Financial performance of the Department of Public Works for period April – September 2010; Progress Reports on Legislation and Charters

Public Works and Infrastructure

25 October 2010
Chairperson: Mr G Oliphant (ANC)
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Meeting Summary

The Department of Public Works reported that it had spent 47% of its adjusted budget for the compensation of employees.  In the economic classifications of goods and services, office accommodation, and infrastructure, the Department had under spent according to the National Treasury Bench Mark. On the Auxiliary and Associated Services Programme the Department had over spent due to unforeseen circumstances. The Department assured the Committee that the figures of spending would drastically change in the third quarter in some areas.

As of the 30 September 2010 the Property Management Trading Entity was in deficit and its bank balance was overdrawn. Property rates, Maintenance and Municipal Services were in arrears. The total Client Capital Budget was R2.23 billion and only R1.08 billion was spent to date. Meetings with the clients (Governmental Departments) in terms of paying their debts to the Department had been concluded and the Department was waiting for the sign off from some of them.
           
The Department explained that it was working on the Agreement South Africa which had been established through a delegated authority by the then minister of Public Works in 1969. There was an extensive consultation between the Department and the stakeholders which led to the conclusion that the mandate of Agreement South Africa had to be extended and a business case for the establishment of Agreement South Africa as an independent legal entity had to be developed. This Business Case would also be submitted to National Treasury for approval of the creation of a public entity; thereafter a bill would be drafted which would be tabled to Parliament during the second term of 2011.

The Department said that the Expropriation Bill had been tabled to Parliament in March 2008 after the Expropriation Act 1975 (Act No. 63 of 1975) was reviewed in 2007/08. A finalised draft bill would be submitted to the Director-General Cluster, Cabinet Committee and Cabinet for approval so to be tabled in Parliament in mid-2011 after being duly certified by the Chief State Law Adviser. The Government Immovable Asset Management Act 2007, Act No. 19 of 2007 was enacted after the Cabinet mandated the Minister of Public Works in 2005 to develop a policy framework to govern the management of immovable assets throughout Government and to implement that policy by means of legislation.

The Department gave an introduction on the Construction Sector Charter which was gazetted in terms of Section 12 of the Broad-Based Black Economic Empowerment  Act 2003 (Act No. 53 of 2003) in July 2006.This Charter was signed as an industrial commitment to support the transformation of the Construction Sector. The Construction Transformation Charter Group, which was the Stakeholder group that represented funding members of Broad-Based Black Economic Empowerment, submitted an application in terms of Section 9 (5) of the Broad-Based Black Economic Empowerment Act 2003 to Department of Trade and Industry and was supported by the Minister of Public Works. In May 2009 the Construction Sector Charter was gazetted in terms of Section 9 (5) of the Broad-Based Black Economic Empowerment Act 2003.

In the next meeting of the Construction Transformation Charter Group that was scheduled for the 3 November 2010, a draft of the Construction Sector Constitution would be approved. Government representatives in the Council would be from the Departments of Public Works, Transport, Public Enterprise and Co-operative Governance and Traditional Affairs. The Chairperson of the Council would be appointed by Minister of Public Works.

The Property Sector Transformation Charter was gazetted in terms of Section 12 of the Broad-Based Black Economic Empowerment Act 2003 in October 2007. The aim of the Council was to promote the transformation and black economic empowerment within the property sector of the South African economy. Members of the Charter Council were elected from National Department of Public Works, industrial associations, the Regulators and the National Economic Development Labour Council. A board of 13 members had been appointed to manage the affairs of the Council. An application to the Minister of Trade and Industry by the Property Sector Transformation Charter supported by the Minister of Public Works had been submitted requesting the Charter to be gazetted in terms of Section 9 (5) of the Broad-Based Black Economic Empowerment  Act 2003 and was gazetted for comments in October 2010.

 

Members asked whether the Department would be compensated by National Treasury for over spent funds incurred when it had prepared for a state function, why the Department spent only 13% on the funds allocated for rural development, whether the 47% used in salaries included the recent approved strike increment, requested the list of the top ten projects from the Department, wanted clarity on the Government Immovable Asset Management Act, were very impressed with the progress of the charters, and congratulated the Departments on a job well done.

Meeting report

Department of Public Works. Presentation

Financial performance April – September 2010

As at the 30 September 2010, the Department of Public Works (DPW) had spent 47% of its adjusted budget for the compensation of employees, which was an underspend of 3% of the half-year’s adjusted budget.  In most of the economic Classifications like Office Accommodation and Infrastructure the Department had under spent according to the Bench Mark. On the Auxiliary and Associated Services Programme the Department had over spent due to unforeseen circumstances. The Department also had under spent on Budget and Expenditure in most of Branches and Regional Offices.

However, Ms Cathy Motsisi, Chief Financial Officer, Department of Public Works, assured the Committee that the figures of spending would drastically change in the third quarter. There were funds that had not been used or had been transferred to other functions of the Department like the Construction Education and Training Authority (CETA), and Distress Relief, Loskop settlement. The Department had spent 90% of the allocated funds on boundary fencing.

As of the 30 September 2010 the Property Management Trading Entity (PMTE) was in deficit and its bank balance was overdrawn. Property rates, maintenance and municipal services were in arrears. The Department’s Capital Budget consisted of 430 projects which made a total allocation of R 1.4 billion. The top ten projects in terms of total cost accounted for R370 million of the allocation and only 32% of the funds allocated had been spent. All the projects on the list were in the construction stage (status 5B).

The total Client Capital Budget was R2.23 billion and only R1.08 billion had been spent to date. A realignment budget was done during September 2010. Meetings with the clients (Governmental Departments) in terms of paying their debts to the Department had been concluded and the Department was waiting for the sign off from some of them. The Client Capital Budget consisted of 610 allocated projects which made a total allocation of R2.230 billion. The top ten projects in terms of total cost accounted for R888 million. All the projects on the list were on status 5B. All these projects were being executed on behalf of the Departments of Correctional services, Justice and Constitutional Development, Defence, and Police Services. The project with the highest value was in Cape Town. 57% of the budget allocation to the ten projects had been spent and this was an indication that all the funds would be spent by the end of the financial year.

Departmental Progress Reports on Legislation and Charters
Mr Mandla Mabuza, Deputy Director-General, Department of Public Works, explained that the Department was working on the Agreement South Africa (ASA) which had been established through a delegated authority by the then minister of Public Works in 1969. The Department of Public Works had reviewed governance of ASA as well as its performance and effectiveness which revealed that ASA lacked legal status and that its reporting to the Minister of Public Works and Minister of Science and Technology at the same time had hampered its effectiveness in the discharge of its mandate. There was an extensive consultation between the DPW and the stakeholders which resulted to the conclusion that the mandate of ASA had to be extended and a business Case for establishment of ASA as an independent legal entity had to be developed.

The legislative plan was that after approval by Minister of Public Works, the business

case would be submitted to the Joint Committee of the Ministries of Finance and Public Service and Administration, called JEC, for the establishment of ASA as a Schedule 3 entity. This business case would also be submitted to National Treasury for approval for the creation of a public entity; only then would a bill be drafted which would be submitted to Parliament during the second term of 2011.

The Department said that the Expropriation Bill had been tabled to Parliament in March 2008 after the Expropriation Act 1975 (Act No. 63 of 1975) was reviewed in 2007/08. Public hearings on the Bill were held by Parliament during May to June 2008.The essence of the review was to align the Act to the relevant provisions of the South African Constitution and to prescribe uniform procedures in all three spheres of Government to expropriate property. Upon completion of Department’s requisition of a Regulatory Impact Assessment (RIA) a draft bill would be submitted to the relevant Director-General Cluster, Cabinet Committee and Cabinet for approval so it could be published for public comment and be submitted to the National Economic Development and Labour Council (NEDLAC) for comment. A finalised draft bill would be submitted to the Director-General Cluster, Cabinet Committee and Cabinet for approval so as to be tabled in Parliament in the middle of 2011 after being duly certified by the Chief State Law Adviser.

The Government Immovable Asset Management Act 2007 (GIAMA) (Act No. 19 of 2007) was enacted after the Cabinet mandated Minister of Public Works in 2005 to develop a policy framework to govern the management of immovable assets throughout government and to implement that policy by means of legislation. GIAMA was applicable only to national and provincial departments. Departments which used and performed caretaker functions on immovable assets were required to compile an annual asset management plan. National and provincial departments were also obliged to compile the annual immovable asset management plan as prescribed in the Public Service Act 1994 (Act No. 54 of 1994) and Public Finance Management Act 1999 (Act No. 1 of 1999) while in terms of the Municipal Systems Act 2000 (MSA) (Act No. 32 of 2000) local government was obliged to prepare an integrated development plan (IDP) which served as the principal strategic management planning instrument.

A different approach ought to be followed if GIAMA principles were to be applied in local government. The DPW had engaged with National Treasury to explore the possibilities of extending application of GIAMA to local government. This extension could only happen if local government regulations could be added, amended or a new legislation could be developed. The DPW would be engaged continuously with the Department of Cooperative Governance and Traditional Affairs on this matter and would update the Portfolio Committee on Public Works.

Mr Mabuza gave an introduction on the Construction Sector Charter which was gazetted in terms of Section 12 of the Broad-Based Black Economic Empowerment (BBBEE) 2003 (Act 53 of 2003) in July 2006.This Charter was signed as an industrial commitment to support the transformation of the Construction Sector. The Construction Transformation Charter Group (CTCG), the Stakeholder group that represented funding members of BBBEE, submitted an application in terms of Section 9 (5) of the BBBEE Act 2003 to the Department of Trade and Industry and they were supported by Minister of Public Works. In May 2009 the Construction Sector Charter was gazetted in terms of Section 9 (5) of the BBBEE Act 2003.

In the next CTCG meeting scheduled for 3 November 2010 a draft of the Construction Sector Constitution would be approved. Founding Members of the Construction Sector Charter were currently in a process of nominating representatives and alternative members of the Charter Council. Government representatives in the Council would be from the Departments of Public Works, Transport, Public Enterprise and Co-operative Governance and Traditional Affairs. The Chairperson of the Council would be appointed by Minister of Public Works.

Mr Mabuza said that the Property Sector Transformation Charter was gazetted in terms of Section 12 of the BBBEE Act 2003 in October 2007. The Property Sector Transformation Charter Council (PSTCC) which had to oversee the implementation of Property Sector Charter was established under Clause 4 of the Property Sector Charter. The aim of the Council was to promote the transformation and BEE within the property sector of the South African economy. The Council was represented by members from all constituent bodies and stakeholders in the property sector and was supported by the executive management team which had significant skills, expertise and experience in the property sector. Members of the Charter Council were elected from national Department of Public Works, Industrial Associations, the Regulators and the National Economic Development Labour Council (NEDLAC). A board consisting of 13 members had been appointed to manage the affairs of the Council. An application to the Minister of Trade and Industry by PSTCC supported by the Minister of Public Works, had been submitted requesting the Charter to be gazetted in terms of Section 9 (5) of the BBBEE Act 2003, and it was gazetted for comments in October 2010.

Discussion
Mr K Sithole (IFP) wanted clarity at if the Department was going to be compensated by National Treasury on the over spent funds when they prepared for a State Function. He also wanted to know why the Department spent only 13% on the funds that were allocated for rural development.

Ms Motsisi stated that DPW requested R8.8 million from the National Treasury for over expenditure but it was not approved so the Department had to get the funds from elsewhere.

Ms Sasa Subban Deputy Director-General, Asset Investment Management, Department of Public Works, explained that the 13% used in rural development was for office accommodation and construction upgrading.

Mr W Doman (DA) wanted clarity as to whether the 47% used in salaries included the recent approved strike increment.

Ms Motsisi confirmed that increment was not included but the Department had R28 million which was going to cover the increment.

Ms N Ngcengwane (ANC) requested the list of the top ten projects from DPW.

Mr Stanley Henderson, DPW, assured the Committee that the figures would drastically change as they were going to spend and transfer a lot of money on the third quarter.

Members were not pleased that progress was slow with GIAMA and they believed that DPW was giving them lame excuses.

Mr Doman wanted clarity as to who would administer GIAMA.

Mr Mabuza stated that it would be DPW.

Ms N Ngcengwane (ANC) wanted to know exactly when the GIAMA would be passed.

Mr Sithole wanted clarity as to why options stated in page 28 of the Report were not tried out.

Mr Mabuza explained that the options could only be implemented after the bill was passed.

The Committee was very impressed with the progress of the charters and congratulated DPW on the job well done.

The meeting was adjourned.

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