DPW PORTFOLIO COMMITTEE

Presentation on:

Construction & Property Sector Charter Councils

and

Legislative Issues

26 FEBRUARY 2013

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Contents• Construction Sector Charter Council (CSCC)

– Progress since August 2012

• Property Sector Charter Council (PSCC)– Progress since May 2012

• Legislative Issues– Agrément South Africa (ASA) Bill

– Expropriation Bill

– CIDB Regulations

– Built Environment Professions (BEP) Policy

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Progress on CSCC

• The CSCC was registered as a Section 21 company (not for profit) in November 2012.

• Memorandum of Agreement (MoA) stipulating financial obligations and reporting between National Department of Public Works (NDPW) and the CSCC was signed in November 2012.

• A CEO was appointed in December 2012 and assumed duty in January 2013.

• Website is fully functional.

• Undertaking research on the transformation of the construction industry (procurement phase):– Database is to be developed to capture scorecard of companies.

– Baseline study to analyse the extent and depth of transformation since 2009.

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Progress on CSCC

• Appointment of Chairperson – NDPW Acting Chief Operations Officer (ACOO) was mandated to engage

with CSCC EXCO to address matter.

– ACOO met with CSCC EXCO on 15 February 2013

– The CSCC EXCO to propose 2-3 names for consideration by 25 February 2013

• The Department has developed a training manual for the public sector and is currently developing a “How To” Practice Note for the public sector to ensure CSCC targets are attained.– to be finalized in March 2013

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Progress on CSCC• Both BDPW and the CSCC will embark on training the public sector

on how to achieve the targets set in the Codes: – National Depts

– Provincial Depts

– Local Government

– Parastatals

• The training was delayed pending the appointment of the CEO (who will drive both the public and private sector training) and finalisation of the CSCC practice note (training manual).

• The training will start in May 2013.

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Progress on Property Sector Charter Council(PSCC)

1. GAZETTING

•Property Sector Charter was gazetted in June 2012 in terms of Section 9(1) of the Broad Based Black Economic Empowerment (BBBEE) Act, 2003 (Act No. 53 of 2003)

•Implications:– All PSCC members can only be verified against Property Sector Code;

– All government entities department and SOE’s must comply with the Sector Codes.

•Sector Codes launched to all members in May 2012.

•Gazetted Sector Code published and printed.

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Progress on PSCC2. SUPPORTING REQUIREMENTS

• Continuous education on Sector Codes via Roadshows and Seminars.

• Development of practice notes for clearer understanding of the Sector Codes.

• Negotiating with DFIs to ring fence funding to enable the Property Sector transformation.

• Both NDPW and the PSCC will embark on training the public sector in May 2013 on how to achieve the targets set in the Codes: – National Depts

– Provincial Depts

– Local Government

– Parastatals

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Progress on PSCC

3. CORPORATE GOVERNANCE

•Property Sector Charter Council has 17 members.

•All Property associations are represented at the Property Sector Charter Council except National Association of Managing Agents (NAMA).

•Matters being addressed through the regulator Estate Agency Affairs Board (EAAB)

•New members include Real Estate Business Owners of South Africa (REBOSA) and Black Association Commercial Property Owners of South Africa (BACPO)

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Progress on PSCC

4. ROADSHOWS DONE TO INTRODUCE GAZETTED SECTOR CODESASSOCIATIONS AREAS NO OF PEOPLE ATTENDED

EAAB National (10 Cities) 1766

SAFMA Sandton 350

SAPOA Johannesburg 90

SAIBPP/WNP/SABTACO/AWIP Cape Town / Johannesburg 110

SACSC Durban 1000

SAIV Johannesburg 250

TOTAL 3566

VERIFICATION AGENCIES

SANAS Verification Agencies Cape Town / Durban / Pretoria 113

IRBA Pretoria / Johannesburg 500

TOTAL 6139

Progress on PSCC

5. PROPERTY SECTOR RESEARCH

•Objective: Establish a baseline for future annual reporting.

•Aim: Improved understanding of the Property Sector to drive Charter Code targets.

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Agrément South Africa (ASA) Bill

• Minister Mahlangu-Nkabinde approved Business Case (BC) in March 2011.

• BC routed to Minister Nxesi to concur and approve the policy position advanced in the BC in November 2011.

• BC to establish ASA as a public entity.

• BC withdrawn January 2012:– Bring in line with the amendments in the National Building Regulations– Remove ASA regulatory role

• Revised BC routed for approval in July 2012.

• Presented to EXCO in 2 August 2012.

• Currently being considered by DG.

• Draft Bill to be Tabled in Parliament by November 2013.

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Expropriation Bill

1. PURPOSE

The purpose of this presentation is to apprise the Public Works Portfolio Committee of the –

Need to review the Expropriation Act, 1975;

Alignment of the draft Expropriation Bill and DRDLR’s Green Paper on Land Reform;

Progress towards submitting the Expropriation Bill to Parliament.

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2. Need to review the Expropriation Act, 1975 Prior to the present constitutional dispensation, the system of government in South

Africa was founded on the principle of parliamentary supremacy. It was common practice for the executive to be granted unbridled legislative powers to govern. The Expropriation Act, 1975 is an example of such legislation.

An evaluation of the Expropriation Act reveals various shortcomings that do not accord with the principle of constitutional supremacy as embodied in section 2 of the Constitution, 1996 –

“The Constitution is the supreme law of the Republic, law or conduct inconsistent with it is invalid, and obligations imposed by it must be fulfilled.”

The review of the Expropriation Act therefore became necessary to ensure consistency with the spirit and provisions of the Constitution , in particular - the equality clause (section 9); the property clause (section 25); just administrative action (section 33); as well as extension of the purpose for expropriation to include public interest.

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Need to review the Expropriation Act, cont… There are an array of authorities within the national, provincial and municipal

spheres of government that are empowered to expropriate property, through some 150 pieces of legislation.

Within the National Government, the President and at least ten (10) Cabinet ministers are empowered to exercise expropriation powers (Agriculture, Forestry & Fisheries; Arts & Culture; Energy; Mineral Resources; Environmental Affairs; Public Works; Rural Development & Land Reform; Trade & Industry; Transport and Water Affairs).

There is therefore a need to ensure uniformity in the way organs of state undertake expropriation and to enhance co-operative governance across the three spheres of government. The proposed Expropriation Bill therefore introduces uniform expropriation procedures which must be followed by all expropriating authorities.

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3. Alignment of the draft Expropriation Bill and DRDLR’s Green Paper on Land Reform

Earlier drafts of the Expropriation Bill contained a provision for the establishment of an Expropriation Advisory Board to – provide expert advice to all expropriating authorities on all aspects of

expropriation (e.g. determination of just and equitable compensation; administrative procedures to be followed in an expropriation); and

render advice to any organs of state on property prices when the State acquires property other than through expropriation, or disposes of property.

The functions of the proposed Expropriation Advisory Board dealing with the provision of advice on (a) assessment of compensation when properties are expropriated; and (b) purchase prices when organs of state acquire property other than through expropriation or sale prices when state property is disposed, overlap with the functions ascribed to the Office of the Valuer-General (OVG), as proposed in Rural Development & Land Reform’s Green Paper on Land Reform.

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Alignment with DRDLR’s Green Paper, cont… DRDLR established a workstream on the proposed Office of the Valuer-General

(OVG) in which DPW; DCoG; SALGA; the banking sector; organised agriculture; SA Council for the Property Valuers Profession; SA Institute of Valuers and other interested parties are actively participating.

In Nov 2012, Cabinet approved DRDLR’s policy proposals on the establishment of an Office of the Valuer-General to provide valuation and property market advice to the whole of Government and to set norms and standards to guide such valuation services.

Given the overlap of the proposed functions of the OVG and that of the proposed Expropriation Advisory Board, the latter has been omitted from the draft Expropriation Bill. In the absence of the Expropriation Advisory Board, DPW would be required to establish internal capacity to provide expert advice to any expropriating authority on administrative procedures to be followed in an expropriation.

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4. Progress towards submitting the Expropriation Bill to Parliament

DPW has developed a 1st draft of the requisite Regulatory Impact Assessment (RIA) for the proposed revision of the Expropriation Act, with assistance from National Treasury. Further engagement with National Treasury would be required in order to refine the RIA.

DPW consulted extensively with Rural Development & Land Reform on an earlier draft of the Expropriation Bill, whereafter it was submitted to the Chief State Law Advisor (CSLA) for informal comments. The CSLA’s comments have been incorporated into the current draft Bill.

DPW submitted the draft Expropriation Bill for scrutiny and comment to two Senior Counsels - an “old school” counsel with extensive experience of expropriations pre and post 1994; and a “progressive” counsel experienced in constitutional and administrative law.

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Progress towards submitting the Expropriation Bill to Parliament, cont…

The Legal Counsels’ comments have been incorporated into the draft Expropriation Bill, which will in due course be submitted to Cabinet for approval to (a) publish for public comment; (b) forward to all government role-players for comment; and (c) submit to NEDLAC.

The Department will –

facilitate thorough external consultation on the draft Expropriation Bill (including the NEDLAC process); and

make every effort to table the Expropriation Bill in Parliament before the end of the 2013 calendar year .

-ooOoo-

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• Risk Mitigation Tool in the procurement of construction work, Seeks to address the: – public sector clients’ level of confidence when appointing contractors in

that, the contractor will deliver a quality product.

– Address challenges of growth faced by emerging contractors.

• January 2012 CIDB submitted draft amendments.

• Task Team made up of CIDB, NDPW-Policy, Legal Services and Ministry was established.

• The Minister approved the gazetting of draft Regulation, for comment, in September 2012.

CIDB RegulationsRegister of Contractors (RoC)

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• On 5 October 2012 the Draft Regulations were gazetted, with the closing date of 05 December 2012, for public comment.  

• The comments are currently being analysed by CIDB and will soon be submitted to the Task Team for consideration.

• The target for final gazetting of the Regulations is March 2013.

• Improvements to Regulations:– Removal of the requirement for contractors to have registered professionals in

their employ;

– Removal of Method B Registration on the CIDB Register of Contractors;

– Tender Value Range Adjustment – 3 Years - adjust for inflation.

CIDB RegulationsRegister of Contractors (RoC)

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CIDB RegulationsRegister of Contractors (RoC)

Grade Upper limit of tender value

range

Current Values Best Annual

Turnover

Reduced Values Best Annual

Turnover (50% of Upper Limit of tender value range)

2 650,000 - -

3 2,000,000 R 1 000 000 1,000,000

4 4,000,000 R 2 000 000 2,000,000

5 6,500,000 R 3 250 000 3,250,000

6 13,000,000 R 7 800 000 6,500,000

7 40,000,000 R 24 000 000 20,000,000

8 130,000,000 R 90 000 000 65,000,000

9 No Limit R 270 000 000 200,000,000

Annual Tender Value

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GradeUpper limit of tender

value range

Current ValuesLargest Contract

(25 % of Upper Limit of tender value range)

Reduced ValuesLargest Contract (22.5% of Upper

Limit of tender value range. 20 % for Grade 2)

2 650,000 R 150 000 R 130,000

3 2,000,000 R 500 000 R 450,000

4 4,000,000 R 1000 000 R 900,000

5 6,500,000 R 1 600 000 R 1,500,000

6 13,000,000 R 3 250 000 R 3,000,000

7 40,000,000 R 10 000 000 R 9,000,000

8 130,000,000 R 32 500 000 R 30,000,000

9 400,000,000 R 100 000 000 R 90,000,000

CIDB RegulationsRegister of Contractors (RoC)

Track Record

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CIDB RegulationsRegister of Contractors (RoC)

Designation Upper limit, (R) of tender value range

Best Annual Turnover

(50% of Upper Limit of tender value range)

Largest Contract (22.5% of Upper Limit of tender

value range. 20 % for Grade 2)

Available capital (R)(10% of

Upper Limit of tender value

range, 5% for Grade 3 & 4)

2 650 000 - R 130,000 - 3 2 000 000 1,000,000 R 450,000 100,000 4 4 000 000 2,000,000 R 900,000 200, 000 5 6 500 000 3,250,000 R 1,500,000 650, 000 6 13 000 000 6,500,000 R 3,000,000 1,300 000 7 40 000 000 20,000,000 R 9,000,000 4,000.000 8 130 000 000 65,000,000 R 30,000,000 13,000.000 9 No Limit 200,000,000 R 90,000,000 40,000.000

Proposed Changes

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CIDB RegulationsExemption from Preferential Procurement Policy

Framework Act, 2000 (PPPFA) [Act No. 5 of 2000]

• The PPPFA Regulations that came into effect on 7 December 2011 prohibited the use of procurement Method 4 (Standard for Uniformity in Construction Procurement) in the public sector.

• Method 4 - combines points for price (financial offer), functionality (quality) and preference to arrive at the highest point scoring tender, in line with the provisions of the Preferential Procurement Regulations, 2001.

 

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• In June 2012, after proposing draft regulations to NDPW and a motivation requesting an exemption from the PPPFA Regulations, CIDB informed NDPW that its draft Regulations required further revision.

• In September 2012 CIDB was requested to further engage with National Treasury in this regard.

• In December 2012 CIDB withdrew the draft regulations to determine whether the draft PFMA Regulations issued by National Treasury in November 2012 address the concerns raised by CIDB.

CIDB RegulationsExemption from Preferential Procurement Policy

Framework Act (PPPFA)

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• Seeks to address the:– public sector non-compliance to the PFMA requirement of payment within 30

days of submission of valid claim.

– Delayed payments between main contractor and sub-contractors/suppliers.

• CIDB had not:– Considered and identified the main reasons for delays in payment ;

– Undertaken a legislative scoping on the matter;

– Sufficiently engaged with government departments.

• Regulations were withdrawn by CIDB in December 2012 to undertake the above exercise.

• Once consultation with government departments have been finalised – a work plan will be developed.

CIDB RegulationsDelayed Payment

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Built Environment Policy (BEP)

• November 2010 erstwhile Minister Doidge withdrew BEP Bill. March 2011 the then Minister, Minister Mahlangu-Nkabinde approved a Discussion Document for consultation with the professional councils.

• After extensive consultation process with the professional councils a Draft Policy on the BEP was developed and is currently being considered.

• Consultation on the Policy will commence once approved by the Minister.

• The Department plans to have a final BEP Policy by Dec 2013.

• The legislative process will begin in 2014.

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THANK YOU

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