irregular expenditure totalled over R500 million. The target would be adjusted going forward. Invoices that were non-compliant were not tracked -- this is why there was a difference between the target and the achievements. The majority of the invoices not paid were related to maintenance. The Department had set up a system to manage invoices. Scarce skills required included quantity surveying, property management, economists, water scientists and engineering skills,

Mr Mziwonke Dlabantu, Director General, DPW, said that because of the large number of projects that they were dealing with, the IDT would be used and allocated projects. If the community was not engaged from an early stage, projects could be blocked from moving forward. The plea had been heard, and when the DPW reported again, they would use actual numbers and provide baselines. All roads fell under provincial management, and if there were any specific issues, they could forward them to the DPW for comment. Operation Phakisa was a multi-departmental project, and the DPW dealt with the leases for those businesses that were being developed. The DPW had around 36 projects they were dealing with in this regard. The DPW had a small harbour unit that was dealing with harbour-related projects. The abuse of subcontractors was normally around delayed payment, and the Department had guidelines for this process. There was an appeal process if there were any issues subcontractors needed to resolve.

Mr Pietro Chiapasco, Acting Deputy Director General: Asset Investment Management, DPW, said that up to 1999, state-owned properties abroad fell within the DPW. Since 1999, the foreign assets abroad had been monitored by the Foreign Services Department, although the disposal still lay with the DPW.

Mr Stanley Henderson, DDG, EPWP, said that the job opportunities reported was a quarterly figure for the EPWP. 183 609 work opportunities had been created in urban areas and 19 868 in rural areas, to make up a total of 222 564. The 6 900 had been an error in the presentation. These jobs were project linked -- they lasted as long as the project lasted. These projects could be renewed going forward. The jobs were not permanent. The job targets were linked to an analysis of the budgets and how many jobs could be created with so-many million rand. The overachievement in training was due to greater efficiency in the training of beneficiaries. Maintenance projects could be ongoing. Decent work was defined by the United Nations in terms of equity, freedom, security and human dignity; it should provide social protection and an income, including prospects for development.

Mr Clive Mtshisa, DDG, Corporate Services, said that the DPW had been separated from the PMTE. On vacancies, the Department had a large vacancy rate and a small budget. The Minister guided the process around where the priorities lay for vacancies. At the moment, the PMTE was the focus. Regarding the three fraud and corruption cases, one involved a brother receiving money from a DPW employee for a car, and the other two related to service agreement corruption.

Mr Nkosi Vilakazi, Acting DDG, responded to the transformation queries. The DPW had a programme where workers were taken through technical, construction and management training, to a National Qualifications Framework (NQF) level 4 certificate. This was happening in partnership with municipalities. There were around 300 people going through this programme at the moment. It focused on women, the disabled and youth.

Mr Mzwandile Sazona, coordinator for Prestige Projects, said that the prestige services were regulated by the ministerial handbook. The funeral policy also followed this handbook. The DPW had realised that they needed some funeral infrastructure so that they did not have to rely on private firms, especially in the rural areas. They had employed someone for the research component of these new policies, which would be finalised in a month.

Ms S Matthews, DDG for DPW, said that a new branch had been set up for immovable assets. The zero percent for verification did not mean that no work had been done. As at 31 March 2015, the DPW had identified 30 000 plus land parcels. 160 to 200 properties had been looked at. A lot of work had been done on pilot projects. The actual mapping of the coastal reserves fell under the Surveyor General’s department.

First quarter financial performance

Mr Mokgoro said that the budget had been R6.4 billion for the first quarter, while actual expenditure had been around R1.9 billion, or 30%. The transfers spike had been due to the change around the PMTE moving. R5.5 billion had been budgeted for transfers, with R3.5 billion going to the PMTE. The EPWP had been allocated R1.7 billion. R1.6 billion of the total budget had been spent at the Q1 stage. 59% of the budget had been allocated to property and construction, and industry policy research.

Total revenue for the PMTE had been R10.9 billion. R4.7 billion had been claimed to date, or 43%. Actual payment to date had been R2.2 billion. Expenditure had been R2.3 billion and the actual amount paid was R1.9 billion. Compensation of employees made up 12% of the total budget, or R1.2 billion. Goods and services were around R7.3 billion. Within this, leasing made up about R4.1 billion, while refurbishment, repair and maintenance made up R3.1 billion.

R733 million had been allocated for capital infrastructure projects. The operating model did not work currently, with the DPW paying within 30 days but being paid only within 60 days. The DPW was in discussion with Treasury to get departments to pay within 30 days, and to have an advanced billing system. R136 million for accommodation was over 60 days. For outstanding invoices, the Department was sending letters of demand, meeting with client departments, physically verifying leases and billing in advance.

Discussion

Ms A Dreyer said that the PMTE had received disclaimer after disclaimer from the Auditor General (AG). She asked whether the CFO felt comfortable moving the heart of the DPW to this dysfunctional unit.

Mr Sithole queried the inner city regeneration project, asking why there had been no progress around it. What was happening in Tshwane?

Mr Filtane asked why nothing had been spent on the Construction Education and Training Authority (CETA). The DPW had a reputation of not looking after its properties. What was happening with the Umtata office? How did the DPW measure return on investments? The presentation had referred to interest free finance -- why had it been provided? Why were MPs charged such a low amount for rent on DPW properties?

Ms Masehela asked what was happening with rural payments and municipalities. 

Ms P Adams asked about the invoice tracking system -- had it been included in the figures? What was happening with the exchange rate against the pound and the overseas grave maintenance payments? There was a large leasing problem -- what was being done by the DPW?

Mr Mokgoro responded that the PMTE was being moved in order to professionalise and make it more efficient. It had initially been moved as a trading entity within the DPW. Two years ago, it had been decided to operationalise the PMTE. The disclaimers had been removed. The qualifications had followed, but the Department had improved and the qualifications would be reduced. Large amounts of expenditure would be directed to inner city regeneration. The service providers had been finalised in May this year. Commonwealth graves needed to be maintained. The transfer to CETA will be in the third quarter. The DPW would need to encourage payment of invoices. All municipalities were being looked at to pay urgently. The tracking system had not yet been included in the figures. The DPW was getting closer to understanding the reasons for the clients’ non-payments. Treasury mediates and assists the DPW. Leasing had been targeted, and the DPW had substantiated the leases.

Mr Dlabantu said that the DPW’s measure of return on investments was not based on profit, but on being able to maintain and replace assets, deliver great service and create jobs. All the while, the cost to the Government had to be reduced. The war graves were vital to be looked after. The one in the Eastern Cape for the ship “Many” would be looked at.

Mr Mtshisa said that the challenges at Mthatha had stabilised now. They had undergone four investigations.

The meeting was adjourned.