Speech notes by Vicky Knoetze MPL – Annual Report of Department of Roads and Public Works for 2016/17: 28 November 2017

INCREASING ACCOUNTABILITY IN PPPs

  • Poor planning and underspending negatively affect service delivery.
  • Stricter Compliance is needed in Supply Chain Management Processes.

Honourable speaker, honourable premier, honourable members and guests, good morning.

Honourable Speaker, in examining the report of the DRPW it becomes more and more evident that there needs to be a focus on improving planning in the Department as poor planning leads to under- or overspending and this, in turn, leads to poor service delivery, especially in the Department that is supposed to be the nerve centre of infrastructure in the province. TO DELIVER SERVICES TO THE PEOPLE IS THE AIM OF EVERYTHING WE ASPIRE TO ACHIEVE.

I am saying poor planning Honourable Speaker because:

  • Programme 2 spent 100% of its budget but only achieved 84% of its targets.
  • Programme 3 spent 99.3% of its budget but only reached an embarrassing 64% of its targets.

According o an online publication called IronTree, a persistent lack of maintenance, poor security, bad project planning, ineffective public servants, corrupt politicians and business people, poor service delivery and not enough capital expenditure, because it’s all going on public service salaries, are conspiring to shake the infrastructure of South Africa and make us realise that as businesses, we have got to plan for a future where we have a backup plan for anything that requires government or other infrastructure.

Everything is under threat as we come to a phase where, due to lack of maintenance and planning, things fall apart.

Further to this, the Department did not fully implement the recommendations of the Auditor-General and the Internal Audit Unit – this is a reoccurring finding. The Department is guilty of irregular expenditure of over R341 million. Fruitless and wasteful expenditure is at a staggering R10 million. Unauthorised expenditure is at an enormous R83.9 million.

Honourable speaker, corruption swallows up huge amounts of money every year – the numbers may vary but the word “billion” crops up often. In 2011 the Council for the Advancement of the South African Constitution said that an estimated 20% of the country’s annual GDP is lost to corruption. In the same year the head of the Special Investigating Unit – mandated to “recover and prevent financial losses to the state caused by acts of corruption, fraud and maladministration” – presenting the body’s annual report, estimated that a R30-billion sum that was unaccounted for was “not unrealistic”.

Communities often express their unhappiness and frustration with poor service delivery, lack of access to water, maladministration, and corruption through protests, which have been occurring regularly across the country.

The Department of Roads and Public Works is an implementing agent for other Departments, this means that there must be zero tolerance when it comes to supply chain management and tender irregularities.

Corruption Watch stated that their reports reveal that the most commonly named type of corruption is that linked to tenders or procurement – 44% of all reports were of this nature. Other types of corruption reported relate to bribery, mismanagement, abuse of power or resources, and employment – the latter is the second most commonly reported type of corruption.

Reports allege that tenders are awarded to friends and family and that more often than not this involves infrastructure.

If corruption can be stamped out, billions of Rands more will be available for service delivery and improving the lives of our people.

Honourable Speaker, year in and year out programme 2 attributes under-performance to poor performing contractors. I want to know, when will we stop seeing this reoccurring finding?

Although the Department is blaming poor contractors, on the other side of the coin, contractors are blaming government departments.

Contractors highlighted the following issues as some of the challenges of doing business with the Department:

  • A lack of clear scope of work
  • Procurement policy requiring the appointment of a contractor with the lowest quote
  • A lack of adequate capacity on project management within the Department
  • The late payment of contractor

It is clearly high time that firstly, the Department stops appointing contractors that are incapable of performing in terms of the scope of the tender and secondly that the Department does some introspection in terms of their role in non-performance of contractors.

In the Transport Programme and in the Public Works Infrastructure Programme there are continuous and re-occurring findings of non-compliance in terms of supply chain management procedures, the under-performance of contractors and failure to achieve targets for infrastructure projects. This programme spent 99.3% of its budget and achieved only 64% of its targets, this programme is supposed to be the flagship programme of the Department but is under-performing, year after year after year.

Honourable Speaker, the Department keeps blaming the lack of technical capacity. Perhaps it is time to place a larger emphasis on Public Private Partnerships (PPPs).

South Africa is a developing country and therefore it is in the first stage of the PPP maturity scale that Deloitte and Touche refer to as the ‘developing market’.

Since 2003, the World Bank PPI database has recorded a continuous drop in investments in infrastructure PPPs in most developing countries.

A wide range of governance issues have limited the ability of PPPs to produce the desired outcomes in developing countries, these include:

  • A lack of accountability,
  • Institutional weaknesses,
  • Widespread corruption,
  • A lack of transparency,
  • Poor regulatory environments,
  • power imbalances between the private sector and the state,
  • A lack of political commitment and
  • A lack of trust, skills, will and expertise to effectively manage funds.

PPPs hold various advantages for government:

  1. The state can stay engaged in project implementation and retain substantial control over its development agenda and strategy.
  2. The government remains a key player when it entrusts the private sector with the responsibility of delivering public services.
  3. PPPs may compensate for the inefficiencies of the public sector.
  4. In a developmental state such as South Africa, the state can, therefore, use service delivery through PPP as a political symbol of responsiveness and as a policy tool with which to portray a more efficient government.
  5. PPPs are alternative service-delivery arrangements to traditional public procurement that may enhance cost-effectiveness and service delivery through accountability.

The reasons advanced for the importance of accountability in PPPs include: keeping proper financial records, performance outcomes, programme effectiveness, efficiency, and manifesting expectations.

Honourable Speaker, implementing tools and policies to focus on the enhancement of accountability in Public-Private Partnerships will go a long way in eliminating issues and failures especially when it comes to non-performing and under-performing contractors. Stricter compliance measures in terms of the supply chain management process will be the other crucial element in remedying the other issues in the transport and public works programmes.

The DG of National Treasury said in 2015 that:

Supply chain management (SCM) is one of the key mechanisms enabling government to implement policy. The negative effects of inefficient public sector SCM, particularly in the procurement phase of the chain, are well documented.

Suppliers charge excessive prices; goods and services contracted for and delivered are of poor quality and unreliable, and there is corruption and waste.

In South Africa, government must start to value the strategic importance of SCM to service delivery.

Honourable Speaker, if it is implemented as envisaged in section 217 of the Constitution, the benefits will be enormous:

  • Good-quality service delivery will be increasingly possible, with significant improvements in the welfare of South Africa’s citizens and especially the poor who rely heavily on government for support;
  • The economy will grow as economic infrastructure is expanded and efficiently maintained;
  • Goods, services and infrastructure will be bought at lower costs;
  • Innovation will result in different approaches to the commodities used in some sectors; and
  • For suppliers, the cost of doing business with the state should decrease substantially. Transparency and open contracting are critical elements of any public sector SCM system. An important part of reforming South Africa’s system must, therefore, be to make procurement information accessible to suppliers and purchasers alike. This will enhance planning, accountability and oversight.

Honourable Speaker, the EPWP programme continues to be the best performing programme of the Department. I do believe that both the Transport Programme and the Public Works Programme can raise its game and also become star performers if there is more focus on better planning, accountability and stricter compliance in the supply chain management processes.

The DA supports the report by the department.

Thank you.