11 PUBLIC HEARINGS ON CONDITIONAL GRANTS AND CAPITAL EXPENDITURE 2008/2009 PARLIAMENT 27 AUGUST 2008

2 PRESENTATION OVERVIEW TRENDS ON ALLOCATIONS EXPENDITURE TO DATE CHALLENGES MONITORING CAPACITY

3 EXPENDITURE ON GRANTS

4

5 Utilization of the Infrastructure Grant for DoE (R’000) INFRASTRUCTURE GRANT YEAR2004/052005/062006/072007/082008/09 (1 ST Quarter) ALLOCATION EXPENDITURE PERCENTAGE EXPENDITURE 30,035,666,749,845,5

6 CHALLENGES ON DoE INFRASTRUCTURE PROJECTS 2004/2005 FINANCIAL YEAR Department received tender documents for 364 projects in November 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.

7 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.

8 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.

9 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).

10 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 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.

11 Utilization of the Grants for DHSS (R’000) INFRASTRUCTURE GRANT YEAR2004/052005/062006/072007/082008/09 (1 st Quarter) ALLOCATION EXPENDITURE PERCENTAGE EXPENDITURE 62,795,8100,087,029,1 FORENSIC PATHOLOGY GRANT ALLOCATION EXPENDITURE PERCENTAGE EXPENDITURE ,523,5 REVITALIZATION GRANT ALLOCATION EXPENDITURE PERCENTAGE EXPENDITURE ,97,02

12 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 Lack of capacity to formulate coherent long-term infrastructure plans in client departments i.e. Master Plans for large projects. 12

13 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 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). 13

14 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. 14

15 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. 15

16 DEVOLUTION OF RATES & TAXES

17 ALLOCATION TRENDS 2006/07 R’ /08 R’ /09 R’ ,000

18 EXPENDITURE 2008/09 TOTAL ALLOCATION R’000 YTD EXP R’000 BUDGET AVAILABLE R’000 YEAR END PROJECTION R’000 36,0000

19 MONITORING CAPACITY property list from National REGIONNO OF PROPERTIES AS PER NATIONAL LIST GERT SIBANDE604 EHLANZENI350 NKANGALA578 TOTAL1532

20 NATIONAL LIST vs VERIFIED LIST FROM MUNIPALITIES

21 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