For Portfolio Committee: Public Works By Mr. Tami Sokutu 22 May 2002

1. PRESENTATION ON BUDGET 2002/2003 For Portfolio Committee: Public Works By Mr. Tami Sokutu 22 May 2002

2. OVERVIEW • Medium Term Expenditure Framework • MTEF Allocation 2002/2003 – 2004/2005 • Comparative Analysis Between 2001/2002 Allocation v/s Expenditure

3. MISSION • Provide And Manage In Accordance With Prescribed Standards And Directives The Accommodation, Housing, Land And Infrastructure Needs Of National Departments And To Promote National Public Works Programme And To Provide Associated Supporting Service

4. 1. Administration: Provides Leadership, Management, Financial And Administration Support 2. Provision Of Land And Accommodation Provides For Accommodation, Housing, Land And Infrastructure Needs Of National Departments PROGRAMMES

5. 3. National Public Works Programme: Delivers Infrastructure To Meet The Physical, Social And Economic Needs Of The Population 4. Auxiliary And Associated Services Provide Financial Assistance To Organisation For Preserving Certain National Memorials And Training Facilitation, Compensation For Losses PROGRAMMES

6. ACTIVITIES INFLUENCING BUDGETING • Client Department’s Strategies And Output That Affect Infrastructure • Design And Implementation Of Capacity- Building Programmes For The Construction Industry • Additional Accommodation Needs Informed By Government Wide Strategy On Infrastructure

7. ACTIVITIES INFLUENCING BUDGETING • Playing The Role Of Custodianship Of State Property • Completing The State Asset Register • Transformation Process Which Aligns Resources To Services Delivery Eliminating Unnecessary Costs And Duplication

8. Promote Public And Private Sector Infrastructure Delivery Construct Public Assets For Disadvantaged Communities By Creating sustainable employment Opportunities ACTIVITIES INFLUENCING BUDGETING

9. Allocations For 2002/2003 To 2004/2005 2002/03 2003/04 2004/05 Personnel364 287 393 644 414 379 Major Cost Drivers2 872 838 3111 493 3 293 952 CBPWP259 820 259 820 - Auxiliary Services 11 842 12 342 12 842 Other 221 892 239 748 246 266 TOTAL3 730 679 4 017 047 3 967 439

10. Analysis Of Major Cost Drivers 2002/03 2003/04 2004/05 Capital 135 148 238 266 152 883 Maintenance 536 556 536 556 593 253 Leasing 817 436 866 628 918 644 Rates 571 791 606 099 642 464 Municipal 811 907 836 944 986 708 TOTAL2 872 838 3 111 493 3 293 952

11. EXPENDITURE PER PROGRAMME AS AT 31 MARCH 2002 100. 84% 101.53% 93.03% 96.89% 111.69%

12. EXPENDITURE PER STANDARD ITEM AS AT 31 MARCH 2002 100.84% 99.96% 2 447 110 105.34% 96.52% 132.59% 60.48% 94.14% 105.00% 865.25% 10383

13. CHALLENGES Non alignment of building programmes to MTEF allocations Lack of prioritization by clients Inadequate formulation of needs assessment (Prototype Business case) Maintenance backlog  Inadequate funds to address maintenance backlog CAPITAL WORKS AND PLANNED MAINTENANCE

14. CHALLENGES (continued) Historical/Tedious Planning & Procurement methods. Insufficient use of Prof input & Project management principles Lack of capacity / Inappropriately qualified project managers Outdated & Unintegrated management info systems State Tender Board’s onerous requirements CAPITAL WORKS AND PLANNED MAINTENANCE

15. INNOVATIONS/ACHIEVEMENTS High level interventions coupled with improved co-operation by clients. Regular Strategic and operational management meetings confirming building programmes within time frames High level professional input and advices on development of “Blue Prints” Persuaded clients to undertake planned maintenance of a capital nature within their capital allocation. CAPITAL WORKS AND PLANNED MAINTENANCE

16. INNOVATIONS/ACHIEVEMENTS (Continued) Introduced term contract eg RAMP to convert reactive to proactive maintenance Adopted proactive pre-planning taking into account industry benchmarks Introduction of project management occupational class Re-defined relation-ship with private sector & commissioned latter to assist with project management CAPITAL WORKS AND PLANNED MAINTENANCE

17. INNOVATIONS/ACHIEVEMENTS (continued) Manual integration systems albeit that integration has not been achieved Challenged certain constraining regulations & obtained requisite approval to increase delegated authority. CAPITAL WORKS AND PLANNED MAINTENANCE

18. UNPLANNED MAINTENANCE CHALLENGES • Insufficient funding levels •  Reactive maintenance and timeous response •  Ineffective PMIS

19. UNPLANNED MAINTENANCE INNOVATIONS/ACHIEVEMENTS • Proven track record to spend all funds for the first time ever – basis to motivate additional funds • Introduction of facilities management and term contracts • Forced reliance on management system

20. LEASEHOLDS ACQUISITIONS CHALLENGES • Lack of alignment of budgets  • Unwillingness by clients to suspend funds for additional leasing requirements • Lack of awareness on part of clients w.r.t budgets & leasing in general • Lack of visibility of leasing portfolio to clients • Onerous/outdated lease contract • Outdated, ineffective property management information system • Backlog on renewal of leases

21. LEASEHOLDS ACQUISITIONS INNOVATIONS/ACHIEVEMENTS • Created a mechanism to allocate & monitor expenditure • Agreed with clients that DPW will act as agent on their behalf & • Motivate for additional funds in future. • Detailed planning & prioritization • Developed specific reports with portfolio information

22. LEASEHOLDS ACQUISITIONS INNOVATIONS/ACHIEVEMENTS • Developed new standard lease contract with max. risk transfer to landlord plus maintenance responsibility • Transitional measure implemented   • Strategic intervention of leasing project

23. MUNICIPAL SERVICES CHALLENGES • Ineffective PMIS • Internal staff inefficiencies • Complex invoicing by local Authority batch accounts etc. • Fragmented approach to payment of services

24. MUNICIPAL SERVICES INNOVATIONS/ACHIEVEMENTS • Forced reliance of manual systems • Continuous training • Continuous consultations with local authorities • Introduction of integrated facilities management on limited scale

25. One of the key cost drivers relating to ownership / holding of fixed property is payment of municipal Rates & Taxes. The expenditure for the past years were: 1998/991999/20002000/012001/02 488 545 499 896 508 892 594 779 MUNICIPAL RATES AND TAXES

26. The reason for increases in the municipal rates and taxes expenditure has been a combination of general increases in rates charged by municipalities on existing properties as well as the additional state owned properties that have been included on the department’s asset register as we get to know about their existence. MUNICIPAL RATES AND TAXES

27. The Department of Provincial and Local Government is currently formulating a Property Rating Bill, which proposes that every state owned property would be ratable. At the moment, a large portion of state owned properties are not liable for payment of municipal rates and taxes as they are not located within municipal boundaries and our department is concerned that the implementation of this Bill might drastically increase the rates and taxes budget requirements MUNICIPAL RATES AND TAXES

28. Another key challenge facing the department remains that of ensuring that the inventory list of fixed properties is kept up to date and that it contains the information that enables proper management of fixed properties. MUNICIPAL RATES AND TAXES

29. The other key challenge that will be prominent in the forthcoming year is the requirement by the National Treasury to attach value to the state owned fixed properties for purpose of disclosing same in the financial statements. MUNICIPAL RATES AND TAXES

30. HIGHLIGHTS OF THE CBPWP JOB CREATION ·   Introduction of rapid delivery projects in order to increase the number of projects implemented as well as to ensure expenditure on the budget. ·   Full expenditure of the entire budget allocated in two previous financial years .

31. HIGHLIGHTS OF THE CBPWP JOB CREATION ·  Furthermore, the success of the programme has generated a lot of expectation on the part of district municipalities and communities. The Department is always inundated with requests from communities and municipalities who are currently outside of the CBPWP targeted areas.

32. HIGHLIGHTS OF THE CBPWP JOB CREATION ·   The MTEF allocation (in the order of R274 million per year) has become too small for the demand. 

33. HIGHLIGHTS OF THE CBPWP MASSIVE PUBLIC WORKS PROGRAMME • The strategy document for Massive Public Works Programme has been drafted and the unit is in a process of appointing consultants that will drive the process.

34. HIGHLIGHTS OF THE CBPWP MASSIVE PUBLIC WORKS PROGRAMME The terms of reference given to them are as follows: • Facilitate the development of a strategy document for partnership between the Department of Public Works and partners identified for the CBPWP

35. HIGHLIGHTS OF THE CBPWP MASSIVE PUBLIC WORKS PROGRAMME • Co- ordinate the identification of partnership project for the expanded CBPWP • Facilitate the preparation of detailed business plans for the partnership projects Between the CBPWP and its partners; • Mobilize the required stakeholders for the partnership projects and ensure their effective participation in the roll – out process; • Investigate existing systems and realign for the management and monitoring of

36. HIGHLIGHTS OF THE CBPWP MASSIVE PUBLIC WORKS PROGRAMME The projects; • Organise training, capacity and institution building process for the partnership Projects; • Develop and implement a communication strategy for the roll-out process of the Programme; • Create networks and linkages for the sustainable implementation of the partnership projects; • Develop sector-based models for the partnership projects in consultation with relevant partners;

37. HIGHLIGHTS OF THE CBPWP MASSIVE PUBLIC WORKS PROGRAMME • Manage the identified partnership projects and report on progress to the Director (CBPWP) Implementation and Partnership Steering Committee (PSC); and • Continuously liaise with the District Councils on progress relating to the Implementation processes. • The outcome of this strategy will ensure that the unit plays a pivotal role in coordinating Public works projects.

38. Audit Committee The Department’s Audit Committee is fully functional and effectively supporting management in ensuring that there is good control environment upon which the financial information is developed and processed. AUDIT RELATED MATTERS

39. Internal Control The accounting and Internal control systems within the Department have improved drastically during the last two years, despite the inherent limitations of the accounting systems currently in use. This movement towards good control environment is evident in the observation of the Auditor General’s audit report for the year ended 31 March 2001. The department has ensured that all appropriate actions are taken to address irregularities and inefficiencies reported to management by both Internal Auditors and Auditor General. AUDIT RELATED MATTERS

40. Internal Control The Department is also engaged in discussions with the Auditor General on their audit approach with a view to ensuring that the audit is conducted in a manner that will help management in its public accountability function whilst also not compromising the independence of the Auditor General in its constitutional mandate. Essentially, management is keen to see an audit report that will assist in addressing the identified areas for improvement. AUDIT RELATED MATTERS

41. THE END