Funding, reporting and accounting structures of Infrastructure South Africa; with Minister

Public Works and Infrastructure

20 October 2020
Chairperson: Ms N Ntobongwana (ANC)
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Meeting Summary

The Committee convened on a virtual platform to be briefed by the Department of Public Works and Infrastructure on South Africa’s Infrastructure Investment Plan Update Report as well as a report on the funding, reporting and accounting structures of Infrastructure South Africa (ISA). The Minister of Public Works and Infrastructure was in attendance.

The Minister of Public Works and Infrastructure stated that the country’s investment plan on and strategy is already in place and there has been a structure created to carry out the investment plan. They agreed they have to change the methodology of planning in dealing with infrastructure, together with the presidency and private sector that have come together to design this new methodology of planning, to determine what would be the best structure of Infrastructure South Africa.

The entity then presented South Africa’s Infrastructure Investment Plan and how it will be implemented to support the economic reconstruction and recovery plan. The delegation started off by outlining and explaining the structure of the entity which the Infrastructure Development Act gives birth to. These structures are meant to operationalise or give effect to the Act.

Secondly, the ISA outlined the execution and purpose of the entity which is to create jobs and to immediately kick-start our economy through infrastructure implementation and investment. The Minister expanded on this by explaining ISA’s ties with the private sector, in terms of getting an advisory council as well as how execution is going to look like on all levels of government.

The deliberation and questions from the Committee highlighted similar concerns the salary bill is going to be very high due to the level of authority in the structure. The bulk of the budget seems to be going towards all these senior positions. This is what the Finance Minister cautioned against and it seems as though the new ISA structure and management did not take the countries concern of reducing public wage bills into account.

The Minister reiterated that everything which is done and every structure which is followed is prescribed in law; the place of ISA in relation to other implementing agencies has been carefully prescribed by law and that is why the Independent Development Trust (IDT) cannot be compared to Infrastructure South Africa to question the need for it. In terms of the law, all tenders are created in terms of Acts and regulations. The Minister proposed again that they would have to change the law and then establish a state-owned company.

The Minister touched on the implementation of the actual programmes that will be done by local governments. She explained that entity’s role is to ensure that they do project preparation, to make sure that before the government’s money is invested in the project, thorough research has been done. In terms of the Act, the entity has advertised for an advisory council – a private sector that will help with implementation of plan. They are in processes of shortlisting and will be done by end of the current week. They will also be guided by spatial planning of the country to determine the need for infrastructure in the whole of the country.

This ISA structure is the first of its kind and it is only fair that Members ask for transparency without being labelled as being political, the Chairperson supported the Committee in this regard and asked the Minister and the entity to be more patient and transparent with the Committee as such questions will continue to come up. It is still a journey of understanding the entity’s place as well as its functions and funding. Members said that the engagement is not a one way street. The Minister and officials will be spending more years together and the Committee’s job of oversight is to keep asking questions moving forward; the delegation should avoid responses such as “I have already said this’’, etc.

Members asked what happens to the personnel who were part of the IDT and were contributing positively. Will the Department be looking to get new people from outside who will start planning or will it be looking at people already there due to lack of time? Time frames are also required in terms of the structures that are said to be put into place. The issue of job creation is paramount; covid-19 created havoc within communities, as people who live near townships and rural areas see these realities daily. A state-owned construction company will assist government and Department itself in cutting the middle man which will also employ people with benefits.

The Members reckoned that the infrastructure is going to be one of the critical drives from the economic recovery but how will the Department ensure that this recovery reaches the most disadvantaged municipalities where the infrastructure is really needed? The country is so skewed. The rural areas still need even road infrastructure. How will it be ensured that it benefits the most disadvantaged communities?

Meeting report

Opening Remarks by the Chairperson

The Chairperson opened the virtual meeting, welcoming the Committee Members, Minister, as well as the delegation from Infrastructure South Africa (ISA). This meeting followed many pronouncements on the media about ISA. She stated that the meeting was to discuss how the Committee is to work with ISA as part of the Department of Infrastructure, to have a better understanding of its funding and functions. This meeting is there for all parties involved to understand interaction and oversight. The Committee needed this so that when it is on any platform, Members know how and what to answer as a Committee. She asked that documents be sent to them early enough so they can read through and analyse these documents before the meeting.

Minister’s Remarks

Ms Patricia De Lille, Minister of Public Works and Infrastructure, thanked the Chairperson for the opportunity to address the Committee. She agreed with Chairperson that the rule in the Department is that Members must receive all presentation forty-eight hours before the meeting and she will follow up on that.

The second point around oversight is that, ISA is always ready to be held accountable. She informed the Chairperson that a council will be established to look at the economic recovery plan, which the infrastructure plan is a part of. In August 2019, the reconfiguration of government created a special place for infrastructure. In May 2020, government approved the establishment of ISA. The investment plan and strategy is already in place and there has been a structure created to carry out the investment plan. The entity agreed that it has to change the methodology of planning in dealing with infrastructure, together with the Presidency and private sector, that have come together to design this new methodology of planning in order to determine what would be the best structure of ISA.

On September 11, 2020, Minister Mchunu (Public Service and Administration) approved the structure of ISA. The entity will be explaining all of this to the Members and lastly, the Department and its entities are grateful that they have received good support from all three levels of government.

Presentation on the South Africa’s Infrastructure Investment Plan

Dr Kgosientsho Ramokgopa, Head of Infrastructure South Africa in the Presidency, clarified that they did submit the presentations on time. It is only the shorter updated version that was late and this happened to be the only version the Committee received and he apologised for that. He then moved straight to the substantive slides.

As the Minister indicated, the Infrastructure Development Act gives birth to a number of structures, such as which structures are meant to operationalize or give effect to the Act. The principal structure is the one chaired by the President; there is participation from various Ministers that the President chose. There is also a structure that manages the work of the PICC (Presidential Infrastructure Coordinating Commission), which is smaller. Then there is the PICC secretariat which deals with the more mundane granular details which is also chaired by the Minister that is mandated with the infrastructure. The administrative arm ensures that the strategic work is implemented and develops reports about the work that has been done. This administrative arm is now chaired by ISA.

This ‘Infrastructure-Led Economic Growth and Recovery Plan’ has been developed within the context that ISA will take up the responsibility of its overall coordination to ensure implementation. ISA has been envisaged within the context of the Infrastructure Development Act. SA’s Infrastructure Investment Plan was formed in order to expedite delivery, job creation and to immediately kick-start SA’s economy through infrastructure implementation and investment.

In executing SA’s Infrastructure Investment Plan, ISA will:

- Work across all spheres of Government

- Ensure that all projects:

  - Have undertaken a comprehensive needs analysis;

  - Interlinking and interdependent infrastructure networks are modelled, not individual projects; 

  - Infrastructure and related network resilience has been factored in;

  - Infrastructure interdependencies (between assets and between networks) have been costed;

  - Monitoring and identifying learnings.

  - Maintain good performance through planned maintenance and smarter use of assets.

  - Transform large-scale capital projects in terms of their planning, governance, financial       management, investment, implementation and lifecycle management.

  - Facilitate long-term investment in infrastructure across the public and private sectors

With regards to the role and importance of ISA, the President has indicated that he foresees the infrastructure be the flywheel to get us out of this hole of the pandemic hits. Infrastructure is the cardinal pillar of the recovery effort. The first set of projects constitutes the first wave of South Africa’s Infrastructure Investment Plan which will now be overseen by ISA moving forward. SA’s Infrastructure Investment Plan will lead to major job creation and at the same time address the essential service needs of communities in both our rural and urban areas, as infrastructure investment will focus on:

- Network Infrastructure, Agricultural Infrastructure, Human Settlements Infrastructure & Social Infrastructure;

- Building new and upgrading existing infrastructure;

- Repurposing redundant infrastructure; and

- Expediting the maintenance of neglected infrastructure.

The slide begins to demonstrate the executive and technical functions. The executive authority oversees the Act and is expected to have an oversight role. The executive focal points include:

- Regulations for the Infrastructure Development Act (No. 23 of 2014)

- Oversight of the National Infrastructure Plan 2045

- Oversight of the Strategic Infrastructure Project Pipeline and the IF in terms of the Presidential Proclamation.

- Oversight and reporting of infrastructure development implementation targets achievements, best practices, blockages, interventions, etc.

Executing SA’s Infrastructure Investment Plan

ISA will work across all spheres of government and:

- Ensure that all projects are taken through the SIDS Methodology, and:

- Have undertaken a comprehensive needs analysis;

- Interlinking and interdependent infrastructure networks are modelled, not individual projects; Infrastructure and related network resilience has been factored in; Infrastructure interdependencies (between assets and between networks) have been costed;

- Maintain good performance through planned maintenance and smarter use of assets.

- Transform large-scale capital projects in terms of their planning, governance, financial management, investment, implementation and lifecycle management.

- Facilitate long-term investment in infrastructure across the public and private sectors.

There is also a reporting structure that has been approved.

The Minister touched on the implementation of the actual programmes that will be done by local governments. She explained that ISA’s role is to ensure that they do project preparation, to make sure that before the government’s money is invested in the project, thorough research has been done. In terms of the Act, the ISA has advertised for an advisory council – a private sector that will help with implementation of plan. They are in processes of shortlisting and will be done by end of the current week. They will also be guided by spatial planning of the country to determine the need for infrastructure in the whole of the country.

Discussion

Ms S Graham-Mare (DA) said that the whole concept of ISA and what they are trying to achieve is an amazing idea; most infrastructure in the country has been done in silos. She still found information given very vague; a lot of areas require clarity, such as why ISA as an entity is needed and if there is the infrastructure coordination body and PICC, it is as though there is an additional layer of bureaucracy which does oversight on PICC. There is an issue of oversight that concerned her here. If the DG is not overarching head, then it is a parallel structure within ISA which is a little concerning; she still had no real idea of what kind of structure they are dealing with, whether it is a committee or SOE and if it’s an SOE, as Dr Ramokgopa mentioned, why would it then fall under this Department? IDT was created in terms of a schedule whereas this one does not.

There are no CFOs who handle the funding in the structure, where funding is going to come from and the approved positions are confusing. The salary bill is going to be very high due to the level of authority in the structure. The bulk of the budget seems to be going towards all these senior positions. If the R23 million of funding is coming from Treasury then which projects lost funding due to this?

Ms M Hicklin (DA) said that Ms Graham-Mare covered most of what she was planned to address. There a few more issues that she wished to touch on such as how the IDT was swept under carpet and no longer exists and where it stands now. Does the ISA incorporate IDT now?

The presentation also talks about R100 billion seat funding. She shares the same concern that there are too many high-level people being employed and this goes against the countless calls to reduce the public service wage bill. It needs to be known that South Africa hit junk status before covid-19 arrived; it is not due to the pandemic.

Ms L Shabalala (ANC) thanked the entity for the presentation. Even prior to corona, the country was not in good standing, and so this is a work in progress.

She asked what happens to the personnel who were part of the IDT and were contributing positively. Will the Department be looking to get new people from outside who will start planning or will it be looking at people already there due to lack of time? Timeframes are also required in terms of the structures that are said to be put into place. The issue of job creation is paramount; covid-19 created havoc within communities, as people who live near townships and rural areas see these realities daily. She would also want to know if they are looking forward in sourcing people that will be employed even as labourers for about five years instead of having a company that will back millions in tenders and then after the project; people are back to the same place and it is a merry-go-round of property. The Department should have a mixture – insource and outsource; 70 percent to tenders and allocate 30 percent internally.

Ms S Van Schalkwyk (ANC) said that the majority of the speakers have already spoken on what she wanted to raise. One of the main questions she had was on the funding of advisory panel, if it has it been approved yet.

In terms of the proposed senior management, she noticed that there is no other support staff. She asked whether the Department plans on using labour brokers for the rest of the positions and how low skilled workers will be incorporated in this. The initiative looks good on paper and hopefully it will materialise even in the long run.

Ms A Siwisa (EFF) noted that the tendering process involves a lot of government spending and asked why the Department cannot consider having a state-owned construction company because they already have expertise and people who are in the IDT. She was concerned about what is going to happen to people who have expertise there. A state-owned construction company will assist government and Department itself in cutting the middle man which will also employ people with benefits.

Ms Siwisa then had connection challenges

Mr E Mathebula (ANC) said that the national unemployment rate is rising and the economy is in trouble. When looking at how the SA economy has been performing, one has to look at how it grew by one percent in 2017 and 0.8% in 2018 while prediction was at 1.3%. This has left little to no room to reduce poverty. The government has come up with this plan to reduce poverty and people should not be criticising this plan. This is a vehicle that should be supported in an attempt to bring economic growth. In the event where this does not do well, they are at liberty to get proper advice. People should not be political about this at the expense of the plight of the citizens. He believed this is the effective mode of transport to try and support the growth of the economy.

Ms L Mjobo (ANC) asked about the problems with the network in parliamentary villages such as Acacia, because it is very bad in a time of virtual communication and meetings.

The Chairperson brought up the Tshwane project and the non-BBBEE compliance. She wanted to know how the transformation agenda will be driven. Dr Ramokgopa had been interviewed and there was an agreement that this plan is not BBBEE compliant.

Secondly, the infrastructure is going to be one of the critical drives from the economic recovery but how will the Department ensure that this recovery reaches the most disadvantaged municipalities where the infrastructure is really needed? The country is so skewed. The rural areas still need even road infrastructure. How will it be ensured that it benefits the most disadvantaged communities?

She also touched on how there has already been R11 million set aside for the next six months just for salary purposes. The bulk of the budget, as the Finance Minister has also confirmed, is going to salaries, and this does not seem to address these issues.

Responses

Minister De Lille first thanked the Chairperson and the Members for their questions and inputs.

The Minister indicated the issue of network has been brought to her attention before; she has went to the DPWI to ascertain if they are the ones dealing with the fibre connections at the villages and the response was that they do not deal with the network in parliamentary villages; it is Parliament that is responsible for this. She asked Public Works to contact the relevant people in Parliament because Members need this connection leading into the second wave of covid-19.

She said she would make a few comments and Dr Ramokgopa would answer the rest. She said that Parliament is there to make laws, and it approved the Infrastructure Development Act in 2014. Parliament is also there to approve budgets and it has approved the DPWI’s budget. If there is anything that the Department is doing that is inconsistent with the law, the Members can raise it at any time. She said she will keep repeating this: in the sixth Administration, when parliament was reconfigured, a Department of Infrastructure was created.  Thereafter, in August 2019 there was a government gazette under which the PICC was made part of DPWI; PICC is within the Department of Public Works, legally done through a gazette.

There are processes done to obtain funding; a budget has been re-prioritised so that they can include the establishment of ISA, establishing a structure is prescribed in law. Because this is a new Department, they had to create a structure. The role of the advisory panel will be only on a needs basis; it is people from the private sector, not just ‘additional’ things that they are doing. They have all been prescribed and accommodated by the law.

Lastly, she spoke to the difference between ISA and other implementing agencies. She said that there are three implementing agencies including IDT. The IDT was established in terms of a trust, with a mandate to go out and build social infrastructure. The IDT cannot be compared to ISA because the DPWI can choose an agency out of all the agencies which will carry out a specific infrastructure. This is all prescribed in law. 

Going to Ms Siwisa’s assertions about the state-owned construction company, such does not exist but can be created in terms of the law; all tenders are created in terms of Acts and regulations. She proposed again that they would have to change the law and then establish a state-owned company.

She indicated that the question about the partnership with the private sector will be answered by Dr Ramokgopa.

On the issue of salaries, she said that this is dealt with by the DPSA; it is not part of the DPWI’s mandate. But even the salaries in the structure they have created, ISA have also been prescribed by law. The Department did not sit and determine salaries. The R23 million is for the whole financial year; they have not done anything illegal.

Dr Ramokgopa addressed the R23 million concern, explaining that one should first ask what can be done with R23 million. He believed that once the structure takes off for the year, the money will be substantially more. They got R340billion of injection into the South African economy, working with eight people. The country is going to get an injection of R1 trillion going into infrastructure and jobs created. He has shown that with just eight people, they have been able to unlock the projects that everyone is currently seeing - about 190 000 units of housing developments. They will come back with the full benefits that will be done for the South African economy.

The next question was about the structure; he said that the kind of skills that they want at Deputy Director-General level are someone who will be responsible for investment planning and oversight, infrastructure delivery management and investments. Just on these two director general positions, you are either going to get an experience analyst or actuarial scientist and if you are getting black and in particular, women, they are getting paid large salaries; you will not get that kind of skill at a chief director level at a cheap cost. The Department is not just looking for someone with no experience and just a master’s degree. They are likely to get someone who has worked with the DFI’s and in the financing environment; these are people who can package projects. They are looking for black women and those do not come cheap; this is why they have to pitch it that high. The kind of work they are doing requires people who have done green economy finance; these are people who have looked into green and project bonds and have wide experience. They have pitched a Director-General job at R1.4 million and as low as this may be, they will still go all out to find someone who is committed to this country. They are going to get economists to come and do modeling and econometrics as well as benefits to localisation of the economy. It is evidence and science being brought into the work that they are doing.

Adding onto what the Minister said, he said that outside of this structure, there are 23 former PICC professionals who are now working in tandem with broader ISA. The Minister makes an important point – part of ISA is to accommodate the PICC.

The Minister responded to the question of it being an SOE, saying that no – Cabinet has said that this structure is an intention to later establish an SOE. Where they are, they only have a branch which is ISA and the head of ISA will report directly to the Minister.

Low-skilled workers will not be employed in ISA; all ISA does is create the necessary environment and construction that allows for job creation. ISA only has high-caliber people who will drive project planning. These are not skills that are part of the public sector by the way; these are from financing industries and other industries and they hope to attract these in addition to the R340 billion that they have already attracted.

With regards to the transformation aspect of this structure, he said that he has been telling this to the media as well – there are multiple stages of transformation; the first is around ownership consideration and of course the Mooi Kloof project does not meet that. The municipalities are going to run their own procurement processes. Jobs will come from those localities. They are going to accommodate people who cannot get RDP’s because they are earning too much according to the legal process but also cannot get bank financing. As a result of this development of 50 000 units in Mooi Kloof were built. The city of Tshwane is going to get an additional R270 million of rates and taxes into their finances. With this money they can provide water to Hammanskraal, provide decent shelter in Soshanguve and do maintenance in Atteridgeville. This is all transformation and in all of this, jobs are being created.

Follow-up discussion

Ms Hicklin wanted to make one statement before she said anything else. The Members are mandated by citizens of South Africa to maintain oversight; they are entitled to ask questions and should not be berated for this. She then spoke about the R23 million that has been taken away from projects: she wanted to know which projects have been compromised.

Ms Siwisa wished to go back to one question that she had left out; this is concerned with a section on the presentation dealing with the private sector. What intervention is the Department going to do to ensure that these investors do not influence which projects should be prioritised and how employment and labour happens? She wanted to know what the Minister going to do to ensure that a state-owned construction company does away with tenders and what will be done to address shortcomings.

Ms Graham-Mare seconded Ms Hicklin in that it is extremely rude to be told not to question; they have never seen a presentation before this Committee and this is the very first opportunity they have. Her understanding from the structures they are being presenting still left her to ask how oversight of PICC works. If the Committee is not being given full information, it will look like things are being hidden; this is a very new methodology and a new way to deal with infrastructure, so it is only fair that everything is transparent. They are dealing with trillions of rands. She commended the last slide presented by Dr Ramokgopa which is very detailed and explains things such as Salary Bill; that is what is required. To say that the Committee is playing politics is completely unfair and disrespectful.

Ms Shabalala said that oversight is meant to be inquisitive and provocative. After Dr Ramokgopa responded, Members got to understand. The engagement is not a one way street. The Minister and officials will be spending more years together and the Committee’s job of oversight is to keep asking questions moving forward; the delegation should avoid responses such as “I have already said this’’, etc. They all need to remain cool headed and calm. She is now convinced that there is value for money here; it is a developmental approach and requires a lot of questioning. They should all just remain calm so that they are able to work together without losing patience.

The Chairperson thanked Ms Shabalala and then told the Minister and Dr Ramokgopa that the Committee will continue to ask questions; Members will not take decisions for them but they will not stop asking questions. The delegation needs to understand that Committee is there to do that. The way in which Minister and Dr Ramokgopa responded was a bit arrogant and they need to understand what they have come before the Committee for.

As a follow up to the explanation given by Minister and Dr Ramokgopa’s organogram, they have not even shown the Committee the full organogram. The information must not be limited so it is only fair that they raise questions moving forward. Members should not be treated as if they are asking nonsense.

The Chairperson handed over to the Minister and Dr Ramokgopa.

The Minister assured the Committee that it is not a matter of disrespect. They are on a public platform, when Information is painted as incorrect she has to correct that as well. All she is asking for too is respect to her and ISA. She also feels to correct incorrect perceptions.

Going back to PICC, there is confusion with that as a structure and technical task team. The PICC coordinating council is chaired by the President; that is the council chair and the PICC commission consists of structure of management’s commission and then there is a PICC secretariat chaired by herself and other Ministers who do the admin of the council they report to.

Because this is an evolving and new Infrastructure Department, as things evolve they will keep Members informed. There is no past history to refer to. Everything has started from scratch after the President gazetted this in August 2019 and also when PICC was transferred to DWI. It is not a matter of arrogance; this is a public platform and they also need to make sure that the correct info goes out to the public.

With regards Ms Hicklin’s request, she indicated that she will send the reprioritisation of the budget to Ms Hicklin. The Minister then thanks the Chairperson.

The Chairperson thanks them for clarification. Since this is a work in progress, the Committee will, from time to time, ask for more questions and developments. She then asked them to log out of the meeting so that the Committee could continue with the meetings minutes. She thanked the Minister and the ISA delegation for attending the meeting.

The Committee Secretary said that minutes have not been sent and she thought they would be dealing with these on the next day.

The Chairperson said it is okay and they will deal with it tomorrow. She thanked the Committee for how they deal with things. She reiterated that the role as a Committee is to ensure what is being said is done and what is done is up to standard and money is spent where it matters more, they have to be there with their eyes and ears serving the oversight rule. She also confirmed that everyone staying in Acacia is having issues with network, Cell C, Vodacom and MTN. Reality is there is a second wave of covid-19 and they are continuing with virtual meetings so the question of network is necessary.

There is a programme they did not end up doing – that of visiting parks, like using Committee days and take one Wednesday as early as 8am to try to deal of the two parks – Acacia and Pelican. Instead of having a portfolio meeting in Parliament they would go and check things out in parliamentary villages.

Ms Siwisa said that she has a serious problem with the way the Minister does her conducting and the different answers she gives to different platforms. She does not adhere to information that was given in formal meetings. She does not know how this can be dealt with because first and foremost, she is accountable to the Committee; she has a tendency of undermining the Committee. Ms Siwisa suggested that the Committee write a letter to Minister to hold her accountable.

On the matter of parliamentary villages, half of the Committee stays in Acacia Park but the state of the residences is not conducive.

Ms Graham-Mare thanked the Chairperson for standing up for Committee. When the Minister mentioned legality, it was incorrect because no one questioned legality; they just wanted clarification. It is concerning that there are other discussions around public works in which the Ministry is not present. She requested that the secretary put together documents that inform all of them from time to time.

Ms Hicklin responded to the Chairperson, thanking her for her support of the Committee and understanding that the Committee’s job is oversight and should not be called playing politics. In responding to Ms Siwisa, she said that as someone who lives in Acacia, she can attest to the living conditions because even her front door is about to fall off. She supports Ms Siwisa’s assertion.

Ms Mjobo also supported the Chairperson’s input on the proposal to visit parks by taking a day to visit Acacia Park. This issue of network is not the responsibility of Parliament.

The Secretary touched on three issues. First on the network in parliamentary villages, there is some work being done to improve the coverage and that project is being done by the parliamentary ICT and she will continue to follow up; second is the programme of the Committee being interested in going to parliamentary villages. She was not sure how this will happen because of their days at the park. Meetings involving the Expropriation Bill are important over and above she would like to apologise that Members have not received the oversight report; it is a long one with information and audio that has been hard to get. This will be sent to Members and get it ready for consideration and apologises once again. She thanks the Chair.

The Chairperson said that it is appropriate that the Committee start next week Tuesday with the Expropriation Bill as it is very important. According to the Parliament, this Bill has been assigned to the Committee. She then thanked the Members for attending and for their robust engagement in the meeting.

The meeting was adjourned.

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