Western Cape Cultural Commission on risk mitigation strategies for cultural/ facilities’ infrastructure; Provincial Treasury on local content requirement challenges

Meeting report

Briefing by the Western Cape Cultural Commission

Ms Jane Moleleki, Director:  Arts, Culture and Language Services, Western Cape Department of Arts and Culture, briefly stated the mandate of the Western Cape Cultural Commission (WCCC). This was to control, manage, develop and maintain movable or immovable property placed under its supervision in terms of the Western Cape Cultural Commission and Cultural Councils Act. Any immovable property donated or bequeathed to the WCCC and accepted with the required approval vested in the WCCC.

In order to achieve the aims for which it was established, the WCCC had to consider registration and de-registration of cultural councils; manage, develop and maintain movable and immovable property; and perform other functions which the Provincial Minister might assign to it. 

Ms Moleleki said the facilities were situated in quiet and tranquil areas, but had been exposed to various incidents of criminality and vandalism in the past few years. These included:

Break-ins, vandalism, theft of assets and removal of copper pipe;
Abalone poaching at the two Melkbos cultural facilities;
Arson attacks at the cultural facility in Stellenbosch. These were linked to service delivery protest action in the Jonkershoek area.

These challenges required a change in approach in ensuring the safety of physical assets and the people using them.

(Pictures were shown to illustrate the facilities; their locations; tariffs for hire; and evidence of vandalism such as attempted break-ins and break-ins)

Briefing by the Western Cape Provincial Treasury

Ms Nadia Ebrahim, Director: Provincial Government Supply Chain Management, Western Cape Provincial Treasury, informed the Committee that local content procurement requirements emanated from two pieces of legislation - the Preferential Procurement Policy Framework Act (PPPFA) and the Broad-Based Black Economic Empowerment Act  (B-BBEEA). There were two custodian departments, resulting in numerous challenges from a process and implementation perspective. Legislative requirements were ambiguous and open to interpretation.

The Western Cape Government (WCG) had produced a Position Paper on Local Content Implementation and made it available to the National Treasury. It had also raised issues in various Treasury forums and in formal written comments on the preferential procurement regulations and instruction notes.

Formal communication had been provided to the Director- General of National Treasury at the end of August 2019 on policy and prescript challenges such as conflicts, impracticalities and red tape in financial prescripts. Local content procurement challenges were also documented.

Emergency protocols issued after the Covid-19 lockdown had not specified compulsory local content compliance for procurement of personal protective equipment (PPE). Two instruction circulars had been retracted. The procuring institutions were required to follow different prescripts every time that these were issued by the National Treasury. There was a lack of consistency in application and requirements.

Cumbersome compliance procedures were irrational and impractical when dealing with a disaster. The local content exemption process at the Department of Trade, Industry and Competition had not been amended. There were challenges in the vetting and verification process under COVID-19 conditions.

Local content compliance was a huge issue at local government level. There were challenges with audit interpretation and a wide range of irregular expenditure. Suppliers were finding it very difficult to adhere to the requirements and municipalities were complaining about a negative impact on operations and, ultimately, service delivery. The City of Cape Town had to cancel quite a significant number of bids because of non-compliance with local content requirements. .

In a special session with National Treasury held on 5 February 2020, the City of Cape Town had unpacked the unintended consequences of the local content requirements.
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The Drakenstein Municipality had a specific Contractor Development Programme that was designed to empower local contractors. The Garden Route District had also identified a range of projects to kick-start the local economy and empower suppliers.

(Tables and graphs were shown to illustrate WCG local spend for 2019/20)

Discussion

Deliberations with the Western Cape Cultural Commission

Ms M Maseko (DA) asked for clarity on why during the 2018/19 period infrastructure maintenance costs were increasing compared to the revenue that was generated and why the same infrastructure maintenance costs decreased during the 2019/20 period in spite of vandalism at the facilities. What mitigating factors had been put in place to result in such low maintenance costs?
           
Ms Moleleki explained that the maintenance costs referred to were costs for day-to-day operations. She said deductions in maintenance costs were related to the closure of some facilities which were given to the Department of Public Works.

Mr Guy Redman, Head of Department, Western Cape Department of Arts and Culture, added that the revenue figures had changed because, for the past two periods, the billing system had been changed. Now they were able to diversify the billing system and this allowed more users for the same facility. The facilities could be booked online.

Ms Moleleki added that some facilities were used every day by groups, while others were used over weekends and, at certain times, during the day.

Mr D America (DA) asked if the revenue generated during 2019/20 reflected the impact of Covid-19. He asked if the commission had spent its entire budget and if there had been a shortfall.

Ms Moleleki stated the figures did not account for Covid-19. During the lockdown, the facilities were given to the Department of Public Works. Other income came from interest on money invested in the bank.

Ms N Nkondlo (ANC) asked what the biggest risk to the facilities was. She asked if the Department of Public Works was the custodian of these facilities in terms of maintenance costs and maintaining an asset register.

Ms Moleleki said the biggest risk was break-ins. The Department of Public Works and Infrastructure was the owner of the facilities in terms of big upgrades and the asset register. The Okkie Jooste facility was the only one owned by the municipality. The Commission only managed the movable property.

Deliberations with the Provincial Treasury

Ms Nkondlo remarked the presentation had been an eye-opener, especially on procurement challenges. The focus should be on building domestic capability. The test was what had to be done about these challenges. She asked why the WCG was struggling to find local content suppliers. What had been the conversation between the Provincial Treasury and the National Treasury regarding the challenges? She also asked if she could get an indication of the 28 local content designations declared by the National Treasury and whether there was an area where the province had been successful.

Mr David Savage, Head of Department, Western Cape Provincial Treasury, stated that winning the game with local content required all elements of the procurement system to work together. These issues could not be solved in a single flash. The province had ensured transparency and competition where possible. The government had to leverage the power of competition over contracts as much as possible and ensure there was participation on top of that. The Walk-In Centres had been very busy and successful. The province was trying to integrate procurement plans so that suppliers could get the right signals. During the Covid-19 pandemic, particular steps were taken with the Western Cape Tourism, Trade and Investment Promotion Agency (Wesgro) to match suppliers with businesses looking for PPE.

Ms Ebrahim said there was very little or no response when bids for local content were invited. When goods were provided, they deviated from local content requirements. For instance, the fabric for cloth masks had to meet the requirements of the World Health Organisation and the national government. There was an opportunity for the government to decide how to make it easy for suppliers to meet local content needs and satisfy the need to diversify the market. There were very few success stories where 100 percent local content requirements had been met.

Mr America remarked that the presentation pointed out an intricate balancing act that had to be performed when it came to procurement. The provincial government had done well in seeking local content compliance. Municipalities fell short in sourcing local content for various reasons. To what extent were the municipalities aware of the requirements and what support was given to municipalities?

Mr Savage said the provincial and local municipality supply chain management (SCM) forum was an intervention to build a cadre of strong SCM practitioners.

Ms Ebrahim added that since 2012 support had been given to local governments in the form of the SCM forum, a help desk and roadshows. In the previous year there had been preferential procurement presentations where the focus was on integrating planning with procurement, and looking at empowerment impact through evidence-based research.

The Chairperson remarked that it would be a marathon to ensure that local content policies were implemented. What the treasury had done in terms of procurement expenditure was commendable. People located in informal areas needed to be active in the economy. Addressing the needs of these people would be a long road. He asked the department to send the Committee a report on tenders which had been rejected.

Ms Nkondlo wanted to know what movement there had been towards compliance on local content, given the fact that this matter emanated from a previous report. She said the presentation presented an opportunity for a dialogue. There were costs to redress when market inefficiencies were being corrected. People who were not participating in the economy were a cost to the State. She would be interested in a report about discussions in 2019 between the province and the National Treasury on gap analysis to see what areas of the economy were affected. She also wanted to know if there had been any progress on SCM at local government level, because the City of Cape Town was one good example for irregular expenditure.

Mr Savage said the comments from the Committee had raised critical elements for the debate on achieving full local content compliance. The key issue was to get certainty on some of the challenges highlighted. Regarding the costs of redress, he said there was a need to make trade-offs. The Constitution of the country was clear on trade-offs. Trade-offs were relative, not absolute. It was difficult to provide a precise answer. He said he would be interested to hear the views of the Committee on a PPE procurement disclosure report. Information on specific commodities would be sent to the committee. The issue of gap analysis was noted. The market power of the WCG collectively was making a big impact. On municipal SCM, he stated that this was a big issue. They were working closely with the municipalities to iron out the issues and identify matters that could be discussed with the National Treasury.

Ms Ebrahim said suppliers were struggling to enter the fray in the market and this too had been a challenge for the Provincial Treasury. On trade-offs, she said information was important and had to be improved. A lot of work had been done by the Department of Economic Development on economic recovery and gap analysis.

Resolutions

No resolution was taken by the Committee on the Western Cape Cultural Commission’s presentation.

Regarding Provincial Treasury, the Committee agreed to request a report on the number of proposals and tenders received but which had been rejected. This would assist in assessing the progress being made on local content. It further resolved that the Provincial Treasury should make a presentation to the Committee on local content declarations, that it provide a list of Walk-In Centres, and that it provide a list of local content designations in terms of the PPPFA. The Committee agreed that the PPE disclosure report should be presented to the Budget Committee instead of SCOPA.
 
Matters Arising

Ms Maseko suggested that the Committee should be proactive and invite representations from the Cederberg and Matzikama municipalities in the light of the Special Investigating Unit (SIU) investigations into Covid-19 PPE tenders.

The procedural officer suggested the committee could conduct oversight visits. It could be provided with procedural advice.

The Chairperson said the Committee had the right to summon any individual or entity of the state to appear before it, but that had to be done in the spirit of cooperative governance. Calling departments was a challenge. He indicated he was interested to hear the views of the Chairperson of the Ad hoc Covid-19 Committee. In fact, Cederberg could appear directly before this Ad Hoc Committee.

Ms Maseko stated it was important for the procedural officer to find out how the Committee could do proactive work in the future.

Ms D Baartman (DA) supported Ms Maseko’s idea and stated that it was important to distinguish between previous and upcoming resolutions.

Ms Nkondlo said the matter raised by Ms Maseko should be concluded speedily. She suggested that the Chairperson should discuss the matter with the Chairperson of the Ad hoc Covid-19 Committee.

The meeting was adjourned.