DPW, CBE, CIDB, PMTE, IDT, and Agrement SA on Annual Performance Plans, with Minister and Deputy Minister

Meeting report

Chairperson’s Opening remarks

The Chairperson welcomed the Minister, the Deputy Minister and the Director General (DG) of Department, including the top leadership of the Property Management and Trading Entity (PMTE), Council for the Built Environment (CBE), Construction Industry Development Board (CIDB), Independent Development Trust (IDT) and Agrement SA.

Minister’s Opening Remarks
Minister Nxesi made a few significant remarks about the role of Parliament in light of recent political changes which saw him return to the DPW after having been deployed elsewhere in government. In his view, the changes underlined the strategic necessity of always maintaining a strong leadership echelon within the Department to mitigate the disruption caused by the inevitable coming and going of Ministers. His remarks were in essence meant to give a broad vision of the DPW in the remaining period of his tenure. Indicating his intention to continue where he had left off before his redeployment, the Minister reminded the Committee of the Turnaround Strategy launched in 2012, which rested on two pillars, namely zero tolerance of corruption and improving ways of doing business at the DPW.

PMTE
At the core of this improvement was the completion of the process of making the PMTE, with its massive property portfolio of land and buildings, fully operational. This meant a PMTE that would add value by ensuring that every government building or land parcel was fully utilised and contributed to the national purse.

The PMTE also had to ensure that facilities used by government departments were properly maintained and did not become a public danger like the Civitas building in Pretoria (used by the Department of Health), where hundreds of public servants had to be evacuated due to reports of structural damage. Other key priorities for the PMTE were to identify land for land reform and social housing; to develop professional facilities management skills for the property and construction sector as well as promoting employment by opening up the entity for small emerging enterprises to break the stranglehold of the old order on the sector. To indicate the strategic importance of the PMTE, the Minister said the entity had not only received Cabinet’s blessing but President Cyril Ramaphosa himself had told the Minister that part of the reason for his re-appointment was that he must drive the process of making the PMTE fully operational.

The immediate challenge of appointing the Chief Financial Officer had already been addressed, while the acquisition of appropriately qualified staff was underway. In this connection he noted that a lot of young people had university degrees in property and construction but were not being absorbed because of certain barriers to entry. The DPW would have to intervene in this area. Another challenge was to give policy direction in the provincial sphere of provincial government, where a lot of chaos was happening, and for which the DPW was always blamed, even though the national Department could not impose its will or intervene.

The recent negative audit opinions received by the DPW and the concerns flagged by the Auditor-General and the Department of Planning Monitoring and Evaluation at the last briefing would be addressed. The Minister pledged himself to ensuring that Departmental plans were implemented and performance targets met and that lack of performance had real consequences. The process to review the Department’s two White Papers to refresh and clarify its mandate was also underway.

Regarding the second pillar of the Turnaround Strategy, namely zero tolerance of fraud and corruption, the Minister announced that the DPW would be working more closely with the Special Investigation Unit (SIU) with particular focus on areas of critical exposure such as construction projects, leases, prestige services, facilities management and emergency day to day maintenance. To illustrate the seriousness of the problem, the Minister told the Committee that as he was speaking, the DPW was in court, having been cited as respondent in a matter where the recently removed board of trustees was seeking an interdict against its removal.

IDT
The Minister presented a picture of poor performance at the IDT, including an illegal board whose priority was increasing its own board fees (with the Chairperson on a monthly retainer of R54 000), while the entity was operating on National Treasury bailouts. The crisis could be traced back to the launch of a forensic investigation by former DPW Minister Pravin Gordhan which uncovered a lot of wrongdoing. The recommendations of the forensic report however had gone unheeded and when the CEO tried to implement them he was removed by the Chairperson of the board. A business case/plan for the IDT that was supposed to have started two years ago had not materialised and as a result, the Deputy Minister of DPW was now handling the matter. The legality of some of the decisions of the board during its tenure was also under question as its appointment had turned out to be highly irregular.

Meanwhile the IDT’s service delivery’s reputation had suffered, resulting in a shrinking client base. Further, the IDT was involved in the debacle around the Mandela house in Brandfort in the Free State where a museum was supposed to be built. Also, it was important to note that this was the very IDT which had a mandate to build schools and clinics in some of the poorest areas of South Africa. To remedy the situation, the Minister said he had held consultations with his counterparts at the Departments of Basic Education, Health as well as Finance, inviting them to nominate people for the new board. Regarding prestige services the Minister went through a list of planned activities designed to improve service delivery to MPs and Parliamentary buildings. These included ensuring that National Treasury had a panel of service providers specific to prestige matters; the roll out of Wi-Fi infrastructure for all three parliamentary villages in Cape Town; beefing up security for the villages; considering the feasibility of reconfiguring or relocating the villages closer to town. The refurbishing of the Marks building and National Council of Provinces building was already underway.

The DG also expressed his thanks to the Committee for the warm welcome and pointed out that he and his team’s role was to implement what the Minister had outlined in his remarks.

DPW Annual Performance Plan
Mr Imtiaz Fazel, DDG: Governance, Risk and Compliance, briefed the Committee. Some of the highlights of the DPW’s Annual Performance were as follows:

• improved quality of its accountability documents, particularly performance information, planning, budgeting, implementation, monitoring and evaluation, and reporting.
• developing a Plan with a clear understanding and acknowledgement of the state of the economy globally and in our country.
• reprioritising appropriately to ensure continued delivery on the mandate within the budgetary challenges.

The DPW’s priorities which informed the 2018/19 Annual Performance Plan included:

• providing work opportunities and income support to poor and unemployed people
• transforming the construction and property sectors
• skills development
• improving the governance of Public Entities and Professional Councils
• combatting fraud and corruption

The Plan also identified a number of strategic risk factors such as:

• breach of key legislation prescripts, acts, regulations and policies (e.g. Public Finance Management Act (PFMA), Government Immovable Assets Management Act(GIAMA,) etc.)
• untransformed built environment disciplines as well as the construction and property industry
• Credibility of the Expanded Public Works Programme (EPWP) eroded due to non-adherence to EPWP prescripts.

Some of the remedial actions to the above included:

• implementation of the Governance, Compliance and Ethics Frameworks.
• implementation of the fraud prevention Framework.
• appointment of an Ethics Officer.
• oversight of the Public Works Bill project.
• review of the CIDB and CBE Acts
• developing a consolidated legislative framework to enforce compliance and determine roles and responsibilities of all Stakeholders

PMTE Presentation

Mr Jacob Maroga, Head: PMTE, DPW began by giving a snapshot of the dimensions of the PMTE Portfolio. It comprises of approximately 29km of land parcels (approx. 5.4 million hectares); building structures encompassing 93km of approximately 36.8 million m² of floor space. The Gross Deemed Cost of the portfolio is R139 billion with collected accommodation charges standing at R4.5 billion. Construction projects in the pipeline were estimated at R44 billion over the MTEF period. The effective optimisation of this portfolio held extensive benefits and opportunities for Government’s broader developmental agenda and socio-economic transformation especially in light of service delivery, transformation, job creation, expenditure efficiency and cost savings. It was therefore crucial to recognise the PMTE as an important socio-economic lever which could exert visible impact in driving capital formation, investment growth and social development.

Strategic risks:

Strategic risks faced were:

• inadequate service delivery leading to the erosion of the Department's mandate.
• inadequate maintenance and safeguarding of State assets.
• inadequate delivery of National Government Priorities
• weakening financial viability and sustainability of PMTE
• inability to maintain a reliable and accurate immovable asset register (IAR)

To counteract the above, a number of actions could be taken including:

• developing a revenue generation strategy
• streamlining business processes to improve response times
• identification of external funding sources and development of proposals to meet funding requirements
• insourcing of capacity through the filling of funded and critical posts within the new PMTE structure
• development of life cycle plans for prioritised immovable assets
• quarterly engagements with Municipalities to align planned precincts with Municipal Infrastructure Plans
• implementation of the Property and Projects Modules on the ARCHIBUS System

Questions and Comments

Ms L Mjobo (ANC) noting that the PMTE had spent R4 Billion on 105 infrastructure projects under six categories, including police stations (R885 Million), courts of law (R771 Million), border posts (R217 Million), correctional facilities (R657 Million), and office buildings (R656 Million) during the period under review, requested clarity on what the category “other” (R952 Million) had comprised of. She also voiced a concern that the empowerment priorities of the PMTE might have the effect of privileging the already empowered over those still in need of empowerment.

Ms Mjobo further asked the PMTE to clarify why only R5 Million had been allocated to an Artisan Development Programme compared to R10 Million for training staff on waste separation at source.

Mr D Ryder (DA) said his first gripe with the DPW’s report was the vagueness of the timelines and targets regarding the review of the Department’s White Papers. Until the review process was done, the Department would continue to lack direction and a clear idea of what it wanted to do.
Next on his list was the EPWP, which he said was one area where the DPW gets “lambasted repeatedly”. Merely having an EPWP Recruitment Guideline for other Departments to use was not strong enough – a set of regulations was more effective.

On Inter-Governmental Relations, Mr Ryder felt that the presentation had been silent on the need for the DPW to ensure that user departments understood their role in the good maintenance of buildings. Too many times, when things went wrong, the finger was unfairly pointed at the DPW. And given the fact that South Africa’s population growth exceeded the growth of the national budget, was there a plan to address this growing imbalance?

Mr Ryder stated that for him the elephant in the room was the PMTE. There had been no mention of what the entity would do about the last audit opinion. How could the PMTE ask for funding when its audit situation was regressing?
On maintenance, the DPW was currently reactive on the matter. His view was that the DPW should have a regular, standing maintenance budget to prevent the degeneration of state assets instead of just responding to emergencies.

Mr M Filtane (UDM) welcomed the Minister’s opening comments, especially on corruption. Confining himself to the PMTE presentation, he remarked that the R139 Billion “Gross Deemed Cost” of the PMTE portfolio was different from two figures cited previously on the same subject. Further, previous presentations had used the word “value” - why “cost” this time?

Mr Filtane observed that the presentation had indicated that no new infrastructure projects were in the pipeline. Was he correct then to assume that this meant a closed door for previously disadvantaged entrepreneurs in the property and construction sector? And in the statement “75% of procurement spend will be awarded to designated groups”, what was meant by designated groups?

Mr Filtane also wanted to know whether the PMTE had a working relationship with the Office of the Valuer-General. During a recent interaction with the Valuer-General Mr Filtane had formed the impression that the office in question was not in step with the shifting paradigm of land reform and the legislative process towards land expropriation in the country.

On the disposal of non-core/high value property by the PMTE for generating revenue or other purposes, Mr Filtane welcomed the PMTE’s position but warned that there were still instances where state properties “slip under the table”. Regarding the PMTE‘s new framework on leasing and letting, up for approval by National Treasury, he wanted to know when exactly that would happen.
Further, Mr Filtane asked the PMTE to state in monetary terms how much had been saved on the reduction of energy consumption by 150 000 000 kilowatts in 2018/19 as stated in the briefing document. He also wanted to know when would the PMTE address the challenges at one of the border posts in Mpumalanga identified during a visit by the Committee in 2016.

Regarding the PMTE’s action plan on non-performing contractors, Mr Filtane said he was quite keen to find out what the plan actually entailed.

Mr K Sithole (IFP) referred to 65 properties said to be made available by the PMTE to the private sector for leasing. Where were these properties located? He expressed concern about the negative audit opinion received by the PMTE last financial year and asked what remedies were in place to prevent a similar occurrence. Similarly, he urged the PMTE to fast track the transformation process to achieve the desired targets of representivity in the construction and property industry.

Regarding the recruitment of EPWP staff, he said there is a need to revisit all the relevant issues on this as in some places the EPWP was close to crisis point.

Ms E Masehela (ANC), in support of her IFP colleague, called on the DPW to provide specific information on transformation, to see exactly how far the Department had gone in implementing transformation. She also requested information on how many lease agreements the DPW had entered into with private landlords as she had thought that was a thing of the past. On EPWP, she expressed her concern with the persistent negative reports associated with the programme and suggested the officials in charge be retrained to ensure that they are doing the right thing.

Ms C Madlopha (ANC) remarked that the whole point of setting targets was to meet them. The AG and the DPME had found the PMTE to be a consistent under performer and Ms Madlopha wanted to know what the actual reasons were for this. Could someone say why this was happening? In addition, was there any plan to correct this kind of behaviour, including the negative audit outcomes?

Ms Madlopha emphasised two related areas of underperformance, namely the failure to sign agreements with provinces and municipalities; and non-compliance at local government level with Division of Revenue Act (DORA) requirements. One result of this had been the withdrawal of municipal grant funding to the EPWP, which could lead to councillors’ houses being burnt by angry residents. Referring to consequence management, she also wanted to know whether DPW officials had signed performance contracts as part of the basic components of a culture of accountability. The EPWP was a serious disappointment for Ms Madlopha as the same issues came up repeatedly year on year. It was clear that no monitoring was being carried out regarding the EPWP.

Ms Madlopha also lent her voice to growing concerns around corruption and fraud at the DPW. She questioned why the anti-corruption targets in the annual plan only reflected the percentage of disciplinary processes undertaken but not their outcomes.

Lastly, Ms Madlopha advised that notwithstanding the need to generate revenue from the disposal of state assets, not all of them should be got rid of, as the state might require these assets in the near future. She cited instances where the state ended up renting the same buildings it had owned at some earlier stage.

CBE Presentation

The presentation was prefaced by a few words by the Chairperson of the CBE, Mr Isaac Nkosi, who said the main priorities of the CBE were transformation of the built environment by placing emphasis on gender and empowerment of previously disadvantaged persons. Other priorities were corporate governance and stakeholder engagement - including the DPW, sister entities, the councils in the built environment, and universities.

Ms Priscilla Mdlalose, CEO, outlined the five main strategic goals of the entity:

1. To provide support to CBE, thus contributing directly and indirectly to the delivery of all strategic outcome-oriented goals of the CBE.
2. A transformed built environment with appropriate, adequate skills and competencies, responsive to the country’s infrastructure delivery operation and maintenance needs.
3. An optimally functioning Built Environment, with a responsive and relevant policy and legislative framework, based on informed and researched positions.
4. Built Environment Professions who operate within a regulated policy and legislative framework.
5. A Built Environment that is responsive to the developmental and economic priorities of Government.

On the other hand, some of the strategic challenges for the CBE were unregistered persons practicing in both the public and private sector; social and income inequalities in communities; gender and racial imbalances in the sector being still a matter of concern; legitimate health and safety issues as a major risk factor in the BE sector and many more. In response to some of the above the CBE was facilitating the review of its legislative mandate; had developed a Corporate Governance Framework; had hosted a Transformation Indaba on 29 August 2017, an engagement envisaged to be an annual event to ensure monitoring of the resolutions and commitment made by the stakeholders and continuous collaboration of transformation initiatives.

CIDB Presentation

Ms Nonkululeko Sindane, Chairperson, also lamented the time constraints which prevented her from expanding on what she called a very difficult corporate and capacity constrained environment at the CIDB.

Mr A Moola, Acting CEO of the entity, led the brief presentation. He outlined some of the strategic objectives of CIDB which included the following:

1. To monitor the growth and transformation of the construction industry in support of achieving transformational targets by 2020 using the Industry Black-Ownership Transformation Index.
2. To support risk management within the industry to ensure that by 2020 at least 85% of projects achieve a performance rating of adequate or better
3. Improve the capacity and competitiveness of the construction industry by 2020 using the Contractor and PSP Recognition Index

IDT Presentation

Mr Thotse Motswaledi, Chairperson, IDT, informed the Committee that the court case referred to earlier by the Minister had been postponed by mutual agreement between the parties. The Minister also announced that a special meeting focusing on IDT and its challenges had been scheduled.

Ms Yvonne Mbane, Acting CEO of the IDT, briefly highlighted the key operational constraints at the entity. Some of those were the following:

• a declining business portfolio owing partially to budget cuts by client departments and client disaffection with the quality and speed of project delivery by the IDT
• inadequate technical capacity to deliver on the current portfolio compounded by an organisational structure biased towards none-core personnel
• outdated programme management systems and under-developed service billing systems
• delays in transfer of funds by client departments exposing the entity to litigation
• weak stakeholder relations (failing to avert withdrawal of projects and continued non-payment of management fees)
• a negative audit opinion (disclaimer) which was currently being addressed through good governance and clean administration efforts.

Agrement SA Presentation

Mr Joe Odhiambo, CEO, said Agrément South Africa has operated for 49 years under ministerial delegation of authority from the Minister of Public Works. The annual grant funding is channelled from National Treasury through the Department of Public Works. The funds are ring fenced and only used for Agrément South Africa. The transactions are subject to the policies, procedures and governance processes set out by National Treasury regulations. Finances are likewise audited as required by National Treasury regulations. Agrément South Africa has received an unqualified audit report for the last few years and has been hailed as an example of good financial management.

The entity fundamentally aims to promote introduction of innovative non-standard construction related products & systems for which there are no South African national standards. An increase in certificated innovative construction products may increase uptake of innovation, which promotes and enhances the use of innovative and non-standard construction related products & systems. Once non-standardised construction products are successfully assessed, certification is provided to meet accepted global standards within accepted global time frames. This is done using excellent project management principles to meet stakeholder expectations.

Questions and Comments

Ms Madlopha said it was clear that working more closely together was the best way forward for all the DPW entities. She congratulated the CBE on its clean audit outcome last financial year. She was also pleased to note that even the red flags identified in the last audit had been addressed.
She asked for a list of the municipalities as well as the 9 Provincial Public Works Departments mentioned in the briefing document as partners with the CBE on the Structured Candidacy Framework.
She wanted to know why the Acting CEO of the CIDB was not present without an apology at the meeting. Of more concern was the report from the AG that CIDB had not submitted some of its quarterly performance reports this year. Did this have anything to do with some irregular expenditure reportedly under investigation which had been picked up by the AG?

Ms Madlopha also highlighted an AG report on the PMTE to the effect that the entity had not been ready for an assessment because of reported disruption at top leadership level.

Mr Ryder zoomed in on the IDT and its challenges. He agreed with the Minister that urgent steps needed to be taken regarding the matter as the IDT played a hugely important role in service delivery – especially in building schools and clinics for the poor and marginalised. It was very likely that another negative audit outcome was around the corner for IDT, because it was obvious that the issues raised in the last one had still not been addressed. He pronounced the IDT as a “mess”. Targets had not been met but the budget was spent already.

Mr Filtane asked Agrement SA for more information on one of its products mentioned in the presentation. The product was supposed to make it easy and affordable for poor people to build houses for themselves.

Mr Filtane also enquired whether Agrement SA could quantify its claims of having made a contribution in the fight against global warming and preserving the environment.

Coming back to the DPW, Mr Filtane asked for timelines regarding the legislative process involving the draft Public Works General Laws Amendment and Repeal Bill. When could the Committee expect the Bill in Parliament?

He raised the issue of young graduates who still could not find work in the construction and property industry as reported by the DPW last year. What was the Department doing to ensure that these people obtained the work experience demanded of them by the industry as a precondition of being hired? He also wanted the rand value of reported cases of fraud and corruption at the DPW.

The Chairperson, citing time constraints, called a halt to proceedings and informed the DPW and its entities that the Committee would be expecting written, detailed responses from Members’ questions and comments.

The Deputy Minister expressed his thanks to everyone for a fruitful engagement and promised that the Committee’s questions would be seriously considered and full answers be provided.

The meeting was adjourned.