Department of Public Works on legislation & status of the Construction and Property Charters, with the Deputy Minister

Meeting report

Introductory comments
The Chairperson welcomed the Deputy Minister of the Department of Public Works (DPW), Mr Jeremy Cronin, the Director-General and delegates from the DPW, and Members of the Committee.  She noted apologies from the Minister, Ms C Madlopha (ANC) and Mr L Gaehler (UDM).  She introduced and welcomed Ms Ncumisa Gloria Matiwane (COPE) as a new Member of the Committee.

Mr Mziwonke Dlabantu, Director-General,DPW, apologised for the absence of the intended presenter, Ms Mandisa Fatyela-Lindie, Acting DDG: Construction and Property Policy Regulation, who was unable to attend owing to family health issues.  He introduced Dr Devan Pillay, Chief Director: Construction Policy, and Mr André Meyering, Chief Director: Property Policy, and indicated that both would make presentations to the Committee.

Establishment of Agrément South Africa (ASA) as a public entity
Dr Pillay said ASA had been established in 1969 by the Minister of Public Works, through a delegated authority, with its prime mandate being to operate as an objective South African centre for the assessment and certification of innovative non-standardised construction products and processes which were not fully covered by a SA Bureau of Standards (SABS) standard or code of practice.  This would serve specifier and user interests by providing assurance on fitness-for-purpose and value for money of new technology, as well as ongoing quality assurance.   Through its links with international peer organisations, it would be able to support the local construction industry in its export activities by facilitating the approval of South African innovative construction products into foreign countries.  

However, ASA’s lack of legal status meant that it was dependent on the Council for Scientific and Industrial Research (CSIR) to fulfil its administrative requirements and to manage its technical agency.  Futhermore, the Auditor General’s (AG’s) report classified transfers to ASA as irregular expenditure.  For these reasons, ASA had developed a business case to motivate its establishment as a juristic person.  This had been submitted to the Joint Evaluation Committee (JEC) for approval in March 2013.   There had been consultation with a wide range of stakeholders, with support in principle for the need for ASA to retain its mandate and continue to exist as a separate, independent organisation, in line with international trends.  It was also proposed that ASA’s mandate should be extended in future to include a regulatory function, but the Department of Trade and Industry had warned that an ASA regulatory function should not infringe any provisions of World Trade Organisation (WTO) trade agreements to which SA was a signatory.

The impact of the new policy positions would be that the irregular expenditure concerns of the AG would be addressed with ASA fully functional as an independent entity.  It would be able to effectively promote the value of certification of non-standard construction materials and systems, thus promoting innovation, local manufacturing and job creation.  The increased availability and reliability of non-standard materials would impact on lowering construction costs for the public and private sectors, and through international engagements, ASA would ensure SA assessment standards remained internationally accepted – thus facilitating local exports of products, materials and systems.

The draft ASA Bill was gazetted on 15 January, 2014, for public comment, which closed on February 17.  Only issues regarding clarity had been raised so far, but if any substantive matters arose, workshops would be held.  The Bill was expected to be tabled in Parliament by September 2014.

Review of Expropriation Act, 1975
Mr Meyering said that the 1975 Act was typical of its era, as it basically said that the responsible minister could expropriate as he pleased.  The proposed new Bill sought to align the Act with the Constitution to provide a common framework to guide the processes and procedures for the expropriation of property by organs of state.  A noteworthy difference from the existing Act was the recognition and compensation of unregistered rights in property in all expropriations.  The Bill did not grant expropriating powers to any functionary other than the Minister of Public Works, but rather prescribed uniform procedures to be followed by all expropriating authorities who derived their powers to expropriate from other pieces of legislation.  The aim was to introduce consistency and uniformity.

In contrast to the 1975 Act, the proposed Bill embodied the constitutional principle of “just administrative action” by providing for the publication of a rationale for any intended or actual expropriation, and giving interested parties an opportunity to raise objections – and have them considered before the expropriating authority decided whether or not to proceed with the expropriation.  

The draft Bill was gazetted for comment in March 2013.  Since then, wide-ranging submissions had been received from organised agriculture, commerce and industry, the financial sector, the legal fraternity, the property industry, professional associations, public entities, government departments and members of the public.  These had led to a revised draft Bill being submitted to the National Economic Development and Labour Council (NEDLAC).  A joint task team of the Trade and Industry Development Chambers had concluded its deliberations, with relatively few areas of disagreement recorded.  However, the labour, community, and business constituencies unanimously oppose any provision of the proposed Bill.

Implementation of the uniform procedures for expropriation should not have a significant impact on staff structures, although some existing personnel might need initial training on the new procedures.

The Bill was currently being finalised, in consultation with the office of the Chief State Law Adviser, and Cabinet approval to table it in Parliament would soon be sought.

Ms A Dreyer (DA) asked if there was a timetable for the submission of the Bill to Parliament.

Mr Cronin responded that the Bill was on the point of being submitted to the Cabinet Committee last week, but there had been some minor issues raised by the state law adviser, so it would now be submitted next week.  He was confident it would be accepted, and that Cabinet would sign off on it the following week.  Unfortunately, there would not be time for public hearings before the end of the current Parliament, but the government did want to “put down a marker” of its intention, and to provide reassurance.

Built Environment Professions proposed policy
Dr Pillay said a review of the Built Environment Professions (BEP) in 2011 had resulted in a policy document based on three principles – public protection, integrity of professions, and government policy objectives.  The document highlighted such challenges as poor cooperation between the Council for the Built Environment (CBE) and Professional Councils (PCs), poor oversight and lack or accountability by PCs, inadequate governance regulations, lack of alignment to government policy planning, lack of transformation, gaps in the registration processes, and the cost of investigating complaints. 

To address these challenges, three options had been considered.  The first proposed a single CBE – a “super council” -- with the PCs converted to six professional boards accountable to the Council.  This was rejected by the PCs and the government.   The second option largely maintained the status quo, with the Minister regulating the CBE and PCs, and the PCs reporting through – but not accountable – to the CBE.   The preferred option, however, provided for functions to be relocated within the DPW, and for the current PCs legislation to be amended to address shortcomings.  Authority would be derived directly from the Minister, and not from the CBE, whose functions would be ring-fenced within the DPW.  This would require legislation to repeal the CBE and amend regulations for BEPC Acts.

Dr Pillay said this approach would address a range of current challenges.  There would be better alignment with government policy planning; there would be no competing interests or conflicting views in executing the mandate; PCs would report directly to the DPW, for improved accountability; cooperation would be enhanced through the amendments of BEPC legislations; the DPW would be better positioned to implement legislation and government priorities, and to drive transformation.   Key CBE and PC stakeholders had been consulted in May and June of last year, and the draft BEP policy would be gazetted for public comment by the end of February 2014.

The Chairperson asked whether the accreditation required by the Engineering Council (ECSA) benefited South African engineers, because the Washington Accord, for instance, did not allow Cuban engineers to work in South Africa.  Did this not create blockages?

Dr Pillay said that to practise in South Africa, engineers needed to be registered with ECSA.  The Washington (and Dublin) Accords gave South African engineers the opportunity to practise in certain overseas countries without necessarily acquiring accreditation in those countries.  The situation was reciprocal, where countries had similar standards and legislative requirements – such as the United Kingdom.  However, Cuba did not form part of the Washington or Dublin Accords, and a possible solution would be for South Africa to enter into an agreement with Cuba, although this would be a political and technical issue.

Mr Cronin said the issue of engineering standards was relevant to South Africa, as a developing country.  Were they appropriate to the developmental profile of South Africa?  Countries like South Korea were doing extremely well, but their engineers would not be eligible to work in this country.  This was an important issue that needed to be raised with ECSA, because SA did not have the engineers it needed.  It was also why a more direct relationship with the PCs was needed to drive the government’s policy initiatives.  At present, the CBE came between the government and the PCs, which made consultation “a messy process.”

Ms Steyn said removing a layer of bureaucrats to allow more direct consultation, would be helpful.

Establishment of Independent Development Trust (IDT) as a public entity
Dr Pillay traced the background of the IDT as a temporary grant-making agency, established in 1990 with a R2 billion government endowment, with the proceeds of its investments being used to enable disadvantaged communities to access resources and improve their quality of life.  This was to be achieved together with strategic partners.   Then in 1997, the Cabinet ruled that the IDT had to be transformed into a government development agency, implementing projects commissioned by government departments.  The IDT handed over its funding agency role to the newly formed National Development Agency (NDA), and since then had implemented over 20 000 projects on behalf of the state.

However, the change in the IDT’s mandate in 1997 saw an increase in services being offered at no cost to the state, but no increase in funding from the fiscus.  This had depleted the IDT’s capital base, with increasing overheads stemming from its growing portfolio of projects and decreasing interest rates.  By 2006, it had been forecast that the trust’s funds would by exhausted by 2012/13, so a cost-recovery programme was implemented.  However, this failed to generate sufficient revenue to ensure the IDT remained financially viable.  At the same time, the government was under pressure to accelerate its delivery of social infrastructure, with the IDT as its implementing agent. 

A consultation process was undertaken last year, involving a “SWOT” analysis, to examine the IDT’s delivery model, establish whether synergies existed between the IDT and other state institutions, and to determine where a role existed for the IDT in the delivery of infrastructure.  The outcome was that the IDT’s market space as the provider of social infrastructure was identified.  It was proposed that the DPW, responding to clients’ needs, would allocate projects to the IDT for implementation, oversee the projects, and provide feedback to the clients.  The IDT would become the implementing arm of the DPW for the provision of social infrastructure, and would consider building internal capacity and skills to undertake projects, to ensure savings to client departments.

The recommendations arising from these proposals positioned the IDT as a Schedule 3A public entity, complementing the DPW in the delivery of infrastructure by enhancing the Department’s capacity and in turn advancing the achievement of national development objectives and enabling the DPW to deliver on urgent and immediate infrastructure requirements.  The 1997 mandate would remain unchanged insofar as it supported all spheres of government to implement projects aimed at eradicating poverty, creating employment, and developing sustainable and cohesive communities.  The main focus, however, would be the education, health and justice (courts) sectors.

There was currently a need to finalise the development of human resource and finance models by the end of March, and the completed IDT business case would be submitted to the Joint Evaluation Committee (JEC) by mid-April 2014, followed by submission to the Cabinet for approval by the end of April.

Discussion
Ms P Ngwenya-Mabila (ANC) expressed concern that the implementation dates for the
Expropriation Bill, the Built Environment Professions policy and the IDT transformation to a public entity, had all been extended.

Mr K Sithole (IFP) endorsed this view, pointing out that the Portfolio Committee’s term of office was nearing its end.  He wanted an explanation of why the mandates of the ASA and CSIR were not the same, even though their operations were similar.  The ASA, as a public entity, would be able to promote job creation – but no target had been given.

Ms N Madlala (ANC) asked when the Cabinet intended to approve the Expropriation Bill, as the Committee was now “exiting” and needed clear guidelines on dates.  On the built environment issue, certain stakeholders were said to have been consulted, but had this process included students, as they were the ones who were suffering the most from the present situation?

Ms N Ngcengwane (ANC) asked whether the issues raised during an earlier public participation process had been reflected in the new draft built environment policy.

Ms N November (ANC) said there was frustration over delays in amending the Expropriation Bill, and urged the DPW to move quickly on the issue.

Mr N Magubane (ANC) complained that a lot of materials of low standard were entering South Africa and being sold at low prices.  People were buying products like zinc sheeting, but they were losing money because these products did not last.   What was the SABS doing about this?  Did they have agreements with foreign countries about standards?   The IDT was doing a lot of good things in South Africa, especially with school buildings and particularly in the Eastern Cape.  The problem is that in most instances, it is being financed by the Department of Education – why could it not do this work without being supported by other people?

The Chairperson asked how the DPW was going to address the blockages which were preventing students from becoming registered engineers.  Some ended up making tea at their work places, and were not given the opportunity to do their practical work.  A situation where children were not allowed to achieve their goals, should not be allowed.  There was also confusion over which tertiary institutions were accredited to provide the relevant courses.

Mr Cronin said it was important to take political responsibility for some of the issues, rather than to dump them on the administrators.  The main issue causing frustration had been the delays, and this had been frustrating for the government as well.  It had to be understood that the DPW was “a department in intensive care,” with the new Minister having to focus on corruption and turnaround issues.  Matters such as the asset register and the Department’s lease portfolio had been priorities, but the situation had now stabilised.  Policy issues had, unfortunately, been put on hold during this period.

He admitted he was partly responsible for the delays in implementing the Agrément Bill.  The policy had been ready two years ago, but it seemed to the incoming Minister and Deputy Minister that too many entities were being created outside of government, and this caused a delay.   In 2008, the DPW had created a draft Expropriation Bill, and his opinion it was unconstitutional, and it was suddenly withdrawn.   Until mid-2012, the Bill seemed to be like a prickly pear which nobody wanted to touch, and no political guidance had been given to the Department.  The Agrément Bill was not a controversial piece of legislation, by the Department was told this was not a priority issue.

The Deputy Minister said there were some misconceptions surrounding expropriation.  A number of people, including colleagues in government, believe they cannot appropriate because there is no new Expropriation Act.  However, the 1975 Act gave national departments, provincial premiers and every municipality expropriation powers.  The other illusion was that the Constitution demanded that there must be a willing buyer and willing seller.  This was nonsense.  The property clause in the Bill of Rights described how expropriation should occur, and merely states there must be just and equitable compensation.
However, government was anxious to get the Bill passed because people were nervous about using current legislation to implement expropriation in case there were constitutional challenges.

Mr Meyering said there had been a few areas of disagreement over the Expropriation Bill with NEDLAC, and a full report would be brought to the Committee.  The issues involved were quite technical.   Regarding the cost implications of compensation for expropriations, as the formula was laid down in the Constitution and the Bill stuck religiously to the Constitution, so there should be no impact on the budgets of government.

Dr Pillay explained the need to differentiate Agrément from the CSIR.  Agrément tests firt-for-purpose innovative construction materials.  There would be a conflict of interest if Agrément also produced the product.  However, a lot of development took place within the CSIR, so if Agrément were absorbed into the CSIR, it would become both player and referee.

There were no job creation targets for Agrément, but by becoming a public entity with its own resources it would begin to play in the field of innovation in the construction centre, and it was hoped this would spur a whole new development within the construction industry, which would lead to job creation.

Regarding consultation with students over the built environment professions, he said that when the Bill was put out for public comments, which should be very soon, it was expected there would be a large number of comments from students and academic staff at educational institutions.

Dr Pillay said most of the comments raised during the earlier public participation process had been reflected in the new draft built environment policy.

The issue of poor quality construction products being allowed into the country had highlighted a serious gap.  When the SABS set a standard for a product, there needed to be three or four similar products in the market for a standard to be set.  A standard could not be set for one product.  For a product to be used in the construction industry, there needed to be certification by either Agrément or SABS.  This would apply to products with a bearing on health, safety and the environment, but not for aesthetic features.

The Chairperson asked whether the Expropriation Bill was withdrawn in 2008 because it was unconstitutional.

Mr Cronin said that in his opinion, the Bill was unconstitutional because it sought to prevent the possibility of going to court on a compensation matter.  In terms of the Constitution, one cannot block access to the courts.   The property clause is explicit that if there is dissatisfaction over expropriation, there is a right to go to court.  However, a court challenge did not halt the expropriation process while the amount of compensation was being considered.  At least 80% of the state’s offer had to be paid over when expropriation took place, and if the state’s offer (or less) is accepted by the court, the expropriated party has to pay the legal costs.  If the state loses the case, it has to pay the legal costs.

Dr Pillay said that currently, the IDT did a lot of work for the Department of Education, and in terms of its funding model, it charged the Department a management fee.   When it became a Schedule 3A public entity, it would be funded directly through the fiscus.

When one registered as a candidate with a professional council, one could never become a professional engineer, for instance, if one was unable to perform the required scope of work.  Because this was a persistent problem, the DPW had worked with the Construction Industry Development Board (CIDB) to address it, using government contracts to rotate through built environment professions to ensure students obtained the relevant scope of work.  The CBE and PCs needed to be “brought on board” to ensure candidates already in the private sector received adequate opportunities, and a policy was being developed to place the onus on the CBE and PCs to drive the candidacy programme.

The issue of the accreditation of institutions had been “a tragedy” for a long time.  It was hoped this problem had been addressed, with PCs being instructed by the DPW to list all accredited tertiary institutions on their websites.  There were still some problems in rural areas, however.

Status of Construction Charter
Dr Pillay gave a brief overview of the status of the Construction Charter.  The Construction Sector Charter Council (CSCC), established in 2009, was the monitoring and overseeing body of the construction sector code and reported to regulatory stakeholders such as Parliament, BBBEE Advisory, the DPW and the Department of Trade and Industry (DTI).  Measuring performance of the sector against the charter since 2009, the CSCC had collected and analysed 3 500 certificates in order to create an empowerment database.  This would indicate the level of transformation in such categories as ownership, women’s empowerment, youth empowerment, procurement and corporate social investment.   Within two months, a very clear picture should emerge of transformation during the first phase, covering the period from 2009 to 2012, and a comprehensive report would be submitted.

The DTI had recently gazetted the new BBBEE codes, reducing the elements from seven to five, while making certain changes within the elements.  As a result, the CSCC would be revising its sector code to align it with the BBBEE code, which was a huge task, because it involved setting new targets for the industry, new processes for how targets should be achieved, and re-educating the implementers of the codes.  Five task teams would be established, each aligned to a code, with specialist advisers to assist in implementing what would be a complex process.  There had been an argument raised by certain sectors that the CSCC should merely continue with the old targets, but this was countered by other sectors, who pointed out that the envisaged transformation would not be achieved.  Actual negotiations on the revised codes should start around the end of March.

Status of Property Charter
Mr Meyering said the Property Sector Charter Council (PSCC) monitored compliance by all parties involved in commercial and residential property, for purposes of business, and zoned land.   The PSCC’s research indicated that the South African property sector in 2010/11 was worth a “ballpark figure” of R4.9 trillion, with residential comprising R3 trillion, non-residential R780 billion, public R570 billion, and zoned urban land R520 billion.   Further research showed that the income generated by the players in the property field amounted to R291.1 billion.

A full report on transformation in the sector should be available in May, although certain findings had already been made through an analysis of companies’ “scorecards.”   These findings indicated that the sector lagged behind in terms of transformation.  Out of 38 000 registered estate agents in 2012, only 13% were black, and out of 11 000 agencies, it was estimated that only 2% - 4% were black, with no black agencies in the leading pack.  A major threat was that, if a black agency built up an attractive asset portfolio, it became a prey for a buy-out by a larger company.  The risk was that if they became successful, they subsequently disappeared! 

Funding remained a stumbling block for new black entrants into the property sector.  Bank funding required a high (40%) level of equity, the National Empowerment Fund had halted funding, the Industrial Development Corporation did not fund property transactions, and there was scant evidence of funding by development finance institutions.

Conclusion
The Chairperson asked that consideration of the status of the Immovable Asset Conditions Assessment Guideline be deferred till the Committee’s meeting next week, when the asset register would be discussed.  Members agreed to this proposal.

The meeting was adjourned.