Public Works Budget: Department briefing

Meeting report

PUBLIC SERVICE SELECT COMMITTEE
7 April 2005
PUBLIC WORKS BUDGET: DEPARTMENT BRIEFING

Chairperson: Mr R Tau (ANC)

Documents handed out:
Department of Public Works budget
Budget Preview Presentation

SUMMARY
In the Department of Public Works briefing, the Director-General noted that their two main challenges were the completion of the asset register and the ongoing struggle not to overspend. A significant shortfall between the budget requested for 2005/06 and that allocated, predicted a continuation of the problem. This left the Department with the difficult choice of deciding not to effect urgent maintenance or going ahead but being called before the Parliamentary Standing Committee on Public Accounts for overspending. Service delivery and improved capacity was another component which faced overhaul.

The briefing was followed by extensive questioning by the Committee on topics such as:
- the continued delay over the completion of the assets register
- national department debt to municipalities for rates and other services
- monitoring the Expanded Public Works Programme
- urgent maintenance of buildings such as prisons and police stations
- consequences of department overspending
- parliamentary villages
- identification of land for redistribution purposes
- restructuring the Department
- Black Economic Empowerment Charters for the construction and property industries
- lack of work ethic evidenced on oversight visits.

MINUTES

Department briefing
The Department Director-General, Mr James Maseko, cited key achievements of 2004/05 as being:
- clean-up of the asset register and acceleration of the vesting process;
- identification of unutilised properties for disposal;
- evaluation and review of the Emerging Contractor Development Programme (ECDP) and the Repair and Maintenance Programme (RAMP); and
- launch of the Expanded Public Works Programme (EPWP).

Previously the Department had had too many goals, causing a loss of focus. This had been changed to three main objectives, which were asset management, service and capacity.

A holistic maintenance plan, in conjunction with the Public Services and Administration Department, aimed at improving all government working spaces. The Pretoria Inner City Project (PCIP) would change the city of Tshwane into a true capital.

Some of the Department’s key initiatives were the Service Delivery Improvement Programme (SDIP) and the Leadership Way, involving the implementation of Batho Pele principles and transformation of a government department culture to a more service and client-orientated one. The Department would be finalising the Black Economic Empowerment Charters for the Construction and Property industries.

The Budget covered four programmes: Administration, Provision of Land and Accommodation, National Public Works Programme and Auxiliary and Associated Services.

Mr Maseko said the budgetary allocation was inadequate to fund the Department’s critical programmes. The Department had consistently overspent on its budget over the past few years. Certain services such as maintenance had to be cut to avoid overspending. The greatest shortfall in the budget allocation was in Programme 2 for the Provision of Land and Accommodation. This amounted to R1.642 billion. This programme included capital works and maintenance, leasing, municipal services, rates on state properties and administration of the budget. Most of these expenses simply had to be paid, in order to avoid dire consequences, leaving the Department with very little choice but to overspend on these items and renege on items such as maintenance. This in turn could lead to standards of health and safety not being met adequately.

The Department had received an additional allocation of R600 million in October 2004, in order to pay for rates and taxes, which had been in arrears.

Mr Maseko said the estimated maintenance backlog was R12.5 billion. The budget allowed for R9400 per facility for maintenance. The Department actually required R2.5 billion per year in order to maintain facilities at an acceptable level.

Discussion
Mr F Adams (NNP) asked when the assets register would be brought up to date and if the Department knew what assets it controlled. It did not set a good example for a National Government Department to be in debt to municipalities. It was not conducive to communities taking responsibility for their debts. He asked whether the Department monitored the EPWP, because many of these projects did not get off the ground and were not being implemented. Local government claimed not to have the funds for these projects. Mr Adams asked whether in the case of maintenance of buildings belonging to the SAPS and Correctional Services, it was not feasible to ask these Departments to take some responsibility for maintaining these buildings themselves. He commented that the state of some buildings was unacceptable and asked with what urgency the Department was facing the issue.

Rev P Moatshe (ANC) referred to the Department's presentation which identified the challenge of supporting provinces to better implement the classroom-building programme and asked whether there was information available on the classrooms being built in each constituency. He asked whether the Department would continue its trend of overspending rather than having budget rollovers. He asked whether there were any consequences for overspending and whether the amount overspent was balanced out at any stage. He referred to the Department’s function of providing financial assistance to Parliamentary Villages and said that in his experience there had been insufficient transport available to take parliamentarians home. He asked how the Department envisaged monitoring service levels, as per performance agreements, since he had personal experience of going to a Home Affairs office, where for fifteen minutes no one had been in attendance.

Mr L van Rooyen (ANC) was concerned about the asset register still being incomplete. The Department of Land Affairs had a shortage of land for redistribution purposes. He asked if the Department had identified any land suitable for this purpose. He asked where the capacity was needed in the Department, because this goal had been raised previously. Perhaps the problem would be better served through restructuring the Department.

He continued that at the Parliamentary Village of Acacia Park, water services had recently been cut because of non-payment. He asked how the Department could explain this when it was supposed to provide financial assistance in these instances.

Mr Maseko replied that the asset register was an ongoing process, which would unfortunately still take at least three years to complete. The Department had instituted a new system four years ago and they were assisting provinces to update their asset registers. The Department had earmarked R10 million out of this year’s budget to accelerate the completion of the asset register. This would involve the use of outside companies for certain services.

The Department had owed money to municipalities for many years running and the problem here was insufficient allocations from National Treasury. The Department had been allocated R600 million in October last year, specifically to settle such arrears. Municipalities and Local and Provincial Governments had submitted accounts to the total of approximately R1.2 billion to the Minister of Finance. Some of these claims could subsequently not be substantiated. Therefore the Department had paid out only R400 million in settlement of verified claims. This was not to say that he blamed municipalities for submitting erroneous claims, as the municipalities had been fraught with their own problems such as amalgamating systems.

Mr Maseko said there was a monitor for the implementation of the EPWP. He said municipalities sometimes did not understand the flow of monies, as the funding for projects did not come from some kind of fund similar to the RDP fund. Projects had to be accommodated within the budget of a municipality.
The current system for maintenance was not decentralised. Government Departments instructed the Department to do maintenance for them, as they were not permitted to use their budgets for this purpose.

The Department did not have information regarding the schoolroom projects according to constituency. It did have some information available on a provincial basis.

Mr Maseko said Departments were not permitted to overspend on their budgets and if they did so they were called to account. They had to give compelling reasons for overspending to the Parliamentary Standing Committee on Public Accounts. Reasons for overspending had to be 'unavoidable', in order for the excess amount not be deducted from the following year’s budget. Reasons considered avoidable and therefore not condoned, resulted in the excess amount being deducted from the next year’s budget. He admitted that overspending was the major problem faced by the Department. Mostly this spending was for municipal services, rates and taxes. The Department simply could not run the risk of clients being kicked out by landlords or services being cut. Regarding transport in Parliamentary Villages, Mr Maseko suggested that the residents committee of the village be informed of the problem, in order to resolve it.

Mr Maseko said the maintenance of certain war graves had been a function of the Department for many years and did not constitute a huge expense. Approximately R1.8 million was spent in order to maintain graves of soldiers of Word War I and II, here and around the world.

He agreed that monitoring would have to be improved, in order to ensure that staff fulfilled their obligations as per their performance agreements.

The vesting process had been undertaken together with the Department of Land Affairs. It entailed redesigning boundaries, aerial photography, deeds registration and confirming borders. Land identified for redistribution, as the result of a community land claim, was assessed to see whether it was suitable and otherwise claimants could be compensated for it instead.

The PICP was an urgent priority of the Department, since government buildings throughout the city of Tshwane were in an unacceptable state of dilapidation. Private-public partnerships would offer an avenue for finding sufficient resources to complete this project.

Capacity building was required in terms of all skills. The Department had restructured two years ago and currently was standing at a 27% vacancy level. Retraining was an ongoing process, as was changing business systems.

Mr Maseko said the amount of R600 million had not been arrived at by the Department itself. Municipalities had claimed R1.2 billion was outstanding of which half was allocated in October in order to settle those claims. There was therefore no inadequate accounting involved on the part of the Department.

Ms B Dlulane (ANC) said that asset registration had been an outstanding issue since 1997. She could not understand why the matter had not been finalized yet. Parliamentary villages in the former Bantustans were being vandalized, as it seemed no Department was taking responsibility or ownership of them.

Mr N Mack (ANC) referred to two points in the presentation stating the Department would resort to stopping services such as maintenance in order to curb overspending and imposing stricter measures to ensure staying within the budget. He asked if they would continue to cut back on maintenance. He said there was a rumour that Parliamentary Villages were too expensive to maintain and that Parliamentarians might receive a housing allowance instead.

Ms M Oliphant (ANC) suggested the Department set deadlines for asset registration in the provinces. She asked whether certain Departments were paying their debts to the Department for buildings built on their behalf.

Mr Tau said that progress had to be acknowledged. Last year narrowing the gap between the first and second economies was a priority. The issue of small emerging contractors versus big contractors was an aspect of this.

He asked when the BEE Charters for the Construction and Property industries would be finalized and whether war graves of former liberation fighters should not be maintained by the Department as well, as these graves constituted just as much a part of the country’s history as those of men fallen during the two World Wars.

Mr Tau questioned whether the practice of signing one’s own warning letter was legal according to labour law. Lack of work ethics was clearly an ongoing problem, as had been evidenced on oversight visits. Staff Members were not prepared to take responsibility for their duties. Payment of small contractors was a case in point where the contractor was sent from pillar to post for payment. He asked how the Department hoped to avoid the incidence of overspending.

Mr Maseko replied every department was permitted to overspend or under spend by a margin of one percent. The implications of overspending were serious. The Committee had to decide however, whether their measure of performance was based on the Department managing to stay within its budgetary limits or fulfilling its obligations properly. He was aware of the delays in payment of contractors, which should take only 21 days. This seemed to be a problem of systems and procedures. Contractors could not expect to be paid for work not completed satisfactorily.

The practice of signing one’s own warning letter was well within the law. He said the biggest problem in government was the lack of consequences. The principle of consequences had to be introduced, in order for incompetence and poor performance in government departments to be eradicated. He suggested parliament take a very strong stance on the matter. He said the Department had a regular forum with the Provincial Public Works Heads of Department in which these tough challenges were being confronted. The graves of liberation veterans were maintained by the Department of Arts and Culture and to some extent by the Department of Defence. This function was therefore split among departments. The deadline for the Construction and Property Charters was June 2005.

Mr Maseko agreed that the completion of the asset register was a most pressing matter and yet this could not change the fact that realistically the register would take at least another three years to complete. The problem was not as grave as it seemed, because the Department knew which buildings were allocated to which province. All assets in the Transkei area had been allocated to the provincial government of the Eastern Cape. Therefore the Parliamentary Villages referred to belonged to the Public Works of Provincial Government in the Eastern Cape. The process of vesting these properties required formally allocating them to the Premiere of Public Works of the Eastern Cape. This process involved the correct owner being assigned in the deeds registry. There was a small possibility that the property was fraudulently allocated to another owner in the deeds registry before 1994, in which case the Department would not have record of it. The chances of this having occurred were minimal, since a thorough registry had been completed of Bophutatswana assets, many of which had been located overseas and had subsequently been sold. The task of asset registry was massive. The provinces were not to be blamed for this, since they faced problems themselves. The only Department that could confirm ownership was the Department of Land Affairs at national level. Submissions from the provinces were made to the Department of Land Affairs.

The Department had to curb overspending and the only way it could do this was to stop providing certain services. Clearly R9400 per building for maintenance purposes was insufficient.

Mr Maseko said allegations regarding the cost of maintaining Parliamentary Villages and the possible closing down of such villages were unfounded. All buildings were expensive to maintain. The Portfolio Committee had merely asked for an analysis of maintenance costs. Properties in Cape Town were too expensive to make the alternative of a housing allowance viable.

Tenders would not be issued if the relevant services were going to be cut. Regional departments had to go through an analysis of which services would be cut, before initiating any cuts. The Department could not stop a contract midway, because it had decided to halt those particular services. Co-operation between National and Provincial Government would probably be the way forward in facilitating the completion of the asset register, rather than an instruction from the National Department to its provincial counterparts.

Client departments paid for new buildings out of their capital budget. The Department of Public Works was responsible for constructing these buildings on behalf of other departments. The Department paid for maintenance. Other departments were not entitled to use their budgets for maintenance. Should the Department of Justice require the building of a court, National Treasury would have to approve this in the budget of the Department of Justice and they would pay Public Works to build it on their behalf.

The Department practised a policy of paying for rates and taxes even if it meant overspending on their budget, because the consequences of non-payment were too serious to risk.

Ms Oliphant (ANC) said she was aware of the Department having built an Educare facility on behalf of the Department of Education, but not having been paid for it to date. She said the Northern Cape premier had mentioned a magistrate court which had been standing incomplete since 2000.

Mr Maseko said that he was not aware of this and that he would investigate the matter, which would require interaction between the National Departments of Justice and Public Works and did not involve the provinces. He said the building of schools posed major problems, as this involved an arrangement between Provincial Departments of Public Works and Education and did not involve national level interaction at all. Payment of contractors was often delayed because the Department of Education had not refunded the department of Public Works for the building of the school. A workshop had recently occurred including the Heads of Department of Education and Public Works, in order to improve co-operation. This would be followed by a meeting of the MECs of Education and Public Works, which would take place on the 18 April.

Mr Tau said he failed to understand why the Department was responsible for the maintenance of war graves, since the Department should surely be more concerned with the living. He felt the matter needed further debate. He thanked the Department for the presentation and asked for the outstanding information to be submitted before the budget was to be approved.

Committee Report on Provincial Visits
The Committee went through the Report Ms Oliphant pointed out spelling errors and agreed to adopt the report. Rev Moatshe seconded the motion.

Mr Mack said he agreed with the report but asked that the travel delays experienced by Members on the trip should be recorded as well.

Mr van Rooyen said the visit to the North West Commission and the briefing by councillors was not included in the report. He himself had made a comment that councillors had not been delivering and this comment had also not appeared in the report. Ms Dlulane said the delay had been due to technical problems.

Mr Tau said the report should perhaps include logistical aspects of visits, in order to ensure that they are recorded.

Ms Oliphant felt that logistics should not form part of the report, as the latter had to be debated in parliament. There should a separate report for logistics.

Mr Tau agreed and asked for adoption of the report including the necessary corrections and amendments.

Ms H Matlanyane (ANC) adopted the report.

Mt Tau asked whether the report should be debated.

Ms Oliphant said the report was long overdue as the trip occurred last year, and that perhaps the Chairperson should issue a statement.

Mr Tau said the report had raised various concerns, which had resulted in undertakings for follow-ups. These issues would have to be revisited.

The meeting was adjourned.