IDT 2015/16-2019/20 Strategic Plan & 2015/16 Annual Performance Plan Presentation

1. Presentation of the IDT 2015/16 – 2019/20 Strategic Plan & 2015/16 Annual Performance Plan to the Portfolio Committee on Public Works

2. 1 • In terms of Section 55 (2) (b) and Section 56 of the Constitution, the National Assembly must provide mechanisms to maintain oversight of any organ of state and may summon/require any institution to report to it. • The IDT complied with the National Treasury Framework on Strategic and Annual Performance Planning as the 2015/16–19/20 Strategic Plan was: • Approved by the Board of Trustees on 25 February 2015. • Lodged with the Executive Authority and National Treasury on 27 February 2015. • Approved by the Minister on 6 March 2015as evidenced by the Foreword, Official Sign-off and Shareholder Compact, • Submitted to Parliament on 11 March 2015. • Therefore the IDT presents the Portfolio Committee on Public Works for consideration and processing: • the 2015/16 - 2019/20 Strategic Plan; • the 2015/16 – 2017/18 Budget; and • the 2015/16 Annual Performance Plan. Purpose of the Presentation

3. 2 1.Background

4. 3 The IDT positions itself to contribute to national development imperatives through its service offering. The strategic posture adopted by the IDT Board is aimed at building an IDT which: • Has the capacity to deliver a distinctive value proposition which measurably advances the national development policy objectives; • Can address the development gap that has continued to undermine government’s development policy objectives; and, • Is financially viable and organisationally sustainable. The Cabinet approved the appointment of a new CEO, Mr Coceko Bambihlelo Johan Pakade who will drive the Strategy. Background & Strategic Posture

5. 4 2.2015/16- 2019/20 Strategic Plan

6. 5 • FOREWORD: EXECUTIVE AUTHORITY • OFFICIAL SIGN-OFF • STATEMENT: BOARD CHAIRPERSON • PART A: STRATEGIC OVERVIEW • PART B: STRATEGIC OBJECTIVES • PART C: LINK TO OTHER PLANS • APPENDICES Strategic Plan: (High Level) Table of Contents

7. 6 • Asserts that IDT’s Strategic Plan underscores the importance of infrastructure in fostering shared prosperity by all. • Highlights IDT’s role within the mandate of the Department of Public Works • Demonstrates IDT’s value-add to national development effort: • Shows the IDT’s alignment to: • The national priority outcome areas; • The National Development Plan; • The National Infrastructure Plan; • The DPW Policy Statement; • Minister’s Performance Contract. • Emphasises IDT’s commitment to be a relevant, effective and financial viable development agency that delivers programmes that make meaningful impact on the life of the country’s citizens. • Minister’s support and commitment to remodelling the IDT. Foreword: Executive Authority

8. 7 • Recaps IDT’s commendable achievements (in terms of delivery) during the 2013/14 financial year. • Acknowledges a qualified audit opinion for the 2013/14 on its regulatory audit which digressed from a potential 11th successive unqualified audit report. An audit action plan has been approved by the Board under the oversight of the Audit and Risk Committee to address the root causes that led to the qualified audit opinion. • Indicates the Board’s resolve to continue working with the Executive Authority to finalise IDT’s mandate which will address among others: • Corporate form; • The business model; • Institutional arrangements; and • Financial sustainability of the organisation.. • The Board of Trustees further commits itself to give management total support in the implementation of the Strategic Plan. Statement: Board Chairperson

9. 8 • The Strategic Plan of the IDT is primarily formulated to support the mandate of the DPW and overall to contribute to the national development effort. The Strategy is prepared in line with the National Treasury Framework on Strategic and Annual Performance Plans (2010) and articulates the following elements : • Vision: To be a leading public sector developmental programme implementation and management agency. • Mission: The IDT manages and delivers integrated quality social infrastructure programmes on behalf of government on time, cost effectively and through a people centred approach. • Our Approach: The The IDT’s approach to social infrastructure development entails all the necessary facilities and networks required to prepare communities to receive, participate in, own and sustain their own development. Introduction

10. 9 Values & Operating Principles

11. 10 • The 1997 Cabinet mandate is still in place, that is: “The IDT must be transformed into a government development agency that will implement projects which are commissioned by government departments.” • Integrated into the public service delivery system in 1999 with the promulgation of the PFMA and listed as a Schedule 2 Major Public Entity. • Reports to the Minister of Public Works, Executive Authority and the Shareholder Representative. • The IDT seeks to contribute towards the mandate, vision and strategic objectives of Department of Public Works (DPW), and to advance the: • National Development Plan • National priority outcomes • National Infrastructure Plan • New Growth Path Legislative and other mandates (1)

12. 11 • Shareholder Compact • Relevant Programmes of DPW • Programme 1: Administration • Programme 2: Immovable Assets Investment Management • Programme 3: Expanded Public Works Programme (EPWP) • Contribution to National Strategic Outcomes • Outcome 1: Quality basic education; • Outcome 2: A long and healthy life for all South Africans; • Outcome 4: Decent employment through inclusive growth; • Outcome 5: A skilled and capable workforce to support an inclusive growth path; • Outcome 7: Vibrant, equitable and sustainable rural communities contributing to food security for all; • Outcome 8: Sustainable human settlements and improved quality of household life; • Outcome 10: Protect and enhance our environmental assets and natural resources; and • Outcome 12: An efficient, effective and development-oriented public service. • The IDT directly supports DPW in its Medium-Term Strategic Framework (MTSF) priorities for job creation, contractor development and skills development. Legislative and other mandates (2)

13. 12 • In the last 10 years IDT delivered programmes worth approximately R20.25 bn.; 85-95% was directed at social infrastructure development. R5.6bn and R6.6 bn. worth of programme delivery in 2012/13 and 2013/14 , respectively. • Agency implements integrated social infrastructure and social development programmes whose outputs have long-term development impact. • One of IDT’s key service offering is social facilitation: IDT facilitates for acceptability and ownership of development, programme delivery undertaken with the full participation of communities • IDT committed to making direct contribution to the achievement of Government’s Strategic Outcome 12 which has been translated by the Department of Public Works to mean “SERVICE DELIVERY QUALITY AND ACCESS TO GOVERNMENT SERVICES”. Situational Analysis: Performance Environment

14. 13 Situational Analysis: Opportunities & Threats

15. 14 Situational Analysis: Opportunities & Threats

16. 15 Situational Analysis: Strengths & Weaknesses

17. 16 Situational Analysis: Strengths & Weaknesses

18. 17 • The environmental scan highlighted the following areas as pertinent to the IDT and it thus informed the corporate strategy: • Persistent poverty and inequality • Unemployment, especially amongst out-of-school youth and young adults • Social Infrastructure backlogs despite massive investments by government. • Local government service delivery challenges • Rural-to-urban migration, land reform and post-settlement support • Changes in and perceived conflicts in instruments meant to promote affirmative action towards empowerment of the previously disadvantaged • Uneven access to basic services • Public fiscus under pressure • Need for alternative and creative ways of stretching public investment, deepening and broadening development impact Situational Analysis: Key Issues

19. 18 Strategic Pillars

20. 19 • Programme 1 articulates the IDT’s responsibility to promote sustainable development in marginalized areas through delivery of integrated social infrastructure. The institution aims to achieve these Strategic Goals by using resources in a prudent and efficient manner. Programme 1: Strategic Articulation

21. 20 • Programme 2 confirms and reasserts IDT’s commitment to continue being a relevant, efficient, effective, sustainable and compliant-driven entity. The IDT commits to strive for the best in terms of Corporate governance practice and prudent leadership and management. Programme 2: Strategic Articulation

22. 21 • IDT is a major public entity and development agency which has to: • Create value in the lives of the people of South Africa. • Ensure that it delivers high quality service and sustainable development in a cost effective way. • Remain relevant in the South African development landscape, • Find innovative and sustainable solutions to the development challenges facing the country as identified in the National Development Plan and other key policy instruments. • The strength of the IDT lies in its ability to deliver quality social infrastructure through its niche in programme management. The results of the scan suggest that the IDT will deliver meaningful value add to government through cost-effective delivery of programmes, in such a manner that key development objectives of job creation, shared prosperity and skills development are an integral part of addressing the social infrastructure and social development backlogs. This will be achieved through the continued application of IDT’s integrated service delivery model. Strategic Vision Implementation

23. 22 • Corporate Business Plan and the 2015/16 APP reflected in Appendix 2 and 3. Delivery of these pre-determined targets hinges on a number of assumptions and dependencies: • Value and delivery of Business Portfolio: The IDT is required to generate its own business portfolio. However, the speed at which agreements are concluded as well as the frequency and values of funds transferred is not entirely within the control of the organisation and delays impact on delivery. Associated indicators and targets assume that agreements are concluded before the start of and or early in the financial year and that clients will transfer funds as stipulated in the agreements. • Management Fee: Is negotiated with clients and stipulated in agreements. . In order to remain a going concern, the minimum average management fee which the IDT can consider is between 6% and 7% in the short term. A level lower than 6% will jeopardise the organisation’s going concern status. If clients do not make the funds available for the IDT to deliver, the organisation will not be able to collect its management fees. Key Performance Measures & Indicators (1)

24. 23 • Going concern: It assumes that the operation will be able to continue trading for a minimum of 12 months. Currently, the going concern base is at 12 months, assuming 100% collection of outstanding management fees. Unforeseen cash flow challenges may jeopardise the organisation and thus could have devastating impact on the delivery of approximately R20bn programmes over the planning period. • Certainty of mandate and long-term sustainability: The Shareholder has undertaken to formally consider and provide certainty on the organisation’s mandate and long-term sustainability. The uncertainty, which had prevailed for a number of years, negatively impacts client confidence, organisational culture and staff morale, which in turn is reflected in business generation, productivity and delivery capacity. • Attract and Retain Right Skills: The on-going uncertainly has increased the risk of flight of skills resulting in a high vacancy rate of 20% in 2014/15. This impacts the organisation’s ability to recruit and retain appropriate skills. Client confidence is enhanced by the organisation’s ability to deploy appropriate competencies to manage programmes. Key Performance Measures & Indicators (2)

25. 24 • Shareholder Compact: Between the Executive Authority and Accounting Authority • Board of trustees and its Committees: • Strategic Planning and Programmes Committee • Human Resources and Corporate ServicesCommittee • Audit and Risk Committee • Finance Committee • Board EXCO (acts as Remuneration Committee ) • Executive Management: Comprising Executive Heads mostly reporting to the Chief Executive Officer (CEO), providing leadership to • Operations (Ops) • Development Services Unit (DSU) • Corporate Services Unit (CSU) • Financial Services Unit (FSU) • Office of the CEO (OCEO) Governance Structures

26. 25 • The major challenge that faces the IDT is the uncertainty surrounding the financial sustainability of the organisation. • Treasury has allocated R50m per year for the 2015/16 financial year. The funds have been allocated on condition that “the Independent Development Trust will develop and submit a restructuring plan to the National Treasury…”. • The Business Case (the plan referred to by Treasury) is being prepared in conjunction with the Department of Public Works. The plan will address, inter alia, the issues of: • The structure, form and resourcing required for the organisation in order for it to become self-sustainable over the MTEF period; • The clearly identified target market for the organisation; • The management fees structure required to provide for the funding of the organisation. An Overview: Financial Challenges & Risks

27. 26 Strategic Risk (1) Management: Litigation

28. 27 Strategic Risk (2) Management: Financial Insecurity

29. 28 Strategic Risk (3) Management: Delays in Programme Funds Transfers & Payments

30. 29 Strategic Risk (4) Management: Loss of Business Portfolio

31. Budget 2015/16 & Forecast 30 • 2015/16 – 2017/18 Budget • The Business Plan for the financial years 2015/16 to 2017/18 shows steady growth in its programme delivery as opposed to the quantum growth rate of the past 3 years. • Between the 2010/11 and 2013/14 programme delivery grew from R 2.2 billion to R 6.63 billion • Growth is predicted to reach R 7 billion to R 8 bn. over the next three years . • Increase in level of management fees to ensure longer-term financial viability. However this action has met resistance from a number of client departments, hence the Practice Note issued by the National Treasury. • Late transfer of programme funds – from which management fees are drawn - exacerbate the financial situation of the IDT. • Cost containment strategy implemented to closely monitor and contain costs.

32. 31 • The IDT has two sources of income: • Management fees: • Management fees charged to client departments constitutes the major source of its income. The level of fees budgeted/projected at 6% during the 2014/15 financial year and management has implemented a process to increase the average level of fees to 6.3% over the budget year. The level of fees will be further increased over the outer years. • Investment income: • Earned from interest on investment fund. • The Fund has declined over years as it has been used to fund the IDT’s operational costs; and, • The reduction in the level of interest rates together with the decrease in the capital invested has resulted in the investment income being reduced significantly over the past few years. Income

33. 32 • The HR Strategy aims to facilitate that the IDT can at all times attract, retain and develop the best available skills such that it is able to deliver on its mandate. • Staff establishment: 441. Staff occupancy: 80%. • The IDT plans to embark on a refocus and streamlining process to improve the service offering of the organization and safeguarding performance on obligations to clients. This process includes a structure review aimed at achieving among other, the following goals: • To increase the built environment technical capacity in order to strengthen social infrastructure programme management while reducing the social and community development staff contingent as part of de-investment in functional areas not aligned with the new mandate • To bring about a healthy balance in the ratio of core and support staff through increasing the total direct programme staff while reducing staff in administration, corporate services and governance positions • To increase capacity at regional level and reduce staff at head office, thus address the top heavy concern visible in the existing structure Human Resources Strategy

34. 33 High-level Organogram

35. 34 • Risk Management Plan • Fraud Prevention Plan • Materiality and Significance Framework • Environmental Plan • Communication Plan • IT Management Plan • Corporate Knowledge Strategy • Monitoring and Evaluation Framework Other Critical Plans and Strategy

36. 35 • In the quest of transforming the IDT from a government funding dependent agency into a self-sustaining organisation based on revenue generated from its service offering, the IDT has instituted a targeted operational refocus placing a significant amount of effort on institutional and financial sustainability aspects. This has necessitated the review of weighting on its Corporate programmes and related strategic goals resulting in the prominence of financial and institutional sustainability matters as provided under Programme 2 in 2015/16 and a gradual shift towards the service delivery-oriented Programme 1 in subsequent years. • Corporate programmes weighting over the planning period • Refer to Hand-out: Corporate Business Plan Corporate Programme Weighting

37. 36 Programme 1 (Service Offering)

38. 37 Programme 2 (Organisational Efficacy)

39. 38 Programme 2 (Organisational Efficacy)

40. 39 Strategic Objective 2 (Organisational Efficacy)

41. 40 3. Implications andRecommendations

42. 41 In considering the 2015/16 – 2019/20 Strategic Plan, the Portfolio Committee on Public Works is requested to note: • That the Strategy, Budget and Annual Performance Plan in question have been prepared on the basis of the status quo with adjustments being made where appropriate and as informed by the environmental scan findings and the strategic direction given by the Board. A review will be undertaken by the Board on confirmation by the Shareholder of the appointment of the CEO and/or mandate of the organization. • The financial vulnerability faced by the organization as highlighted in the 2015/16 budget arising from among other retention of personnel in operational areas not supported by the refocus and streamlining objectives and challenges relating to charging and collection of management fees. • That the tight fiscal position of government as evidenced by budget cuts in public spend has dual and adverse impact in programme portfolio payments and income of the IDT as presented in the Corporate Plan. Implications of and on the Strategy

43. 42 In considering the 2015/16 – 2019/20 Strategic Plan, the Portfolio Committee on Public Works is requested to note: • The weights allocated to key performance indicators and targets in the Corporate Plan as a basis for directing organizational strategies and operational focus and thus informing corporate performance evaluation. • The financial sustainability challenge that has faced the IDT as it impacts on the Organisation’s ability to delivery on its mandate. • The value of programme implementation agency agreements (PIA) or memoranda of agreements (MOA) signed for future implementation is currently in excess of R 20 billion over the next three years. This would represent a significant risk to the relevant departments and service delivery to communities should the IDT not be able to implement their programmes. Implications of and on the Strategy

44. 43 • It is therefore recommended that the Portfolio Committee on Public Works: • Recommends the IDT’s 2015/16 - 2019/20 Strategic Plan, 2015/16 Annual Performance Plan and 2015/16 – 2017/18 Budget to Parliament; and • Sustains its support for the long-term sustainability of the IDT such that the organisation can maintain and accelerate its distinctive role in delivering social infrastructure in the most marginalised communities on behalf of government. Recommendations

45. 44 Thank You!Siyabonga!Enkosi!Dankie!Ke a leboha!