DAFF & ARC 2019/20 Quarter 3 & 4 performance; with Minister

Meeting report

DALRRD Quarterly performance report

Mr Mike Mlengana, Director-General (DG), and Mr Mokutule Kgobokoe, Deputy Director-General (DDG), Department of Agriculture, Land Reform and Rural Development (DALRRD), briefed the Committee on the validated performance of the Department for the third quarter of 2019/20. The presentation reflected on performance against planned deliverables for the period from October 2019 to December 2019, as reflected in Part B of the Annual Performance Plan for 2019/20.

The impact of the COVID–19 national state of disaster and the nationwide lockdown on the government‘s non-financial performance reporting had resulted in a submission to the Department of Planning, Monitoring and Evaluation (DPME) of the third and fourth quarter validated preliminary reports.

All 2019/20 targets had been planned and implemented to impact service delivery, as captured by Departmental strategic goals and objectives..

The quarterly performance presented had contributed to service delivery through:

• Enhanced production, employment, and economic growth of the sector;
• The creation of an enabling environment to attain food security and sector transformation; and
• Sustainable use of natural resources in the sector. 

These had been achieved mainly by:

• Effectively managing bio-security and related sector risks;
• Supporting market access and agro processing;
• Coordinating government food security initiatives; and
• Strengthening the interrelation with stakeholders.

An achievement of 71% was reported, as a result of attaining 36 out of 51 planned targets.

The third quarter had been a period in which the government’s planning cycle was at an advanced and critical stage. The Department was therefore engaged in series of planning meetings internally and with the DPME, working towards the finalisation of the 2020/21 annual performance plan (APP) for the DALRRD.

The planned review of transversal indicators for the next Medium Term Strategic Framework (MTSF) had been discussed intensively, with the intention that the review sessions would transpire in the fourth quarter. The actual sessions were eventually halted in fourth quarter due to the Covid-19 pandemic and the nationwide lock down.

The process of data collection for a producer/farmer register in all provinces had been intensified during the period under review.

Minister’s overview

The Minister of Agriculture, Land Reform and Rural Development, Ms Thoko Didiza, thanked the Chairperson and the Committee for the opportunity to present the former Department of Agriculture, Fisheries and Forestry’s (DAFF’s) third and fourth quarter reports. She would not be at the meeting for long as she had to attend a Cabinet meeting. She commented that it was imperative to brief Parliament and account to the Portfolio Committee on the work undertaken for the nation. The former DAFF had not achieved certain targets, yet overall it had tried to meet all the set targets.

During the period under review, South Africa had experienced a drought that had affected the majority of South Africa’s nine provinces. The DAFF had engaged the Department of Cooperative Governance and Traditional Affairs (COGTA) on the drought situation. This engagement had taken some time, as some provinces had failed to report on how they had spent the funds allocated for drought relief.

The DAFF had been able to secure R131 million for drought relief, from which the provinces could draw funds, subject to the approval of their business plans. During the intervening period, the provinces were supposed to provide the relevant information, but the lockdown had put a stop to the process. Some provinces could thus not submit their business plans.

The DAFF had negotiated with COGTA to ensure that the allocated funds were not lost. After the negotiations, provinces were encouraged to submit their business plans. All seven affected provinces had then managed to submit their business plans. A follow-up meeting with COGTA had been scheduled to discuss the disbursement of the funds.

The Minister recalled that Limpopo had recently experienced an outbreak of Foot and Mouth Disease (FMD) in Limpopo. Thus far, 19 deep tanks had been disinfected and the area was being monitored for traces of the disease.

Limpopo had indicated that the provincial government did not have the necessary budget to implement disease surveillance. The national department was exploring various avenues to assist Limpopo.

In Bushbuckridge, there had also been instances of FMD, with 11 deep tanks disinfected. Containment had been done, as well as vaccinations. The Minister was at pains to explain that according to the DAFF, the disease had been brought under control. She added that the disease would have a negative effect on South Africa’s trade with some countries, as several of South Africa’s trade partners monitored the disease management and surveillance of countries.

She stressed that should Limpopo and parts of Mpumalanga not be able to manage the outbreak, South Africa’s FMD status would be affected internationally. Meetings were also held with the Eastern Cape on that province’s African Swine Flu (ASF) outbreak, and the province had reported success in stemming the spread of ASF. The Eastern Cape attributed the success to the containment work conducted and the public awareness campaigns. The Free State province had also indicated that they had managed to close the affected areas and that all cases had been dealt with.

Regarding South Africa’s responsibilities in Africa, the Minister said that African Agricultural Ministers met on 16 April to look at the impact of Covid-19 on food security in the continent. The Minister had agreed to establish a task force to look at the detailed work African countries had done to ensure food security. An additional meeting of trade and finance ministers was also planned for July to discuss the matter.

The Minister said that the Forestry and Fisheries units had subsequently moved to the Department of the Environment. The report that would be presented to the Committee would reflect expenditure and performance for the third and fourth quarters. The official transfer of these units had occurred on 31 March.

Discussion

Ms M Tlhape (ANC) recalled that during the presentation it had been mentioned that by 2021, the Department of Monitoring and Evaluation would not allow Departments to present preliminary reports. Departments would be allowed to present only validated reports. She also wanted to know what would happen to the fourth quarter report. Would it be validated?

On transversal indicators, she noted that during a previous engagement, the Department had already presented the strategic plan for the next six years. She wanted to know whether any changes had been made to these transversal indicators, and whether they had been included in the strategic plan.

She called on the Department to address all information technology (IT) related issues. She failed to understand how it had been able to operate in the absence of reliable software.

Ms Thlape also asked to be apprised on the compilation of the farmers’ register. She wanted to know about the target the Department had set for the register.

She decried South Africa’s disease surveillance, and questioned why the Department had failed to detect the most recent outbreak of African Swine Flu. How would these lapses be addressed? She added that the culling of animals as a result of African Swine Flu had led to economic distress for affected small scale farmers. Did the Department have any measures in place to assist these farmers?

Mr N Capa (ANC) commented that the human resources (HR) figures presented by the Department had provided comfort. He wanted to ascertain whether these HR ratios had been planned.

Ms T Breedt (FF+) thanked Minister Didiza for the concise overview. She said the Minister had covered all the relevant topics that she was interested in.

She asked the Department to inform the Committee on the seven provinces that had applied for drought relief, and how these funds would be allocated amongst the seven provinces. She had been told that the Western Cape would receive R25 million. She also requested the Department to provide feedback on when the funds would be disbursed, as farmers were in dire need of financial assistance.

She also wanted to know the following;

• Had the Department worked with the Department of Trade and Industry (Dti) on mitigating the trade risks associated with African Swine Flu?
• The timeframe for the risk management strategy;
• 60 agro-processing entrepreneurs had been trained by the Department. What were they trained in, and would they be assisted to start their own businesses?

Ms T Mbabama (DA) recalled that R50 million had been budgeted to monitor the prevalence of African Swine Flu and FMD in South Africa, yet only R1.2 million had been spent. She expressed her dismay at the under-spending. She also asked to be briefed on the Department’s Agri-Black Economic Empowerment (BEE) Fund and the Agri-BEE Sector Code.

Mr M Montwedi (EFF) expressed his concern with Minister Didiza’s comments about the R131 million disbursement towards drought mitigation. He had been in contact with several farmers in the Northern Cape, especially from the Richtersveld area. These farmers were in dire straits and had never received any form of government assistance. A letter had been sent to Minister Didiza, but no feedback had been received.

He lamented the fact that the majority of Northern Cape farmers had not been approved for emergency Covid-10 funding. This exacerbated the problem for Northern Cape farmers. He asked whether it was true that farmers had been given R30 vouchers.

He also expressed his dismay at the tussle between the Department and the Agriculture Research Council (ARC).

Ms N Mahlo (ANC) asked whether the Department provided any support to veterinary students who failed their exams. She also wanted to know whether the Department played any role in climate mitigation.

Ms D Mahlatsi (ANC) asked the DG to explain what the Department’s attitude towards consequence management was. She also wanted to ascertain whether there was a correlation between management’s performance versus the Department’s financial performance. She was adamant that spending 100% of an allocation did not necessarily translate into sound performance. She asked the Department to explain whether its vacant posts were funded or unfunded.

Mr R Cebekhulu (IFP) said that the Department had also mentioned that communal land would be improved, and wanted to know which provinces had benefited from the communal land improvement programme.

Ms S Mbatha (ANC) asked whether the Department had a disaster management plan in place. She expressed worry at the rising influence of climate change on agriculture, and the most recent Covid-19 impact on production.

She also called on the Department and the ARC to resolve all outstanding issues.

DALRRD’s response

Mr Kgobokoe said that the Department of Monitoring and Evaluation had issued guidelines to the effect that that the current system of preliminary and validated reporting would be scrapped. Instead, Department would be allowed to report only when the report had been validated.

The farmers’ register was at an advanced stage. When the Covid-19 pandemic hit South Africa, the Department had already moved at lightning speed. To date, 80 000 farmers had been registered. The database was at the national office, and Members were more than welcome to come and view the register. The target that had been set was 135 000 farmers. Since the country had moved to lockdown Level 3, the Department had urged the relevant extension heads to re-start work on the farmers’ register under the strictest of health safety measures.

Ms Priscilla Sehoole, Chief Information Officer (DALRRD) responded on ICT and the risk management associated therewith, and said that:

• The ICT system in question related to an in-house system that the Department wanted to develop for invoice tracking;
• The Department conducted benchmarking activities and engaged with sister departments;
• It had received a demonstration from the then Department of Rural Development and Land Reform (DRDLR);
• The invoice tracking system of the  DRDLR seemed appropriate and effective;
• The DRDLR had then merged with Agriculture;
• The invoice tracking system had then become the property of the DALRRD;
• The invoice-tracking system was currently in use.

She added that vacancies could not be filled as a result of the moratorium that had been placed on hiring new staff. The government was in the process of reducing the size of most departments and as such, the Department would look at the pool of officials that were already in the system.

Mr Ramasudu referred to biosecurity surveillance, and explained that the Department had a framework in place that outlined the diseases that had to be surveyed for in a particular year.  This survey indicated who must do what and when. The ARC conducted all the tests on behalf of government. After the tests had been conducted, the Department compiled a surveillance programme.

He was adamant that the Department did have a plan in place to deal with any biosecurity threats.

He added that since the emergence of Covid-19, questions had been posed around the impact of wild game and zoological diseases on biosecurity. He reassured Members that South Africa stood ready to identify these biosecurity threats.

On the culling of animals, he explained that the Animal Diseases Act (ADA) prescribed what should happen in the event of animal diseases taking hold.

In the case of African Swine Flu, once the animal had been affected, that animal would die. The Department saw this as a natural occurrence and so instead of compensation, the Department may offer to restock the farmer. There were no provisions in the ADA for compensation, as no animal had been killed. The only way to contain any animal diseases was to apply strict control measures.

On drought mitigation and the Richtersveld, he said that there had been a response in terms of a Ministerial intervention.

He told the Committee that the following seven provinces had received drought relief:

• Northern Cape   R 36 million
• Eastern Cape    R 35 million
• Western Cape   R25 million
• North West        R8 million
• Limpopo            R18.5 million
• Mpumalanga     R12.5 million
• Kwazulu-Natal  R5 million

Gauteng and the Free State had not received any allocations.

He pleaded ignorance when it came to the R30 vouchers that Mr Montwedi mentioned. He asked Mr Montwedi to provide more information so that he could do a follow-up.

On student support, he said that there was not much that the Department could do once students had failed their veterinary exams. Instead, it could ensure enough support for students.

ARC Audit Findings/Improvement Report

Mr Shadrack Moephuli, Chief Executive Officer (CEO): Agricultural Research Council (ARC), Ms Maureen Manyama, CFO, briefed the Committee on the ARC’s audit improvement plan.

The Committee was informed that the ARC had received another qualified audit opinion for the third consecutive year. Although the number of findings had been reduced, the remaining findings had impacted negatively on its performance.

The following anomalies were highlighted;

• Lack of compliance with procurement and contract management;
• Revenue;
• Trade and other payables;
• Trade and other receivables;
• PPE;
• Biological assets;
• Uncorrected misstatements.

To mitigate the deficiencies, the ARC had resolved to implement an audit improvement plan. It highlighted the following necessary steps that had to be taken;

• Improvement of the overall corporate governance;
• Performance management and employee relations;
• Interim financial statements to be thoroughly checked to avoid misstatements;
• Thorough management plan of all the ARC’s properties and equipment (assets).

DAFF audited outcomes for 2018/2019

Mr Jacob Hlatshwayo, CFO: DALRRD, briefed the Committee on the former Department of Agriculture, Forestry and Fisheries (DAFF) audit outcomes. The DAFF had received a qualified audit opinion from the Auditor General of South Africa (AGSA).

In the opinion of the AGSA, the financial statements had been fairly presented in all material respects as they related to the financial position of the DAFF as at 31 March 2019. The financial performance and cash flows for the year were in accordance with the Modified Cash Standard prescribed by National Treasury and the requirements of the Public Finance Management Act (PFMA) and the Division of Revenue Act (DoRA).

The basis for the qualified opinion was as a result of the Department not recording all disposals for biological assets, as there were inadequate systems to record the disposals. This had resulted in the amount of disposals disclosed in note 32 (movable tangible capital assets) being misstated.

The AGSA was unable to determine the full extent of the misstatement because it was impracticable to do so. Furthermore, AGSA was unable to obtain sufficient appropriate audit evidence for biological assets amounting to R52 416 196, as the compartments that contained these biological assets were inaccessible and therefore these assets could not be verified.

Consequently, AGSA was unable to determine whether any further adjustments were required to the biological assets stated at R877.6 million in note 33 (intangible capital assets) of the financial statements.

Corrective measures proposed by the DALRRD included the following, but were not limited to:

• There was a need to establish an investigations component that was linked to the ethics management directorate. The Director: Ethics Management would enter into discussions with the Director-General with regard to the organisational development process.
• The Directorate: Financial Accounting had issued Financial Circular 15/2019 on 22 August 2019. The circular brought the content of the audit finding to the attention of all officials in the Department and specified the corrective measures and responsibilities of role players.
• The Directorate: Supply Chain Management would monitor and report on all payments that were delayed. 98% of payments were being processed within 30 days from date of receipt of invoice.
• Delayed property management payments due to budget constraints, would be addressed through budget processes and engagements with National Treasury.

Discussion

Ms Thlape applauded the ARC for the well-structured and clear audit improvement action plan. She cautioned the ARC against inaction, and called for swift implementation of the plan.

She asked how the fact that the ARC was an implementing agency affected its mandate.

The ARC had nearly collapsed because of the amount of money the Department owed them. She wanted to know whether the entity had a healthy balance sheet.

Ms Mahlatsi was of the view that the ARC had shown enormous progress in preparation for the audit    report. Despite its challenges, there seemed to be a clear indication of what it wanted to achieve.                                  

She expressed her dismay with the Department. Of the 27 audit findings it received for the year in question, 10 had been repeats and 17 were new. In the report presented to Members, only nine audit findings had been addressed, with the majority still outstanding. It was clear that the problems at the Department persisted, with no intervention whatsoever. The Committee should express its displeasure at the Department for the lack of vigour and attention paid to dealing with the audit findings. She wanted to know how many people worked in the audit unit, and what their bona fides were.

Ms Mbabama said it seemed as if the ARC had all their ducks in a row. She looked forward to the end result after the plan had been implemented, as it was a good plan.

She directed scorn at the Department’s audit performance. There had been poor performance in the implementation of corrective measures. It seemed as if the Department had not taken the audit outcomes seriously.

Mr Montwedi asked what the Department had done to stem the fruitless and wasteful expenditure tide. It was always investigating, yet nothing ever came of these investigations.

Mr Capa touched on the issue of biological assets that had always been a bone of contention between the Department and the auditors. He wanted to know whether the Department and the AG had found common ground on the matter.

He found it interesting that the Department did not know why they could not finalise the things they were supposed to finalise. He called on the Department to empower its staff.

Ms Breedt said she was cautiously optimistic about the ARC’s audit plans. The ARC realised what needed to be done, and did not only pay lip service to what needed to be done.

She criticised the fruitless and wasteful expenditure on animal feed meant for drought relief that was never delivered. She also mentioned the funds spent on veterinary mobile clinics and travel for officials. She wanted to know when these investigations would be finalised, as they had been stalled for quite some time.

ARC and DALRRD replies

Mr Mlengana conceded that there had never been thorough compliance. He had issued a communication to the relevant section heads to be extra vigilant and comply with financial and audit regulations. He indicated that the repeat findings had occurred in sub-departments. The internal audit unit was well capacitated, yet anomalies persisted. He had issued warnings to the relevant managers regarding the repeated findings.

Investigations had been conducted into the 2016/17 and 2018 audit findings that highlighted the incidences of graft and malfeasance. He was confident that these issues had been dealt with, as money had been recovered from the responsible officials and where they had left the public service, their pensions had been attached. He admitted that a lot of officials had been implicated.

Mr Hlatshwayo said that his department had not received any invoices from the ARC. Two teams from both the ARC and the Department had been working together to solve all outstanding issues. The DALRRD had verified that another R8 million still had to be paid to the ARC. This would bring the total disbursement to the ARC to R58 million. However, the ARC was of the opinion that the Department still owed them R73 million.

Referring to the disappeared R100 million earmarked for drought relief, the CFO said the Department’s legal team was busy working on the case. Summonses were expected in the case soon.

Mr Moephuli thanked Members for their support, and said the ARC hoped that when they submitted their financial statements to AGSA it would agree with the corrective measures implemented. The work presented had been verified by internal audit service providers, and that the ARC had approached the AG to conduct a mini-audit, which had assisted it to rectify certain anomalies.

He explained that some of the root causes were both internal and external, and had to do with equipment. That was why some policies had needed to be changed. The proposals had been taken to the ARC board, which had subsequently approved the changes.

On the recovery of funds from former officials for irregular subsistence claims, the Committee was informed that officials represented by Solidarity had refused to pay any money back. Thus far, the ARC had been able to reduce the amount from R15 million to R3 million.

The Kaonafatso ya Dikgomo (KYD) livestock programme was an important tool to develop farmers. The programme thus posed a reputational risk for the ARC should it not be implemented due to a lack of funding. The ARC would continue to engage the DALRRD on what needed to be done.

The ARC took note of the comments about the biological assets, as some biological assets were used for production and others for research. The ARC would just have to isolate the two from each other.

The meeting was adjourned.