Implementation of IFMS piloting in WC; Red Ants Security Relocation and Eviction Services (Pty) Ltd matter; National Treasury Instruction Notes

Meeting report

Briefing by the Department of the Premier on IFMS piloting in the Western Cape

Mr Aphiwe Mazomba, Director: Supporting and Interlinked Financial Systems, Department of the Premier, informed the Committee that National Treasury had approached the Western Cape Government (WCG) to offer an opportunity for the province to participate in the programme as a Lead-site. Cabinet approved this in principle and requested clarity on the roles and responsibilities and the funding of IFMS. Since then, the IFMS implementation programme changed continuously.

The objectives of the IFMS were:
- modernise technology by replacing the ageing technology and avoiding increasing costs of maintaining obsolete legacy systems
-improve business processes through facilitating ongoing financial, supply chain and human resource management improvements and reforms
-compiling data to improve the availability of quality information for planning, reporting and better decision-making in the management of public resources.

Mr Mazomba stated that there are no pilot initiatives on the IFMS with WCG at this point. The only pilot was the IFMS 1 for SAP implementation on the HR systems, which failed. National Treasury approached the WCG to assist with technical resources to support their e-Recruitment pilot at National Treasury and the Department of Public Service and Administration (DPSA). The WCG is currently reviewing the Memorandum of Understanding in respect of the technical resources to support the National Treasury with their pilot.

In the absence of the IFMS, there have been improvements in legacy systems because they require a revamp or modernisation to enable access to credible information quickly. The focus now is geared towards Evergreen Legacy System (i.e. continue to Innovate and improve current legacy systems) to respond to the New Norm caused by the disruption of COVID-19. The Evergreen Legacy System project has strong linkages to the Vision Inspired Priorities number five (VIP 5), Innovation and Culture, and the Digital Transformation strategy driven by the Centre for e-Innovation.

Lastly, he reported that projects on the go are the dash boarding of systems information as part of data enablement on all key source systems (BAS, LOGIS, PERSAL), e-leave systems to support digital transformation in HCM, general e-Administration on financial systems (AFS, e-recruitment, etc.), integration of financial systems and standardisation, and data cleansing activities on the financial systems with a particular focus on master data management to enable seamless transition to IFMS.

Briefing on the Red Ants Security Tender and Instruction Notes Issued by National Treasury in 2019/20 and 2020/21

Mr Isac Smith, Chief Director: Asset Management, Department of the Premier, briefed the Committee on the Red Ants Security Relocation and Eviction Services matter, including the general sourcing and implementation of Transversal departmental contracts which are utilised by the departments and entities of the WCG.

He stated that the Red Ants Security tender requirements were about safeguarding immovable assets when threats become known, to detect and prevent unlawful Invasions, and react to any efforts by unlawful invaders to erect structures on government property. The Red Ants monitor the identified properties of the WCG with an appropriate vehicle with at least two guards. They act as static guards when rental units become vacant; security officers may be placed immediately to prevent illegal occupation and vandalism. The reaction unit must be deployed within an hour to prevent further invasion and erection of structures should a property be physically invaded. They remove pegs, demolish half-built structures and completely build unoccupied structures and occupied structures within 24 hours of erecting.

On relocation and eviction services, the following are minimum services required for illegal structures:

-demolition of illegal informal structures on land owned by the WCG/municipalities, with or without the removal of building materials;
-dismantling and transportation of legally built informal structures and relocation of households including possessions;
-removal of old motor vehicle tires and the disposal thereof at designated landfill sites;
-removal of pegs or markers that are used to identify plots during unlawful land invasions;
-removal of construction material, ruble and accumulated dirt from relocation/demolition/invasion site and dumping thereof at a designated dumping site;
-monitoring team and appropriate vehicle per shift

The Security Framework Agreement is a multi-regional, multi-service type Framework where the work or service envisaged under the Framework would be located within the six different regions of the Western Cape Province and would be limited to the service type bidders submit a bid for: Cape Metro, Eden, West Coast, Central Karoo, Overberg, and Cape Winelands.

These are the types of services offered:

-Normal physical guarding (normal guarding solution such as access control)
-Special Tactical guarding (specialised guarding solutions such as armed response; crowd control unrest; strikes; tactical responses etcetera.)
-Security analysis /assessment (high level holistic analysis of the overall physical security of buildings, facilities and locations, which includes the evaluation of access control systems, physical security, CCTV systems, lighting, fencing)
-Off-site monitoring and control room (off site control of physical security requirements)

It must be noted that security analysis/ assessment has not been awarded due to non-compliant service providers.

Mr Smith also took the Committee through the Instruction Notes that National Treasury issued to government departments and entities of the Western Cape Government for the 2019/20 and 2020/21 financial years. Concerning supply chain management, it was indicated that all circulars and instructions issued during 2020/21 and 2021/22 have been applicable and implementable. Where circulars or instructions are unclear and/or difficult to implement, and/or where there are queries or concerns relating to the practicality, rationality, interpretation and/or legality of circulars or instructions, and/or where there are other extraneous factors that affect the implementation of circulars or instructions, National Treasury is engaged to augment and provide clarity in respect of the circular or Instruction.

The National Treasury instruction should apply to institutions regarding the following factors:

whether and to what extent the Western Cape Government has existing or improved methods of satisfying the purpose of the National Treasury instruction, which methods negate the need for strict compliance with some or all of the requirements set out in the National Treasury instruction;
the practicality and rationality of the requirements provided for in the National Treasury instruction;
whether and to what extent requirements provided for in the National Treasury instruction are in line with provisions of the Constitution and other legislation;
the impact of implementing the requirements provided for in the National Treasury instruction from a process, resource, value for money, red tape and systems perspective; and
the cost-benefit implications of ensuring strict compliance with the requirements provided for the National Treasury instruction.

In his conclusion, he stated that the province generally implements all National Treasury and Provincial Treasury instructions fully to the extent that they are applicable and implementable. However, there may still be isolated instances of non-adherence to National Treasury and the Provincial Treasury instructions by departments and provincial entities.

The main contributor to the irregular expenditure was isolated non-compliance with procurement requirements from National Treasury instructions and circulars. Much of this expenditure may be attributed to a difference in opinion between provincial departments and entities and the auditors interpreting National Treasury instructions and circulars.

It should be noted that many instances of reported irregular expenditure and fruitless and wasteful expenditure are instances of non-compliance where repeat findings are not prevalent. The AGSA, in their audit report, did not report on any fraud or corruption concerning the reported irregular and fruitless and wasteful expenditure.

Departments have implemented the National Treasury instructions and the related Treasury circulars. These include adhering to Section 32 of the PFMA and interim financial statements submission dates. This results in the Provincial Government Accounting and Compliance unit meeting their Annual Performance Plan targets, specifically 4.2.2.3.The number of votes assessed against the applicable accounting frameworks and norms and standards requirements for the 2019/20 and 2020/21 financial years.

Discussion
Ms M Maseko (DA) wanted to understand the motivation for the Cabinet to see the IFMS as something good.

Ms Julinda Gantana, Deputy Director-General: Governance and Asset Management, WC Provincial Treasury, stated that this was where the province was and they felt it was better to be involved during the early stages than to come when they are told the project has to be implemented, and this was also part of the province’s vision-inspired-priorities because it has been working tirelessly for the good governance agenda over the years. This presented the Western Cape with an opportunity to influence.

Mr Smith added that the Western Cape wanted to be part of this initiative from the beginning. That is why this got buy-in from the senior management of the province. There have been various sessions with National Treasury and the Eastern Cape Provincial Treasury. There are frustrations, but the Western Cape wants to be part of this initiative.

Mr D America (DA) remarked that there had been no movement in implementing the IFMS initiative. He then wanted to know what the issues were in not concluding the MOU and if they were related to funding; and asked if the request for the Western Cape to assist in e-recruitment had been put on hold.

Mr Mazomba indicated that the MOU is an important document for due diligence regarding responsibilities. Currently, it is being circulated to the legal services for comments and advice before it is signed.

Mr A Van der Westhuizen (DA) commented that the IFMS has been in the process for a very long time. The world of computers is changing very fast and we seem unable to catch up. His concern was that the provincial government was vulnerable to cyber-attacks. He stated that Members support the need to modernise software systems. He then asked the Provincial Treasury to confirm if National Treasury was carrying software costs because money was spent on licences not put to use. He enquired if the MOU was directing knowledgeable people to assist in the implementation phase of the IFMS. He commented that the Western Cape should, with the help of the AG, be comfortable with all the aspects of the MOU.

Mr Mazomba admitted they are behind the curve and there is a need to catch up. There are Practicing Notes from National Treasury that are holding them back, and those Notes are there to ensure there are no duplications. He also admitted they had seen a lot of cyber-attacks. National SITA hosted national systems where security protocols are handled. So far, there have been no attacks. National Treasury is the correct department to answer fruitless and wasteful expenditure that has to do with Oracle licences not used. He said legacy systems on software are costly and have aged, which was another challenge. He said that they had informed National Treasury to move with the times and be on the cloud.

The Chairperson wanted to find out if the Western Cape could do its own initiative similar to the IFMS because the IFMS implementation has not been delivered for 17 years. He asked if Oracle had been appointed as a service provider since 2012. He said he wanted to understand why the HR system failed.

Mr Hilton Arendse, CIO, Department of the Premier, explained everything had been designed, but the problem was they wanted to build everything at the same time instead of doing it in pieces, starting with architecture first. One has to optimise the process first and then add technology. Many lessons have been learnt before they could move forward. He stated they should have implemented one module at a time instead of a bing-bang approach.

Mr Mazomba added that National Treasury practice notes are clearly not to duplicate things. The software cannot drive business processes; it should enable business processes.

The Chairperson asked if there had been any interaction between the Treasury and Oracle.

Mr Mazomba admitted that it has included National Treasury with the new coming product and how it would be infused in the working of the government.

Ms Maseko remarked that the red tape of the IFMS should be cut because technology is moving at a very fast pace.

Mr Mazomba said that there was a need to move as a unit with the times.

Deliberations on the National Treasury Notes and the Red Ants security tender

Mr Van der Westhuizen wanted to know the extent of engaging provinces before National Treasury issues Instruction Notes. It appears that it is difficult to amend an Instruction Note when it has been issued. He asked if the Instruction Note was the law or its legal enforceability. He also wanted to find out to what extent provinces have to follow the instruction note. He wanted to know what the latest was on the circular from National Treasury concerning the court ruling, which resulted in HODs being concerned about procurement procedures.

Mr Smith reported that there are continuous discussions with National Treasury. Before circulars are sent out, there is an opportunity for comments. Relations with National Treasury are still good. He then stated that an Instruction Note is law. There have been court cases. As a result, it has been proven that there is certain power in the Notes from Treasury. The Western Cape is the only province with an e-procurement system. He said it is their responsibility to adhere to the intent of the Instruction rather than following it to the letter.

On the letter from National Treasury, he said the court has found procurement regulations unlawful. But it was felt that if you stop procurement, you stop and delay service delivery. Institutions could also ask for exemptions, but there is no empowerment. The awarding process is based purely on price. But now, there is a uniform approach in the Western Cape Province.

Mr America asked for clarity on the procurement of security services and wanted to know who the main contracting party was in security services. He also wanted to know if the main contractor contracts sub-contractors and who determines contract prices.

Mr Smith said there is no main contractor for the 20 contracts. Everything is done through the e-procurement system and rotation system. The contract holder is the Department. Treasury only does the contractual agreements.

Ms Maseko asked for clarity on who is responsible for enforcement during invasions citing the current COMRADES project between the Departments of Public Works and Human Settlements. ‘For instance, if there is a need for the Red Ants, is the process going to be about protecting assets or enforcement’? She asked further if the budget for the two departments was proactive and did cater for things like invasion so that the AG did not see that as a finding.

Mr Smith said there was a need to talk to the Departments of Transport, Public Works and Human Settlements regarding the interpretations.

The Chairperson asked if processes were followed when one Department was providing a service to another. He asked for clarity on the renewal of contracts.

Mr Smith stated that the Red Ant’s contract had been renewed, and a second contract for a new service provider was also renewed. He also stated that departmental claims were part of their financial systems. The Departments of Transport, Public Works and Human Settlements agreed that there were agreements between the HODs. The Department of Human Settlements agreed to reimburse the Department of Public Works.

Mr M Xego (EFF) asked for clarity on the misunderstanding between the AG and National Treasury, and he wanted to know who incurred the cost between the Department and the Red Ants because during the hard lockdown, there were demolitions which ended up in the courts and the province lost all the cases.

Mr Smith said he was not in a position to respond to legal matters.

Mr America remarked that he has observed that Treasury is inflexible when it comes to Notes, especially when engaging the AG regarding the interpretation of Notes. He then asked for the view of Provincial Treasury about this. He asked further what the position was regarding the outcome of the SCA judgement on the procurement regulations of provinces.

Ms Gantana explained that they engage at different levels with the AG and there are also engagements with the Business Executive of Treasury. The AG is supreme when it comes to auditing. When the Instruction comes through, issues are taken back to the AG. If there were disagreements, then everything was discussed. She said they have been fairly successful in engaging with the AG regarding interpretations. They also engage with the lawmaker on the implementation phase and compliance matters.

Mr Smith added that when audits were done for municipalities, they saw that the AG had listened to their concerns on instructions. Regarding regulations, it has been simple for the Western Cape because it has explained how it has implemented the 2017 regulations. He said they had maintained their position even though it was unconstitutional in its approach. There is opportunity for exemption, but the province is waiting for the courts to explain the derivation of unconstitutional process.

Mr Xego asked for clarity on the interdepartmental claims and wondered if it was a norm for them to take place.

Mr Smith stated that it was a practice exemplified by the Provincial Training Institute, where officials were sent for training. The departments paid the Department of The Premier. It is incumbent upon the Provincial Treasury to engage the AG on the matter. But it is a practice, not non-compliance. If the AG sees it as non-compliance, then it should explain that.

Ms Maseko suggested that the Committee should engage with the AG on why a norm for the Department is a finding for the AG.

Minutes

The Committee adopted minutes of 14 March 2022 without amendments.

Resolutions

The Committee resolved that it had enough information on the IFMS and the Red Ants and further agreed to engage with the AG on understanding some of its findings.

The meeting was adjourned.