This is concerning because, together, these sectors are responsible for managing almost a third (R584 billion) of the estimated total expenditure budget of R1 855 billion, and are instrumental in managing infrastructure and delivering key essential services to citizens.
These four sectors each play an essential role in achieving key government priorities. Thus, paying urgent attention to the root causes behind their failure will have the biggest impact on the success of government initiatives.
We begin the chapter by reporting on the results of our audit of infrastructure grant management for projects funded by key grants in the health, education, human settlements and public works sectors. We have reported similar findings in previous years, but little has changed in terms of improving the management of infrastructure projects. We then provide insight into, and identify the root causes behind, key challenges that are prevalent in infrastructure management, such as delayed projects, poor quality and maintenance of infrastructure, excessive and unnecessary costs incurred for unoccupied buildings, and poor project management and implementation. We also highlight the impact of these issues.
In the remainder of the chapter, we give more context to the audit outcomes for each of the four sectors by including insights on the following:
- Financial management and financial health – we expand on matters relating to budgeting, (including the impact of budget reprioritisation, budget cuts, over- and underspending, and budgeting for medical claims), financial reporting, financial health, unauthorised expenditure and losses.
- Programme performance – we focus on key observations, including whether key performance indicators and targets were achieved and reliably reported, and whether departments are on track to achieve targets included in the Medium-Term Strategic Framework (MTSF) and the National Development Plan. Where applicable, we also include obstacles preventing good performance reporting.
- Compliance with legislation – we highlight the main areas of non-compliance with legislation.
- Material irregularities – we provide details on and the status of any material irregularities identified in these sectors.
- Root causes – we discuss the root causes behind accountability failures in these sectors.
For the 2020-21 audits, we focused on grant management across sectors. This snapshot shows the audit outcomes of infrastructure grant management with an emphasis on projects funded by key grants in health, education and human settlements.
1 This programme aims to contribute to eradicating infrastructure backlogs in schools, especially those with dangerous structures and a lack of water, sanitation and electricity, to support better teaching and learning environments that comply with the government’s minimum norms and standards for school infrastructure.
It is widely accepted that South Africa’s economic recovery from the devastation of the covid-19 pandemic and social unrest hinges on infrastructure development, which unlocks value. As Finance Minister Enoch Godongwana said at the National Investment Dialogue in late September 2021, the country urgently needs investment in areas such as energy (including alternative energy), water and sanitation, roads and bridges, and human settlements.
One of the key initiatives in the South African Economic Reconstruction and Recovery Plan is the aggressive infrastructure investment that will lead to increased income levels in the construction sector.
South Africa desperately needs investment in infrastructure. However, the budget and cost overruns that have become almost synonymous with public sector infrastructure projects are putting further strain on government’s limited financial resources.
Our reports have repeatedly highlighted billions of rands of irregular and fruitless and wasteful expenditure in various government infrastructure projects. While some of this can be attributed to improper tender practices, corner-cutting and the like, a significant amount of money is lost to inefficiencies such as scope creep, where additional scope is added to a project during the construction phase.
This chapter includes information, statistics, insights and stories from our audits of infrastructure projects in the health, education and human settlements sectors.
Service delivery objectives
- The Constitution of the Republic of South Africa states that everyone has the right to have access to adequate housing. The mission of the Department of Human Settlements is to facilitate creating sustainable human settlements and improving the quality of household life.
- One of the National Development Plan implementation goals is to build healthcare infrastructure for effective service delivery. This objective is also captured in goal 4 of the health sector’s strategy 2019–2024. Through the health facility revitalisation grant, which is the largest source of funds for public health infrastructure, provincial departments of health are responsible for building, replacing, maintaining, renovating, upgrading and adding to infrastructure.
- The education sector remains a priority for government and receives a large share of voted government funding.
Although each sector has a unique set of circumstances, infrastructure investment in these sectors yields the same problems and inefficiencies. During our audit, we paid specific attention to infrastructure delivery across the project life cycle, focusing on some of the key projects in every province.
We also concentrated on each key phase of infrastructure delivery to address the economical, efficient and effective use of resources in constructing infrastructure. The different phases of the project life cycle for infrastructure delivery are depicted on the next page.
Overview of deficiencies, findings and impact
Over the past few years, we have identified significant internal control deficiencies that led to repeat findings on the economical procurement of resources, and the efficient and effective delivery of infrastructure. These remain unresolved, and infrastructure projects still fail to realise the intended service delivery objectives. In our estimation, if departments imposed consequences, it would promote accountability and thus improve government’s ability to deliver infrastructure projects effectively and within budgeted cost. In implementing our expanded mandate, we have also identified a number of potential material irregularities that are at various stages of the material irregularity process. The findings and key delivery challenges are detailed in the graphics below.
The following graphs show the number of provinces in the targeted sectors with key findings on time, cost and build quality.
Root cause analysis
The diagram below highlights the main root causes identified during the audits on infrastructure delivery. There are many contributing challenges and a holistic approach is required to improve infrastructure service delivery. While addressing one or two root causes may alleviate the problem, a coordinated and comprehensive process is required to achieve the goal of delivering infrastructure to the citizens of South Africa.
The remainder of this chapter focuses on the unattended project deficiencies in the areas of planning, project implementation and management, and commissioning, with examples of each.
The success of an infrastructure project depends, to a large extent, on the quality of the needs assessment and planning of a project.
Inadequate needs assessment and project planning for infrastructure projects
Departments did not always ensure that the needs of the project were properly identified so that they could plan accordingly.
Syferfontein housing project (WC) – Human Settlements
Water use license and building plans were not approved in time, contributing to extension-of-time claims of R4,69 million, and a six-month delay in completing houses.
The purpose of the project was to construct civil services for 359 erven and build 173 housing units. The project commenced on 31 August 2018; however, the provincial department did not ensure that all the planning processes and approvals were in place upfront:
- The water use licence application was only approved 52 calendar days after the project commenced, resulting in the contractor claiming for extension of time as well as stockpiling to the value of R2,75 million.
- The department (as the developer) did not ensure that the George Municipality provided revised construction drawings and site instructions to the contractor in good time. The contractor then claimed an extension of time amounting to R1,94 million for 135 calendar days (24% of the original 573 construction days).
The extensions of time contributed to a delay in completing the project.
In addition, although 147 housing units had been completed by 2 December 2019, the units were not commissioned and thus stood vacant and were not handed over to the beneficiaries. The delays were caused by a delay in upgrading the Outeniqua wastewaster treatment works contract, which included a package plant to allow connections to the new housing units. This had an impact on the intended beneficiaries.
Julius Sebolai Primary School site (GP) – Education
Poor planning resulted in additional cost of 35% (R27,04 million) more than original
The site was handed over for construction in April 2015, and the original contract value was R77,83 million. However, poor planning resulted in the following:
- In August 2015, the provincial department converted the project into a smart school prototype that included R15,89 million in design and specification changes.
- The geotechnical investigation was only conducted on 29 June 2015, after the contract was awarded. Excessive rock was identified on site, increasing the contract value by a further R5,79 million. This extra cost was due to poor planning for the initial tender process, as the tender was not specific about the proposed project location. Bidders did not have an opportunity to visit and investigate the site before tendering.
- During the site handover, the existing mobile classrooms could not be relocated as the department could not arrange for an alternative location. A decision was made to split the project into two phases to allow learning to continue during construction. The estimated cost of incorporating a second phase (including a soccer field, sports facilities, combi courts and external work) was R5,36 million. The project was actually completed on 21 June 2019, and the newly constructed school is in use. However, by 18 June 2021, the mobile structures were still on site, unused and occupying the area allocated to sports fields, denying the learners access to onsite recreation facilities.
Project implementation and management
Project implementation and management focuses on achieving critical targets or delivery dates, monitoring current expenditure against progress and budgeted funds, monitoring quality against specifications, and addressing risks with suitable interventions.
The provincial departments responsible for education, health and low-cost housing are usually responsible for project implementation and management, and supplement their limited capacity with consultants and implementing agents.
Ineffective monitoring of project milestones and contractors or implementing agents
Provincial departments did not monitor and evaluate projects effectively to ensure that they were completed on time, within budget and to the required quality. Of the projects selected for detailed auditing, 68% were completed late or were still under construction after the contractual completion dates. The average delay for these projects was 26 months, as shown in the
Jubilee Primary School (EC) – Education
School projects were delayed by more than four years and learners were accommodated in temporary classrooms. Completed infrastructure is not being used.
The school, built in the 1950s, was known as the plankie school, as most of the existing structures were built from timber. In 2011, the structure was deemed unsafe, posing a grave risk to teachers and learners, and the school was slated to be demolished as soon as possible. Repairs, renovations and additions to the value of R77,01 million commenced on
5 August 2014, with a planned completion date of 5 September 2016.
As at 16 July 2021, the contractor had not reached practical completion and the project was still in progress. The actual project expenditure as at 30 August 2021 was R105,14 million – 37% higher than the original contract value.
This excluded professional fees of R15,95 million.
The delay in service delivery deprives communities of their constitutional right to have access to basic school infrastructure.
As the contractor has taken time to complete the project, the implementing agent decided to hand over the completed sections to the department.
Project status on 16 July 2021: Temporary prefab classrooms in use (left) and unused computer laboratory (top)
Betshwana – 1 000 housing project (EC) – Human Settlements
Project delayed by more than four years due to poor planning and poor contractor performance, which led to poor-quality work that needs repairs.
The project consisted of constructing 1 000 housing units with VIP toilets and water tanks. The 24-month contract had a value of R140,30 million and was due to be completed in May 2017. However, as at 12 July 2021, the project was still not completed, with 92 housing units outstanding.
The actual spend on the contract was R126,11 million. The delay in completing the project was caused by poor project and budget planning, and the poor performance of the contractor, resulting in work of poor quality that required repairs. The project has been delayed by more than four years, and is still ongoing.
Khotsong/Caleb Motshabi water and sewer reticulation (FS) – Human Settlements
Project was delayed more than three years as unsatisfactory performance by first contractor led to a new contractor being appointed.
In April 2015, construction began on a water and sewer reticulation network to 5 690 stands. The project, valued at R303,39 million, was planned for completion by 2 April 2018. In July 2017, the contract with the service provider was terminated due to unsatisfactory performance. At termination, only 14% of the work by contract value had been completed, while approximately 20% (R60,89 million) had been paid.
A second contractor was appointed in August 2017 to complete the construction at a total contract value of R196,01 million. Subsequent variation orders amounted to R87,21 million, while an increase in scope contributed a further R40,72 million to expenditure.
In July 2021, the project was still under construction and had been delayed by more than three years. The termination of the first contractor and appointment of a new contractor contributed to the delay, which led to a delay in service delivery.
Pelonomi tertiary hospital (FS) – Health
Health service delivery hampered as hospital completion delayed by more than four years.
This is the province’s only specialist referral hospital. The provincial department started a project to refurbish the neonatal, obstetrics, antenatal and delivery wards of the existing maternity ward. The R41,90 million contract had a completion date of 29 October 2016, but was still not complete as at 27 May 2021 – a delay of more than four years. There was also no activity or contractor on site as the project was halted due to contractual litigation between the contractor and the department. The contractor has since vacated the site.
The department did not promptly institute corrective action, such as charging penalties or terminating the contract, once performance issues were identified. These delays negatively affected the hospital’s ability to execute its mandate and attend to referrals from regional hospitals. The delays continue to have a negative impact on the province’s infant and maternal mortality, and its general healthcare services.
Below are some examples of projects with ineffective monitoring.
We also identified quality defects at 10 schools across five provinces, largely due to poor workmanship that was not effectively addressed. The contractors or professional teams did not address poor quality because the provincial departments did not adequately monitor, manage and supervise the projects.
Underperformance by contractors not identified and dealt with
Contractors did not always make adequate progress during the contractual term, and replacing them resulted in significant project delays and escalating project costs. In some instances, the combined costs of the original and replacement contractors exceeded the original contract price.
New nursing college (NC) – Health
Poor contractor performance resulted in project delay of more than three years, cost increase of 61% to R260,51 million, and remedial work at a cost of R410 453.
Construction of the R161,42 million college began in November 2016, and the contract with the first contractor was terminated on 27 May 2019 for reasons including poor-quality work, health and safety shortcomings, and poor planning. The contractor was paid R96,44 million.
A second contractor was appointed on 29 September 2020 at a contract cost of R164,07 million. Some project sections needed to be re-worked, which increased the total project cost to
R260,51 million, R410 453 of which related to remedial work.
The project was still under construction as at 7 June 2021 – a delay of more than three years from the original planned practical completion date.
Masinenge slums clearance housing project (KZN) – Human Settlements
Poor contractor performance resulted in project delay of more than five years, only 26 of 882 units being completed in contract period, cost increase of 18% per house, and remedial work at a
cost of R3,48 million.
The project was initiated in 2013-14 to provide decent housing for the occupants of the Masinenge informal settlement in the Ray Nkonyeni Municipality. The planned 800 housing units were later increased to 882 units.
The 30-month contract had a planned completion date of 0 April 2016 and a contract value of R97,96 million.
Various challenges encountered during the project led to the initial contractor being terminated. By February 2016, only 26 units had been completed. This poor progress was caused by ineffective project management processes and unenforced contractual remedies for delays in the project.
On 7 July 2020, a new service provider was appointed on a 24-month contract to continue with the project. The contract value of R102,33 million, including R3,48 million for remedial work.
The cost per house increased by 18%, from R116 410 in the initial contract to R137 927 for the new contract. The delay in completing the project is currently more than five years.
Quality defects observed during site visit: Structural crack on the side of the houase (left) and ceiling collapse (top)
Ufafa rural housing project (KZN) – Human Settlements
Poor contractor performance resulted in delayed provision of 547 houses to the community. Appointment of new contractor resulted in 10% increased cost per house due to time lapsed.
Planning for the project, which is a priority for the Ubuhlebezwe Local Municipality, started in 2012. The two-phase, 1 000-house project falls within areas of the provincial growth and development strategy that have a high need for services and a high potential for economic development that could contribute to sustainable community development.
After various delays in funding approval, the R55,89 million phase 1 contract was signed on
13 February 2017 for a construction period of 25 months.
Due to delays in project planning, construction was delayed and the service provider did not complete the project by March 2019. An extension of time was granted until November 2019. However, because the projected targets were not met and the quality of workmanship on site was poor, the municipality terminated the contract on 20 September 2019, with only 453 of the 500 phase 1 houses completed.
On 3 May 2021, a new contractor was appointed to construct 300 houses over 24 months at a cost of R38,29 million, but construction of the phase 2 houses had not yet started by 23 June 2021.
Nine years has elapsed since the start of the project, and only 453 of the original 1 000 houses
for the first two phases have been completed. A new contractor has been appointed to construct a further 300 houses by April 2023, with the balance of phase 2 still to be contracted.
The cost per house has risen by 10%, from R104 829 to R115 567.
During our site visit, we observed quality defects that the provincial department has indicated
it is investigating.
Contractors not paid on time
Late payments to contractors often contribute to project delays and additional expenditure due to
Commissioning is the final phase of completing a project. The contractor commissions the completed building to the client department for occupation and use.
Lack of coordination and collaboration between role-players
Role-players at different levels of government, or within in the same institution, did not work together to synchronise project completion, staff appointments and the availability of completed infrastructure and municipal services in order to ensure comprehensive infrastructure delivery.
Low-cost houses in Emzinoni (MP) – Human Settlements
Basic services not available due to insufficient coordination.
Lack of coordination between the provincial department and the Govan Mbeki Local Municipality meant that completed houses did not have in-house water, electricity and sanitation services. In some instances, beneficiaries created illegal electricity connections because there was no bulk supply to the housing units. Some beneficiaries abandoned the units, which were then vandalised. The department will have to spend more money to fix these houses when the bulk supply is available, as beneficiaries are unlikely to occupy houses that have been vandalised.
Vandalism inside house (left) and illegal electricity connections (top) at Emzinoni (Ext 16)
Vlakkeland housing project (WC) – Human Settlement
Poor coordination resulted in additional costs.
The provincial department and the Drakenstein Municipality did not coordinate and formally agree on the responsibilities, timing and actions required from the municipality before the project began. For example, the role-players did not agree on:
- the time frames and sequencing for approving the house plans, which contributed to an eight-month delay and a cost increase of R3,05 million
- when the municipality would take over the civil portion of the housing project. As a result, the department paid the contractor preliminary and general costs of R1,14 million to remain responsible for the civil portion of the project over a longer period. If the department had agreed on the timing for taking over the civil works portion before the contract commenced, this additional cost could have been avoided
Our recommendations to those involved in and overseeing infrastructure projects are as follows:
- Projects should be adequately planned to reduce delivery delays and unnecessary extensions. Poor demand and procurement planning results in inadequate specifications, wrong decisions about the type and scope of work and/or the feasibility of the project, and unrealistic cost estimates.
- Factors that could lead to delays and impede projects should be identified during planning, and continuously revised and updated during implementation. Measures should be implemented to address factors likely to contribute to delays.
- The provincial departments should improve their project management and monitoring to ensure that all instances of poor workmanship are promptly identified and rectified.
- Projects should be adequately managed and deviations from the contract or poor performance should be addressed promptly in terms of the contract. For example, penalties or terminations should be implemented immediately once the deviation is discovered.
- Project managers should prioritise completing projects and avoid the risk of cost escalations.
- Coordination between the implementing agent, client and other role-players should be improved to ensure that the infrastructure can be commissioned and used immediately after practical completion.
- Different project phases should be completed in a practical and logical order, and deliverables should be used and tested to ensure that they meet the project need.
Over the past few years, we have identified significant internal control deficiencies that led to repeat findings on the economical, efficient and effective use of resources on the delivery of infrastructure projects. These findings are not receiving enough attention, and key delivery challenges to infrastructure projects, such as the continued shortage of housing, good school infrastructure, access to healthcare facilities and poor-quality infrastructure, still affect service delivery. As a result, the lives of citizens in many parts of the country have still not improved.
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