Revised EPWP Integrated Incentive Model Presentation

1. Presentation onRevised EPWP Integrated Incentive model to Portfolio Committee on Public Works 29th May 2012 1

2. Content of the Presentation • Background on EPWP Phase II • Background on the EPWP Incentives • Recommendations from a review of the Schedule 8 Grant • Explaining the new EPWP Grant Model • Eligibility criteria • Determining the Grant Allocation • Cost of work to be created • Adjusting for potential and need • Special Considerations for poor, impoverished areas • Mainstreaming EPWP in existing planning processes • Disbursement • Technical Support Programme • Monitoring and Reporting • Reflecting on the differences and advantages between the old and new grant • Summary of the new EPWP Conditional Grant

3. Background on EPWP Phase II • EPWP Phase I was successful in creating more than 1 million work opportunities over 5 years however the scale of unemployment and poverty being experienced by South Africa required a much more large scale response to the problem • EPWP was seen as an opportunity to address the social welfare gap on a larger scale than before • Key Issues that needed to change in order to scale up in Phase II: • Make the creation of paid work the primary objective of EPWP • Locate clear political and administrative accountability for EPWP job creation targets across all spheres of government • Provide fiscal incentives to accelerate the scaling up of EPWP (allow incentive to be performance/demand driven) • Mainstream EPWP criteria & outputs with the core mandates and programmes of implementing public bodies • Mobilise non-state capacity to deliver additional EPWP work opportunities • Technical Support to spheres, sectors and implementing bodies

4. Background on EPWP Incentives Public Works set out to pilot a number of funding models:

5. Experience in implementing all EPWP Incentives

6. Recommendations for Improvement Suggested the need for special considerations for this category Suggested the need to link the grant to LI Suggested changing how the appropriation works Suggested the need for more structured planning & oversight in EPWP project selection Suggested the need for a more structured Technical Support Programme

7. New EPWP Conditional Grant (1 of 10) • The intention of the new EPWP Conditional Grant is: • To make available EPWP funding aimed at expanding job creation efforts within existing government programmes but targeting specific focus areas, where labour intensive delivery methods can be maximised . • This essentially means that: • There is a stream of additional funding aimed at expanding or funding unfunded labour intensive projects • EPWP Planning will be mainstreamed into both existing planning processes, asset repair and maintenance • Submitted projects will be reviewed and if verified as being labour intensive, will be regarded to qualify to be EPWP projects. Further design support will be done if required. • Specific focus (service) areas where labour intensive delivery methods have proven to be successful will be targeted. • One specific starting point to identify key focus areas to align with EPWP funding would be in municipal IDP’s • To be eligible for the EPWP Grant, the only criteria is that a public body must currently be participating in EPWP and reporting performance. • To be eligible, a public body must have reported to Public Works past EPWP performance, i.e. performance of the prior year or the current year’s performance to date, by 22 October 2011. • Public bodies can have reported EPWP performance in any sector to be eligible for an allocation. Indicative count is that 254 municipalities and 70 provincial departments have reported in at least one sector and will be eligible

8. New EPWP Conditional Grant (2 of 10) The next few slides illustrate how the above basis is applied.

9. New EPWP Conditional Grant (3 of 10) • Methodology for determining the EPWP Grant Allocation • Firstly, • The model starts from the basis of past performance and estimates from the minimum cost of the jobs created by the public body in the past year • This minimum cost represents the possible grant allocation • But, the public body will not necessarily receive the exact cost of work created in the past year – they could receive more or less depending on their potential to create work and the imperative to inject funding into poorer areas. • So secondly, • The model works out how much of the “possible grant allocation” a public body can “earn” by applying an adjustment factor for potential, need and special considerations for poor areas. • What does the adjustment factor consider? • The level of unemployment or poverty in an area • The potential number of jobs that can be created from existing budget allocations (only applied to those who have MIG/IGP/USDG etc and 30% of these are expected to be EPWP specific; the rest will likely focus on bulk infrastructure) • Public bodies using a large portion of their project budgets for wages (high labour intensity) 1 Cost of work created = Number of days of work created X minimum EPWP wage (R63.18 per person day of work)

10. New EPWP Conditional Grant (4 of 10) • Whether the municipality is implementing EPWP projects in more than one EPWP sector: There are specific focus areas where labour intensive delivery methods can be applied in both the infrastructure and environment and culture sector; and DPW wants to encourage municipalities to pursue and implement programmes/projects in these areas in both sectors. • Whether the municipality is classified as part of the special dispensation created for poor, rural municipalities • There are a number of sources being explored to identify this special category of municipalities, including • Using the CRDP nodes • Using the list of un/under-services areas from the Local Government Turn Around Strategy(LGTAS) • Department of Corporative Governance (DCoG) list of backlogs per municipality priority services. • Using the categorisation framework to be applied by DCoG’s MISA, that categorises municipalities by the following characteristics • socio-demographic conditions • service backlogs, infrastructure and maintenance needs • technical delivery capacity • economic status (low income base) • The municipalities in this category will be mainly rural municipalities. • This special category of municipalities will • receive higher grant funding • receive a capacity supplement • be able to access a focussed technical programme for design, planning, implementation and reporting support Eg. If we used MISA’s categorisation framework, 85 municipalities that are eligible would be classified under this special dispensation

11. New EPWP Conditional Grant (5 of 10) 2 Adjustment Factor based on potential, need and special considerations for poor areas FINAL GRANT ALLOCATION = MINIMUM FTE COST X ADJUSTMENT FACTOR 1 2 • The minimum allocation is R882,000. • Once the EPWP Conditional Grant Allocation is determined, EPWP will set job creation targets for the grant amount.

12. New EPWP Conditional Grant (6 of 10) • EPWP Planning • Given that there are existing processes for development and infrastructure planning at provincial and municipal levels, DPW will provide support public bodies to mainstream job creation and EPWP principles. DPW will also actively support planning and simplify the planning requirement of a normal schedule 5/6 grant. • Overall, DPW will communicate to stakeholders that any plan for projects identified as a labour intensive projects or part of the EPWP focus areas, should contain certain information (required by EPWP) • This will provide clarity regarding what is a labour intensive project • This will encourage public bodies to think about job creation in the planning phases • This will get public bodies using existing plans to include job creation implications • DPW will support the mainstreaming of EPWP • DPW will negotiate with national departments (Roads, Education, Health, Department of Corporative Governance (MIG), Human Settlements, Agriculture) to include the required EPWP information fields in their normal grant plans • The EPWP team will extract EPWP project information from the relevant databases to compile draft project lists for public bodies • These project lists will be analysed by DPW to assess whether public bodies are able to meet their targets • This pre-completed project list will be sent to public bodies for further detail where there are gaps; for the inclusion of new projects and signature.

13. New EPWP Conditional Grant (7 of 10) • Guiding EPWP Planning • To guide funding, DPW has identified focus areas for the grant where labour intensive delivery methods work best • DPW will provide a Project Selection Criteria to assist or if necessary even pre-package projects for public bodies that aims to better identify EPWP projects to be funded through the grant: • Compliance with the Ministerial Determination and EPWP Guidelines on Labour Intensive Construction • Projects to pay a minimum wage of R63.18 per person day of work to the EPWP target group • For both sectors, projects must create a minimum of 6.6 full time equivalent jobs (or 1610 person days of work) for every Rand million of the project budget.

14. New EPWP Conditional Grant (8 of 10) • Technical Support Programme • The National Department of Public Works will provide technical support in the following areas as required or agreed with Public bodies: • Planning support • assisting public bodies to identify suitable EPWP projects and programmes • assisting public bodies to develop plans to meet targets • Ensure alignment within existing planning mechanisms such as the Integrated Development (IDP) and Municipal Infrastructure Grant (MIG) submissions • Project design support • assisting public bodies in the design of projects and programmes • advising on contract documentation details and the alignment of procurement processes to facilitate EPWP implementation • Implementation support • reviewing the progress of public bodies, including reviewing site visit reports and performance information • identifying and understanding blockages to implementation and developing innovative methodologies for resolving them • identification of training needs for projects selected and the facilitation of procuring such training. • Reporting support • this focuses on supporting public bodies to develop effective management information systems and processes • assistance in ensuring that reporting is done on EPWP projects implemented. • General support usually deals with creating enabling conditions for the implementation of EPWP projects.

15. New EPWP Conditional Grant (9 of 10) • Technical Support Programme • The National Department Public Works will do the following: • Develop and implement a structured Technical Support Programme • Focus technical support , with small rural municipalities being the priority • Focus on replicating and supporting the implementation of labour intensive projects in specific areas • Either mainstream reporting support or re-think the manner in which this support is currently being provided wherein it absorbs a significant amount of resources.

16. New EPWP Conditional Grant (10 of 10) • Monitoring and Reporting • Reporting will continue to occur via EPWP's reporting system. This will be enhanced to distinctly report, • progress on implementing projects and creating work with existing budget allocations, and • progress in utilising the incentive (whether this is used in supplementing, complementing or leveraging existing projects or implementing new ones) to create work towards its Grant FTE Target. • In addition, there will be validation of financial data, in particular expenditure and wage data, with existing reports • EPWP will make efforts to simplify the reporting process by • Negotiating with other partners involved in implementation and expenditure monitoring to include EPWP information fields in existing reports - eg. Negotiating with Treasury to include in their IYM a distinct reporting line item for expenditure on the grant; and simplifying the quarterly reporting on the grant with National Treasury to occur solely through the existing EPWP reporting system and not duplicating reporting • Investigating the possibility of linking to existing systems or uploading certain data from existing systems to relieve the burden on public bodies of re-capturing this information. • Disbursement of the EPWP allocation will now take place in the manner that normal schedule 5/6 grants do. It is anticipated that: • 40% of the allocation will be disbursed at the beginning of the financial year upon the approval of the public body's EPWP business plan by Public Works • A further 1-2 payments will take place, provided the public body is implementing its EPWP projects and spending its initial 40% towards its job creation targets.

17. Differences between the old and new grant Red writing shows differences in the two models. 17

18. Differences between the old and new grant Red writing shows differences in the two models. 18

19. Differences between the old and new grant 19

20. EPWP Conditional Grant Process Flow 20 20

21. Summary of the new EPWP Conditional Grant • The intention of the new EPWP Conditional Grant is: To provide EPWP funding to expand job creation efforts in specific focus areas, where labour intensive delivery methods can be maximised. • The EPWP Grant Allocation will be determined by taking into consideration: past performance, the potential to create work, and the need to inject employment opportunities and funding into poor rural areas. • Public bodies will need to mainstream EPWP into their existing planning processes; and plan to use the grant in line with the criteria set by DPW to maximise job creation. • There will be a special focus on supporting poor, rural municipalities. • A structured Technical Support Programme will identify, structure and agree support with public bodies, but will aim to prioritise support to those municipalities part of the special dispensation. • Reporting will continue as it does now, with enhancements to the report to ensure DPW reports on baseline performance and grant performance and spending. • The disbursement of the EPWP Grant may occur in 2-3 payments: • 40% of the allocation will be disbursed at the beginning of the financial year (15th May for provinces and 15th Aug for municipalities) • the remaining 60% will be made in 2 payments during the year provided public bodies are implementing projects as planned. 21

22. I THANK YOU 22