Statistics South Africa on its Annual Report 2011/12

Meeting report

Statistics South Africa 2011/12 Annual Report presentation
Mr Pali Lehohla Statistician-General (SG) noted that it was on 10 October 2011 that the Census 2011 was launched. It had to be asked if statistics mattered in public life in South Africa and in the making of decisions, and on the basis of Stats SA's organisational performance, and the story of 2011 Census and its achievements and challenges, he would marshal evidence to answer this question. Thereafter he would review Stats SA's financial performance. These were the three main items that he wanted to address.

Did statistics matter?
The answer was probably yes; the system of statistics in South Africa contributed to: Informing planning, monitoring progress, evaluating performance, and supporting the system of planning in crafting the roadmap to achieve long-term goals.

The story of the Census 2011
This began with preparation, getting ready, and, in particular, the sixty days of deployment of the Census, the logistics, the processes of analysis, and, of course, the upcoming publication of the results on 30 October 2012. The main preparations for the Census began in March to April 2011 with the demarcation of boundaries, advertising and the creation of satellite offices, and introducing information technology (IT) infrastructure, and finalising the systems. From April to August, Stats SA made preparations to advertise for and recruit staff, and for the campaign for public participation. Then followed the intensive sixty days up to the end of October. In those sixty days Stats SA spend about R1.6 billion. In those sixty days, Stats SA had to recruit, train, and appoint some 160 000 field workers. 1.2 million tons of material had to be ferried to the districts. 1 200 containers, each containing about 1 000 kilograms of materials had to be conveyed. People had to be deployed in 103 000 enumeration areas. Stats SA sought to inform people who their enumerators would be by means of poster campaigns. Stats SA visited 14.6 million dwellings. Up to three attempts to visit a dwelling were made if the first attempt was unsuccessful. 7 400 vehicles with the Census brand were on the streets. Every day there was monitoring of progress made. This was followed by a period of four months in which Stats SA was working on processing statistics and decommissioning field workers. There was a post-enumeration survey. Then Stats SA began to process the data at the processing centre where it had 2 200 people. On 30 October 2012 Stats SA would present 'the South Africa I know, the South Africa I understand'.

Challenges: Census 2011
These included recruiting 157 886 field workers; training, deployment, and management; systems; monitoring and tracking of personnel; appointment of personnel; supply Chain Management and the uneven environment (venues and catering); supplier payments and the 30 day rule; enumerator payments through the Banking System (enumerators not automated teller machine (ATM) literate); vehicle management; damages; tracking and misuse; logistics; printing and forward logistics; and collections in a highly mobile society.

Despite a rosy picture of how Stats SA went out into the field, there were challenges. 157 886 field workers was equivalent to about 10% of the public service. These field workers were managed by about 4 000 personnel. Among those 4 000 were about 500 who were handling personnel, human resources (HR), finance, and the like. This was a mammoth challenge. Monitoring and tracking so many people in the field was very difficult. A census was the greatest mobilisation in times of peace. Particular challenges were supply chain management and the uneven development of South Africa. It was also necessary to provide food to the field workers and in some cases local service providers did not have tax clearance certificates.

Stats SA's invoices grew by a factor of ten, and Stats SA's 'narrow pipe' at the State Information Technology Agency (SITA) could not handle this challenge. It was impossible to meet the 30 day payments deadline, but Stats SA did what it could and payments still went through.

Some enumerators could not use automated teller machines (ATMs). However, Stats SA paid 95% of enumerators on day one. However, it had been very difficult to deal with the remaining 5% of payments and some were still outstanding.

As to legal management, 'the damages were gigantic'. Insuring vehicles was difficult. Stats SA used tracking devices and these helped to mitigate the problem.

Challenges and constraints
▪ These challenges included increased pressure to implement international standards (System of National Accounts (SNA) 2008, International Standard Industrial Classification of all Economic Activities (ISIC) 4, and the System of Environmental and Economic Accounting (SEEA) to remain relevant and comparable to South Africa's peers – the Organisation of Economic Cooperation and Development (OECD), and the Brazil, Russia, India, China, and South Africa group (BRICS).
▪ The increased need for sub-national economic statistics could not be met within the existing business register model.
▪ There were decreasing response rates (respondent fatigue). Promoting the use and understanding of statistics was very important.
▪ Business registration reform – collaboration between partner departments: the Companies and Intellectual Property Commission (CIPC) (previously Companies and Intellectual Property Registration Office (CIPRO) was identified as the leading department. Collaboration was expanded between Stats SA and South African Revenue Service (SARS) on employment matters.
▪ It was necessary to balance maintenance of ageing Information Communication Technology (ICT) infrastructure with the demands and opportunities of new technologies.
▪ Human resource constraints: statistical capacity in the South African National Statistics System (SANSS) and analytical and methodological capacity.
▪ There was increased demand and pressure to provide statistical support to partners in SANSS.
▪ A further challenge was internalisation of the SANSS.

Achievements
▪ All relevant economic and social statistical releases adhered to International Monetary Fund (IMF) Special Data Dissemination Standards (SDDS) requirements.
▪ New release on Victims of Crime.
▪ New series on social development indicators based on the living conditions survey released.
▪ The plan to meet the dwelling frame in collaboration with others was on track and would be less expensive as Stats SA used partners, especially the municipalities, through collaboration as opposed to doing costly fieldwork.
▪ An improved statistical infrastructure with provincial offices was established across the country.
▪ Stats SA administered the census whilst supporting core business.
▪ Stats SA led in international statistical development: achieved Africa Counts; adopted Civil Registration and Vital Statistics (CRVS) as African Symposia for Statistical Development (ASSD) priority over the next five years; and led statistical harmonisation and development on the African continent.

The last task of the Hon. Dr Nkosazana Dlamini-Zuma as Minister of Home Affairs before taking up her present post as the Chairperson of the African Union Commission was to launch and allow Stats SA to run the Civil Registration and Vital Statistics (CRVS) for the next five years.

Performance 2011/12
Actual performance for each statistical theme, such as economic growth in the economic statistics subsystem, and life circumstances, service delivery and poverty in the social statistics subsystem, was described. (See table, slides 8-9)

Human resources performance
The vacancy rate was 13.2%. The percentage of women in the senior management service (SMS) was 33.3%. A table of interns absorbed per financial year from 2005/06 to 2011/12 was provided. Over this period a total of 167 interns had been absorbed. (See table, slide 10)

Stats SA sought to become an employer of choice. It wanted to compete in terms of the quality of careers offered.

Organisational performance
Field operations were successfully concluded and processing resumed. Stats SA continued to deliver on its core statistical products, established a national footprint for statistical collection, continued to build statistical capacity, improved statistical systems and processes, continued to lead harmonisation of statistical development, and improved governance had resulted in unqualified audits for six consecutive years.

However, 2011/12 was an unusual year as it was the year of the census with its inherent risks. In this year, Stats SA received a qualified audit opinion. (Slide 11).

Financial performance
Qualified Audit on the accruals disclosure: the basis for the qualified opinion was the inadequate systems in place to track records of accounts payable for goods and services received but not yet paid for.

The following matters were emphasised: significant uncertainties; unresolved matter of advance payments of R7.8 million; procurement of goods and services for R35.8 million - matter under investigation; and material losses: losses amounting to R34.4 million written off as irrecoverable.

The following steps were taken to improve in governance and financial management: Stats SA enhanced oversight functions at national, provincial and district level - compliance monitoring, audit monitoring; and commenced with implementation of a corporate governance framework, including risk management.

Challenges were system functionalities and integration, overall human resources in provinces, and funding the strategy. (Slide 12)

Stats SA had received unqualified audit opinions for five years. It might not come as a surprise that in this year of seismic movement, that Stats SA might be revisited by a qualified audit. In response Stats SA was enhancing its oversight functions, and implementing a corporate governance framework including risk management. Moreover, Stats SA had met with the Accountant-General.

Expenditure per programme
Figures were provided for expenditure in the seven programmes: administration, economic statistics, population and social statistics, methodology and standards, statistical support and informatics, corporate relations, and survey operations; and adjusted appropriation, virement, final appropriation, actual expenditure, variance, and expenditure as a percentage of final appropriation. (See table, slide 13)

Expenditure trend
The expenditure trend from 2008/09 to 2011/12 spiked dramatically. (See graph, slide 14)

Forthcoming events
These included economic statistics: the re-weighted and re-based Consumer price index (CPI), and the re-engineered Producer price index (PPI) release; the Millennium Development Goal (MDG) report for 2012/13; and the Census Release: 'The South Africa I know, the home I understand'. The release date of Census 2011 was to be 30 October 2012. Census 96 was released 24 months later. Census 2001 was released 21 months later.

Census products were easy to use, accessible, electronic, available also through print media, were mobile devices based, Geographic Information System (GIS) based, going to enhance the use of evidence in decisions, the rallying point for citizens to discuss and debate, for children at school to understand their environment, and for communities to engage with themselves and the state and make choices. (Slides 15-16)

It was a major achievement, previously unheard of in South Africa and in many parts of the world, to release the Census results only 12 months after the Census. Because the results would be so accessible, they would empower the citizens to make choices.

Trust in statistics through building a sustainable organisation
Stats SA sought to broaden the role and reach of official statistics, growth through coordination, enhanced quality, sustained capacity, and to do more with the same. (Slide 17)

Discussion
The Chairperson commended Stats SA on the precision with which it had executed its plan for Census 2011. This gave confidence that, whatever the outcome, it was something that all South Africans would embrace. Without the information that Stats SA provided, South Africa would not be able to meet its challenges.

Mr E Mthethwa (ANC) asked what two key issues, if addressed, might improve Stats SA's results.

Ms Z Dlamini-Dubazana (ANC) congratulated Mr Lehohla and his team. It was unfortunate that the Auditor-General (AG) did not weigh Stats SA's commitment.

She suggested that Stats SA propose a better mode of payments, especially for the temporary staff. Many such staff came from the rural areas and therefore did not know how the banking system worked. The Committee could assist Stats SA by negotiating with the Minister. The VIP payroll system could actually lead to such a qualified audit report, as there might be errors when making payments.

Much as Stats SA had received a qualified audit report, it was working in a difficult environment. One needed breathing space and good working conditions, so the problem of the building infrastructure of Stats SA needed to be taken seriously. One had been hearing of it for two or three years. To what extent did the problem of infrastructure contribute to the payment made in advance?

What monitoring mechanism was in place when materials were delivered to the offices? Were those in charge of receiving and accounting for materials well-trained?

Local service providers should be appointed in good time, in order to enable them to prepare themselves, including preparations to comply with regulatory requirements.

Dr Z Luyenge (ANC) appreciated Stats SA's work, which was what the public service required of civil servants in the execution of duties requiring passionate commitment. He encouraged Stats SA to keep up the good work. The Committee's main concern was the outcome of Stats SA's efforts. It was possible to receive a clean audit opinion, but if the impact of the expenditure incurred was ineffective, there was no benefit to the intended beneficiaries. It was Stats SA's passion and commitment to deliver that counted.

Despite the uneven environment, how did the communities themselves from among those differing environmental standards view the role of statistics and understand the importance of being counted?

Within the sixty days Stats SA had spent a vast amount of money. Perhaps this had something to do with the qualified audit opinion. Did Stats SA manage to pay all its service providers within the time frame?

Mr D Ross (DA) said that, given the enormity of Stats SA's task, it was acceptable that there would be problems and that one would not always receive the audit reports that one would want to achieve in terms of quality and complying with all the regulations.

However, he disagreed with Mr Lehohla when he said that the system did not give in dramatically. 'The Auditor-General's report was a devastating report.' It showed some very serious deficiencies in terms of management. He gave examples of deviations. An important issue was procurement and contract management. Stats SA did not have adequate systems in place to maintain records of accounts payable for goods and services received but not yet paid for. He asked if there could not be an external investigation of the material losses amounting to R34.4 million. These were not small losses. The organisational structure had to be improved.

Ms J Tshabalala (ANC) welcomed the report and congratulated Stats SA on the work undertaken. She was also worried about the financial performance, specifically around the unresolved matter of advance payments of R7.8 million, and the matter of procurement of goods and services reported to be under investigation. A detailed report was required to enhance the Committee's oversight role. Stats SA should take the Committee through in confidence on its method of procurement.

The material losses of R34.4 million and their being written off as irrecoverable were also a serious matter. A detailed report on the losses was required as well as a report on the procurement processes to verify whether these matters were outside the control of Stats SA.

What could have been done better to avoid these problems and what remedies did Stats SA suggest?

The financial management aspect was very worrying, particularly on the details.

She asked what the paragraph on facilities management (Annual Report, pdf version, page 27) was really reporting on. Which period of October to December was referred to? When would the agreement with three service providers be finalised?

The figures for vacancies and women in SMS were commendable (Annual Report, page 21 [pdf version, page 27]), but what had happened to the 157 886 field workers. Were the field workers absorbed? Were they young people?

Responses
Mr Howard Gabriels, Chairperson of the Statistics South Africa Council, said that Mr Lehohla had given a very good picture of the impact of the census. The story of 1996 was that everything had ground to a halt in order to do the census of that year. Stats SA had then only a year to prepare for the census. It was in 1995 that Mr Lehohla was appointed to the position of Chief Director with responsibility for the census. In 2003 the Stats SA Council recommended that there should not be a census in 2006. This was in order to strengthen the organisation because the concern from 2001 was that if there was another census in five years time the entire infrastructure would be overloaded. This Report showed that the Stats SA organisation had now grown and was strong and could withstand the impact of this imposition on it. The 2011 Census was a major milestone in building the capacity of the organisation.

The Council had agreed to give the Director-General, National Treasury, access to the Census data before the official publication date of 30 October under strict conditions and with the usual confidentiality requirements. This was an exceptional decision to avoid delaying feeding the data into the budget process.

The Council was concerned with the methodologies of how the data was produced. One of the big concerns of Council was the need to promote credibility in official statistics.

The audit qualification was primarily on accruals. The accruals amounted to about R130 million that had not been paid but was owing on goods or services provided, and would flow into the next financial year when those suppliers or providers were paid. In this regard the system had been deficient. The amount in the context of R3.6 billion was, however, a relatively small amount.

The other items were matters of emphasis. Mr Lehohla had agreed with the Auditor-General that these matters be properly investigated, not internally, but by the Accountant-General. The outcomes would be reported to the Committee and to the Standing Committee on Public Accounts (SCOPA).

The audit outcome was a disappointment, but the organisation had grown to a point where it could recover quickly. The 2001 Census had resulted in multiple qualified audits.

In a few weeks time the outcome of the Income and Expenditure Survey would be released. This was a survey of some 30 000 households which recorded a two-weekly diary of all household expenditures and income. This survey created a basket to measure the Consumer Price Index (CPI).

It was important to note the continuing quality of the ongoing work of Stats SA, besides work of the Census.

At the same time, Stats SA was helping colleagues on the continent to run censuses, in some cases where censuses had never been conducted before. Support had been given to colleagues in countries like Sudan and such support provided a foundation for development.

The Council was confident that Stats SA would recover from the challenge of the audit opinion and rebuild confidence in Stats SA's organisation.

Mr Lehohla thanked Mr Gabriels and the Chairperson. He explained that the data was produced for use. It was very important to understand that the data was for use by the state and not for the statisticians. When it was a matter for public concern, Stats SA had to deliver on that public concern. The fundamental principles made this clear around the citizenry's entitlement to public information. It was also clear that there should not be political interference in the method. It was important to note that, in disclosing data to the Director-General, National Treasury, that the numbers could not be changed or manipulated for political ends.

The losses were very sad. Stats SA had done all it could to resolve that problem. In whatever approach was taken, there had to be co-ownership. If Stats SA sought owner-drivers from whom to recruit field worker supervisors, it would have to find owner-drivers with sufficient income to put petrol in their cars and wait a few months to receive reimbursement. Such owner-drivers were most likely to be found amongst teachers. However, at the time of the pilot, the teachers went on strike, and, together with other challenges facing teachers and schools, were found to be too risky a group for Census duties. Stats SA had also considered using the military; however, the conditions were not conducive. The third option was to rent cars with drivers, but this was too expensive.

One company in 1996 had insured the cars which Stats SA had used for the 1996 census, and it had gone bankrupt.

So Stats SA had anticipated problems with the provision of some 6 000 vehicles. The state had to carry its own risk.

In an attempt to mitigate risks, Stats SA had branded the cars so that they could be identified from a distance. Moreover, Stats SA had installed transponders on the cars, and each time a car ventured outside its assigned region, the Stats SA operations room would call the driver and ask him why. He himself had been called one day when, while in the North West province, he had driven close to the border of Botswana.
As a general opinion, he would prefer to use teachers as supervisors of field workers in a census, because teachers had the necessary equipment and skills, were part of the system of government and were distributed evenly, but with the kind of matric results and other situations in the country, the use of teachers might not be ideal in South Africa at present. It was necessary to use what we had rather than what we desired to have.

What could improve the census in the future? He was not sure that October was the right month. It was too close to Christmas. It was too close to the period of examinations. March or August would be much better. Choosing a better month was one way to improve in future.

Also in order to improve it was necessary to have addresses. Six million dwellings in South Africa still lacked addresses. This was a serious problem and a big task, although it had been discussed in South Africa since 1998. Turkey had addressed a similar problem expeditiously.

Maybe the key to eventually replacing a census was to have continuous registration as part of the civil registration process. Children could be registered against an address as soon as they were born. Deaths could be registered against an address as they occurred. Then at any given time it would be possible to determine the size of the country's population. Movement of population depended on geography. When one moved from here to another place, one must be able to specify one's address at point of departure and one's address at the place of destination. The technology enabled this, but without a complete system of addresses, that movement could not be accounted for, so the need for a census was even greater.

Indeed it was necessary to think ahead. It was essential to use local providers to supply food to the field workers. There should be no need to bring in external 'big name' providers. The food had to be cooked and distributed to the field workers where they were working. This was the active citizenry that Stats SA wanted. Unfortunately Stats SA had not yet succeeded much in this direction, although it happened in a number of instances. In part this was because of the constraints of Stats SA's supply chain management's interpretation of the situation.

There were indeed many deviations, but in a project of this nature to be carried out with speed and under pressure, they arose and he himself had approved each one. They were symptoms but were used in a way that was allowed, and did not mean that there was no governance.

The R7.8 million was an urgent matter in the public domain. The Government Communication and Information System (GCIS) bought in bulk as it was entitled to do. At the same time Stats SA was bound by the Public Finance Management Act (No. 1 of 1999) (PFMA) and had to use funds prudently. It had to be asked how one extended that PFMA rule into another department. The matter was being resolved through the courts and the state was denying liability.

The other matter under investigation was in the hands of the Accountant-General.

Stats SA had continued to use, at the processing centres, 2 000 of the 157 000 field workers. Perhaps 100 of them had been recruited on a longer term basis into the organisation. The 157 000 was a valuable cadre. The most important training that they received was not the formal training from Stats SA but their experience gained in going house-to-house – the ability to knock at the door, the confidence to enter, the confidence to persuade, and to confidence to leave with an answer. It was a skill that no one could acquire in any other way. Government should consider this cadre and ask itself what it could do with these people. It was by no means an ordinary skill. Government should tap into this resource.

Moreover, Stats SA's information technology infrastructure was valuable and could be used collaboratively with other departments.

Ms Akhtari Henning, DDG: Corporate Services, said that Stats SA was currently examining ways to conduct the next census and improving the methods, not just of the payment of field workers, but also reducing the vehicle accidents and damages.

There had been a huge momentum with regard to the Stats SA building. Stats SA was now in the second phase of obtaining the National Treasury approval required in terms of the Public Private Partnership (PPP) regulations. Stats SA had also obtained the three successful service providers; and had published a newspaper advertisement to thank the three successful bidders and to thank the Department of Public Works (DPW) for the parcels of land which DPW had confirmed that it had acquired for Stats SA. At the end of January 2013 Stats SA hoped to start evaluation. It had consulted National Treasury with a view to reduce the negotiation period within the PPP that Stats SA was currently running. By October 2015, if all went well, Stats SA should move into its new building.

Stats SA's expansion had not contributed to the qualified audit opinion. The qualification was around the payment of service providers who had delivered goods but who had not been paid by 31 March 2012. The expansion had given rise to problems in terms of decentralisation. There was a very good collaboration between the corporate services functions and making sure that all the logistics were done and also ensuring that the questionnaires were delivered to the various provinces and district offices.

She welcomed the training of the small, medium and micro enterprises (SMMEs) for the future. This was important, the only way to develop society, and to ensure the availability of service providers in all spheres, because Stats SA's work was different from that of all other departments.

The rules and regulations of the Independent Electoral Commission (IEC) were different from those which bound Stats SA. The IEC had the option not to follow certain regulations. However, the regulations provided some space to allow smaller entrepreneurs to come on board, and Stats SA wanted to give these entrepreneurs every opportunity.

With regard to the sixty days payments, there was some difficulty in giving a figure in the financial statements that was precise in terms of the goods received but not paid for. This created a doubt for the Auditor-General.

The deviations were done in terms of the regulations, as Mr Lehohla had explained, and were in cases of sole service providers or in cases of urgency. The significant increase was relative to the activity that Stats SA undertook for the census.

The 30 day payments were a system issue. Stats SA was one of the few departments that had an 'invoice-packing' system, in which service providers clearly understood to whom they had to send invoices. In the past four or five years, Stats SA did not have those issues. However, when the number of invoices entering the basic accounting system more than doubled, SITA systems started 'falling over'. For a very short period of time, close to 59 000 invoices were processed, with almost the same number of staff members. The effort put in allowed the Auditor-General not to raise it as a matter of emphasis, but just to highlight it.

However, Stats SA could not afford to allow such an audit report to recur.

Compared to the grave incidents that had occurred in 2001, most of the vehicle incidents this time involved only minor damage. 2001 damage costs were almost double those of 2011. The tracking system greatly helped, especially as the number of vehicles was almost 40% more than in 2001. It was not practicable to recover the cost of damages, hence this cost was listed as irrecoverable.

Stats SA would report in due course on the matters of emphasis and the R7.8 million with GCIS. The Accountant-General was investigating both matters.

As to facilities management (Annual Report, page 21 [page 27 of pdf version]), this division, besides looking after the building, had also a regulatory role including security and occupational health and safety (OHS) matters. This paragraph was specifically written around the extra infrastructure built. Stats SA could perhaps provide further explanation in the coming months.

Stats SA kept the field workers on its data base and absorbed some of them for some of its other surveys. This was not permanent but periodic employment. Unfortunately the fiscus would not allow Stats SA to absorb more than one or two% since there was a threat of a budget cut for Stats SA over the next three financial years.

The system was finalised around April to May 2012 so this was not reported in this Report.
 
Ms Semphete Thobejane, Chief Financial Officer, added that Stats SA did not have sufficient funding to undertake the Census according to the conventional method. All the deviations were within the legal framework.

Mr Lehohla appreciated the Committee's understanding and support. He noted that Stats SA's audit committee had found the Auditor-General's opinion 'rather harsh'. The circumstances around the qualification were not endemic but occurred at the particular time of the Census, and Stats SA had the capability to recover.

The Chairperson commented that there was a perception that the work of Stats SA was merely seasonal. It was for policy makers to indicate constantly that Stats SA had important ongoing work. It would be useful to compare the Auditor-General's report at the time of the previous census with this Report to determine whether there had been an improvement or not in order to make an informed conclusion. There was a worrying trend in overall stagnation or decline in audit results in the public sector. Although the Report was now a matter for Scopa, this Committee also had the right to engage with Stats SA on this Report to see how it could assist Stats SA to improve on these key issues. He agreed with Mr Gabriels that the data was produced for use by the state, that South Africa had done very well to avoid political interference in Stats SA's methodology, and agreed with the Stats SA's decision to disclose information in advance to National Treasury to assist with the Medium Term Budget Policy Statement (MTBPS). The Committee looked forward to the Census results and was confident that Stats SA had done a good job. The experience of the field workers cadre must not be lost, and perhaps could be utilised by the IEC. Moreover, these foot soldiers should participate in the special national event to announce the results so as to associate them with the final product, which was a culmination of their work. This was to avoid an impression of an elitist approach and at the same time keep them together and acknowledge their contribution. The understanding of ordinary people was not to be underestimated.

The Chairperson adjourned the meeting.