DPWI Portfolio Audit Outcomes; DPWI, IDT, Agrément SA & CBE, 2020/21 Annual Report; with Minister and Deputy Minister

Meeting report

Opening Remarks by the Chairperson

The Chairperson reopened the virtual meeting and immediately handed over to the Deputy Minister for her review remarks about the entities that would be presenting.

The Deputy Minister of Public Works and Infrastructure, Ms Noxolo Kiviet, brought to the Committee’s attention the two CEO’s of Agrement South Africa and the Construction Industry Development Board (CIDB) that they had lost. She had mentioned the new board of members from IDT and the new CEO of CIBD. The IDT has appointed a new board chairperson and deputy chairperson. The Acting CEO’s term for IDT has come to an end.

The meeting was interrupted due to the Deputy Minister losing her connection, and she requested that Mr Molatelo Mohwasa, Chief Director: Public Entities (IGR) & Acting Inter-Governmental Coordination, Department, do the introductions on her behalf.

Mr Mohwasa began the introduction and indicated that IDT has an Acting Chair, Ms Zimbini Hill, who will introduce the team from IDT, and the acting CEO, Ms Tebogo Malaka.

Independent Development Trust: 2020/21 Annual Report

Ms Hill, the Acting Chairperson of IDT, introduced herself and the team of IDT, to the Members. She said that the entity is tabling the 2019/20 Annual Report.

She indicated that, in the past, the IDT has had a number of performance related issues such as: a decrease in the portfolio, issues with pro-audit outcomes, amongst others. For the financial year 2019/20, the IDT has received a disclaimer opinion from the auditors. IDT obtained disclaimer audit opinions in five out of the last six financial periods up until 2019-20. Annual financial statements for year ended 31 March 2021 was submitted on 16 September 2021. Material findings were on the high vacancy rate, non-submission of information on time and I.T infrastructure issues were raised.

Ms Hill mentioned that a new board came during the mid-term 2021/22, and through the appointment of a fully functioning board, trustee governance issues and performance related issues have been addressed. She said that the IDT has a twelve-member board of trustees who serve a four-year renewable term. The company secretary reports to the CEO, and the board has a number of committees seeing to different areas of governance.

The IDT’s Acting CEO, Ms Malaka, presented the 2019/20 Annual Report. She indicated that clients were put on hold due to budget cuts.

Ms Hill said that the board was appointed in August 2020 and has the following priorities: rebuilding the entity, playing an oversight role, monitoring the implementation of the audit action plan and targeting the filling of vacancies. She added that the board is seeing to various branches of governance and committees and their improvement, as well as introducing a board executive committee. She mentioned that positions within the committee are being advertised, and shortlisting is being conducted. Also, the audit committee has an audit plan that it is managing consistently. She said that the board has approved the calendar for the year, and the oversight functions are being addressed and a strategic function will be in effect in the future.

[See presentation attached for further detail]

Discussion

The Chairperson thanked Ms Hill for the presentation, and welcomed the new board of IDT. She spoke about the challenges that IDT and its workers experienced.

Ms S Graham (DA) said that she is excited about IDT’s new plans and future because this entity plays a critical role in this Department and has not been given the proper opportunities to function effectively. She asked whether the board was fully constituted for the entire twelve-month period review. She had thought that the IDT was down to four members for the next financial year, and questioned whether it was for the financial year being discussed instead. If not, were the meetings held properly curated and recognised as legal? She reckoned that the legal cost of R15 million is very high. Was this for lawsuits against IDT or for IDT litigation? If for the latter, are we recovering sufficient funds for the litigation to warrant the ongoing legal matters? What is the ratio of litigation against IDT, and which have been instituted?

She pointed out that multi-year projects only discuss budgets in the first year, and that costs are covered in the first year but clients run into financial problems during the second, third, etc. Is there a way this can be addressed such that fees can be paid upfront? She noted the 97% collection rate of management fees, and commented that it is very high. Where, then, is IDT losing money? Is it lack sufficient business? She noted the R148.5 million government grant in 2020, and she questioned whether this was for 2019/20 period or 2020/21 period. If it was for the period under review, how was that money used?

Ms M Hicklin (DA) welcomed the IDT’s return. She said that her biggest concern was that the IDT was characterised by instability brought by weak administration and low staff morale. She hopes this is a thing of the past, and that the future will bring about strong staff morale and the knowledge that IDT is an invaluable part of DPWI and has its support. She asked if the litigation comes to pass, is not instituted by the IDT and is from people that are suing IDT. If the IDT becomes insolvent, where to from there? How do we mitigate against this?

Ms A Siwisa (EFF) welcomed the new board. She said that she was concerned how Infrastructure South Africa will affect the work of the IDT, since their mandate is not the same. What is the Department promising to ensure that IDT becomes successful? She added that, if the Department does not support the IDT, then the entity will get back to losing credible people that are onboard. Hence, what guarantee does the Department give that it will support the IDT?

She asked that the role of the contractors in the IDT be elaborated on. She also asked for a breakdown of the projects for the financial year, and whether they have been completed or are still running. She also questioned how many targets are there in total, in reference to slide one.

Mr E Mathebula (ANC) mentioned that, within the IDT, there were projects that were halted by community members in the past. What were the reasons for this? Many were appointed as subcontractors despite not qualifying. There are no problems if stakeholders and community members are on board with projects and there is compliance if there are valid consultations and recognition of leadership in particular places.

He said that the IDT spoke of black empowerment and women employment, but he has not heard them speak of empowering people with disabilities. Why is there an exclusion of people with disabilities? He said that those that are disabled bring it to their attention that they do not get government job opportunities. The disabled should be a part of projects that will benefit them. He mentioned that there is a poor percentage of women and youth, around 15%, and that IDT is achieving half of what was targeted. The unemployment rate of black people is very high, and 53% of women unemployed, as well as 75% youth unemployed. IDT has had issues of not providing information to the office of the AG. As a result, they had gotten a disclaimer. He noted that the new board of IDT is to “move with speed”, correct past mistakes and reach targets.

Responses

Ms Malaka responded to Ms Graham on legal costs regarding IDT and litigation. She mentioned that there is a huge bulk of litigation against the IDT, but this is the cost of delayed payments and is a historical matter that is being cleared up. There is now a clause set in place by the contractors because of the clients not transferring money. The litigation is both to the IDT and the clients. Once these cases are closed, IDT will get the return of cost from the Department, that caused IDT to be litigated against. Most of the litigation is IDT’s contractors taking IDT to court because the entity is not paying.

She said that multi-year projects are being considered, as there is a plan for a future meeting with treasury to create an agreement with clients to say upfront what will be paid for year one, two and the rest of the project, including how the money will be paid for the full duration of the project. Previously, treasury gave money to IDT. Therefore, IDT had money readily available to pay the contractors and could trace, account money owed to it, and what was transferred to it. This system minimised litigation greatly.

She responded to Ms Hicklin’s question on instability and low staff morale. The new board is addressing these issues, and team building exercises are being put in place. Low staff morale was also due to a lack of a fully functioning board in the past. The new board is ready to bring stability to IDT.

She responded to Mr Mathebula about projects being stopped by community members, and whether sufficient consultations have been done. She said that, when IDT has projects, it does social facilitation within that particular community. A community liaison official will also assist IDT on community engagements. When the project begins, community members are involved – not always in the initial social facilitation process, but in some cases of criminality elements, general consensus and so on. Projects take time to be implemented, whether issues are resolved or not. Business forums have been “hijacking” projects without being part of the initial processes of the projects, and influence contractors. In some cases, the community will assist IDT and defend the project that the entity has started. The disclaimer was due to the issues of this financial year, where offices were closed due to the announcement of closure of IDT. When this had happened, there lacked proper record-keeping and filing. In other cases, some officers given to IDT were very small and could not accommodate documents. But currently, the management and board are sorting out this problem by ensuring that officers accommodate documents and record filing.

Mr Mashaba responded to Ms Graham about whether the board was fully constituted under the year under review. He said that, during that year, there was an interim board that had five members, then reduced to three. By the end of the financial year, the members continued to resign, till the last in July 2020, due to ethical issues and liability cover issues. He said that an accounting authority was needed within IDT, as a condition for treasury to fund IDT and this position was given to Chris Lambat. He mentioned that, at the time, they were also bringing a formally recognised board. The six trustees of IDT were returned to the board in October 2020, and their term ended in March 2021, extended to end of June. In July 2021, Master of Court had issued a note of authority to the current fully-fledged board, and the board was inaugurated on 02 November 2021.

Agrement South Africa: Annual Report 2020/21

Deputy Minister’s Overview

The Fourth Agrément South Africa (ASA) Annual Report for the 2020/21 financial year provides an insight into its outlook, non-financial performance, financial performance and human resources information. Despite unfavourable economic conditions due to the COVID-19 pandemic, ASA managed to contribute almost 25% of its current expenditure budget towards Solidarity Funds. ASA continues to grow the organisation, improve its operational efficiencies, and support the objectives of the Department of Public Works and Infrastructure. The Board exercised its oversight role to ensure the organisation achieved its mandate. ASA’s core mandate is the technical assessment and issuing of approval certificates for non-standardised construction related products and systems for which there are no South African national standards.

 

Dr Vuyelwa Nhlapho spoke on behalf of Agrement South Africa, and gave an apology for Prof. Mahachi. She mentioned that COVID-19 has negatively impacted the nature of their work, and they had received an unqualified audit opinion, with emphasis of the matters on financial statements, supply chain management and non-financial performance information on technical services. In its financial performance, the entity had a surplus of R1 506 501 for the year under review.

Mr Richard Somanje went over the Annual Report 2020/21 for Agrement South Africa.

 [See presentation attached for further detail]

Discussion

Ms Hicklin said that she wants to know how Agrement has suffered during the pandemic. Has the lockdown process decreased productivity? What is the likelihood of recovery of bad debts?

Mr Somanje responded to Ms Hicklin, saying that the lockdown had affected Agrement significantly and that the post-lockdown period also took its toll on the organisation. He said that certificate holders are not coming forth due to the impact of lockdown on them. When Agrement wants to visit certificate holders, they are not ready because their businesses have gone down. The entity supports economic recovery and those that cannot pay do not get suspended, but only when it is a technical requirement. Due to the pandemic, it is understood that there will be financial difficulty for many businesses. Bad debts are being monitored and managed. The pandemic has also impacted bad debts, but many are in the processes of paying out these debts. During the post financial year there was a workshop with certificate holders to understand the impact and use of certificates. Data analysis systems are in place to analyse the impact on communities and South Africa at large to see how certification implements change in usage.

Construction Industry Development Board: Annual Report 2020/21

Dr Natalie Skeepers, CIDB Chairperson, introduced herself and the members.

Mr Bongani Dladla, Acting CEO, CIDB, went over the CIDB Annual Report 2020/21. He said that, for 2020/21, the entity had 19 annual targets. It achieved 17 of them, missing only two. This represents an 89% overall achievement. The audit outcome of CIDB has remained the same with an unqualified opinion, with findings in other areas. The CIDB objective is to obtain a clean audit in the 2021-22 financial year and beyond.

The CIDB retained a healthy financial position with R169m positive cash resources. A significant increase was recorded on Property, Plant and Equipment (PPE) as a result of the new office building. There was an increase in surplus for the year compared to the previous financial year. The decline in revenue was driven primarily by the impact of COVID-19. Employee costs increased due to some of the key positions that were filled during the year. However, operating expenditure decreased by R30 million because of savings that were realised on IT expenditure, professional fees and travel expenditure during the year.

He then went over industry statistics. He gave the details of ownership of CIDB-registered contractors nationally, for ownership control of 51% or more, and for ownership control of 90% or more. He said that the construction industry, including professional service providers, contractors & materials suppliers, remains largely under-transformed. Lack of transformation in contractor ownership and access to work opportunities are particularly pronounced in grades seven to nine. There was a slight increase in the number of black-owned contractors from 2019Q2 to 2020Q2 across grades two to nine. Women ownership of 51% and above, was around 29% of all contractors in 2019Q2, showing a slight increase of 1% in 2020Q2. The overall performance indicates that the women ownership has increased, but the pace is too slow. For ownership of 51% and above, youth ownership was around 19% in 2020Q2 down by 1% since 2020Q1.

The presentation also showed that state-owned companies and public entities account for 44% of public infrastructure budget. Underspending by state-owned companies increased substantially in the 2019/2020 financial year. According to National Treasury, at the end of 2019/2020, state-owned companies had spent only 50% of their budget. The slowdown in the construction economy is exacerbated by underspending of capital budgets. By the end of the 2019/2020 municipal financial year, municipal underspending stood at around R28 billion, around R17 billion contributed by metros. In 2019/2020, 243 out of 257 municipalities spent less than 40% of their budgets. The disruptions caused by the lockdown restrictions contributed to this.

[See presentation attached for further detail]

Discussion

Ms Graham noted that CIBD plays a pivotal role in construction. Her concern was that CIDB capacitated 22 client departments, and none are doing contractor development. She said that the presentation, in slide 22 and 23, did not have this year’s figures. Why is the presentation showing historical figures instead of current figures?

Regarding the BUILD concept, are the training programmes that will be in use already developed? If not, what happens to the money that will be used in the interim for developing the programme? Who identifies the needs for CIDB – is it the contractor or the Department? How does skills development impact productivity? Who determines the beneficiaries and what is the criteria for this? She said that the drop in figures for the financial year in discussion is concerning. What is being done to address this? How will compliance related issues be addressed? She said that tax clearance certificates and non-compliance issues for contractors need to be brought to light. In rural areas, it is difficult for people to get tax clearance certificates. She mentioned that the outcome of SIU cases are concerning – out of 25 cases, only 1 has been finalised.

Ms Siwisa asked what CIDB is doing about women in the industry of construction, adding that they require guidance. She said that registered candidates have to pay a fee, and that it is concerning that some pay but do not get the opportunity of work. How are they being assisted to get the experience and recommendations from contractors? She added that slide 28 to 30 shows a decrease in youth and women employment, and this is concerning. How is CIDB going to intervene to resolve this and shift those employed from Grade on up to Grade seven skillsets?

Ms Hicklin said that there needs to be an upskilling and steppingstone from Grade one upwards, as this will allow candidates to move up the ladder in the industry.

Mr Mathebula said that there is a need from unqualified audits to clean audits. He asked whether there are community programmes to introduce CIBD to the public, in order to ultimately maximise public participation. He said that people with disabilities should have more employment opportunities, and youth empowerment and employment are necessary.

Ms Hicklin further added that she was concerned about the BUILD project and breach of contracts. She wanted to know the difference between pending court and pending inquiry, and why 80 investigations have not been completed.

The Chairperson said that one of the challenges in the report is that the Grade one company competes with the Grade one level due to lack of rules to prevent this from happening. She said that, if this continues and is not addressed, then it will be a problem for transformation in South Africa; it will impact those that had been disadvantaged before during Apartheid and now.

Responses

Mr Bongani responded to Ms Graham about transformation statistics. He said that these statistics are produced every financial year and in the middle of the year; that is what is being presented in the report. He said that, within the BUILD programme, there are projects that have been designed and those that are under-designed – such as construction management, guidance courses, and so on. He mentioned that guidance courses are for Grade one contractors, to teach them about the industry and offer them training and skills about contracting, tendering, etc. He added that there are also business advisory services being used.

He responded to Ms Hicklin, on career pathways. He explained that the entity offers a robust environment and opportunities for growth and employment. Different people get different training according to the skills they lack and skills they require. He said that the drop in figures is concerning, and majority of their programmes sees to this to bring more employment of women, youth and blacks.

He responded to Ms Graham about compliance-related issues. He said that the Deputy Minister is assisting with this, and figures are being produced on clients. The AG is also assisting with these issues. DPME are involved with clients to ensure that projects are recognised and sent for construction permits. The requirements for Grade 1 businesses are being reviewed for the registration criteria, and more training and skills are being organised for them to enable more opportunities.

He responded to Ms Siwisa, saying that training of contractors is being seen to, and that many workshops have been set in place in several provinces to address this. Transformation statistics for this year has been 69%, which 58% was achieved, and for 2024 is 75%. He said that this will be worked on.

He responded to Ms Graham on tax clearance and updating the system when it comes to issues of registration expiry. He said that many awareness campaigns are set in place for clients and contractors to know about the status of their registration.

He responded to Ms Hicklin about upskilling grade one businesses by saying that this is the process of the BUILD programme – which is to ensure an increase in gradings, skills and sophistication of different programmes to enable these businesses to compete with bigger businesses. Quality management systems are set in place to contractors. CIDB is working with proposals and industry players to ensure litigation and development approaches.

He responded to Mr Mathebula about CIDB awareness. He said that CIBD is involved with the community but more needs to be done to increase public participation and the Committee needs to help with this. He said that targets are set on youth, black, women employment and is designed to empower them, along with disabled people. But more needs to be done with this as well.

He responded to the Chair about grade one businesses competing with grade nine businesses by saying that this is currently under discussion and plans are being discussed to avoid this in the future.

The CIBD had four proclamation cases from KwaZulu-Natal, Eastern Cape, Gauteng, etc. The CEO and team are trying to address these issues as soon as possible. The difference between inquiry and pending court is that most SIU cases are investigated through SIU and are further investigated if criminalised. The CIDB tracks these cases and determines a way to move forward according to regulations and laws set in place. Cases in inquiry are being investigated internally.

Ms Skeepers said that there has been a lot of instability in the organisation. The work put in throughout the year had called for the board to step up their game. She said that Parliament requested that there should not be any acting vacancies. The new board is maintaining stability of CIDB.

CBE Annual Report 2020/21

Dr Sitsabo Dlamini, CEO, CBD, said that the CBE is paying attention to three issues: 1) transforming the BUILT environment, 2) creating skilled BUILT environment professionals, and 3) expediting the empowerment of women, youth and the disabled.

The Covid-19 pandemic imposed the following challenges on CBE, which necessitated reprioritisation on the CBE’s budget: (1) a 12.06% budget reduction; (2) a 100% debt relief to the six Councils that operate under the CBE; (3) Virtual platforms replaced all contact meetings (internal and external) required to deliver the APP; (4) Delayed procurement and operational processes. Despite that, during the 2020/21 year, the Council for the Built Environment (CBE) received a clean audit, and necessary oversight has been put in place to ensure that this is maintained. The were no material irregularities or irregular expenditure.

Achievements over the period included: CBE obtained a clean audit in 2020/21, 2019/20 and 2018/19. High-level business processes for the organisation were developed - Departmental Standard Operating Procedures were consolidated into one organisational procedure manual. Nine marketing communication activities were undertaken, aimed at creating awareness on the role and services.

[See presentation attached for financial information and further detail]

Discussion

Ms Graham said that she was concerned regarding the high number of complaints received and that the report only speaks about three complaints. The country is importing too many skills, whereas it should be checked whether the local workforce has the necessary skills. She says that is CBE does not support its members, and that there are huge governance issues, which are not being reflected in the report. The Council needs to answer to the Committee. What are their oversight roles, and are they fulfilling them?

Ms Hicklin said that the complaints slide does not add all the complaints. Many councils were fired for several issues, including misconduct, harassment and had reputational damages, amongst others. What progress is being made in any of the investigations? The Portfolio Committee has not gotten results on any investigations and is unsure of whether they have been handled. Reports were due to the Committee but were not brought forward. The CBE has to come clean and be held to account regarding these issues and complaints. The presentation highlights nothing of these crucial issues. Whistle-blowers have not been protected and are being victimised. What is being done to protect them?

Ms Siwisa said that a full report on the sexual harassment case from CBE is needed by the Committee. The investigation status needs to be known, and whether the accused has been suspended. She asked what CBE is doing to see that candidates comply with CBE requirements. She was concerned that women employment is in the minority. What is being done to empower women?

Mr Mathebula said that there was an issue of corruption and funding. How are these issues affecting CBE? What is being done to handle this? He applauded CBE on their clean audit.

The Chairperson said that CBE needs to come up with initiatives for increased registration amongst black, women, and the youth.

Ms Hicklin added that she wants to know more about the investigation on the South African Council for the Architectural Profession (SACAP) and the methodology that CBE used. She has no knowledge of the completion of this investigation. Was it conducted by SACAP or an independent organisation? The minutes of the meeting and information needs to be brought forward.

Mr Mathebula said that he wants to know more about the transformation and registration numbers.

Responses

Dr Dlamini responded to Ms Hicklin on allegations of harassment. He said that intervention has been taken to acts that have been appealed, and any issues that need to be appealed to CBE will be addressed from there. Matters appealed have been addressed. Issues on SACAP have not been formally appealed to CBE, and hence have not been addressed. He mentioned that an appeal was made to the Ministry.

He responded to Ms Siwisa on the CBE compliance. He said that the pandemic affected many, and many therefore had struggled to renew registration with Councils. CBE suspended levies that Councils pay to allow them to be complaint with fees. He mentioned that there are courses online that are free. He said that the CBE are addressing women empowerment by having a dedicated transformation committee that engages with industry stakeholders to ensure women are given priority and recognised, despite having disadvantaged backgrounds, and offering them skills and opportunities.

He responded to Mr Mathebula on corruption and funding. He said that steps are being taken to address these issues within CBE, and that code of conduct and procedure are set in place to minimise issues of corruption. He added that there is a whistle-blowers hotline, and the community are encouraged to report issues of corruption and misconduct.

He responded to Ms Hicklin’s question on disciplinary issues. He indicated that interventions are being taken through the Act of CBE. SACAP was not formally brought forward to CBE for intervention.

He responded to the Chairperson’s question about initiatives to encourage the disadvantaged. He said that mechanisms are used to increase registration and opportunities to disadvantaged. Even those that lack qualifications can be trained, and taught skills to upgrade themselves in order to get bigger opportunities.

Ms Hicklin asked whether there is protection for the whistle-blower’s hotline, because there have been many whose reputation has been tarnished for using it.

Dr Dlamini responded that he was unaware of this issue, and that steps are taken to ensure the protection of individuals and sophisticated systems are put in place to secure filing and complaints to which very few have access to.

The Deputy Minister said that clarity is needed on the issues raised regarding absence of leadership in the Department. She said that the AG has commended the Department on having no new expenditures. This is a positive sign because it is evidence of effective consequence management; it shows that unauthorised expenditure is a “no-no”, will not be tolerated and will have consequences.

She said that Infrastructure South Africa (ISA) is a coordinating and facilitating entity under the oversight of the DPWI; the IDT is an implementing agent. Therefore, the two are not the same; they have different responsibilities. She spoke about the post-litigation period for IDT, and if things go wrong to a point of liquidation. She said that it should be indicated to the new board of the poor performance of IDT being due to the dual status it has, being a trust and schedule-making entity. She mentioned that the new board must discuss with Cabinet about what form IDT should take. She said that everything that can be done will be done to prevent IDT from falling.

For the issue of the SACAP report, there was a delay due to the specific steps and measures that had to be taken by Cabinet to address this issue, as noted by the President. She said that it is important for a board to have youth and women involved in it. Previously, the team that presented a board that lacked youth and women were rejected by Cabinet and this caused a delay, as they had to restart the process. She said that the issue of SACAP was raised and addressed by the Committee.

The Chairperson thanked the Members for attending the meeting, the Deputy Minister and all the guests for appearing before the Committee.

Budgetary Review and Recommendation Report (2020/21) of the Portfolio Committee on Public Works and Infrastructure on the Performance of the National Department of Public Works and its Entities

The Committee considered and adopted the Error! Hyperlink reference not valid. with amendments. 

The meeting was adjourned.