AGSA, DPME & FFC briefings; DAFF, DRDLR, CRLR & OVG 2018/19 Annual Reports & 2019/20 Quarter 1 performance; with Minister

Meeting report

Auditor-General’s report on audit findings

The Auditor-General of South Africa (AGSA) commended the Perishable Products Export Control Board (PPECB) and the Deeds Registration Trading Account on achieving clean audit outcomes.  The financial statements prepared remained a concern, as material adjustments had affected the annual financial statements (AFS) submitted for audit purposes at the Department of Agriculture, Forestry and Fisheries (DAFF), the Agricultural Research Council (ARC), the National Agricultural Marketing Council (NAMC), Onderstepoort Biological Products (OBP), the Department of Rural Development and Land Reform (DRDLR), the Agricultural Land Holding Account (ALHA) and the Ingonyama Trust Board (ITB).

The DAFF had received a qualification on the accuracy of biological assets and the ARC on property, plant and equipment, inventories, receivables for exchange transactions and revenue from rendering of services.

The ITB had received an adverse opinion with qualification on property plant and equipment, expenditure management, irregular expenditure and contingent liabilities.

There had been a reduction in auditees during the 2019 financial year, as Ncera Farms had been deregistered.

The DAFF had produced credible and reliable financial statements that were free of material misstatements, and had reported in a useful and reliable manner on performance as measured against predetermined objectives in the annual performance plan (APP). It also complied with key legislation in conducting its day-to-day operations.

The DAFF and its affiliates also produced financial statements without material misstatements and was assisted in correcting the material misstatements, but struggled in one or more areas to align performance reports to the predetermined objectives they committed to in the APPs .

Collection of debt during the debt collection period for the ARC had been concerning, as it amounted to 137 days, compared to 155 days the previous year.

The Agricultural Research Council (ARC) had operated at a deficit, and this had been the case for the prior year as well. A deficit of R22 million (2017-18: R38 million) was reported. Measures had to be implemented to address this situation to ensure sustainable service delivery and financial viability. Current liabilities exceeded current assets by R139 million (2017-18: R93 million). It might not be able to pay its creditors as payments become due, and negative operating cash flows resulted in questions about the auditee’s financial viability and its ability to continue operating optimally at its current capacity as a going concern.

The ALHA accumulative receivables amounted to R64 474 000. Management -- accounting officers/authorities and senior management -- did not respond with the required urgency to AGSA’s messages about addressing risks and improving internal controls. Management must hold staff accountable for poor performance and consequence management should include instances of non-implementation of action plans developed to address the AGSA findings.

Discussion

Ms A Steyn (DA) expressed her frustration with the continued challenges within the former Departments of Agriculture, Forestry and Forestry, and Rural Development and Land Reform, and wanted to ascertain what steps, if any, AGSA were taking to institute corrective measures, especially as it related to the various investigations. The Portfolio Committee (PC) was familiar with the challenges and needed assurances of what was being done to clean up the rot.

Every year the AGSA repeated its findings and the PC was not privy to that information, although it was available within the Departments. She further wanted to know what recommendations the AGSA could assist the PC with, in order to be of assistance to the Department.

Ms K Mahlatsi (ANC) saidt she needed some clarity about the audit outcomes and adverse opinions. She lamented that the Department in question had continued to have adverse findings for two consecutive years, and asked what the challenges were. Regarding compliance, it seemed that the Department had regressed since the last financial year, and wanted to ascertain whether some audit functions were being outsourced by the Department. She broached the issue of wasteful and fruitless expenditure, and requested an explanation on risk management within the Department and the decision-making processes. She requested AGSA to highlight what was being done to address the impact of non-compliance as so far internal controls were concerned.

Ms T Mbabama (DA) stressed that it appeared that there was a leadership vacuum in the Department, and that senior management had failed to implement consequence management. She implored the Department to be transparent and inform the PC of its challenges, which appeared to be the same issues. These challenges may relate to skills shortages, capacity issues, or the Department simply being overwhelmed by its mandate.

Mr N Capa (ANC) said his questions were directed at the Department as the relevant authority. He asked to be empowered, especially regarding the risks associated with the merger of the two Departments, which were supposed to identify risks and unify the fragmented Departments.

Ms M Tlhape (ANC) requested the AGSA to provide clarification on whether there was any effort by the Department to approve and work towards a clean audit, especially since it seemed as if the DAFF's performance had regressed. She also wanted to ascertain whether the AGSA had approved the Department's audit plan and whether it monitored compliance on the recommendations it had provided. This question was related to the lack of internal controls that seemed to dog the Department.

The inherent challenges at the Agricultural Research Council (ARC) were also broached, and Ms Thlape stressed the importance of the entity. She wanted the AGSA's opinion on what could be done to address these challenges and whether it had provided guidance on the current measures to address these challenges.

The Chairperson said he was concerned that the AGSA allowed the Department to correct their audit report before it was submitted for review. This prevented the PC from fully grasping the extent of irregularities. The PC would like to get an understanding of when matters would be turned around, as the AGSA could not continue to be tasked with interventions on issues that had become repetitive. He lamented the continued audit difficulties by DAFF and the ARC, while also highlighting the DAFF's inaccuracies when it came to its asset register. He wanted to know how the DAFF had got to a point where for the third consecutive year it faced challenges with regard to internal audits, and its failure to retain a chief financial officer (CFO).

AGSA Response

Ms Michelle Magerman, Senior Manager, AGSA, replied that the PC also had the right to monitor the recommendations imposed by the AGSA, and that her office would also avail itself to the PC for engagements on pertinent issues that were related to audited outcomes.

She added that the biological assets of DAFF required specialised intervention, so it was essential to employ an expert in this field.

With regard to rural development, she stressed that it was pertinent to assess the impact of senior leaders, and that the AGSA took cognisance of the fact that there had been a regression in the audit outcomes of this Department. Risk management was a serious challenge within the Department, and in the case of the Ingonyama Trust, serious intervention was required. Mr Indhren Perumaul would address this issue during his input.

The Agricultural Land Holding Account (ALHA) had incurred penalties due to the late payment of invoices and as a result of expenditure incurred in respect of a project, where the NAMC had acted as an agent for a project that was cancelled, without any deliverables being met. There was a need for serious consequence management implementation when it came to these specific audited outcomes.

ALHA'S financial statements, performance and annual reports, expenditure management, the status of internal control, proper record keeping and risk management posed significant risks to the performance of this organisation.

The merger of the respective departments and the risks that this posed in any organisation brought about its own challenges, and that this had to be managed in an orderly fashion, especially when old systems were merged into new ones.

She added that performance auditing was an independent auditing process that evaluated the measures instituted by management to ensure that allocated resources were procured economically and utilised efficiently and effectively. Adequate and concise information was thus key during these processes.

Performance auditing encouraged learning and change within the public sector by providing new information and drawing attention to various challenges, especially as it related to the status of records reviews, and an early warning system for accounting officers, authorities and the internal control environment within the department. Performance auditing played an important role in keeping the legislature well informed about governmental actions and the outcome of its own decisions. It increased public transparency and accountability, providing objective and reliable information on how the public service performed.

Legislation required internal auditors to report against their predetermined objectives and to submit annual performance reports for external auditing. The objective of audits of predetermined objectives was to determine whether the reported performance against auditees’ predetermined objectives in the annual performance report were useful and reliable in all material respects.

This meant that the reported performance information had to be valid, accurate and complete. This was particularly relevant as it related to the material adjustments the AGSA made, and it was in no way an action to fix financial irregularities in the Department.

She reminded the Members that since the 2005-06 financial year, the AGSA had been phasing in the auditing of predetermined objectives and the explanation to senior management within all spheres of government. This was done to highlight the importance of lending credibility to published service delivery information audited by the AGSA.

Mr Indhren Perumaul, Deputy Business Executive, AGSA, said that the Ingonyama Trust had received another adverse opinion. An adverse opinion was when financial statements contained material misstatements that were not confined to specific amounts, or the misstatements represented a substantial portion of the financial statements. In addition, there had been serious misalignment between the audit committee and the Ingonyama Board, as the board had not complied with the accountability framework. The Trust could not account for its properties, various plants and equipment, and had a dismal procurement and contract management system that showed scant regard for compliance with legislation.

The total value of all the properties that the Trust owned amounted to R24.4 billion. There was also the issue of rent collection that the Trust was entrusted with, and did not take into account the investment portfolio of the Trust as governed in terms of the Generally Recognised Accounting Practice (GRAP). During the financial year in question, the Trust had spent R326.88 million on municipal property rates, but these were not properly accounted for and had caused a disagreement. The Trust also felt that it fell outside the scope of the AGSA, a sentiment that the AGSA did not share.

Follow-up questions

Mr Capa reiterated that the Ingonyama Trust was a publicly-funded institute, and was subject to oversight and specific recommendations related on how to address the serious challenges at this institution.

Ms Steyn said that she was concerned at the lack of record keeping by entities listed by the AGSA, and commented that this was at the crux of the organisational challenges they faced. She wanted to ascertain to what extent AGSA's reach extended.

Ms N Mahlo (ANC) called on the AGSA to visit the Department in order for it to account for its actions, as it seemed that the DAFF was not complying with AGSA’s prescripts.

She cited the South African Weather Service (SAWS) as an example, and observed that if this service started giving the wrong weather information, it would lose the trust of South Africans.

The Chairperson echoed Ms Mahlo's sentiments and emphasised the importance of DAFF addressing its internal challenges.

AGSA’s response

Ms Magerman responded that when the AGSA assessed departments, it also took record keeping into account. She lamented the challenge with regard to the lack of proper record keeping in some DAFF entities.

She referred to the expanded mandate of the AGSA, and said that a central feature of the amendments was the introduction of the concept of “material irregularity,” which was intended to isolate other common errors or deficiencies so that activities that placed the public purse at risk of financial loss, were identified and pursued. A material irregularity meant any fraud, theft, breach of a fiduciary duty or non-compliance with or contravention of the law that could result in a material loss, the misuse or loss of a material public resource or substantial harm to a public sector institution or the general public. This meant that the focus of an audit would be to thoroughly assess the existence or otherwise of material irregularities in transactions or balances. This was important, as it eliminated any speculation or doubt about the nature and substance of matters leading to, say, irregular expenditure or lack of proper accounting rigour.

Once a material irregularity had been identified or was suspected, the AG may take the following actions;

• Refer a suspected material irregularity to a public body with a suitable mandate and powers --authorities with the requisite investigative capacity and skills, including the Public Protector, the Special Investigating Unit (SIU) and the police. The public body would deal with the matter within its own legal mandate and take appropriate action where necessary.
• Make recommendations in the audit report on how a material irregularity should be addressed, within a stipulated period of time. If these recommendations had not been implemented by the stipulated date, the AG may take binding remedial action, and if the irregularity involved a financial loss, issue a directive to the accounting officer or accounting authority to quantify and recover the loss from the responsible person.
• If the accounting officer or accounting authority failed to implement the remedial action, including a directive to quantify and recover a financial loss, the AG may issue a certificate of debt in the name of the relevant accounting officer or accounting authority. It was the responsibility of the relevant executive authority, such as a minister or member of a provincial executive council or municipal council, to recover the loss from the accounting officer or authority.

She added that these three steps came with many checks and balances, providing the public entity or department concerned with sufficient opportunity to fix the flagged problem before it got to the issuing of a certificate of debt. That action would be taken only if and when those charged with governance failed to act.

In essence, the primary responsibility to identify and action material irregularities still remained with the line management of the audited institution. No part of an entity’s statutory responsibilities could be transferred to the AGSA, which through these amendments provided a transparent and reliable source of evidence and monitored the proper restoration of an accountable system of financial management.

She stressed an earlier point made by Mr Perumaul that the Ingonyama Trust did not regard itself as being a public entity, let alone being covered by Public Finance Management Act (PFMA) prescripts. She called on the PC, as well as the Ministry, to intervene as the Ingonyama Trust had to comply with GRAP and the PFMA.

Fruitless and wasteful expenditure had increased over two years, and this meant that expenditure had been incurred in vain, and could have been avoided if reasonable steps had been taken. It was a sign that there had been no value for money and that when expenditure had been incurred in contravention of key legislation, prescribed processes had not been followed.

The Chairperson said that he supported the AGSA's expanded mandate. There had to be consequence management where fraud and corruption were concerned. He also wanted to know what the expanded mandate meant in the case of the Ingonyama Trust.

Follow-up questions

Ms Steyn wanted to know when the expanded mandate of the AGSA would be introduced, as the AGSA would not be able to deliver on its mandate in the absence of adequate record keeping.

Ms Mahlo also touched on the expanded mandate, and asked who monitored the AGSA in the execution of its mandate. The AGSA would have to come up with clear guidelines, and it could not always complain.

Ms Mbabama said that it was pertinent to be provided with timeframes for the implementation of the recommendations that the AGSA made.

Mr M Montwedi (EFF) said he was worried about the history of irregular expenditure at the DAFF, and the public funds that had been wasted by public servants. He wanted to know what would happen to the public servants that had incurred this irregular expenditure, especially after they had resigned from the public service.

AGSA response

Ms Magerman replied that the expanded mandate had been rolled out with effect from 1 April 2019, and that it was piloted in the departments with the highest irregular expenditures. The PC was also welcome to give inputs on the recommendations that the AGSA could make to departments, and reminded it that accounting officers were responsible for the implementation of consequence management.

She said that record keeping was a fiduciary duty and required by law. In this instance, the AGSA did not audit service delivery, but how funds had been spent to effect government service delivery outcomes.

Financial and Fiscal Commission (FFC)

The Financial and Fiscal Commission (FFC) reported that there had been a slight improvement, from 2.37% to 2.40%, in the broader economic context between 2016 and 2017 in the agriculture, forestry and fisheries sector. A year on year decline of 4.8% in agricultural contribution to the gross domestic product (GDP) had been reported for 2018, which had been driven mainly by declining production in field crops and horticultural production. Declining agricultural production and increased input costs (including fuel prices) among other things contributed to agricultural food inflation that had impacted on prices.

Food inflation remained higher than the consumer price index (CPI) over the period, with the exception of 2015.In 2016, food inflation remained higher than the CPI, and this could be attributed to the drought experienced in late 2015 and early 2016. This had affected food security.

The Department’s 2018/19 Annual Performance Plan (APP) was premised on the five-year strategic plan, with an emphasis on food security through the implementation of  the Fetsa Tlala programme aimed at assisting vulnerable households and smallholder producers to produce their own food.

Through Ilima/Letsema, households were expected to benefit from food production initiatives which included the provision of inputs such as fertilisers, seed, seedlings, breeding animals and machinery. Through the Comprehensive Agricultural Support Programme (CASP), it was aimed to provide support to subsistence, smallholder and black commercial producers for the production of grains, livestock, horticulture and aquaculture areas.

Job creation would be achieved through facilitating increased support for exports to the African continent, China and the world at large. The Land Care programme aimed to promote sustainable land and soil management practices, prevent land degradation and desertification in rural areas.

Low economic growth had had a negative effect on the attainment of departmental annual performance plans, and this had been exacerbated by drought and resulted in decreasing agricultural production in 2018/19. The slowdown in the production of field crops and horticultural products affected prices and food security and the contribution of the sector to GDP.

Key to the attainment of department’s APPs was the utilisation and performance of key conditional grants -- CASP, LandCare and Ilima/Letsema -- which had not performed well in 2018/19.

Land redistribution had peaked at 392 850ha in 2011/2012, and had consistently declined since then, with the exception of 2014/15, when there had been a marginal increase. It had declined to a mere 92 032ha in 2017/18. The average annual growth rate for the period between 2009/10 and 2017/18 reflected a negative growth of 38%.

Discussion

The Chairperson lamented the fact that the FFC had omitted the latest land redistribution figures and that the presentation covered only the 2017-18period.  The same applied to the amount of hectares of land that was available for redistribution.

Ms T Breedt (FF+) commented on the data gathered by the FFC and how this data was gathered, saying that deeper interrogation of the data was warranted. It was imperative for South Africa to have food security, and rural communities and farmers had to be assisted, especially since South Africa was in the midst of a severe drought. The Minister of DAFF thus had a great task at hand.

Ms Mbabama said that she saw no value in the presentation by the FFC, as it made no sense for the it to present on its mandate when this was already known.

Mr Montwedi noted that in 2011, the state had redistributed more land to claimants, but there seemed to be a decline in the redistribution of land. He wanted to know what the reasons for this decline were.

Mr N Masipa (DA) commented that the FFC presentation had failed to deal with specifics and the key factors that impacted on the challenges that DAFF faced in the execution of its mandate.

Ms K Mahlatsi (ANC) said the FCC’s presentation had dealt with the planning process and the Annual Performance Plan (APP) of the DAFF, and suggested that the FFC had to be part of the planning process, just like National Treasury (NT), as it appeared as if departments were “thumb-sucking” targets.

She called on the Chairperson to dismiss the FFC’s presentation, and requested that it be reworked as it was irrelevant.

Mr Capa said that land appropriation without compensation was going to happen in South Africa, and that there was no turning back.

Ms Mahlo referred to the mandate of the FFC, and said that the Constitution stipulated that provinces as well as departments were entitled to an equitable share of revenue collected nationally, and the FFC should make recommendations to Parliament in this respect. The FFC thus had a duty to empower the PC, and the presentation did not speak to what had been requested from the entity.

She stressed that countries committed themselves to expenditure of 10% on agriculture, and reports commissioned by the New Partnership for Africa’s Development (NEPAD), as well as the United Nations (UN), all pointed towards the catalytic effect that agriculture had on economic growth, development and employment creation. South Africa should thus invest more in this sector.

The Chairperson also took issue with the lack of detail in the FCC’s presentation, and pointed out that the FFC had to go back to the drawing board and rework its presentation and present it to the PC by no later than Friday 11 October 2019.

He then requested Ms Thoko Didiza, Minister of Agriculture, Land Reform and Rural Development, to provide a Ministerial response to the FFC’s presentation.

Minister’s response

Minister Didiza stated that she was worried about the FFC’s presentation, as the analysis it provided had been insufficient and lacked depth. It failed to identify shifting trends, no contextual basis was provided and the level of support by government in the form of subsidies had been omitted. Many issues related to rural development and land reform had been missed, and she wanted to ascertain from the FFC what actions it had taken to factor in issues related to rural development and land reform. Land reform by its very nature was a disruptive process, and the FFC had failed to take this into account as well.

The presentation also had not referred to the various global trading regimes, like the World Trade Organisation (WTO) and the Africa Growth and Opportunity Act (AGOA) to which South Africa was a signatory. She cited South Africa’s challenge with the influx of chicken from Brazil, the United States and Europe.  

The presentation was also unclear on CASP, as the programme was aimed at the provision of post- settlement support to targeted beneficiaries of land reform and other producers who had acquired land through private means. It was thus pertinent to be provided with a clear understanding of the FFC’s interventions and how it monitored implementation of its recommendations.

The Chairperson thanked the Minister for her response and called upon the FFC officials to go back to the drawing board, as they had incurred fruitless and wasteful expenditure by travelling to Cape Town, only to present a meaningless presentation. He reiterated that the FFC would be given until 11 October 2019 to prepare a succinct and relevant presentation.

Department of Planning, Monitoring and Evaluation (DPME)

The DPME reported that 39 indicators had been planned for implementation, of which only 18 (46%) had been achieved.  19 (49%) had not been achieved and 2 (5%) were not reported against the medium term strategic framework (MTSF) 2014-2019 period.

The land acquisition target of two million hectares of strategically located land for land reform by 2019 was not met, as only 1 013 028 hectares had been acquired. The development of one million hectares of under-utilised land in communal areas and land reform projects for production had seen only 763 715 ha being cultivated. The target was not met. However, against the MTSF target of 80 000 smallholder producers to be supported, a total of 251 352 smallholder producers had been supported, so the target was exceeded. A total of 10 425 new enterprises were supported, against the target of 1 620, so the target was exceeded by more than six times.

A total of 10 760 rural enterprises and 1 535 co-operatives were supported -- more than five times the target of 2 158 -- through various initiatives by the Department of Cooperative Governance and Traditional Affairs (COGTA), the Department of Tourism, SABMiller, ZZ2, Rural Development and the Cooperative Incentive Scheme. The establishment of a total of 649 new cooperatives and industries had been supported. The target had been one per district municipality, or 44, so the target was exceeded nearly 15-fold. Against the MTSF target of 4.3 million people vulnerable to hunger, the percentage of persons that experienced hunger had decreased from 13.2% in 2014, to 11.3% in 2018.

Discussion

Ms Mahlo said she did not learn much from the presentation as it lacked substantive information on the monitoring and evaluation aspect of the DAFF. She also wanted to know how the DPME had arrived at the achievements it listed in its annual report.

The Chairperson echoed this sentiment, especially as it related to the target of one million hectares of redistributed land it had set for itself. He called on the DPME to provide succinct information.

Ms Mahlatsi took issue with the insufficient information provided by the DPME in their presentation, and wanted to ascertain what prescripts had been provided to the DPME on what was required. She had expected a broad analysis on the MTSF, as it set out the actions and targets the government wanted to achieve. The MTSF had to be read in conjunction with any remedial action recommended by the DPME.

She lamented the capacity challenges within the Valuer-General’s office, and asked why this was not included in the DPME’s report, as the entity was struggling with just 17 officials. This was indicative that not much effort had been put into the report, and she called on the Chairperson to dismiss the DPME’s officials as their presentation contained nothing new.

Ms Steyn wanted to know who monitored the DPME’s performance, as she had similar concerns as both the Chairperson and Ms Mahlatsi. She decried the fact that the DPME claimed there was a functional land claims commission, and asked who provided the information to it. She also wanted to ascertain how the DPME kept track with name changes of the various programmes, as it appeared that old policies were simply being rehashed under new terminologies.

Mr Montwedi wanted to know how the DPME had arrived at its conclusions on the indicators listed on slide 7 of its presentation, and whether there had been any consequence management. What was the rationale for the continued support of only certain programmes, as it seemed that government was creating a cycle of dependency in this regard?

The Chairperson indicated that there had a request by the PC to the DPME to provide a cumulative report on the 2014-2019 targets. However, it was reporting on 2013-2014 targets.

DPME response

Mr Mdlalose replied that the National Development (NDP) set the targets monitored by the DPME and that this served as the basis on how it arrived at its findings.

Regarding who was monitoring the DPME, he said it was subject to prescripts by the Department of Public Service and Administration (DPSA), and that any outcomes monitored by the DPME were subject to the internal controls of government departments.

Some of the intended deliverables had been unpacked, and this indicated which projects had to be monitored and funded.

The Chairperson said that it seemed as if old phrases had been rehashed, and asked the DPME to prepare a detailed presentation.

Department of Agriculture, Fisheries and Forestry (DAFF): Annual Report

The Department of Agriculture, Forestry and Fisheries (DAFF) said the strategic risk register could not be reviewed due to capacity constraints. The process of appointing a service provider to assist with the full implementation of the risk management strategy was under way. The register would identify risks and the root causes of internal challenges. Two animal disease risk surveillances were conducted, for foot and mouth disease (FMD) and Peste des Petits Ruminants (PPR).

181 Compulsory Community Service (CCS) veterinarians had been deployed to resource poor communities. 163 graduates had completed their studies during 2018. Two had passed the South African Veterinary Council (SAVC) examination in 2016 ,12 had passed their SAVC examination in 2017 and four CCS veterinarians from the 2017 University of Pretoria (UP) group had been deployed.

Annual performance monitoring report on agricultural land rehabilitation interventions had been compiled. A total of 45 479 ha of agricultural land had been rehabilitated, and 16 000 ha was planned to be rehabilitated.

The livestock industry experienced an occasional spread of diseases that threatened its productivity and profitability. In June 2018, an outbreak of African Swine Fever (ASF) was reported in the Springbok area of the Northern Cape Province. This came after a movement of pigs from Kimberley. This outbreak fell outside of the ASF-controlled areas of the country. The provincial veterinary services conducted investigations and put control measures in place to prevent further outbreaks.

Agricultural production, health and food safety expenditure of R8.991 million in respect of the Primary Animal Health Care Programme was not incurred due to the fact that the equipment that was imported from overseas could not be delivered before the end of the financial year.

Discussion

Mr Capa commented that he had noticed that several of DAFF's financial allocations had been delayed, and he wanted an explanation as to why it had not processed departmental approvals. In addition, he wanted to know whether this was due to human error, as it seemed deliberate and delinquent. He wanted to ascertain how this issue was going to be resolved.

Ms Steyn asked for clarity on animal health scares in South Africa, like foot and mouth disease, bird flu and other health scares and the reasons for the continued challenges with regard to animal health scares. She added that she had it on good authority that the DAFF struggled to pay overtime remuneration to its animal health technicians, and that testing at the Onderstepoort Veterinary Institute had been stalled as a result of delayed payments to technicians. She also wanted to know what the status of the export ban on South African wool was.

The DAFF had reported that it had a 72% achievement rate, and she wanted to know how it had arrived at this conclusion. Why had it not spent its entire drought budget, as many farmers were in urgent need of assistance? She commended Minister Didiza for accompanying Deputy President Mabuza to drought stricken areas, and questioned why the National Treasury was still waiting on documents from the DAFF related to the last drought that South Africa had experienced.

She said it was problematic that the DAFF made use of Google maps to map its forests, and that it was not in position to fully account for its forestry asset register.

She further broached the matter of the Special Investigating Unit (SIU) investigation into the CASP funding, and wanted to ascertain from the DAFF what its role in the investigation was.

She was adamant that the PC could not just believe everything it was told by the DAFF, and said there was a need for verification by the PC about the details it had been given.

Ms Mbambana commented that the scenario painted by the DAFF seemed very rosy, but she was worried about South Africa’s food security and agrarian reform. The DAFF had made mention of an animal risk assessment and in relation to this, she wanted to be provided with an explanation on what was meant by this and why the DAFF’s annual report was not approved.

She expected an explanation on the allocation of fishery licences to cooperatives, as well as DAFF’s role in identifying internal weaknesses and what it was doing to correct these weaknesses.

She touched on the transformation of the work force, and wanted to ascertain what the Department meant by transformation.

Ms Breedt recalled her experiences in the Free State, and said that even though a department had met its targets, it did not necessarily translate into service delivery. She wanted to know whether the DAFF had an understanding of what was happening on the ground.

She also echoed Ms Steyn’s sentiments about the severe drought affecting certain parts of South Africa, and wanted to know what was being done to assist farmers.

The ageing staff component of the DAFF was also highlighted, especially in the forestry section, and urged it to ensure that it attracted more young people. She also highlighted the importance of consequence management in the DAFF.

Ms Mahlatsi referred to the government's policy of conditional grants, and requested clarity on why provinces had failed to spend their conditional grants. Why had only two provinces listed by DAFF in its presentation seemed to benefit from government support? She also wanted to be briefed on how the DAFF intended to secure food security by 2030.

Ms B Tshwete (ANC) wanted to know whether the DAFF had a risk management strategy in place. It seemed as if it continued to make the same mistakes year in and year out, and that government officials did whatever they wanted. She castigated the Department for presenting annual plans that covered previous years, and asked whether this meant that the same annual plan was relevant for the current financial year.

DAFF’s response

The DAFF Acting CFO assured Ms Steyn that the DAFF knew the extent of its forest inventory and that South Africa’s “biological assets” totalled about R850 million. The inventory of South African forestry assets took into account age, density and the quality of trees.

He was currently working with an internal auditing team comprising five officials that were assessing the organisational structure. This team would then make recommendations.

Mr Mike Mlengana, Director-General (DG): DAFF, said that the land question and its productive use would need a meaningful conversation with land owners, be they farmers, companies or trusts. There needed to be genuine deliberations on transforming this sector. Historically, black South Africans had been excluded from meaningful participation in the agricultural economy. The food value chain remained highly concentrated amongst a few players. This was hardly the basis for building a sustained agriculture economy that served all South Africans. DAFF needed to work together to open up the sector, create opportunities for the historically disadvantaged groups, and make a concerted effort in growing the sector on an inclusive basis.

The DAFF needed to ensure that in the reorganisation of the new department that the requisite skills were in place. Strengthening the institutions was critical for service delivery purposes, just as ethical conduct was important when utilising public resources for the development of citizens. It was for these reasons that the DAFF was committed to finalising those investigations into activities highlighted as criminal and negligent.

Agricultural production linked to market access would enable the DAFF to make a contribution to the economy as expected. The opening up of markets in countries such as the Republic of China for beef and fruit were just but one example of the growth opportunities that were available.

Mr Joe Kgobokoe, Deputy Director General (DDG): Policy, Planning, Monitoring & Evaluation, DAFF, said that the Department had also re-orientated its focus by prioritising bio security in order to mitigate risks of animal and plant disease. It would continue to ensure budget support towards stepping up surveillance of the foot and mouth diseases (FMD) in red line zone which cuts across three provinces, Limpopo, Mpumalanga and Kwazulu-Natal. The monitoring capacity as it related to the transfer of funds such as the CASP to provinces, would be enhanced.

He added that various instruments that sought to support developing farmers, which in large measure were grants for support in infrastructure such as CASP and land development, currently resided with rural development.

In order to sustain South Africa’s bio security in the livestock industry, the DAFF would continue to recruit veterinary doctors and animal health specialists. It would also work with the provinces to ensure that dipping services and other veterinary services were undertaken at scale. During this financial year, Onderstepoort Biological Products (OBP) would commence with the upgrading of the facility to ensure that vaccine production was undertaken within the prescribed international standards. In order to sustain the efficiency and expansion of these state entities, DAFF urged provincial governments -- in particular the Departments of Agriculture -- to procure their animal vaccine products from OBP.

He said the commercialisation of black farmers remained an important objective in South Africa, and to date 463 farmers had been assisted. Better policy instruments would be developed in order to articulate what form of support government could provide. The DAFF had various instruments that sought to support developing farmers. These were in large measure grants for support in infrastructure, such as CASP and land development, which was currently with rural development.

South Africa had performed particularly well on food security, despite the continuing drought. During the drought, the country had managed to produce half of its requirements. Among South Africa’s strengths were its food safety net programmes. These were public initiatives that protected the poor from food-related shocks. Other strengths include nutritional standards, which included national nutrition plans, dietary guidelines and nutritional monitoring.

The Chairperson asked Minister Didiza to provide a ministerial response.

Minister’s response

Minister Didiza said the first protocol she had signed as a minister had been in May 2000. This had been a major boost to South Africa’s economy, given that China was the largest consuming market for South African beef and related products. The Chinese did not give an open scope for products that could be brought into the Chinese market, as China preferred negotiating per commodity.

Due to the outbreak of FMD in January this year, South Africa had lost its status recognised by the World Organisation for Animal Health (OIE), as a FMD-free zone. Many countries, including China, had no choice but to ban imports of cloven-hoofed animals and products from South Africa.

The ban was still in force in limited affected areas in Limpopo, Ehlanzeni in Mpumalanga, and Umkhanyakude in KZN. This had resulted in a serious loss to South Africa’s agricultural industry, and President Ramaphosa had made a special request to China to allow it to resume exports of beef, animal skins and wool to China as soon as possible.

China’s decision to lift the ban, despite the fact that the OIE had not restored South Africa’s status as an FMD-free zone, sent a message to the international community and was a challenge to the OIE to speed up the procedure to resume South Africa’s status, and had encouraged other countries to resume beef imports. In May, China took a decision to lift the ban on imports of wool and animal skins, and in June it sent an expert team to South Africa to study FMD. The Chinese delegation visited 100 abattoirs, but only three were verified as safe and meeting Chinese standards. The same applied to feed lots. One of the abattoirs had been disregarded, as it slaughtered pigs and beef at the same facility.

The Minister added that her Department would strengthen monitoring and evaluation of the comprehensive agricultural support programme in order to ensure that there were no slippages. Skills development in agriculture was critical. She added that the DAFF needed a deliberate strategy for youth and women’s development in agriculture, building on initiatives that had been undertaken already.

In addition, the DAFF had a responsibility to revitalise restituted land back to production, as well as support farmers settled on agricultural state land and those in communal areas who had acquitted themselves as farmers, even where land scarcity remained a challenge.

The Minister said that all spheres of government had to take responsibility for the implementation of drought policies, but disaster management was a competency of the Department of Cooperative Governance and Traditional Affairs (COGTA). The DAFF had been working closely with the Northern Cape on the current drought affecting the region. Before a drought could be declared as a national disaster or emergency, COGTA would have to be convinced through a thorough analysis of information provided to them by affected provincial departments and their national counterparts. The Northern Cape Departments of Agriculture (NCDA) and the Northern Cape Department of Cooperative Governance and Traditional Affairs (NCCOGTA) had met with COGTA without having liaised with the DAFF, as prescribed by COGTA.

During discussions with the NCDA, the DAFF had wanted to know why the Northern Cape had been saying that it had been experiencing a drought for six years. Nevertheless, once all relevant stakeholders had come to an agreement, the DAFF would than go to NT with a request for funding. At the end, the DAFF confirmed that there had been a drought. The R 230 million allocated for drought relief came from COGTA and was not a disbursement from DAFF. In this instance, the DAFF played a monitoring role and assisted provinces with technical expertise. The fact that a province may pronounce that it might be suffering from a drought, did not actually mean that an actual drought existed. In addition, the DAFF advised that provinces should factor climate change into their planning as drought was now a permanent climatic factor in South Africa. Provinces were also advised to utilise their CASP allocations for drought relief.

There had been a dynamic in 2017-2018, when the DG was suspended, and that process did have certain consequences for the governance processes of DAFF. When the DG returned, the Executive Authority (Minister) had retained the accounting delegation for the DAFF. The DG thus did not have the delegation to do the work that had to be done, as some of the operational issues had been administered from the Minister’s office.

She addressed Ms Steyn’s questioned on the internal DAFF challenges and recalled the 2017 suspension of the DG and stated that it was going to take time to turn things around, as the reality had an impact on the functionality of the structure.

She recalled that when she was appointed as Minister of the DAFF, she had been told there was an agreement between the ministry and labour for a moratorium on disciplinary matters. This had been unacceptable, and the moratorium was reversed. The challenges experienced at the DAFF were thus related to the governance, organisation and accountability that had to be addressed.

The Chairperson said he hoped that everything the Minister had highlighted would be corrected, as the PC wanted to see a functioning DAFF.

He touched on time management and requested the three remaining entities-- the Department of
Rural Development and Land Reform (DRDLR), the Commission on Restitution of Land Rights (CRLR) and the Office of the Valuer-General (OVG) -- to be cognisant of the time, and proposed that all presentations be presented in succession, with questions allowed afterwards.

Department of Rural Development and Land Reform (DRDLR)

Mr Mdu Shabane, Director General: DRDLR, said his Department had submitted three sets of reports, each one of which had been divided into various categories. The Acting Chief Operations Officer (COO) would address the overall performance of the Department, and the Chief Financial Officer would address the financial matters.

He said he would like to make a declaration -- and took full responsibility for what he was about to inform the PC on. The pack of documents that contained the annual report omitted the overview of the internal audit committee findings and the implementation thereof. The updated report was available, and with the Committee’s concurrence, he requested that the DRDLR be allowed to present the report on 9 October. The report was outdated and had been overtaken by events, and certain things had not be done. Some of the measures were also outdated in the sense that the new Minister had given an instruction that these measured had to be dropped.

The Chairperson replied that any report submitted to Parliament should be accurate and reflect the realities on the ground. He asked Members to comment.

Ms Mahlo suggested that the DG be given until 9 October for the relevant information on the internal audit to be included. She suggested that the DG and his team should be the last presenters for the day.

Ms Mbabama added that she was confused about what the DG proposed. She felt that the PC had to be appraised on the other matters, and that the internal audit findings could be discussed on the 9th.

Ms Steyn had reservations about the relevance of the annual report that had been provided, as the foreword had been written by the previous Minister, yet it spoke of future programmes. She found this challenging, as the financial year had ended on 31 March 2019, and echoed other Members’ sentiments that an updated and accurate report had to be submitted. When she read the report, it seemed as if the last six months had not happened, but this did not preclude the DG from presenting on other matters contained in the report.

Ms Thlape agreed with Ms Steyn that it was important to work with accurate information.

The Chairperson made a ruling that the DG would be allowed to formulate a presentation that included all the relevant information, as the PC had to compile and adopt a report for tabling before the National Assembly. The DG was given until 9 October to rectify the necessary omissions.

Ms Nomonde Mnukwa, Acting COO, DRDLR, said the Department had recorded a 73% organisational performance for the 2018/19 financial year, and 69% overall for the five-year 2014/19 MTSF period. It had achieved 96% of its target to pay all invoices within 30 days of receipt by the Department and its entities. The reason for this had been that when NT had closed the financial year; it had also closed its systems, and that had made it difficult to load information. This had led to variations, with invoices submitted to different line function units. It had obtained an unqualified audit.

DRDLR also set a target of 20 reviews of district rural development plans, and these targets had been met. Another target was to accurately capture deeds registrations, and to date 936 708 out of 943 969 had been achieved. There had been challenges with poor quality documents submitted by conveyancers, and some had been withdrawn, which was the reason for the variance.

The Department had also set a target of 95% for deeds that would be made available within seven days from lodgement for execution, and had managed to secure a 93% success rate. The reasons for the variance were the major planned shutdown by the State Information Technology Agency (SITA) that affected systems, and power outages, which had resulted in certain documents not being able to be recovered. It was also envisaged that 195 maps of the national map series would be produced, and 223 maps had been achieved. Some of the maps had lacked details which had to be added, and this had influenced the variance.

The Department had also envisaged that it would take 14 days to process registrable diagrams, sectional plans, and general plans. The target had not been met, as it took an average of 16 days as a result of internal capacity challenges and inadequate information submitted by private conveyancers.

A target of 80 infrastructure projects (agro parks) had been set, and 144 rural enterprises had been achieved. The reason for the variance was that the financial years had overlapped.

On skills development in rural areas, the Department had set a target of 6 864 people to be placed and as a result of interventions by rural disaster management, 8 589 people had been placed. 81 000 hectares had been set as a target for land reform, and 85 324 hectares had been achieved, largely as a result of the many offers that had been accepted in the North West Province.

Ms Rendani Sadiki, CFO: DRDLR said expenditure had increased from R 9.5 billion to R 10.3 billion, an annual increase of 2%. The breakdown was 20% for salaries, 16.4% for goods and services, 6.2% for capital assets, and 57.2% for service delivery outcomes such as grants.

During 2015/16, unspent funds had been mainly due to delays experienced in rural development projects, and in 2016/17 unspent funds were due to vacant posts. In 2017/18 and 2018/19, under-spending was related to vacant posts and delays experienced in the commencement of a new office building construction.

A total of 31 496 hectares had been acquired, and eight smallholder farmer beneficiaries had been allocated land. Seventy-one land claims were finalised, with 59 claims settled. Most of the expenditure related to grants and subsidies had gone to rural development, restitution and land reform.

DRDLR had 63 audit findings during the 2018/19 statutory audit. 16 of them were repeat findings from prior years, and 24 of the 63 had been resolved. Management was in the process of developing a management action plan to address the root causes. Corrective measures included prioritising and fast tracking the implementation of rural development projects; the recruitment processes; and a bilateral meeting between the Department’s Minister and the Minister of Finance to approve a concurrence letter to start with construction of the new office building.

Commission on Restitution of Land Rights (CRLR)

Ms Nomfundo Ntloko-Gobodo, Chief Land Claims Commissioner: CRLR, said the entity existed to provide equitable redress to victims of racially motivated land dispossession, in line with the provisions of the Restitution of Land Rights Act, 1994 (Act No. 22 of 1994). The LAMOSA 2 judgment was handed down on 29 March 2019, and was a unanimous judgment that dismissed the application for an extension to the 24 months given in the 2016 judgment. The CRLR was thus prohibited from processing any new order claims until it had settled or referred all old order claims to the Lands Claim Commission (LCC). The Chief Land Claims Commissioner should file a report with the LCC at six monthly intervals, setting out the number of outstanding old order claims, how this would be processed, and the anticipated date of completion.

During the period under review, the CRLR had managed to settle 502 claims, finalised 995, and 140 phased projects had been approved. Two out of three targets -- finalised and phased projects approved -- had exceeded the original planned targets for the 2018/19 financial year.

Office of the Valuer-General (OVG)

Mr Thapelo Motsoeneng, Acting COO: OVG, provided the Committee with details of the OVG’s performance information, its financial performance, audit outcomes, audit risks and the management report.

The Land Restitution programme targets were not met due to the fact that the OVG organogram that was determined by the Valuer-General in terms of the Property Valuation Act had not been implemented. This implied that the OVG was not capacitated to meet this target, even though it had believed it would secure the requisite capacity when the target was set. During the fourth quarter, the OVG also played a role in negotiations with land owners who had rejected DRDLR offers based on OVG valuations. This had removed resources from finalising further valuations.

The annual financial statements had been prepared in the expectation that the entity would continue to operate as a going concern for at least the next 12 months. Management had made and disclosed estimates and assumptions that had affected the amounts presented in the annual financial statements and related disclosures.  

The OVG had 13 audit findings during the 2018/19 statutory audit. It had tabled an APP for the 2018/19 financial year, and as a result had been audited on performance information for the first time

The meeting adjourned.