Expropriation Bill: consideration; DPWI & PMTE 2022/23 Annual Reports; with Deputy Minister

Meeting report

As this was the first meeting of the Select Committee in 2024, the Chairperson opened the meeting on the virtual platform with a welcome to all Members.

Noting that neither the Minister nor Deputy Minister of the Department of Public Works and Infrastructure (DPWI) was on the platform, Mr M Rayi (ANC, Eastern Cape) expressed his concern. He was concerned with the non-attendance of Minister Sihle Zikalala since his appointment. He also did not note any apology from the Deputy Minister either.

The Chairperson indicated to Mr Rayi that the Minister had been the first one to log in, but he would nevertheless register the concern. He questioned the whereabouts of the Deputy Minister from the parliamentary liaison officer.

The parliamentary liaison officer replied that the Deputy Minister had struggled to connect to the platform.

The Chairperson then outlined the agenda of the meeting. The meeting would begin with the Committee receiving a briefing on the C list of the Expropriation Bill.

Consideration of C-List of the Expropriation Bill [B23B-2020] (sec 76)

Ms Phumelele Ngema, Parliamentary Legal Advisor, took the Committee through the C list of the Expropriation Bill.

The C list had been submitted in December last year in the hope that Members would have had sufficient time to look through the document.

The C list referred to the attached document.

Adv Shaun van Breda, Senior State Law Advisor, reminded the Committee that the original C list had been presented on 6 December. Subsequent substantive amendments had mainly been made to clause 20.

Mr Sifiso Mdakane, Director-General, DPWI, assured the Committee the Department and its Chief Director of Policy had worked side by side with other Members in Parliament, and were satisfied with the bill. He hoped that the due processes would follow from here onwards.

Mr M Dangor (ANC, Gauteng) highlighted the issue of the timeframe. If the bill was sent back to the National Assembly (NA), it would again return to the NCOP.

Mr T Brauteseth (DA, KZN) sought clarity on that matter. He asked if the Select Committee would vote on the bill in this meeting, or whether it would send this bill back to the NA and vote when it was referred back to the NCOP again.

The Committee Secretariat advised that the Select Committee was going to accept, or not accept, the C list, which would then become the Department's version of the bill. The C list would then be sent to provinces, and the provinces would send the Select Committee their own final mandates on the bill. After that process, the Select Committee could adopt the bill for it to go to the House, and then be referred back to the NA. If the NA did not accept the changes proposed by the NCOP, only then would the bill be referred back to the NCOP. In that situation, both Houses may be subjected to mediation.

Ms Ngema corroborated on that point. She explained that since it was a s76 bill, the bill had to go through the NCOP process. Once the NCOP passes the bill with changes, the bill must be referred to the NA for concurrence before it is sent to the President for assent. As the NCOP had made changes, the bill had to go back to the NA for concurrence. Normally, if the NA accepted and proposed no changes, there would be no need to refer the bill back to NCOP again. However, if there was no concurrence, there would be other mechanisms, such as mediation, that Parliament needed to take.

The Chairperson then asked Select Committee Members to vote on the C list.

Those in favour included Ms M Moshodi (ANC, Free State), Mr E Landsman (ANC, North West), Mr Rayi, Mr Dangor, Mr M Mmoiemang (ANC, Northern Cape), Ms M Mamaregane (ANC, Limpopo).

Those who voted against the C list were Ms S Boshoff (DA, Mpumalanga), Mr Brauteseth, and Mr J Londt (DA, Western Cape).

The Select Committee adopted the C list and would now be sent to the provinces before the provinces provided their own mandates on the C list.

Briefing by DPWI and Property Management Trading Entity (PMTE) on 2022/23 Annual Report

Ms Bernice Swarts, Deputy Minister, DPWI, clarified that she had been on the platform since the beginning of the meeting. She appreciated the previous presentation on the Expropriation Bill with amendments. She was happy with the processes and hoped the bill would meet the timeframe before the end of the sixth Parliament.

Mr Mdakane, DG of the DPWI, made the Department’s presentation, which included the mandate and performance highlights of the Department and the PMTE. The Department (main vote) had achieved 85% of its key performance indicators (KPIs), while the PMTE had achieved 108% of its KPIs.

DPWI's financial performance

Referring to the financial performance, he said the Department had achieved an unqualified audit with findings over the past three financial years. It received R8.1 billion and spent R7.9 billion, with a variance of R242 million.

The under-spending by R82 million on the compensation of employees (CoE) remained a concern.

The under-spending on goods and services was mainly due to delays in receipt of invoices from service providers, implementation of the cost containment measures, and lower than projected expenditure on certain items. He highlighted that contractors’ poor performance had resulted in the termination of contracts and the Department having to replace them with new contractors. Contractors, especially those from previously disadvantaged groups, often fail to complete work due to various factors, such as a failure to obtain financial resources, etc.

Transfers and subsidies expenditure amounted to R6.955 billion, and the expenditure was equivalent to 99% of the adjusted budget allocation of R7.056 billion. The underspent budget of R100 million was allocated after the adjustments estimates process, and the funding was allocated with conditions before funds could be transferred for the programme to be implemented. The delays in fulfilling the conditions due to external factors had resulted in funds not being transferred. The funding was allocated for implementing the project preparation implemented by Infrastructure South Africa (ISA).

Machinery and equipment expenditure for the end of March 2023 was R10 million, equivalent to 53% of the adjusted budget allocation of R19 million. The unspent budget was R9 million, and was due to a delay in the acquisition of assets that had been ordered but not delivered at year end.

PMTE's financial performance

The Department acknowledged the challenging nature of the audit outcome for the PMTE. The entity obtained a disclaimer in its 2021/22 audit but improved a bit and got a qualified opinion in 2022/23.

The actual receipts for the period ended 31 March 2023 amounted to R19.1 billion, representing 87% of the projected annual receipts. This was mainly due to unpaid invoices for the state-owned accommodation charges and municipal services paid on behalf of the client departments.

The variance between the budget for construction management services and the actual expenditure was due to a reclassification of projects between capital and operational expenses after the financial year-end. This seeming overspending was offset by underspending on the capital items for which these projects were budgeted.

As the projects were recoverable, the PMTE had to request approval from the client departments before tenders were advertised. When recommended bids were higher than the estimate, there was an increase in the cost of the project every time. Delays in client responses were a major cause of under-expenditure. Clients were expected to sign off on their available allocations before the start of the financial year, but some clients made the allocations available only during the first quarter of the financial year. This led to further delays and under-expenditure, as projects could not be placed on the procurement plan before approval of the budget. Further delays were experienced on site by defaulting contractors and other contractors not delivering in accordance with the projected project expenditure. 

The delay in filling vacant funded positions had also contributed to under-spending.

Real Estate Management Services

The cause driver of the low spending on this programme was the municipal services paid on behalf of the client departments. Although the function of payments for municipal services had been devolved in 2006, the PMTE had been administrating these accounts on behalf of the clients. This was being devolved in totality and would be phased out. The item was fully recoverable and included only for cash flow purposes. Municipal services expenditure was based on actual consumption by client departments, and would fluctuate due to load-shedding and saving initiatives implemented by clients. The budget amount was only for cash flow projection purposes, and could not be seen as an under-spending.

The unspent funds which were allocated for the rectification of illegally occupied properties had also contributed to under-spending.

The PMTE had an irregular expenditure of R2 billion at the end of 2022/23. Fruitless and wasteful expenditure amounted to R137 million.

(See presentation for details)

Discussion

Mr Dangor wanted to know if the Independent Development Trust (IDT) was now a standalone body, or if it was funded by the state.

He found it misleading that the Department described other governmental departments as clients. Calling them clients sounded as if they were clients from the private sector.

Mr Rayi enquired about the average timeframe for the disciplinary cases. He found it disturbing that such cases could take months or even years in the public service sector, whereas it usually takes only one month in the private sector.

He noted that the Department, though striving to reach the 2% target for the employment of people with disabilities, had failed to do so due to the unavailability of suitable applicants. He therefore asked if the Department had engaged with the Department of Women, Youth and Persons with Disabilities (DWYPD) to source such candidates.

He asked the Department to explain why the AG’s report had flagged its expanded public works programme (EPWP). Even though its targets were on track, the credibility of its achievements was questionable. Speaking from his own observation at a school near Arcadia Park, he had seen some EPWP workers gathered around outside a school, trying to get access to the school’s WiFi. They were not working. He thus asked the Department if there was proper supervision over EPWP workers.

Mr Rayi was aware that the Infrastructure Development Bill had not yet been introduced to Parliament, but it had been approved by Cabinet. Normally, bills that were approved by Cabinet were then subsequently introduced in Parliament, so he asked the Department to explain why this had not been the case in this instance.

He wanted to understand why the EPWP performance of certain provinces, such as the Eastern Cape and KwaZulu-Natal, were over 100%. Did that mean they got money from other provinces that had spent less?

He was disappointed at the 20% achievement on Programme 3, and noted the different reasons that the AG had given. The AG had stated that some projects had lasted more than three years, but the presentation indicated that the Department was not taking responsibility and was instead shifting responsibility onto client departments. For instance, the DPWI was now steering away from the Parliament restoration project.

Mr Rayi asked the Department to elaborate on the unspent balance of R83 million on CoE, machinery, and equipment. On CoE, he was unhappy with the Department’s performance in filling critical vacancies. There had been no budget cut for DPWI on CoE compared to some other governmental departments, yet it still could not fill critical posts. He asked the Department to give the Committee an explanation.

He noted the huge discrepancy between the 1.5 million hectares of land distributed in the AG's report, whereas, in the actual performance, only 173 243 hectares of land had been released. The AG had stated that this was not on track to achieve the medium-term strategic framework (MTSF) target. He asked the Department to explain that.

Mr Rayi requested an update on the status of the Telkom Tower complex. The Department purchased the complex for R694 million in 2016, but so far, only one of the nine buildings has been utilised.

He commented that the AG had noted an increasing trend of irregular expenditure in the Department and PMTE. What other consequence management measures had the DPWI implemented besides applying for condonation?

Mr Brauteseth requested a detailed report on the EPWP workers, including where they were deployed, their work tasks, and what they had achieved. He noted that among the many institutions he dealt with, there were no clear indicators of the actual work that had been done where those EPWP workers were deployed. There were ghost EPWP workers and he requested a report on that issue, as well as any consequence management that had been implemented.

On parliamentary villages, his observation was that though a lot of money had been spent on security, many reports still revealed that people from outside were getting inside the village, going from house to house, begging for money. He wanted an explanation from the Department, and requested a full audit of everyone who stayed there. He personally had been a victim of harassment involving begging for donations by someone from outside of the parliamentary village.

He concluded by saying that the DA noted the report.

Mr Rayi added to his earlier input, saying that there was no functioning parliamentary village management board as yet. It was a concern that the AG had raised as well. The AG had stated that the Director-General of the DPWI was the standing chairperson of the board. The instability of the board has resulted in no annual financial statement being submitted to the AG since 2013. The board was not being held accountable for the R11 million that was being transferred from the DPWI annually. The outcome of that was the neglected state of facilities, lack of action and resolution of long-standing problems, safety problems, and lack of accountability for contracts. He observed that random cars were coming in and out of the parliamentary village without being subjected to scrutiny.

The Chairperson enquired about the impact of the return of R100 million on Infrastructure South Africa’s projects. He believed it might be important to get an update on the projects that were run by ISA, as well as the working relationship and accountability between ISA and the DPWI.

Response

Mr Mdakane explained that the IDT was a Schedule 2 entity of the DPWI, which meant that the entity was accountable to the Ministry. The Department had provided R70.3 million to the entity because it did not have sufficient funds to deal with its operations. The Department used the entity as an implementing agency for service delivery.

He informed the Committee that the average timeframe to conclude disciplinary processes in the Department ranged from one to two years. Depending on appeals, that timeframe could be even longer. He assured the Committee that the Department was trying hard to ensure that cases were being dealt with as quickly as possible, but there were difficult cases that would take longer. For instance, if the Department dismissed individuals, they would then go to court, which took a very long for the whole process to be concluded.

He indicated that the Department would be taking guidance from Mr Rayi to engage with the DWYPD to identify the designated groups.

Commenting on EPWP workers, he acknowledged that there was no robust system in place to keep a file on each and every EPWP worker. The Department had engaged non-profit organisations (NPOs) and was developing a comprehensive system to ensure that it monitored the profile of each EPWP worker.

He agreed with Members’ concern regarding the poor work performance of EPWP workers. It was one of the areas that was being highlighted by the Ministry, and the Minister was also of the view that EPWP workers should be monitored. He said the Department would be tackling the issue, working together with the Deputy Director-General of the EPWP, to avoid those unpleasant situations from happening.

He assured the Committee that the Department took its work seriously and did not shy away from its actual mandates. For instance, in restoring the parliamentary precinct project, he had just spent some time with the Secretary to Parliament, Mr Xolile George, and reassured him that the DPWI would be working with Parliament throughout this entire process. Although he understood the frustration of some clients in this area, in this specific case, it was the DPWI that had appointed the Development Bank of Southern Africa (DBSA), and thus the DPWI would be responsible for the project. He mentioned that only yesterday, he had urged the DBSA to accelerate its processes to appoint contractors. He emphasised the principle that the maintenance of public facilities was the mandate of the Department, and thus the Minister was the one that gave authorisations. Hence, though he understood the frustration, he disagreed that the DPWI was shying away from its mandates.

Mr Mdakane attributed a number of factors to the unspent R83 million on the compensation of employees. When the new Ministry came in, the Minister had wanted to understand the organogram of the Department. As a result of that, there has been a moratorium. He highlighted that the 43 vacant positions included senior management positions, such as 12 chief directors and 31 directors. The filling of those posts was at an advanced stage, with short-listing and interviews that would follow soon. Although the Department’s budget seemed not to have been affected, it had put a moratorium in place to help the fiscus. It was now in the process of applying to the Department of Public Service and Administration (DPSA) to prioritise the advertisements and recruitment of over 200 positions.

He explained the under-spending on machinery and equipment, saying that it remained a bit of a challenge because service providers often did not deliver their services in time. Payments could be made only once goods were received, so the delay in service delivery contributed to the under-spending.   

Responding to the question on Telkom towers, he acknowledged that the Department had been experiencing quite a lot of challenges, and these did not come from the DPWI alone. He reminded the Committee that the initial rationale was that the DPWI had planned to collapse at least 15 leases from the South African Police Service (SAPS) and transfer them to one building, but doing that was a mammoth task. The new head of the PMTE was working hard to ensure the finalisation of this task.

He acknowledged that the Members were correct in saying that the Director-General of the Department was the standing chairperson of the parliamentary villages management board. Given that he had only commenced his duty from 1 January, the little information of which he was aware,  was informed by the report which he had read. There was a big challenge when Members did not attend meetings, so there was no quorum for them to commence. However, he was committed to escalating the matter if those things were not being addressed on the ground.

He acknowledged the validity of Mr Brauteseth’s input, that it was necessary for the DPWI to provide a detailed report on EPWP workers and their work tasks. To address the issue of EPWP ghost workers, he indicated that the Department’s Deputy Director-General: Corporate Services, was working to assist in ensuring that all EPWP workers were identified.

He agreed with Mr Brauteseth that the DPWI needed to audit the facilities under its charge, such as parliamentary villages. He asked the PMTE and Deputy Director-General to take notice of this point. For example, in the corrective services facilities which had been handed over to client department, the DPWI was responsible for the audit of all persons that came in and out of those facilities. The same should apply to parliamentary villages.

During one of his oversight visits about four weeks ago, he had discussed the situation with the security at the parliamentary villages, who had all expressed concern about the safety measures there. The lack of security measures posed a risk to Members. He assured the Committee that the Department would request the real estate management members at the village to ensure security measures were in place.

Mr Mandla Sithole, Chief Financial Officer (CFO), DPWI, talked briefly about the issue of irregular expenditure and the consequence management measures for those involved. Those who were implicated had been referred to labour relations, where the disciplinary processes would be unfolded.

He explained to Mr Dangor that as much as government departments got their budgets from the same source, which was the Treasury, in terms of vote, those were seen as independent entities of their own from an accountability perspective. They were therefore described as different client departments.

Ms Mameetse Masemola, Deputy Director-General: Infrastructure Investment Planning & Oversight, ISA, informed the Committee that National Treasury and Department of Public Service and Administration had to satisfy two prerequisites. These were to develop a business case that sets out the framework to establish ISA as an agency and to indicate the envisaged budget, strategic positioning, organogram, etc., and the need to have legislation in place that gives effects to that entity. The decision had been made in May 2020 that ISA would be a public entity that reported to the Minister of the DPWI. The advice from the National Treasury to the accounting officer in 2022/23 stated that it was expected that the ISA would be established and operate independently over the medium term expenditure framework (MTEF). She reported that both prerequisites -- the business case and the amendment bill -- had been approved by the DPWI's Minister, Director-General and ISA. The latest update was that those two documents still needed to be approved by the Minister of Finance and Minister of Public Service and Administration. It was anticipated that the ISA would be a Schedule 3a entity. Once that process was concluded, the Infrastructure Development Bill would have to obtain pre-certification from the Office of the Chief State Law Advisors, and would then be gazetted for public comments. Thereafter, the normal process would ensue.

Ms Masemola said that the Chairperson had asked an important question about the ISA surrendering funds to National Treasury. The role of the ISA was to upstream investment in the planning and preparation of infrastructure investment projects. Research showed that 80% of public infrastructure investment programmes and projects failed to come to fruition because of a lack of planning and preparation. ISA was in that space to address that issue and ensure that infrastructure projects were viable and bankable, so it could leverage private sector finance.

She explained that ISA had been unable to utilise the R100 million because of the requirements set by National Treasury. That decision was made in October, but ISA was informed by National Treasury only in January. Unfortunately, given the short period of time to the end of the financial year, it had been unable to satisfy those requirements. The impact of that was that the government would not be able to see a robust and comprehensive project pipeline. In the absence of a project pipeline, there was no sustainable construction book. However, significant progress had been made, and she was hopeful that more infrastructure projects would come out in the foreseeable future.

Ms Masemola indicated that the current Act dictated that the ISA reports to the Minister, who reports to the Presidency through the Presidential Infrastructure Coordinating Commission (PICC) Council.

Mr Siza Sibande, Head of the PMTE, acknowledged the need for the entity to improve its performance and was firmly committed to dealing with consequence management.

He informed the Committee that the entity’s turnaround strategy was focused on delivering quality work to clients. The PMTE was also committed to improving the turnaround times. The Committee would see that new infrastructure norms and standards were being rolled out in the district and rural areas soon.

Deputy Minister’s closing remarks

DM Swarts welcomed all the inputs that had been made by Members.

She emphasised that the Department was committed to improving its reporting format on EPWP workers, so that its future presentation would include details of what programmes they were engaged in, in which provinces and communities those workers resided, and the number of jobs created. She highlighted that EPWP was turning 20 years old in March. She agreed with the Committee that the Department should be able to account for every EPWP worker in each municipality and province. The recruitment of EPWP workers should include those workers’ profiles, which would greatly assist in addressing the issue of ghost workers. She herself had also noted the numerous media reports that EPWP workers were sleeping on the job. The Department had put a clause into the exit strategy to ensure that the programme was at a transitional stage to help participants achieve something greater. For instance, in the Western Cape, there were 165 EPWP graduate participants who, upon completing the terms under the programme, had moved on and registered at technical and vocational education and training (TVET) colleges, as well as relevant sector education and training authorities (SETAs).

She acknowledged the importance of the maintenance of public buildings. Through the Minister, the Department introduced the "renovate, occupy, transfer" programme which would assist in rehabilitating buildings. The DPWI was planning to move away from using buildings that belonged to the private sector and was of the view that government should use its own buildings. To achieve that, the maintenance of those buildings was key.

Deputy Minister Swarts explained to Mr Dangor that the Department intended for the IDT to stand on its own and be self-sustainable. The Department had made suggestions which were incorporated into its business plan, which awaited approval at the moment on how the IDT could sustain itself without the assistance and funding of the DPWI.

Overall, she acknowledged that there were many areas, such as the asset register, which the DPWI needed to improve on. She expressed her gratitude to Members for their inputs, and assured the Committee that the Department would engage in discussions to align its annual performance plan (APP) targets with the budget.

The Chairperson thanked the Ministry and Members for their participation in this first meeting of 2024.

The meeting was adjourned.