DPWI & PMTE 2022/23 Annual Performance Plan; with Minister

Meeting report

Department of Public Works and Infrastructure (DPWI) and the Property Management Trading Entity (PMTE) Strategic and Annual Performance Plans 2022/23

Mr Alec Moemi, Acting Director-General, DPWI, said the presentation would cover the background, strategic overview, programme performance information, key strategic risks, and the budget structure and estimates.

Mr Imtiaz Fazel, Deputy Director-General (DDG), DPWI, said there were ten national annual strategic priorities. These included massifying job creation and infrastructure; structural reforms; ease of doing business; better leveraging of public procurement; digitalisation and modernisation; basic services; electricity, water and sanitation; food security and household income; eradicating the title deeds backlog; vaccinations; corruption prosecutions, and reducing violent crime. He said that a million work opportunities were being made available each year. Additionally, buildings would be used for shelter and gender-based violence (GBV) purposes.

Mr Lwazi Mahlangu-Mthembu, Acting DDG: Governance, Risk and Compliance, presented the programme performance information.

(See slides 13-31 for tabled information)

The information on key strategic risks was discussed and could be found on slides 32-34 of the presentation.

Mr Mandla Sithole, Chief Financial Officer (CFO): DPWI discussed the budget structure and estimates. Over the medium term, the Department would continue to focus on creating work opportunities; providing better oversight, cooperation, and service delivery; and facilitating skills development in the construction and property sectors. An estimated 87% (R22.7 billion) of the Department’s budget over the period ahead was allocated to transfers and subsidies for the operations of its entities and for conditional grants to provinces and municipalities for the implementation of the expanded public works programme (EPWP). An estimated 13% (R3.3 billion) of the budget over the same period was earmarked for spending on compensation of employees (COE) and goods and services. The PMTE would focus on developing precincts to support efficient and integrated government planning by grouping departments that provide similar services to make service delivery more efficient, refurbishing and maintaining government buildings in its portfolio, and developing 12 small fishing harbours.

A key component of the PMTE funds would be channelled towards improving access for people with disabilities. The Department intended to complete 48 accessibility infrastructure projects -- to retrofit the buildings to make them accessible for people with disabilities over the medium term. The Department would also execute the refurbishment and repair of DPWI capital projects for 24 departments, including correctional centres, police stations, courts, office buildings and prisons. The execution of these projects was projected to cost R19.3 billion in the medium-term expenditure framework (MTEF) period. A further R4.4 billion had been allocated over the medium term for building maintenance.

Ms Patricia de Lille, Minister of Public Works and Infrastructure, said that the medium term strategic framework (MTSF) targets would not be reached as the Department had fallen behind. In September, it would approach the Portfolio Committee on its outcomes. It was willing to take into consideration targets recommended by the Members. Before June, the Department and Executive Authority would look at the budgets and trade-offs to meet the targets. This was the major change that was going to take place. A number of laws needed to be repealed based on the recommendations of the Commission Report that came out in 2012 but had not been repealed yet. The provincial government would fund six rural bridges. Floods had destroyed many areas, and the Department would meet with National Treasury to prioritise the budget.

Discussion

Ms S Graham (DA) noticed that one of the three buildings identified for refurbishment for the operating and transfer programme was Telkom Towers. Hundreds of millions of rands had been spent on Telkom Towers, so why was it still a building that required refurbishment? The values of the Department were professionalism, responsiveness, integrity, dependability and efficiency -- but there was a lack of responsiveness. She had sent several inquiries that had not been addressed or acknowledged. This was disturbing, considering people’s lives were being threatened due to property that was owned.

She said that gangs moving into buildings had been raised to the Durban Excelsior Court as an urgent matter, and there had been no acknowledgement. Values should be adhered to. She mentioned 48 illegally occupied buildings out of 2 029 that were un-utilised and another 1 029 other properties. She asked if there were any properties that the Department was renting and paying for that were unlawfully occupied or if the buildings that were referenced were only buildings owned by the Department. The APP spoke about revenue, where 10% was referenced as "other," and she wanted to know the "other" encompassed.

She suggested that a review be done on the organogram. There was a deficit of 2 034 posts and 600 vacancies. There should be a move toward automation within the Department. If there was automation, there needed to be a review of who was operational or not in the Department. This went hand in hand with the information communication technology (ICT) system. A review of the organogram and skills assessment should be done. The DPWI spent 97% to 100% of its budget, whereas the PMTE spent between 83% and 93% of its budget. The Department spent 59% of its budget on operations. There was a big disjuncture between how much money was being spent on Infrastructure South Africa (ISA) versus taking care of assets themselves. The Department was literally letting other people take care of their assets when they could do it themselves.

There had been an audit performance in 2021 where there was a 100% business process automated, but now there were smaller percentages. Ms Graham asked for clarity on this. The actual audited performance in 2021 was 100% business process automated, and then in the next three years, the targets were 35%, 30% and 60%. She did not understand how 100% was already attained, but now the Department was going backwards toward smaller percentages. The annual target vacancy rate was 11%, but the normative target was 10% -- why was the Department not aiming for the norm?

The Expanded Public Works Programme (EPWP) had five sub-programmes, and there was only one target. She did not understand how there could only be one key performance indicator (KPI) when there should be more indicators. There should be a report on what the EPWP was achieving instead of a progress report. Two hundred ninety organisations used the EPWP. She asked about the value of the projects that were being done. She used an example of a construction site where there were good EPWP workers on a public works project, and people had shown amazing initiative. As a result, they were being called out of the EPWP project and given job opportunities within the organisation. This was a successful EPWP intervention. She recommended that more of this should be done.

She pointed out that the prestige programme had two sub-programmes, but there were no actual targets or outcomes set. Timeframes should be set for the projects and expected outcomes. One KPI for an entire management system was not measurable. She said there were comments and recommendations without deliverables or measurables for the outcomes of those things. The Department should measure whether these recommendations are being implemented. There was no incentive for client departments to maintain properties. There was no clear delineation between maintenance, repair and refurbishment. Therefore, it was said that they were getting away with not doing day-to-day maintenance because it was a repair and refurbishment project, and that fell within the domain of the DPWI. There were no measurables for proactive maintenance. There was inadequate budgeting. The client departments were not adequately budgeting for the maintenance of the properties they were leasing, and the Department was not properly budgeting for that.

She asked for clarity on client maintenance contracts. How often was the list of properties updated? How many were there? Who was responsible for compliance, and how was it addressed and enforced? It had been mentioned that there was no income projected from construction management, and yet there were a lot of outcomes for the number of design solutions, the number of projects completed, and the number of infrastructure projects completed. There were five KPIs but no revenue for that work. She asked for clarity on this. The Department was working with special development frameworks with municipalities and provinces, but what about assessing existing buildings and speaking to municipalities and client departments to address their needs by remodelling existing properties versus new builds? Why was ISA only doing new builds? What about the properties standing empty and that were being vandalised and illegally invaded?

 Why was a new automated asset management system being looked into? She asked why the focus on evaluating existing evaluation of infrastructure was not being done ordinarily. Were the objectives for the operational plans on construction management a percentage of total projects? Why were the targets for the new financial year lower than the targets achieved during the height of the lockdown? She acknowledged constant underspending on the same items, such as compensation of employees, and yet the budget kept on increasing. If the Department was still aiming for an 11% vacancy rate, then there was no need to increase the spending on employee compensation. Some of that money could be used toward maintenance. She asked for a breakdown of goods and services, including maintenance, repairs, and leases. She recommended that concerning risks, a timely claim might be an excellent form of risk mitigation to prevent lockouts.

Ms S Van Schalkwyk (ANC) said that for the PMTE, there was a programme, real estate management services, with a target to let out 100 unused vacant state-owned properties. She asked why there was a figure for the total of unused state-owned properties, but the departmental receipt showed a decrease of R835 000 for letting properties through the PMTE? It did not make sense to improve the number of leased unused vacant state-owned properties and then decrease the revenue being received. She welcomed the initiative of using some of the unused vacant state-owned properties for gender-based violence (GBV) purposes. Would money be involved, or was it free? She also welcomed the 180 preventative maintenance contracts to reduce reactive maintenance. Were there proper measures to ensure that this was not an area that service providers could abuse? There was an increase for consultants’ business and advisory services of 59.37%. It had been said before that this should be limited. She asked for clarity on the increase.

Ms M Hicklin (DA) said there was no facilities management in the DPWI. This was something that needed to be addressed. There was also a press release calling for pro bono assistance concerning the floods in KwaZulu-Natal (KZN) and the Eastern Cape. There was an impression that the fixing of bridges and assistance would come from SA National Defence Force (SANDF) architects. The call for pro bono assistance was being done very haphazardly. This was worrisome. There needs to be some kind of organisational structure. She suggested that the money that was not spent for COE should be reprioritised for different projects. For example, the bond disposal property was absolutely shocking -- there were no windows, the grass had not been cut, rats were running around, and there were plumbing issues. The DPWI needed to work with people in those offices and renovate them.

Mr W Thring (ACDP) said that the Department and the Portfolio Committee needed to accept that job opportunities had not resulted in permanent decent jobs. He recommended that the DPWI partner with the private sector to upscale those who had EPWP and learnership opportunities. This would help people become part of the skilled workforce, artisans, technicians, engineers, or other professionals. He asked if the Department had plans to do this.

It had been reported that the immovable asset register was incomplete and that the PMTE could not confirm a completely accurate and valued recording of important items in its account. This was unacceptable. The DPWI was the largest property portfolio holder in the country, and this was a competitive advantage that was not being maximised. There were possible property rights of human settlements for educational and economic development that were not being unlocked. When would this comprehensive asset register finally be ready? He asked the Minister what bridges in KZN were added to their targets and a timeline for their completion.

Mr E Mathebula (ANC) said the operational budget took a big chunk (60%) of the budget. Projects were needed to boost the economy and provide job opportunities for the unemployed. He asked what would be done to reduce this large percentage and suggested that the Department needed to thoroughly look at the comprehensive asset register and fix it. There was the issue of bridges in KZN and the Eastern Cape and other properties that were also affected, like schools and hospitals. Were they going to focus only on the bridges and ignore the other properties, even though they fell under this Department? How was money going to be sourced for the new budget?

Ms A Siwisa (EFF) asked the Department to provide the locations where infrastructure projects had been completed or when they would be completed in this financial year. She had a problem with buildings not being used by the DPWI but were being rented out to other departments, and it seemed like the Department was working backwards. Utilised buildings were being leased to private companies and other departments. She asked when these buildings would be available for GBV purposes. In which provinces would these buildings be?

How many women were heads of companies in broad-based black economic empowerment (BBBEE)? How many had people with disabilities? There needed to be a way to build sustainable bridges. She suggested that Agrѐment South Africa should become more involved, provide value for money, and provide innovative methods. The DPWI should sit down with other departments, such as transport and housing, and reach agreements. She asked how far the maintenance plans process was. She requested a report on the floods in KZN and the Eastern Cape. Did the floods affect the APP for 2022/23? Schools, public buildings and roads had been damaged.

Ms L Shabalala (ANC) asked if the July unrest of last year had impacted the Department and its buildings. If so, what was the effect on infrastructure? What was the cost of its intervention? What were the costs of legal representation? She asked for a breakdown of the R1 billion. What was being done about job creation?

The Chairperson said that in 2019, it had been promised that the buildings near the Telkom Towers would be occupied. It was now 2022, and this was still a problem. She asked the Minister to ensure that this issue would be resolved before her term ended. The issue of parliamentary villages and prefabs was raised, and it was wrong to let people stay in those houses. Before the lockdown, there had been a project, but it was not about demolishing those temporary prefabs but rather about renovating the buildings and the houses that were already built bricks and mortar structures.

She asked for clarity regarding management in the Department and expressed her frustration over the asset register. She appreciated the prompt response of the DPWI concerning what had happened in KZN.

Responses

Minister De Lille said she was more than willing to provide the Portfolio Committee with any report they needed. She noted that various workstreams had been put in place involving the Deputy Minister and entities such as the Council for the Built Environment (CBE) and the Construction Industry Development Board (CIDP). A report on these workstreams would be made available. The first workstream was based at the Durban Air Force Base, which used its aircraft to help deal with the mud. The second workstream was based on damaged government assets. There were 49 identified buildings, and with the help of other entities, the Department could start assessments immediately.

The DPWI had identified 616 land parcels to resettle some of the communities in low-lying areas, but only 258 land parcels were suitable for resettlement when the verification was carried out. KZN had identified 193 land parcels that could be used for resettlement.

The issue of "pro bono" was certain levels of assessments that building professionals could perform pro bono. However, the design of assets did come with accountability because an engineer had to sign off on the design. This was where the pro bono work stopped. The Department ensured that skills were used where available, and had been able to provide access to four municipalities. National Treasury had made R1 million available, which was not enough. If extra funding were needed, the Department would make a funding application. The breakdown of the six extra bridges was: three in the Mkhambathini municipality, one in the Ndwedwe municipality and two in the iLembe municipality.

South Africa was on board, and the DPWI had been working with other departments to determine alternative building methodologies they had that were being approved by the South African Bureau of Standards (SABS). The gender-based violence (GBV) centres would benefit two provinces -- Gauteng and the Western Cape -- with six buildings each. Another 83 buildings had been identified, and the funding of the operational costs would now be looked into. A memorandum of agreement would be signed with the Department of Justice to release some trained inmates (26 suitable inmates) to help the DPWI in this project. The EPWP does not include a training fund to make EPWP participants more employable. However, funding had been secured for 8 300 participants. The breakdown was an artisan development programme (400), an accredited skills programme (450), capacity building initiatives (450), and another 450 students for a learnership which would train contractors to implement labour-intensive infrastructure projects.

The Minister acknowledged that there was a struggle with technology in the DPWI. She had suggested that the Department go out and request information on what digital systems were in the market, but there had been only excuses. After what KZN had experienced, a request was made to digitise the immovable asset register. She was hopeful that this would be implemented soon.

The issue of litigation and the new framework could be obtained directly from the Department of Justice. The Telkom Tower issue began in 2014. The Committee had visited in 2019 and the police occupied the buildings and floors. It had taken ten years to complete one tower. The second and third tower was part of this new project. The work was being done by implementing agents, and the Department would now tighten its contractual obligations and management.

Regarding the issue of leases worth R4.5 billion, 90% of this was in dispute over being overcharged by the private sector. There was a guideline as to the cost per square meter, and in 2019,  government established what it could afford to pay. There was a process of renegotiating, and therefore the process had not been finalised by the end of December 2021. These month-to-month leases were irregular expenditure. The DPWI was now regularising those leases, but they still wanted to overcharge the government, and that was where the Department had ended up in court. The court had decided that the Department should continue those leases monthly for three months and then stop. If this was finalised, it would lead to an unqualified audit.  

The Minister said they wanted to be held accountable by the Portfolio Committee. She referred to the change of Director-General and that there was a risk department that dealt with APPs and investigations, an anti-corruption forum, etc. However, there was a backlog within government now that a new Director-General had taken up his position. The Minister kindly asked the Portfolio Committee to give them some time to address this situation.

Mr Moemi said that the Minister already indicated in advance that some targets in the APP had to be reviewed. The national state of disaster impacted changes in the budget deficit, so the targets would be measured against this.

He said that the Department, the Portfolio Committee and its entities needed to acknowledge that the changes at the PMTE had not necessarily taken root to arrive at where they should be. There was quite a sizable amount of money spent on renting private sector buildings. The Department needed to utilise its own portfolio. The Minister had requested an issue of 100 buildings and profiled another 100 buildings to use these assets. There had not been any significant impact in bringing in about R80 million a year, which was a far cry from what the Department was letting out. This imbalance had been identified, and the Minister had directed that the PMTE be restructured. There was now a small trading entity that would take care of these properties. These properties would be run with the necessary skill sets that were required to achieve this objective. Progress had been made on the issue of the immovable asset register. This was one of the targets, and it would soon be digitised. The PMTE took a significant chunk of the budget, but the Department was working on this.

Ms Nyeleti Makhubele, DDG: Real Estate Management Services, apologised for not responding to emails, as she had not seen them. The team in the Durban regional office had had a meeting with the South African Police Service (SAPS), where SAPS had taken over the building and would be responsible for safeguarding the buildings. There were plans for the buildings, and any queries should be sent to them. The number of unused properties was just under 1 200, but not all of them could be taken out at the same time. There was a verification of those properties because some were said to be vacant when they were not. She said that the decrease in revenue could be an error, as it should be increasing, and this would be looked into.

Mr Sithole said that the infrastructure projects relied mainly on recovery costs from the clients, so it was not necessary that they charged revenue for that -- it was just a recovery cost. The letting out revenue was not decreasing and, in fact, was increasing at 8%, which was aligned to the target. The proposal to use the excess COE for other programmes needed to be discussed internally. The issue of operational projects and the feasibility of infrastructure projects needed to be addressed. It should be highlighted that when one was running a portfolio of properties, there were significant operational costs such as scheduled maintenance and day-to-day maintenance. There were also rates and taxes and certain costs that were unavoidable. There had been no sharp increase in the budgets of both the PMTE and DPWI -- it was a 4.5% overall increase.

An official said the presentation provided a breakdown of the R1 billion rand indicated as expenditure. He explained that programmes one and three took the bulk of the budget. There was an increase of R5 million for consultants. For the financial year 2022/23, the budget for consultants was R43 million, and it would be the same for the next financial year. There would be a slight increase in the 2024/25 financial year, moving from R43 million to R45 million.

Ms Sasa Subban, DDG: Real Estate Investment Services, said asset management plans contained strategic requirements. They look at prioritising maintenance and refurbishment of buildings, disposal plan users, and any new acquisitions, and the users are responsible for developing a high-level condition assessment. Therefore, it was important for users to submit their asset management plans, which supported the development of a custodian asset management plan. Ideally, the user asset management plan and the custodian asset management plan, in terms of their configuration and purpose, were supposed to be utilised as bidding documents and that should be done in advance. The Department required an announcement on the immovable asset register, but a lot of work had been put into getting all of the buildings and land parcels that DPWI owned into the existing immovable asset register.

Mr Clive Mtshisa, DDG: Corporate Services, responded to the expenditure on litigation cases. R24 million had been spent by the end of March for different aspects of litigation such as court cases, legal opinions, and disparity hearings. At the beginning of April, R300 000 had been spent on legal expenses. The annual targets that had been set for the ICT architecture had been firstly to enable mobilisation of the system. The 100% was the finalisation of that architecture. Then the percentage of automation against that architecture was denoted as 35% and then moved to 30% overall by the end of the period. The strategic plan itself would then be 100% of the implementation of that full ICT architecture in automation.

There were norms set by the Department of Public Service and Administration (DPSA) for the vacancy rates. Before 2019, the DPWI's vacancy rate was higher than the national level. A lot of work had been done to move gradually towards that 10%. The Department was on track towards reaching 10%, as it was even higher than 16% at some point. The issue of review and reconfiguration of the Department's organisational structure was something that the Minister looked into from time to time.

ISA was a new structure that had been reconfigured, processed and approved by both National Treasury and this Portfolio Committee in 2020. A lot still needed to be considered concerning ISA -- whether it would remain within the DPWI or stand alone. The reconfiguration of the property portfolio and how best to reconfigure it to become an integral part of the Department was something that the acting Director-General was looking into.

The filling of vacancies had been a major challenge in the past, and the Minister had recently put in place clear interventions to ensure that all existing vacancies were filled. Currently, there are 643 vacancies. He gave a detailed breakdown of the stages reached in the filling of these vacancies.

There were 285 senior management service (SMS) positions, including positions below and above the SMS level. The interesting part was that internal candidates mostly filled the bulk of some of these vacancies, and therefore there was no impact on the vacancy rate. People were retiring and resigning, which impacted the vacancy rate. He emphasised that a lot had been done since the Minister had outlined the clear interventions.

Minister De Lille said that the services of the DPSA had been invoked to assign a team to the Department to do a skills audit to evaluate standard operating procedures to promote employment equity. Many of the posts that came through were from successful male candidates (58% of employees in the DWPI were males). There was a provision that departments could do some of their own maintenance to the value of R100 000, which the National Treasury had increased to R1 million. The DWPI had signed agreements with the Department of Justice and Correctional Services, the Department of Sports, Arts and Culture and Home Affairs, amongst others, to do some of their own maintenance. The requests for maintenance and repairs had tripled in the last financial year, indicating a certain lifespan in older buildings. The Department would ensure that all the other departments were aware of the facility of the R1 million for own maintenance. She would address the issue of reducing the budget for consultants, as that money could be spent on providing job opportunities.

Concluding remarks

The Chairperson commended the Department for the work they had been doing and expressed the hope that the Portfolio Committee, the Department and its entities would continue to work together.

The meeting was adjourned.