Background on EPWP

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EPWPEPWP INCENTIVE GRANT MODEL REVIEW INCENTIVE GRANT MODEL REVIEW PROPOSAL PRESENTATION TO PROPOSAL PRESENTATION TO

SELECT COMMITTEE ON SELECT COMMITTEE ON APPROPRIATIONSAPPROPRIATIONS

11 OCTOBER 201111 OCTOBER 2011

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Background on EPWP• SA was experiencing unacceptable levels of structural unemployment,

worsened by global economic crisis• EPWP was seen as an opportunity to address the social welfare gap• EPWP would enable government to act as an employer of last resort as part

of the Anti-Poverty Strategy• However, the scale and impact of EPWP Phase I was limited

Key Issues identified as affecting impact in Phase I:1. Duration of work opportunities were shorter than anticipated2. Training framework was not effective3. Need for more focused targeting

Key Issues identified as impeding EPWP growth:1. DPW had very limited authority to drive the programme2. No effective mechanism to mobilise funds to scale up performing areas3. Need to switch the programme to a demand driven approach4. Need for uniform wage structures

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Background on EPWPKey Issues identified as impeding EPWP growth

continued…:5. Need to increase the labour intensity of projects without an excessive

long term fiscal burden6. Need for capacity support for implementing bodies

As a result, the following changes were made in EPWP Phase II:

1. Make the creation of paid work the primary objective of EPWP2. Locate clear political and administrative accountability for EPWP

job creation targets across all spheres of government3. Provide fiscal incentives to accelerate the scaling up of EPWP (allow

incentive to be performance/demand driven)4. Mainstream EPWP criteria & outputs with the core mandates and

programmes of implementing public bodies5. Mobilise non-state capacity to deliver additional EPWP work

opportunities6. Technical Support to spheres, sectors and implementing bodies

1. A wage subsidy 2. Expansion Incentive 3. Performance based incentive

• Provided to existing non-government organization who:

₋already create work for poor communities₋have programmes that can be expanded in terms of size, reach and coverage₋are able to secure funding for all other programme related costs₋Involves the payment of a minimum daily wage ate for very day of work created

• Pays all wages (monthly) as work is created• Applied to the non-state sector (NPO pilot & CWP)

• Provided to existing performing government programmes:

₋that have a performance track record and have met a high performance criteria₋that have the potential to immediately expand due to demand₋that have the capacity to manage expansion₋that has capable implementers ₋where all operational/management costs

(funds small % of operations)•Incentive is dedicated to expansion costs (funds small % of operations)•Targets attached incentives efficiencies in job creation•Applies to national E&C and SocSec government programmes

•Provided to provincial and municipal public bodies who participate in EPWP:•Allocation is based on how many jobs can be created with funds already being received by prov depts/ munis through grants•Provided in the form of a performance bonus

₋performance is counted as the number of days of work created₋performance each quarter is assessed₋a quarterly reward is earned₋reward = min daily wage₋once the ‘reward’ is paid, it can be used for job creation in any programme/area

•Provided as an incentive to provincial and local government

Background on EPWP IncentivesPublic Works set out to pilot a number of funding models:

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Introduction to the Integrated Incentive Grant

Aim: The original intention of the EPWP Incentive Grant was to increase job creation efforts by provinces and municipalities by providing a financial performance reward. The incentive grant was premised on the assumption that a financial reward would motivate provinces and municipalities to create more EPWP work primarily by shifting towards more labour intensive methods of construction. Assumption: Government was investing large amounts of public funds into infrastructure; and government wanted to maximise this existing investment for the purposes of job creation; incentivising public bodies to implement infrastructure projects more effectively, efficiently and labour intensively. For the incentive to work as intended, the following pre-conditions are necessary:

• Agreed, dedicated focus and political will to mobilise job creation• Concerted effort to shift current project design/ implementation

methodology towards labour intensive construction methods• Implement more projects (and thus create more jobs)• Accurately report performance.

Key issue

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Performance on the Incentive: past 2 years

• The number of public bodies eligible has almost doubled each year • Provinces - from 17 (2009/10) to 32 (2010/11) to 59 (2011/12) • Municipalities – from 68 (2009/10) to 126 (2010/11) to 198 (2011/12) showing

tremendous progress in public bodies understanding how to access the incentive grant

• In 2009/10 only 3 provinces accessed the Incentive Grant (KZN, EC, WC) but in 2010/11 only 2 provinces did not access their Incentive Grant allocations (NC, NW)

• KZN & EC lead provincial performance• 13 municipalities with an incentive allocation did not report in 2009/10 and 12 in

2010/11• Gauteng municipalities account for almost half of municipal performance• There is still a clear need for dedicated technical capacity to support project design

and implementation as well as reporting.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009/10 Breakdown of Earnings contribution


Provincial Infrastructure Incentive Earned

MP

NC

FS

LP

NW

WC

GP

EC

KZN

77% Earned

58% Earned

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%



Municipal Infrastructure Incentive Earned

MP

NC

FS

LP

NW

WC

GP

EC

KZN

44% Earned

57% Earned

PROVINCES

2009/10 Earnings 2010/11 Earnings

2009/10 Incentive Allocation(R'000)

2009/10Incentive Earned (R'000)

% Earnedin 2009/10



% Earnedin 2010/11

KZN 84,180 84,854 101% 169,470 135,613 80%

EC 29,992 17,457 58% 60,354 33,232 55%

GP 500 0 0% 39,154 2,498 6%

WC 500 14,269 2854% 23,218 1,700 7%

NW 7,192 0 0% 2,897 0 0%

LP 500 0 0% 2,903 6,790 234%

FS 23,008 0 0% 13,767 2,380 17%

NC 500 0 0% 1,167 0 0%

MP 5,047 0 0% 18,074 8,293 46%

Total 151,419 116,581 77% 331,004 190,506 58%

Provincial Performance on the Incentive: past 2 years

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PROVINCES

2009/10 Performance 2010/11 PerformanceNumber of provincial

departments

2009/10 Incentive FTE targets

2009/10Actual FTE Performance

2009/10 % Target Reached

2010/11 FTE Target (Excld Housing)

2010/11Actual FTE performance (Excl. Housing)


2009/10

2010/11 2011/12

KZN 16,551 13,061 79% 29,183 16,910 58% 2 6 7

EC 9,314 8,567 92% 15,906 10,057 63% 5 7 9

GP 2,651 2,042 77% 6,561 1,760 27% 1 2 8

WC 2,061 2,464 120% 4,815 1,167 24% 1 2 2

NW 3,565 951 27% 3,356 558 17% 2 2 4

LP 5,267 688 13% 3,980 2,183 55% 1 3 8

FS 5,075 639 13% 5,079 1,783 35% 2 6 11

NC 1,161 219 19% 2,343 453 19% 1 2 6

MP 3,345 373 11% 3,284 2,744 84% 2 2 4

Total 48,990 29,004 59% 74,506 37,616 50% 17 32 59

Provincial Performance on the Incentive: past 2 years (Cont.)

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MUNICIPALITIES

2009/10 Earnings 2010/11 Earnings



% Earnedin 2009/10



% Earnedin 2010/11

KZN 39,974 26,102 65% 123,613 46,113 37%

EC 53,559 7,818 15% 97,806 37,532 38%

GP 35,674 60,488 170% 168,098 133,394 79%

WC 7,288 1,271 17% 26,038 2,549 10%

NW 8,901 2,174 24% 32,999 17,135 52%

LP 18,329 6,140 33% 55,355 23,060 42%

FS 9,073 1,956 22% 31,400 6,071 19%

NC 15,496 5,769 37% 50,399 3,965 8%

MP 13,454 2,453 18% 37,288 3,488 9%

Total 201,748 114,170 57% 622,996 273,307 44%

Municipal Performance on the Incentive: past 2

years

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MUNICIPALITIES

2009/10 Performance 2010/11 PerformanceNumber of provincial

departments

2009/10 Incentive FTE targets

2009/10Actual FTE Performance


2010/11 FTE Target

2010/11Actual FTE performance (Q1- Q3)

2010/11 % Target Reached (Q1 - Q3)

2009/10

2010/11 2011/12

KZN 10,545 9,068 86% 18,570 2,396 13% 9 13 20

EC 11,242 3,862 34% 9,876 3,383 34% 12 25 37

GP 17,973 21,392 119% 32,155 8,436 26% 6 11 13

WC 3,235 1,652 51% 6,144 1,448 24% 7 7 20

NW 1,548 1,367 88% 3,493 825 24% 6 17 23

LP 3,188 2,137 67% 5,359 1,265 24% 10 18 27

FS 2,448 711 29% 4,605 1,051 23% 4 10 24

NC 2,695 700 26% 5,058 225 4% 5 8 13

MP 2,340 441 19% 3,488 933 27% 9 17 21

Total 55,214 41,330 75% 88,748 19,962 22% 68 126 198

Municipal Performance on the Incentive: past 2 years (Cont.)

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Experience in implementing all EPWP Incentives

1. A wage subsidy 2. Expansion incentive 3. Performance based incentive

What has worked • Works well for established,

capacitated NGOs • NGOs able to fund all wages

and use other funding for operations, materials, etc

• Quick uptake where there have been unpaid volunteers

• Works well where services are in demand by society

• Wage subsidy goes into the pockets of workers via their NGOs

Where it has not worked • Small/ new NGOs struggle to

find other funding for non-wage costs

Complications experienced • Reporting & payments

procedures difficult for NGOs with limited operational capacity to manage large numbers of workers & payments

What has worked • Performing

programmes able to become more efficient, more labour intensive

• Performing implementers incentivised to expand

• Have been expanding quickly

Complications experienced

• Reporting procedures

What has worked • More provincial and municipal public bodies

participating in EPWP • General mobilisation to create jobs • Incentivising increased reporting • Performing public bodies performing better What has not worked • Small, rural munis do not have sufficient grant funding

to meaningfully participate • Labour intensity not yet improving

─ Incentive too small in some cases to change behaviour

─ For small munis, no technical capacity for labour intensive design

• Incentive not built into contracts • Incentive does not reach contractors (bottom end of

supply chain) - meaning they do not have a reason to change delivery methods

• Incentive earned is not being ploughed back into job creation

Complications experienced • 'Performance bonus' concept not easily understood • Prov/ Muni treasuries not sure how to appropriate

incentive • Small munis struggling with no base funding to

perform • Incentive not really a carrot enough to turn labour

intensity around

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Evaluation of the Incentive: past 2 yearsThe evaluation of the Incentive showed that public bodies are still

struggling:1. Firstly, just to implement their infrastructure programmes/ projects (Are there constraints

inherent in the way MIG/IGP works? What are the MIG/IGP implementation challenges?)

2. Secondly, to design and implement these programmes/ projects more labour intensively (there is a real lack of technical expertise)

In terms of technical project design and implementation, the evaluation report showed that:• Many public bodies are indicating that they still find designing projects with labour intensive

methods as an aim, a challenge • There are still perceptions that it is costly to implement EPWP• Public bodies find it difficult to integrate and align EPWP with other infrastructure policies and

processes• A more serious challenge highlighted relates to the lack of technical capacity in municipalities to

implement infrastructure projectsPublic bodies indicated they would benefit from additional technical support from National Public

Works in the following areas: • Identifying suitable projects for EPWP• Setting targets for projects• Assistance with designs and contract documentation to ensure labour intensive construction• Ensuring EPWP mainstreaming: policies and procedures • Providing advice on alternative models on EPWP: large projects /contractor development.

3. Thirdly, to then properly report this performance (in the detailed manner required).

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Evaluation of the Incentive: past 2 years

27%

20%20%

18%

9% 6%

Type of Support that Institutions need to access the Incentive Grant

Training

Reporting

Data handling

Technical support

Coordination

Budgeting

Encouraged to achieve targets,

34%

Source more funding, 11%

Improved reporting, 21%

Creating more jobs, 13%

Implement projects more

labour intensive, 13%

Implement more projects , 8%

Report off system, 5% Implement,

3%

Skills development, 3%

Behavioural changes indicated

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Measures put in place in 2010/11 to improve the drawing down of the

incentive• DPW Support to public bodies has been strengthened

─ The capacity of DPW’s Municipal Technical Support Directorate has been strengthened by the appointment of more officials to support municipalities

─ Technical support is still being provided to public bodies to implement their projects more labour intensively

─ Public bodies are being provided with support to report on EPWP - 90 data have been deployed in public bodies capturers employed are helping in this regard.

• Partnership Support─ A partnership with DBSA through the Siyenza Manje programme has been

put in place to support municipalities ─ Training of officials in municipalities in labour-intensive methods of

construction with LG-SETA is currently being rolled out─ Training through the Construction SETA for municipal officials and Vukupile

through the small contractor development programme

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Technical Support provided to Municipalities

Technical Support provided to Municipalities entails the following: •Identification of suitable projects•Setting of work opportunity targets for projects•Assisting with designs and contract documentation•Extract project training needs•Assist with procurement process•Create enabling conditions: wage rates, contractors trained et•Contract management•Reporting•Project evaluation•EPWP Mainstreaming: Municipal policies and procedures

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Proposed Revisions to Improve the Incentive Model

In order to improve the uptake of the incentive, a review of the incentive model is proposed. The revised model should:

•Take special cognisance of small and rural municipalities and other public bodies with smaller MIG/IGP allocations or limited funding, but potential to contribute to job creation

•Attempt to directly incentivise/implement increased labour intensity

•Allow for an easier flow of funds to kick start job creation

•Provide more certainty in the allocation to ease appropriation issues

•Address the issue of public bodies not earning their allocations

•Seek to have a greater oversight in the incentive being spent to further increase job creation

•Enhance ‘packaged’ technical support to public bodies, particularly small and rural municipalities

In a snapshot: ─Public bodies will receive an allocation based primarily on past performance but also taking into consideration the distribution of the poor and a special dispensation for poor municipalities in the form of a schedule 5 EPWP grant ─for which they need to plan labour intensive projects to implement, within the focus areas specified─while using existing budget allocations (MIG, etc) more effectively and efficiently to increase the access to further EPWP grant allocations.

In a snapshot: ─Public bodies will receive an allocation based primarily on past performance but also taking into consideration the distribution of the poor and a special dispensation for poor municipalities in the form of a schedule 5 EPWP grant ─for which they need to plan labour intensive projects to implement, within the focus areas specified─while using existing budget allocations (MIG, etc) more effectively and efficiently to increase the access to further EPWP grant allocations.

Model Element Current Incentive Model Proposed Improved, Simplified incentive

IncentiveAllocation

• Eligibility based on:─ Having reported in a past

year─ Having created a minimum

number of jobs in the prior year

• Eligibility based on:─ Having reported in a past year─ Implement a specific category of EPWP, with a focus on the

following areas : economic and social infrastructure tourism and cultural industries agricultural support and landcare primary healthcare

• Basis of the Incentive Allocation:─ Based on past performance─ Based on the number of jobs

that can be created from existing budget allocations

─ A zero threshold for poor municipalities - every job created will attract an allocation

─ FTE reward @ R60 per day of work

• Basis of the Incentive Allocation:─ Should still be primarily based on past performance─ Should take into consideration the potential number of jobs

that can be created from existing budget allocations─ Should also take into consideration the distribution of the

poor and unemployed─ Will include a higher allocation for those public bodies

achieving a higher labour intensity• Will create a special dispensation for poor municipalities

within the grant─ Classify a set of poor municipalities that will be provided

with a special additional allocation for planning and capacity building

─ Should also provide enhanced packaged technical support (procurement, design, planning, reporting) to these municipalities

─ Will amend the thresholds for public bodies (under review)─ Will maintain the zero threshold for poor municipalities -

every job created will attract an allocation─ FTE reward @ R60 per day of work

Conceptual basis of the Improved Incentive Model

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Model Element

Current Incentive Model Proposed Improved, Simplified incentive

Incentive Allocation

EPWP Planning

Reporting

•Method of Allocation:─Incentive Allocation is regarded as indicative only─Schedule 8 incentive is still to be earned in-year

•Planning

─Public bodies plan the number of jobs to be created from existing budget allocations

•Method of Allocation:─Incentive Allocation is regarded as certain─Schedule 5 allocation that is based on past performance

•Planning

─Planning for job creation from existing budget allocations will continue─In addition, incentive use will also be planned for, with a concentration on labour intensive projects across EPWP sectors - via a project list or business plan

•Reported EPWP performance determines the incentive earned and paid out•EPWP performance is counted against the FTE Target (based on MIG & past performance)Reporting via the EPWP MIS supported by DPW

•Reported EPWP performance only informs the incentive allocation for the following year•EPWP performance is counted against the FTE Target (based on a number of factors indicated above)•Reporting via the EPWP MIS supported by DPW

Conceptual basis of the Improved Incentive Model

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Conceptual basis of the Improved Incentive ModelModel Element

Current Incentive Model Proposed Improved, Simplified Incentive

Basis of Disbursement

•Paid based on quarterly performance (number of jobs created above the threshold)•FTE Reward = R60 per day of work created

•50% paid at the beginning of the year on approval of the public body's EPWP project list or business plan•Second payment midyear in line with:

─progress in implementing the project list or business plan─Progress in utilising existing budget allocations towards FTE target

FTE Target•Determined by:

─Applying a Threshold FTE factor to MIG/IGP to get a threshold (floor)─Applying a Performance FTE factor to MIG/IGP to get a ceiling target─Adjusting the ceiling target depending on performance of the previous year

•Performance against the final FTE target is assessed quarterly to determine the incentive amount earned and paid out

•Set a baseline MIG target ─Applying a Performance FTE factor to MIG/IGP to get a MIG target

•Set an incentive target─Set a target based on how many jobs should be created from every Rand million─Performance against the incentive target will be assessed midyear to ensure the public body is implementing its project list or business plan

•Performance against the MIG target + incentive target will be assessed annually to inform the following year's allocation

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Summary of proposed review to the Incentive

•The proposal to the EPWP Integrated incentive is to change the incentive from a Schedule 8 to a schedule 5 grant. This will help with predictability of funding to Public bodies.•The eligibility of Public bodies for the incentive grant will still depend on them having reporting to the National Department of Public Works in a Prior financial year. •The incentive allocation to Public bodies will depend on their report in the prior financial year. 50% of the allocation would be made at the beginning of the financial year. The remaining 50% will be made depending reporting by the Public bodies.•Public bodies would submit their business plans in line with their incentive allocation.•Technical Support would be made to Municipalities to implement EPWP. Focus would be given to rural municipalities.

THANK YOU!THANK YOU!

Documents

Background on EPWP