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PUBLIC HEARINGS ON CONDITIONAL GRANTS AND CAPITAL EXPENDITURE 2008/2009

PARLIAMENT 27 AUGUST 2008

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PRESENTATION OVERVIEW

• TRENDS ON ALLOCATIONS• EXPENDITURE TO DATE• CHALLENGES• MONITORING CAPACITY

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EXPENDITURE ON GRANTS

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EXPENDITURE ON GRANTS

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Utilization of the Infrastructure Grant for DoE (R’000)

INFRASTRUCTURE GRANT

YEAR 2004/05 2005/06 2006/07 2007/08 2008/09(1ST

Quarter)

ALLOCATION 102 068 185 659 181 144 400 587 171 673

EXPENDITURE 30 622 66 153 120 912 199 515 78 138

PERCENTAGE EXPENDITURE

30,0 35,6 66,7 49,8 45,5

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CHALLENGES ON DoE INFRASTRUCTURE PROJECTS

2004/2005 FINANCIAL YEAR

• Department received tender documents for 364 projects in November 2004.

• Most of the consulting companies appointed by DoE were not registered with the relevant professional bodies and there was poor monitoring of projects.

• Most of the advertised and awarded projects had a duplication of scope of work, hence required DoE to approve the change in the scope of work.

• Some of the contractors appointed had insufficient capacity and experience that delayed the completion of the projects.

• Late payments of contractors by user Department, resulted in some contractors delaying the completion of projects and abandoning sites.

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CHALLENGES ON DoE INFRASTRUCTURE PROJECTS

2005/2006 FINANCIAL YEAR• Department received a list of 186 projects in May 2005 for

implementation.

• 303 projects the contracts were awarded to contractors by DoE and transferred to the department for implementation.

• Most of the projects it was discovered that there was a duplication of scope of work, which then required DoE to approve the change in the scope of work.

• Some of the contractors appointed had insufficient capacity and experience that delayed the completion of the projects.

• Late payments of contractors, which resulted in some contractors abandoning sites.

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CHALLENGES ON DoE INFRASTRUCTURE PROJECTS

2006/2007 FINANCIAL YEAR• Department received a list of 417 projects in December 2006 for

implementation.

• 50 projects were cancelled due to over commitment of budget by DoE and 367 were implemented. The over commitment of budget is due to lack of technical estimating skills from the user Department.

• Implementation of some projects delayed due to scope change that needed to be approved by DoE.

• Late payments of contractors resulted in some contractors completing projects late and abandoning sites.

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CHALLENGES ON DoE INFRASTRUCTURE PROJECTS

2007/2008 FINANCIAL YEAR

• Department received a IPMP in November 2006 with 188 projects, revised project list and changed scope of work was received in February 2007 from the user Department.

• Scope verification was concluded in July 2007 due to many scope

changes and the number of projects were reduced from 188 to 141 projects.

• Conclusion of the scope of work in July resulted into the appointment of contractors by February 2008 (30 weeks).

• Delays in the payment of contractors and consultants affected the progress on the projects due to the lead time between the consultants, DPW & User Department (bureaucratic process).

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CHALLENGES ON DoE INFRASTRUCTURE PROJECTS

2008/2009 FINANCIAL YEAR

• Department received a IPMP in November 2007 with a list of 21 projects and 2 projects were added in January 2008.

• As per the IPMP the Department was mandated to do the planning phase only.

• The implication for the above is that only professional fees will be spent (only 75% of the professional fees) from the current allocation of R171 million.

• 8 projects, designs and tender documents are completed. • 15 projects with scope change request for approval to change the scope has been

submitted to DoE.

• As at the end of July 2008 DoE spent 45,5% (2007/2008 projects) of the R171 million allocated for the 2008/2009 projects. Over expenditure is expected if the roll-over budget is not released.

• There is a commitment of R80 million of payments certificates processed, which has not been effected.

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Utilization of the Grants for DHSS (R’000)

INFRASTRUCTURE GRANTYEAR 2004/05 2005/06 2006/07 2007/08 2008/09

(1st Quarter)ALLOCATION 40 553 55 005 46 646 72 790 80 114

EXPENDITURE 25 418 52 683 46 645 63 312 23 301

PERCENTAGE EXPENDITURE

62,7 95,8 100,0 87,0 29,1

FORENSIC PATHOLOGY GRANT

ALLOCATION 0 0 0 47 592 42 003

EXPENDITURE 0 0 0 6 446 9 884

PERCENTAGE EXPENDITURE

0 0 0 13,5 23,5

REVITALIZATION GRANTALLOCATION 68 000 93 000 73 000 107 843 244 322

EXPENDITURE 26 000 74 000 73 000 46 289 17 149

PERCENTAGE EXPENDITURE

38 80 100 42,9 7,02

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CHALLENGES ON INFRASTRUCTURE GRANT

• Infrastructure Programme Management Plan (IPMP) received in December 2007 without scope definition.

• Revised IPMP received in April 2008 and scope definition finalized in June 2008.

• Lack of capacity to formulate coherent long-term infrastructure plans in client departments i.e. Master Plans for large projects.

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CHALLENGES ON REVITALIZATION GRANT

• Infrastructure Programme Management Plan (IPMP) received in December 2007 without scope definition.

• Revised IPMP received in April 2008 and scope definition finalized in June 2008.

• Lack of capacity to formulate coherent long-term infrastructure plans in client departments i.e. Master Plans for large projects.

• Lack of proper monitoring of consultants by the Department.

• Poor planning by the user Department (budget for 2007/2008 budget was not all allocated).

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CONSTRAINTS

Department Public Works• Late payment of Consultants and Contractors due to long lead processes

(Consultant, DPW then end User Departments).

• Lack of skilled professionals for appointment within Government e.g. Quantity Surveyors to assist with project closure and payment certificates.

Service Providers• Shortage of competent Consultants and Contractors especially for complex

projects resulted into projects being re-advertised more than once.

• Lack of cash flow by some of the Contractors.

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MONITORING CAPACITY

• Monitoring of project implementation decentralized to Regional Offices.

• Originally three Regional Offices now increased to four with the addition of Ehlanzeni North.

• Regional Office capacity strengthened through deployment of Operational Support Team professionals as well as Cuban professionals.

• Regions are supported by a core group of senior professionals from Head Office.

• Early indications are that closer physical proximity to projects, due to decentralization, contributes to improved monitoring and service delivery.

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DEVOLUTION OF RATES & TAXES

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ALLOCATION TRENDS

2006/07R’000

2007/08R’000

2008/09R’000

0 0 36,000

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EXPENDITURE2008/09

TOTAL ALLOCATION

R’000

YTD EXP

R’000

BUDGET AVAILABL

E

R’000

YEAR END PROJECTIO

N

R’000

36,000 0 36,000 36,000

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MONITORING CAPACITYproperty list from National

REGION NO OF PROPERTIES AS PER NATIONAL LIST

GERT SIBANDE 604

EHLANZENI 350

NKANGALA 578

TOTAL 1532

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NATIONAL LIST vs VERIFIED LIST FROM MUNIPALITIES

REGION MUNICIPALITY NUMBER OF PROPERTIES AS PER NATIONAL LIST

NUMBER OF PROPERTIES VERIFIED WITH MUNICIPALITIES

VARIANCE TOTAL VALUE OF VERIFIED RATES

GERT SIBANDE ALBERT LUTHULI 165 0 165 R 0.00DIPALESENG 29 0 29 R 0.00PIXLEY KA SEME 27 0 27 R 0.00MKHONDO 67 0 67 R 0.00GOVAN MBEKI 82 0 82 R 0.00MSUKALIGWA 116 218 -102 R 0.00LEKWA 118 110 8 R 136,392.00

EHLANZENI MBOMBELA 72 101 -29 R 12,123,883.21THABA CHWEU 190 149 41 R 2,360,697.52NKOMAZI 62 59 3 R 284,252.49UMGINDI 26 34 -8 R 696,728.95

EKANGALA DELMAS 71 18 53 R 657,362.06EMAKHAZENI 318 85 233 R 230,939.06EMALAHLENI 58 0 58 R 0.00STEVE TSWHETE 131 0 131 R 0.00

TOTAL 1532 774 758 R 16,490,255.29

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CHALLENGES

• The system iE-Works not yet very ready for use

• Municipalities are slow in billing the department

• Municipalities not billing as per National & Provincial Property lists