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29 March 2006

Madame Speaker
The Deputy Minister of Public Works, Mr Ntopile Kganyago
The Chairperson of the Public Works Portfolio Committee, Mr Fezile Bengu
All the MECs for Public Works from various provinces
Honourable members
Senior Management from the Department of Public Works
Senior leadership and management of our statutory entities
Distinguished guests
Ladies and gentlemen

The successful 2004/05 financial year brought us a step closer to our vision of making ours an efficient and effective organisation characterised among others by prudent financial management. In that year the Auditor-General awarded an unqualified audit report to the Department, a history making gesture, in recognition of the various interventions instituted since we launched MINTIRHO YA VHULA VHULA (Actions speak louder than words) in 1999. Mintirho was our maiden programme of action through which we publicly committed ourselves to clean administration, good corporate governance and accelerated delivery of quality products and services in creating a better life for all and the hard work is beginning to pay off. We are encouraged.

In line with our White Paper, the Department of Public Works (DPW) will, beginning April 2006, devolve its leasing, maintenance, property rates and municipal services budgets to its client departments. The property rates will also be devolved to the provinces in the course of the year for all the properties vested in their names. Capital works budgets were devolved to clients more than three years ago. The motivation for this devolution of budgets is to increase transparency in the budgeting process, and to introduce incentives for more efficient use of resources. The transparency of the budgeting process is increased by ensuring that all the costs associated with a particular service are part of the budget for that service, and departments will have a much stronger incentive to use office space and water and electricity more efficiently when they have to pay for these resources from their own budgets.

However, DPW will continue to render the functions associated with these budgets. Departments will be required to pay the funds back to DPW in the form of an accommodation charge made up of an amount for actual leases and an amount for pre-determined rentals of state-owned property. Due to the current under-funding for maintenance, the rental charge for state-owned property will be very low compared to market-related rentals.

DPW will therefore continue to manage the expenditure of the funds which it is devolving, but will now manage this expenditure on an agency basis on behalf of departments. DPW will use the income from the accommodation charges:

* To pay leases on behalf of departments;
* To carry out maintenance and refurbishments on state-owned buildings; and
* To provide funding for capital works including planned maintenance.

A Trading Entity is being established in DPW for the purpose of receiving and spending the accommodation charges. This will require dividing the Department into two sections, with the planning and operational units falling under the Trading Entity, which will produce a separate annual report. The Trading Entity will operate as a self-sustaining entity, with the costs associated with the planning and operational units of the Department being included in the accommodation charges. The Trading Entity will be fully established by 1 April 2007. I would like to acknowledge the cooperation and assistance being provided by National Treasury for the establishment of the Trading Entity.

On the request of the South African Police Service (SAPS), we have agreed to delegate some custodial responsibilities, including construction and maintenance, for police stations to SAPS from 1 April 2006. However, DPW will continue to provide these services to all its other client departments.

I am pleased to announce that my Department has been allocated an amount of three comma zero eight billion rand (R3.08 billion) for the 2006/07 financial year. This amount represents a decrease of two comma eight billion (R2.8 billion) compared to the previous year and is attributable to the amount devolved to the national departments in line with the process of introducing accommodation charges referred to previously. However, as mentioned previously, DPW will continue to manage the expenditure of the devolved funds, apart from part of the funds devolved to SAPS.

DPW has been allocated R500 million to capitalise the Trading Entity, and these funds will be largely used for maintenance. As a result, taking into account the revenues to be received from client departments through the accommodation charges, DPW will spend approximately 50% more on maintenance next financial year than it spent this financial year. We anticipate that this increase in maintenance expenditure will continue into the future, as the accommodation charges are gradually increased towards market-related levels.

The Department has relentlessly pursued the path of efficiency and effectiveness. This year (2005/06) will again see the Department achieve 100% expenditure on its allocated budget of R5.56 billion. Approximately R2.5 billion will have been spent on capital construction works and R900-million on maintenance programmes.

This achievement was made possible mainly by our deliberate efforts to improve our efficiency and effectiveness. Earlier this month in Bloemfontein, the Department formally launched its Zimisele - Give It Your Best – service delivery improvement programme. This is a comprehensive turn-around programme aimed at introducing more business-like management methods into the Department, so that the Department will become a service provider of choice for our client departments. A three-year plan for rolling out the Zimisele programme is underway in the Department; and Service Delivery Improvement facilitators have been appointed internally and are currently undergoing training.

Public Works is responsible for the management of three public entities, namely the Construction Industry Development Board (CIDB), the Independent Development Trust (IDT), and the Council for the Built Environment (CBE). It transfers funds to the CIDB and the CBE, and receives regular reports and carries out its oversight role in terms of the Public Finance Management Act (PFMA). During the course of next financial year, the Department will carry out a performance review of these entities, in line with its obligations in terms of the PFMA.

The Government-wide Immovable Asset Management (GIAMA) Bill has been tabled in Parliament, and the Department is already starting to put in place Immovable Asset Management Plans for government departments. GIAMA provides for improved planning for immovable assets, which in turn will result in more efficient and effective use of these resources. National and provincial government departments will be required to compile User Immovable Asset Management Plans (UAMPs) as part of the strategic plans, which they annually submit to Treasury. These plans should indicate how the assets are being planned and managed in terms of established asset management principles, based on the fundamental principle that the contribution of immovable assets to service delivery must be optimised. As a result of this improved planning, the fiscus will benefit from a reduction in the overall cost of service delivery coupled with reduced demand for new immovable assets. The Asset Management Plan for the Department of Home Affairs is currently being finalised, and the plans for the remaining client departments will be completed during this calendar year.

In an effort to further improve the utility and compliance of our immovable asset register, the Department has recruited and employed 54 young graduates as part of a three year, R30-million project, to collect further information on the Department’s properties and enhance the data integrity of the asset register. An agreement has been reached with the Accountant-General and the Auditor-General regarding the minimum information requirements for immovable asset registers, and this project is focusing on collecting the remaining information which will enable the Department to fully comply with these minimum information requirements for all its properties. This includes, for example, measuring the exact extent of properties where such measurements have not been made previously. The project is moving briskly and in tandem with the Department of Land Affairs’ vesting exercise.

At the same time, the Department has prioritised disposal of immovable assets and to date has identified more than 2000 properties for analysis prior to their phased disposal. As set out in the GIAMA Bill, the principle underlying this disposal process is that the state should only retain properties which are required for service delivery or for prestige or heritage reasons. The state should not be paying rates and services for properties, which are not being utilised for service delivery. Currently 170 properties are being disposed of under phase one. Subsequent phases will see also the disposal of bigger properties including the re-advertisement of both a 150 hectare property at Midrand and the Blaauwberg property. The latter will be sub-divided into smaller portions, which will be individually disposed to achieve a meaningful participation of empowered property development and management entities. Badly dilapidated vacant residential properties will be auctioned to accelerate their disposal and save on costs.

Currently these disposals are being carried out in terms of the Preferential Procurement Policy Framework Act and its Regulations, which provides for the allocation of either 10 or 20 preference points for Black Economic Empowerment (BEE) during the tender adjudication process. However, we are working with the Department of Public Enterprises on a new disposal policy with the aim of increasing the contribution of the state’s disposals to BEE and to addressing inequities in the property market. A submission in this regard will be made to Cabinet by the end of April.

My Department will set up a mechanism similar to a call centre to encourage and invite the members of the public to volunteer any information that will help us to prevent the misuse of state properties including incidents of vandalism, neglect and laundering. The Department is considering a limited amnesty period for those confessing to illicit associations with these properties.

The recently signed Transformation Charters for the construction and property industries create a new platform of collaboration for sustained growth and empowerment in the respective sectors. These charters now set out clear targets and commitments supported by the private sector. I take this opportunity to thank the many organisations and individuals that have worked so hard for more than a year to deliver agreement on achievable and challenging targets.

In the forthcoming financial year, the Department will spend approximately R1.4 billion on leased accommodation from the private sector. In line with spirit of the recently launched Property Charter, the Department will be developing various mechanisms in consultation with the client departments, existing landlords and financial institutions, to encourage the entry of black owned property owners into this lucrative market. I will be setting stringent targets to the Department to ensure that new leases and renewals are used to achieve the stated transformation and empowerment objectives. The Department will also be communicating its transformation strategies so that the key stakeholders have a clear understanding of our long-term transformation objectives.

The current boom in the property and building sector signals the beginning of a period of sustained growth, underscoring the centrality of the construction industry to the Accelerated and Shared Growth Initiative for South Africa (AsgiSA). Driven by increasing public and private sector investment in infrastructure, the construction industry will need to more than double its output over the next ten years. Investment growth provides immense opportunities to increase the participation of blacks and women within the industry. The biggest single challenge is to boost the skills and capacity of both the industry and the public sector to deliver the infrastructure that is pivotal to our country’s development.

In this context the Department is working closely with the Construction Industry Development Board (CIDB) and the Department of Trade and Industry on an industrial strategy for the construction industry, with the aim of positioning the industry as one of the growth industries in AsgiSA. In addition, the Department and the CIDB are co-ordinating a study to determine the projected skills needs and shortages in the construction industry over the next 15 years. The study is being coupled with an initiative to recruit and train unemployed people to meet the projected skills gaps over time. These initiatives are part of the Joint Initiative for Priority Skills Acquisition (JIPSA), under AsgiSA.

This year, the CIDB will focus on the development of registered black and women contractors. With over 8500 contractors now registered in different categories, the CIDB Register of Contractors provides a framework for targeted interventions to gear finance, training, mentoring, and appropriate information and management tools. The program will build on the commitments of the construction charter and the experience of national and provincial departments of Public Works.

Contractor registration is already opening doors to support by banks and financial service providers as the industry moves into a more regulated environment. For example, National Urban Reconstruction and Housing Agency (NURCHA) now offers finance to all registered contractors on public sector projects, provided the tender is viable. In a related initiative, Public Works, the Independent Development Trust (IDT) and First National Bank recently signed an agreement to promote registered emerging contractors on schools and health facilities in the North West and Eastern Cape, with other provinces to follow.

Strengthening the infrastructure delivery capacity of the public sector remains a key objective in the CIDBs continued roll-out of streamlined and uniform procurement documentation and procedures, and government’s Infrastructure Delivery Improvement Program (IDIP). The need to improve the states ability to deliver services efficiently and effectively was stressed by the President in his State of the Nation Address. The IDIP is a joint initiative of National Treasury, the Development Bank of Southern Africa (DBSA), the CIDB, and the departments of Public Works and Education. It involves introducing improved infrastructure planning and management methods into provincial Education and Public Works departments, with the aim of ensuring that funds are both fully spent and spent efficiently and effectively. As a result of this initiative and the improved working relationship between the national and provincial departments of Public Works and Education, the problem of children learning under trees will be eradicated by the end of this financial year.

The launch of an independent Association for Women in Property in 2005 heralds prospects for the historically disadvantaged groups in the industry that is still reeling from the adverse effects of apartheid space planning and property development. The Department of Public Works has been implementing BEE programmes in the construction sector for some time, including the Emerging Contractor Development Programme, the EPWP Vuk’uphile and venture learnership programmes, and the Incubator Programme. In order to increase its contribution to transformation in line with the charters, the Department will also be establishing similar programmes in the property industry. Discussions are currently under way with a number of high street banks regarding putting in place access to finance for emerging black landlords. This access to finance will be a component of a new Emerging Landlord Development Programme, which the Department will launch during the coming financial year. The Department has also adopted a revised BEE strategy, which includes BEE targets for its expenditure in the construction and property industries. These targets are in line with the Charter targets.

Initiatives such as the Department’s Re Kgabisa Tshwane programme will provide many opportunities for emerging property enterprises. In partnership with the Department of Public Service and Administration (DPSA) and the City of Tshwane Metropolitan Municipality, the Re Kgabisa Tshwane programme was formally launched on 10 November 2005 in response to the Cabinet and President’s call to improve the physical working environment of public servants as part of Batho Pele. The programme will also contribute to urban renewal and help to position Tshwane as the leading capital in Africa. The Department of Public Works has developed a Spatial Development Framework and has begun the Options Analysis process to determine the most appropriate, long term accommodation solutions for national government departments and their agencies, which will be accommodated in seven precincts in and around the inner city. The upgrading work has started with the R50-million upgrade of the Central Government Offices for the Department of Public Works and the R200-million upgrading of the Civitas Building for the Department of Health. Construction work for the National Library (Arts and Culture) is also underway while work for the headquarters for the Departments of Education and Foreign Affairs is imminent. The Tshwane Municipality is working on plans to upgrade the urban environment in the precincts, particularly safety and security, recreational spaces, cleaning, and public transport, including feeder systems to the Gautrain. It is estimated that approximately R10 billion worth of investment will be mobilised over a period of 10 to 15 years through the Re Kgabisa Tshwane. Many of these projects will be implemented through public-private-partnerships.

Some of the future construction expertise (and capacity) necessary for successful execution of projects such as the above, are currently being developed in the Expanded Public Works Programme (EPWP) Vuk’uphile Contractor Learnership Programme. To date the EPWP has surpassed its employment creation targets, across four sectors, with more than 220 000 work opportunities created in the first year (2004/05). At least 40% of the beneficiaries were female, and an additional 60 000 work opportunities were created in the first quarter of the second year (2005/06).

Contributing to skills development, a total of 39 provincial departments and municipalities has signed Memoranda of Understanding with the Department of Public Works and the Construction SETA (CETA) for the training of contractors and supervisory staff in the management of labour-intensive construction projects. This has resulted in the growth of the Vuk’uphile Learnership Programme from the initial target of 500 to 2175 learnerships. Approximately 40% of the Vuk’uphile learners are female and 68% are youth. A total of 3000 Vuk’uphile learner-ships are planned by the end of 2009. I would like to acknowledge the Department of Labour, Construction SETA, IDT and ABSA bank for their efforts in making Vuk’uphile a success.

In addition, beneficiaries working on the Expanded Public Works Programme have received training in Life Skills courses such as HIV/AIDS, Career Guidance and Personal Finance through the Memorandum of Understanding between the Department of Public Works and the Department of Labour. Additional technical training in areas such as kerb-laying, paving, building and brick-making has been provided to people working on EPWP projects. Public Works is working with the Department of Transport to increase the number and the size of labour-intensive road construction and maintenance programmes in an effort to enhance the scale and impact of the EPWP, as part of AsgiSA, and proposals have been made to National Treasury for additional funding in this regard.

Two focus areas have been identified for immediate work and training opportunities in the social sector of the EPWP. These are the Home/Community-Based Care (HCBC) Programme and Early Childhood Development (ECD). The Social Sector Plan aims to create a total of 231 000 work opportunities, with 125 000 in the HCBC Programme and 106 000 in ECD. An additional R4.2 Billion has been allocated to the provinces as part of the provincial equitable share to expand ECD and HCBC from 2006/07 to 2008/09.

Cabinet has mandated the EPWP Economic sector through the EPWP Venture Learner-ship Programme to develop and support 3000 businesses by 2008/09. To date, in partnership with the Sector Education and Training Authorities (SETAs) and several provincial and municipal departments, 170 businesses responsible for executing government contracts worth R37 million have participated in the Venture Learner-ship Programme. These businesses receive business-related training through the SETAs, practical training projects from government, and access to finance through ABSA bank, and exit the learnership programme with a National Certificate in business.

By the end of April 2006, the sector would have signed commitments for the development of a further 320 SMMEs. By the end of the 2006/07 financial year, in total 1000 SMMEs will be assisted through the Venture Learner-ship Programme. These businesses will be developed in all the provinces and will be in sectors such as agriculture, tourism, food and beverages, information technology, wholesale and retail, and waste management. Opportunities for venture learner-ships in other sectors where government procures goods and services are currently being researched.

The EPWP is well on its way to meet its target of 1 million jobs by 2009. I would like to take this opportunity to thank all municipalities, provinces and national sector departments for their efforts in ensuring that the EPWP is making an impact. I would also like to acknowledge the contribution of the Business Trust, whose technical assistance and support to further enhancing the impact of the EPWP has been indispensable.

In the spirit of Zimisele, we have been implementing a number of initiatives aimed at improving our service delivery, including business process re-engineering; decentralisation to regional offices and increasing delegations to regional offices; restructuring involving increasing capacity at regional offices; and a thorough revamp of our supply chain processes. Our human resources section has been recruiting young and skilled blacks for placement in learnerships and internship programmes with the aim of simultaneously addressing skills shortage and employment equity in the Department. In addition, working together with the Council for the Built Environment (CBE), the Department has established partnerships with tertiary institutions to attract young graduates to replenish scarce skills. Internationally it has linked up with Cuba to import skills in the built environment and the United Arab Emirates to identify women for training in project management. These efforts are in line with, and amplify the ideals of AsgiSA.

Ethical conduct is key to doing business in South Africa and the Department will continue to step up pressure to create a zero-tolerance environment for fraud, corruption and maladministration. In April 2005, DPW initiated a process to develop a Broad-Based Black Economic Empowerment (BBBEE) strategy. The preliminary phase to this process was to do an assessment of the current contribution to BBBEE by the Department. This involved looking at mainly R10-million or more of individual contracts awarded by the Department over a three-year period including 2005 financial year. Companies found to have been fronting have been handed over in a report to the National Prosecuting Agency (NPA) for further investigation including forensic audits. Those found guilty by the NPA will be prosecuted.

Internally, the Department has improved its anti-corruption capacity in accordance with the Cabinet’s decision for the creation of “a minimum capacity” to create awareness against, and pursue total eradication of fraud and corruption. The approved Fraud Prevention strategy of the Department is aligned to the government’s National Anti-corruption Strategy and was recently singled out for praise as “a best practice example” by a DPSA publication.

As a demonstration of our zero-tolerance to corruption, at our Nelspruit Regional Office members of the management team, including senior managers, were suspended pending outcomes of disciplinary processes. The Department has joined forces with the National Prosecuting Authority to investigate allegations of irregularities in the award of contracts at other Regional Offices. Working with the Commercial Branch of the SAPS, a fraud of R4,2 million was uncovered at the Pretoria Regional Office and our timeous action prevented further fraudulent transactions to the value of R11 million. Criminal prosecutions will be instituted against those implicated in both cases.

Corporate governance is compatible with good administration and the Department has developed performance measures and targets for all its programmes as part of its continuous improvement. This balanced score card will ensure that our programmes have clear outcomes linked to the goals and objectives as set out in the Department’s strategic plan. It will also by implication, assist with the realignment of our performance to the imperatives of AsgiSA.

As we record new milestones, we shall revert to our publics with vigorous communication and marketing campaigns because we owe it to the nation to amplify the successes and challenges of government. The electorate has on six occasions (including three local elections) diligently mandated this government to govern. We have launched a public relations campaign called ‘South Africa Works because of Public Works’. This is part of our earlier undertaking to contribute to socialisation and democratisation through constant public awareness efforts. I invite honourable members to visit our stall at the Rand Easter show this year. The teasers heralding the launch of the National Construction Week campaign in July are already out. A brainchild of the Department, the Construction Week will mobilise public sentiment behind the construction sector and confirm its status as an asset to the nation.

In conclusion I want to acknowledge the role of the Independent Development Trust (IDT) in the work of managing development programmes as well as monitoring and assessing their impact. This includes assisting with the maintenance of state’s immovable assets on behalf of my Department as a contribution to the job creation and skills development objectives of the EPWP. In the next few months a new Board of Trustees for the IDT will be appointed. I like to thank the current Board for their contribution.

My sincere appreciation and gratitude goes to the Deputy Minister, Mr Kganyago, for all the cooperation and support particularly his stewardship in moments of my incapacitation. I also want to thank the Portfolio Committee for their oversight role including all constructive inputs. We commit to nurture this relationship. The contract of the Director-General, Mr James Maseko ended in January and I wish him well in his new endeavours. I also want to thank men and women who make us proud working under the different programmes of EPWP. Some are here with us today. I call upon the entire staff of the Department to double their efforts to realise the aims of AsgiSA and other millennium targets. When we say SOUTH AFRICA WORKS BECAUSE OF PUBLIC WORKS, let us always ponder over those words.

I thank you.

Issued by: Department of Public Works
29 March 2006