The Performance of the Department of Public Works (1 st Quarter 2015/16) South Africa Works because of Public Works PRESENTATION TO THE PORTFOLIO ON PUBLIC WORKS PARLIAMENT OF THE REPUBLIC OF SOUTH AFRICA CAPE TOWN 22 SEPTEMBER 2015 OFFICE OF THE DIRECTOR-GENERAL

2 Contents 1.Purpose 2.Methodology in the treatment of quarterly performance information 3.Programme Performance – Part A: DPW and Part B: PMTE 4.Performance Challenges 5.Financial Information (DPW and PMTE)

3 Purpose Purpose of the Presentation by the Department of Public Works -To reflect on the 1 st Quarter Performance and Financial information of the Department of Public Works and PMTE in the financial year 2015/16 in order for the Portfolio Committee to advise on improving performance. Objective of the Portfolio Committee on Public Works -To have an understanding and measure the 1 st Quarter Performance and Financial performance of the Department for the financial year 2015/16.

4 5 year Strategic Goals & Outcomes Vision - A service oriented Public Works Department delivering value and contributing to the national agenda for social and economic development. Strategic Goals and contributions to Government Outcomes Strategic GoalsGovernment Outcomes An efficient, competitive and responsive accommodation infrastructure network Outcome 6 (An efficient, competitive and responsive economic infrastructure network) and Outcome 12 (An efficient, effective and development oriented public service and an empowered, fair and inclusive citizenship) Strategic leadership and regulation of the construction and property sectors to promote economic empowerment and skills development Outcome 5 - A skilled and capable workforce to support an inclusive growth path Good corporate governance to support effective and efficient service delivery Outcome 12 - An efficient, effective and development oriented public service and an empowered, fair and inclusive citizenship Decent employment through inclusive economic growthOutcome 4 - Decent employment through inclusive economic growth Contribute towards comprehensive rural developmentOutcome 7 - Contributing towards Government’s objective to develop rural areas

5 Setting the Scene The Minister’s Policy Statement identified five strategic priorities for the five-year period of this Administration: The creation of 6 million work opportunities through the EPWP; Operationalisation of the PMTE (Property Management Trading Entity) to manage the core business of Public Work, i.e. custodianship of the State’s immovable assets and provision of accommodation to Government departments; Operationalisation of the Governance Risk and Compliance Branch – to strengthen the fight against fraud and corruption, as well as to spearhead the Efficiency Enhancement phase of the Turnaround - using the tools of strategic planning, Service Delivery Improvement Model processes and risk and performance management. Priority Four: the Policy Review – working with all stakeholders, particularly the provinces, to develop a new Public Works Sector policy guideline (White Paper) culminating in the enactment of a Public Works Act to codify and clarify the mandate of Public Works; The Transformation of the Built Environment – so that ownership, control and the composition of the built environment professions better reflects the demographics of South Africa.

6 Cont.… These priorities set a different thinking around the delivery mechanisms and targets for the Department and PMTE particularly moving from Phase 1 of the Turnaround (Stabilisation) to Phase 2 – Efficiency Enhancement

7 PART A: DPW PERFORMNANCE INFORMATION (Pages 1-13 of the Word Document) INFORMATION (Pages 1-13 of the Word Document)

8 DPW This programme serves to provide strategic leadership and support services, including for the accommodation needs and overall management of the Department of Public Works. It is responsive to meet strategic goal 4 – Good Corporative governance to support effective and efficient service delivery. Sub-Programmes Investigation Services Finance and Supply Chain Management Corporate Services

9 Highlight/Achievements – Programme One: Administration Reduction in Irregular Expenditure - 44% (against a 5% target) of reduction of irregular expenditure baseline. Irregular expenditure has been one of the major challenges in the Department for a long time. Efforts to significantly reduce irregular expenditure are now being realised. Payment of invoices within 30 days - 94% of compliant invoices were settled within 30 working days. This is important, not as a compliance requirement only, but also as means strengthen and empower suppliers and their participation in boosting the economy. Prioritised funded Vacancies - 100% funded and prioritised vacancies advertised as per Recruitment Plan, 46 Positions advertised, 103 Appointments made, 20 Promotions, 3 external transfers, 1 internal transfer, 32 additional appointments. Skills development programmes (Beneficiaries participating in the DPW Skills Development Programme in the following areas - 90 Young Professionals (180%), 700 Interns (603%), 52 Learnerships (116%), 262 Management Trainees (3275%), 133 Artisans (266%).

10 Highlight/Achievement – Programme One: Administration. Investigations imitated within 30 days - 100% (9 of 9) investigations finalised within 30 days of reported allegations. The Department’s Fraud Prevention Strategy, Anti-Fraud and Corruption Policy are now in place and a whistle Blowing Policy has been approved with the sole aim of encouraging whistleblowing on activities associated with fraud and corruption. Fraud and Corruption cases – 100% (3 of 3 cases) reported fraud and corruption related cases were subjected to disciplinary processes.

11 This programme seeks to promote sound sectorial intergovernmental relations and strategic partnerships and ensure coordination of service delivery within the public works sector Sub-Programme Inter-Governmental Relations and Coordination Monitoring, Evaluation and Reporting of Public Works Sector

12 Programme Two: Programme Two: Inter-Governmental Coordination This is a new programme with the following objectives: Drive Accountability Management Committee as a mechanism to enforce compliance; Planning for successful outcomes through long and short term strategic planning processes towards a 5 Year Strategic Plan and Annual Performance Plan; Service delivery improvement planning and monitoring; Quarterly monitoring, evaluation and reporting of organisational performance; Annual strategic and operational risk management processes. In the process numerous meetings in this regard have been coordinated to give effect to this new programme.

13 This programme ensures the creation of work opportunities and the provision of training for unskilled, marginalised and unemployed people in South Africa by coordinating the implementation of EPWP

14 EPWP The programme plays, largely, a policy and coordinating function with the rest of government. With a function of this nature, challenges such timeous and accurate data and information are a common element Highlights/Achievements Work Opportunities (out of a target of ) work opportunities reported in the EPWP reporting system aligned to the EPWP Business Plan (phase 3). Work Opportunities (WO) – a total of (out of a target of ) work opportunities were created through the labour intensive approach aligned to the EPWP business plan. The introduction of the new system has resulted in the slow reporting of many public bodies hence the figures reported. Training is continuous, which will assist to improve the figures moving forward. Beneficiaries trained – a total of learners trained through the National Skills Fund. The overachievement in number of participants, is due to the various approved procurement models currently being used for contracting of accredited training providers for actual training implementation i.e. Head Office Procurement Model, Decentralization Procurement Model, CATHSSETA Procurement Model, AgriSETA Procurement Model & merSETA Procurement Model.

15 This programme promotes the growth and transformation of the construction and property industries, promote uniformity and best practice in construction and immovable asset management in the public sector

16 Programme 4: Property and Construction Policy This programme ensures transformation and regulation of the Construction and Property industries to ensure economic growth and development. It is a dependent programme and largely a process or chain-event driven in nature. It often experiences challenges such as delays in stakeholder feedback on a particular policy and political considerations. It also depends on the Parliamentary programme. Its function has huge impacts in the transformation of the built environment. Highlights/Achievements Public Works White Paper Research on identified themes was to be undertaken this quarter. Progress has been made but full swing research not yet completed. Bill to manage the disposal of immovable assets under the custodianship of the Department – the Department has developed a Draft discussion document for consultation with stakeholders. Further processing of the draft will commence with the inclusion of inputs from stakeholders Public Works General Laws Amendment and Repeal Bill - much progress has been made in this regard. Gazetting of the Bill will take place after scrutiny of the Bill by Office of the Chief State Law Adviser (OCSLA)

17 This programme’s purpose is to set policy, norms and standards for the provision of prestige accommodation and meet the protocol responsibilities for State functions

18 Programme 5: Programme 5: Auxiliary and Associated Services Highlights/Achievements Policy guidelines on installation, management and maintenance of security infrastructure national key points - Draft policy guideline has been completed. Service level Agreement (SLA) - Draft SLA for Presidency completed. Category III clients and Public Works standards and norms – no research report on Prestige norms and standards completed. Prestige Events - 4 of 6 events supported with moveable infrastructure (1 Awards event postponed to Sept 15).

19 PART B: PMTE PERFORMANCE INFORMATION (Pages 1-11 of the Word Document) INFORMATION (Pages 1-11 of the Word Document)

20 Programme 1 Administration This programme provides leadership, strategic management, governance and support to the Property Management Trading Entity (PMTE).. Sub-Programmes Management and Leadership Operations Support Services Financial and Accounting Management Supply Chain Management

21 Highlight/Achievements Debtors Balance % (against 60% target) of invoices issued during this quarter were collected within 60 days. Payment of invoices within 30 days - 73% of compliant invoices were settled within 30 working days. This is important not as a compliance requirement only, but also as means to strengthen and empower suppliers and their participation in boosting the economy.

22 Programme 2 Programme 2: Real Estate Investment To achieve an efficient and competitive Real Estate Portfolio for the State through effective planning, analysis and informed investments. It aims at achieving an efficient, effective and competitive State Property Portfolio in order to provide cost effective accommodation to other State Departments so they derive costs savings, meet their service delivery objectives and to realise the preservation and growth of the State’s asset portfolio Sub-Programme User Demand Management Planning & Precinct (Spatial) Development Services Property Performance Management Investment Management

23 Highlight/Achievements User Demand Management - seeks to determine client needs develop comprehensive knowledge of client requirements in line with their service delivery priorities – No User Departments Framework Agreements concluded for the use of freehold property in the 1 st Quarter Planning and Precinct Development services – plan and develop integrated government precincts in urban and rural areas including planning the development of harbours for improved government accommodation and enhanced delivery and service Preliminary investment decisions - 80% (against 75% target) preliminary investment decisions approved within 3 months from date of request (8 out of 10 requests) and 9 backlog investment decisions completed in the 1 st Quarter. In terms of investment solutions for construction within the stipulated period – No investment solutions were concluded. No requests for Operation Phakisa initiatives received within the 3 month period. No requests for Fishing Harbours infrastructure received within the 9 month period.

24 Programme 3 Programme 2: Real Estate Investment To provide effective and efficient delivery of accommodation needs for DPW and User Departments through construction Sub-Programme Construction Project Planning Construction Project Management

25 Highlight/Achievements Work opportunities created through construction projects (against a target of 2 000) work opportunities created through construction projects. This was due to increased recruitment drive of EPWP beneficiaries on projects. Completed projects within agreed construction period – 23 (against 16 targeted) projects completed within agreed construction period. This is a measure of efficiency. Completed projects within approved Budget – 23 (against 16 targeted) projects completed within approved budget.

26 Programme 4 Programme: 4: Real Estate Management The purpose of the programme is to timeously provide and manage suitable accommodation in support of Client needs to meet their service delivery objectives Sub-Programmes: Management of Freehold Property Land Administration & Management Surplus Freehold (Revenue) Management Leasehold Management

27 Highlight/Achievements Lease agreements reviewed - 99% lease agreements reviewed according the rental rate per square metre and escalations. Leases renewed before expiry date - 40% (against 25% for the quarter) leases renewed before expiry date. Leased accommodation - 28% against a target of 42% leased accommodation (lease in) provided within agreed time frame. Surplus Freehold - 75 (or 25% of 300) surplus freehold property allocated towards BBBEE.

28 Programme 5 Programme 5: Real Estate Information and Registry Services The purpose of the programme is to develop and manage a complete, accurate and compliant Immovable Asset Register to meet service delivery objectives for the State, Department and Property Management Trading Entity (PMTE) business requirements. Further, it seeks to provide leadership, guidance and support to National, Provincial and Local Government custodians of State assets to ensure use of applicable standards in accounting for immovable assets and management of IARs and develop, maintain and report on a consolidated National database of State properties Sub-Programmes: Asset Registry Services Conveyancing

29 Highlight/Achievements Verification of Assets - 0% of Real Estate Assets (annually identified after December) verified in this quarter. Conveyancing - 0% Real Estate transactions conveyanced within 180 Days. Coastal reserve - 0% of coastal reserves under the custodianship of Public Works mapped. Provincial Real Estate Asset Register incorporated into the single repository - No Approved Data Migration Plan. However, much progress has been achieved.

30 Programme 6 Programme 6: Facilities Management The purpose of the programme is to ensure that immoveable assets used by government departments and the public, are optimally utilised and maintained in a safe, secure healthy and ergonomic environment while contributing to job creation, skills development and poverty alleviation. Sub-Programmes: Scheduled Maintenance SHERQ Management Unscheduled Maintenance

31 Highlight/Achievements Energy consumption – reduction in kilowatt-hour (Kwh) usage achieved on energy consumption. Water Consumption – 0 reduction in kilolitre (Kl) usage achieved on water consumption. Unscheduled maintenance - 30% efficiency (turnaround time) for unscheduled maintenance on freehold property within 5 days. Work opportunities created through maintenance programmes work opportunities created through maintenance programmes (DPW & EPWP).

32 Performance Challenges (DPW and PMTE) There are challenges with the appointment of service providers in areas where certain scarce skills are required. This then contributes to delays in achieving the set targets or under-performance. In areas where there are dependencies from external stakeholders or client departments, delays or non-corporation is often a challenge resulting in non-achievements of targets. This is largely applicable to Policy and legislation related matters. Capacity and Budget constraints in some areas continue to be a hindrance to performance. An example includes the facilities management contracts. Efforts are being made to reach the Energy & Water Efficiencies and Waste Management as part of the Green Building Programme. Generally, there are challenges with the current business model/value chain. This requires a review of the individual units’ value chains and craft an integrated business model that will address fragmentation and duplications. Although this financial year, the Department is starting to experience some degree of coordinated activities.

33 Some Success Factors (DPW and PMTE) Increased drive towards the achievement of EPW targets that cut across various units in the Department. This shows some degree of collaboration and a move towards a integrated value chain. Implementation of a turnaround strategy coupled with continuous engagements with relevant stakeholders to improve performance of construction projects. Continued engagement with contractors and setting parameters for non-performance, which may result in termination of the contracts & consultants and intervention meetings held with contractors to improve performance. Overall, whilst the discussions are going ahead in terms of the Organisational Structure (DPW and PMTE), significant progress with identifying critical areas has been made. An informed strategy to capacitate the Department and PMTE is beginning to emerge. Greater accountability through Governance structures that continuously seek innovative ways to improve performance.

34 Macro Service Delivery Model The service delivery model shows the key groups, how they will interact and how they will interface with internal and external service recipients in order to deliver the strategy

35 DPW FINANCIAL INFORMATION INFORMATION

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Summary Expenditure per Economic Classification 37 Summary Expenditure Report per economic classification – for the month ended 30 June 2015

38 Summary expenditure per economic classification for the month ended 30 June 2015

Notes to Expenditure Summary per economic classification 40 Current year vs budget analysisCurrent year vs prior year analysis Compensation of employees  Expenditure below the guideline of 25% due to delay in implementing annual salary adjustment due to delay in concluding the negotiations with the unions.  No over spending projected at the end of the financial year.  Expenditure decreased (from R1.667 billion in 2014/15 to R475 million in 2015/16) compare to the previous year due to transfer of function to the PMTE.  Approximately 73% (R1.3 billion) of the compensation of employees was transferred to the PMTE as part of transfer of function. Goods and services  No over spending  Expenditure decreased compare to the previous year due to transfer of function to the PMTE.  Budget for Office Accommodation (R516 million) was also transferred to the PMTE.  Bulk of the Turnaround previously under the Department were transferred to the PMTE as part of the transfer of function. Transfers and subsidies  Expenditure in line with the drawings  No over spending  Increased expenditure relates to increased budget for the PMTE resulting from the transfer of function.  The budget allocation for the PMTE increased from R673 million in 2014/15 to R3.6 billion in 2015/16.  Budget allocation for CIDB decreased from R77 million in R66 million as part of government cost containment measures implemented by National Treasury. Machinery and equipment No over spending  Budget and expenditure decreased with the transfer of function as compare to the previous financial year

Notes to Expenditure Summary 41 Transfers and subsidies relates to:

Summary Expenditure per Programme 42 Summary Expenditure per Programme for the period ended June 2015

43 Summary expenditure per programme for the month ended 30 June 2015

Budget Allocation per Programme Chart /16 44

45 PMTE FINANCIAL INFORMATION

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47 PMTE Budget and Expenditure Report as at 30 June 2015 Guideline: 25%

Financial Performance of the PMTE 48 BudgetClaimed to date % Budget vs Claimed Actual Received/ Paid % Actual Received / Claimed R’000 % % Revenue % % State Accommodation Charges % % Private Accommodation Charges % % Management Fees (Municipal) % % Augmentation % % Other Expenditure Cleaning and gardening Private Leases Rehab, Repair and Maintenance Property Rates Municipal Services Other (Operational expenditure) Profit Vs Net Cash Movement: 30 June Cumulative Bank Balance: 30 June

Summary Expenditure per Economic Classification 49 Classification % of total budget Allocation R’000 Expenditure R’000 % Exp% Exp 2013/14 Compensation of Employees 12% %- Goods and Services Including Cleaning and Gardening, Operating Leases, Maintenance, Repair and Renovations and other Administrative Expenditure 67% %20% Transfer Payments Property Payments 9% %2% Capital Payments Rehabilitation, Repair and Renovations of a Capital nature & Machinery and Equipment 11% %17% Total %19%

Summary Expenditure per Objective 50 % of Total Allocation R’000 Expenditure R’000 % Exp% Exp 2013/14 Cleaning and Gardening2% %15% Leasing (Private owned)37% %24% Refurbishments, Repair and Maintenance29% %19% Planned Maintenance Current8% %16% Planned Maintenance Capital8% %16% Rehabilitation3% %17% Day-to-Day10% %25% Municipal Services2% %0% Property Rates9% %1% Current9% %2% Arrears0% %0% Compensation of Employees12% %0% Goods and Services7% %0% Machinery & Equipment0% %0% %19%

Notes to the expenditure 51 Guideline expenditure as at the end of June 2015: 25% Cleaning and gardening: The expenditure was lower than expected at the end of the first quarter due to some contracts being awarded later than originally planned. The expenditure will improve in the next year due to contracts now being in place. Operating leases: The expenditure is in line with the time lapsed and it is envisaged the full budgeted amount will be spent Refurbishments, Repairs and Maintenance: This budget is based on projects on different levels of implementation. This include planning, procurement and construction. Measures have been put in place to monitor these projects, identify any actual or potential blockages and to resolve it. The expenditure on this item is improving each financial year. Although the programme is a bit behind in terms of time lapsed, several contracts are in place and all allocated funding should be spend by the end of the financial year Municipal Services: This item is new to the PMTE and represents expenditure previously claimed from DPW. This is due to the transfer of functions from DPW to PMTE. Property Rates: Expenditure on this item has improved significantly due to interventions to identify and process outstanding claims from municipalities. under-expenditure. All outstanding claims will be settled early in the new financial year.

Notes to the expenditure - continued 52 Compensation of Employees: The expenditure is in line with the time lapsed at 24% which is an indication that the full budget will be spent. Goods and Services: The expenditure is relatively low as at the end of the first quarter, but this will increase as special initiatives are which were in planning phase are implemented during the latter part of the year. Machinery and Equipment: The expenditure will improve during the year as orders have been placed and which will be paid during the next quarters.

DPW Capital Infrastructure Budget 53 Office % of total budget Allocation Expenditure % Exp % Exp 2013/14 R'000 Departmental 28% %19% Accessibility for Disabled Persons 3% %19% Dolomite Risk Management 18% ,02613%37% Land ports of Entry (BCOCC) 16% %10% Inner City Regeneration 11% % Prestige 24% %21% Total %14% The expenditure on this budget is low at the end of the first quarter, but will improve during the financial year. R112m of the allocation is for strategic acquisitions and will be once off payments. The entity has appointed an implementing agent to eradicate the backlog on the delivery of projects.

54 PMTE Revenue Management Report

Debtors Age Analysis 55 Categories Current30 Days>60 DaysTotal 2014/15 Prev YearsTotal R’000 Accommodation (State Owned) Accommodation (Private) Municipal Services PACE Recoverable: CA Total Percentage 58%42%

ANALYSIS The operating model that is being utilized by the PMTE dictates that the entity should be operating a revolving overdraft of at least R800 million. This is mainly caused by the timing delay between the payment of third parties and the eventual recovery from clients. The operating model that is being followed to recover monies relates to private leases, municipal services, client infrastructure spending (capital allocation) and other recoverable infrastructure projects is as follows: PMTE pays lessors, contractors and municipalities on behalf of client departments; The invoices are then issued to the clients in arrears; Clients have 30 days to pay us in terms of the PFMA, however, this timeline is sometimes not adhered to which amplifies the already delayed recovery. This gives rise to 60 to 90 days delay in matching the expense with the revenue; and In essence the PMTE is providing interest free bridging finance to clients. 56

Accommodation Charges (State Owned) – Top 10 Clients 57 Client Opening balance 01/04/2015 Amount received for previous years Invoiced amount 2015/16 Amount received 2015/16Closing balance R'000 SAPS Correctional Services Defence and Military Veterans Justice and Constitutional Dev Agriculture Arts and Culture Water Affairs Public Works Health (Civitas) Labour (exc SETA) Total top 10 26,2243,801,4401,900, ,160 1,095,388 Total population 33,509 3,940,2231,970, ,837 1,143,784 % of total78%96% 97%96%

58 Client Opening balance 01/04/2015 Amount received for previous years Invoiced amount 2015/16 Amount received 2015/16 Closing balance R'000 SA Police Service Justice and Constitutional Development Public Works Statistics SA Defence Labour (Excl Seta's) Home Affairs Transport Independent Police Investigative Directorate National Treasury Top 10 total Total population % of total57.5% 69.2% 65.4% Accommodation Charges (Private Leases) – Top 10 Clients

59 Client Opening balance 01/04/2015 Amount received for previous years Invoiced amount 2015/16 Amount received 2015/16 Closing balance R'000 SA Police Service Justice and Constitutional Development Public Works Statistics SA Defence Labour (Excl Seta's) Home Affairs Transport Independent Police Investigative Directorate National Treasury Top 10 total Total population % of total57.5% 69.2% 65.4% Municipal Services – Top 10 Clients

60 Client Department Opening balance 01/04/2015 Amount received for previous years Invoiced amount 2015/16 Amount received 2015/16 Closing balance R'000 Public Works Correctional Services Arts and Culture SA Police Services Justice and Constitutional Dev Defence Home Affairs Total PACE– Top 7 clients

61 Client Department Opening balance 01/04/2015 Amount received for previous years Invoiced amount 2015/16 Amount received 2015/16 Closing balance R'000 Defence Government Printing Inter Relation and Coop Public Works9 039 Rural Dev and Land Affairs SA Police Services Environment Affairs3 492 Home affairs2 056 Total top 8 clients Total population % total population99.8%100%99%100% Recoverable CA– Top 8 clients

INTERVENTIONS TO ADDRESS LONG OUTSTANDING DEBT The following interventions have been implemented: – Meetings with clients departments have been held to follow up on outstanding debt – Letters of demand are written to clients – National Treasury intervention – Each region instructed to address all disputed claims without further delays – Clean lease database – Complete the physical verification, confirm occupation with clients and update the system – Source copies of lease agreements to clients – Billing in advance Clients has reported a number of reasons for not paying Disputes on occupation Unavailability of funds for previous years claims Lack of supporting documents (lease agreements) Amounts paid to Landlords is not in line with lease agreements 62

National Department of Public Works (NDPW) Head Office: Public Works CGO Building Cnr Bosman and Madiba Pretoria Central Private Bag X65 Pretoria 0001 Website: 63 Thank You